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Limiting retroactivity in Mortgage-Floor Clauses is the New Bailout for Spanish Banks

Limiting retroactivity in Mortgage-Floor Clauses is the New Bailout for Spanish Banks

Next July 12 will be decisive for the future of much of the Spanish banking sector and for millions of both Spanish and foreign consumers affected by the mortgage-floor clauses. That day Mr. Mengozzi, Advocate General of the ECJ, will issue his report on these controversial clauses, which have unjustly benefited the Spanish banking system, to the detriment of consumers who purchased a home in recent years.

In the sentence of May 9th, 2013, the Supreme Court of Spain opened the possibility of limiting the retroactivity of the wrongfully paid amounts of mortgage. This possibility was later confirmed by the sentence of March 2015, which was seen by the banks as a lesser evil regarding the whole thing of the floor clauses. It was so because both sentences on the one hand forced to cancel the juicy clauses, but also limited until after May 2013 the time they could be claimed. For its part, the Spanish Supreme Court basically justified this measure in order to limit the damage that full retroactivity could bring to the Spanish economy.

At that time, as banks regretted losing part of their income, customers celebrated the reduction of their monthly mortgage payments.

Undoubtedly, it is only ignorance of Spanish law which can justify the right to limit retroactivity, given that Article 1303 of the Spanish Civil Code states that “declared the nullity of an obligation, the contracting parties must return to each other the things subject of the contract, with its fruits, and the price with interest.”

Subsequently, in April 2015, the Judge of the Commercial Court Number 1 of Granada raised the issue of the limitation of retroactivity to the Court of Justice of the European Union (CJEU). The Judge of Granada questioned the validity of that ruling which left the consumer in a situation deemed unfair as enacted in the art. 6.1 of Directive 93/13 / EEC.

This was when bankers finally began to worry. Especially when Europe made Spanish banks make a provision of 7,200 million euros to deal with the claims. At that time it was regarded as a threat to the Spanish banking system.

Opinions regarding the EU directive have had several interpretations by different States, which result in full retroactive rights or not.

On the one hand we have the position of UK, which supports that a National Judge may limit the retroactivity, thus restricting the right to full payment of the amounts paid unfairly by bank customers.

At the other extreme we have the Czech Republic, which, in line with Europe, believes it is only the ECJ which can decide on this issue because it is an interpretation of a rule of the Union.

But undoubtedly the most interesting position is that of the Bank of Spain which, without considering the legality of the clauses or the right that consumers have to recover their money, boasts “… the total retroactive cancellation of ground clauses would undermine the ability of banks to contribute to national recovery and welfare, damaging the welfare of citizens … ”

Thus the limit of retroactivity is transformed into a new sacrifice for consumers of banking / real estate products in Spain, expecting them to give up their rights; in fact transforming these rights into a new bailout for Spanish banks.

Maria Arcenegui Siemens

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