- On 25 January the EU Court of Justice ruled in Case C-498/16, Schrems v Facebook Ireland.
- A social network user can remain a consumer and sue in the courts of their home country even if they have public-facing activities.
- They cannot pool in their own country the claims other consumers have assigned to them: collective action is limited.
On 25 January 2018 the Court of Justice of the European Union ruled in Case C-498/16, brought by the Austrian Maximilian Schrems against Facebook Ireland. The Court was answering a preliminary reference from the Austrian Supreme Court on which courts have jurisdiction to hear a user’s claim against a major digital platform.
The answer has two sides. On one hand, the Court confirmed that Schrems keeps his status as a consumer, even though he has published books, given lectures, run websites or raised funds for litigation. On the other, it held that this status does not allow him to gather in his home court the claims other consumers have assigned to him: the protection is personal.
The consumer forum
European rules on jurisdiction generally allow a company to be sued in the country where it is domiciled. To protect the weaker party, consumers have an exception: they may sue the other party in the courts of their own domicile. That exception is interpreted restrictively, because it departs from the general rule.
In this case the Court applied that logic strictly. It recognised that the private use of an account is not lost because the user, over time, becomes a public voice on the subject. But it denied that the privilege can be transferred: someone who receives claims assigned by others is not himself a consumer in respect of them. The ruling follows the Court of Justice’s approach of interpreting strictly the exceptions to the general rule on jurisdiction, even where their aim is to protect one of the parties.
What it means for companies
Companies that provide online services to consumers in different EU countries must expect they may be sued in each of them. A contract clause forcing litigation in a single country cannot be enforced against someone acting as a consumer, and each customer may go to the courts of their own domicile. Anyone providing digital services to consumers should document how a customer is identified as a consumer or as a business, because that classification determines the competent jurisdiction, the pre-contractual information and much of the applicable obligations.
The limit on collective action, by contrast, prevents a single court from concentrating all the lawsuits of users from other countries. But it does not close the door on other routes, such as actions by consumer associations provided for in each member state. In any case, cross-border litigation is more costly than local litigation and requires advisers in each jurisdiction. In cross-border e-commerce, this means knowing the competent courts in each country where goods are sold and weighing the cost of defending a claim there before launching an offer across the Union.
What to review
First, the general terms and conditions: check that they distinguish between consumer and business customers, and that jurisdiction and governing-law clauses are valid in each case. Second, liability insurance, which should cover claims in the countries where the company sells.
Finally, data protection, which in May becomes subject to a new European regulation with high penalties. A service well documented in this area reduces the risk of litigation. This text is general information, not legal advice; for your specific case, consult your adviser. Finally, customer service should be ready to resolve complaints amicably: a quick and well-documented reply is almost always cheaper than litigation in another country.
Selling to consumers across Europe means preparing for disputes across Europe.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
