Limitation of claims by consumers and banks arising from invalid Swiss franc loan agreements.

The issue of the limitation period for claims arising from defective Swiss franc loan agreements raises significant controversy. The Supreme Court resolution of 7 May 2021 in case no. III CZP 6/21 aims to remove doubts related to the limitation of claims between parties to such agreements. This resolution has faced criticism. Nevertheless, it will shape the case law because it was granted the force of a legal principle. It is also worth paying attention to the recently published justification of this resolution, especially regarding the institution of limitation periods.

In the “classical” approach to limitation under civil law, the moment when a claim becomes due (i.e., the start of the limitation period) does not depend on the creditor’s knowledge of the claim’s existence. Therefore, the limitation period may expire before the creditor becomes aware of the possibility to pursue the claim – as indicated by the Supreme Court in the judgment of 16 December 2014, case no. III CSK 36/14. This reasoning aims to ensure legal certainty, to avoid situations where a creditor would seek enforcement of a claim 20 or 30 years after providing the performance, simply because only then did the creditor “gain” awareness that what was provided years earlier was undue.

Such a classical understanding of limitation becomes outdated when confronted with EU law in the area of enhanced consumer protection. Primarily, the assumption underlying increased consumer legal protection is difficult to dispute: the consumer is in a weaker position than the entrepreneur, both in terms of bargaining power (having to accept contract terms drafted by the entrepreneur) and due to information asymmetry. Precisely because of the consumer’s weaker position compared to the entrepreneur, the Court of Justice of the European Union (CJEU) stresses in the context of limitation periods the need to consider the moment the consumer became aware of the unfair nature of the contract term or the moment the consumer could reasonably be expected to become aware of it (see judgment of 9 July 2020, C-698/18 and C-699/18, SC Raiffeisen Bank SA, paras. 63–67, 75).

Referring to the above approach indicated by the CJEU, the Supreme Court, in the justification of the resolution in case no. III CZP 6/21, stated that in cases concerning Swiss franc loans, the start of the limitation period cannot be automatically linked to the moment the parties performed their contractual obligations (as would be assumed in the classical understanding of limitation).

The Supreme Court noted that the limitation period for the consumer’s restitution claims cannot begin before the consumer actually knew or, reasonably speaking, should have known about the unfair nature of the clause. In practice, interpretative difficulties may arise, especially regarding determining when the consumer could reasonably have known about the unfair nature of the clause.

The Supreme Court also pointed out that a consumer — being aware of unfair contract terms — may waive the protection granted by the provisions on unfair contract terms, for example if the consequence of exercising this protection would be the contract’s invalidation causing adverse effects for the consumer. The Supreme Court considered this a significant factor in determining the start of the limitation period for the bank’s claims resulting from the contract’s invalidation due to unfair contract terms, i.e., claims particularly concerning the repayment of the disbursed loan amount. The Supreme Court took the position that the limitation period for the bank’s claims may begin only after the borrower-consumer makes a binding decision to waive the curing of the unfair clause and to accept the consequences of the contract’s total invalidity (and simultaneously to oppose the granting of protection against these consequences through the introduction of substitute regulations). When making such a decision, the consumer must be aware of the consequences of exercising the protection afforded by the provisions on unfair contract terms. As the Supreme Court argues — until the properly informed consumer consents to be bound by the unfair clause or refuses such consent (or a reasonable time for expressing consent expires), the loan agreement, which cannot be validly binding without this clause, remains in a state of suspended ineffectiveness, i.e., it does not produce legal effects, although it may still produce effects if the consent is given or — if certain conditions are met — if it is replaced by substitute regulation. It is clear that as long as this suspension state lasts, the lender cannot demand the performance agreed in that contract.

In other words, only a firm decision by a well-informed consumer not to waive the legal protection against unfair contract terms enables the bank to pursue claims.

Several objections can be raised to this line of reasoning.

Firstly, how can it be known that the consumer is aware of the consequences of exercising the protection granted by the provisions on unfair contract terms? Ordinary courts themselves have difficulty determining whether, if the Swiss franc loan agreement is declared invalid, its parties may claim from each other more than the return of what they provided, e.g., interest for using the capital. The District Court for Warsaw-Śródmieście, in case no. I C 1297/21, referred a question to the CJEU as to whether such additional claims may be raised by the parties. The Supreme Court has not unequivocally ruled on this either. Therefore, since the case law encounters difficulties in determining the consequences of the contract’s invalidation due to unfair contract terms, it is even less likely that the consumer can be fully aware of what exercising protection under those provisions entails.

Secondly, it is not the case that the bank must passively await the consumer’s position on whether they consent or object to being bound by the unfair clause. The bank could summon the consumer to make such a statement and thus remove the suspension preventing the bank from enforcing its claims. After all, as a professional entity, the bank should expect that in the future the consumer may contest dubious indexation clauses in the Swiss franc loan agreement.

Thirdly, the possibility to waive the protection granted by the provisions on unfair contract terms exists in the consumer’s interest. It is the consumer’s choice whether to exercise this option, bearing in mind that contract invalidation — as a consequence of exercising such protection — may be disadvantageous to the consumer. However, waiving such protection once the consumer has already filed a lawsuit against the bank is at least doubtful. Meanwhile, the possibility of waiving this legal protection has de facto served as an element of argument against consumers, enabling banks to successfully pursue claims by denying the possibility of contesting those claims on limitation grounds.

Despite the many doubts raised by the discussed Supreme Court resolution, it is worth emphasising once more that it will serve as a reference point for Swiss franc loan cases. Primarily, based on the justification of this resolution, one can note that:

1. the discussed resolution enables recognising in the consumer’s claims instalment payments which under the “classical” civil law approach would be considered time-barred. In this context, it would be necessary to determine when the consumer acquired knowledge of the unfair contract terms, or reasonably speaking, could have acquired such knowledge — and to set that moment as the start of the consumer’s limitation period. Determining this moment — as mentioned above — is not without problems. Case law will develop in this regard.
2. the discussed resolution opens the possibility for banks to effectively pursue the repayment of the capital disbursed to the consumer, because the limitation period for the bank’s claims does not begin on the date of disbursing the loan amount or its tranches, but from the moment the loan agreement became permanently ineffective, i.e., when the well-informed consumer made a binding decision to waive the curing of the unfair clause and to accept the consequences of the contract’s total invalidity (and to oppose the granting of protection against these consequences through substitute regulation). Determining when the consumer makes such a conscious decision (considering the consequences of contract invalidation) also opens the door to interpretation.