The protection afforded to consumers by EU law is not only limited to the performance of the contract, but also applies afterwards; in case of annulment of the contract due to the unfairness of one of the terms, the legal and factual situation that would have existed if no tortious clause had been included in the contract must be restored – the Court of Justice of the EU ruled Thursday in a case about a loan issued in Swiss francs.
After several years of implementation of the mortgage loan agreement indexed to the Swiss franc, consumers decided that the provisions contained therein, which allow the bank to freely determine the exchange rate of the loan indexation currency, may constitute unfair terms within the meaning of European law ( Article 3(1) of Directive 93/13/EEC). So they filed a lawsuit.
According to consumers, after the removal of the indexation clause, the amount of the installment without indexation should be determined and the loan should be considered as issued in the Polish currency with an interest rate based on the LIBOR index. Nevertheless, they agree to the dissolution of the contract.
Consumer process
The Polish court tended to regard the indexation provisions as illegal. At the same time, he did not rule out the possibility that the contract could not be performed objectively due to the deletion of the contested provisions. As a result, the contract would be declared invalid and consumers and banks would be required to refund the benefits.
Consumers who file a lawsuit, however, have no significant savings. Therefore, the Polish court has asked the Court whether the consequences of the annulment of the contract should be assessed only from the perspective of national law (i.e. to circumvent Directive 93/13) and, secondly, whether it is mandatory to situation of the consumer on his own initiative to check whether the possible termination of the contract will not expose him to particularly unfavorable consequences. Another question concerns the admissibility of replacing an unfair contract term with a provision of generally applicable law, which provision is not directly applicable to a particular legal relationship, but would be applied accordingly or by analogy.
In the judgment, the Court pointed out that “the protection afforded to consumers by EU law (Directive 93/13) is not only limited to the period of performance of the contract, but also applies after the performance of that agreement”. On this basis, the CJEU assumed that in the event of a contract being annulled due to the unfairness of one of its terms, it would be for the Member States to regulate the consequences of such annulment through national law, with compliance with EU regulations.
In particular, this regulation should restore the legal and factual situation that would have existed without the abuse clause
– emphasized the CJEU.
In this context, the Court objected to the application of provisions of national law which, in connection with the annulment of the contract, would lead to an equal sharing of losses between the parties.
This solution would undermine the protective effect of Directive 93/13 and would not prevent the trader from using unfair contract terms against consumers in the future
he explained.
The Court also recalled that the protection system established by EU law does not apply if the consumer opposes it. After all, the consumer cannot object that a contract term is unfair and non-binding, thus expressing his free and informed consent to the term and thus avoiding termination of the contract.
However, in order to enable the consumer to give such consent, the national court must indicate to the parties in an objective and exhaustive manner what legal consequences the removal of the unfair term may have, whether or not the parties are represented by a professional representative. Such information is all the more important when failure to apply an unfair term could lead to the annulment of the entire contract, exposing the consumer to claims for a refund
– took note of the Court of Justice of the EU.
In that regard, it is for the national court to take all necessary measures to protect the consumer, in compliance with national law, against the particularly harmful consequences which the termination of the contract could have for him
– concluded the CJEU.
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Source: wPolityce