Thursday, 14 September 2017

Procedural obstacles to tackle Swiss francs credits - AG Wahl in Gavrilescu (C-627/15)

AG Wahl issued an opinion today in the case of a Romanian couple, Gavrilescu (C-627/15), who have concluded a credit contract in Swiss francs with Volksbank Romania. The contract obliged them to pay back the loan in the same currency. Such contracts used to be very popular in Central and Eastern Europe, as they were perceived as protecting the borrowers from currency fluctuations - with Swiss francs being perceived as stable, whilst local currencies - not so much. Unfortunately, with the financial crisis and the significant depreciation of local currencies against Swiss francs, a lot of people got in financial trouble with their mortgage and other credit payments, as they kept on receiving their salaries and pensions in local currency but had to pay the credit back in Swiss francs. Of course, we could argue that they took that risk knowingly, choosing to conclude a contract in a foreign currency, but before such a statement would be made, we'd need to consider that 1. this might not have been a conscious choice, as banks could present only credit offers in Swiss francs to consumers; 2. there was a long tradition in these countries of contracts being concluded in foreign currency rather than local one, which significantly impacted estimation of risks and decision-making.

Gavrilescu argued that terms on repayment of the loan in foreign currency were unfair, as they placed the risks of possible fluctuations of currency exchange rates on consumers. Despite the couple settling with the bank, the referring court asked for the preliminary reference procedure to continue, seeking clarification of the nature of core terms in such contracts, to assess whether they could be subject to the unfairness test. Moreover, as the contract gave a unilateral right to the bank to converse the rate of repayments from Swiss francs to the local currency, if certain conditions were fulfilled, but did not grant such a right to consumers - the Romanian court asked about the applicability of unfairness test to such a term. 

Unfortunately, AG Wahl argues that all these very interesting and very pertinent questions will need to remain unanswered, considering that the case has been settled and, therefore, they are now purely hypothetical and answering them would potentially violate the principle of individual autonomy (the right of the parties to settle and end the proceedings) and of sound administration of justice. None of the substantive questions is, therefore, discussed in the opinion. We leave it to our readers to look up the analysis of the civil procedure-related questions.

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