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Hungary's supreme court decision on fx loans
1. HUNGARY’S SUPREME COURT DECISION ON FX-LOAN CONTRACTS
Further to the recently available information accessible on public domain, the Kúria
(Hungary’s supreme court) declared the FX margin unlawful, however by replacing the
void (contractual) clause with a valid (statutory) one, saved the entire contract. Even if
with a different content, the contract, as it is, has survived.
Budapest, June 4, 2014
by Igor Máté (https://www.linkedin.com/in/igormate)
The decision was issued by the Kúria in a single, separate case (Kásler vs. OTP Mortgage Loan
Bank) therefore it is not (yet) a uniformity decision that would be compulsory for all the
lower courts in Hungary. Notwithstanding, it is likely can be envisaged that the upcoming
uniformity decision will be in line with the merits of the yesterday decision.
The judgment follows the month ago decision of European Court of Justice (the “ECJ”)
declaring that it is up to the national courts’ discretion to decide on
whether the unfair nature of the contractual clause re the application of FX margin (in
Hungarian: árfolyamrés) can be scrutinized by the courts (pursuant to the respective
European legislation) and if yes,
the specific clauses on FX margin of the respective contract(s) are or are not unfair (and
therefore are or are not null and void), and if are
repairing the contract with applying the statutory rule of national laws: replacing the null
and void original contractual clause
o if such an applicable statutory rule exists in the respective national law, and
o taking into consideration that the full and entire nullity is not the interest of the
customer, since in this case they should be obliged to repay the loan at once in
one sum.
2. 2
With the decision the Kúria took the empowerment given by the ECJ and decided that the
argued clause
can be examined whether it is fair or not,
is unfair, therefore null and void
can be replaced by a statutory rule of law
be replaced by that statutory rule of law.
From practical point of view, the FX margin employed earlier contractually by OTP (as it was
announced by the bank) have been replaced by virtue of the court decision with the mid
CHF/HUF rate of the National Bank of Hungary, announced on the day of the crediting the
client and on the days of repayments.
The reasoning of the decision states that the unfair nature of the FX margin employed by the
bank(s) shall be declared due to the fact that behind this fee there is no actual service
performed by the bank(s), since no real conversion of currencies has happened … This
question (if not via conversion, then how the currencies will change – in the everyday
meaning of the word!) is one of the crucial part of the reasoning that can and shall be
evaluated once the entire official decision is available.
No consequences or forecasts can be made upon the decision regarding a “global” political-
legislative solution. Nullity of contracts, in general, can be declared by courts. Accordingly,
in order to make a contract null and void, a court action shall be initiated by the claimant
customer. In general, without a separate court action, one concrete court decision or even
uniformity decisions do not (cannot) declare at once all the concluded contracts of all banks
and all clients null and void (the institution of class action in Hungarian legal system does not
exist).
As flashed above, the decision envisages the content and the approach of the Kúria’s
upcoming uniformity decision (that was also yesterday broadcasted to be passed by June 16,
2014, 3 months earlier than formerly anticipated and forecasted (by around September
2014).