On the 14 May 2019, Advocate General Pitruzzella from the Court of the Justice of the European Union (CJEU) delivered his opinion on Case C‑260/18 “Dziubak vs. Raiffeisen Bank International AG”, following a request for a preliminary ruling from the Regional Court in Warsaw (Poland) relating to a case which ended up in a standstill concerning unfair terms in consumer contracts.

The AG considered a case which explores whether it is possible for a national court to save a consumer contract containing unfair terms or otherwise, particularly in light of the provisions in the Unfair Contract Terms Directive (Directive 93/13), which is transposed into Maltese law through the Consumer Affairs Act (Chapter 378 of the laws of Malta). Article 6(1) of the Unfair Contract Terms Directive stipulates that ‘Member States shall lay down that unfair terms used in a contract concluded with a consumer by a seller or supplier shall, as provided for under their national law, not be binding on the consumer and that the contract shall continue to bind the parties upon those terms if it is capable of continuing in existence without the unfair terms.’

The main proceedings before the referring court in Poland related to a mortgage loan agreement which was concluded back in 2008 between the applicants and the defendant bank, wherein the latter granted them a loan specified in Polish currency, but which was indexed to Swiss franc. It is key to note that the terms for indexing the loan to foreign currency were outlined in the loan agreement itself, which in turn reflected the mortgage loan regulations used by the bank and which provided inter alia that the loan would be disbursed in Polish Zloty at a rate not lower than the buying rate for the Swiss francs, in accordance with the exchange rate table in force at the time the loan was disbursed.

The applicants, as consumers, brought an action before the Regional Court in Warsaw contending the invalidity and unlawfulness of the loan agreement due to the unfair terms outlining the indexing mechanism. The borrowers claimed that the unfair indexing method allowed the bank to unilaterally and discretionally fix the exchange rates. Dziubak alternatively requested that while the unfair terms are deemed invalid, the contract is performed anyway without such terms.

In his legal analysis, AG Pitruzzella referred to extensive case law of the CJEU which evidences that the level of protection bestowed by the Unfair Contract Terms Directive is founded on the notion that the consumer is in a weaker position than the supplier and that one of the main goals of the same directive is to achieve a level playing field between the parties and to deter suppliers from using any unfair terms in the agreements.

The AG pointed out that such level of deterrence cannot arise out of national legislation which would in turn allow the national courts to directly modify contracts for the pursuance of the Directive’s objective. The AG outlined, inter alia, that Directive 93/13 prevents a national court from revising a contract by recourse to national law which provides that the contents of a legal transaction are to be modified on the basis of equity or customs, which are not supplementary provisions. Otherwise, national law would be undermining the Directive’s deterring objective to dissuade suppliers from using unfair terms in their service agreements.

The Regional Court was also called upon to determine at what time the effects of the annulment of an agreement in its entirety are to be assessed and to establish what importance is to be given to the consumer’s requests. On this point, the AG opined that unless otherwise provided for under national law, the effect of omitting an unfair term from an agreement should be assessed as at the time of the judgment. This effectively reflects the notion that the consumer’s interests which must be considered by a national court are those which exist at the time of the judgment and not those on the basis of which the consumer had decided to enter into the agreement.

Lastly, it was also highlighted that the national court’s remit was limited to the assessment as to whether a contractual term is unfair or otherwise. In assessing whether it would be an option to keep in place the unfair contract terms when such are to the consumer’s advantage, Pitruzella referred to Directive 93/13 which states that unfair terms are not to be binding on the consumer and the Court’s settled case-law only permits departure from that assumption in one particular instance. The AG referred to Pannon GSM, C‑243/08 wherein it was held that the only exception to that rule was that a contract term which had been declared unfair would continue to be binding on the consumer at the consumer’s express request. A contrario sensu, in the absence of such an express consent, a national court cannot uphold the unfair term, even if it considers that the terms bestows a solution which is more beneficial to the consumer. In this particular judgement the applicants had expressly objected to the term in question being upheld and therefore the Pannon exception was not applicable.

This article was first published in The Malta Independent, 18 September 2019.