In today's article I am going to discuss the currently hot topic of Franckowicze and the Supreme Court ruling, which all those interested in this topic are eagerly awaiting.. Before we get to the point - a few words of explanation by way of introduction.
Franc loans became popular in Poland more than 10 years ago. The stable exchange rate of the Swiss franc and low interest rates on loans and mortgages largely contributed to this. As a consequence, they were more profitable than 'zloty' ones. Sometimes they were even within the reach of people who had very low creditworthiness.
For several years now, most people with such a commitment to their bank have been struggling with the negative consequences of the 'fashion' that prevailed years ago. These are due to the large increase in the exchange rate of the franc, which automatically increased instalments and the amount to be paid back - sometimes even twice. The confusion surrounding franking credits is also due to several other factors. These include the use of so-called abusive clauses (i.e. prohibited provisions) in loan agreements. Over time, more and more people wishing to save their financial situation began to take legal action, taking their cases to court. Proceedings on franking credits, due to their specific nature, are intricate and difficult to resolve.
Position on the Francophiles
The Court of Justice of the European Union, among others, has taken a position on the matter on several occasions, in one of its judgments, which I have discussed at length in this post: CJEU ruling of 3 October 2019 and the situation of Polish Frankovichs .
Although this ruling gives guidance to national courts on the subject of adjudicating on the abusiveness of provisions contained in credit agreements, the recent ruling by the Polish Supreme Court (hereinafter: SN) was most eagerly awaited. This was because it was supposed to ensure the adoption of a certain uniformity in the adjudication by Polish courts. Many judges began to hold off on announcing their judgements. They preferred to wait for a single position of the SN, which would consolidate the previous lines of case law and indicate a unified direction in adjudication.
Originally, the adoption of the resolution by the full composition of the Civil Chamber of the Supreme Court was to take place on 25 March 2021. Subsequently, the meeting was postponed several times in order to issue an order refusing to adopt the resolution on 6 July 2021. What exactly did it concern?
Francophiles and the ruling of the Supreme Court - resolution of 6 July 2021.
Questions were referred to the Supreme Court by the Court of Appeal in Warsaw.
The first was whether, in the event of a declaration of invalidity (Article 58 of the Civil Code) or ineffectiveness (Article 3851 § 1 of the Civil Code) of a credit agreement indexed to the Swiss franc, in the performance of which the consumer obtained a specific capital from the bank and then made repayments of credit instalments to the bank, an independent claim arises in favour of each party for undue benefit (Article 410 § 2 of the Civil Code), or only a single claim, the subject of which is the difference in the value of the enrichment of each party, and thus vested only in the party whose benefit was of greater value.
The second question related to whether a benefit on account of an unmatured debt within the meaning of Article 411(4) of the Civil Code covers cases of payment of loan instalments by the borrower in execution of an invalid or ineffective ab initio loan agreement, which reduce the bank's claim for repayment of the loan principal as undue benefit.
On the other hand, the third question was whether, in an action brought by a consumer seeking repayment of loan instalments from a bank, the court, taking the view that the agreement is not binding on the parties and that the consumer has not been impoverished, may grant the action in part by determining in the operative part of the judgment the invalidity or ineffectiveness of the loan agreement, or whether Article 321(1) of the Code of Civil Procedure precludes such a decision.
On 6 July 2021. A three-judge panel of the Supreme Court declined to answer legal questions on franking credits. Indicating that the doubts raised had already been resolved in previous resolutions.
Francophiles and the Supreme Court ruling
The Supreme Court, after hearing the representatives of the respondent bank and presenting the opinion of the State Attorney, refused to adopt the resolution. How was this argued?
- Firstly, the issue of settlements between the borrower and the bank if the agreement is declared ineffective or invalid was resolved in the resolution of 7 May 2021. III CZP 6/21, which has the force of a legal principle. According to this resolution, if, without an ineffective provision, a credit agreement cannot be binding, the consumer and the creditor are entitled to separate claims for the return of monetary performances made in the performance of that agreement (Article 410 § 1 in connection with Article 405 of the Civil Code). The creditor may demand the return of the performance from the moment the credit agreement has become permanently ineffective.
- Secondly, answers to the questions posed by the Court of Second Instance can also be found in the resolution of 16 February 2021. (III CZP 11/20). According to it, a party who repaid a loan in performance of an invalid credit agreement is entitled to a claim for the repayment of the repaid funds as an undue benefit (Article 410 § 1 in connection with Article 405 of the Civil Code) regardless of whether and to what extent it is the bank's debtor for the repayment of the unduly received amount of the loan.
Summary
The Supreme Court's ruling in the Franckowicz case was supposed to resolve many doubts. Indeed, the referral of the questions gave hope that the franking cases would proceed more quickly, more simply. Besides, issuing a positive verdict for the Frankowiczes minimised the risk of losing such a case. The judges also reacted eagerly to this information. Answering the questions would have meant that they would not have had to make their own choices about franking agreements when passing judgment, as the SN decision would have given a new direction in jurisprudence. The official reason for the SN not issuing a resolution is the need to gather other positions on the case.
Of course, this does not mean that the situation of Francophiles is worsened as a result of such a ruling by the SN. I have repeated this in a previous post, but I think it is worth doing it again. The first, and effective, step in the clash with an unreliable bank is, first of all, a thorough analysis of the loan agreement. This aims to verify the borrower's situation and potential options. It should be emphasised over and over again that the borrower is the weaker party in this type of transaction. It is precisely for this reason that he deserves special protection.