Consequences of cancellation of contract: EU Judgment in Case C-520/21 Bank M.

Thursday 15th June 2023

Judgment in Case C-520/21 Bank M. (Consequences of cancellation of contract)

(Approximation of Laws)

In 2008 A.S. and his spouse, E.S., concluded a mortgage loan agreement with Bank M. for the purpose of building a house. The loan amount was denominated and disbursed in Polish zlotys (PLN) but – similarly to thousands of other mortgage loans granted to consumers in Poland from the early 2000s – was indexed to the Swiss franc (CHF). Monthly loan installments were to be paid in PLN after conversion according to the CHF selling rate published in Bank M.’s table of exchange rates in force on the date each loan installment fell due.

Considering that the loan agreement at issue contains unfair terms such as rendering it void in its entirety under Polish law, A.S. brought an action against Bank M. before the District Court of Warsaw-Śródmieście. He argued that Bank M. had received the monthly loan installments without any legal or contractual basis and had benefited from them. He requested Bank M. to pay compensation for having used his money without a contractual basis, for the loss of opportunity to earn profit through his temporary inability to use his money, and for the decrease in the purchasing power of the money he had transferred to the bank.

The referring court asks the Court whether the Directive on unfair terms in consumer contracts, as well as the principles of effectiveness, legal certainty, and proportionality, must be interpreted so as to preclude an interpretation of national legislation to the effect that, where a loan agreement concluded between a consumer and a bank is declared void in its entirety, the parties are entitled to assert claims against each other that go beyond reimbursement of the monetary consideration they paid under that agreement and the payment of default interest at the statutory rate from the date of the request for reimbursement.

Background Documents C-520/21