EnglishOne of the class action lawsuits in which lawyer Gheorghe Piperea is defending bank borrowers has been brought before the Court of Justice of the European Union (CJEU), through the preliminary questions addressed by the Court of Appeal of Oradea.
Răsvan Horaţiu Radu, our governmental agent for the Court of Justice of the European Union, (a dignitary who is part of the Ministry of Foreign Affairs), has responded in July 2016 to the enquiry which the Court of Justice of the European Union addressed to the Romanian government on the matter.
In an interview, lawyer Gheorghe Piperea explained what the responses of Romania's representative with the Court of Justice of the European Union mean, given that for the most part they go against the statements subsequently issued by prime-minister Dacian Cioloş.
Even though the observations concerning CHF-denominated loans which the Romanian government had sent to the Court of Justice of the European Union supported consumers, prime-minister Cioloş challenged the law of the conversion of CHF-denominated loans, and has recently submitted the case to the Romanian Constitutional Court. The hypocrisy of the current technocrat government didn't stop there, because one day later, the PM publicly justified that action by claiming that the law of conversion was not directed at social cases, even though he does not make that same claim in the text he sent to the Constitutional Court.
Lawyer Piperea told us: "When going before the Court of Justice of the European Union, the governmental agent represents Romania. They just express Romania's opinion on the matters tried by the Court. Even though the position of a member state is not binding for the Court, it still is an official opinion, and therefore weighs heavily on the scales of justice".
The case in which the court of Oradea has asked for the opinion of the Court of Justice of the European Union concerns the freezing of the leu/CHF exchange rate at the value it had on the day the contract was signed.
Reporter: What details can you give us on the case in which the Court of Oradea sent questions to the Court of Justice of the European Union? What is its status and what are the questions sent?
Gheorghe Piperea: It concerns a freezing of the leu/CHF exchange rate at the value it had on the date the contract was signed. Among other things, we have also invoked the presence of abusive clauses in the contract, especially those that make the currency risk the exclusive liability of the consumer.
But we have also alleged that those adhesion contracts (which do not allow consumers the option to negotiate) are the result of deceitful practices and of the violation of the obligations to inform their customers that the bank has according to the law, as well as the fact that they have the characteristics of a toxic financial product, put on the market with the approval of the NBR (hence why it is indirectly guilty for the ruination of those borrowers).
Reporter: What are your comments on the observations of the Romanian governmental agent concerning loan agreements for which questions were sent to the Court of Justice of the European Union?
Gheorghe Piperea: I want to mention that the government agent has provided us an affirmative response to all of the three questions that we sent to the Court of Luxemburg - that a clause concerning the exchange rate is not part of the price (remuneration) of the contract, and that, therefore it can be analyzed by the domestic court where its abusive nature is concerned, that the repetition in the contract of additional legal clauses, as the so-called monetary nominalism is called, doesn't mean that the contract in question is "clean" of any abusive conditions (as some courts have mistakenly stated) and that imposing the payment to be made in which debtor earns their income in a disproportionate size compared to the one that was taken out is a major imbalance. The opinion of the government agent is a bit surprising, compared to the official position of some Romanian authorities, but all the more valuable because it provides additional justifications for these lawsuits, based on the future interpretation issued by the CJEU, to see rulings issued in favor of consumers, meaning the victims of abuse and of deceiving practices.
Reporter: In his response, Răsvan Horaţiu Radu says that "the payment obligation in a foreign currency (the same as the one that the loan has been taken out in), when the currency risk has been made the exclusive responsibility of the consumer, leads to an uncertain situation for the consumer. More specifically, this means the costs that the consumer would have to bear, are apparently unlimited, while the lender would not have any obligation to provide any service in return". In this context, and with banks claiming that they had no way of estimating the CHF exchange rate, what is your opinion on the statements made by bankers and the NBR claiming that debtors should have been aware of the fact that the Swiss Franc was not a stable currency and that those borrowers were lacking financial education?
Gheorghe Piperea: Essentially, the government agent is saying that these CHF loans have been designed as random contracts, (a kind of juridical poker), but they have been advertised and sold as if they were commutative contracts - meaning certain, predictable, in which both parties know the extent of their obligations, as well as the scale of the risks they are taking on. For a payment obligation, which is essentially undefined, the bank does not offer nor will it offer an equivalent counterperformance. Obviously, that aspect is bound to certify the serious imbalance between the performances of the parties. From that point of view, the banks' statements that the parties to these adhesion contracts should have known what they were in for are completely false. Furthermore, the banks' defenders keep saying, every time they are backed into a corner by this argument, that the "poor" banks couldn't have foreseen the strengthening of the CHF(nota bene: the documents, reports and studies that we have uncovered in the interim contradict that claim; banks knew or should have known that the CHF was a safe haven currency in situations of economic crisis, and thus it becomes extremely strong in such times). So, banks, which are professionals, and risk professionals, were not aware of that risk, but consumers, the uninformed, uneducated, despised precisely for not taking the time to read dozens of pages of the loan agreement and the thousands of pages of official documents and of economic doctrine, knew or should have known that the CHF was going to get stronger. Isn't that wonderful?
Reporter: The representative of the Romanian government in the Court of Justice of the European Union states that, "in the case of contractual clauses as well as those that are being discussed in the lawsuit on the docket of the court that sent the inquiries, the requirement for a clear and intelligible wording must be construed to mean that it is also a requirement to transparently discuss the consequences of those contractual clauses, and of the mechanisms for the repayment of the loan, so that the consumer can assess the economic consequences of the contractual provisions as far as they are concerned themselves, including the currency risk". Do you think that the loan agreements concluded in 2007-2008 meet these requirements?
Gheorghe Piperea: No, and they couldn't have met those requirements anyway. They weren't designed to be transparent, but rather to be wordy and therefore, in order to allow banks to exploit their confusing nature. There are two more reasons why these requirements were not met by the ones who put out these agreements on the market, in a culpable manner: (i) they are adhesion contracts and, as people were in a hurry or they were pressed for time to sign the loan agreements due to having signed pre-contracts to buy the homes, no one had the time to read those contracts; how many of us, when it's raining or stormy, check whether the umbrella is safe and looking good, how many of us realized that in that sunny weather, figuratively speaking, the bank was giving us that umbrella and when the rain would come, they would take it back? (ii) people who borrowed in CHF were niche customers, with low salaries, who wouldn't have qualified for loans denominated in Euros and who were tempted, just like in a fair or a flea market, with second hand loans, but which banks claimed were just as good as loans denominated in Euros, and definitely just as expensive; there are consumers who, with salaries of 700 lei, would take out loans of 70,000-80,000 CHF and no one was wondering how they would pay those loans back ...
Reporter: The observations drawn up by the representative of the Government and submitted to the Court of Justice of the European Union also state that "the insertion of clauses concerning the assumption of the whole currency risk by one of the parties (the consumer), without stipulating contractual mechanisms to attenuate that risk, denote the creation of an imbalance between the rights and obligations of the parties, from the very conclusion of the contract. The fact that the circumstance which represents the materialization of the risk only occurs at a later moment and is expressed through the creation of an imbalance between the performances does not mean that the significant imbalance between the rights and obligations of the parties did not exist from the very moment the contract got signed. (...) The Romanian courts found banks had the option to use the variations on the currency market, which will represent a risky context for consumers". Still, despite these circumstances, the Government has notified the Constitutional Court of Romania concerning the Law on the conversion of CHF denominated loans. How do you explain the discrepancy between these observations made by Mr. Horaţiu Radu only to then have the Cioloş government submit that case to the CJEU?
Gheorghe Piperea: As far as In understand it, the submission of the complaint against the law of conversion with the Romanian Constitutional Court by Mr. Cioloş invokes the text of article 1 paragraph 5 concerning the quality of regulations, the principle of non-retroactivity and, respectively, the guarantee of ownership. The issue that Romania had to answer through its governmental agent concerns an ongoing lawsuit, brought based on existing laws. That is why, apparently, the two official positions do not contradict themselves. Still, it can be noticed that the Romanian governmental agent notes an essential element: the materialization of the currency risk, even though it is inherent from the date of the contract's signature, occurs later, during the execution of the contract and can continue until its completion. From that point of view, the counterargument of the non-retroactivity of the law, (which was also used in the case of the Law of giving in payment, but rejected by the Romanian Constitutional Court) is pointless. Just like the so-called violation of the right of ownership is a meritless claim, because "ownership" acquired through abuse cannot be guaranteed or protected by the Romanian state.
Reporter: In the response of the government to the Court of Justice of the European Union it is mentioned that the Swiss Franc "fluctuates on the international banking market, while other foreign currencies (the Euro) are correlated with the leu, as a result of the protection which the National Bank of Romania offers to the exchange rate". At the same time, the notification made by the Romanian government to the Romanian Constitutional Court contradicts these statements, estimating that the law on the Conversion of loans taken out in CHF "violates the principle of non-discrimination, as it discriminates against individual consumers/beneficiaries who have taken out loans denominated in other lei or in other currencies". How is Romania going to be perceived, when two representatives of the government have contradictory positions?
Gheorghe Piperea: First of all, the Government is obviously in the wrong when speaking about this alleged discrimination. This is where the contradiction between the two official positions is obvious, it can no longer be disguised. Second of all, the excerpt you quoted demonstrates the serious culpability of the judgment and public policy of another Romanian authority: the NBR. As you can note, to the contrary of all the things stated by the heads of the NBR from their position of defenders of the banks, the government agent of the NBR is claiming that only the leu/euro exchange was protected by the NBR, while the CHF/leu exchange rate wasn't. Besides, the CHF exchange rate fluctuates on the interbank market and that is why it is dangerous for debtors. The fact that not even at the last minute, did the NBR intervene to halt the destructive effects which were unregulated in 2007-2008, denotes the huge guilt of those that are (temporarily) in charge of the fate of that entity, which has such a tight domain over our economic and social life, but which is so absent from the Constitution.
Reporter: How would you comment on the fact that the government doesn't mention anything about the social nature of the law in the observations sent to the Court of Justice of the European Union or in the complaint addressed to the Constitutional Court, but PM Dacian Cioloş has stated the next day after sending the law of conversion to the CCR, that the issue raised by the Executive would be the social nature that the law doesn't have, thus requiring the existence of a cap on the amount of the loans which the law would be applicable to?
Gheorghe Piperea: I think that Mr. Cioloş is either the victim of a misunderstanding, or the wrong end of a public communication line. The consumer protection legislation, such as this law for the conversion of the CHF loans at the historic exchange rate (which is in fact an amendment to the Emergency Government Ordinance no. 50/2010 concerning consumer protection in banking agreements) is not a social protection law. In reality it concerns the consumers' economic interests, their violated rights, the harm they have suffered as a result of deceitful commercial practices and the sale of toxic financial products. From that point of view, there can be no difference in treatment between consumers regardless of the size of the loan or their social position. And consumers aren't people that are on welfare, waiting for handouts from the state, rather they are debtors who are captive in abusive contracts or victims of abusive practices. The government agent couldn't have made such a confusion. The NBR propaganda and the banking lobby have shifted the debate in a different direction, because that was going to generate a reaction of opposition from the population, which has literal idiosyncrasies when it comes to social aid measures. After noticing that this idiosyncratic reaction exists (artificially amplified by bloggers, hosts of talk-shows sponsored by banks, journalists friendly with banks, but who are self-titled anti-populists), the story about the social nature of the consumer protection laws was memorized like a poem and repeated every time the law of giving in payment and of conversion were going to be fought. I have even seen this mantra recited by economics professors in the Academy of Economic Studies and whom, when questioned in TV shows, admit on the spot that those laws aren't going to drive banks away from Romania, nor are they preventing investors from coming over, but they might give banks and investors some arguments to use if lawsuits were to be filed with the ICSID. Unfortunately, this "poem" is also being repeated by the government. And when in official statements made by the government we are being warned that banks might win at the ICSID, then it's serious, because officials of the Romanian state are worried they might become in the near future witnesses or bearers of "evidence" of expropriation of investors in Romania.
Reporter: Poland has addressed questions to the Court of Justice of the European Union as well. What are the observations in Poland's case on the subject and what has the Polish government answered to the CJEU?
Gheorghe Piperea: Even more surprising is that Poland has answered two of our questions with a "yes", and left the third unanswered. For example, it is shown that if, as per the contract, borrowers bear the currency risk in its entirety, which consists of the hike of the monthly payments caused by the fluctuations of the exchange rate, then those currency risk clauses should not only be checked in terms of their abusive nature, but they actually "present an increased risk of being abused, which would cause significant imbalance [...] to the detriment of the consumer".
Moreover, Poland claims: "When the loan was taken out in the foreign currency that the borrowers do not make their income in, the effects may be that consumer's debt becomes extremely onerous, compared to the moment the contract was signed, due to significant changes in the currency exchange rate".
Reporter: Thank you!
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