On 10 September 2024, the Luxembourg Consumer Code was amended by a Law of 27 August 2024 (the "Amending Law").
The Consumer Code regulates, amongst other things, contracts concluded between professionals and consumers (i.e. natural persons who are acting for purposes outside of a commercial, industrial, craft or self-employed activity). Its primary goal is to protect consumers and to promote balanced relationships between professionals and consumers.
Article L. 211-2 of the Consumer Code deals with unfair terms (clauses abusives). It provides that any clause or combination of clauses that creates an imbalance in the parties' rights and obligations arising under a contract between a consumer and a professional, to the detriment of the consumer is abusive, void and deemed to be non-existent. Article L.211-3 contains a list of terms that are deemed unfair.
Key amendments under the amending Law
The Amending Law strengthens the protection of consumers under the Consumer Code by, inter alia:
Automatic setting aside of unfair terms by judges
- providing that when judges have the necessary legal and factual information, and after having heard the observations of the parties, they must automatically set aside the application of an unfair term. Whilst this amendment aligns with the position taken by EU courts, it goes a step further than the position previously taken by Luxembourg courts which held that a judge had the right (but not the obligation) to automatically raise the unfairness of a contractual term and as a result set aside such term
Irrefutability of unfair terms listed in Article L.211-3
- providing that the unfair terms listed in Article L. 211-3 of the Consumer Code are to be irrefutably deemed unfair. Whilst a lot of practitioners agreed with this understanding, certain legal authors argued that this was unclear under the former Article L. 211-3 of the Consumer Code.
Nullification of excessive penalty clauses
- adding to the list of unfair terms, excessive penalty clauses (i.e. contractual provisions that assess against a defaulting consumer an excessive penalty). Whilst previously a judge was able to reduce the penalties under such clauses, they are now void in their entirety in contracts with consumers.
Restrictions on termination clauses in contracts of indefinite duration
- adding to the list of unfair terms contained in Article L. 211-3 of the Consumer Code, termination clauses allowing a professional to terminate an agreement concluded for an undetermined duration with a consumer without a reasonable notice period, except in the event there are serious grounds for termination.
The Amending Law further strengthens the position of Luxembourg consumers. Professionals should update their contractual documentation to the extent necessary to avoid being adversely affected by these changes.
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