a)  Hungary / b)  Constitutional Court / c) / d)  14-11-2014 / e)  34/2014 / f)  On the consumer forex based loans / g)  Magyar Közlöny (Official Gazette), 2014/149 / h) .
Keywords of the systematic thesaurus:
General Principles - Certainty of the law.
Fundamental Rights - Civil and political rights - Procedural safeguards, rights of the defence and fair trial - Scope - Civil proceedings.
Keywords of the alphabetical index:
Contract, foreign currency loan / Legislation, retroactive / Procedure, fair.
The Settlement Act, which describes the consequences of the application of the unfair clauses amending bank FX loan agreements unilaterally, is in harmony with the Fundamental Law.
I.1. In the beginning of 2014, the government had asked the Constitutional Court to consider whether some conditions of the foreign-currency (hereinafter, "FX") loan contracts, that are weighing on Hungarian households, might be unconstitutional and how existing contracts could be modified through legislation. The Constitutional Court, in its Decision 8/2014, pointed out that the "lawmaker, just like courts, is entitled to modify current and lasting contractual relationships if conditions that set in after the contract is signed mean sustaining the contract with an unchanged content hurts the substantial and justified interest of one of the signatories."
In June 2014, the Supreme Court (Curia) ruled in favour of FX debtors, arguing that the banks should not have charged their clients the exchange rate spread. In addition, the Curia’s Uniformity Ruling no. 2/2014 declared that contractual provisions enabling the unilateral amendment of a contract are unfair if they do not comply with certain principles. The principles include clear and intelligible drafting, taxonomic definition, objectivity, factuality and proportionality, transparency, terminability and symmetry. Contractual clauses defining the criteria of unilateral contract amendment are fair if they clearly and intelligibly define how and to what extent changes in the circumstances of the listed causes affect the consumer’s payment obligations. Also, they are fair if they make it possible to verify the unilateral amendments’ compliance with the principles of proportionality, factuality and symmetry.
Act no. XXXVIII of 2014 on the settlement of certain questions related to the Uniformity Ruling of the Curia on financial institutions’ consumer loan contracts (hereinafter, the "Settlement Act"), issued in the wake of the Curia’s decision, declared the application, as of May, 2014, of the bid/offer spread unfair. It also used the presumption of unfairness in respect of all General Contracting Terms and Conditions that stipulate the option of unilateral contract amendment. It also considered that financial institutions have, in the case of FX loans, 30 days from the effective date to contest such presumption of unfairness in court, in legal actions conducted under civil law. Under the Act, any unfairly settled sums must be reimbursed to clients based on a separate Settlement Act.
2. Three judges of the Budapest-Capital Regional Court initiated the constitutional review of the Settlement Act. The judges found problematic that the Settlement Act demands compliance with principles, going back a decade, which have so far not been formulated and published by either the lawmaker, the supervisory authorities or the courts. The Settlement Act rearranges the relationships that exist under private law between the banks and their clients in a retrospective manner. It, moreover, overrides the general guiding rule of ‘lapsing’ (the Statute of Limitation), which can have unforeseeable consequences on society. They also found unconstitutional that banks may file civil lawsuits against the assumption of unfairness, within 30 days from entry into force of the legislation in the case of FX loans.
II. First, the Constitutional Court examined whether the Settlement Act has violated the prohibition of retroactive legislation and whether the rules of the concerned judicial procedures complied with the requirement of a fair trial.
In connection with the prohibition of retroactive legislation, the Constitutional Court declared that the general legal requirements of good faith and fair trial had always been the limits of the unilateral modifications of the agreements. The enabling provisions of the Settlement Act did not repeal or suspend the requirement of a fair trial.
Although the interpretation of the concrete conditions of the fair unilateral modification of the agreements was adopted only later, by the Uniformity Ruling of the Curia and finally into the Settlement Act, these requirements were already deducible from the general legal principles. The standard of fairness has not been changed. Although it was expressively laid down in the Settlement Act, it had already been a requirement (based on the previous Civil Code and on the judicial practice) before. In other terms, the challenged regulation did not change the legal qualification of the unfair clauses of the contracts. It only codified the already existing legal principle and judicial practice.
In the context of the right to a fair trial, the Constitutional Court held that the matters in dispute are not only the problem of the concerned debtors, but are also of economic and social relevance. Thus, the problem cannot be solved effectively in the frame of a civil suit. The thirty days for the financial institutions to initiate the proceeding at the court cannot be considered an unnecessary or disproportionate limitation on fundamental rights. The deadline shall be sufficient for the financial institutions to decide on the commencement of action to rebut the presumption of unfairness. In order to prepare for the action, the plaintiffs were entitled to use the arguments and evidence from the previous lawsuits against them. In connection with the other short deadlines, the Constitutional Court declared that these deadlines shall not be considered as infeasible. In light of these arguments, the Constitutional Court rejected the judicial initiatives.
The currency-rate risk and rate spread in the FX loan contracts and the judicial initiatives of the Budapest-Capital Regional Court of Appeal and constitutional complaints of the concerned persons/institutions were not subject to this review.
III. Judges Imre Juhász, László Salamon, Tamás Sulyok attached concurring opinions and judges László Kiss, Miklós Lévay, Péter Paczolay and Béla Pokol attached dissenting opinions to the decision.
- Bulletin 2014/1 [HUN-2014-1-002].