Last Thursday the Court of Justice issued a judgment in the Croatian case Milivojević (C-630/17). Ms Milivojević concluded a credit agreement through an intermediary to obtain funds for the extension and renovation of her house, to create apartments to be let for tourists. Part of the loan might have, however, been used for private purposes. The credit was secured by the mortgage on the house and was supposed to be paid back from profits that Ms Milivojević would acquire by letting the apartments. The credit agreement was concluded with the Raiffeisenbank, which turned out to be considered a 'non-authorised lender' in Croatia, as it was established in another Member State and was not authorised to operate in Croatia by the Croatian National Bank. Contracts concluded with non-authorised lenders may be declared null and void in Croatia with retroactive effect, which is what Ms Milivojević applied for.
The referring court had questions about the validity of its jurisdiction under the agreement, which stated that either the courts of the domicile of the debtor or of the registered seat of the bank were competent in case of disputes. In the procedure the parties were disputing the place of conclusion of the agreement, which could determine jurisdiction - Raiffeisenbank claimed it was Austria, Ms Milivojević - Croatia. Moreover, the referring court wondered whether Ms Milivojević could be considered a consumer, which would grant her exclusive jurisdiction rights. Furthermore, the questions of the compliance of the Croatian law allowing to invalidate credit agreements concluded with non-authorised lenders established in other Member States than Croatia with retroactive effect was raised.
Having read the facts, most of us would immediately deny the status of a consumer to Ms Milivojević in this particular transaction. She is openly admitting to having taken out the loan for the purpose related to conducting a business activity - letting out parts of her house to tourists. In light of the Gruber case, demanding that the use for business purposes was merely negligible, this situation does not seem to qualify as a consumer transaction, even if in the process of renovation of her house from the acquired loan money Ms Milivojević would have also improved parts of the house, in which she herself had lived.
The Court relies more on the recent Schrems judgment, but still concludes that
"Ms Milivojević can be considered to have concluded the agreement at issue as a consumer only if the link between that contract and the professional activity in the form of tourist accommodation services is so marginal and negligible that it appears clearly that that contract was concluded essentially for private purposes." (para. 93)
Retroactively invalidating (consumer) credit agreements
The CJEU states that EU law (specifically Article 56 TFEU on the freedom of the provision of services) precludes Croatian law allowing to invalidate credit contracts with non-authorised lenders, who are established in another Member State, from the date of conclusion of that agreement, even if it was concluded before the entry into force of that Croatian law. Whilst it may be necessary for national law to ensure that credit agreements concluded by weaker parties are legal and afford them sufficient protection, this objective may be achieved by less restrictive measures (see in particular further para 73-74 of the judgment).
Determining competent courts
Further, Croatian law is incompatible with EU law by providing for different jurisdiction rules than these set out in Regulation No 1215/2012 (Brussels I recast). See further on these issues: paras 80-84. Finally, there was a question whether exclusive jurisdiction of Article 24(1) Regulation 1215/2012 would apply in this case, as it applies to actions relating to rights in rem in immovable property. The CJEU decided that an action for a declaration of invalidity of a credit agreement and of the notarised deed relating to the creation of a mortgage taken out as a guarantee for the debt arising out of that agreement does not fall within that concept (see para 105). However, an action for the removal from the land register of the mortgage on a building - would be covered.