The Supreme Court recently extended its established jurisprudence that banking secrecy may prevent a statutory transfer of credit claims on fulfilment of such claims by a third party (Section 1422 of the Civil Code) to also apply to credit insurers. Further, the court affirmed its view that the purpose of making a credit claim recoverable does not constitute an overriding interest that could breach banking secrecy.
In its decision,(1) the Supreme Court dismissed an extraordinary revision by which the claimant, the credit insurer of a non-performing credit claim of a provincial bank, attempted to appeal the dismissal of its payment claim against the defendant (the bank's debtor). Like the lower courts, the Supreme Court devoted little time to the plaintiff's legal arguments. As such, apart from the core findings, the merits of the case and the claimant's legal reasoning remain somewhat obscure.
The case's core aspects are that, in addition to a mortgage, the bank took out credit insurance on its credit claim against the debtor. The credit agreement did not provide for the debtor's explicit (written) waiver of banking secrecy (respectively, the debtor's consent to full disclosure to collateral providers).
In its decision, the Supreme Court confirmed the court of appeal's view that:
- there was no statutory assignment in accordance with Section 1422 of the Civil Code,(2) because the claimant performed under the credit insurance agreement rather than "paid a debt for which he is not liable" (as required for Section 1422 to be applicable). Accordingly, the assignment of the credit claim was based solely on the credit insurance agreement;
- even if the requirements of Section 1422 of the Civil Code were fulfilled, banking secrecy – in accordance with settled case law and legal doctrine – would prevent the assignment of the claim to an assignee that is not subject to the statutory secrecy obligations pursuant to Section 38 of the Banking Act;
- the debtor had not fully released the bank from secrecy obligations in accordance with Section 38(2)(5) of the Banking Act, but had solely given its consent to disclose to a collateral provider "to the extent necessary for the assessment of the risk of liability";
- the statutory exemption from banking secrecy "where disclosure is necessary in order to resolve legal matters arising from the relationship between the credit institution and customer" (Section 38(2)(7) of the Banking Act) is inapplicable if the claimant pursues the claim as the credit insurer rather than the credit institution; and
- a debtor's non-objection to the transfer of a mortgage to a claimant cannot be deemed as a tacit approval of the transfer of the credit claim from the bank to the claimant because a mortgage provider cannot object to a transfer of the secured claim unless the mortgage agreement (as registered in the land register) contains a contractual non-assignment clause.
Based on this reasoning, the Supreme Court dismissed the extraordinary revision, holding that the defendant had failed to raise a substantial legal issue. It thereby confirmed the court of appeal's judgment dismissing the payment claim and holding that the credit claim had not been transferred from the bank to the credit insurer due to a violation of banking secrecy (Section 38(1) of the Banking Act).
The Supreme Court's decision essentially follows the guidelines set out by established case law. In general, the court adopts a strict approach to banking secrecy and upholds its prohibitive effect on assignments to non-banks, which renders (for example) non-performing loan transactions regarding credit claims governed by Austrian law rather cumbersome. Hence, this decision is not particularly surprising, as it confirms the invalidity of an assignment of a credit claim to an insurer.
Notwithstanding this, on the one hand the decision is interesting because of the plaintiff's ostensibly daring argument. On the other hand, the decision also highlights an issue with credit insurance arrangements which is based on an earlier Supreme Court decision(3) in which the court decided that Section 67 of the Insurance Contract Act, which provides for the statutory assignment of an insured's (damage) claims to its insurer, does not apply to credit insurance transactions.
Section 67 of the Insurance Contract Act aims to prevent:
- insured parties from being compensated twice (ie, by both the damaging party and the insurer); and
- the insurer and not the damaging party being left to pay the damage.
Notwithstanding the fact that settled case law and doctrine also apply Section 67 of the Insurance Contract Act to a wide range of other types of claim, in its earlier decision the Supreme Court took the view that Section 67 was inapplicable as the claims for performance cannot be assigned. This view was not unanimously confirmed by legal scholars(4) with reference to (for example) damages claims based on late payments.
In the decision at hand, the Supreme Court did not address Section 67 of the Insurance Contract Act, even though it explicitly held that the claimant had based its claim on a variety of and changing legal grounds. As such, this decision may be also seen to reconfirm the inapplicability of Section 67 to claims under credit insurance transactions.
Hence, in order to prevent (for example) fraudulent debtors from being released from their obligation by credit insurer payments or insured parties from doubling up, credit insurance documents and those relating to underlying transactions must be tailored to ensure that insureds' claims are effectively transferred to their credit insurers. Otherwise – as in the case at hand – the legal consequence of the nullity of the transfer is the reversal of the performances by the credit insurer and the bank under the principles of undue enrichment (Section 877 of the Civil Code) (ie, the bank will have to return the amount received from the credit insurer).
(2) Pursuant to Section 1422 of the Civil Code, any party that pays the debt of a third party for which they are not liable can demand from the creditor the assignment of its rights prior to or upon payment. In such cases, the payment is deemed as fulfilment of the claim.
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