Previous decision-making practice – students outside consumer protection law

In Czech decision-making practice, the view has long been upheld that the contractual relationship between a student and a private university cannot be subsumed under the concept of a consumer contract. This essentially stemmed from a single decision of the Supreme Court from 2014[1], in which the Supreme Court, when assessing the application of the financial limit for the admissibility of an appeal under Section 238 par. 1 lett. c of the Civil Procedure Code, emphasized the legal form of the plaintiff (a private university) as a public benefit company, and the public nature of the service provided, which enables the implementation of the constitutionally guaranteed right to education within the meaning of Article 33 par. 1 of the Charter of Fundamental Rights and Freedoms by ensuring access to higher education. For these reasons, the Supreme Court refused to qualify the relationship between a student and a private university as a consumer relationship.

This conclusion was also confirmed by the Supreme Court's decision from 2018[2], according to which, in order to assess a contract for studying at a private elementary school from the point of view of Section 1810 of the Civil Code, it is not sufficient to simply find that it is a private school established in the form of a limited liability company (i.e. a business corporation established for the purpose of doing business and making profit), but it is necessary to take into account the provision of a public service[3] – education – emphasized by precedents , as well as the method of financing the school facility (especially from public funds) or the disposal of the profit made.

As is customary, these decisions have caused a striking "snowball effect " in the decision-making practice of lower instances, when courts in disputes between private schools and their students have simply ruled out the application of consumer protection provisions, disregarding the specific circumstances of individual cases.[4] However, there are also honorable exceptions that (in my view, rightly) rejected excessive generalization.[5]

The concept of consumer protection through the lens of the interpretation of the CJEU

However, the Constitutional Court pointed out in its Ruling that the above-described concept of the Supreme Court contradicts the case law of the CJEU, which formulates the basic principles of European consumer law. In particular, the decision:

- Zentraler zur Bekämpfung unlauteren Wettbewerbs (judgment of 3 October 2013, case no. C-59/12), according to which even entities of a public nature (in this case a public health insurance company) must be considered entrepreneurs if they carry out gainful activity, regardless of their legal form and activity in the public interest;

- Kamenova (judgment of 4 October 2018, case no. C-105/17), where the CJEU, when classifying an entity as an entrepreneur, emphasized the need to take into account the specific factual circumstances of the contractual relationship and the specifics of the performance of commercial activities, such as its consistency, profit-making purpose, information asymmetry, VAT payer status, etc.;

- Karel de Grote (judgment of 17 May 2018, case no. C-147/16), according to which even a publicly funded university may be considered an entrepreneur in some activities if these activities show signs of an economic service provided for payment.

The CJEU has therefore long insisted that no activity – including education – is a priori excluded from the scope of consumer law if it is provided for payment and in the context of an economic/commercial activity. At the same time, it recognises a split status, where one entity may be an entrepreneur in some activities but not in others.

Conclusions of the Constitutional Court and impacts in practice

Referring to the above-summarized conclusions of the CJEU, the Constitutional Court in its Ruling quite clearly and resolutely[6] rejected the previous interpretation according to which private universities are excluded from the consumer relations regime. On the contrary, it stated that a private university, which is a commercial company registered in the commercial register (in this specific case, it was a school in the form of a joint-stock company), carries out economic activity systematically, for a payment and in a competitive environment, and therefore, within the intentions of the decision-making practice described above, meets the characteristics of an entrepreneur, while entering into a contractual relationship with a student within the framework of its entrepreneurial activity and with an entrepreneurial intention. On the other hand, the student acts outside the framework of entrepreneurial activity, and therefore there is no reason to deny him consumer protection.

Although in this specific case the intervention of the Constitutional Court only led to the case being returned to the Supreme Court for a substantive hearing of the appeal, the Ruling has much more far-reaching effects, as, with regard to its relatively unambiguous formulation[7], it leaves absolutely no room for a different interpretation and considerably expands the rights of students not only on a procedural level (by accessing the Supreme Court regardless of the value of the dispute, but also by out-of-court dispute resolution at the Czech Trade Inspection Authority), but also on a substantive level, through the protective provisions of the Civil Code or the Consumer Protection Act, including the entrepreneur's information obligation, putative abusive arrangements or the preference for the interpretation most favorable to consumers.

Although the Ruling formally applies only to private universities, it cannot be ruled out that similar principles may also be applied to some activities of public universities in the future (cf. the above-mentioned decision in the Karel de Grote case ). For example, if a public university provides, in addition to standard studies, paid lifelong learning programs, language courses or professional training with a clear commercial focus, these activities may also be qualified as entrepreneurial, and the students of these programs as consumers.

The Ruling thus represents a fundamental breakthrough not only in legal theory but also in the everyday practice of private educational institutions. In the context of the growing importance of the private universities sector in the Czech Republic, the Constitutional Court has opened the way to consistent protection of students and made it clear that education provided for a payment is subject to the same rules as any other service on the market. Private schools therefore have no choice but to adapt to these rules and revise their contractual documentation accordingly.

[1] Resolution of the Supreme Court of 26 October 2016, file no. 33 Cdo 4532/2014

[2] Judgment of the Supreme Court of 17 October 2019, file no. 33 Cdo 3805/2018

[3] within the meaning of Section 2 par. 3 of Act No. 561/2004 Coll., on pre-school, primary, secondary, higher vocational and other education (Education Act), as amended.

[4] cf. e.g. judgment of the Municipal Court in Prague dated 25 February 2021, file no. 25 Co 1/2021-185

[5] cf. e.g. judgment of the District Court in Cheb of 3 June 2022, file no. 9 C 421/2021-205

[6] In parts of the decision, the Constitutional Court even called the Supreme Court's arguments "absurd."

[7] cf. the first paragraph of the Ruling: "The Constitutional Court is for the first time addressing the question of whether a contract concluded between a student and a private university is a consumer contract. According to the Constitutional Court, this is the case, therefore an exception to the statutory exclusion of civil appeal will apply.

Source: epravo.cz