The Croatian Supreme Court rendered a new interesting decision in the ongoing dispute between consumers and banks with respect to the fairness and validity of CHF denominated consumer loans, by partially repealing the first appellate ruling and dragging the dispute into a partial retrial.
These new legal developments gave the consumers further impetus for their judicial initiatives. As already reported in the 6th edition of the DRInsider, due to unsatisfactory reasoning, the Constitutional Court repealed the Supreme Court's prior decision with respect to two issues: (i) the Supreme Court's determination that CHF currency clauses represent clear and valid contractual provisions and, as such, that they are not subject to the fairness test, as well as (ii) the Supreme Court's decision not to request a preliminary ruling on the interpretation of the applicable EU law by the CJEU.
In its new decision, the Supreme Court elaborated that it decided not to request a preliminary ruling from the CJEU due to the fact that EU law does not apply to the subject matter of the dispute, as the dispute relates to the application of CHF currency clauses in the period prior to Croatia joining the EU.
The Supreme Court further determined that only Croatian law applies to the matter at hand, provided, however, that the Croatian courts should interpret the national law in the spirit of EU law, as far as practically possible. This also includes the consideration of CJEU case law.
In this respect, the Supreme Court stated that it appropriately took into consideration the fairness test established under CJEU case law, but that such test was not applicable to the validity of CHF currency clauses, since it was established in relation to a completely different controversy. During the earlier stages of the process both the first appellate court and the Supreme Court established that CHF currency clauses were not subject to the evaluation of fairness and validity under Croatian law, as such clauses were sufficiently clear, easily noticeable and understandable.
Notwithstanding the above, the Supreme Court now took into consideration the reasoning of the Constitutional Court and decided that the competent lower instance courts will have to determine whether all relevant information and warnings have been given by the banks to consumers when entering into loan agreements with CHF denomination. If the banks failed to do so, the Supreme Court held that the trial courts would have to assess whether such conduct resulted in unfair and invalid contractual clauses.
Alongside the Supreme Court's decision, consumers were also encouraged to continue their dispute against banks by the CJEU's recent ruling in the case C-186/16 Ruxandra Paula Andriciuc and Others v Banca Românească SA, which established that currency clauses are not invalid per se, but the banks needed to diligently inform consumers of all relevant circumstances.
Additionally, an interesting new development in relation to this dispute is the fact that the foreign shareholders of three Croatian banks involved in the Swiss Francs saga initiated arbitration proceedings against the Republic of Croatia before the International Centre for Settlement of Investment Disputes due to the coercive conversion of CHF denominated loans.
The Croatian judiciary is certainly expecting an interesting and turbulent forthcoming period.