CONSUMERS : ECJ: ABUSIVE EXPROPRIATIONS UNDER SPANISH LAW RULED ILLEGAL.

The EU Court of Justice handed down a ruling, on 14 March, that will be seen as historic in Spain. It overturned the Spanish legislation that prevents a court from declaring unfair a term of a loan agreement and staying the proceedings to force the owners out of their home(1). This judgement closes a four-year legal battle led by various associations - including consumer groups - against this measure that has irreversibly thrown thousands of Spanish families into the street while obliging them to pay back their loans with interest. The court sided with the associations by declaring this impossibility to stay the mortgage enforcement proceedings incompatible with the directive on unfair terms in consumer contracts(2).

Mohamed Aziz, a Moroccan national working in Spain, tried to recover his property by taking an action in a Spanish court, which turned to the Court of Justice for a ruling on the compatibility of this legislation with the EU directive. In July 2007, he took out a 138,000 loan with Catalunyacaixa, secured by a mortgage on his family home. Upon running into financial difficulties, he stopped making monthly instalments from June 2008. The bank initiated enforcement proceedings, using clauses giving it the possibility to recover the full debt and annual default interest of 18.75% on the unsettled amounts. It also obtained mortgage enforcement proceedings whereby the property was vested in the bank at 50% of its value. This was followed by Aziz's eviction, in January 2011.

Shortly beforehand, Aziz had applied for a declaration seeking annulment of a term of the mortgage loan agreement on the ground that it was unfair, and consequently seeking annulment of the mortgage enforcement proceedings.

PRINCIPLE OF EFFECTIVENESS

The court stated that while the grounds of opposition allowed in mortgage enforcement proceedings and the powers conferred on the court hearing the proceedings are a matter for the national legal order, in no case must they undermine the effectiveness of the protection established by the directive. Under the principle of effectiveness, national legislation must not make it in practice impossible or excessively difficult to exercise the rights conferred...