Araceli Turmo , 21 mars 2013

In a much awaited ruling in Case Aziz v Catalunyacaixa (C-415/11), the Court of Justice assessed the compatibility of Spanish legislation concerning mortgage enforcement proceedings with Council Directive 93/13on unfair terms in consumer contracts. The claimant in the main proceedings had concluded a loan agreement with the defendant bank, secured by a mortgage on his family home. When he experienced payment difficulties, the bank initiated enforcement proceedings which led to his eviction. Under Spanish procedural law, consumers are not able to contest the fairness of contract terms in mortgage enforcement proceedings, but only in separate, declaratory proceedings, which have no bearing upon the enforcement of the loan agreement. The defendant brought such proceedings, arguing that a term in the agreement was unfair, leading the Spanish court to refer two questions to the Court of Justice.

The first question expressed doubts as to the compatibility, with Directive 93/13, of legislation which does not provide for grounds of objection based on the unfairness of contract terms in mortgage enforcement proceedings, and does not allow the court competent to rule on such claims to grant interim relief or terminate the other proceedings. The Court of Justice recalled that, in the absence of harmonisation of national mechanisms for enforcement, such rules are a matter for national legal orders. However, it held that the Spanish legislation at issue clearly impairs the protection sought by the directive, in breach of the principle of effectiveness. Under these rules, the final vesting of mortgaged property in a third party is almost always irreversible, even where the declaratory proceedings lead to the annulment of the mortgage enforcement proceedings, leaving financial compensation as the only remedy available to the consumer. Referring to Advocate General Kokott’s Opinion, the Court held that such a remedy is clearly insufficient, especially in cases where the mortgaged property is the consumer’s family home. It cannot constitute an adequate or effective means of preventing the continued use of that term within the meaning of Article 7(1) of Directive 93/13. Moreover, specific characteristics of court proceedings cannot affect the legal protection from which consumers must benefit under the directive.

The second question sought clarification of the concept of ‘unfair term’ within Article 3(1) and (3), and Annex I, of Directive 93/13, in order to assess the contract terms at issue in the main proceedings. The Court of Justice referred to the Advocate General’s Opinion, holding that a ‘significant imbalance’ in the parties’ rights and obligations must be assessed, in particular, by comparing them with the applicable national rules, and having regard to the legal situation of the consumer. In order to determine whether this imbalance arises ‘contrary to the requirement of good faith’, courts must assess whether the seller or supplier, dealing fairly and equitably with the consumer, could reasonably assume that they would have agreed to such a term. Lastly, the unfairness of a contractual term should be assessed taking into account all the circumstances in which the contract was concluded, and the nature of the goods or services for which it was. The Court of Justice proceeded to give more precise indications for the assessment of three specific terms to which the national court had referred, emphasizing the importance of comparison with the relevant applicable national rules: the inclusion of acceleration clauses in long-term contracts, applicable on account of defaults within a limited specific period; a default interest rate of 18,75% automatically applicable to sums not paid when due; and the term allowing the lender to unilaterally determine the amount of unpaid debt.

Reproduction autorisée avec l’indication: Araceli Turmo, "The restrictive Spanish legislation on the stay of mortgage enforcement proceedings infringes EU law", www.ceje.ch, actualité du 21 mars 2013.