EU inaction to protect against unfair terms in Cypriot contracts

Subject: EU inaction to protect against unfair terms in Cypriot contracts

In his reply of 6 October 2020, Commissioner Reynders stated that in 2013 the Commission had launched infringement proceedings against Cyprus and, after finding that the Cypriot authorities were not properly applying Directive 93/13/EEC on unfair terms in contracts as no solution had been found to remedy all grievances, it resumed infringement proceedings in July 2019 by sending an additional letter of formal notice to Cyprus.

The infringement procedure’s specific stages are set out in the EU Treaties. The Commission sends a formal letter requesting further information to the Member State concerned, which in turn has to send a reasoned reply within a specific deadline, usually two months. If the Commission concludes that the Member State fails to fulfil its obligations under Union law, it is entitled to send a reasoned opinion.

In the light of the above:

What action does the Commission intend to take in relation to rulings issued by Cypriot courts that infringe the ban on unfair terms in contracts, including charges concerning unfair interest rate clauses or straightforward invalid loan agreements or mortgages, as Cypriot law makes no provision for the right to set aside judgments?

Joint answer given by Mr Reynders on behalf of the European Commission (9 July 2021)

As mentioned in its replies to questions E-004376/2020, E-004377/2020 (1) and P-000374/2021 (2), the Commission opened in 2013 an infringement procedure against Cyprus for ineffective enforcement of Directive 93/13/EEC (3) and Directive 2005/29/EC (4).

⋅1∙ https://www.europarl.europa.eu/doceo/document/E-9-2020-004376-ASW_EN.html

⋅2∙ https://www.europarl.europa.eu/doceo/document/P-9-2021-000374-ASW_EN.html

⋅3∙ Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ L 95, 21.4.1993, p. 29‐34.

⋅4∙ Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal

market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (‘Unfair Commercial Practices Directive’), OJ L 149, 11.6.2005, p. 22‐39.








| | )Since then, the Commission has been in contact with Cyprus, which responded positively to several concerns. Certain grievances remaining unresolved, the Commission sent an additional letter of formal notice on 25 July 2019 (5) and a reasoned opinion on 18 February 2021 (6). After assessing the reply by Cyprus of 16 April 2021, the Commission is considering possible next steps.

Directive 93/13/EEC requires Member States to ensure that consumers are not bound by unfair terms and have effective remedies against such terms (7). It is the primary responsibility of national authorities and courts to safeguard consumer rights in individual disputes and, if relevant, order the State to make good the loss sustained by individuals as a result of the infringement of Union law attributable to it (8).

The provision of accommodation to consumers evicted from their homes based on unfair terms is not regulated under Union law and falls under the competence of the Member States.

However, Directive 2014/17/EU (9) requires Member States to encourage creditors to exercise reasonable forbearance before initiating foreclosure proceedings and, if outstanding debt remains, to facilitate repayment to protect consumers.

The Commission cannot review decisions of national courts or authorities but it monitors the implementation of Union law to detect potential systemic failures and it may open infringement proceedings in line with its enforcement priorities if a Member State, including its courts, fails to implement Union law (10).

⋅5∙ https://ec.europa.eu/commission/presscorner/detail/en/INF_19_4251

⋅6∙ https://ec.europa.eu/commission/presscorner/detail/en/inf_21_441

⋅7∙ See Section 5 of Commission Notice — Guidance on the interpretation and application of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer

contracts, OJ C 323, 27.9.2019, p. 4‐92, COM(2019) 5325 final.

⋅8∙ See for example CJEU judgment of 30 September 2003, Case C-224/01, Köbler.

⋅9∙ Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential immovable

property and amending Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010 Text with EEA relevance, OJ L 60, 28.2.2014, p. 34‐85. The directive came into application on 26 March 2016.

⋅10∙ Set out in the Commission Communication C(2016)8600 of 21 December 2016 ‘EC law: Better Results through Better Application’.