Case summary

Deciding Body
Supreme Court
Tribunal Supremo
Spain
National case details
Date of decision: 17.01.18
Registration ID: 25/2018
Instance: Cassation (review)
Case status: Final
Area of law
Consumer protection
Unfair terms

In judicial dialogue
Judgement of the CJEU Case C-92/11 RWE Vertrieb AG v Verbraucherzentrale Nordrhein-Westfalen eV, Case C-26/13 Árpád Kásler e Hajnalka Káslerné Rábai v OTP Jelzálogbank Zrt, Case C-143/13 Bogdan Matei e Ioana Ofelia Matei v SC Volksbank România SA, Case C-96/14 Jean-Claude Van Hove v CNP Assurances SA

Life-cycle diagram

  1. 22 May 2014

    Judgement of the Commercial Court of Sevilla

  2. 14 April 2015

    Judgement of the Appellate Court of Sevilla

  3. 17 January 2018

    Judgement of the Supreme Court

Identification of the case

National law sources
  • Articles 5 and 7 of the Ley de Condiciones Generales de la Contratación (Law on General Terms and Conditions)
  • Article 80.1 of the Texto Refundido de la Ley General para la Defensa de los Consumidores y Usuarios (Law compilation of the General Law on Protection of Consumers and Users)
EU law sources
  • Article 4(2) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts

Summary of the case

Facts of the case

In March 2010, Mr M. signed a deed to purchase a home from Cioter S.L. through subrogating in a mortgage loan arranged by Cioter S.L. with Caixabank SA in July 2006, which included a clause limiting the variability of the agreed interest rate (‘floor clause’).

M. filed a lawsuit against the aforementioned financial entity, in which he requested the nullity of the aforementioned floor clause and the restitution of the amounts paid as a consequence of its application.

The court of first instance issued a judgment and declared the floor clause null and void due to a lack of transparency, and held the lender had to return the amounts collected as a result of its application, with interests.

The first instance judgment was appealed by Caixabank SA. However, the appellate court overruled the judgement of first instance, dismissed the claim and held the contract term was transparent and hence binding on the consumer.

Mr. M. filed an appeal for cassation, based on two grounds.

The first ground of the appeal concerns the violation of Articles 5 and 7 of the Spanish Law on General Terms and Conditions (LCGC) and the Supreme Court case law. The claimant argued that the contested judgment did not carry out the transparency control of the contested clause, but merely stated that the buyer, having subrogated in the position of the seller in the loan agreement, it should have informed itself of the loan’s conditions even though the subrogation deed did not mention the floor clause.

The second ground concerns the violation of Article 80.1 of the Consolidated Text of the General Law for the Defense of Consumers and Users (TRLGCU) and related Supreme Court case law.

The Supreme Court addressed both grounds of appeal jointly.

Type of enforcement
  • Civil judicial enforcement
Measures, actions, remedies claimed/applied

Mr M. claimed and obtained the holding that the contract term –the floor clause - was unfair under the Directive and hence null under Spanish law and that the amounts paid as a result of the application of the contract term had to be restituted to the debtor.

Reasoning (legal principles applied)

The Supreme Court had to evaluate whether ‘floor clauses’ in mortgage loan contracts were transparent and hence binding on the consumers. Floor clauses establish a minimum rate below which the variable interest rate cannot fall.

In many cases the Supreme Court held that these floor clauses were not transparent and ordered the restitution of unduly paid amounts. In order for consumers to make an informed decision about their mortgage loan contracts, the Supreme Court required that banks actually provided simulations of different scenarios based on different interest rates and based on the existence or not of the floor clauses.

The Supreme Court based its decision on the case law of the Court of Justice of the European Union (cases C-92/11, RWE Vertrieb; C-26/13, Kásler y Káslerne Rábai; C-143/13, Matei; C-96/14, Van Hove). According to these cases, it is not only necessary that the clauses be written in a clear and understandable way, but also that the consumer be able have a real knowledge of them, so that an informed consumer can foresee the legal and economic burden of the contract based on precise and understandable criteria. In line with the interpretation of Article 4(2) of Directive 93/13 provided by the Court of Justice of the European Union, the Supreme Court also required that general terms and conditions in consumer contracts be transparent.

According to the Supreme Court, the transparency control of standard contract terms is twofold: on one side, it is intended for the adherent to know with simplicity both the economic burden that the contract actually entails, that is, the capital sacrifice made in exchange for the economic benefit he wants to obtain, on the other, it intends to provide the consumer with a clear definition of its legal position both regarding the typical elements of the contract and the allocation of risks.

General terms and conditions that refer to essential elements of the contract are required to provide additional information so that they enable consumers to adopt their contracting decisions with full knowledge of the economic and legal burden that the contract will entail without requiring to perform a thorough and detailed contract analysis.

Transparency controls aim at excluding economic burden included in the contract that was not noticed by the consumer when entering into the contract. The Spanish Supreme Court held that the consumer should be provided with clear and adequate information on the legal and economic consequences of contract terms so that it is aware of their legal or economic significance under the contract.

Regarding the transparency requirements of contract terms in the case of contract subrogation, the Spanish Supreme Court held that the contractual subrogation of the consumer in the position of the debtor did not relieve the bank from its duty of transparency. In the case at hand, the floor clause was not even included in the deed, but other financial clauses were mentioned, from which its existence could not have been deduced.

The court further explained that, in this case, a variation of the reference index was designed so that it could only benefit the bank because although the Euribor index fell significantly, the borrower could hardly benefit from such decrease, whereas if the Euribor index increased, the consumer would be hurt by such a rise. Also, the floor clause itself was a simple subsection within an extensive and cumbersome section referring to the interests of the loan, in a loan that is offered, prima facie, as a variable interest loan, with a reference to an official index (Euribor). The court held that that simple paragraph of just a few lines completely modified the economy of the contract.

The court finally recalled that both European and Spanish case law have highlighted the importance of the transparency of pre-contractual information provided to consumers, because it is at this stage that the decision to contract is adopted.

As a consequence, the court upheld the appeal and confirmed the judgement of first instance which declared the floor clause null and void and stated the lender had to return the amounts plus interests received up to that moment as a result of the application of the contract clause.

Elements of judicial dialogue

Vertical dialogue type
  • Direct dialogue between CJEU/ECtHR and National court (out of preliminary reference procedure)
  • Dialogue between high court - lower instance court at national level
Cited CJEU
  • CJEU C-92/11, Vertrieb
  • CJEU C-26/13, Kasler
  • CJEU C-143/13, Matei
  • CJEU C-96/14, Van Hove
Dialogue techniques

Conform interpretation with EU law as interpreted by the CJEU.

Case author

Research Assistant Sébastien Fassiaux, Universitat Pompeu Fabra, Barcelona

Published by Chiara Patera on 26 March 2020