Banks sue borrowers

Lawsuits filed by borrowers against banks to invalidate loan agreements indexed to the Swiss franc no longer cause a sensation. A number of rulings given by the Court of Justice of the European Union and the Supreme Court resolving one doubtful issue after another conclusively in favour of franc debtors have established a uniform line of jurisprudence in this type of cases. As a result, we have recently seen a wave of court rulings in favour of borrowers. Never before has the percentage of cases won by franc debtors been so high.

Consequences of finding a credit agreement null and void

A final and legally binding judgment declaring a loan agreement indexed to the Swiss franc to be null and void gives rise to such effects as if the agreement between the parties had been never concluded. This results in the parties being required to make mutual settlements and to reimburse any services performed under the agreement declared null and void by the court. As part of such settlements, one party usually makes a declaration on set-off of claims so that both claims cancel each other out to the amount of the lower claim. As a result, only one party is required to pay the other the amount remaining to be paid after the set-off.

In addition, due to the final and legally binding force of the ruling declaring the loan agreement null and void, the mortgage on the property, established as collateral for repayment, is terminated.

Claims filed by banks

In exercising their procedural rights in actions brought by borrowers, banks usually choose to appeal against a first-instance court judgment declaring a loan agreement null and void. They also often file cassation appeals, noting numerous procedural defects in the content of those judgements. This does not, however, change the statistics, which are on the side of borrowers.

It has recently become increasingly common for banks to protect their interests by bringing actions against borrowers, including a wide variety of demands. The main one is that borrowers should pay the bank the amount of the principal disbursed under the loan agreement. Generally speaking, this is a valid claim once the judgment declaring the loan agreement null and void has become final. At first, banks also demanded an extra amount of money as remuneration for the non-contractual use of the principal. This was changed by the judgment of the Court of Justice of the European Union of 15 June 2023 in Case C-520/21, which conclusively resolved the issue by indicating that there were no grounds for recognising such claims.

As a result, banks have slightly modified their trial strategy. Now, more often than not, in addition to demanding payment for the principal disbursed, they claim payment on account of the unjust enrichment of the borrowers or the adjustment of the value of the principal disbursed in connection with the change in the value of money. So far, only a handful of judgments have been passed by first-instance courts assessing this issue in a way that is favourable to borrowers. However, there are no final judgements in this respect as yet.

Wave of lawsuits in December 2023

In its judgment of 14 December 2023 in Case C-28/22, the Court of Justice of the European Union made it clear that the limitation period for banks’ claims cannot run only from the moment the judgment declaring the credit agreement null and void becomes final. This would be, in the CJEU’s view, an abuse violating consumer rights. The judgment does not specify exactly when the three-year limitation period for the claim should start to run, specifying instead that it is up to the national court to examine this. The CJEU rulings in favour of borrowers in December 2023 resulted in a wave of lawsuits, filed in large numbers before the end of the year.

This raises the question of why banks decide to bring further lawsuits against borrowers given that, with each successive CJEU judgment, their chances of success in these proceedings grow slimmer. While the filing of a lawsuit itself interrupts the running of the limitation period for the bank’s claims, losing the proceedings generates a number of additional costs for the bank in terms of, inter alia, reimbursement of the costs related to proceedings and legal representation. The sum of the costs generated simply by bringing this type of action can be as high as 10% of the loan principal. Lawsuits brought against borrowers are not worth the risk of losing and paying the legal costs.