Article 47 Charter and Civil Courts: the case of arbitration clauses in consumer contracts

On 20 April 2018 Anna van Duin presented a part of her research at the colloquium 'Citizen's Rights and EU Law', organised by the Cátedra Jean Monnet at the Universitat de Barcelona. Her working paper 'Article 47 EUCFR and Civil Courts: the case of arbitration clauses in consumer contracts (the Netherlands vs Spain)' is now available online: http://diposit.ub.edu/dspace/handle/2445/122626 Click here for the full programme and a video registration of the colloquium.

Spanish 'floor clauses' (cláusulas suelo) - EU Court of Justice steps in: nullity is nullity

Repost from the blog on Recent developments in European Consumer Law:

Judgment of the EU Court of Justice in Joined Cases C-154/15, C-307/15 and C-308/15 (Gutiérrez Naranjo v. Cajasur Banco, Palacios Martínez v. BBVA and Banco Popular Español v. Irles López)

Yesterday the EU Court of Justice gave its long-awaited judgment in the joined cases from Spain on the infamous 'floor clauses' (cláusulas suelo). It is a real Christmas present to Spanish consumers and house-owners: the CJEU has "overruled" national case law that limits the temporal effects of the declaration of nullity of an unfair term. Nullity is nullity. The impact of this judgment on the Spanish banking sector is huge: banks will have to pay back an estimated amount of 3.000 to 5.000 million euros (source: El País). The judgment has already been called a "formidable varapalo judicial a la banca", a tremendous judicial blow to the banks.

'Floor clauses' in mortgage loan agreements establish a minimum rate below which the variable rate of interest cannot fall. Until the Spanish Supreme Court (Tribunal Supremo) found them to be unfair in 2013 due to a lack of transparency, they were widespread. The biggest question for Spanish consumers after yesterday's judgment, which has been widely covered in Spanish media, is: how much money do we get back?

The reason why they ask this question, is the Supreme Court's decision to limit the temporal effects of its judgment to after the date of its publication, 9 May 2013, both in respect of collective actions for an injunction and individual actions by consumers claiming repayment. Only the amounts overpaid on the basis of 'floor clauses' after that date had to be paid back. One of the considerations of the Supreme Court was that retroactive (i.e. restitutory) effect of the invalidity of the clauses at issue would give rise to serious economic repercussions. Lower courts in Spain, however, doubted whether the Supreme Court's approach was compatible with Directive 93/13/EEC on unfair terms in consumer contracts. Last July, we reported on this blog that it was permissible in the opinion of the Advocate General. The CJEU has now decided otherwise, which means that Spanish consumers can also claim repayment of the amounts overpaid to the banks on the basis of 'floor clauses' during the period before 9 May 2013, from the beginning of their contract.

For the readers of this blog, the judgment may not be entirely unexpected. The CJEU refers extensively to its previous case law about the interpretation of "not binding on the consumer" under Article 6(1) of Directive 93/13. It reiterates that it is for the national court "purely and simply" to exclude the application of an unfair term (para. 57). The national court may not revise the content of unfair terms, "lest it contribute to eliminating the dissuasive effect of the straightforward non-application with regard to the consumer of those unfair terms" (para. 60). The determination of unfairness "must, in principle, have the consequence of restoring the consumer to the legal and factual situation that he would have been in if that term had not existed" (para. 61). Thus, the national court must impose the repayment of amounts that prove not to be due, which entails "a corresponding restitutory effect" (para. 62). The absence of such restitutory effect would call into question the dissuasive effect that Articles 6(1) and 7(1) of Directive 93/13 are designed to attach to a finding of unfairness.

The CJEU then proceeds to consider that national (case) law may not alter the scope and, therefore, the substance of the protection guaranteed to consumers by the Directive. The Supreme Court was entitled to hold that its judgment did not affect situations in which a judgment with the force of res judicata had been given. While it is compatible with EU law to lay down reasonable time-limits for bringing proceedings, only the CJEU can decide upon a temporal limitation of the effects of a rule of EU law. National (case) law may not aversely affect the substance of the right that consumers acquire under that rule. The temporal limitation made by the Supreme Court is tantamount to depriving any consumer having concluded a mortgage loan contract before 9 May 2013 containing a 'floor clause' of the right to obtain repayment in full of the overpaid amounts. The CJEU concludes that national case law, such as that following from the Supreme Court's judgment of 9 May 2013, ensures only limited protection for consumers. Such protection is incomplete and insufficient and does not constitute either an adequate or an effective means of preventing the continued use of 'floor clauses'.

The CJEU rejects the argument brought forward by, among others, the Spanish government that the question of the effects of the finding of unfairness as regards 'floor clauses' does not fall within the scope of Directive 93/13, because that finding would afford a higher level of consumer protection than guaranteed by the Directive. The review of the substantive unfairness of a clause relating to the main subject-matter of the contract, where the consumer did not have the necessary information on the conditions and consequences of that contract before entering into it, falls within the scope of the Directive.

The CJEU brushes aside the Supreme Court's considerations in one fell swoop. It does not matter whether the 'floor clauses' were in themselves lawful, that their use had long been tolerated on the market, that the banks had complied with the regulatory requirements for information, or that there could be serious economic repercussions. The judgment was a bombshell: "Ahora mismo sale gratis disparar contra la banca" ("Right now, the banks have been made fair game"; source ABC). It is perceived as yet another setback for the Spanish banking sector. A string of preliminary references to the CJEU, starting with the well-known Aziz case, has strengthened the judicial protection of consumers against unfair contract terms. Still, yesterday's judgment comes as a surprising end to a long-running battle between Spanish consumers and the banks, supported by the government. It remains to be seen how the European judgment will be implemented at the national level; most banks do not seem eager to accept an obligation to automatically repay all their clients.

Effective consumer protection in light of Article 47 EUCFR: Opinion of AG Kokott (C-503/15 Margarit Panicello)

Yesterday, Advocate General Kokott presented her opinion in yet another case on Spanish procedural law and the effective protection of consumers against unfair contract terms (Case C-503/15, Margarit Panicello). I reproduce part of the summary I wrote for the blog 'Recent developments in Consumer Law' here, because it builds on a previous blog I have posted here: 

The case discussed in the present blog stands out, because of the explicit reference to Article 47 of the Charter in the request for a preliminary ruling. The 'referring court' (one of the questions at issue is whether the Secretario Judicial - court registrar - can actually be regarded as a court or tribunal for the purposes of Article 267 TFEU) has asked the EU Court of Justice whether certain procedural rules are incompatible with Article 47, in that they preclude the possibility of judicial review. In Spain, there is a special procedure (jura de cuentas) available to lawyers for the recovery of unpaid fees that are owed to them by their clients. Unpaid fees could be a sign of a soured relationship, and lawyers would rather not litigate against their clients; for them, jura de cuentas is a preferably 'evitable' (avoidable) evil. AG Kokott's opinion makes clear why it might be an 'evitable' evil in light of EU law as well.

To relieve the judiciary, the exclusive competence to deal with the jura de cuentas procedure has been transferred to the Secretarios Judiciales. The procedure is optional; lawyers can still choose to initiate court proceedings. The applicable procedural rules preclude the Secretario Judicial to examine ex officio whether the contracts between lawyers and their clients (natural persons), on the basis of which recovery of unpaid fees is claimed, contained possible unfair terms or unfair commercial practices. AG Kokott's conclusion that those rules are incompatible with Directive 93/13/EEC (on unfair terms in consumer contracts) is perhaps not very surprising, against the background of the CJEU's case law. The opinion is more interesting from the perspective of Article 47 of the Charter, which safeguards the right to effective judicial protection against violations of the rights and freedoms guaranteed by EU law. 

In the case of Finanmadrid, the referring court had made a similar reference to the Charter, but the CJEU avoided answering the question related to Article 47. In yesterday's opinion, AG Kokott explicitly adopts the reference to Article 47 of the Charter. And rightly so, because the procedural rules at issue do not only impede the (full) effectiveness of Directive 93/13/EEC, they may also constitute an intolerable interference with "the right to an effective remedy before a tribunal" enshrined in Article 47. As AG Kokott observes (para. 114), when provisions of national law fall within the scope of EU law, it must be assessed whether they are compatible with EU fundamental rights (click here for a further analysis of Case 617/10, Åkerberg Fransson). Moreover, the CJEU has held in Sánchez Morcillo (para. 35) that: 

"the obligation for the Member States to ensure the effectiveness of the rights that the parties derive from Directive 93/13 against the use of unfair clauses implies a requirement of judicial protection, also guaranteed by Article 47 of the Charter, that is binding on the national court (see, to that effect, judgment in Banif Plus Bank, C‑472/11, EU:C:2013:88, paragraph 29). That protection must be assured both as regards the designation of courts having jurisdiction to hear and determine actions based on EU law and as regards the definition of detailed procedural rules relating to such actions (see, to that effect, the judgment in Alassini and Others, C‑317/08 to C‑320/08, EU:C:2010:146, paragraph 49)."

According to AG Kokott, several elements of the jura de cuentas procedure are problematic in light of the required level of consumer protection. These elements are partly considered with respect to the question whether the request for a preliminary ruling is admissible. They are nevertheless relevant for a substantive assessment of the Spanish procedural rules (cf. paras. 104-105 and 115-117). 

• The first element is the 'reversal of the dispute' or 'shift of initiative' to the client/consumer, who needs to oppose the claim before the proceedings become contradictory (para. 41). Only then, the case will be more closely examined on the merits (paras. 44-47). 
• Secondly, the decision of the Secretario Judicial is non-appealable and immediately enforceable, even though it does not obtain res judiciata force (paras. 48-50 and 91). In AG Kokott's view, enforcement of the decision is equated - by the Spanish legislator! - with the enforcement of judicial decisions, just like judgments given in preliminary relief proceedings (paras. 51-60). This means that there is neither an obligation for the Secretario Judicial to ex officio examine possible unfair terms, nor an opportunity for the client/consumer to raise a defence that would suspend the enforcement proceedings. 
• Thirdly, the jura de cuentas procedure concerns a legal dispute (paras. 83-86) and has a mandatory, binding character, even though it is optional for lawyers (paras. 87-88). 
• Fourthly, even if an ex officio examination of unfair terms would be possible at the enforcement stage, that would not be sufficient, for reasons of both process efficiency and the effectiveness of EU law (paras. 133-136). A decision would still be given and the client/consumer would receive a demand to pay, exercising pressure. Therefore, there is a risk that payment would take place without enforcement proceedings being necessary. 
• Fifthly, filing opposition against enforcement cannot be compared to having the opportunity to oppose the claim before a decision is given (para. 136). Such an opposition would not suspend the proceedings, and would thus pave the way to the payment of potentially unfair claims (para. 137). 

Although these elements are not listed as such by AG Kokott, they directly support her conclusion that the procedural rules at issue are contrary to Article 47 of the Charter as well as Directive 93/13/EEC (read in conjunction with Directive 2005/29/EC concerning unfair business-to-consumer commercial practices). All these elements resonate with the right to effective judicial protection, which includes - inter alia - the right to an effective, proportionate and dissuasive remedy, respect for the rights of the defence, the right to be heard and the principle of equality of arms. The opinion demonstrates that Article 47 of the Charter can provide a framework for the assessment of procedural rules that govern legal disputes falling within the scope of EU law, in this case: a dispute about a contract possibly containing unfair terms (and unfair commercial practices). If and to what extent Article 47 and the principle of effectiveness or the 'full effect' of EU law overlap, remains to be seen. In this respect, the 'referring court' makes a distinction between judicial review in general (question 1) and ex officio examination under Directive 93/13/EEC (question 2). AG Kokott does not separate the notion of judicial review and Article 47 of the Charter from the context of Directive 93/13/EEC, probably because Article 47 has an accessory character: it always requires a connecting link with a substantive provision of EU law. That does not mean that Article 47 does not have anything to contribute. AG Kokott seems to recognise this in her opinion. 

The question of admissibility has not been addressed in this blog. However, AG Kokott's views as regards the independence of the Secretario Judicial (paras. 71-81) are worth reading. It is interesting to note that the Spanish government has argued that the Secretario Judicial cannot be considered as an 'externally' independent authority, which has sparked a discussion about the transfer of quasi-judicial competences away from the judiciary and the Rule of Law (cf. para. 86). If the CJEU follows AG Kokott's conclusion that the request should be declared admissible, it will be difficult to avoid a reference to Article 47, which is an expression of "the fact that the Union is a community based on the rule of law" (see the Explanations relating to the Charter of Fundamental Rights). 

A victory for the banks? Opinion AG Mengozzi in high-profile cases on Spanish 'floor clauses'

elmundo.es

This morning, Advocate-General Mengozzi presented his Opinion in three high-profile cases that have generated a lot of attention in Spain (Joined Cases C-154/15, C-307-15 and C-308/15 (Gutiérrez Naranjo v. Cajasur Banco, Palacios Martínez v. BBVA and Banco Popular Español v. Irles López). I reproduce the summary I wrote for the blog on 'Recent developments in European Consumer Law' here:



The cases discussed in this blog post go far beyond the parties' interests and are perceived as being part of an ongoing battle between "the banks" on the one hand and "the consumers" on the other. They originate from a disagreement between the Spanish Supreme Court (Tribunal Supremo) and lower courts about the required level of protection under the Unfair Contract Terms Directive (93/13/EEC). The subject matter of the three cases are the so-called cláusulas suelo (literally: 'floor clauses'), i.e. minimum interest rate clauses, used by banks in mortgage loan agreements. In Spanish media, today has already been called "D-Day" for cláusulas suelo. 

What are cláusulas suelo? AG Mengozzi explains: "Those clauses allow a banking institution which grants a variable rate mortgage loan to impose a lower limit on the variable interest rate, so that even if the applicable interest rate [e.g. EURIBOR] is below a certain threshold (or 'floor'), the consumer will continue to pay minimum interest equivalent to that threshold." Such 'floor clauses' were common practice in Spain. In a judgment of 9 May 2013, the Tribunal Supremo declared cláusulas suelo to be unfair. In short, it found that those clauses were not transparent: consumers were unable to foresee the economic and legal burden the contract would place upon them.

The present cases concern the effects of this judgment, more specifically the question of retroactive effect. Under Spanish law, the general penalty for unfair terms is invalidity, which creates a right to full restitution. To what extent can consumers claim restitution of the amounts paid on the basis of 'floor clauses'? According to the Tribunal Supremo, such a refund is only due from the date of the judgment, 9 May 2013. It held that the temporal effects of its judgment could be limited under the principles of legal certainty, fairness and prohibition of unjust enrichment, because the banks had acted in good faith and there was a risk of serious economic difficulties (cf. the CJEU's judgment of 21 March 2013, C-92/11, RWE Vertrieb). However, lower courts have questioned the date from which the refund should begin. Is the Tribunal Supremo's limitation of the restitutory effects produced by an unfair - and therefore, under Spanish law, invalid or void - contract term compatible with the interpretation of "non-binding" in Article 6(1) of Directive 93/13? Should the refund of the amounts paid by the consumer on the basis of the unfair term arise only on the date of a court decision confirming the unfairness, or from the date the contract was concluded?

Advocate-General: Tribunal Supremo's approach is permissible 
AG Mengozzi first establishes that the Tribunal Supremo, by classifying 'floor clauses' as unfair terms in particular because of a lack of sufficient prior information, has not afforded a higher level of protection to consumers than that offered by Directive 93/13 and that thus, ascertaining the requested interpretation is relevant (paras. 43-50). He refers to the CJEU's case law (inter alia, its judgment of 30 April 2014, C-26/13, Kásler) to conclude that the requirement of transparency within the meaning of Article 4(2) of Directive 93/13 must be understood in a broad sense: not only should the relevant term be grammatically intelligible to the consumer, but the consumer should also be able to assess the economic consequences resulting from the application of that term, including the calculation of the repayments and interests.

As regards Article 6(1) of Directive 93/13, AG Mengozzi considers that the expression "non-binding" is neutral. He then moves on to say that the CJEU seems to have considered the invalidity of unfair terms not as the only way to satisfy the requirement that unfair terms are non-binding (para. 60). The CJEU has not decided that national courts must declare those terms invalid and create a corresponding right to restitutio in integrum (para. 64). From 9 May 2013, 'floor clauses' must cease to exist in the Spanish legal order: they must be eliminated from existing contracts and can no longer be included in new contracts. Therefore, the full effects of invalidity under Spanish law are guaranteed from 9 May 2013 and the effectiveness of Directive 93/13 is fully assured pro futuro. With regard to the prior period, AG Mengozzi observes that EU law harmonises neither the applicable penalties nor the circumstances in which a supreme court decides to limit the effects of its judgments. This means that the present situation falls within the national procedural autonomy of the Member States (para. 68). In AG Mengozzi's view, the Tribunal Supremo's approach - the temporal limitation - is permissible in the light of the principles of equivalence and effectiveness, provided that it remains quite exceptional (p. 73). While he disagrees with the alleged "innovative nature" of the judgment of 9 May 2013, AG Mengozzi points out that the Tribunal Supremo struck a balance between the protection of consumers and "the macroeconomic challenges to the already weakened banking system of a Member State" (para. 72). The safeguarding of legal certainty is "a concern shared by the EU legal order", "on account of the many legal situations which are potentially affected and which could undermine the stability of an economic sector" (para. 74).

A victory for the banks?
AG Mengozzi's consideration of "macroeconomic challenges" is in line with the Tribunal Supremo's argument that its judgment, without a restriction of the retroactive effect, would cause a risk of serious economic difficulties. It has been said that the risk for the Spanish banking sector is 3.500 million euros; no wonder that the AG's Opinion is perceived as a victory for the banks. Yet, the Opinion passes over a number of counter-arguments, brought forward on behalf of the consumers involved as well as by the referring courts.

First, it has been doubted whether the banks have actually acted in good faith.[1] As AG Mengozzi concludes, the judgment of 9 May 2013 was not really "innovative"; the CJEU's case law after that date is "nothing other than the logical continuation of a series of earlier judgments" (para. 49). Can it be said that the banks' "good faith" only ceased to exist on 9 May 2013? In addition, the banks themselves, who drafted and used the highly disputed 'floor clauses', were the cause of the lack of transparency making those clauses unfair. In this respect, AG Mengozzi's remark that the conditions governing the circumstances in which a supreme court may limit the effects of its own judgments fall within the scope of the Member States' national procedural autonomy (para. 80) is unsatisfactory, especially given the emphasis he puts at the same time on the balance struck by the Tribunal Supremo (paras. 72-74). If the Tribunal Supremo's reasoning is subjected to scrutiny in the light of the principle of effectiveness, the part on good faith could be more closely examined as well.

Secondly, the question has been raised whether the Tribunal Supremo's approach is contrary to the prohibition imposed on national courts of revising or altering the content of an unfair term (see, e.g., the CJEU's judgment of 14 June 2012, C-618/10, Banco Español de Crédito). AG Mengozzi does not answer this question directly. Perhaps limiting the effects of invalidity is not the same as varying the content of contract terms, the ratio behind this prohibition might nevertheless apply equally.[2] It is not entirely clear why the required "deterrent effect" (para. 71) should not date further back than 9 May 2013. One could argue that the banks are now rewarded for awaiting the Tribunal Supremo's judgment before changing their practice. In the words of Prof. Francisco de Elizalde (footnote [1]): "It could lead possible infringers to believe that the greater the damage, the more lenient the remedies."

Thirdly, AG Mengozzi appears to pay strikingly little attention to the position of consumers. Admittedly, achieving the balance sought by Directive 93/13 is not the same as favouring the consumer. But AG Mengozzi dismisses the plight of Spanish consumers too easily, where he says that a consumer who had concluded a loan agreement containing a 'floor clause' could simply repay one loan with another from a different banking institution, and that application of the 'floor clause' would not have led to a substantial change in the monthly amounts payable by consumers anyway (para. 73). He seems to overlook the economic risk mortgage loan agreements and 'floor clauses' pose to the consumer's household finances. His statement is all the more curious in relation to the finding of unfairness of those very same 'floor clauses'.

Finally, it is a pity that AG Mengozzi only spends one brief paragraph at the very end of his Opinion on the relationship between collective and individual actions (para. 81). In Case C-308/15, a specific question was asked by the referring court about the meaning of the right to effective judicial protection as enshrined in Article 47 of the EU Charter of Fundamental Rights in this respect (see para. 32). Not only does AG Mengozzi seem to deny the precedent effect of the Tribunal Supremo's judgments, he also does not seize the opportunity to propose a more systematic solution to the disparities between the Tribunal Supremo and lower courts (see also para. 23). He just presumes that the implementation by the lower courts is "likely to safeguard the principle of equality and the principle of economy of procedure" (para. 81), without even mentioning Article 47. Is this another missed opportunity? We will know when the CJEU renders its judgment in the cláusulas suelo saga. To be continued. 

---

[1] See further: Francisco de Elizalde, 'The Rain in Spain Does Not Stay in the Plain - Or How the Spanish Supreme Court Ruling of 25 March 2015, on Minimum Interest Rate Clauses, affects European Consumers', EuCML 5/2015, pp. 184-187; link.
[2] The Commission, for example, has argued that the declaration of an unfair term as invalid "is not compatible with a limitation of the effects of such invalidation, unless such limitation is necessary to preserve the principle of res judicata" (see EurActiv).

Fair time limits for unfair terms control - AG Szpunar's opinion in case C-8/14 BBVA v Fernández Gabarro

The interaction between the CJEU and Spanish national judges in procedures regarding unfair terms assessment in mortgage enforcement proceedings offers a good example of judicial contributions to the fine-tuning of rules of private law. This morning, Advocate General Szpunar delivered his Opinion in the case of BBVA SA v Fernández Gabarro and others - I reproduce part of the summary I wrote for the blog on 'Recent developments in European Consumer Law' here:

The BBVA case is a follow-up to the law reform that was set in motion by the CJEU's Aziz judgment (on which we reported earlier; see also a posts on CJEU Sánchez Morcillo and CJEU Unicaja Banco). Following this judgment, Spanish procedural was changed so as to make it possible to stay mortgage enforcement proceedings while an assessment of the fairness of the contract terms governing the client/bank relationship is pending. The present case concerns the possibilities for effective judicial policing of unfair contract terms in disputes that had been brought to court before the law reform came into force and had not yet been concluded.

The question raised by the national judge is whether the time limit of 1 month for raising a claim of unfairness of the contract terms is in line with EU law. Fernández Gabarro et al, the consumers in this case, claim that it is not in accordance with the Unfair Terms Directive to impose such a time limit. Furthermore, a limit of 1 month in their view was in any case far too short to prepare a claim, given the great number of requests made to lawyers at the time the reform law came into force, which lawyers could not handle in such a short time.

AG Szpunar observes that the question essentially regards the compliance of the Spanish provision with the principles of effectiveness and equivalence (para. 26). This implies that national rules safeguarding EU rights must not be less favourable than those governing similar domestic transactions that are not subject to Union law (equivalence), nor may they be framed in such a way as to render impossible or excessively difficult the exercise of rights conferred by Union law (effectiveness).

As regards the time limit of 1 month, the AG is of the opinion that it is in compliance with EU law: although short, it gives sufficient opportunity to raise a claim against the fairness of the contract terms governing the mortgage enforcement procedure (para. 46-47).

As concerns the date on which Art. 4 took effect, however, the AG indicates several problems. This provision, stipulating the time limit of 1 month for raising unfair terms claims in pending procedures, entered into force the day after Ley 2013/1 was published. Moreover, the consumers in the present case were not informed of this. The AG expresses doubts as to whether Art. 4, thus, complies with the principle of equivalence, but observes that it is for the national judge to investigate whether similar procedural time limits apply in comparable domestic cases (para. 53).

More importantly, in the AG's opinion, several factors justify the conclusion that the time limit renders the exercise of the consumers' rights under Directive 93/13 impossible or excessively difficult (para. 54 ff). These include the facts that procedural time limits in Spanish law hardly ever take effect the day after publication of new legislation, that consumers could only have taken full benefit of the time period set in Art. 4 if they had known about the provision coming into force, and that legal representation was required for raising a claim under Art. 4. Furthermore, on the basis of previous CJEU case law, in respect of national legislation which comes within the scope of Union law, it is for the Member States to establish those periods in the light of, inter alia, the significance for the parties concerned of the decisions to be taken, the complexities of the procedures and of the legislation to be applied, the number of persons who may be affected and any other public or private interests which must be taken into consideration (para. 61, referring to CJEU Sopropé and Pontin) - on all of these points Art. 4 raises concerns. Consequently, the AG reaches the conclusion that a transitional provision as is at stake in the present case does not comply with the Unfair Terms Directive in light of the principle of effectiveness.

Unfair terms assessment in mortgage cases in line with EU law - CJEU judgment in cases Unicaja Banco and Caixabank

Today, the Court of Justice of the EU delivered its judgment in a number of joined cases (C-482/13, C-484/13, C-485/13 and C-487/13) on the judicial assessment of general terms and conditions applying to Spanish mortgage contracts, involving the Unicaja Banco and Caixabank. 

In line with Advocate-General Wahl's opinion in the case (on which I reported earlier on the blog 'Recent Developments in European Consumer Law'), the CJEU found Spanish law to be compatible with EU law, provided that certain conditions were met.

The Court ruled:

Article 6 of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts must be interpreted as not precluding a national provision under which the national court hearing mortgage enforcement proceedings is required to adjust the amounts due under a term in a mortgage-loan contract providing for default interest at a rate more than three times greater than the statutory rate in order that the amount of that interest may not exceed that threshold, provided that the application of that national provision:

–        is without prejudice to the assessment by that national court of the unfairness of such a term and

–        does not prevent that court removing that term if it were to find the latter to be ‘unfair’, within the meaning of Article 3(1) of that directive.

See also the Court's press release.