Uniformity decision 6/2013 PJE
Chaired by the President of the Curia, the Civil Department, proceeding as a uniformity panel, passed its uniformity decision in issues of principle that arose in connection with foreign currency loan contracts.
In Hungary between 2003 and 2008 approximately 750.000 foreign currency loan contracts were concluded. Due to the considerable weakening of the Forint after the conclusion of the contracts, the instalments of the debtors drastically rose, creating a major social problem. The number of court cases involving foreign currency loan contracts significantly increased. At the beginning of November 2013 the head of the Civil Department asked for information from tribunals and courts of appeal concerning the number of cases related to foreign currency loan contracts and law application problems in such cases. Based on the information provided and on the findings of a discussion at the Szeged Court of Appeal, the head of the Civil Department of the Curia initiated a uniformity procedure in order to develop judicial practice in the field concerned.
The Civil Department of the Curia decided on the matters with more than two thirds majority. During the very short time, only three weeks, at disposal the decision, which is binding on courts, was preceded by an extraordinarily intensive preparatory work, in the course of which the Prosecutor General ex officio expressed his standpoint and the chair of the uniformity panel requested the opinion both of the President of the Hungarian National Bank and Lajos Vékás law professor.
The operative part of the uniformity decision reads as follows:
1. Foreign currency based credit agreements, loan agreements and financial leasing contracts (hereinafter: foreign currency loan contracts) are foreign currency contracts. The parties denominated the creditor’s and the debtor’s financial liability arising from the loan contract in foreign currency (denominated currency), and they had to pay it in Forints (paid currency). With such contracts the debtor got into debt under the conditions of an interest rate more favourable than that of the Forint loan in the given period, therefore, the debtor shall bear the impacts of the exchange rate changes: the weakening of the Forint leads to an increase of the debtor’s financial burden, while strengthening leads to a decrease thereof.
2. Just the fact that the exchange rate changes burden the debtor in exchange for the more favourable interest rate does not render the foreign currency loan contract as a type of contract unlawful, obviously immoral, usurious or sham, nor is the contract aimed at impossible services. The unforeseeable one-way shift of contractual burdens after the conclusion of the contract cannot be evaluated from the viewpoint of invalidity, since the cause of invalidity has to exist at the time of the conclusion of the contract.
3. The statutory obligation of the financial institution to provide information had to extend to the possibility of exchange rate change and its impact on the payments. The obligation to provide information could not extend, however, to the extent of the exchange rate change.
4. If the court establishes the nullity of a contract, upon a claim (counterclaim) for the application of the legal consequences, the court has to endeavour primarily to render the contract valid, provided that the cause of nullity can be eliminated or has subsequently terminated.
5. If the court finds a clause of a consumer contract void but the contract can be performed without the invalid part, the clause found to be void becomes ineffective from the point of view of legal consequences, however, the remaining contractual clauses continue to bind the parties.
6. It is only after the European Court of Justice passes a preliminary ruling in case C-26/13 that the uniformity panel of the Curia will answer the question when a contractual term which makes unilateral amendment of contracts possible meets the requirements of transparency.
7. Amendment of a contract by the court is a legal means having the function to remedy in individual cases the adverse impact that a change in the circumstances of the long-term legal relation of the parties after the conclusion of the contract has on the legitimate interests of either party. It is not, however, a legal means to remedy the consequences of comprehensive economic changes affecting a great amount of a particular type of contracts in a similar way – in a way that is detrimental only to one of the parties. If the legislature has addressed these detrimental consequences in a legal rule from a certain viewpoint, the intervention on the part of the legislature excludes individual judicial discretion in that viewpoint.