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Attorney Milena Nowicka
Annulment of Swiss franc loan agreements – how did it look up to now?
How did banks try to discourage borrowers from annulling loans by suing for compensation for non-contractual use of capital?
The CJEU judgment unequivocally resolves the issue of lawsuits for compensation for non-contractual use of capital.
What changed after the CJEU judgment of 15 June 2023?
15 June 2023 is an important date for borrowers with Swiss franc loans who, for years, struggled with rising mortgage instalments. The ruling issued on that day by the Court of Justice of the European Union (CJEU) means that the situation of these borrowers is better than ever before. Although until now most cases concerning the annulment of Swiss franc loans were already ending in success for borrowers (according to statistics, around 96–98%), they now have even fewer reasons to worry. This is because banks will no longer be able to sue them for compensation for non-contractual use of capital.
In most cases, Swiss franc loan agreements contained so-called abusive clauses. These are provisions that grossly violate consumers’ interests. For this reason, they can be treated as invalid from the very beginning. This means that the agreement is usually interpreted as if the prohibited clauses had never been included in it.
According to another groundbreaking CJEU ruling from several years ago, abusive clauses in Swiss franc loan agreements are so essential to the loan itself that borrowers have a choice: either to demand the “de-franking” of the loan (i.e. removal of provisions related to conversion to or from CHF), or to demand the complete annulment of the agreement.
Not without reason, borrowers more often choose the latter option. Declaring an agreement invalid means that the situation must be restored to what it would have been if the agreement had never been concluded. Put simply: each party returns everything it received from the other.
Thus, in the event of annulment, you must indeed return the borrowed principal to the bank. On the other hand, you receive from the bank all instalments paid to date, including interest, margin, and additional fees. It should also be added that each party – the bank and you – has a separate claim for payment in accordance with the so-called two-condiction theory. In short: first, based on the judgment, the bank returns everything it has received from you so far, and if it wants the return of the loaned principal, it must claim it separately. It cannot simply return to you an amount automatically reduced by what you owe the bank.
Annulment of a Swiss franc agreement was, by definition, a major loss for the bank. It did not earn anything from having lent a specific amount to borrowers years earlier. For borrowers themselves, however, the situation was very favourable. Considering the rapidly rising exchange rate of the Swiss franc, and thus high loan instalments, it often turned out that not only was the amount returned by the bank sufficient to repay the entire borrowed sum, but after settlement there could still be tens of thousands of zlotys left in the borrower’s account.
It is therefore hardly surprising that banks increasingly proposed settlements and looked for other ways to prevent borrowers from annulling agreements. This is how the period began in which banks started filing lawsuits for compensation for non-contractual use of capital.
Banks based their arguments on a relatively simple assumption: since the agreement was invalid from the very beginning, borrowers had no legal basis to use the bank’s money. This means that for several, sometimes even dozens of years, they had been using capital to which they were not entitled. Moreover, in this way they made an excellent investment. The property purchased earlier with the borrowed funds probably had a much higher value after years had passed. Borrowers therefore used someone else’s money to make profits, while the bank could not use those funds for other purposes during that time.
The banks’ strategy at the time can therefore be summed up in a few sentences: “Try to annul the agreement, but in response we will sue you for non-contractual use of capital. We will demand interest for the entire period of using our money. The amount will be substantial, so think carefully whether you really want to file a lawsuit.”
And indeed, banks were consistent in this approach, and more and more lawsuits for compensation for non-contractual use of capital reached the courts. No wonder that many borrowers were simply afraid to fight for their money and annul their agreements. However, this changed on 15 June 2023.
The lawsuits filed by banks were not being decided at the time, but were awaiting the CJEU’s position on this matter. This finally happened on 15 June 2023. Once again, the Court sided with borrowers.
The CJEU noted that if banks had not used prohibited contractual provisions, had not violated consumer rights, and had not abused their stronger position, the annulment of agreements would never have occurred. Consequently, banks themselves bear responsibility for this situation and should accept its consequences. Allowing them to sue for non-contractual use of capital would enable banks to benefit from their unfair practices.
The conclusion? Borrowers no longer need to fear that by annulling an agreement they will have to pay banks substantial amounts for alleged non-contractual use of loaned funds. This situation can therefore be considered a victory for borrowers, an even greater chance of winning against the bank, and fewer reasons to worry about filing a lawsuit.
It should also be added that, according to the CJEU, borrowers themselves may seek not only the annulment of the agreement, but also an additional amount as compensation from the bank for the fact that the agreement turned out to be invalid. What amounts could this involve and how should they be justified? The Court did not address this issue, and it will be up to Polish courts to decide it in the course of proceedings concerning the annulment of Swiss franc loans.
The CJEU judgment of 15 June 2023 is one of the landmark rulings in Swiss franc loan cases. Let us summarize what has changed:
It can therefore be said that banks have just lost one of their effective methods of discouraging borrowers from filing lawsuits. As a result, your situation as a Swiss franc borrower is now more favourable than before.
