In a recent case, the Hungarian Supreme Court had to decide whether a Hungarian undergraduate student studying economics and carrying out international forex transactions can be considered as a “consumer” and thus eligible for starting litigation at his residence, in Hungary against the foreign platform service provider?
Facts
An undergraduate student, domiciled in Hungary, studying economics (“Plaintiff”) traded on the foreign exchange market from August 2014 to January 2015, under a contract (“Contract”) concluded with a brokerage firm established in Cyprus through a website provided by the latter (“Defendant”).
The Plaintiff made profit on one of the accounts held by the Defendant and, in January 2015, he submitted a request for a transfer of the profit to the Defendant. However, the Defendant refused the payment.
Relying on his status of consumer, the Plaintiff started litigation for the profit in Hungary where he was domiciled.
The Defendant primarily sought the dismissal of the action on the grounds of lack of jurisdiction of the Hungarian courts. He argued that the Plaintiff could not be considered as a consumer.
Regarding the merits of the case, the Defendant argued, among others, that the law applicable to the Contract is not the Hungarian law, but Cypriot law.
First and second instance court
Both the first and second instance court found that the statement of claim of Plaintiff was well founded on the merits and ordered the Defendant to pay the requested amount.
Concerning the Defendant's objection to jurisdiction, relying on the case-law of the Court of Justice of the European Union (CJEU), the second instance court held that the conclusion of the Contract did not fall within the Plaintiff's professional activity. Consequently, the Contract was a consumer contract which allows to start litigation in Hungary, the domicile of the Plaintiff.
Hungarian Supreme Court
The Defendant submitted a request for judicial review of the final judgment to the Supreme Court of Hungary.
According to the Supreme Court, to decide on the question of the jurisdiction it was necessary examine whether the Plaintiff had concluded the Contract with the Defendant as a consumer. The special provisions of Brussels Ia Regulation are applicable only if, among other things, one of the contracting parties acts in a consumer capacity.
Based on the relevant case-law of CJEU, the Supreme Court laid down that the second instance court rightly established that the Hungarian court had jurisdiction. The Plaintiff's sole purpose in concluding the Contract was to satisfy his private consumption needs. It was, therefore, correct to conclude that the special rule of jurisdiction laid down in the Brussels Ia Regulation for consumer contracts was applicable to the present case.
Thus, the jurisdictional objection of the Cypriot Defendant was unfounded.
However, the Defendant's secondary request concerning the applicable law was successful as the Defendant rightly complained that the courts in the case did not apply Cypriot substantive law and did not clarify its content.
Consequently, the Hungarian Supreme Court set aside the final judgment and ordered the first instance court to start a new procedure and issue a new decision on the merits of the case.
Comment
The question in the present case was whether the Plaintiff concluded the Contract with the Defendant as a consumer within the meaning of Article 17(1) of the Brussels Ia Regulation, and whether he can invoke Article 18 (1) of the Regulation.
The latter provision created an exception from the actor sequitur forum rei principle of the Brussels Regime, based on which defendants can be sued at the place of their domicile as a main rule.
Article 18 (1) of Brussels Ia Regulation allows consumers to bring legal proceedings either in the Member State where the defendant is domiciled or before the courts of their own domicile.
When it comes to Article 17(1) of the Regulation, the CJEU has made several decisions which have developed case law on the qualification of a consumer.
Among others, in the Jana Petruchová v FIBO Group Holdings Limited case, the CJEU laid down that, among others, the value of the transactions carried out under contracts, possible knowledge or expertise in the field of financial instruments are irrelevant to the question of the classification of the client as a "consumer" within the meaning of Brussels Ia Regulation.
Furthermore, in AU v Reliantco Investments LTD, Reliantco Investments LTD Limassol Sucursala Bucureşti case, the CJEU concluded that for the purposes of that classification, among others, factor such as the fact that that person carried out a high volume of transactions within a relatively short period is, in principle, irrelevant.
Based on the above case-law, the Supreme Court examined only whether the Contract was for the Plaintiff's private consumption or whether it was part of his professional activity.
The decision of the Supreme Court meant that FOREX transactions used for satisfying personal needs of natural persons will be considered consumer contracts in Hungary.
Therefore, customers domiciled in Hungary can initiate proceedings under the Brussels Ia Regulation in front of the Hungarian courts against FOREX platform providers registered in other EU member states, or even in third countries.
In the article, we analysed the Hungarian Supreme Court decision published under No. BH 2023.9.219 (Kúria Gfv.III.30.388/2022/6.
By Richard Schmidt, Partner, and Peter Korozs, Junior Associate, SmartLegal Schmidt & Partners