After the Court of Justice of the European Union (ECJ) issued on 3 October 2019 the long-awaited ruling on Swiss franc loans, most commentators found in unison that conclusions following from that ruling mean that Swiss franc loans should be detached from Swiss francs, meaning that the principal amount of loan should be expressed in zloty in the amount actually drawn by the borrower and the interest rate should be calculated according to a preferential LIBOR interest rate increased by the bank’s margin. This would lead to significant borrower’s overpayments, of course, which should be returned. Yet careful reading of the judgment does not provide sufficient grounds for such conclusions.
Contrary to popular opinion, the ECJ’s judgment is rather conservative. The ECJ suggested that when a local court finds a clause allowing the bank to apply its own conversion tables, mortgage loan contracts linked to foreign currencies should, in principle, be declared void. According to the judgment, the Swiss franc contracts should not continue in existence after the unfair terms were removed, because removal of these clauses would exclude the indexation of such loans to foreign currency, thereby preventing the application of advantageous LIBOR interest rate, possibility to apply which follows directly from introduction of indexation mechanism to the contract. To this effect, the ECJ refers to its previous judgement issued in Dunai case where it held that contractual terms relating to exchange rate risk define the main subject matter of an indexed loan.
Practically, it means that without an indexation clause (which indicates currency exchange rate for that purpose), operation of an indexed loan is not possible. This is, however, contradicted by the position of the Supreme Court which in its case law finds it possible to replace a loan indexed to a foreign currency into a PLN loan while retaining LIBOR-based interest rate, as a result of finding the clause on applying by the bank its own conversion tables to be abusive. Therefore, it is not unlikely that following the ECJ’s judgment, the Polish Supreme Court will adjust its position in that regard, or at least will apply more profound reasoning, taking into account contradictory conclusions of the ECJ.
Another substantial conclusion following from the ECJ’s judgement is that loan contracts may be found invalid only when a consumer agrees to it. The ECJ pointed out that in matters of consumer protection in connection with using abusive clauses by traders, if the national court finds that the contract cannot be performed without abusive clauses, court may not find the contract invalid without the consent of a consumer. It is the consumer who should decide whether to benefit from this protection or willfully waive it while being duly informed of the consequences.
According to the ECJ, in a situation, where it is not possible to keep valid a contract without abusive clauses, it should be a consumer’s decision to annul the contract or to resign from the protection whatsoever and decide to continue the performance the contract containing abusive clauses.
In view of the ECJ position is seems rather unlikely to keep PLN loans with LIBOR-based interest rate. Therefore, it might be possible that Swiss franc mortgage holders will have to face a choice whether to annul the contract with all consequences thereof, such as the need to repay the entire loan with immediate effect, or to resign from pursuing claims against bank and continue to perform the contract on the same terms.
Due to complicated legal status of the borrowers whose contracts may potentially be declared void, taking an informed decision with that regard may prove very difficult, and to this end, further judicial decisions verified by the Supreme Court will be fundamental.
In that context, in spite of appearances, the ECJ’s judgment does not seem advantageous for the Swiss franc mortgage holders.
The coming months will show the position of Polish courts in the light of the ECJ’s verdict. But even more important will be the standpoint of the Polish Supreme Court whose opinions have many times diverted from the opinions of the ECJ.
Director of the Commercial Law and Property Department, Advocate
TGC Corporate Lawyers
Senior associate, Advocate
TGC Corporate Lawyers
TGC Corporate Lawyer