A preliminary ruling of the Court of Justice of the European Union (CJEU) in case C-630/23, following a referral from the Hungarian supreme court Curia, may impact the treatment of foreign currency denominated financial leasing agreements with consumers. The ruling outlines remedies if a leasing agreement is found to be invalid due to an unfair term.
Current FX lease agreements in Hungary
If a foreign currency-denominated financial lease agreement is found to be invalid due to an unfair exchange rate clause, Hungarian courts — in line with the laws on the settlement and conversion of foreign currency loans adopted in 2014–2015 and Curia decisions on the uniform application of the law — have replaced the unfair clause with the mid-market rate of the National Bank of Hungary or the exchange rate set during the statutory conversion process. Hungarian law and case-law do not make it possible to restore the legal position the consumer would be in had the agreement never existed.
Remedy outlined by the CJEU
The CJEU ruled that if a financial leasing agreement is found to be invalid due to an unfair term that places the exchange-rate risk on the consumer and the agreement cannot exist without that term, then member states must pass legislation that allow the restoration of the legal and factual situation that the consumer would have been in if the leasing agreement had not existed.
According to the CJEU, such restoration can be achieved with the following remedies:
- the creditor must reimburse the monthly instalments and fees paid under the lease agreement along with default interest; and
- the consumer must return the goods provided by the creditor under the lease agreement or reimburse its corresponding value.
National legislation may not grant the creditor the right to claim any further compensation.
Applying remedies in Hungary
The CJEU’s ruling acknowledges that the obligation to interpret national law in conformity with EU law has certain limits. National law cannot be interpreted contra legem on the basis of this obligation.
The key question is how to interpret the legal consequences of invalid agreements under the Hungarian Civil Code according to the CJEU’s remedies outlined above. Whether the remedies can be applied under Hungarian law is a matter for the Curia to decide.
Possible state liability claims
If the Curia concludes that the CJEU's requirements are incompatible with Hungarian law and as a result Hungarian law is incompatible with EU law, consumers may be entitled to claim compensation from the state for loss or damages caused by the non-conformity.
Sufficient consumer information
As mentioned above, the remedies outlined by the CJEU are only applicable if the financial leasing agreement is found to be invalid due to an unfair term. When assessing such invalidity, the focus in Hungary is whether the lessor duly informed the consumer of the exchange-rate risk.
For more information on this preliminary ruling and laws governing exchange rates in Hungary, contact your CMS client partner or these CMS experts.
The article was co-authored by Viktória Dorusák.
