Judicial Games: Withdrawn Revision Again Delays Decision on ‘Franc’

The saga surrounding loans in Swiss francs shows no signs of ending, and judging by the current course of proceedings and decisions of the Supreme Court, a final ruling could still be years away. It is increasingly likely that it will come from the Constitutional Court. After the Supreme Court judges made three different decisions on this case in 2022 (one in favor of consumers, one in favor of banks, and a compromise third), a uniform legal interpretation on this matter has never been established, and it was expected that it would be made by the extended panel of the Civil Department of the Supreme Court.

 

According to the Amendment to the Civil Procedure Act, the extended panel of the Supreme Court, consisting of 13 members, can decide on legal questions, but only for second-instance decisions made after July 19, 2022. When such a case finally came up for consideration, the extended panel was selected, but instead of making a decision, the proceedings were recently suspended because the bank withdrew the requested revision, putting the entire story regarding lawsuits for loans in francs back on hold – awaiting a new case to come before the Supreme Court.

 

Given that, according to the claims of the Franak association, 90 percent of second-instance cases are in favor of consumers, the majority of revision requests at the Supreme Court have been submitted by banks, so the outcome of the proceedings is currently primarily in their hands. By withdrawing the revision request, the decision on ‘franc’ can continue to be postponed indefinitely. Due to the divided opinions of the Supreme Court judges on this matter, the selection of 13 judges for the extended panel plays a crucial role in making a decision. Participants in these proceedings generally know the stance of each judge, allowing them to anticipate the outcome of the decision and prepare further steps in the case of an ‘unfavorable’ composition of the extended panel.

 

– The ratio of initiated revisions by banks to consumers at the Supreme Court of the Republic of Croatia is 10:1, meaning that every tenth revision is a request from a consumer, while the remaining 90 percent are initiated by banks. This means that 90 percent of cases have been definitively resolved in favor of consumers, and only 10 percent in favor of banks. I wonder, is it possible that 90 percent of judges in lower courts have one opinion, while on the other hand, a potential majority of judges at the Supreme Court have a completely different opinion? This possibility does not seem likely to me, but it is still very indicative that the Supreme Court has not yet established a uniform legal interpretation.

 

This means that there is a significant division among the judges of the Supreme Court, but it is approximately in a 1:1 ratio, which is why no one has prevailed, and why there is still no uniform legal interpretation today. Perhaps this year, even before the Supreme Court, the Constitutional Court will resolve this, which has already received, according to my knowledge, three constitutional complaints seeking the annulment of inconsistent revision decisions of the Supreme Court of the Republic of Croatia related to CHF loan conversions – explains Goran Aleksić, coordinator of the legal team of the Franak Association.

On the other hand, the Banking Association insinuates a conflict of interest among the judges of the Supreme Court, as their response suggests that the revision was withdrawn because the bank assumed that the outcome would be unfavorable for it.

 

– We understand the reasons why the bank decided to withdraw the revision in this case, especially considering the disorganization of the legal interpretation institute and the circumstances related to the session where this issue was to be decided. We believe it is necessary, as stated in the judgment of the Court of Justice of the European Union in joined cases C-554/21, C-622/21, and C-727/21 (Hann-Invest), to align judicial proceedings in Croatia with European standards of judicial independence. All attempts to unify judicial practice that are contrary to the demands of European Union institutions towards the Republic of Croatia are unacceptable.

 

The Croatian Banking Association believes that the fundamental constitutional and conventional obligation of the courts is to ensure impartial and fair trials, with complete objectivity and transparency of proceedings. In this context, it is concerning that judges who were previously excluded from proceedings related to CHF loans due to conflicts of interest are participating. We believe it is unacceptable for any judge, regardless of the instance, to decide in cases where their private interests may conflict with the public interest – say the Banking Association.

 

From the above, it can be assumed that in the case of an unsatisfactory composition of the extended panel at the Supreme Court, banks will likely use the option of withdrawing cases, so any decision at that court could be made if the extended panel decides on a case where the revision request was submitted by a consumer.

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Given this stalemate, we also asked attorney Igor Metelko, who represents consumers in lawsuits against banks, about possible further legal steps until a final resolution of the Franak case. According to him, even after the Supreme Court’s decision, if it is made through the extended panel, it is possible for the consumer or the bank, depending on who considers themselves the aggrieved party, to continue the proceedings at the Constitutional Court.

 

– The Constitutional Court can reject or dismiss the constitutional complaint, but it can also conclude that a specific constitutional right, such as the right to a fair trial, has been violated in the proceedings before the courts, thereby explaining its position and returning the case for reconsideration by the courts, which are then obliged to act in accordance with that decision. Such an approach was applied, for example, in the case of assessing the nullity of the currency clause in the collective dispute in the Franak case. The duration of the proceedings before the Constitutional Court depends on its working dynamics — from the submission of the complaint to the decision, it can take a year to a year and a half, with cases of particular social and public significance being prioritized – explains Metelko.

As a last instance, there is also the European Court of Human Rights, which can also reject or accept the request, which usually also takes about a year. Therefore, until a final answer to the question of whether consumers with converted loans have the right to compensation or not, it will very likely take several more years.

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However, the already unified legal interpretation of the Supreme Court, or the decision of the Constitutional Court, will certainly be the main guideline for lower-instance courts, which will then continue proceedings in accordance with the legal interpretations of those courts, without waiting for the European Court of Human Rights. As an argument that consumers did not receive full restitution through conversion, the Franak association points out that financial expert assessments unequivocally demonstrate that conversion did not achieve balance between the bank and the consumer, as the remaining principal after conversion should be 10 percent lower, annuities between 15 and 25 percent, and that the overpayment determined by conversion constitutes only 10 percent of the compensation to which consumers are entitled.

 

On the other hand, the Banking Association believes that former users of CHF loans have been placed on an equal footing with users of loans in other currencies and refer to one of the three revision decisions of the Supreme Court (Rev 637/2019-2), which is in favor of banks, according to which a client who accepted the legally prescribed conditions for converting CHF loans into euro loans has no right to a refund based on the provision on variable interest rates from the original contract.

 

Both sides would likely agree that ten years after the conversion of loans from Swiss francs to euros is too long a period for the absence of a unified legal stance on about 50,000 disputes that consumers are conducting against banks. Although this is a complex legal issue, it is difficult to justify such prolonged uncertainty, especially when it affects tens of thousands of citizens and seriously undermines trust in the judicial system.