Slovenian Supreme Court: A CHF Loan Is Void in Cases of Inadequate Risk Disclosure

For years, we have argued in numerous proceedings, often successfully, that this approach is incorrect. We have repeatedly pointed out that, due to the requirements of Directive 93/13/EEC, the legal framework governing similar factual situations is broadly the same throughout European legal systems. Consequently, it is worth considering the more developed case law of other countries.

In a similar case, the Slovenian Supreme Court recently ruled in favour of borrowers holding foreign-currency loans and, based on arguments identical to those our firm has been advancing for years, declared a CHF-denominated consumer loan agreement entirely void. The decision, issued in January 2018, was also reported in the Hungarian-language press.

Although the full written reasoning of the judgment is not yet available, we have summarised the key points of the court’s oral reasoning on the basis of a Croatian-language press release.

Key Findings of the Court

The appellate court found that CHF loans are not ordinary loan products but rather financial products involving significant risks, and that banks had failed to provide consumers with adequate information concerning such loan agreements.

The judgment confirmed that the requirements established by the Court of Justice of the European Union in Case C-186/16 had not been satisfied. Specifically, the court held that:

• Although the contractual clauses relating to the Swiss franc (CHF) were grammatically precise, they were not explained clearly and comprehensibly. Consumers were not informed how the relevant mechanisms operated, which factors could affect them, or which future events might influence the CHF exchange rate. As a result, consumers could not reasonably foresee the risks involved.
• CHF loans were not ordinary loans but financial products directly linked to the foreign exchange (FOREX) market. Consumers should therefore have been specifically informed of this characteristic.
• Banks were required to explain precisely how a substantial depreciation of the euro could affect the consumer’s outstanding debt and how it could increase the monthly repayment obligations.
• Given that such products are not ordinary mortgage loans but complex financial instruments, consumers should have been advised by specially qualified advisers possessing appropriate expertise in such products.
• Banks did not offer consumers any products capable of hedging or mitigating foreign exchange risk, while at the same time the banks themselves were fully protected against those risks.
• Banks were aware that consumers generally did not earn income in Swiss francs and had not entered into the transaction as investors seeking speculative gains. Instead, consumers had chosen the loans solely because of their lower interest rates.
• Finally, banks knew that a depreciation of the euro, leading to a deterioration in consumers’ creditworthiness, could result in consequences beyond the consumers’ ability to manage.

The reasoning also expressly highlights that the court took into account similar higher-court decisions rendered in both Spain and Germany when reaching its conclusions.

As soon as the full written reasoning becomes available to us, we will publish it as quickly and as comprehensively as possible.

Should you require further information regarding the decision or its implications, please do not hesitate to contact us.