ElectronicPayment

19 December 2002

Ruben Peeters

Earlier this year the Brussels Court of Appeal delivered a severe judgement against Banksys, the Belgian provider of electronic payment services for ATMs and retail outlets, using the C\\zam system. Banksys has a monopoly over the operation of these systems in Belgium. In April 2001 Banksys informed its retail customers that interruptions would take place in the services it provided because of measures it had to take in connection with the conversion to the Euro. Banksys acknowledged that these interruptions might briefly prevent consumers from using the payment system and apologised for the inconveniences.

In May and June 2001 Banksys issued press releases dealing with shortcomings in the payment system, such as a slowdown in processing payments in department stores and incidents where some bankcards were refused by ATMs without reason. Banksys stated that it was doing all it could to sort out the problems being experienced by retailers, and went so far as to advise consumers to use cash rather than rely on electronic payment methods during weekends. The Banksys network was also completely unavailable at some locations on certain days.

As a result of these disturbances to normal service the Belgian Union of Independent Enterprises (UNIZO), the Belgian Union of Drugstores (VDV) and two retailers applied for an injunction against Banksys to compel it to ensure continuity of service. The lower court rejected the application but it was granted on appeal.

The Belgian Court of Appeal decision was based on the terms of the standard agreement governing Banksys’ relationship with the retailers, which provided that “Banksys, as well as the banks that are connected to the network, commit themselves to carry out the transfers correctly and timely”, and that “as soon as the Banksys computer centre receives the order for the electronic transfer, the client is credited with the amount of the transaction that is carried out on its terminal.” The Court of Appeal held that these provisions implied clear obligations to achieve a certain result (“obligation of result”). The service provider who fails to achieve such results is presumed liable for this failure. It is open to the service provider to advance a defence of impossibility under the force majeure provisions, but the burden of proof lies with the service provider as the party seeking to rely on the defence. By contrast, it is much easier for the service provider to fulfil an obligation to use reasonable endeavours, and the burden of proving that it has not fulfilled the obligation lies with the claimant.

The Court of Appeal granted the injunction sought by the retailers on the grounds that Banksys was contractually obliged to achieve a certain result. Moreover, the Court stated that, because Banksys offers these electronic payment services as an alternative to cash payment, it should ensure the same degree of reliability as cash payment, under all circumstances.

The Court stated that Banksys saw future interruptions in service as inevitable, and appeared to consider – wrongly, in the Court’s view – that reasonable endeavours were sufficient to satisfy its obligations. It was held that because of its contractual obligations and its position as a monopoly provider of these services in Belgium, Banksys was obliged to carry out all electronic transfers in a correct and timely manner i.e. it must, save where conditions of force majeure prevailed, ensure the continuity of its electronic payment systems.

The order was subject to a penalty of €200.000 each day a discontinuity of service occurred.

On the other hand, the Court expressly recognised Banksys’ right to decide to shut down its system for short periods for technical reasons, provided it warned customers of this. Therefore, it can be concluded from the judgment that such technical grounds may constitute force majeure, for which the service provider cannot be held liable. A warning to customers, if possible, seems advisable.

It is not clear whether other service providers operating in Belgium will be treated with the same degree of severity. However, Belgian case law appears generally unsympathetic toward service providers. It is advisable therefore that service providers carefully examine their contracts to determine what their obligations are in relation to the provision of a continuous service.