Price adjustment clauses are crucial for energy suppliers amid rising energy prices. In its settled case law, the Federal Court of Justice (FCJ) has recognised energy providers’ interest in maintaining a lasting balance between contractual obligations. Accordingly, customers were required to object to a price increase within three years, even where the price adjustment clause was invalid. The ECJ has now rejected this approach, which effectively gave binding effect to invalid price adjustment clauses. In its judgment of 24 September 2026 (C-900/24), delivered following a request for a preliminary ruling from the Berlin Court of Appeal, the ECJ strengthened the position of consumers and customers treated as equivalent to consumers, paving the way for potential repayment claims extending far back into the past.
Background
In November 2012, energy supplier SVB – Neues Schweizer Viertel Betriebs + Service GmbH & Co. KG (“SVB”) entered into a district heating supply contract with Glarner Straße 5 GbR (“Glarner”). The contract, which had a minimum term of ten years, was based on SVB’s standard contract template and divided the heating price into several components, including a consumption charge. It also contained two separate price adjustment clauses, one of which related to the consumption charge. With effect from 1 May 2019, SVB – invoking the FCJ’s case law discussed below – unilaterally amended the price adjustment clause governing the consumption charge.
Between 2015 and 2020, SVB billed Glarner on the basis of annually adjusted consumption charges. However, Glarner first objected to the bills in a letter dated 3 July 2019. Glarner subsequently brought an action against SVB before Berlin Regional Court, seeking repayment of amounts overpaid between 2015 and 2018. On appeal, Glarner extended its claim to include overpayments made in 2019 and 2020. It also asked the court to declare that the price adjustment clauses were invalid.
Legal framework and questions referred for a preliminary ruling
The Berlin Court of Appeal held that the price adjustment clause governing the consumption charge was invalid because it violated the transparency requirement under section 24(4), sentence 1 of the Ordinance on General Conditions for the Supply of District Heating (Verordnung über Allgemeine Bedingungen für die Versorgung mit Fernwärme, “AVBFernwärmeV”). The legal questions subsequently referred to the ECJ concerned the consequences of invalid price adjustment clauses in energy supply contracts. To date, German law in this area has been shaped by two strands of FCJ case law. First, under this case law, a long-term energy supply contract containing an invalid price adjustment clause is subject to supplementarily interpretation (ergänzende Vertragsauslegung) allowing customers to invoke the invalidity of price increases only if they object to them within three years of receiving the first annual bill reflecting the increase. This “three-year rule” thus allows unfair contractual terms to continue to have effect under certain conditions. Its purpose was to prevent the invalidity of a price adjustment clause from rendering the entire contract invalid. The reasoning was that, without the possibility of adjusting prices, the balance between the parties’ reciprocal obligations would become untenable, rendering the entire contract invalid under section 306(3) German Civil Code (Bürgerliches Gesetzbuch, “BGB”) (see FCJ, judgment of 1 June 2022 – VIII ZR 287/20, paras. 42 et seq., 49 – juris). Second, the FCJ takes the view that, pursuant to section 4(1) and (2) in conjunction with section 24(4) AVBFernwärmeV, energy suppliers are entitled to amend an invalid price adjustment clause unilaterally with effect for the future if and to the extent the amendment renders the clause valid (see FCJ, judgment of 27 March 2024 – VIII ZR 122/23, para. 18 – juris). This approach was intended to restore the balance between the parties’ reciprocal obligations going forward.
The Berlin Court of Appeal essentially asked the ECJ to determine whether the two strands of FCJ case law outlined above are compatible with Article 6(1) and Article 7(1) of Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts. German law extends the protection under the Directive not only to consumers but also to civil-law partnerships that, like Glarner, act for purposes outside their trade, business or profession.
Article 6(1) Directive 93/13/EEC requires Member States to ensure that unfair terms in consumer contracts are not binding on consumers and that the contract nevertheless remains binding on both parties if it is capable of continuing in existence without the unfair terms. Article 7(1) of the Directive requires Member States to ensure that, in the interests of consumers and of competitors, adequate and effective means exist to prevent the continued use of unfair terms in contracts concluded with consumers by sellers or suppliers.
ECJ’s decision
The ECJ reached the following conclusions:
- Three-year rule: The FCJ’s three-year rule was incompatible with Articles 6(1) and 7(1) Directive 93/13/EEC. Where the invalidity of an unfair term created a contractual gap, Article 6(1) precluded that gap from being filled by general provisions of national law “which have not been subject to a specific assessment by the legislature with a view to establishing a balance between all the rights and obligations of the parties to a contract”. The ECJ indicated that the rules on supplementary interpretation of contracts fell into this category. It further held that permitting courts to salvage unfair terms through judicial interpretation would undermine the dissuasive purpose of Article 7(1) as sellers or suppliers might remain tempted to continue using such terms if the courts could revise them as necessary.
- Effects on the contract as a whole: The rejection of the three-year rule raised the question of whether an invalid price adjustment clause rendered the entire energy supply contract invalid under section 306(3) BGB. The Berlin Court of Appeal had questioned whether section 306(3) BGB was compatible with the Directive since, under the provision, a contract would be invalid if maintaining it would impose undue hardship on even one of the contracting parties (in this case, the energy supplier). The ECJ confirmed that the situation of just one contracting party could not be the decisive criterion. It was now for the Berlin Court of Appeal to examine, in particular, whether applying section 306(3) BGB would have particularly unfavourable consequences for the consumer. In this regard, the wishes expressed by the consumer were the decisive factor.
- Unilateral replacement of an invalid price adjustment clause: The ECJ also found the second line of FCJ case law at issue to be incompatible with Articles 6(1) and 7(1) Directive 93/13/EEC. Accordingly, national legislation or a national judicial practice which enables an energy supplier to make unilateral changes, with future effect, to a price adjustment clause that has been declared void due to its unfair nature was not permissible. In particular, the case law in question did not fall outside the scope of the Directive since section 24(4) AVBFernwärmeV, on which the FCJ had based that line of authority, was not a mandatory statutory or regulatory provision within the meaning of Article 1(2) Directive 93/13/EEC. This was because section 24(4) AVBFernwärmeV did not require the agreed price to be adjusted in the event that an unfair price adjustment clause had been declared invalid, the ECJ said.
Practical significance
The ECJ’s ruling has far-reaching implications for energy supply contracts, the full extent of which remains uncertain. The ruling enables consumers and customers treated as equivalent to consumers to challenge price increases based on invalid price adjustment clauses in court even years later and, where appropriate, seek reimbursement. Energy suppliers therefore face the risk of being permanently tied to the price originally stipulated in the contract, which in many cases may no longer cover their costs.
The true impact of the ruling will also depend to a significant extent on how the German courts, beginning with Berlin Court of Appeal, resolve the many questions of national law left open by the ECJ. Notably, it remains to be seen whether the courts will conclude on the basis of section 306(3) BGB that energy supply contracts containing invalid price adjustment clauses are void in their entirety. While this would eliminate the risk of an increasing imbalance in the reciprocal obligations of supplier and consumer going forward, it would require the restructuring of many customer relationships and entail the complex unwinding of past transactions on the basis of unjust enrichment. If, by contrast, the contracts were to remain in force without the price adjustment clauses, alternative mechanisms for adjusting prices would have to be considered. Either way, questions regarding the limitation period will arise. The response of the German legislature will also merit close attention as the ECJ has confirmed that specific supplementary provisions of domestic law aimed at filling gaps created by unfair terms are permissible in principle.
Following the ECJ’s ruling, energy supply companies should review their existing contracts and standard terms and, where necessary, prepare for potential repayment claims by customers. The judgment also underscores the need for particularly careful drafting of future price adjustment clauses.
Forward
