Poland's court to verify whether WIBOR clause is detrimental to consumers, not to assess benchmark itself, says CJEU Advocate General

"Article 3(1) of Directive 93/13 must be interpreted as requiring the national court to assess whether a contractual clause relating to a variable interest rate based on the WIBOR benchmark, despite the requirement of good faith, creates a significant imbalance to the detriment of the consumer between the parties' rights and obligations arising from the contract," the CJEU's Advocate General said in the opinion.

It was pointed out that the enterpreneour (in this case - a lender) must inform the consumer in a sufficiently precise and accurate manner of the name of the reference index (benchmark) used and the name of its administrator, as well as the potential consequences for the consumer of using that benchmark, so as to enable him to assess, in particular, the total cost of the credit.

"The manner in which the creditor provides this information, whether directly or indirectly, must result in that information fully disclosing the method used and the main factors causing fluctuations in the index rate and not giving a distorted picture of the nature of the index," the opinion pointed out.

The Advocate General of the CJEU stated that in its overall assessment of the unfairness of a contractual clause, the national court must assess whether the lender, in dealing fairly and equitably with the consumer, could reasonably expect the latter to accept such a term following individual negotiation.

"To this end, it is necessary to verify whether the consumer has consented to the risks arising from the use of contractual clause in question after receiving complete and accurate information. However, this assessment would not be based on the WIBOR benchmark as such or on the method used to determine it," the Advocate General stressed.

"In the main proceedings' dispute, the assessment of the national court should be limited to the disputed contractual clause and to all the circumstances surrounding the conclusion of the contract, and issues related to the benchmark management system should be excluded from the scope of that assessment," he added.

The Regional Court in Czestochowa, which referred the question to the CJEU, stated that contractual terms relating to variable interest rates based on the WIBOR index could be regarded as contrary to the requirement of good faith and causing a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer on the basis that that the consumer was not properly informed about the exposure to the risk associated with variable interest rates, and that this risk was not equally shared between the parties.

The court in Częstochowa also found that PKO BP, as the lender, was aware of how the WIBOR index was determined and was aware of the existing doubts as to the transparency of the determination of the WIBOR rate, but decided not to inform the consumer of this. In the opinion of the referring court, this may be seen as a source of imbalance between the parties to the contract in relation to all aspects of that contract.

The Advocate General of the CJEU, responding to these statements by the court in Czestochowa, pointed out that it is for the referring court to examine whether the disputed contractual term is unfair within the meaning of Article 3(1) of Directive 93/13, which should be done by conducting a full assessment of the criteria resulting from the case law of the Court.

This assessment must cover, in particular, the lack of clear information that could limit the ability to understand the economic consequences of the disputed agreement.

"In this context, the referring court must verify whether the failure to provide accurate and sufficient information could have led to an imbalance in favour of the bank to such an extent that it caused a significant imbalance in the rights and obligations of the parties under the disputed agreement, to the detriment of the consumer," CJEU's Advocate General pointed out.

"To that end, the referring court must assess whether the lender (PKO), treating the consumer (J.J.) fairly and equitably, could reasonably assume that the consumer would have accepted such a term in the course of individual negotiations of the agreement," he added.

In the opinion of the Advocate General, the lender must provide the consumer with the names of the reference rates (benchmarks) and their administrators, as well as information on the potential consequences for the consumer. This information must be provided to potential borrowers in a sufficiently precise and accurate manner so that the average consumer can access the relevant publicly available information and familiarise themselves with the main elements of the method used to develop the reference index.

"Potential consequences for consumers of significant importance are those resulting from factors that may affect the extent of the consumer's liability, including in particular the risk associated with fluctuations in variable interest rates and information on the main elements causing such fluctuations," he added.

"An analysis of the benchmark framework established by Regulation 2016/1011 shows that the transparency requirement laid down in Directive 93/13, interpreted in conjunction with that regulation, does not require the lender to provide more detailed information on the method of determining the reference index than that required under Regulation 2016/1011," the Advocate General recalled.

In his opinion, transparency does not mean publishing the formula used to determine a given reference rate, but rather disclosing sufficient information to enable interested parties to understand how the reference rate (benchmark) was obtained and assess its representativeness, adequacy and suitability for its intended use.

According to the head of Polish banking lobby ZBP Tadeusz Bialek, CJEU's Advocate General has confirmed the correctness of the WIBOR calculation and the fulfilment of information obligations.

"The court cannot verify the method of determining the WIBOR benchmark. Verifying the method goes beyond the scope of Consumer Directive 93/13. The bank is required to provide information about the name, administrator and effects of the index increase on the interest rate of the loan. The banks have fulfilled these obligations," Bialek said in a comment following the release of the opinion.

"The Directive does not oblige the bank to directly provide information on the method of determining the benchmark. According to the Advocate General, information on the method is contained in the BMR Regulation, and detailed information is provided by the index administrator, i.e. GPW Benchmark," he added.

Chief Adviser to the CEO of listed lender Santander BP Piotr Bodyl Szymala believes that

although the opinion is worded in such a way that "everyone will probably see what they want to see in it," the Advocate General has in fact confirmed that there are no grounds - in the Polish reality - to question the WIBOR benchmark.

"In two steps, the thesis is put forward that in the Polish reality, since there is only one representative reference index and its use is mandatory, the courts cannot question it," he assessed.

"However, even if we were to accept that contractual provisions concerning variable interest rates based on WIBOR can be assessed in the light of the directive, there are still no grounds for questioning them. This is confirmed by hundreds of Polish court rulings to date, in which judges have ruled on this issue and found no violation of consumer rights, either in the content of the agreement or in the manner in which banks fulfil their information obligations," he added.

The Regional Court in Czestochowa referred four questions to the Court of Justice of the European Union for a preliminary ruling: whether national courts may verify the provisions of loan agreements concerning variable interest rates based on WIBOR; whether such provisions are subject to scrutiny in terms of transparency and comprehensibility for the consumer; whether the lack of complete and clear information about the WIBOR risk may mean that the clause is unfair and violates good practice, and also - if the WIBOR clause is found to be abusive - whether the loan agreement can continue to function only on a margin-only basis, or whether it becomes invalid in its entirety.

The Advocate General's opinion precedes the CJEU ruling. CJEU rulings are usually consistent with the Advocate General's opinion.

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