HUB: The Legal Interpretation of the Supreme Court Contradicts Its Own Legal Position Presented in the Test Procedure

Based on a preliminary analysis of the legal interpretation of the Supreme Court of the Republic of Croatia, it can be noted that the request for additional restitution, as demanded by consumer representatives, has not been taken into account.

However, the Croatian Banking Association still holds the view that the legally conducted conversion from 2015 has fully resolved the issue of compensation for former users of CHF loans and believes that the legal interpretation issued by the Supreme Court deviates from its previous positions expressed in the test procedure, as well as from certain provisions of the legal solution that regulated the conversion, states the HUB’s announcement.

They remind that it was precisely the Supreme Court that, in one of its earlier positions, advocated the understanding that the conclusion of the Conversion Agreement ensured the removal of unfair contractual provisions while simultaneously maintaining the validity of the contract, which is in accordance with the fundamental principles of European regulation.

– In the Test Procedure, the Supreme Court expressed the view that the Conversion Agreement concluded based on the Consumer Credit Act has legal effects and is valid in cases where certain provisions of the basic loan agreement are null and void. As justification for this position, the Supreme Court, among other things, clearly concludes in its reasoning that the Conversion Agreement represents a new legal basis that has its source in a mandatory provision assessed as compliant with the Constitution of the Republic of Croatia and has legal effects and is valid even when certain provisions of the basic agreement are null and void – they say at HUB, which has recently been headed by Tamara Perko.

‘Hence, any additional compensation would be discriminatory’

Croatia, they continue, is the only country that had a legal solution with retroactive effect, which clearly defined all conditions for conversion, the method of compensating consumers, and establishing the same position for users of CHF loans as for users of loans with a currency clause in euros. In the conversion, all overpayments based on exchange rate differences and overpaid interest were to be taken into account by the banks, and all overpayments were retroactively used to settle loans in EUR.

– Furthermore, the conclusion of the Conversion Agreement was mandatory for banks and based on the principle of free and informed consent of consumers. This compensated former users of CHF loans, and any additional compensation for one category of debtors would be discriminatory and would disrupt the existing balance established by law, which is in complete contradiction to European law and the principles of consumer protection.

Additionally, we remind that the EU Court in decision C-567/20 established that consumers do not have the right to contest the provisions of the annex to the contract through which the conversion was carried out. This eliminated the basis for restitution since the disputed provisions from the basic agreement were replaced by a valid annex. Restitution under the basic agreement was incorporated into the conversion mechanism, and in the case of converted loans, there are no further rights to restitution based on the basic loan agreement.

In conclusion, such a solution contradicts the constitutional principle of the separation of powers and the rule of law and will consequently negatively affect the level of legal and investment security in the Republic of Croatia, as well as its perception in the eyes of the domestic and foreign investment public. Banks will consider further options and legal remedies available to them and will individually decide on their application – states the announcement from the banking association.