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Modification of the criteria in relation to floor clauses

Until mid-December, irrespective of whether or not precautionary measures (injunctions) were taken in proceedings in which the nullity of floor rate clauses was requested, everything depended on the Malaga Commercial Court before which the proceedings were heard.

With regards to this, it is necessary to point out and explain the following:

  1. What is an injunction (interim measure)?

It is a measure taken at an early stage of the procedure in order to guarantee or ensure a right once the judgment is delivered. However, it is necessary to fulfill the conditions set out in article 728 of the Code of Civil Procedure (hereinafter LEC), which are: (i) appearance of prima facie case; (ii) danger of procedural delay; (iii) deposit.

  1. What interim measures are sought in proceedings in which the nullity of a floor clause is requested?

It is obvious that suspension of the clause´s application during the procedure, for practical purposes results in the suspension of payment of those amounts payable to the bank under the minimum interest rate clause of the loan. Therefore, it imposes the duty on the bank to invoice the corresponding monthly bills without applying the minimum limit of the clause under dispute.

  1. How many Mercantile Courts are there in the province of Malaga?

There are two Mercantile Courts and both are located in Malaga. Between bankruptcy proceedings and proceedings concerning general contracting conditions (such as floor clauses, preferential shares, etc….), among many others, both courts are completely overloaded. Proof of this can be found in the schedule that both courts have, for example, trials have to be scheduled two years in advance and, therefore, the adoption of these injunctions is absolutely necessary.

In effect, the adoption or not of such injunctions depended entirely on whether proceedings took place in one court or another, as Commercial Court No.1 approved the precautionary measures, while Commercial Court No. 2 dismissed them.

However, the High Court of Malaga has “unified” criteria, agreeing to the revocation of the precautionary measures issued by Commercial Court No. 1, informing this Chamber that, until a judgment states that the floor clause is null, it “must be deemed valid and in force”. Therefore the customer must still pay the amount under this clause throughout the procedure, which, if everything goes as planned will be concluded within four years. The Chamber also adds that: “the request for the clause´s suspension is merely a request to rescind an agreed obligation and while the clause is not declared invalid, it must be deemed valid”.

For practical purposes, the current interpretation of the Chamber implies that, despite having filed a lawsuit and requested the nullity of the floor clause, the lack of an injunction will mean we have to continue paying under the clause until judgment is given, that is, approximately four years. A rather surprising ruling states that, even in the event that the eventual judgment is favorable, according to the famous Supreme Court decision of the 9th May, 2013, the extra amount paid will not be paid before or during the proceedings because of this clause.

Nevertheless, it seems that there is light at the end of the tunnel, as the High Court of Malaga considered article 1303 of the Spanish Civil Code to be applicable in their recent judgment. This further confirms that considering “declaring the nullity of an obligation, the Contracting parties must each give up to each other the things which had been subject to the contract, with their fruits, and the price with interest, except as provided in the following articles”. Therefore, our Provincial Court considers that during the procedures consumers will have to continue to pay their entire mortgage without limit (respecting the floor rate clause). In the end though, if this article is applied, they will not only recover these amounts, but in addition the extra paid amounts too. It remains to be seen what the Supreme Court will say about this.

At Lexland Lawyers we advise all those who are affected by the floor rate clauses and wish to request the return on overpayments. Our professionals are here to answer your questions, with first consultation free of charge.

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