2014. October 06.

Is the Act on foreign exchange loans unconstitutional?

The new second package helping the foreign currency debtors has arrived.

The second package has been adopted by the Parliament two weeks before. The Hungarian Banking Association requested the President of the Republic not to countersign the Act. Finally president János Áder countersigned the Act on Saturday. Thus the financial institution have to reckon with the clients between 14 January 2015 and 30 September 2015 in connection that how much was the overpayment due to the exchange-rate spread, respectively due to unilateral contract modifications. This procedure concerns approximately 1,3 million contracts, of which almost half are forint credits. However for this procedure first of all the State have to win the legal proceedings initiated by banks, in which the banks try to prove that they played fair.

Up to now 65 judgments have been adjusted and altogether three plaints of the public institutions were partly accepted and three other cases are currently in front of the Constitutional Court. Last week the minister of Ministry of Justice said that the lawsuits might be permanently completed at the latest in the first half of January. „According to our hopes the appeal proceedings shall be completed until the middle of November. The judicial review, which is pending in front of the Supreme Court shall be permanently completed under our hopes until the end of the year or at the latest in the first half of January” – declared László Trócsányi, the minister of the Ministry of Justice.

The action of the EvoBank was the first from the actions initiated against the Hungarian state by the public institutions which has been negotiated on the second instance by the Court of Appeal of Budapest. On the court hearing the presiding judge emphasized in the oral preamble of the legally binding warrant that the council of the Court of Appeal asks the Constitutional Court to state several sections of the first Act on foreign exchange loans (Act XXXVII of 2014) unconstitutional and to obliterate those. Among other things for the section which adjusts that the contractual stipulation is void if the public institution did not initiate civil proceeding in the deadline stipulated in the Act or the action was rejected by the court or the civil procedure was terminated by the court. The Metropolitan Court would get the Constitutional Court to terminate that legal provision as well, under which the public institution has to reckon with the consumer according to separate Act.

According to the Metropolitan Court as appellate court additional 10 more sections of the Act are unconstitutional, principally those sections relating to civil proceeding which are fix that what kind of procedures are suitable for the public institutions to disprove the legal presumption of the unfairness.

According to the opinion of the Metropolitan Court of Budapest these legal sections harm the principle incorporated in the New Fundamental Law of Hungary, namely that Hungary is an independent, democratic rule-of-law state, harm the principle of division of powers, respectively harm that section under which everyone shall have the right to have any charge against him or her, or his or her rights and obligations in any litigation, adjudicated within a reasonable time in a fair and public trial by an independent and impartial court established by an Act. Furthermore the Act hurts the principle relating to the independence of the judges set out in the Fundamental Law, the principle of legal certainty, respectively hurts that the judges provide judicial activity according to the opinion of the Court of Appeal.

In his preamble the judge evaded that the unfairness of the contractual condition is an ethic conception, and the „logically conclusion based on public experience” of the judge has significant consequence by the judgment of the conception; however, the judge could not conclude conclusion, which requires expertise merely under the logical rules, without any help in this respect. The judge said that the realization of the seven principles set out in the Act can be mostly educed without any special expertise, but the legal knowledge of the judge is not always sufficient for the assessment of the effects of the economic procedures.

The judge added that because of the tight deadline set out in the Act, the conduction of the evidence procedure may solely confine to handing over the documentation, and enforcement of additional evidence instrument may jeopardize the observing of the deadlines, moreover it makes impossible that.

In the appeal the EvoBankZrt. requested that the Constitutional Court sets out that the Act is unconstitutional, respectively it interferes international contracts and requested at the Constitutional Court the initiation of the procedure aimed at excluding the enforcement of the unconstitutional provisions. According to EvoBank in the preamble of the judgment passed by the Court of Appeal, the Court has acknowledged that „having unconstitutionally anxiety in the Act” as well.

The plaintiff Bank added in its appeal that the rising of the regular payments does not go hand in hand with the groundless „enrichment” of the creditor, since the creditor enforced in principle the plant of the fund costs in the course of the interest elevation, thus the balance between services did not fall over certainly in general aspect.

The respondent Hungarian State requested the approval of the judgment on first instance passed by the and state its cross-appeal that the Act on foreign exchange loans is not post legislation because the harmonized decision of the Supreme Court based on the “old” Civil Code and other legislations connected to consumer sales contracts.

According to the Hungarian State the legislator did not create such legal environment, so the disadvantage of the scope extended for the contracts technically concluded earlier shall be borne solely by the public institutions.

Should the decision of the Metropolitan Court does not suitable for the banks, so for the banks shall remain only the way of extraordinary remedy to dispute the judgment, whereby they could submit retrial or review request. Here we would like to indicate that constitutional challenge submitted to Constitutional Court on transaction stamp and concerned to banks has already rejected by the Constitutional Court.