CHF litigations: a dangerous precedent?
The topic of loans denominated in Swiss francs has been a source of legal and political controversy ever since consumers filed the first lawsuits against banks in 2015 because their payment obligations in euros increased due to a shift in the EUR:CHF exchange rate. Unlike some other CEE jurisdictions, Slovenia has not adopted specific legislation addressing Swiss franc loans, aside for a hastily passed law in 2022, which was declared unconstitutional before it entered into force. But in recent months there has been a marked tilt in court practice in favour of a pro-consumer interpretation of the applicable legislation.
The initial judgments from Slovenian courts predominantly held that currency clauses set out in Swiss franc loans were not deemed unfair pursuant to the Slovenian Consumer Protection Act (implementing the Unfair Contract Terms Directive). Instead, the courts emphasised the need for a case-by-case evaluation to determine whether banks adequately informed consumers about the inherent risks associated with exchange rate fluctuations.
In a noteworthy development, recent Supreme Court decisions, influenced by CJEU Paribas case law, have drastically broadened the notion of banks' pre-contractual information and notification duties. As a result, numerous Swiss franc loan contracts have been declared null and void by the courts.
If it persists, the current trend should strongly signal to banks that courts will likely protect consumers in case of unfavourable market developments. Think of similar products such as EURIBOR-linked loans, not to mention the various other retail investment products. How this will be reflected in the way these products are originated (and, indeed, priced) in the future, remains to be seen.
Collective proceedings: the consumer protection sledgehammer
In 2023, a newly established not-for-profit organisation filed a collective action against 11 Slovenian banks, alleging that they overcharged consumers by applying a zero-floor in their calculation of interest applicable in EURIBOR-linked floating rate loans (i.e. taking 0 % instead of a negative number when EURIBOR was in the negative). By and large, this calculation was based on express contractual clauses (known as "zero-floor" clauses) inserted in the underlying loan agreement.
In contrast to Swiss franc loan litigation, where borrowers are suing the banks individually, collective proceedings have been filed on behalf of the entire class of affected borrowers. These employ the toolbox provided by the Slovenian collective action legislation, adopted as early as 2017, but materially reflecting the EU Representative Actions Directive.
At the time of writing, no judgments have been passed yet in these collective proceedings. Apart from the substantive merits, the key open question is what criteria the organisation lodging the collective action must fulfil to be deemed a qualified entity eligible to file the suit on behalf of the affected group.
Leaving aside the substantive merits of the dispute, collective proceedings are universally expected to set a landmark new precedent when it comes to the effectiveness of the collective redress toolbox in enforcing consumer protection legislation on a mass scale.