forthcoming in Unfair Contract Terms and Restitution in European Private Law - the National and ECJ Litigation on House Loans Indexed in a Foreign Currency (Cambridge)

Restitution Claims – EU Consumer Law Principles and the Mortgage Credit Directive as an Overarching Value Model

The legal consequences of void contracts are very important for the contractual parties, especially regarding their mutual restitution claims. This holds especially true in foreign currency loans annulled by courts for being unfair after a stark devaluation of the local currency. While there is ample CJEU case law on the Unfair Contract Terms Directive, restitution claims are not well defined under EU consumer law – either by the Unfair Contract Terms Directive itself or by the CJEU. This chapter examines the guiding principles with which to navigate the uncharted territory of restitution claims in cases that are not explicitly regulated by EU consumer law. The general principles of EU consumer law give helpful guidance, both generally and specifically, on foreign currency loans. Underpinned by the general EU law principle that unjust enrichment has to be restituted, the principles of private autonomy, consumer equality (not superiority), fairness and good faith, and no penalization, apply to the restitution claims of void consumer contracts, including foreign currency loans. While these principles remain vague, the Mortgage Credit Directive provides a clear ruleset and, in addition, a value model for cases outside its immediate scope of application – as recognised by the CJEU in the Schyns case. The consumer creditworthiness assessment is a key example of a fair and balanced restitution regime for incriminated contracts. The Mortgage Credit Directive also offers a balanced model for upholding the contract’s validity by allowing foreign currency mortgages, protecting consumers against the exchange rate risk and even allowing loans at a variable rate under certain conditions. It implements the general principles of consumer law and gives a valuable blueprint for solving cases of foreign currency loans outside its temporal or material remit, i.e. loans agreed before the national transposition or consumer loans for movable property.