In Case C-630/23 of 30 April 2025, the Court docket of Justice of the European Union (CJEU) dominated on the implications of the removing of a time period regarding alternate fee threat in a leasing settlement denominated in a overseas foreign money.
Info of the case
In June 2007, ZH and KN concluded a leasing settlement denominated in Swiss francs (CHF) with AxFina for the acquisition of a car. The credit score was to be repaid in 120 month-to-month instalments denominated in Hungarian forint (HUF). The time period regarding the alternate threat positioned the danger related to the appreciation of the CHF in opposition to the HUF solely on the customers. In Might 2013, AxFina dissolved the settlement with instant impact as a result of customers being in arrears. The whole debt in HUF thus turned due and payable in a single cost. In compliance with Hungarian regulation (Paragraph 3(1) of the DH2 Regulation), AxFina deducted ‘the quantity ensuing from the settlement (…) as an overpayment attributable to an alternate fee distinction (…) and the proceeds of sale of the car’ (para 20). It then introduced an motion claiming that, ought to the time period be discovered unfair and the settlement be discovered invalid, the contract ought to be declared retroactively legitimate from the date of the conclusion. The customers ought to thus be ordered collectively and severally to pay the debt, within the quantity of HUF 1 637 682, of which HUF 972 960 have been owed in respect of the alternate fee threat.
The courtroom of first occasion discovered the settlement invalid as a result of unfairness of the time period in query, however discovered that the customers needed to bear the danger as much as a sure extent. It decreased the quantity owed on the premise of the contract – which it declared legitimate –by the quantity the customers had misplaced ‘as in contrast with the scenario that might have obtained if that settlement had been denominated in Hungarian forint’ (para 22). The courtroom of enchantment upheld the judgment, stating that the hurt, relying on the unfair time period, may very well be eradicated and that restoration of the scenario which the customers would have been in had the settlement not included that time period was not doable, as a result of irreversible nature of the efficiency.
ZH and KN introduced an motion earlier than the referring Supreme Court docket, Kúria, searching for a ruling dismissing AxFina’s authentic motion. They argued that ruling out restoration was opposite to EU regulation and that the nationwide courtroom can’t alter the content material of the unfair time period.
The Supreme Court docket observes that underneath Hungarian regulation, the implications of the invalidity of leasing agreements consist in both declaring it legitimate or declaring it efficient till the choice of invalidity, thus excluding restoration of the unique scenario (para 27). It’s thus doable that, the place the contract is discovered invalid following the removing of an unfair time period, a Hungarian courtroom can declare the contract legitimate retroactively ‘in a such a method that the unfair time period (…) doesn’t confer any obligation on the buyer involved, whereas the opposite phrases (…) which aren’t unfair, proceed to bind the events’ (para 31). This fashion, the unfair time period putting the danger solely on the customers can be eliminated, and the leasing would live on (para 32).
Query referred
The Hungarian Supreme Court docket thus referred one related query.
It requested whether or not Article 6(1) of the Unfair Contract Phrases Directive (UCTD) could be interpreted as that means that the contract in query can live on with out the unfair time period (which pertains to the principle obligation), the place the regulation of the Member State regulates the foreign money conversion mechanism by the use of obligatory statutory provisions.
Additional, it requested whether or not it’s suitable with the UCTD a Member State’s authorized observe, in response to which, in view of the precept of unjust enrichment, the creditor should reimburse the buyer ‘the quantities charged by the creditor underneath the time period declared unfair, however that order just isn’t made within the context of a restitutio in integrum, as a result of a particular provision of nationwide regulation excludes that doable authorized consequence of invalidity’ (para 37). As an alternative, the order is made to revive ‘the steadiness of the contract between the contracting events (…) by making use of the principle authorized consequence’ in case of invalidity, of the regulation of the Member State, specifically ‘a declaration of validity in respect of the contract, such that the unfair phrases don’t impose any obligation on the buyer, however the remaining (honest) parts of the contract (together with the contractual pursuits and different prices) proceed to bind the events on the identical phrases’ (para 37).
Alternatively, it requested whether or not it’s suitable with the UCTD a observe in response to which, the place a declaration of validity just isn’t doable, ‘the authorized penalties of invalidity are decided by declaring the contract relevant till judgment’ and ‘the settlement of accounts (…) is carried out by making use of the precept of unjust enrichment’ (para 37)
The CJEU first dominated {that a} time period held to be unfair should, in precept, be thought to be by no means having existed, in order that it is going to be ineffective in the direction of the customers. Thus ‘the dedication by a courtroom that such a time period is unfair should (…) have the consequence of restoring the buyer to the authorized and factual scenario that she or he would have been in if that time period had not existed’ (para 45). A ‘corresponding restitutory impact’ should observe the unfairness of a time period, the dissuasive impact of Article 6(1) in any other case being known as into query (para 46). By implication, whereas nationwide legal guidelines should outline the authorized results of discovering a contractual time period unfair, ‘such a discovering should enable the restoration of the authorized and factual scenario that the buyer would have been in if that unfair time period had not existed, by, inter alia, making a proper to restitution of benefits wrongly obtained (…) by the vendor or provider’ (para 48).
Can the contract live on?
The referring courtroom assumes that the applying of Hungarian regulation meets the necessities of the UCTD in that, from such utility, it follows that the customers not bear the monetary penalties of the unfair phrases, whereas persevering with ‘to benefit from the beneficial rate of interest linked to the overseas foreign money stipulated in that contract’ (para 50). Nevertheless, the CJEU observes that there exist limits to the discretionary energy of the Member States to determine the standards governing the potential for a contract to proceed present with out its unfair phrases (para 55). To conclude {that a} contract is ‘able to persevering with in existence with out the unfair phrases’, as established by Article 6(1), it’s needed to determine that the continued existence ‘doesn’t contain any modification of the contract aside from that ensuing from the deletion of these phrases’ (para 62). The place, like within the case at hand, the referring courtroom has discovered that the unfair time period defines the principle subject material of the contract, it doesn’t appear legally doable for the contract to proceed in existence (para 63, see Dunai, C‑118/17, para 52). A nationwide courtroom can’t treatment the invalidity of the contract ensuing from the unfairness of a time period by declaring, without delay, the validity of the contract and altering its foreign money (para 64, see AxFina Hungary, C‑705/21, para 41). This could de facto alter the content material of the time period.
Additional, whereas the Court docket has dominated that Article 6(1) doesn’t preclude a nationwide courtroom from changing a time period with a provision of nationwide regulation the place the buyer can be in any other case disfavoured by the annulment of the contract in its entirety (see Abanca Corporación Bancaria and Bankia, C-70/17 and C-179/17), it is very important do not forget that the desires of the buyer are decisive in assessing the implications of the annulment of the contract (see D.B.P. and Others (Mortgage loans denominated in overseas foreign money), C-80/21 to C-82/21). Within the case at hand, the customers have clearly expressed their want that the leasing be annulled in its entirety (para 70).
Does the Hungarian authorized observe have a deterrent impact?
The compatibility with EU regulation of the Hungarian authorized observe detailed above depends upon two issues: first, it ought to make it doable to revive each in regulation and reality the scenario which the buyer would have been in had the contract not existed; second, it shouldn’t undermine the deterrent impact of the UCTD (para 76; see Financial institution M.). In instances just like the one at stake, the buyer should at the least be entitled to reimbursement of the month-to-month instalments and charges paid (para 77). A cost solely of the sums obtained by AxFina on the premise of the time period regarding the alternate fee threat is in no way enough (para 78). They have to be reimbursed for all month-to-month instalments. Additional, granting AxFina the best to hunt compensation past restitution of the products made obtainable in efficiency of the settlement (i.e., the car) or the reimbursement of the corresponding worth would remove the deterrent impact of the UCTD, de facto permitting the credit score establishment to be remunerated for using these items by the customers (para 79; see Financial institution M). Additional, opposite to what the Hungarian Supreme Court docket argued, this interpretation just isn’t questioned by the necessity to make sure that ‘the penalty imposed is …proportionate’. In Deutsche Financial institution Polska, C-325/23, the Court docket, in reality, dominated that invalidating a contract as a result of unfairness of a time period is in no way a penalty (para 80).
Conclusion
With this ruling, the Court docket of Justice intervenes, consolidating Financial institution M, and thus including an additional piece to a fancy means of clarification on the compatibility of authorized penalties of discovering a contractual time period unfair with EU regulation. As lately famous by the scholarship, nationwide courts attain considerably differing outcomes with regard to the implications of the unfairness of a contract time period (E Mišćenić, P Tereszkiewicz and M Infantino, ‘The Interaction Between the CJEU and Nationwide Courts within the Case Regulation on Unfair Contract Phrases in Overseas Forex Loans: A Comparative Overview’ (2023) 19(4) European Assessment of Contract Regulation 346). Whereas Member States are in control of figuring out what the implications of the invalidity of the entire contract are, the Court docket can and is offering steering on the alignment of nationwide guidelines with the goals of the Unfair Contract Phrases Directive.
