Brussels, 13/07/2016 (Agence Europe) - It is possible to use macroeconomic issues to justify a temporal limit on the effects of invalidity of clauses declared abusive in a mortgage contract, in order to avoid disastrous consequences for the whole economy from widespread use of this clause.
This is the conclusion reached by Advocate General Paolo Mengozzi and presented to the European Court of Justice on Wednesday 13 July, in relation to a number of combined cases (C-154/15, C-307/15 and C-308/15) on a ruling of the Spanish Supreme Court, which recently ruled on “floor” clauses in mortgages. Under these clauses, even if interest rates fall below a certain threshold or “floor” set out in the contract, the consumer must continue to pay minimum interest payments of the amount of the “floor” rate and cannot benefit from a lower interest rate.
The Spanish Supreme Court ruled that these clauses are unfair, but decided to limit the effects in time of the ruling that they are invalid. The “floor” clauses no longer apply from the date of the ruling, viz. 9 May 2013. But many individuals are now demanding that banks repay the money they paid under the “floor” contract right from the start of their mortgage payments.
The case was sent to the European Court of Justice to determine whether such a limit to the effects of invalidity of an abusive clause is compatible with EU Directive 93/13/EEC, which establishes that consumers are not bound by abusive clauses. The Advocate General says the Spanish ruling complies with the Directive, which does not require member states to provide for the retroactive invalidity of such a term.
He says that when ruling on the temporal effects of its decision, a national supreme court may balance consumer protection with macro issues associated with the scale on which “floor” clauses are used. In this context, the Advocate General takes the view that a temporal limit on the effects of the invalidity of an unfair term may be justified without upsetting the balance in the relationship between consumers and sellers or suppliers. The judge emphasises that this must be an exception rather than the rule. (Original version in French by Jan Kordys)