Debtors facing mortgage foreclosure proceedings may have a powerful defence weapon in the Unfair Contract Terms Directive 1993, in light of a recent EU ruling. This comes at a time when pressure mounts on EU member states to restructure and expunge bad debts from their banking systems. On March 14th, the [broken link removed] of the [broken link removed] handed down a judgment in a case taken by a Spanish mortgage holder, Mr Aziz, against the bank which granted him a 33-year mortgage in 2007 and began foreclosure proceedings against him in 2009.
The court held that Spanish mortgage enforcement legislation contravened EU law, since the grounds on which a debtor could object to mortgage foreclosure proceedings did not include a claim that terms of the relevant mortgage contract were unfair and unlawful under the 1993 directive, or that the proceedings should be staying pending resolution of a separate court action based on the 1993 directive.
The judgment is noteworthy not only because of the topical nature of its subject matter in Spain, as well as Ireland and Europe as a whole, but also because of new legal guidance provided by the court on the definition of an “unfair term”.