The Croatian Supreme Court rendered a new compelling decision in a long-lasting judicial process between consumers and banks concerning the validity of CHF denominated consumer loans by stating that the conversion of loans into EUR denomination does not remedy the nullity of their provisions.
As previously reported in our 6th, 9th and 12th issue, a collective lawsuit was filed in 2012 by consumers with CHF denominated loans against the largest operating banks in Croatia due to significant increases in the exchange rates between Swiss francs and Croatian kuna. It was demanded that the problematic CHF currency clauses and variable interest clauses be declared null and void, which has by now been generally confirmed by highest Croatian courts involved in the dispute.
However, some issues remained unsolved for loans that were in the meantime converted from CHF to EUR. Namely, as a result of strong public pressure in 2015 and after the collective dispute had already been underway, the Croatian Consumer Credit Act was amended to enable consumers to convert their CHF denominated loans to EUR and in this way combat the raging CHF exchange rates. More than 50,000 consumers did so by entering into conversion annexes to their loan contracts with the banks. Following the conversions, some trial courts argued that consumers who converted their CHF loans into EUR were precluded from seeking declaration of nullity of such loans.
However, in its most recent decision published on 12 February 2019, the Supreme Court held that a null contract cannot become valid even if the cause of its nullity is subsequently remedied. The Supreme Court, therefore, concluded that consumers who converted their loans from CHF into EUR could still seek to have such loans declared null and void.
The decision is of great importance for numerous consumers, as calculations have shown that the conversion of loans allowed consumers to recoup around 50% of the amount they would have otherwise benefited from if, for example, variable interest rates clauses were declared null. In order to obtain repayment of the overpaid amounts, consumers had to file individual lawsuits by 13 June 2019, when their claims would have become time-barred by statutory limitations.
Such Croatian Supreme Court reasoning adheres to the ECJ's recent ruling in case C-118/17, which states consumer loans containing null currency clauses cannot become valid even if a state adopts a law by which such clauses are remedied. No national laws may derogate the consumer protection granted under EU law and in such cases, consumers must be left with a final choice – whether they want to be bound by such contracts or not.
It seems that the judicial saga with the CHF consumer loans has entered its final stage. Even so, effective consumer protection is now in the hands of numerous first instance courts and it may take some time for consumers to obtain final decisions in their favour.
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