The Supreme Court judgment of interest to banks and Swiss franc borrowers

The judgment of the Supreme Court in case no. II NSNc 89/23 is important because it confirms that the existence of abusive clauses in a loan agreement does not automatically invalidate the entire agreement.

“Although the judgment concerned a specific situation – an action by a bank to terminate a loan agreement due to the borrower’s failure to pay instalments – its interpretation of Article 6(1) of Directive 93/13 and Article 3851 § 1 of the Civil Code is applicable on a wider basis, and can also apply to other cases involving Swiss franc loans,” says Andrzej Pałys, Partner, Head of the Disputes of Financial Institutions, who represents banks in disputes with Swiss franc borrowers.

And he stresses that the Supreme Court’s position should not be limited to cases where borrowers stop paying their instalments.

Abusive indexation does not necessarily invalidate a loan agreement

According to our expert, the Supreme Court has indicated that a court hearing a particular case is obliged to consider whether it is possible to continue the agreement after the abusive provisions have been removed. In other words, a court should assess each time the impact of a particular abusive provision on the continuation of the loan agreement and the possibility for the parties to be bound by its other provisions. Although this may seem obvious, judicial practice often fails to take sufficient account of the particularities of certain agreements.

In response to a question about the meaning of the statement that “abusive indexation does not necessarily invalidate the entire loan agreement”, he said that the Supreme Court’s theses had already been signalled in case law and marked a departure from the interpretation of the legislation currently being advocated, in particular by law firms representing borrowers, which implies that “the agreement is invalidated upon request”.

In the judgment in question, the Supreme Court reiterated that a court may not disregard the interests of the other party when one of the parties is a consumer.

No court has found the loan agreement to be absolutely invalid

Some panels of judges acknowledge that we are dealing with ‘big number judgments’ and the courts are increasingly trying to consider cases wholesale, as it were, and interpret the rules of civil procedure in a ‘consumer-friendly’ manner. However, a fair trial is held in individual cases on their own merits, based on the specific facts of the case, says Andrzej Pałys.

He adds that the position presented by the Supreme Court in this respect shows a very important direction, namely a reminder of the role and significance of individual consideration of each case by the court.

According to Piotr Szymański, Attorney at Law and Senior Associate in the Disputes of Financial Institutions Practice, the judgment in question addressed the absolute invalidity of the loan agreement to a limited extent only, and the position presented there had already been signalled by the Supreme Court. However, it is important to emphasise that none of the courts hearing this case, including the Supreme Court,  have found the loan agreement to be absolutely invalid.

However, the Supreme Court notes the need to carefully analyse the facts of each case and to take into account the interests of both parties to the agreement rather than applying automatic ‘one size fits all’ solutions.

In practice, this means that courts should strive for a balance between protecting consumers’ rights and accommodating the interests of banks and other entities, rather than issuing judgments based on general assumptions. Therefore, the Supreme Court’s decision, emphasising the significance of a fair and individual examination of each case, is important for the future development of judicial practice in Poland.

Source: Business Insider

Date: 14 April 2023

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Andrzej Pałys

Piotr Szymański