The CJEU has published its judgment in the Dunai case (C-118/17) last Thursday, in which it continues to specify the terms of declaring unfair foreign currency-denominated loans, following on the Kásler case. We have previously commented on the complexity of the arguments raised in the opinion of AG Wahl in the Dunai case (Consumer protection and rule of law...), evaluating the compliance of Hungarian law with the Unfair Contract Terms Directive. The most interesting part of the judgment is actually the last one - on the competence of national supreme courts in setting binding guidelines for lower courts how to assess unfairness.
To briefly remind the facts of the case: Mrs Dunai concluded a credit agreement denominated in Swiss francs in 2007, even though the loan was advanced to her in Hungarian florints. Just like in the Kásler case, various exchange rates (buying and selling ones) applied to different calculations between the Swiss francs and Hungarian florints - i.e. between the conversion of the loan and its repayments. After the Kásler judgment, Hungarian legislator adopted new laws in 2014 trying to protect Hungarian credit consumers from the harsh effects of having taken out a loan denominated in Swiss francs, but it did not protect them against unfair terms placing the whole of the exchange-rate risk on the borrowers. One such clause was found in Mrs Dunai's contracts.
Terms on exchange difference
The CJEU considers Hungarian 2014 laws, which allow to replace banks' own buying and selling rates of Swiss francs to be replaced by the official exchange rates set by the National Bank of Hungary, effectively altering terms and conditions of the contract, as compliant with the purpose that the UCTD attempts to achieve. This purpose being restoring contractual balance between the parties. However, the CJEU places a condition on this assessment: to the extent that such an assessment prevents the contract terms on exchange difference from being found unfair (as they will be amended to be fair), this may not place the consumer in a worse position than if the unfairness were found. This means that the consumer has to be restored to the legal and factual situation that he would have been in the absence of that term (para. 40-43). Therefore, the national court will need to ascertain "whether the national legislation, which
declared terms of that nature to be unfair, allowed the legal and
factual situation in which Mrs Dunai would have been in the absence of
such an unfair term to be restored, in particular by giving rise to a
right to restitution of advantages wrongly obtained, to her detriment,
by the seller or supplier on the basis of that unfair term" (para. 44).
Terms on exchange rate risk
Terms on exchange risk rate differ from terms on exchange difference, as the first ones fall within the concept of core contract terms, excluded from the unfairness test provided they are transparent, pursuant to Art. 4(2) UCTD (para. 48). If such terms are non-transparent and found unfair, the national court should generally declare the whole contract annulled as a result of finding a core term, without which the contract cannot survive, unfair and thus non-binding (para. 52). Here, Hungarian 2014 laws seem to be in breach of the UCTD as they imply that national courts will keep the contract valid instead (para. 53). The national court may also not substitute the core term by supplementary provisions of domestic law, as this is only possible when the cancellation of the contract would have been to the detriment of the consumer, which was not the case in Mrs. Dunai's situation (para. 54-55).
Competence of national supreme courts to adopt 'binding decisions' on how to examine unfairness
The last part of the judgment considers the scope that national supreme courts have in adopting binding decisions on how to interpret national provisions implementing EU law, so as to guarantee uniformity of this interpretation by lower courts. This is a tricky question, as issuing such binding decisions might lead to national supreme courts deciding on de facto interpretation of EU law provisions rather than just of national law, which competence belongs to the CJEU. Still, the CJEU seemingly recognises the benefit of leaving the scope for national supreme courts to adopt such binding decisions, clarifying certain criteria in which light national lower courts must examine unfairness of standard terms, to ensure consistency in the interpretation of law and legal certainty (para. 63). Why is this recognition illusory though? Because this competence left to the national supreme courts may not take away the lower court's rights to apply for a preliminary reference from the CJEU in these matters or to ensure full effectiveness of EU law and provide consumers with effective protection (para. 64). Consequently, I would not really see it as the CJEU providing the scope for national supreme courts to adopt 'binding' decisions, but rather to issue certain guidelines, which lower courts may still disagree with and not follow.
