The position of consumers has been strengthened by a recent Supreme Court resolution by which the courts are obligated, within enforcement proceedings initiated against consumers, to examine, of their own motion (ex officio) whether an enforceable title contains unfair provisions. The resolution only relates to enforceable titles that have not been previously reviewed by a court, primarily agreements concluded in the form of directly enforceable notarial deeds.The resolution of the Supreme Court represents a further step in the protection of consumers with regard to unfair clauses as regulated by Council Directive 93/13/EEC on unfair terms in consumer contracts (UCTD). It is in line with the Guidance on the interpretation and application of the UCTD and the respective decisions of the Court of Justice of the European Union (CJEU).
In general, within enforcement proceedings, courts are not allowed to examine underlying contracts. Enforcement is considered to represent the final stage in exercising one’s rights, which occurs after all relevant factual issues and legal questions have already been sufficiently discussed within a litigation proceeding.
However, many loan and mortgage agreements with banks were concluded in the form of a directly enforceable notarial deed. This form allowed the creditor to obtain an enforceable title when conditions defined in the agreement were fulfilled, without having to initiate and conduct lengthy court proceedings. Notaries were required to check the form and the content of such agreements and to explain it to the parties. In the case of default, usually on the consumer´s side, the creditor would submit to the notary the agreed evidence that their claim had not been settled, upon which the notary would issue a certificate of enforceability and the private agreement entered into between the debtor and the creditor would become an enforceable title, having the same legal effect as a court decision. Thus, neither the amount of the outstanding debt nor any other terms and conditions of such agreements were subject to court examination before becoming enforceable.
The issue of numerous existing enforceable agreements containing possibly unfair clauses was partially reflected in the last changes to the Enforcement Act in 2020, which provided for the possibility that the debtor requests a delay of the enforcement, if the enforceable title derives from an agreement concluded by a consumer and, depending on the available evidence, there is a likelihood that one or more contractual provisions are null and void. The enforcement court is not supposed to decide on nullity – the consumer is required to file a respective lawsuit before the competent court.
We expect that the provisions in question will be further amended to reflect the recent position of the Supreme Court. In this new resolution, even though the Supreme Court does not define the kind of decision the enforcement court should bring if the enforceable title does contain unfair provisions and respective legal remedies, we assume that the courts will instruct consumers to initiate respective lawsuits and decide to delay the enforcement.
Furthermore, there is another related recent decision of the Supreme Court, from January 2022, by which the Supreme Court allowed an extraordinary remedy – a review of the possibility of invoking unfair clauses within an appeal against an enforcement decision. Although the decision on this possibility is still pending, in the explanation of their permission of said remedy, the Supreme Court quoted the Guidance on the interpretation and application of the UCTD and the respective decisions of the CJEU, which indicate the direction of their future decision.
It is expected that the Supreme Court will confirm the possibility of discussing unfair clauses even at this stage of proceedings, in accordance with the position of the CJEU that procedures that give creditors the possibility of more expedient enforcement of their claims based on titles other than judgments and which entail no or only limited substantive checks by national courts, must not deprive consumers of their right to proper protection against unfair contract terms.
Encouraged by EU case law, Croatian courts are transferring the burden of consumer protection from consumers to the courts. As this topic is gaining more traction, it is likely that the legislator will follow suit and amend the Enforcement Act to reflect the foundation laid by the courts.
By Sandra Lisac, Partner, and Vedrana Vuckovic, Associate, CMS