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Robert Mazur, The Difficult Path of the Implementation of Directive 93/13/EEC in Poland, as Illustrated by the Example of the Consumer Dispute with the Banking Sector Concerning Housing Loans Indexed to the Swiss Franc in 2013–2019 in:

OER Osteuropa Recht, page 182 - 204

OER, Volume 66 (2020), Issue 1, ISSN: 0030-6444, ISSN online: 0030-6444, https://doi.org/10.5771/0030-6444-2020-1-182

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Robert Mazur* The Difficult Path of the Implementation of Directive 93/13/EEC in Poland, as Illustrated by the Example of the Consumer Dispute with the Banking Sector Concerning Housing Loans Indexed to the Swiss Franc in 2013–2019 Abstract This article outlines the long and difficult path of implementing Directive 93/13/EEC in Poland in the context of Swiss franc housing loan disputes. It elaborates on the in‐ itial problem of mass inclusion of abusive provisions in loan contracts, the essence of such disputes as well as the main issues raised by borrowers against banks, and con‐ tinues with a discussion of grounds for abusiveness of indexation clauses in the deci‐ sions of Polish courts, the consequences of finding indexation clauses abusive (accor‐ ding to court decisions), and the question of invalidity of the contract. In summary, the article concludes that the 20s of the 21st century should be a time of realistic and practical implementation of the provisions of Directive 93/13 in Poland – i.e., a cen‐ tury that conforms to the ‘spirit’ of European law. The promising beginnings – formal implementation (and its errors) When on 5 April 1993 the Council of the European Communities was adopting Coun‐ cil Directive 93/13/EEC of 5 April 1993 on abusive provisions in consumer con‐ tracts,1 introducing the European consumer protection system that is still in place at the present day, the democratic and economic transformations in Poland were still in a very early phase. No more than four years earlier Poland’s economic system was still officially based on central planning of the production and distribution of goods, while the entire political power was held in the hand of one party, the same for forty years, under the single-party system. The beginning of the 1990s in Europe was a period of deep transformation, both political and economic. Entire decades lived without economic or political freedom meant, however, that the majority of Poles had no first-hand experience of a free-mar‐ ket economy or a multi-party system. Expectations in both these areas cases were, therefore, set very high, while the skill at navigating the two aforementioned pillars of a modern state was low. As a result, while Directive 93/13/EEC was being enacted on the European level, legislative authority in Poland was exercised by the 1st Sejm, in which – due to the I. * Robert Mazur, RA, “Mazur I Wspólnicy”/ Mazur & Partners, Warschau. 1 Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts; Official Journal L 095, 21/04/1993 P. 0029–0034. OER 1/2020, DOI: 10.5771/0030-6444-2020-1-182 lack of an electoral threshold – as many as 29 political parties were present. That in‐ credibly fragmented Sejm was dissolved after several weeks, following two consecu‐ tive ineffectual attempts at forming a government, opening a near five-month period of the country’s functioning without a legislature in the very epicentre of the transfor‐ mation. In the same period Poland’s GDP was only at 4.4 % of Germany’s (two decades later that would already be 14 %) and was at a similar level to Ukraine’s (two decades later that would be 470 % of Ukraine’s GDP). The social well-being was shaken with the first wave of registered unemployment, with more than 16 % of the workforce being unable to find any employment whatsoever — a new kind of phenomenon in society. Interestingly, Soviet forces were still deployed in Poland, to leave only as late as September 1993. From this perspective, especially from the perspective of the enormity of pro‐ blems faced in everyday life, it would have seemed that providing Polish consumers with a European level of protection against unfair business practices would not beco‐ me the focal point of the legislature’s attention for many years to come. Such a view, however, would have been a sign of underestimating Poland’s ambitions in the period of transformation, and especially her aspirations to become a fully valuable part of the Western world as quickly as possible. And though at the time when the aforementio‐ ned directive (hereinafter the ‘Directive’ or ‘Directive 93/13’) was being enacted on the European level Poland’s membership in the NATO or EU was universally regar‐ ded as a bold vision but still only a dream, incorporation of the Directive's principles into the Polish legal order came surprisingly soon. Already in February 1999, deputies to the 3rd Sejm received Sejm Print no. 945,2 opening the legislative process the end result of which was to be the implementation into Poland’s legal order of a total of four directives dealing with the protection of consumer rights, including also, or even – from the perspective of its later importance – including first and foremost the implementation of the provisions of Directive 93/13. This Sejm Print, as read from the perspective of the beginning of the 21st century’s third decade, is a document of extraordinary informative value, since in addition its purely technical function, as the starting point for a strictly defined legislative proce‐ dure, it also contains a reflection of the Zeitgeist of the first years of Poland’s road to the West – that unique, no longer reproducible fascination with what was qualitatively new and so much different from the principles (and tools) governing consumer pro‐ tection in the worlds of ‘real socialism’ and early years of the transformation. It would later be proven that this change was a huge qualitative leap, unbelievably im‐ portant, and that some of the sponsors’ concerns concerning, for example, the need for a breakthrough in the mindset of practising lawyers (as will be discussed below) were nearly prophetic. 2 The government draft bill of the Act on Off-Premises and Distance Contracts and Amending the Acts: Civil Code, Code of Civil Procedure and Code of Infractions; text available only in Polish via the search engine located at http://www.sejm.gov.pl/archiwum/prace/kadencja3/ prace3.htm. The Difficult Path of the Implementation of Directive 93/13/EEC in Poland 183 Undoubtedly, the draft bill put much emphasis on how it was introducing novel, innovative principles, previously rather unknown to the system. The explanatory me‐ morandum even went as far as to include a separate chapter titled: ‘Concept of the Act from the perspective of legislative technique,’3 worth quoting more extensively here, as it would later turn out to be extremely helpful in explaining in the courtrooms the ‘spirit’ of the newly adopted solutions: ‘This assumption [i.e. assuming tight linkage between the provisions of the Act and of the Code, to preclude the former from becoming a mere ‘empty façade’ — author’s note] was implemented using several legislative techniques. The choice among them depended on the possibility of fitting the solutions adopted in specific directives into the system of Polish law, which was not always easy to achieve. The provisions did not merely follow the principle that Polish law has to meet the minimum standards of the directives. Steps were also taken to take the directives as a model with regard to the level of protection, the scope of application and proposed exceptions, the protection strategy and the implemen‐ tation tactics. The reason for this approach was the conviction that such a type of framework would better serve the harmonization of the law, understood to mean not only the compliance of the provisions themselves but also the acceptance of the ‘philosophy’ of the Euro‐ pean directives and their internalization in the mindsets of lawyers who in the future would make the decisions on the application of the Act. From a practical point of view, this means the possibility to make use of other countries’ accumulated experiences in as‐ similating the content of the directives, and of their judicial practice, and especially the possibility to borrow from existing interpretations of contentious or dubious matters and to make use of the existing literature, taking advantage of the discussion on the imple‐ mentation of directives in those countries. Consumer directives contain many regulations which are instructive or educational in nature. This means that they contain a multitude of obligation’ norms not always coming with a harmonious sanction attached, such as triggering the nullity of the contract or gi‐ ving rise to liability. This course of action is intentional, and in itself it arises from the policy and programme documents in the area of consumer protection, which provide for extensive educational activities that are also reflected in the contents of the directives. This approach does not conform to the tradition of Polish contract law. In our country, a different rule used to prevail — one of sparing regulation, avoiding superfluity, even where the conclusion that such superfluity exists would have to be the result of a com‐ plicated interpretative process. The draft bill, to a certain extent, breaks with the preexisting tradition, especially as regards the detailed regulation of off-premises and dis‐ tance contracts. Also the extensive list of abusive provisions is a novelty from the viewpoint of legislative technique. This innovation, however, is supported by the fact that the level of legal cul‐ ture and sensitivity to what is considered improper in transactions with consumers (al‐ so among professionals) are lower in our country than in Western Europe. Hence, if in those countries it is regarded as advisable and desirable to support education with an appropriate legislative technique, it would be striking if, in circumstances that require greater educational efforts, such efforts were abandoned on account of formal legislative tradition.’ Fragments such as the above-quoted, constituting an element of authentic interpretati‐ on of the provisions of the Polish Civil Code (hereinafter the ‘CC’), would later — 3 Pp. 4 et seq. of the explanatory memorandum to the draft bill – Sejm Print 945, 3rd Sejm. 184 Robert Mazur especially during the first wave of lawsuits brought against banks in 2013–2017 – be‐ come significant arguments for use by lawyers representing consumers in disputes against business parties. Importantly, the sensitivity of the courts applying the provisi‐ ons stemming from Directive 93/13 – not of a recent date by 2013–2017 -would turn out to be astonishingly low, even from the perspective of experienced attorneys, fami‐ liar with the shortcomings of the judicial decision-making process in some of the courts. Eventually, the legislative procedure was to bear fruit in March 2000 in the adop‐ tion of an amendment to the Civil Code, introducing Articles 3851–4, applicable from 1 July 2000. Thus formally, Poland implemented the foundations of the EU consumer protection system almost 4 years before the country joined the European Union. Imperfections could not be avoided; and in the years to come they would be lever‐ aged by entrepreneurs for defence against allegations of using abusive provisions in their contracts. And so the legislature somewhat unfortunately introduced to the Civil Code two statutory requirements for finding a contractual clause to be abusive, na‐ mely the ‘violation of good mores’ and ‘flagrant violation of the consumer’s inte‐ rests’. The problem is that only the ‘violation of good mores’ ground came with the explicit requirement of being examined in reference to the time of entering into the contract. The lack of a similar solution attached to the other ground would later be interpreted as meaning that the legislature wanted the ‘flagrant violation of the consu‐ mer’s interests’ to be examined in reference to a different point in time. Numerous courts would fall into the significant error of analysing whether the bank ‘properly’ implemented the abusive provisions and delving into analyses of the Swiss franc’s ex‐ change rates imposed on the borrowers after the conclusion of the contract (exami‐ ning whether those were ‘market’ and ‘equitable’ rates), and even shifting onto the borrowers the burden of proving in court what rates the bank should have applied in‐ stead of those actually applied on the basis of the rights reserved for the bank in the abusive provisions, dismissing the actions when the borrower failed to meet such un‐ expected requirements. That the unfairness is to be examined in reference to the time of the making of the contract was first determined by the resolution of a panel of seven judges of the Su‐ preme Court of 20 June 2018,4 which still did not discourage many entrepreneurs from attempting, in the course of examining the abusive nature of specific provisions, to rely on facts that arose during the performance of the contract by the parties. It was also noted – pointing out the imperfections of the implementation of Direc‐ tive 93/13 into the domestic legal order – how Polish legislature used the term ‘fla‐ grant violation of the consumer’s interests’ in lieu of the term ‘significant imbalance’. The view held by Polish legal scholars and most of the judicature was that the term ‘flagrant violation’ usually required the demonstration of a particularly striking, highly intensified violation of a specific principle or rule; potential ramifications could include the consumer being de facto refused the required protection in reliance on the insufficient intensity of the violation of the consumer’s interest sphere (where‐ 4 Resolution of a panel of 7 judges of the Supreme Court of 20 June 2017, III CZP 29/17: ‘The evaluation whether a contractual cause is abusive (Article 385(1)) refers to the time of making the contract.’. The Difficult Path of the Implementation of Directive 93/13/EEC in Poland 185 as if the grounds were the existence of a ‘significant imbalance’, the protection would probably have been granted). In this regard it seems that the constantly increasing awareness of the need for pro-European interpretation (‘sympathetic construction’) of national law and the fact that indexation (denomination) clauses were many times re‐ cognized as abusive in the decisions of the Supreme Court5 gradually cancel out the practical consequences of the rather unfortunate formulation of this particular ground for unfairness. The birth of the problem – mass inclusion of abusive provisions in loan contracts At this point it may be argued that the initial years of their application the Code’s re‐ gulations on abusive provisions had limited practical impact, especially in reference to the banking sector and its activities. It is true that, as part of the abstract review of contractual clauses carried out primarily by the President of the Office of Consumer and Competition Protection, these regulations supplied the basis for the final and bin‐ ding recognition of many contractual clauses as abusive, which in practice meant that such clauses were entered on the list of abusive provisions kept by that authority.6 Nonetheless, the effect of such an entry remained contentious in the jurisprudence for many years to come, especially as to whether the subject falling within its scope is only the economic operator directly named in the entry (and in consequence – only the parties bound by contracts with that particular operator and containing that parti‐ cular clause) or whether the prohibition against the use of a clause recognized as abusive is in principle unlimited with regard to persons.7 The provisions of Articles 3851–4 gained wider practical significance in reference to the activities of the financial sector only as a result of the activities undertaken by banks from 2004 and with the greatest intensity in years 2006–2008. That was the time when the banking sector launched an offering, backed by a strong marketing ef‐ fort, of consumer loans in which the debt, incurred usually for the purposes of obtai‐ ning housing within Poland, was linked to the value of the Swiss franc (CHF). The linkage, however, was defective in its formation already from the beginning, and- as it would later turn out – this defect will manifest itself on several planes at once, allo‐ wing the courts a broad spectrum of options for removing the linkage with the Swiss franc (odfrankowienie) or finding a contract for a loan linked to a foreign currency invalid. Here, for the sake of orderly discussion, it is necessary to discuss the two basic types of contracts that formed in practice. It must be noted right away that none of the two types ever came to be statutorily defined, and the banks themselves did not con‐ II. 5 The abusive nature was determined, among others, in the judgments of the Supreme Court of 22 January 2016 (I CSK 1049/14); 8 September 2016 (II CSK 750/15); 1 March 2017 (IV CSK 285/16); 14 July 2017 (II CSK 803/16); and 29 October 2019 (IV CSK 309/18). 6 https://www.rejestr.uokik.gov.pl/. 7 The matter had to be resolved by the Supreme Court in the form of a resolution of a panel of seven justices (cf. resolution of a panel of seven justices of the Supreme Court of 20 November 2015, III CZP 17/15). 186 Robert Mazur sistently follow any harmonized naming convention. Suffice to say that one and the same type of loan was variously termed by various banks – as a loan ‘adjusted to-, ‘indexed to’ or ‘denominated in’ a foreign currency or even a ‘loan in a converti‐ ble currency’, and not infrequently several different terms were applied in the context of same obligation relationship, varying across different documents, e.g. the loan app‐ lication, loan contract and accompanying declarations submitted by the borrowers at the time of entering into the contract. It seems, however, that currently – at the beginning of 2020 – despite the chaotic naming patterns in contracts and other bank documents, the view on the division of agreements into two main types, i.e. indexed credit agreement and denominated credit agreement, is fairly uniformly accepted.8 A loan indexed to the exchange rate of a foreign currency is understood to mean a loan granted in Polish zloty, with the parties, at the time of entering into the contract, knowing only the loan’s value in Polish currency (and nothing more). Only when the contract has been concluded and the funds are being disbursed by the bank (in Polish zloty) the borrower’s debt is calculated in a foreign currency. From then on the len‐ ding bank expects the borrower to repay the amount of the debt as denominated in the foreign currency in question, while requiring the payment to be made in Polish zloty and not in that foreign currency. Both the first conversion of the zloty amount into the foreign currency (calculation of the loan balance in the foreign currency) and the fu‐ ture conversion of each monthly instalment of the loan (also expressed in the foreign currency) to the specific amount of monthly payment to be made in Polish zloty will be based on exchange rate table unilaterally determined by the bank. For the original conversion of the amount of the loan in Polish zloty into the foreign currency the lo‐ wer buy rate (resulting in accordingly larger debt in the foreign currency), while the instalment (expressed in the foreign currency) is converted each time at the higher sell rate (resulting in an accordingly larger amount in Polish zloty). By contrast, in a loan denominated in a foreign currency the amount of the loan is expressed in a foreign currency in the contract itself from the very beginning. Here, the borrower will receive some equivalent of that amount in Polish zloty but is not aware of the exact amount at the time of making the contract. The amount is only de‐ termined after the conclusion of the contract, when the funds (or part of them, e.g. a tranche) are actually disbursed by the bank. Similarly to the indexed loan, any conver‐ sions follow rates applied by the bank and published in the bank’s rate table, and the loan amount to be disbursed (the bank’s payment to the borrower is determined in Polish zloty) is calculated at the lower buy rate (the amount actually paid is, therefore, accordingly lower), while the instalments are repaid the same way as in the indexed loan, i.e. the instalment (expressed in a foreign currency) at each time follows the hig‐ her sell rate of the currency (producing an accordingly higher amount in Polish zloty). 8 Cf. J. Czabański, Walutowe klauzule waloryzacyjne w umowach kredytów hipotecznych. Analiza problemu [Indexation to foreign currency in mortgaged loan contracts. Analysis of the problem], Palestra 6/2016, 2–5. Also: judgment of the Court of Appeals in Warsaw of 10 July 2019, VI Aca 1712/17, pp. 26–27 of the justification of the judgment. The Difficult Path of the Implementation of Directive 93/13/EEC in Poland 187 In the practice prevalent in the years 2006–2008, majority of banks offered inde‐ xed loans, i.e. loans where the debt was expressed in a foreign currency, though in an amount unknown when concluding the contract. In later years court decisions would first of all have to confront the question of the permissibility of loan contracts structure in such a way that the bank’s original pay‐ ment to the borrower (in the denominated loan) and the value of the consumer’s obli‐ gation (in the indexed loan) is unknown at the time of executing the contract. At pre‐ sent, it appears that the Supreme Court accepts such contracts,9 without, however, im‐ plying approval for the arbitrary shaping of the mechanisms indexing or denomina‐ ting the parties’ payments. There is no significant contention currently as to that – even though the legislature has supposedly permitted – as it appears – indexed or de‐ nominated loans, the permissibility of these loans cannot be construed as a licence for just about any architecture of such indexation or denomination. On the contrary, in‐ dexing mechanisms must at each time be examined with regard to meeting require‐ ments arising not only from the rules of consumer protection but also from the general principles of the law of obligations, among them especially the limits of the freedom of contracting (Article 3531 CC), and the outcome of such an evaluation will in the majority of cases be disqualifying for a specific indexation mechanism and with it not infrequently the entire contract. The essence of the dispute and the main issues raised by borrowers For greater transparency in the later part of this article, the mechanisms that make the parties’ obligations dependent on the value of a foreign currency will be uniformly referred to using the term ‘indexation’. From the perspective of the jurisprudence of Poland’s common courts and of the Supreme Court in years 2015 to 2019, it is possible to conclude that loan contracts were drafted by banks in an astonishingly carefree manner, paving way for the borro‐ wers to raise a broad spectrum of issues, most of which have been recognized by courts as valid, viz. both with regard to abusive contractual provisions in the under‐ standing of Directive 93/13 and the invalidity of the indexation clauses under the ge‐ neral rules, for numerous co-existing reasons. The typical lawsuit against a bank, see‐ king to destroy the ‘currency element’ in a loan contract or destroy the contract itself, usually combines allegations belonging to both of these areas. ● Invalidity of the loan contract and the question of abusive provisions In a natural way this leads to the discussion of which rules – those relating to abusive provisions or those relating to the invalidity of legal transactions – should apply first. None of the above two views could currently be regarded as prevailing. Hence, one can come across the view that the evaluation of invalidity grounds should only follow III. 9 Cf. judgment of the Supreme Court of 22 January 2016 (I CSK 1049/14): ‘Such a formula‐ tion of an “indexed-loan contract”, of course, fits within the general structure of the bank loan contract and constitutes one of its possible variants. There would be no basis, therefo‐ re, to claim (nor does the respondent bank claim) that some sort of separate, original type of bank contract has formed in practice.’ 188 Robert Mazur after the evaluation of the abusive nature of the provisions of the contract,10 carried out on the basis of Articles 3851 et seq. CC. Invalidity, therefore, should hypothetical‐ ly be considered only with regard to a contract from which all abusive provisions have been successfully severed but also (hypothetically) in the event of incidental re‐ view for abusive provisions yielding the conclusion that the contract in question does not contain any such provisions (which, however, would be an impossible finding in the majority of fact set which, however, in most cases, is impossible to accept). Only the severing of the abusive provisions (i.e. finding that such provisions never exis‐ ted11) permits the determination of the actual contents of the contract and only such contents can subsequently be reviewed for validity. There also exist different views, in particular the view that if a legal transaction is non-existent due to invalidity (where, for example, it violates Article 3531 CC or fails to comply with the requirements of Article 69 of Banking Law), it cannot be affected by the attribute of being abusive. According to those views the analysis of the invali‐ dity of contractual provisions should always precede the analysis of whether they are abusive.12 10 Cf. particularly judgment of the Supreme Court of 21 February 2013, CSK 408/12: ‘Severing from the contractual relationship of terms found to be unfair does not entail the frustration of the entire legal relationship, even should it occur from the circum‐ stances of the case that but for such terms the contract would not have been made. This follows from the interaction between Article 58(3) CC and Article 3851(2) CC, which, as a later and more specialized provision relative to Article 58(3) CC, precludes the latter’s application, establishing in the situation referred to in its § 1 the principle of preserving the binding force of the contract.’ Analogously, for example, the Court of Appeals in Warsaw, in its judgment of 17 August 2012, VI Aca 345/12, or the Court of Appeals in Lublin, in the judgment of 28 May 2014, I Aca 86/14. Similarly A. Kidyba (red.), Kodeks cywilny. Komentarz. Tom III. Zobowiązania – część ogólna [Civil Code. Commentary. Volume III. Obligations — General Part], 2nd ed.: ‘Hence, for example, if in the drafting of specific contractual terms the parties have exceeded the limits of the freedom of contracting set by the principles of social co-existence, in particular the principles of contractual equity (Article 3531 CC) and simultaneously such terms need to be found unfair (Article 3851 CC), then Article 3851(2) CC as the more specialized provisi‐ on relative to Article 58 CC will apply and the parties will be bound by the contract in the remaining part.’ Ibidem: The nature of the regulation contained in Articles 3851–3 is more specialized relative to the provisions applicable to the shaping of the contents of a contract by the contracting parties (cf. Articles 58, 3531 or 388). The ratio for its introduction with the Act of 2 March 2000 on the Protection of Certain Consumer Rights and on the Liability for Harm Inflicted by a Dangerous Product was the intention to provide consumers with more effec‐ tive protection in their contractual relationships with professional parties and the need for Polish law to reflect the provisions of Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (OJ EU L 95 of 21/04/1993, p. 29). 11 Cf. particularly the judgment of the CJEU in the joined cases C-154/15, C-307/15 and C-308/15 (Naranjo), ¶ 75, and especially ¶ 61, where the Court clearly indicates that abusive provisions are to be regarded as never existing. ‘It follows from the foregoing reflection that Article 6(1) of Directive 93/13 must be interpreted as meaning that a contractual provision held to be unfair must be regarded, in principle, as never having existed, so that it cannot have any effect on the consumer.’. 12 Cf. Court of Justice of the European Union, judgment of 14 March 2019, C-118/17: The Difficult Path of the Implementation of Directive 93/13/EEC in Poland 189 When arguing in favour of giving priority to the unfairness test, the following ar‐ guments are primarily cited: ● Provisions of Articles 3851 et seq. CC address a specific section of social relations (transactions professional on one side, using standard contract forms) and doubt‐ less pursue specific goals, i.e. consumer protection, restoration of an upset con‐ tractual balance, as well as deterrence and prevention; moreover, these provisions independently determine their addressees (the business party and the consumer) and grounds of application (including, inter alia, violation of the good morals, fla‐ grant violation of the consumer’s interests). Their nature is, therefore, specialized (lex specialis). ● Apart from the specialization of the purpose, the difference in the sanction applied is also key.13 The sanction is unique in the scale of the entire system of civil law and consists in compelling the business party to perform a contract of which the contents (stripped of the abusive provisions) do not reflect the business party’s in‐ tention and – probably at least in part of the cases – interests. From this perspec‐ tive a finding of invalidity of the contract appears to be excessively favourable to the business party, as it relieves that party of the necessity of suffering an unsatis‐ factory contract, which is contrary to the principal goals of Directive 93/13/EEC and which may be regarded as diluting the sanction provided for in Article 3851(1) CC and Article 6 of the Directive. ● Since the provisions of Article 3851 et seq. CC are more recent than the general provisions in the Civil Code, they can be regarded as gaining priority and exclu‐ ding the application of the prior provisions due to their posterior status (lex poste‐ rior). As already noted, however, none of the above-referenced views could currently be re‐ garded as prevailing. The body of decisions in the ‘cases involving Swiss franc loans accept both the concepts in a parallel way, with similar intensity, and in some decisi‐ ‘54. Moreover, it should also be noted that, although the Court accepted, in its judgment of 30 April 2014, Kásler and Káslerné Rábai (C‑26/13, EU:C:2014:282, paragraphs 83 and 84), that a national court may substitute a supplementary provision of domestic law for an unfair contractual provision in order to ensure the continued existence of the contract, it follows from the Court’s case-law that such possibility is limited to cases in which the cancellation of the contract in its entirety would expose the consumer to particularly unfa‐ vourable consequences, such that the latter would be penalised (see, to that effect, judg‐ ments of 7 August 2018, Banco Santander and Escobedo Cortés, C‑96/16 and C‑94/17, EU:C:2018:643, paragraph 74, and of 20 September 2018, OTP Bank and OTP Faktoring, C‑51/17, EU:C:2018:750, paragraph 61).’. 13 For the most exhaustive discussion of the differences see: J. Pisuliński, Sankcja zamieszcze‐ nia w umowie niedozwolonego postanowienia w świetle dyrektywy 93/13/EWG i orzecz‐ nictwa TSUE, in: M. Romanowski (ed.), Życie umowy konsumenckiej po uznaniu jej posta‐ nowienia za nieuczciwe na tle orzecznictwa Trybunału Sprawiedliwości UE, Warsaw 2017, 98–102: ‘Due to the foregoing considerations the sanction in the first sentence of Article 3851(1) cannot fit within any classification, already known to traditional law, of sanctions vitiating a legal transaction, but it must be regarded as a specific sanction proper to consumer law.’ 190 Robert Mazur ons both grounds are identified as being correct, resulting in the amounts claimed from the bank being awarded to the borrower.14 In the disputes handled by the author of this paper, the point of departure for the arguments raised at trial is the assumption that the contract contains abusive provisi‐ ons relating to the unfair and opaque indexation mechanism, where in accordance with Articles 3851 et seq. CC such terms are non-binding on consumers (claimants) by operation of the law, retroactively (ex tunc). As a result, a loan contract made by a consumer is ex lege and ex tunc free of the indexation mechanism. The actual contents of the loan contract are different, therefo‐ re, from the literal wording of the contract. It is in this area (the actual contents of the loan contract, with the assumption that the loan contract does legally exist) that the principal point of contention between the parties lies. The respondent bank usually as‐ serts that a contract made on the bank’s standard form complies with consumer law. Consumers, therefore, look to the court for legal protection consisting in the con‐ firmation that the contents written into the contract constitute abusive provisions, the contract is devoid of an indexation mechanism, and the respondent bank is under an obligation to provide restitution for what it has unlawfully collected from the consu‐ mers in reliance on that indexation. This comes with the proviso that consumers do not exclude the possibility that the various legal defects in such a contract, including the manifest presence therein of abusive provisions, can import the no-nexistence and in particular the invalidity of the contract. Consequently, the judicial proceedings initiated by the lawsuit consist of two sta‐ ges, one following the other: (1) The first stage, concerning the examination of the contractual provisions for being abusive, i.e. the stage of incidental review of the standard form of the contract. This completes with the determination of the actual (legal) contents of the con‐ tract, binding as from the very beginning of the parties’ collaboration, i.e. it ends with the setting aside of the abusive provisions (if correctly executed, a finding of the inefficacy, i.e. no-nexistence of the indexation to the exchange rate of a for‐ eign currency should ensue). Thereafter: (2) The second stage, concerning the decision on the claim for payment arising from the findings made and completed in the first stage. This determination consists in comparing the settlements actually made against the settlements that ought to have occurred in accordance with the real (legal) wording of the contract as deter‐ mined in the first stage, or – if the contract is invalid – this stage consists in a fin‐ ding that any amounts collected by the bank were collected without a contractual (legal) basis, hence altogether undue. To sum up, the judicial proceedings – from the perspective of the provisions of sub‐ stantive law applied therein – are divided into two stages. Single-stage proceedings (unfairness alone, without ruling on the parties’ settlements) are not permitted in the light of the established line of decisions on declaratory relief (as claimants are denied 14 Cf. judgment of the Warszawa-Praga Regional Court of 2 December 2016, III C 75/16. The Difficult Path of the Implementation of Directive 93/13/EEC in Poland 191 the right to claim declaratory relief if they have a farther-reaching claim under the sa‐ me legal relationship, i.e. a claim for payment, which in such type of cases practically always occurs).15 The first stage engages the provisions of consumer law, which is European law (or national provisions on the invalidity of legal transactions incompati‐ ble with the statute or with the principles of social co-existence). The second stage relies on national law, i.e. the general provisions on contractual obligations as applied to a contract previously ‘filtered’ (in the first stage) of illegal provisions (unless there is a finding that the contract is non-existent). Grounds for abusiveness of indexation clauses in the decisions of Polish courts ● Absence of individual negotiation (Article 3851(1) CC, 1st sentence) In practically all without exception sets of facts coming up before courts for ruling, the disputed contractual terms come wholly from the standard form used by the bank in the making of the contract. This applies both to indexation proceedings and to other abusive provisions in the contract. In practice, such provisions have practically never been the subject of individual negotiation between the parties, for such individual negotiation – if it even occurred in a small number of cases – concerned rather the size of the margin or other cost ele‐ ments connected with the bank’s offer. As a result, consumers had practically no rea‐ listic influence on the contents of the contracts they entered into, in which the indexa‐ tion mechanism was regulated. The consumers entered into the contract by adhesion, i.e. by acceding to a ready product and adopting all terms relating to it as predetermined by the bank. In Polish law the onus of proving the contrary circumstance, i.e. that the parties mutually, by negotiation, shaped the wording of any of the aforementioned provisions, and in parti‐ cular that the provisions are the manifestation of a negotiated deviation from the stan‐ dard form for an ‘indexed’ loan, falls on the respondent bank (Article 3851(4)). It is in practice a circumstance that cannot be proved, especially in the light of the fact that court decisions reject the possibility of a finding that the selection of, for example, one product from among several products offered by the same bank constitutes indivi‐ dual negotiation or that merely the possibility of entering into negotiation without lea‐ ding to any deviation from the originally proposed contents of the standard-form con‐ tract does.16 The ground of the absence of individual negotiation is usually already fulfilled prima facie, which in practice does not change the fact that respondent business par‐ ties consistently assert otherwise. IV. 15 Cf. judgment of the Regional Court in Warsaw of 4 December 2017, XXV C 261/17. 16 Cf. judgment of the Court of Appeals in Warsaw of 14 July 2011, VI ACa 74/11; judgment of the Court of Appeals in Warsaw of 18 September 2013, VI ACa 1600/12 (similarly the Regional Court in Łódź in the justification of the judgment of 20 August 2015, I ACa 1813/14), judgment of the Regional Court in Warsaw, 28 October 2016, XXVII Ca 3165/16; judgment of the Regional Court in Warsaw of 8 December 2016, XXVII Ca 3575/16. 192 Robert Mazur ● The ground of violation of good morals and flagrant violation of consumer inte‐ rests (Article 3851(1) CC, 1st sentence, and Article 3(1) of Directive 93/13/EEC) As already noted, for a provision to be found abusive the Polish Civil Code requires it to violate the good morals and flagrantly violate the consumer’s interests. That the in‐ dexation mechanism meets this ground is currently a settled matter in the jurispru‐ dence of the Supreme Court. Cf. in particularly judgment of the Supreme Court of 22 January 2016 (I CSK 1049/14): ‘In consequence, the aforementioned mechanism for the exchange rate of the foreign currency to be determined by the respondent is manifestly contrary to good mores and flagrantly violates the consumer’s interests (Article 3851 CC).’ Cf. also judgment of the Supreme Court of 4 April 2019 (III CSK 159/17): ‘It is the Supreme Court’s view that the above-described mechanism for the bank to deter‐ mine the currency exchange rates, leaving this for the bank’s discretion, is manifestly contrary to good mores and flagrantly violates the consumer’s interests, and a clause that does not contain unequivocal content and thereby leaves the business party with unrestrained decision-making freedom as to the costs of the loan, i.e. with regard to an issue of great importance to the consumer, is an abusive provision.’ Cf. also judgment of the Supreme Court of 9 May 2019 (I CSK 242/18): ‘It fol‐ lows from the foregoing remarks that, as a result of the abusive nature of the provisi‐ ons the indexation clause is composed of, the loan granted to the claimants had to be regarded as a loan in the Polish zloty not containing such a clause.’ ‘The Supreme Court shares the Court of Appeals’ view that the provisions of the general terms defining the rules for the CHF conversion, both while drawing the loan and repaying the individual instalments, had the nature of abusive contractual terms. Provisions similar to those employed by the Bank have already frequently been the subject of the common courts’ and the Supreme Court’s consideration, and the prevai‐ ling view is that the analysed terms are abusive.’ Cf. also judgment of the Supreme Court of 29 October 2019 (IV CSK 309/18): ‘In the case at hand it should be beyond any doubt that the contractual terms contained in sections 2 and 4 of Appendix 7 to the loan contract need to be regarded as abusive contractual provisions in the understanding of Article 3851(1) CC. As the Courts rightly noted in the course of the instances, such provisions shape the rights and obli‐ gations of the consumer-borrower in a manner contradictory to good mores by plac‐ ing the terms of the indexation of the debt in the power of the stronger party to the contract, i.e. the bank.’ The usual inference in court decisions is that indexation clauses in the contract un‐ der examination are unfair, since the business party may on their basis unilaterally de‐ termine the amount of the debt it is owed by the consumer, without being constrained in so doing by any contractual limitation or criterion. Such clauses also vest the business party with the unilateral power to determine the amount of interest it is owed by the consumer (by unilaterally determining the ba‐ sis on which the interest is charged). Moreover, they give to the business party the unilateral power to determine the amounts owed to it as instalments, by determining the zloty amount the consumer has The Difficult Path of the Implementation of Directive 93/13/EEC in Poland 193 to pay – according to the business party’s view – for the instalment expressed by the business party in the ‘indexation currency’ to be discharged. They also provide for the business party to effect the ‘adjustment’ (indexation) of the consumer’s debt based on two different ‘adjustment’ standards – first a low ‘buy rate’ (which, as already noted, allows for a high debt balance to be determined to the business party’s advantage) and thereafter – a high ‘sell rate’ (which allows for the monthly payment to be set on a high level). Finally, they provide that the consumer bears the unlimited risk of the increase in value of the debt owed to the business party, with no upper limit, while eliminating the same risk on the bank’s side17 (the bank’s maximum and still only theoretical risk is limited to not receiving the repayment of the amount drawn – a risk objectively di‐ minishing with each passing month as a result of the repayments made by the consu‐ mer). The jurisprudence commonly accepts that the business party’s right to determine the consumers’ financial situation eludes any control – due to the absence of any cri‐ teria, principles or conditions whatsoever. The business party deprives its counterpar‐ ties of any rights in this regard. Any determinations made by the bank are binding on the consumers whatever the content (sic). At the same time, there is no opposite right even partially limiting the bank’s powers. The consumers, therefore, find themselves completely helpless in the face of the bank’s contractual position arising from the standard-form contract along with decisions made by the bank and directly shaping the consumers’ economic situation. ● Lack of transparency — independent grounds for abusiveness of indexation clau‐ ses (Article 385(2) CC, 1st sentence, in conjunction with Article 3851(1) CC and Article 5 of Directive 93/13/EEC). The indexation provisions challenged in litigation are also (independently) abusive on account of being non-transparent (unclear, unintelligible, opaque). In the legal system discussed herein lack of transparency constitutes an indepen‐ dent ground for abusiveness. Lack of transparency occurs whenever the contractual provisions fail to meet requirements including, inter alia, Article 385(2) CC, 1st sen‐ tence, and Article 5 of Directive 93/13/EEC. Article 385(2), 1st sentence, provides that: ‘A standard contract form should be drafted clearly and intelligibly.’ Article 5 of the Directive, on the other hand, provides that: ‘In the case of contracts where all or certain terms offered to the consumer are in writing, these terms must always be drafted in plain, intelligible language.’ The Court of Justice of the European Union explained the scope of the above terms in its case law, with binding effect on the member states.18 The Court of Justice explained that the requirement of transparent contract drafting imposed on the busi‐ ness party must be given wide construction. It is in no way limited to linguistic or grammatical intelligibility, but in each case it imports an obligation of such drafting of 17 Cf. judgement of the Regional Court in Cracow of 12 December 2017, I C 316/15; judg‐ ment of the Regional Court in Warsaw of 15 December 2017, XXV C 961/17. 18 Cf. judgement of the Court of Justice of the European Union of 30 April 2014, C-26/13; judgement of the Court of Justice of the European Union of 20 September 2017, C-186/16. 194 Robert Mazur the terms of the contract as to enable the consumer to make an informed, prudent de‐ cision and, above all, to understand the specific operation of all of the contractual me‐ chanisms, along with the evaluation of all possible economic consequences of ente‐ ring into the contract. Failure to comply with this duty means that the non-transparent provisions of the contract will be abusive provisions. In the area of loan indexation the typical contract is usually completely unintelli‐ gible and unclear. It specifies no rules of operation for the indexation mechanism, and as a result the consumer, at the time of making the contract, has no way of understan‐ ding what the mechanism relies on or how it operates. Thus, the consumer has no way of assessing the impact that mechanism is going to have on the consumer’s situation vis-à-vis the bank. The typical contract contains the term ‘indexation’ (or similar, without any defini‐ tion), while all elements of the mechanism refer to the bank’s own discretionary deci‐ sions. Non-transparency as an independent ground for finding indexation clauses to be abusive had for many years not been treated by common courts with the attention it deserved. The breakthrough was made only with the judgments of the Supreme Court in 2019. The Supreme Court, in the judgment of 29 October 2019 (IV CSK 309/18), found: ‘The situation is not changed by having obtained from the respondent borrower a state‐ ment contained in section 1 of Appendix 7 to the contract, very generally worded, to the effect that: “in connection with drawing a foreign-currency loan the borrower represents that the exchange-rate risk in relation to the currency in which the borrower has assumed the obligation is familiar to the borrower and has been explained to the borrower by the Bank, and the borrower is aware of assuming this risk.” Firstly, if the importance of change to the currency exchange rate and the risk incurred had truly been adequately explained, a rational borrower would not have opted for a loan defectively linked to the exchange rate of a foreign currency, given the perspective of several dozen years of re‐ payments, unless it should otherwise occur from the circumstances. Secondly, if the len‐ ding bank had intended to sufficiently inform the borrower, being an individual and a consumer, about the risks arising from a loan linked to the exchange rate of a foreign currency, it would not have offered such loans at all, realizing, as a professional party, that such a contract could easily be deemed unfair.” The Supreme Court took a similar position also in the judgment of 9 May 2019 (I CSK 242/18), where it observed: ‘Exclusion from review, however, may not extended to non-transparent terms, in their case the consumer has no easy way of assessing the extent of the debt incurred and its relation to the value of the consideration offered by the other party. The latter situation happens in the case of the indexation clause analysed here. In its interpretation of Article 4(2) of Directive 92/13 in a similar context, the Court of Justice of the European Union found: ‘the requirement that a contractual condition must be drafted in plain intelligible language is to be understood as requiring not only that the given term should be gram‐ matically intelligible to the consumer, but also that the contract should set out transpar‐ ently the specific functioning of the mechanism of conversion for the foreign currency to which that condition refers, and the relationship between that mechanism and the mecha‐ nism provided for by other contractual terms relating to the disbursement of the loan, so that the consumer is in a position to evaluate, on the basis of clear, intelligible criteria, The Difficult Path of the Implementation of Directive 93/13/EEC in Poland 195 the economic consequences for him which derive from it.’ (Judgment of 30 April 2014, Kásler and Káslerné Rábai v. OTP Jelzálogbank Zrt, C‑26/13, ¶ 75, similarly judgment of 20 September 2017, R. P. Andriciuc and Ors. v. Banca Românească SA, C-186/16, ¶ 45). It is evident that the indexation clause contained in the parties’ loan contract did not meet these criteria, and the claimants were not in a position to assess, on the basis of the contract, the amount they would have to pay afterwards.’ The Supreme Court also took a similar view in the judgment of 29 October 2019 (IV CSK 309/18): ‘In this regard significant importance also belongs to the requirement of appropriate transparency and clarity in the contractual provision, that is the response to the question whether the contract concluded between the parties clearly shows the reasons for the and the specific characteristics of the currency-conversion mechanism, so as to enable the consumer to foresee, on the basis of such transparent and intelligible criteria, the resul‐ ting economic consequences. … The specific information asymmetry, and in particular the situation in which the consumer is notified of the amount of instalments owed already paid in connection with drawing the corresponding sum from the consumer’s account is unacceptable in the light of Article 3851 CC. The judicial practice is that common courts relatively rarely use the expertise of court-appointed experts to determine what level of knowledge about the hazards in‐ volved in a contract whose value is determined in reference to the exchange rate of a foreign currency the bank could have had at the time of offering an indexed product, at least in order to determine the scope of information theoretically available to pass on to the borrower. When such an action is taken by the court, and the expert study is commissioned, such studies equally rarely are sufficiently comprehensive and backed by reference to convincing sources. Hence, it is worth calling attention here to a study prepared by a court-appointed banking expert in 2019 for the purposes of proceedings before a court of first instance. What distinguishes the study is its substantive quality and conciseness, as well as the diligence of the expert, whose observations – upon ha‐ ving at the court’s order analysed the characteristics of the Swiss currency and a series of economic mechanisms – included, inter alia, the following conclusions: ‘In the expert’s view for the Bank to comply with the mandatory disclosures to the Clai‐ mant in a realistic and loyal manner would have involved sharing at least the same infor‐ mation fundamental to that relationship which the Bank itself had in its possession, and especially the information about: ● the unpredictability of future exchange rates; ● consequences of pairing in a single product an anti-cyclical currency (CHF) with a low-liquidity pro-cyclical currency (PLN); ● impact on the long-term value of the Claimant’s obligation of the fact that the CHF/PLN rate is a theoretical cross rate; ● the fact that the mortgage loan offered was the equivalent of a speculative transac‐ tion known as the ‘unhedged Carry Trade’; ● indication that CHF is not fit for long-term loan obligations due to its characteristic property — gaining strength relative to the main reserve currencies and other curren‐ cies irrespective of inflation already since 1900; ● impact of hypothetical turbulences in financial markets on the currency pair matched in the loan; 196 Robert Mazur ● warning signs the Claimant should watch for throughout the life of the loan with a view to hypothetical conversion — increase in the pricing of credit derivatives for Polish State Treasury bonds (CDS), risk volatility indices (VIX); ● factors having a strong impact on the product’s profitability from the Claimant’s per‐ spective – the market value of the unlimited currency risk taken over the by the Clai‐ mant free of charge, as well as the values of spreads later to be collected by the Bank; … It must be emphasized that even despite being provided with all of the above information an educated and diligent consumer, due to obvious anthropological shortcomings … can still be incapable of adequately processing it.’ To sum up, the lack of transparency, understood as the lack of possibility for the con‐ sumer to understand the operation of the indexation mechanism and the impossibility (on the consumer’s part) to understand the economic consequences of entering into a contract with specific contents imposed by the lender, has ultimately been regarded in the jurisprudence as a basis for finding the contractual provisions to be abusive. And this refers to both the inability to understand the nature of Swiss franc and its innate economic strength and the inability to predict how the bank will define exchange rates in its own exchange rate tables. Consequences of finding indexation clauses abusive, according to court decisions Over the initial couple of years of borrowers’ struggle with banks in courts, one of the central axes of the dispute was – and indeed continues to be, although to a lesser extent – besides the abusiveness itself or lack of it – the question of whether abusive provisions could be ‘repaired’.19 The term ‘repair’ contains in itself a whole spectrum of various interpretative operations of which the common point is that, according to those in favour of the possibility of ‘repairing’ abusive provisions, only certain frag‐ ments of the indexation mechanism are unfair, while the ‘principle of indexation’ its‐ elf is still binding on the parties (i.e. the consumer’s obligation is not unlinked from the value of the foreign currency), and it merely requires certain reconstruction opera‐ tions to be performed. As follows from the CJEU’s case law (cf. especially the judgment in C-618/10), European law in principle excludes a situation in which the domestic court would be creatively supplementing a contract after part of its terms turn out to be non-existent as a result of incidental review.20 This is the correct view, considering especially that V. 19 This matter was addressed by the Court of Justice of the European Union in the judgment of 3 October 2019, C-260/18, in respect of Article 56 and Article 354 of the Civil Code, providing for the possibility of supplementing the contract on the basis of principles and customs. 20 Cf. CJEU judgment of 14 June 2012, C-618/10, especially 69: ‘if it were open to the national court to revise the content of unfair terms included in such contracts, such a power could compromise the attainment of the long-term objective of Article 7 of Directive 93/13. That power would contribute to eliminating the dissuasive effect on sellers or suppliers of the straightforward non‑application with regard to the consumer of those unfair The Difficult Path of the Implementation of Directive 93/13/EEC in Poland 197 for the national court to wield such a power would entail developing in the court pro‐ ceedings a solution to balance the interests of the contractual parties (as it is hardly conceivable that the court would attempt to impose contractual imbalance in lieu of provisions suffering from just that defect). Hence, the court, in balancing those inte‐ rests, would also be paying heed to the interests (presumably also the economic inte‐ rests) of the violating party – the proponent of the abusive provisions, which would impair the long-term goal of the Directive that is, among other things, the effective prevention of abusive provisions. This is because such a business party, as is rightly noted in court decisions, could expect the only result of the illegal practices to be the restoration of such terms to the contract as should have been there since the begin‐ ning. It would be difficult to deem the risk of ‘restored balance’ sufficiently large as to discourage business parties from introducing abusive provisions. On the contrary, that would appear potentially to create a long-term incentive for behaviours inconsis‐ tent with consumers’ interests, especially in the light of the fact that a statistically in‐ significant proportion of consumers, even those aware of the defective nature of their contract, will make the decision to embark on litigation and consistently see it to com‐ pletion. The CJEU’s position, however, did not meet with broader understanding in the practice of common courts, and also the practice of the Supreme Court had, until 2019, lacked a clear confirmation of the prohibition of ‘repairing’ abusive provisi‐ ons.21 It could even be said that the courts’ decisions showed a certain kind of confu‐ sion, for when the courts decided to modify the contract (for example by replacing the abusive provision that the bank would determine the exchange rates in its rate table with a provision that the contractual parties would settle on the basis of the National Bank of Poland’s average rate for that currency), they failed – in not infrequent cases – to identify the legal basis for such a decision in the justifications of their judg‐ ments.22 Sometimes the consumer’s action was dismissed because the replacement of abusive provisions with clauses providing for the use of the NBP’s average rate was not listed among the particulars of claim, with the court not even stating that it would have been correctly made but only indicating that it could be considered, e.g. in addi‐ tion a solution consisting in the introduction of a ‘market’ rate to the contract.23 As if that had not been enough, the basis for the modification of the contract after the removal of abusive provisions was also identified in the principles of social coexistence (without specifying which principle was concerned), custom, or the parties’ intention (unfortunately rather liberally reconstructed by the court), all of which in or‐ der to introduce ‘fair’ contents to a contract having had its abusive provisions severed from it. terms (see, to that effect, the judgment in Pohotovost case’, paragraph 41 and the case‑law cited), in so far as those sellers or suppliers would remain tempted to use those terms in the knowledge that, even if they were declared invalid, the contract could nevertheless be modified, to the extent necessary, by the national court in such a way as to safeguard the interest of those sellers or suppliers.’. 21 Cf. judgements of the Supreme Court of 14 May 2015, II CSK 768/14; and of 14 July 2017, II CSK 803/16. 22 Cf. judgment of the Regional Court in Warsaw of 28 November 2017, XXVII Ca 911/17. 23 Cf. judgment of the Regional Court in Warsaw of 24 May 2017, XXVII Ca 3046/16. 198 Robert Mazur Unconventional, and erroneous, attempts at ‘repairing’ contractual terms were ma‐ de even by the Supreme Court, which, in one of its most highly criticized judgments, ordered the contract supplemented by analogy to the pre-WWII regulation of promis‐ sory notes, which indirectly – only on the basis of the literature – involved recourse to the NBP’s average rates to determine the value of the foreign currency.24 The situation underwent a somewhat substantial change only after the CJEU han‐ ded down its judgment of 3 October 2019 in C-260/18 where, in response to the re‐ quest for a preliminary ruling posed by the Regional Court in Warsaw in a case rela‐ ting to an indexed loan granted to a Polish married couple, the Court categorically ex‐ cluded the invocation of general provisions by the national courts, i.e. provisions not containing any specific rule commanding the conduct of those addressed but only re‐ ferencing such evaluation criteria as the parties’ intention, custom, etc. It is worth emphasizing at this point that in the Polish framework there exists no provision which could form the basis for ‘repairing’ a contract upon the fulfilment of the grounds of application of the dispositive provision as arising from the CJEU’s case law. (In general, what follows from that case law is only the admissibility of the application of a dispositive provision if in the contrary case, i.e. non-application of the provision, the contract examined by the court would lapse in its entirety, triggering negative consequences for the consumer, who would be penalized by such a lapse of the contract — for that is not the purpose of the consumer-protection system.) Prior to 2009, which is when the selling of loans linked to a foreign currency de facto ceased, there had existed no provision of law that would define, within the framework of the law of obligations, the method for determining the value of a foreign currency relative to the Polish zloty, let alone one that would say anything about the rules for settle‐ ments between the parties to a loan indexed to or denominated with the exchange rate of a foreign currency, in the absence of contractual regulation by the parties in respect of the value of their obligations. ● Consequences of a finding of abusiveness – first scenario (PLN loan with LIBOR 3M CHF interest): As noted above, in the light of the current views of the Supreme Court, the indexation mechanism of the typical loan indexed to the exchange rate of a foreign currency is abusive. Polish lawmakers have regulated the consequences of the finding that a contractu‐ al provision is abusive in Article 3851(1) and Article 3851(2) CC. Under § 1 the con‐ sumer becomes relieved of the abusive provisions (according to the statute, such pro‐ visions ‘do not bind the consumer’). This effect occurs by operation of the law, re‐ troactively. Under § 2 the contract, stripped of the abusive provisions, binds the busi‐ ness party and the consumer ‘within its remaining scope’. The European lawmakers have regulated these consequences in the same way in Article 6(1) of Directive 93/13/EEC: ‘1. Member States shall lay down that unfair terms used in a contract concluded with a consumer by a seller or supplier shall, as provided for under their national law, not be 24 Cf. judgment of the Supreme Court of 14 July 2017, II CSK 803/16. The Difficult Path of the Implementation of Directive 93/13/EEC in Poland 199 binding on the consumer and that the contract shall continue to bind the parties upon those terms if it is capable of continuing in existence without the unfair terms.’ The lawmakers, therefore, do not provide for the lapse of the entire contract as the primary consequence of abusive provisions (while allowing it). It is preferred for the contract, after the exclusion of the abusive provisions, to remain in force in so far as legally possible and in so far as such a contract does not threaten the consumer’s inte‐ rests (provided that the consumer’s own position taken in this regard is binding). Under the unfairness regulation the contract should, in principle, continue in force and continue to bind ‘without the abusive provisions’. The key question is, therefore, to determine the extent to which parties will be bound by the contract after the remo‐ val of abusive provisions and, consequently, determine whether such a contract ‘filte‐ red’ of abusive provisions can legally exist. As to the foregoing it must be noted that after the severing from the contract – ex lege and ex tunc – of the unfair and wholly non-transparent indexation of a loan to the exchange rate of a foreign currency such a contract is, first of all, ab initio the con‐ tract for a loan in the Polish zloty, without any conversions to or from a foreign cur‐ rency, while retaining the interest rate agreed by the parties. The above result nowadays meets with universal approval (with a simultaneously increasing share of decisions establishing the invalidity of contracts indexed to a for‐ eign currency). This result arises cumulatively from several co-existing circumstan‐ ces, namely: ● the indubitable, in the light of court decisions, prohibition against the supplemen‐ tation of such a contract by the national court (cf. CJEU judgment in C-618/10, and especially in the Polish case C-260/18); ● the member states’ obligation to discourage business parties from introducing abusive provisions (cf. Article 7 of the Directive); ● the lack of dispositive provisions that could be directly ‘introduced into the con‐ tract’ to replace the abusive provisions, and in particular the lack of any such pro‐ visions at the time of making the contract (and the consumer’s inability to include them in the decision-making process); ● even if such provisions would exist, not meeting the grounds for their application, as specified by the CJEU, due to, in example, lack of the consumer’s consent to such ‘repairing’ of the contract. Cf. in particular the firm line held in this regard by the decisions of the Supreme Court, including especially its judgment of 4 April 2019 (III CSK 159/17), observing the following: ‘The above reflections lead to the conclusion that the indexation clause stipulated in the loan contract and in the standard terms forming part thereof are not binding on the clai‐ mants (Article 3851(1) CC), ex tunc and ex lege, in which connection it must be severed from the contract, which for the remaining part shall bind the parties (Article 3851(2) CC). The severing of the indexation clause covers all of the terms of the contract compo‐ sing it, hence both those contained in § 9(1)(a) and in § 7(4), 1st sentence, of the general terms. … In practice this leads to the acknowledgement of the need to retain LIBOR interest rates for the contract, even though all links between the value of the obligations and a curren‐ 200 Robert Mazur cy other than the Polish zloty are severed. It is irrelevant here that the parties would most probably not have stipulated a LIBOR interest rate for a zloty loan if aware of the unfair‐ ness of the indexation clause. The necessity for adopting such a conclusion arises from the application of Article 3851(2) CC and the severing from the contract of solely such terms as were found to have been unfair. Any attempt to modify other provisions of the contract on this occasion would be incompatible both with that provision and with the above-presented case law of the Court of Justice of the European Union, from which ari‐ ses a prohibition against the modification of contractual terms by the national court.’ Cf. Supreme Court, judgment of 9 May 2019, I CSK 242/18), stating, among other things: ‘The Supreme Court shares the Court of Appeals’ view that, given the facts of the case, the severing of the abusive indexation clause will not lead to the lapse of the contract for the remaining part. … In the case this was possible because the contract, with the abusive provisions severed, continues to contain all elements necessary to define the contents of the legal relationship and especially the amount of the loan in the zloty, the term of the loan and repayment dates, and the interest rate. As for the last-mentioned matter, it is necessary to agree with the view taken in the judgment of the Supreme Court of 4 April 2019, III CSK 159/17, whereby the severing of an unfair indexation clause does not lead to any modification of the amount and rules for the determination of the interest rate. In practice this means that the loan continues to bear interest according to the LIBOR interest rates usually used with CHF, even though all links between the value of the obligations and a currency other than the Polish zloty are severed.’ The Supreme Court’s views are consistent with the academic studies conducted by the Supreme Court’s Research and Analysis Bureau. Suffice to cite here the conclusion of the study titled Studia i Analizy Sądu Najwyższego — Materiały Naukowe (Supreme Court studies and analyses — academic materials) (Vol. VII, Warsaw 2019), which contains the following statement: ‘It would be absurd to deny the possibility of concluding a PLN loan contract with inte‐ rest calculated “as for a CHF loan” in a situation when in reality the commonplace lo‐ ans with LIBOR interest were PLN loans merely indexed to a foreign currency.’ The incidental, additional indexation mechanism does not, therefore, constitute an element of the parties’ contract (it is non-existent ab initio). As a result, the business party must suffer a contract with such contents as in the classic loan free of unfair in‐ dexation mechanisms, being satisfied in that contract with traditional ways of making a profit, set by the lawmakers for every loan contract (interest, commissions, fees, in‐ surance). The business party is not entitled to any compensation on this account. In particu‐ lar it is inadmissible to increase the business party’s compensation (e.g. by awarding a higher interest rate than agreed) or to deny the consumer protection (and especially limit the scope of that protection), citing the business party’s interests or especially those of third parties, such as other consumers, or the economic interest of the ban‐ king sector. The scope of the lack of binding force must be determined with the Directive’s goals in mind. And the Directive assumes the consumer’s interests are to be protected, not the business party’s. Moreover, the Directive clearly requires the member states to The Difficult Path of the Implementation of Directive 93/13/EEC in Poland 201 discourage and deter business parties from using abusive provisions. This means the effective prevention of the use of abusive provisions altogether. And that is not only the kind of prevention in which these provisions will only supply a tool with which to counteract abusive provisions used by the business party time and again. This precludes any decisions leading even partially to safeguarding the business party’s interests or to mitigate the consequences of that party's own use of abusive provisions. In particular any forms of retaining indexation and especially giving the latter new meanings or contents must be regarded as incompatible with the goals of the Direc‐ tive and the CJEU’s uniform case law. ● Consequences of a finding of abusiveness — second scenario (lapse of the con‐ tract as a result of finding of abusiveness of the indexation clause) It follows from the case law of the Court of Justice of the European Union (and an expanding body of Polish court decisions) that the hypothetical lapse of the entire lo‐ an contract along with the indexation element (after severing it) is a permissible and possibly inevitable finding. In this regard attention is drawn particularly to the CJEU judgment of 3 October 2019 in the Polish case C-260/18, where the Court (albeit not very firmly) appears to favour the lapse of an indexed-loan contract after the severing of the unfair indexation terms, leaving the question open to detailed analysis and resolution by national courts. In any case, however, the lapse of the contract (invalidity, lack of conclusion, nonexistence, etc.) requires the consumer’s approval; the latter, however, is usually gran‐ ted in the course of the litigation. Invalidity of the contract Irrespectively of arguments supporting the unfairness of the indexation mechanism, it is almost always asserted in the litigation that the contract may be suffering from de‐ fects rendering it invalid in whole or at least substantial part. The following are usually cited: ● incompatibility of the contract with the principles of social co-existence,25 such as the principle of contractual loyalty, through such shaping of the contract the stron‐ VI. 25 The concept of ‘principles of social co-existence’ is normatively identical to the ‘good mores’, and the contract’s mechanisms doubtless evidently go against the latter. This also makes the violation of the principles of social co-existence a foregone conclusion for the purposes of evaluating the grounds of application of Article 58(2) CC. (More broadly cf. the court decisions extensively cited in Supplement 7 — Invalidity, and especially the resoluti‐ on of the Supreme Court of 20 December 2012 in III CZP 84/12: ‘In the previously cited judgment of the Supreme Court of 25 February 2010 I CSK 384/09, on the other hand, it was held that there was no basis on which to look for differences in meaning between the concepts of good mores and of social co-existence …. In consequence, it is a justified conclusion that the existence of the principles of social co-existence and good mores in the legal system is not the consequence of the lawmaker’s attachment of normatively different meanings therefore but rather the effect of historical legislative processes.’). 202 Robert Mazur ger party as to enable the stronger party to determine with binding force the obli‐ gations of the weaker party; ● incompatibility of the contract with the principles of social co-existence, including without limitation the principle of contractual loyalty, through unequal distributi‐ on of the economic risk relating to the contract, in a manner enabling the infinite growth of the consumer’s indebtedness to the bank; ● incompatibility of the contract with the principles of social co-existence, including without limitation the principle of contractual loyalty, by making the amount of the consumer’s indebtedness to the respondent dependent on a measure of which the objective value has been increasing relative to all currencies in the world for at least a century; ● incompatibility of the contract with the statute and with the nature of the obligati‐ on (excess of the limits of contractual freedom, Article 3531 CC), by shaping the contract in such a way as to make one of the parties decide upon its contents (cf. especially the resolution of the Supreme Court of 19 May 1992, III CZP 50/92; resolution of a panel of 7 justices of the Supreme Court of 6 March 1992, III CZP 141/91; and resolution of a panel of 7 justices of the Supreme Court of 22 May 1991, III CZP 15/91); ● incompatibility of the contract with Article 69(1) of the Act of 29 August 1997 — Banking Law, especially to the extent the contract allows for the volatility of the consumer’s indebtedness and double (tiered) ‘adjustment’ of the debt by the char‐ ging of interest (already by definition serving the role of adjustment, since interest rates are, after all, variable), ‘valorization’ of the debt (and instalment payments) in reference to the exchange rate of a foreign currency and ‘valorization’ of the instalments in reference to the exchange rate of a foreign currency. The invalidity of a loan indexed to the exchange rate of the Swiss franc has already been the subject of a number of final and binding decisions of common courts. Examples can be found in the judgments of the Regional Court in Gdańsk of 5 November 2019 (III Ca 519/19), and of the Court of Appeals in Warsaw of 5 Novem‐ ber 2019 (VI ACa 542/19), 23 October 2019 (V ACa 567/18), and 27 November 2019 (V ACa 752/18), among others. In judicial practice the bases for finding contracts to be invalid reflect the majority of the above grounds. A certain novum, however, comes with the increasingly broad reception of the CJEU judgment in the Polish case C-260/18, where the Court found, among other things, that European law does not preclude the finding of nullity of an indexed loan if, in the light of national law, the validity of such a contract, after sever‐ ing the abusive provisions from it, can no longer be sustained. As noted above, the Court took a position favourable – albeit not a firm one – to the invalidity of a PLN loan contract with the use of an interest rate practically used for loan contracts granted in a different currency, while leaving the question open for national courts to decide. This is a direction that is slowly manifesting itself in the judgments of Polish courts, although it invites doubt if only because of how difficult it is to identify any rule of law linking the rules for determining the interest rate on a loan to the currency in which the loan is actually granted. Hence, the finding of a loan in Polish zloty to bear The Difficult Path of the Implementation of Directive 93/13/EEC in Poland 203 interest at the LIBOR 3M CHF rate does not violate any specific rule of law, and the invocation of the principles of social co-existence could by doubtful in this case. The future Observation of the development of the lines of jurisprudence in common courts and the Supreme Court, especially in 2019, permits the thesis that the 20s of the 21st cen‐ tury should be a time of realistic and practical implementation of the provisions of Di‐ rective 93/13 in Poland, one that conforms to the ‘spirit’ of European law, which ulti‐ mately takes place precisely in the form of the adjudication of the individual disputes between the most interested parties. It does not appear to be a likely possibility that the banking sector will voluntarily abandon the use of the abusive provisions discus‐ sed in this article, which are and in the closest years to come will in fact be performed by banks in hundreds of thousands of loan contracts made (as at the end of 2019 the number of active loan contracts linked to the Swiss currency still exceeds 400,000). The increasing awareness among consumers along with the increasing number of ac‐ tions brought does not seem to constitute a powerful argument in favour of voluntary abandonment by the banks of the use of abusive provisions. On the other hand, the banks benefit from the fact that the statute of limitations has already run on some con‐ sumers’ claims and more claims become limited with each passing day, translating in the scale of the entire sector into amounts sufficiently large that – as it appears – the economic calculation could prevail and discourage the taking of measures that appear reasonable only from the legal point of view. VII. 204 Robert Mazur

Abstract

This article outlines the long and difficult path of implementing Directive 93/13/EEC in Poland in the context of Swiss franc housing loan disputes. It elaborates on the initial problem of mass inclusion of abusive provisions in loan contracts, the essence of such disputes as well as the main issues raised by borrowers against banks, and continues with a discussion of grounds for abusiveness of indexation clauses in the decisions of Polish courts, the consequences of finding indexation clauses abusive (according to court decisions), and the question of invalidity of the contract. In summary, the article concludes that the 20⁠s of the 21st century should be a time of realistic and practical implementation of the provisions of Directive 93/13 in Poland - i.e., a century that conforms to the ‘spirit’ of European law.

References

Zusammenfassung

Osteuropa Recht behandelt Gegenwartsfragen der Rechtssysteme und Rechtswissenschaft im östlichen Europa sowie deren völkerrechtliche Einbindung. Im Fokus stehen die ost-, ostmittel- und südosteuropäischen Staaten sowie der Kaukasus und Zentralasien. Die Zeitschrift dokumentiert und analysiert Gesetzgebung, Rechtsprechung und rechtswissenschaftliche Debatten in den einzelnen Staaten der Region und leistet einen Beitrag zum internationalen Rechtsvergleich. Die Zeitschrift erscheint vierteljährlich und ist peer-reviewed. Publikationssprachen sind Deutsch und Englisch. Osteuropa Recht wurde 1954 von der Deutschen Gesellschaft für Osteuropakunde e.V. gegründet.