EU Rules against Croatian Law on Retroactive Invalidation of Loans

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ZAGREB, February 14, 2019 – The Court of Justice of the European Union on Thursday ruled that Croatia’s legislation on retroactive invalidation of loans concluded with foreign lenders not authorised to provide credit services in that Member State is against the EU acquis if the legislation is not applied also on Croatian lenders.

The Luxembourg-based court concludes “that EU law precludes legislation of a Member State under which credit agreements and other legal acts based on those agreements concluded with a lender which is established in a Member State other than that of the recipient of the service and which does not hold all the necessary authorisations, issued by the competent authorities of the first Member State, are invalid, retroactively, from the date on which they were concluded.”

This ruling was made regarding the case of a Croatian national, Anica Milivojević, who in 2007 concluded a credit contract with the Reiffeisenbank, based in Austria, on a non-renewable credit agreement in the sum of 47,000 euro.

“The loan was taken out using an intermediary resident in Croatia and the agreement contains an alternative jurisdiction clause in favour of either the Austrian or the Croatian courts. As security for the repayment of the loan, Ms Milivojević also signed a notarised deed relating to the creation of a mortgage based on that agreement which was subsequently entered in the Croatian land register,” the EU court says in its press release.

In 2015, the Croatian national brought an action before the Rijeka-based Municipal Court against Raffeisenbank for a declaration of invalidity of the credit agreement and of the notarised deed and for the removal of the mortgage from the land register. While Raiffeisenbank argues that that agreement was concluded in Austria, Ms Milivojević asserts that it was concluded in Croatia.

On 14 July 2017, a national law entered into force which provides for the retroactive invalidity of credit agreements concluded in Croatia with a foreign lender which does not hold the authorisations or approvals required by the Croatian authorities and which could be applicable to the dispute in the main proceedings. “By today’s judgment, the Court states that it has jurisdiction to examine the compatibility of the Law of 14 July 2017 with the freedom to provide services.

“In that regard, although Croatia argues that EU law does not apply to the agreement at issue because that agreement was concluded prior to the date of Croatia’s accession to the European Union, that argument cannot be accepted, since the effects of that agreement continue to make themselves felt after that date.

“Moreover, as is clear from the Act of Accession of Croatia, the provisions of the original Treaties are binding on the Republic of Croatia from the date of its accession, with the result that they apply to the future effects of situations arising prior to that date,” the EU court says.

With regard to the freedom to provide services, “the Court points out that that principle requires the elimination of all discrimination on grounds of nationality against providers of services established in other Member States and the abolition of any restriction which is liable to prohibit, impede or render less attractive the activities of a provider of services established in another Member State.”

“Noting that, for the period between 1 July 2013, the date of the accession of Croatia to the EU, and 30 September 2015, only credit agreements concluded with non-authorised lenders which have their registered office outside Croatia are invalid, the Court considers that, for that period, the Croatian law directly discriminates against lenders established outside Croatia.

“From that date, since the invalidity regime applied without distinction to all non-authorised lenders, the Law of 14 July 2017 constitutes a restriction on the exercise of the freedom to provide services,” the EU courts warns.

More news on Croatia and the European Union can be found in the Politics section.


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