Judges A Rosas, C Toader, A Prechal (Rapporteur), E Jarašiūnas
Advocate General E Tanchev
Article 1(2) of Council Directive 93/13/EEC covered terms in consumer contracts which reflected mandatory statutory or regulatory provisions and established an exclusion from the scope of that Directive. Pursuant to article 3(1), a contractual term which had not been individually negotiated was to be regarded as unfair if it caused a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer. Pursuant to article 4(1), in order to assess, in a situation in which the term in question related to the definition of the main subject matter of the contract, whether that term was drafted in plain intelligible language within the meaning of article 4(2), account should be taken, inter alia, of all the terms of the contract that were included therein at the time of its conclusion. According to article 6(1), member states were to lay down that unfair terms used in a contract concluded with a consumer should, as provided for under their national law, not be binding on the consumer and that the contract should continue to bind the parties upon those terms if it was capable of continuing in existence without the unfair terms. Pursuant to article 7(1), member states had to ensure that adequate and effective means existed to prevent the continued use of unfair terms in contracts concluded with consumers.
The borrowers concluded a loan denominated in Swiss francs with the predecessor in law to the bank, but disbursed and repaid in Hungarian forints on the basis of the exchange rate of the day. The bank then assigned the loan. The loan contract contained terms stipulating a difference between the exchange rate applicable to the disbursement of the loan and that applicable to the repayment of the loan, with a power to make unilateral amendments in favour of the lender, allowing it to increase the interest rate, costs or commissions. The borrowers brought an action for annulment of the loan contract, on the ground, inter alia, that they were not able to evaluate the extent of the foreign exchange risk, since the contractual term had not been drafted in plain intelligible language. The Budapest High Court upheld the borrowers’ claim. On appeal by the bank and the assignee, the Regional Court of Appeal, Budapest stayed the proceedings and referred to the Court of Justice of the European Union for a preliminary ruling questions concerning the interpretation of various provisions of Council Directive 93/13/EEC.
On the reference—
Held, the concept of “term which has not been individually negotiated” in article 3(1) of Directive 93/13 included a contractual term amended by a mandatory national statutory provision adopted after the conclusion of a contract with a consumer, for the purpose of removing a term which was null and void from that contract (judgment, paras 46–49, operative part, para 1).
(2) The scope of the Directive did not cover terms which reflected mandatory provisions of national law, inserted after the conclusion of a loan contract concluded with a consumer and intended to remove a term which was null and void from that contract, by imposing an exchange rate set by the national bank. However, a term relating to the foreign exchange risk was not excluded from that scope under article 1(2) of Directive 93/13 (judgment, paras 64, 68, 70, operative part, para 2).
(3) Article 4(2) of Directive 93/13 meant that the requirement for a contractual term to be drafted in plain intelligible language required financial institutions to provide borrowers with adequate information to enable them to take well-informed and prudent decisions. That requirement meant that a term relating to the foreign exchange risk had to be understood by the consumer both at the formal and grammatical level and also in terms of its actual effects, so that the average consumer, who was reasonably well informed and reasonably observant and circumspect, would not only be aware of the possibility of a depreciation of the national currency in relation to the foreign currency in which the loan was denominated, but would also be able to assess the potentially significant economic consequences of such a term with regard to his financial obligations (judgment, paras 75–78, operative part, para 3).
(4) Article 4 of Directive 93/13 required that the plainness and intelligibility of the contractual terms to be assessed by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract, notwithstanding that some of those terms had been declared or presumed to be unfair and, accordingly, annulled at a later time by the national legislature (judgment, paras 80–83, operative part, para 4).
(5) Article 6(1) and Article 7(1) of Directive 93/13 meant that it was for the national court to identify of its own motion, in the place of the consumer in his capacity as an applicant, any unfairness of a contractual term, provided that it had available to it the legal and factual elements necessary for that task (judgment, paras 90–91, operative part, para 5).
A Lendvai for the bank and the assignee.
P Dantesz for the borrowers.
M Z Fehér, agent, the Hungarian Government.
B Majczyna, agent, for the Polish Government.
A Tokár and A Cleenewerck de Crayencour, agents, for the European Commission.