Supreme Court Makes Two Important Decisions for Consumers and Banks

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Image: Pexels
Image: Pexels

The Franak association brings together former holders of loans pegged to the Swiss franc.

The Supreme Court said that in one of its two decisions, it allowed a review motion against a second-instance court ruling related to the following legal issue, whether “in an appeal against an enforcement ruling and the subsequent proceedings, to have the enforcement declared impermissible, one can insist on the circumstance that points to the nullity of the notarial act (consumer contract), which constitutes the enforcement order in the enforcement proceedings.”

“This is a legal matter that requires the Croatian Supreme Court to adopt a legal position in line with the Court of the EU in the application of the Unfair Contract Terms Directive, which should result in the evolution of law through legal practice,” the court said.

Franak believes this means that the Supreme Court will decide whether enforcement may be carried out if implemented on the basis of an invalid contract, but also on the basis of a contract containing invalid contractual provisions, i.e. on the basis of a partially invalid contract.

“That decision will apply to all loans with the CHF currency clause, but also to euro and kuna-denominated loans with contractual provisions on invalid interest rates,” the association said.

In the other decision, the Supreme Court refused a review motion by a bank, upholding decisions by lower courts and taking the position that as the plaintiff, the bank must compensate the consumer for litigation costs regardless of the fact that the client had withdrawn the lawsuit.

Franak said this decision is not related to a decision on consumers’ right to compensation after the conversion of CHF-pegged loans to euro loans, which it expects the Court of the EU will make by May.

“If, however, the Court of the EU decides that our case is not within its jurisdiction, the decision on conversion and compensation will be made by the Croatian Supreme Court, but this specific review motion has nothing to do with that either,” the association said.

It expressed satisfaction that the Supreme Court president “is doing what he promised to do” and that it expected “the issue of nullity of contracts on CHF-pegged loans to be resolved by Easter.”

The position of Supreme Court president is held by Radovan Dobronić, who on 4 July 2013, as a Zagreb Commercial Court judge, delivered a ruling in favour of the Consumer Protection Association which had sued eight banks with regard to the Swiss franc foreign currency clause and their unilateral decision to increase interest rates.

Dobronić said at the time that the banks had violated consumers’ rights by failing to fully inform them about all the parameters necessary to decide on taking loans.

The ruling on the legal nullity of the currency clause in contracts on loans pegged to the Swiss franc, was later upheld by the High Commercial Court and its ruling was upheld by the Constitutional Court.

For more, check out our politics section.


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