The Slovenia Times

Court strikes down Swiss franc law


The Constitutional Court has struck down a law that distributed the surging costs of loans denominated in Swiss francs between banks and borrowers and put banks on the line for an estimated €300 million in costs.

In a ruling released on 14 December, the court said the entire law was retroactive since it applied to loan agreements signed between 2004 and 2010, even though the conditions for retroactivity had not been satisfied.

Such retroactivity constitutes "a systemic revision of credit agreements denominated in Swiss francs that were agreed before the law entered into force," it said.

Even though this alone would have sufficed to strike it down, the court also examined whether the condition of special public interest had been met. It concluded that this was not the case.

The law was passed in February this year as a result of years of efforts by the Franc Association, a group of borrowers who have loans denominated in Swiss francs, and with abundant help from the National Council, the upper chamber of parliament.

The borrowers claim they were not sufficiently informed about currency risks and have accused some banks of misleading clients.

The lower chamber, the National Assembly, passed it in a near unanimous cross-partisan vote.

As soon as the law was passed the Bank Association, a trade group representing Slovenian banks, initiated a Constitutional Court review.

It argued that the legislation was detrimental not just to banks but to the corporate sector as a whole since it implied that any contracts concluded in Slovenia were open to potential retroactive changes.

Banks have estimated they could incur costs of up to €300 million due to the retroactive effect of the law.

They insist that if there had been any misdeeds, they must be resolved by courts on a case-by-base basis. Several individual cases have made it to court and the record so far is mixed.

The Bank Association said it did not see the ruling as a victory but as a reaffirmation of the rule of law in Slovenia.

The central bank added that clients are indeed the weaker party in contractual relations with banks, but the law did not address the issue appropriately.

Bank of Slovenia along with other stakeholders will continue to seek effective mechanisms to address it.

Swiss franc loans were popular in Slovenia in the early 2000s, but monthly instalments surged after 2015, when the Swiss central bank removed a cap on the value of the franc.


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