European Court: Hungary Court Can Overwrite Unfair Forex Loan Agreements

Brussels, April 30 (MTI) – National courts have the competency to replace unfair provisions in loan agreements in line with the laws of the given country, the Luxembourg-based European Court of Justice ruled today.

National courts can overwrite such provisions in order to restore fair and balanced conditions between the contracted parties and to maintain the validity of those agreements, the court said.

The ruling was made in the Kasler-OTP case involving a Hungarian lender and borrowers with a foreign-currency-denominated loan.

In its ruling, the court said that borrowers taking out a loan in a foreign currency must be in a position to consider its financial consequences and should be made aware that repayment of the loan may be made at a different rate from the one applied when the loan is taken out and the loan amount is converted to forints.

The case had been initiated by the Kuria, Hungary’s supreme court, in order to establish, among other things, whether the Hungarian justice system has the right to examine whether the conditions contained in the contracts of borrowers with foreign currency loans are fair or not.

The Kuria said after the announcement in Luxembourg today it would study the European Court’s ruling, and on this basis it was expected to make a decision in respect of the Kasler-OTP case at some time before its  July 15-Aug. 20 summer recess.

The Banking Association told MTI on Wednesday that the legal issues of foreign currency lending were “gravely important” and the European Court’s ruling was a complex one, so its legal experts were examining it in depth before offering an opinion.