12.103 An example of the difficulties that might arise, especially in financial services and investments, can be seen from the parallel proceedings in England and Greece in the case of Standard Bank of London Ltd v Apostolakis.199 The defendants were a wealthy Greek couple living in Athens. Mr Apostolakis was a civil engineer by profession, but also a property developer.200 His wife was a lawyer, practising in family law.201 The couple had substantial deposits in foreign exchange, mainly with banks in London and Geneva. They invested some £400,000 each year.202 However, their overall portfolio was ‘undoubtedly conservative, with other investments being primarily in bonds and mutual funds’.203 The couple embarked on a far more adventurous arrangement with a London-based bank. They entered into an umbrella agreement, which involved them agreeing that the bank would make forward purchases of European Currency Units (‘ECUs’) on their behalf in exchange for Greek drachmas.204 The profits from such investments arose from the difference between the interest rate payable on the ECU and the rate payable on the Greek drachma. The investor would borrow ECUs at the lower rates of interest and use those funds to buy drachmas for deposit. The primary risk associated with this investment was any devaluation of the drachma.205 At the beginning of this agreement, the couple had to make two margin deposits with the bank in London to support the foreign currency trades. These totalled US$1.1 million. Within seven months from the agreement, the couple had entered into 28 separate transactions with the bank with a resulting exposure of some US$7 million.206 Some 16 of these had been closed, but 12 remained opened when, over a weekend, the Greek (p. 528) government devalued the drachma.207 The next working day, the bank closed the couples’ 12 remaining transactions, creating a loss for them on the contracts, and as a result the bank forfeited their margin deposits.
12.104 Mr and Mrs Apostolakis began proceedings in Athens against the bank.208 Before being served with the Greek proceedings, the bank had started its own proceedings in England seeking an anti-suit injunction to restrain the Greek proceedings on the basis of the English exclusive jurisdiction agreement. The bank sought summary judgment on their claim, and the trial of preliminary issues was ordered. The first issue concerned whether there was an exclusive jurisdiction clause between the parties. The English court held that there was. The second issue was whether the contract or contracts made between the Bank and the defendants were consumer contracts for the purposes of Article 13 of the Brussels Convention and/or Unfair Terms in Consumer Contracts Regulations which implemented the European directive (93/13/EEC).
The English court held these transactions were consumer contracts. Longmore J held that ‘[i]t is certainly not part of a person’s trade as a civil engineer or a lawyer…to enter into foreign exchange contracts’.209
The court then considered whether the couple were engaged into another trade by reason of the contracts they had made. Longmore J held:
Their contracts were seen as financial services investment contracts. The bank had submitted that the sheer scale of the 28 contracts militated in favour of the conclusion that the defendants were acting as traders in foreign exchange. The English court thought that the scale of the contract cannot be determinative whether it was a consumer contract.211
Longmore J also rejected the bank’s submissions, based on the observations of the Court in Benincasa
that European law required a court to classify as a consumer contracts only those concluded for the purpose of satisfying an individual’s own needs in terms of his private consumption. On the evidence before the court, both the original umbrella agreement and the subsequent individual contracts made under it, were to satisfy the needs of Mr and Mrs Apostolakis:
(p. 529) 12.107
In the subsequent decision in Standard Bank London Ltd v Apostolakis (No 2)
David Steel J expressed a preliminary views on that the London jurisdiction clause was unfair within the meaning of the Unfair Terms Consumer Contract Regulations 1994 and/or 1999 and was not binding on the defendants:
12.108 Shortly after the second English decision in Athens, the Polimeles Protodikeio (Multi-Member First Instance Court) ruled in the defendants’ Greek action against the Bank. The Greek Court, despite being fully aware of the judgments in England, determined they were not binding on them,216 and came to the opposite conclusion, holding that the contracts entered into by the couple did not constitute consumer contracts. In the light of the English jurisdiction clause, they declined jurisdiction.217 The Greek court drew a distinction between investment transactions, such as the purchase of unit trusts and stock exchange transactions that involve the ‘average consumer’, which they described as ‘persons who are not specialized in this specific sector’, and those in which the participants may be regarded as ‘quasi-professional’.218 Given the transactions being entered into by Mr and Mrs Apostolakis, the Greek court concluded that the couple did ‘not follow the paradigm of the average saver’ and were ‘not in need of the protection afforded to inexperienced and ignorant customers’.219 Under the influence of Greek domestic law, which declares that the repeated carrying out of an objectively commercial transaction causes a party to acquire the capacity of a trader, even if he has another non-trading profession,220 the Greek court ‘concluded without any hesitation’ that Mr and Mrs Apostolakis had been engaged in ‘entrepreneurial activity’ regarding both the original umbrella agreement and the subsequent forward exchange contracts. ‘Moreover, it can be concluded that these contracts did not aim at satisfying own needs in terms of private consumption.’221 The transactions were entered into ‘for the purpose of profiting’.222 The Greek Court saw the contracts as ‘objectively commercial’.223 The ‘business relationship’ between the parties constituted ‘a commercial activity’ for Mr and Mrs Apostolakis ‘who, by carrying out the above acts and by operation of law, had acquired the capacity of traders’.224 Alternatively, the court relied on Article 281 of the Greek Civil Code,225 which provides that ‘the exercise of a right is prohibited where it manifestly exceeds the bounds of good faith, morality or the economic (p. 530) or social purpose of that right’. To afford the defendant’s consumer protection would be to allow the abusive exercise of those rights.
12.109 The difficult question of which first instance court was correct has attracted considerable thought among English scholars, who have reached differing conclusions as both regards the correct approach and the result in Standard Bank.226
12.110 In Germany, the Bundesgerichthof has held that German courts had consumer contract jurisdiction over a Swiss defendants under the Lugano Convention227 in relation to asset management228 and/or hedge fund transaction,229 even though each contract contained Swiss choice of law and exclusive jurisdiction clauses. The court held, by analogy with Article 5 of the Rome Convention,230 that the latter contract was for the supply of services and the concept of ‘provision of service’ ought to be broadly interpreted, and this included all contracts in which a business related service is promised to the consumer.231
12.111 Recital (26) of the Rome I Regulation emphasizes that financial services such as investment services are within the scope of consumer contract protection.232 Disputes like Standard Bank involving high-value cross-border trading in the financial services/investments field may surface in the future.233 Certainly, they have already in relation to tort jurisdiction disputes generally.234
12.112 Ultimately, the question of when a customer becomes a trader may prove to be a factual matter that depends on both subject matter and purpose of the contract and the sheer volume or repetition of the transactions involved. As Professor Hill put it:
A classic car enthusiast does not trade in used cars as a second hand car dealer traders, but if the enthusiast’s buying and selling activities are sufficiently extensive, it is reasonable to conclude that the enthusiast is carrying on a secondary trade.235