Bar of credit in PLN based on the LIBOR reference rate – Judgement of the Regional Court in Warszawa.

The position expressed in the above-mentioned title was presented in the judgement of the Regional Court in Warszawa of December 15-th 2017, Ref. No. XXV C 961/15, which in the first place considered contractual provisions stating the indexation itself with the CHF rate and its mechanism, in particular, the Bank’s exchange rates abusive, and therefore null and void. Based on the judgement, that contractual provisions providing for credit indexation are not allowed, and thus they cause an uneven distribution of risk between the parties resulting from the reservation of credit indexationthe expression of the consumer’s liability in a foreign currency, its rate is subject to many changes – no mechanisms that could reduce the risk to the consumer can be guaranteed in the contract.

After eliminating the “indexation provisions” from the legal relationship, there is the legal relationship of the credit granted and repaid in the Polish currency, where interest rate is based on LIBOR ratio. The opinion of the Court is that LIBOR reference rate is closely related to the currency escalation clause and settlements in a foreign currency, that is why legal relationship in the above-mentioned form is not possible.

In the opinion of the Court, reservation of the interest rate of the above-mentioned credit based on LIBOR rate is contradictory to the nature of the legal relationship of the credit regulated by the Banking Law Act, it is in contradiction with the principles of social coexistence. The result of concluding a credit contract in the given form leads to determining the payment of credit principal in the Polish currency, and the payment would be provided based on indicators totally inadequate to the economic value of the currency being the basis for settlements of the parties.

The Court recognized the principle that the interest rate of the credit is determined on the basis of ratios not corresponding to the currency in which the credit was granted, as being dissonant to the principles of social coexistence. However, it is impossible to agree with the conclusions of the Court in which the Court has stated that keeping the contract in the above-mentioned form – credit in zloty +LIBOR is unfair to borrowers who at the same time concluded contract for credits granted and repaid in the Polish currency and who have borne greater costs related to the use of someone else’s capital.

The elimination of the provisions applying to the interest rate of the credit based on LIBOR rate, does not result in a gap that would stop the contract from being performed. In the Court’s opinion, the lack of determination of variable interest rate can be completed either by reference to the rules set out in the regulations for credits granted in Polish zlotys, or if it is impossible, by referring to art. 359 § 2 of the Polish Civil Code, which specifies that if the amount of interest is not determined, statutory interest shall be due.

However, keeping the will of the contracting parties in mind, as well as the inability to accept the effects of adding prohibited provisions to the contract, which would be unfavourable to the consumer, the Court opinion is that it should be assumed that without provisions concerning the interest rates that are partially invalid, the credit contract would not have been concluded between the parties, and therefore it should have been considered null and void as a whole.