Loans with variable interest rates indexed to foreign currencies carry a double risk for borrowers: a rise of interest rates and an adverse development in the exchange rate. While they therefore could have been forbidden for consumer credit, they are allowed both at EU and (most) national levels. Consumer credit arrangements indexed to foreign currencies that were legal in principle have raised enormous problems when they occurred in large numbers in Eastern and Central European countries and reference was not directly written into the terms (like in Romania), but could change with additional discretionary decisions (such as in Poland and Croatia). While Croatia has introduced special legislation to cure the overall problem, Polish cases are potentially not only causing a systemic risk for the whole banking system, but abundantly are the subject of CJEU case law. This triggers the core interest in contract law, namely an unheard-of relevance in EU law of general and more specific questions of the law of restitution – on the basis of unjust enrichment and/or of damages. This article presents the following five main theses. Firstly, while the Unfair Contract Terms Directive (UCTD) contains too vague a scheme of remedies/sanctions for detailed answers, the overarching benchmark is clear, namely a fair balance of interests and the meeting of justified expectations, which the parties, especially on the consumer side, could have had at the moment when the loan was issued. Secondly, general (EU) principles of unjust enrichment, as well as of damages, are recognised by the CJEU in EU law. They order the restitution of what was gained above the status quo ante, but could not have been acquired on markets even by informed and proper contracting at that time and/or the restitution of losses incurred as compared to the status quo ante. Thirdly, Articles 23 and 24 of the Mortgage Credit Directive (MCD) constitute a suitable model around which a set of claims in unjust enrichment can be shaped and can be applied also to old cases. Fourthly, any windfall profit of borrowers (gain beyond what could have been achieved at the moment of formation of the contract) has to be avoided in the name of fairness and justified expectations – which are recognised in CJEU case law as the two main benchmarks of the regime of sanctions of the UCTD. Finally, a fair restitution regime is reached if the borrower, who had not been properly informed (with the nullified clause), can now make an informed choice between the different offers that were offered on markets when the loan was issued. Thus, he/she could now opt for a loan in either the national currency plus applicable interbank interest rate (in the Polish case Zloty tied to WIBOR) or their foreign currency counterparts (i.e. a loan in CHF tied to LIBOR). Expropriation (of banks) of the loan capital, as well as the possibility to use that capital to generate interest have to be avoided, for penalisation is neither an aim of European contract law nor of the UCTD.
European Review of Contract Law , Vol. 19, Issue 1,
2023
