Poland’s Supreme Court has again delayed issuing guidance on how to deal with a raft of cases concerning billions of euros of foreign-currency loans. The ruling is expected to have significant repercussions for those who took out the loans and the banks that issued them.

Yesterday’s latest postponement was caused by doubts as to whether, because of the government’s contested judicial reforms, some judges were legitimately appointed. The Supreme Court has asked the Court of Justice of the European Union (CJEU) to help resolve the issue.

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The problem of foreign-currency mortgages, mainly issued in Swiss francs, has animated debate in Poland for more than a decade. Hundreds of thousands of Poles took out such loans to take advantage of low interest rates on the Swiss franc.

Later, however, many struggled to pay back instalments when the currency sharply appreciated against the zloty after the 2008 financial crisis and when it was unpegged from the euro in 2015.

There are still around 415,000 active Swiss franc mortgages worth 94 billion złoty (€21 billion), according to Poland’s Credit Information Office (BIK).

Following a 2019 ruling by the CJEU in favour of Polish borrowers, cases multiplied, with debtors winning 90% of the time. However, courts have issued a variety of interpretations on how to deal with their compensation, which the Polish Supreme Court was due to clarify this week.

Its ruling is expected to issue guidance on how to deal with contracts containing clauses deemed unfair, including questions of whether to annul them, as well as concerning the terms on which borrowers and lenders can seek compensation following a verdict.

The outcome has been keenly anticipated by Poland’s banks but was postponed due to the pandemic. In April and May this year, the court again twice delayed its decision in order to seek opinions from the central bank, the Financial Supervision Authority, and the commissioner for children’s rights.

Yesterday, the court announced that it would once again postpone the guidance, this time over doubts as to whether the full composition of its civil chamber, which is ruling on the case, is legal. In a statement, it referred a number of procedural questions on the appointment of judges to the CJEU.

Supreme Court spokesman Aleksander Stępkowski said that “doubts concerning loans denominated and indexed in a foreign currency remain unresolved” because the court would first need to address the issue of “appointing judges and the system of justice in the Republic of Poland”.

The legality of the composition of the Supreme Court became an issue following a government reform of the body that nominates judges, the National Council of the Judiciary (KRS), which increased the influence of politicians over appointments.

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The Supreme Court itself has previously ruled that “the KRS is not an impartial and independent body”. This year, the European Court of Human Rights agreed, deeming that politicians are “able to interfere directly or indirectly in the appointment of judges”.

Due to such doubts, some of the Supreme Court’s judges appointed before the KRS reform have argued that a verdict issued with the participation of judges appointed in recent years could in the future be questioned.

In its questions to the CJEU, the court asked whether the civil chamber in its current shape is legally fit to issue guidance, as well as whether the new disciplinary regime for judges and recent rulings by the Constitutional Tribunal affect this “verification” of the Supreme Court’s ability to rule.

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“We are aware that such a decision would be very important for tens of thousands of court proceedings; it would help to clarify the legal situation,” said the court in a statement.

It explained that the guidance would weigh on decisions by borrowers as to whether to enter into legal disputes with banks, as well as for banks on whether to offer settlements.

There were some 58,000 cases lodged in Polish courts on the issue by the end of June, according to the Polish Bank Association (ZBP). Now a response from the CJEU could now take “months, and even years,” reports Rzeczpospolita.

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Main image credit: Slawomir Kaminski / Agencja Gazeta

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