Right of detention in the context of franc agreements

Facts

Polish dispute between WN (consumer) a Bank related to the reimbursement of amounts paid to Bank under a mortgage credit agreement indexed to CHF containing unfair terms.

The territory Court of Krakow (Reference Court) addressed the following question for a preliminary ruling: ‘Are Articles 6(1) and 7(1) of Council Directive 93/13/EEC of 5.4.1993 on unfair terms in consumer contracts (OJ 1993 L L. No. 95, p. 29) must be interpreted as meaning that the provisions in question are contrary to the rule of non-binding unfair contractual terms for the consumer (Article 6(1) of Directive 93/13/EEC) and to the rule of effective consumer protection (Article 7(1) of Directive 93/13/EEC) and to the rule of effective consumer protection (Article 7(1) of Directive 93/13/EEC) in order to let the national case-law allowing the consumer to postpone, at the time of the consumer’s ability to accomplish the restitution effects of the unfair nature of the condition contained in the contract concluded with the consumer by the trader by stating that the performance of the benefit awarded to the consumer by the trader should be at the same time be offered by the consumer to reimburse the benefit received from the consumer or to safe the trader’s claim for reimbursement of that benefit?’

TS Position

The effects of considering the contract invalid

In paragraph 58 of the judgement of 15.6.2023, Bank M. (Results of declaring the contract invalid), C-520/21, Legalis, the Court of Justice held that the work of the national court to waive the application of a unfair contractual condition requiring payment of amounts which prove to be undue entails, in principle, an appropriate restitution effect for those amounts. Failure to do so could undermine the deterrent effect, which Article 6(1), in Article 7(1) of Directive 93/13/EEC, intends to attribute the unfair nature of the conditions contained in contracts concluded by the trader with consumers.

In the present case, according to the judicial explanation of Polish law, monthly instalments of repayment already paid by WN under the Mortgage debt Agreement shall not be taken into account in the calculation of the amount to be paid or secured by WN to Bank following an appointment by Bank to the right of detention. Therefore, WN would be obliged to pay a crucial amount which could exceed its financial capacity, so that continuing to execute that contract could be more advantageous to him than exercising the rights which it derives from Directive 93/13/EEC.

It is besides apparent from the case file that the right of detention under appeal Bank, besides applies to the claim raised by Bank for salarieswhich comes from the usage of capital by WN. In paragraph 78 of judgement C-520/21, the Court besides held that the explanation of national law by which a credit institution is entitled to claim compensation from the consumer beyond the reimbursement of the capital paid for the performance of that contract, and thus the receipt of remuneration for the usage of that capital by the consumer, would contribute to eliminating the dissuasive effect on traders by declaring that contract invalid. The Court explained in paragraph 80 of judgement C-520/21 that, first, according to the rule nemo audienceur propriam turpitudin allegans (referring to its own conduct will not be heard) neither can the organization benefit from its unlawful conduct nor can it receive compensation for the inconvenience caused by it.

Interest on delay

It besides follows from the order for mention that account should be taken of the plea of detention referred to Bank, would violate the law WN to receive interest for delay. In paragraph 86 of the judgement in Case 14.12.2023 Getin Noble Bank, C-28/22, Legalis, the Court pointed out that the effectiveness of the protection afforded to consumers by Directive 93/13/EEC would be jeopardised if these consumers, citing the rights which derive from that Directive, were exposed to the hazard of not receiving interest for late payment from amounts to be reimbursed to them due to the fact that specified a contract has been invalid since the expiry of the time limit imposed on the entrepreneur for the performance of the benefit, after the entrepreneur receives a call for reimbursement of those amounts. Therefore, Article 6(1) and Article 7(1) of Directive 93/13/EEC, in relation to the rule of effectiveness, must be interpreted as precluding the judicial explanation of national law that, where a mortgage credit agreement concluded by an entrepreneur with a consumer can no longer stay binding after the unfair conditions contained in that contract have been removed, that trader may trust on the right of detention to make the reimbursement of benefits received from that consumer subject to the presentation by him of an offer for reimbursement of benefits which he himself has received from that trader or a warrant for the refund of those second benefits. This is the case where the exercise of that right of detention by that trader results in the failure of the right of that consumer to get interest for the hold from the expiry of the period imposed on the entrepreneur in question for the performance of the benefit, after that entrepreneur receives a call for reimbursement of benefits paid to him in the performance of that contract.

Consequently, if the right of detention is effectively invoked Bank the state of hold of that banking institution would cease, and so WN The TS would have lost all or part of its right to receive interest on late payment from a letter of formal announcement addressed to that institution, and the anticipation would have jeopardised both the effectiveness of the protection afforded to consumers by Directive 93/13/EEC and the accomplishment of its deterrent effect.

In conclusion, the TS held that Article 6(1) and Article 7(1) of Directive 93/13/EEC must be interpreted as precluding the judicial explanation of national law that, in the context of the annulment of a mortgage credit agreement concluded by a banking institution with a consumer on account of the unfair nature of certain conditions of that contract, that institution’s right of retention makes it subject to the right of retention to the consumer’s right to get payment of the amounts which it had ordered from that institution due to the restitution effects resulting from the determination of the unfair nature of those conditions, from the simultaneous offer by that consumer to reimburse or to safe the reimbursement of all the benefits received from the same institution by the consumer on the basis of that contract, regardless of the payments already made in the performance of that contract.

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