Judicial valorisation of benefits when a CHF credit agreement is invalid

The CJEU's 2023 rulings should have ended the practice of banks seeking judicial valorisation of the amount of capital paid out, which is subject to reimbursement by the consumer as part of the settlement of invalid mortgage contracts denominated in Swiss francs. In our experience, however, this has not been the case. In the following post, I will explain why a claim for valorisation of the amount of the loan should not be considered by the court.

Historically, banks have claimed compensation from borrowers for the non-contractual use of capital. In its judgment in Case C-520/21 of 15 June 2023, the CJEU held that only a demand by the bank for the return of the capital plus default interest is legitimate and only these are subject to restitution. To demand compensation from the consumer that goes beyond the return of the capital paid for the performance of that contract and beyond the payment of default interest could undermine the deterrent effect intended by Directive 93/13. The banks' method of redress then became to sue borrowers whose contract had been declared invalid by a court judgment for the judicial valorisation of the loan capital on the grounds of the need to realign the nominal sum of the loan disbursed following a fall in the purchasing power of money.

Why should judicial valorisation not apply to the borrower's returned capital? Deciding on all possible claims of the banks, it has already been determined in the CJEU judgment in Case C-520/21 of 15 June 2023 that not only remuneration for the use of the loan capital, but also judicial valorisation of the bank's benefit is excluded. Demanding benefits other than capital and interest from the consumer could undermine the deterrent effect intended by Directive 93/13.

The CJEU's decision of 11 December 2023 in Case C-756/22 was of no small importance for the banks' valorisation claims, as the question addressed by the District Court for Warsaw - Śródmieście was directly related to valorisation. The Court was to consider whether, if a credit agreement is invalid from the outset due to the inclusion of unfair contractual terms in it, the bank, in addition to the return of the money paid in performance of the agreement (credit capital) and statutory interest for delay from the time of the demand for payment, can also claim any other benefits, including claims (in particular remuneration, compensation, reimbursement of costs or valorisation of the benefit). The CJEU resolved the above-mentioned issue by answering in an unequivocally negative manner, pointing to the provisions of Articles 6(1) and 7(1) of Directive 93/13 as an impediment. It is therefore clear from this ruling that the bank is not entitled to a judicial valorisation of the loan capital.

In addition, Article 3581§3 of the Civil Code, relating to valorisation, refers to the principles of social co-existence. The provision stipulates that in the event of a significant change in the purchasing power of money after the obligation has arisen, the court may, after considering the interests of the parties, in accordance with the principles of social co-existence, change the amount or manner of fulfilment of the monetary benefit, even if they have been established in a judgment or an agreement. If the bank has acted unlawfully by granting credit on the basis of a contract containing unfair terms, the principles of social co-existence do not allow the amount of credit paid to the borrower to be made more realistic in favour of the bank.

The possibility of valorisation of the capital by the bank is also ruled out by the subjective prohibition in Article 3581§ 4 of the Civil Code, which provides that a party running an enterprise may not demand a change in the amount or manner of fulfilment of a monetary benefit, if the benefit remains in connection with the running of that enterprise.A professional business entity, such as a bank, is obliged to take due care of its own interests, whereas valorisation is intended for an entity that is economically weaker. In conclusion, the judicial valorisation of the amount of capital paid to the borrowers would result in an additional benefit being granted to the bank, which, in a situation of invalidity of the mortgage contract, would be contrary to the provisions of Directive 93/13 and the Civil Code.