In a recent case, Horatiu Ovidiu Costea v. Volksbank Romania, the Court of Justice of the European Union (the "ECJ") clarified the meaning of "consumer" under the EU directive on unfair terms in consumer contracts (Directive 93/13/EEC, the “Unfair Contract Terms Directive”). The Court concluded that a practising lawyer who concluded a credit agreement with a bank and provided property belonging to his law firm as security is a "consumer" within the meaning of the Unfair Contract Terms Directive.

In the case, which involved Mr. Costea’s challenge of unfair provisions of a loan agreement, the Romanian court requested a preliminary ruling from the ECJ on whether the claim fell under the Unfair Contract Terms Directive considering that Mr. Costea acted in his professional capacity when providing for the security to the loan agreement.

Mr. Costea concluded the loan agreement under the following conditions:

  • The repayment of the loan was secured by a mortgage registered against a building belonging to Mr. Costea’s law firm.
  • Mr. Costea signed the credit agreement in his capacity as both the borrower and the representative of the law firm which acted as the mortgage guarantor.
  • The mortgage was subsequently created by a separate notarised agreement between Volksbank Romania and Mr. Costea's law firm.

The ECJ held that the definition of “consumer” is objective and must be determined according to whether the person is acting for purposes relating to his trade, business or profession in the specific agreement. Where a person concludes a contract partly for purposes outside of his profession and partly for purposes relating to his profession (as in the present case), the contracting party should be considered to be a consumer if the professional scope was not predominant within the overall context of the main agreement.

Specifically, the ECJ held:

  • a natural person who practises as a lawyer and concludes a credit agreement with a bank, in which the purpose of the credit is not specified, may be regarded as a “consumer” within the meaning of Directive 93/13/EEC, where the credit agreement is not linked to that lawyer’s profession, and
  • the fact that the debt arising out of the credit agreement is secured by a mortgage taken out by that person in his capacity as representative of his law firm and involving goods intended for the exercise of that person’s profession, such as a building belonging to that firm, is not relevant to the qualification as “consumer”.