Latest EU ruling and its impact on Polish Swiss franc loans

In a judgment of 12 January 2023 (Lithuanian case C-395/21), the CJEU explained what a trader’s obligations are when concluding a contract with a consumer where the financial consequences of the consumer’s commitment depend on future events that are unforeseeable and beyond the consumer’s control.

The judgment is important for Polish consumers involved in disputes with banks over what are known as franking agreements (Swiss franc-denominated loans).

Background

In the case at hand, a lawyer (the trader) concluded several contracts for legal services with a client (consumer). The terms of the lawyer's remuneration included in the contract were expressed in a cursory manner and included only the hourly rate (i.e. the lawyer's remuneration payable upon completion of the case) and payment of an advance. The key point was that the contract did not indicate the minimum or estimated number of hours the lawyer anticipated spending on the case. After almost one year, the law firm handling the case invoiced the client and, when it did not receive the total amount requested, claimed remuneration of EUR 9,900 from the consumer, plus additional costs borne when performing the agreement.

Application of Directive 93/13 to contracts between lawyers and consumers

In judgment C-395/21, the CJEU clarified the concept of 'main subject matter of the contract', and confirmed that a contract for legal services concluded between a lawyer and a consumer where the price of the services to be provided is based on an hourly rate falls within the scope of that concept (points 29-32).

Requirement for clarity of contractual provisions

Further, based on EU Directive 93/13, the CJEU emphasised that the contractual provisions binding the parties to the contract should be transparent and comprehensible for the consumer. Under EU law, this requirement should be interpreted broadly. The contractual terms must be drafted in plain language and must provide the consumer with all the information needed to assess the financial consequences of the contract (point 38).

The Court also stated that such information should be communicated to the consumer before the contract is concluded to enable them to decide whether to sign the agreement (point 39).

Nevertheless, the Court noted that, while a trader cannot be required to inform the consumer of the ultimate financial consequences of a commitment where these depend on future events that are unforeseeable and beyond the parties’ control, the information the trader provides (prior to the conclusion of the contract) should allow the consumer to take a prudent decision, in full knowledge of the possibility of such events occurring and of the consequences they may have for the provision of the legal services in question.

According to the CJEU, the terms found in the contract were unfair to the customer, and the information obligation had not been duly fulfilled by the trader.

No possibility for national courts to replace unfair clauses with others

The CJEU also found that national courts cannot replace unfair contractual terms with other provisions based at their discretion. Most importantly, the Court held that in such cases traders are not entitled to remuneration, despite having provided a service. An exception is where the consumer would be exposed to particularly unfavourable consequences in relation to the cancellation of the contract. In such cases, the unfair contractual provisions should be replaced by a supplementary provision of national law so as to uphold the contract.

Polish perspective

The C-395/21 judgment is important for Polish consumers because it confirms the standpoint presented in cases concerning valorisation clauses in indexed or denominated loan agreements.

The CJEU confirmed that if in a contract the trader is free to set the level of remuneration and the consumer is not able to estimate the approximate cost they will ultimately have to pay to the trader, such a clause is abusive.

As in the case of the disputed Swiss franc-denominated loans, there are no supplementary provisions in Polish law that could replace unfair contractual provisions.

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