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Court of Justice of the European Union


Luxembourg, 21 December 2016

In Spain, many individuals have initiated judicial proceedings against financial institutions seeking a declaration that the ‘floor clauses’ inserted in mortgage loan agreements concluded with consumers are unfair and that, consequently, they are not binding on the consumers. The clauses in question provide that, even if the interest rate falls below a certain threshold (or ‘floor’) defined in the agreement, the consumer must continue to pay minimum interest equivalent to that threshold, without being able to benefit from a lower rate. By judgment of 9 May 2013, the Tribunal Supremo (Supreme Court, Spain) held the ‘floor clauses’ to be unfair, given that the consumers had not been informed properly about the economic and legal burden which the contract would place upon them. Nevertheless, the Tribunal Supremo decided to limit the temporal effects of the declaration of invalidity of those clauses, so that they would have effect only for the future, as from the date of delivery of the abovementioned judgment.

Some of the consumers affected by the application of those clauses are asking for repayment of the sums they claim have been unduly paid to the financial institutions from the date on which their loan agreements were concluded. The matter having been brought before them, the Juzgado de lo Mercantil no 1 Granada (Commercial Court No 1, Granada, Spain) and the Audiencia Provincial de Alicante (Provincial High Court, Alicante, Spain) ask the Court of Justice whether the limitation of the effects of the declaration of invalidity from the date of delivery of the judgment of the Tribunal Supremo is compatible with the Directive on unfair terms, 1 given that, according to that directive, such clauses are not binding on consumers.

In today’s judgment, the Court holds that EU law precludes national case-law in accordance with which the restitutory effects connected with the invalidity of an unfair term are restricted to the amounts overpaid after the delivery of the decision holding that the term is unfair.

The court notes first that, according to the directive, unfair terms must not bind consumers as provided for under the national law of the Member States, with the obligation being on those States to provide adequate and effective means to prevent the use of unfair terms. The Court explains that the national court must purely and simply exclude the application of an unfair contract term in such a way that it is deemed never to have existed and so that it does not bind the consumer. The finding of unfairness must have the effect of restoring the consumer to the situation that consumer would have been in if that term had not existed. Consequently, the finding that ‘floor clauses’ are unfair must allow the restitution of advantages wrongly obtained by the seller or supplier to the consumer’s detriment.

See full press release here.  

The decision is available here.


News Type: 
case law
Consumer protection
EU Housing Rights
Right to housing