International financial markets, why not for consumers?

German version available here

One of the European cornerstones is the freedom to provide services. In principle, anyone in Europe is allowed to offer services across borders, guaranteed and shaped by numerous sector-specific rules and regulations. However, a recently published decision of the German Federal Court of Justice (BGH) clearly shows that the legal possibilities in the banking market reach further than the range of products currently offered to consumers would suggest. Particularly, for banks only represented in individual countries, the potential clientele is larger than most people are probably aware.

In its ruling of 6 February 2020 (Ref.: I ZR 1/19), the BGH had to deal with the intricacies of EU Regulation 260/2012 (SEPA Regulation). The subject of the proceedings was the extent to which a German bank customer in Germany can pay with a bank account from another European country - in the BGH proceedings a Luxembourg account. The customer with residence in Germany wanted to place an order with his account at a German internet retailer. However, when paying, the customer was then confronted with the error message "Invalid IBAN". The error message was due to the fact that the customer had not given a German IBAN.

However, Article 9 para. 2 of the SEPA Regulation clearly states: "A payee accepting a credit transfer or using a direct debit to collect funds from a payer holding a payment account located within the Union shall not specify the Member State in which that payment account is to be located [...]". The internet retailer had infringed this directly applicable rule. Since the BGH also regarded the provision as a market conduct rule within the meaning of Section 3a of the German Unfair Competition Act, it affirmed an overall infringement of competition and the claim for injunctive relief of the plaintiff consumer association against the internet retailer. The judgement had been preceded by a ruling of the European Court of Justice (ECJ) in a case also concerned with the SEPA Regulation in which the ECJ generally affirmed the question of whether Article 9 para. 2 SEPA Regulation serves to protect consumers.

As a consequence, the ruling makes it clear for the banking market that in competition, especially for current account customers, in principle it is not necessary to manage their accounts in each individual European country. Rather, even a German bank can easily service French customers from Germany - for example as a direct bank - without these customers experiencing disadvantages in their daily business. In this respect, the ruling of the BGH can be generalised for the whole European Union without limitation, since the underlying regulation is directly applicable throughout Europe.