Gloss on the Judgment of the Court of Justice of the European Union of 14 December 2023 (Case C-28/22)

Abstract

This gloss analyses the Court of Justice of the European Union judgment of 14 December 2023 in case C-28/22 concerning the use by banks of the right of retention as a procedural defence in litigation over foreign-currency-indexed (or denominated) mortgage loans. The CJEU held that Article 6(1) and Article 7(1) of Directive 93/13/EEC, read in light of the principle of effectiveness, preclude a national judicial interpretation enabling a trader to make restitution to a consumer conditional upon the consumer offering repayment of the capital (or providing security), where the exercise of that defence results in the consumer losing entitlement to default interest from the expiry of the time limit set for performance following the consumer’s demand for repayment. The author argues that the ruling is substantively sound and important for ensuring the practical effectiveness and deterrent function of the unfair-terms regime, as it curtails litigation strategies capable of weakening consumer protection. The gloss also outlines the divergent approaches in Polish case law regarding whether a credit agreement should be classified as a reciprocal contract – an issue traditionally used to justify the application of Civil Code provisions on retention – and discusses the protective (security) rationale attributed to retention in domestic jurisprudence. The main conclusion is that, after the CJEU’s judgment, debates on the reciprocal nature of credit agreements become secondary in this context, because the decisive benchmark is the EU standard of effective consumer protection; set-off is indicated as the preferred mechanism for post-invalidity settlements between the parties.