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Swiss Franc loan contracts involved thousands of borrowers in default both in Cyprus and other Balkan and European countries. This particular banking product that had been promoted especially in the early 2000’s resulted in a severe socio-economic problem due to its adverse effects suffered by borrowers due to the depreciation of the exchange rates. The indignation of borrowers that observed a substantial increase in their balances on their loans and payments forced them to resort to legal measures to defend
their legal rights and entitlements.

The start of the judicial processes in various other European Courts and their decisions in favour of the borrowers have played a prominent role in the protection of creditors’ legal rights and the treatment of lending contracts that demonstrated the controversial and damaging clauses contained within the contracts against their clients. Consequently, the National European Court tended to adopt decisions that were in favour of the borrowers.

Recently, in Cyprus the first partial vindication of a borrower was heard before the District Court of Nicosia that contested the bank’s overcharges and the financial loss caused by the depreciation of the exchange rate between the Swiss Franc and the Euro. The loan was granted by the bank for the purposes of funding emergency housing.

The Plaintiffs (borrowers), as with the majority of bona fide borrowers, paid their loan instalments meticulously and regularly, however their loan never reduced over time and in fact continued to increase.
Swiss Franc borrowers were forced to convert their funds to pay their loan instalments on the day that the payments were due and according to the exchange rate on the date of the instalment payment. The devaluation and considerable downturn of the Swiss Franc negatively affected the loans and compounded the interest on the loans.

The Plaintiffs (borrowers)in this particular case requested the issuance of a protective interim order under the provisions of Article 32 of law 14/60 for: a) the suspension of the monthly instalments on the agreement, and b) the suspension of the defendants’ life insurances with 2 insurance companies in favour of the borrowers and not the bank.

The Cypriot Court on correctly interpreting the European Directive 93/13/EEC on the unfair terms in loan contracts applied the European Precedent of the European decision C-26/13 Kasler and Rabai v OPT Jelzalogbank Zrt dated 30/04/2014 regarding the borrowing of Swiss Francs and questioned the clauses that weakened the other parties negotiation chances and in particular the bank’s position of “take it or leave it” that was in violation of the borrowers’ principles of autonomy and their contractual freedoms.

It is on this basis that the Cypriot Court, directed the decision of the European Court of Justice in the case of Kasler for the understandable wording of terms so that they are meaningful and clear to a borrower.
It is widely viewed that the judge’s decision will primarily focus on ‘whether the manner and kind of lending represents a common loan agreement, for which the borrower knows from the beginning that he will be required to pay back a specific amount including the relevant interest on the loan’.

The Court rightly determined on the case that the borrower was not in a contractual position to have knowledge of the entire sum of the loan and the obligations/relationship between the lender and the borrower. In these types of loan contracts the content is normally unknown and/or undefined and/or unclear in the repayment of the loans that are reliant on exchange rate fluctuations (between the currency of the loan contract and the currency of the borrower’s income) including the variable interest rates imposed on the loan.

Although, the Cyprus Government has to date not taken a stance on this matter, the Cypriot Justice System has followed both European Legislation and Case Law in protecting the borrowers on contracts containing unfair and concealed terms by the banks for their sole purpose of gaining a profit.

The first Cypriot judgment (albeit interim) regarding Swiss franc loans in conjunction with the European Legislation and Case Law are formidable safeguards that are available to borrowers in difficulty to restore their financial losses they have suffered through the Courts.

The content of this article intends to provide a general guide to the subject matter. Specialist advice should be sought on each particular case. For any further information, please contact Mr Savvas Savvides at

Halil İbrahim Koca

Immigration Adviser

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