In conclusions published on Thursday 3 May in Case C-51/17, Advocate General Evgeni Tanchev states that a Member State’s legislative response to a ruling of the Court of Justice concerning the unfairness of contractual terms for lack of clarity is judicially reviewable.
In February 2008, Ms Teréz Ilyés and Mr Emil Kiss concluded with a Hungarian bank a credit contract for the provision of a loan denominated in Swiss francs (CHF). According to the contract, although the monthly repayment instalments were to be paid in Hungarian forints (HUF), the sum of these instalments was calculated on the basis of the current exchange rate between the HUF and the CHF with the borrowers agreeing to bear the potential costs of fluctuations in the exchange rate between the two currencies.
The exchange rate subsequently changed considerably to the detriment of the borrowers, which resulted in a significant increase in the amount of their monthly instalments.
In May 2013, Ms Ilyés and Mr Kiss instituted legal proceedings before the Hungarian courts against OTP Bank and OTP Factoring, to which the creditor claims arising from the loan contract at issue had been transferred. In the course of these proceedings, the question arose as to whether the term of the contract placing the exchange rate risk on the borrowers could be considered unfair within the meaning of the directive on unfair terms in consumer contracts (Directive 93/13/EEC) and, as such, not binding on the borrowers on account of this term not having been drafted by the bank concerned in a plain and intelligible manner.
In the meantime, Hungary adopted laws in 2014 by which it removed from foreign currency loan contracts certain unfair terms, converted virtually all outstanding consumer debts under these contracts into HUF, and made other amendments to the content of legal relationships between the parties to the contracts at issue. The new laws, however, continued to place the exchange rate risk on the borrower.
The new laws implement a decision by the Hungarian Supreme Court that deemed a number of clauses in foreign currency loan agreements incompatible with the EU Directive, a decision issued following a previous European Court of Justice ruling (Case C-26/13).
The case of Ms Ilyés and Mr Kiss was sent to the Budapest regional appeals court, which asked the ECJ whether it can assess the unfairness of an unclear term placing the exchange rate risk on the borrower despite the validity of this term being confirmed by the Hungarian legislator and it not covered by the scope of the directive.
In his conclusions, Tanchev says yes, recalling that the purpose of the exclusion of terms reflecting mandatory statutory or regulatory provisions from the scope of application of the directive is justified.
However, that assumption cannot hold with respect to statutory measures, such as the aforementioned laws in Hungary, which were passed after the date on which the relevant contract was agreed and with a view to implementing a judicial finding of non-compliance with the directive.
In this regard, the Advocate General is of the view that the exemption at issue was designed to ensure that Member States were permitted to maintain or introduce rules going beyond the protective provisions of the directive.
Moreover, the Advocate General stresses that the legislative response of a Member State to a finding of the Court that a national law or practice is incompatible with the directive cannot be excluded from judicial review since such an exclusion would be at odds with the provisions of the Charter of Fundamental Rights of the EU.
In these circumstances, the Advocate General proposes that a term which has become part of a foreign currency loan contract by legislative intervention and which leaves an initial term of the contract placing the exchange rate risk on the borrower, does not reflect mandatory statutory or regulatory provisions within the meaning of the directive.
As a consequence, in cases where that term was not formulated in the contract in a plain and intelligible manner, the national court can examine whether it constitutes an unfair term not binding on the consumer. (Original version in French by Mathieu Bion)