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15 December 2017
The Supreme Court recently rendered its first judgment on the admissibility of the use of electronic mailboxes, which are exclusively incorporated and only accessible via the e-banking system of a credit institution for serving client account notices and statements to consumers. This ruling will significantly affect Austrian banking practice. Email client communication procedures, which are inadmissible by the Supreme Court, materially correspond with the approach used by a large variety of credit institutions and other payment service providers.
The Austrian Association for Consumer Information – a consumer organisation constituted under Austrian law which has the right to file for injunctions to protect consumer interests – brought an action against an Austrian bank regarding various provisions of the bank's general terms and conditions. The association claimed that the following provision violated the Payment Services Act:(1)
"Notices and declarations (in particular account information, account statements, credit card statements, notices of changes, etc.) which the bank is obliged to provide or to make available to the Customer shall be sent to a Customer, who has agreed to e-banking, by mail or by electronic means by making them retrievable or transmitting them via the B***** e-banking."(2)
The Supreme Court, in accordance with the first and second-instance court decisions, permitted the legal action for the majority of the litigated provisions and released a partial decision regarding the most disputed provisions in May 2015.(3) However, with respect to the abovementioned provision, the Supreme Court requested a preliminary ruling by the European Court of Justice (ECJ) under Article 267 of the Treaty on the Functioning of the European Union.(4) The ECJ issued its judgment in January 2017.(5) This update focuses on the rulings on the use of electronic communication via the defendant's e-banking system.
Based on the terms and conditions of the Payment Service Act, the defendant did not send notifications to the customer by mail or to their designated private email account, but instead published relevant notices in the electronic mailbox of the customer, which was accessible only via the defendant's e-banking system.
The Supreme Court tested the admissibility of this procedure against the Austrian legal framework – in particular, against the Payment Services Act and relevant case law.
Pursuant to the Payment Services Act, an agreement on e-banking services qualifies as a dependent provision to the basic framework contract on payment services. Following the framework provided for by the EU Payment Services Directive, the payment service provider (PSP) must notify the payment service user (PSU) of any changes in the contract at least two months before such changes become effective. Section 26 of the Payment Services Act (which implements Articles 41 and 36 of the EU Payment Services Directive) requires such notifications to be provided either in written form on paper or – subject to the consent of the PSU – via a durable medium. In addition to the question of the medium used for transmitting a notification, the method used for communication must also be considered. The Payment Services Act distinguishes two different methods for communicating information to a PSU, information must either be:
Relevant notifications (ie, changes to the framework contract), must be actively provided to the PSU by the PSP.
In summary, in the request for a preliminary ruling, the Supreme Court asked whether:
While the main emphasis of the preliminary judgment focused on the interpretation of the EU Payment Services Directive, the ECJ also addressed relevant provisions under:
Article 4(25) of the EU Payment Services Directive defines a 'durable medium' to be:
"Any instrument which enables the payment service user to store information addressed personally to him in a way accessible for future reference for a period of time adequate to the purposes of the information and which allows the unchanged reproduction of the information stored."
In its September 2016 opinion, the attorney general emphasised that the requirements of storability and unchanged reproduction are functional requirements of a durable medium, which can be met irrespective of physical structure, considering and allowing technical evolution accordingly. The attorney general also stated that in Content Services, the ECJ allowed for a flexible definition of durable medium and allowed for the sole requirement of a functional equivalent to paper.(9)
In its reasoning, the ECJ considered additional factors, such as the ability of the PSU to access, reproduce and store information as considered by the EFTA Court in Inconsult Anstalt v Finanzmarktaufsicht.(10) In this decision, the EFTA Court held that a website can constitute a durable medium, provided that it enables the customer to store information, in a way that makes it accessible as long as it is of relevance for the customer to protect his or her contractual interests towards the insurance intermediary. Further, the website must guarantee that relevant information stored can be reproduced in an unchanged from. From these requirements, the court differentiated ordinary websites from sophisticated websites. In the court's reasoning, 'ordinary' websites, which serve as a dynamic electronic host for the provision of information, did not meet the requirements to be classified as a durable medium. Whereas a 'sophisticated' website allows a user to copy and store information on his or her computer or use a secure storage area on the Internet, which requires authentication through a user code and password and can therefore be classified as a durable medium.
Using the sources mentioned above, the ECJ also considered Recital 24 of the EU Payment Service Directive, which determines that websites may be deemed to be a durable medium, provided that:
For the latter, the ECJ stressed that in order to qualify as a durable medium, a website must not only ensure the unchanged reproduction of the original information, but also exclude any possibility for the information to be changed unilaterally by:
Information provided versus information made available
As to the distinction between information provided and information made available, the ECJ adopted a pragmatic approach and referred to the alternatives provided in Recital 27 of the EU Payment Service Directive. Further, the ECJ held – and thereby summarised the more elaborate reasoning of the attorney general – that information sent to the e-banking mailbox alone may not be sufficiently equivalent to information obtained via the user's private email account. As e-banking email accounts do not typically allow for communication with other third parties, PSUs cannot be expected to take notice of the information therein, let alone consult it on a daily basis.(12)
The ECJ finally noted that in the present case the information transmitted by the PSP via the e-banking website may be considered to constitute provided information as required under Article 41(1) of the EU Payment Service Directive, if accompanied by supplementary behaviour on the part of the PSP. Accordingly, the PSP would be required to actively notify the PSU via his or her regular private email account that there is new information in their electronic mailbox on the company e-banking website. In this way, the PSP explicitly draws the PSU's attention to the availability and existence of information on the e-banking website.
Following this guidance from the ECJ, the Supreme Court rendered a straightforward decision and held that the clause under scrutiny had to be interpreted to the maximum detriment of the consumer. By applying the ECJ guidelines, the Supreme Court held that the provision could not be interpreted in a way that preserved its validity and thus held that the provision under scrutiny violated Sections 29(1)(1) and 26(1)(1) of the Payment Services Act. Accordingly, the Supreme Court dismissed the defendant's revision and granted the injunction.
Although the ECJ's decision was based on an interpretation of the existing EU Payment Services Directive, this decision is also relevant for the EU Second Payment Services Directive,(13) which is to be implemented by January 13 2018. The new directive maintains the distinction between information provided and information made available to customers.(14)
Accordingly, banks and other payment service providers must pursue a two-tier approach as addressed by the ECJ if they intend to continue using their internal e-banking website. If relevant information must be actively provided, simply publishing this information on the e-banking website will not be sufficient and the bank will need to inform its customers further via physical mail or email. While this double effort seems to be justifiable in the interests of consumers – especially if one considers that approval is based on a non-objection by the PSU to proposed changes to a contract – there are still some outstanding issues.
The requirements for provider-user communication via an e-banking mailbox apply only if the legal provisions require relevant information to be provided. Therefore, banking activities outside of the scope of the EU Payment Services Directive are not affected. The exact scope of the application of the EU Payment Service Directive is somewhat unclear with regard to specific banking products. For example, it is unclear whether the directive on payment accounts also apply to saving accounts. This point has been referred to the ECJ, but has not yet been decided.
For further information on this topic please contact Stephan Schmalzl at Graf & Pitkowitz by telephone (+43 1 401 17 0) or email (email@example.com). The Graf & Pitkowitz website can be accessed at www.gpp.at.
(1) Bundesgesetz über die Erbringung von Zahlungsdiensten (Zahlungsdienstegesetz – ZaDiG), BGBl I Nr 66/2009, last amended in BGBl I Nr 149/2017. The Payment Services Act transposes EU Directive 2007/64/EC on payment services in the internal market into Austrian law.
(2) "Mitteilungen und Erklärungen (insbesondere Kontonachrichten, Kontoauszüge, Kreditkartenabrechnungen, Änderungsmitteilungen etc), die die Bank dem Kunden zu übermitteln oder zugänglich zu machen hat, erhält der Kunde, der E-Banking vereinbart hat, per Post oder durch Abrufbarkeit oder Übermittlung elektronisch im Wege des B***** E-Bankings."
(11) This also includes the time period after the termination of the contract, as the customer may still need to have access to relevant information in order to seek redress properly (CF Advisory Opinion Case C-375/15, as well as EFTA Court Advisory Opinion E-4/09).
(12) This approach is even more conclusive when considering that the EU Payment Services Directive and the Payment Services Act, stipulate that changes in framework contracts – if explicitly agreed on by the contracting parties – be considered to have been agreed to by the PSU, if not contested within a certain period of time before entry into force.
(13) EU Directive 2015/2366 of the European Parliament and of the Council on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and EU Regulation 1093/2010 and repealing EU Directive 2007/64/EC.
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