Last week the long-awaited decision of the Supreme Court's plenary session on Servicers (1/2023) was published. All eyes of all debtors are now on the Parliament, hoping for a legislative intervention before the elections. Horizontal solutions, however, are unlikely to be provided. So we are back to the situation that existed before the summer of 2022, when we published our article on the 4 court decisions that reversed the situation up to that point (see
here). The window created in 2022 following a series of decisions could not possibly be left open for a long time and either legislatively or judicially (as was the case) would be resolved. But what is the rationale behind the contested decision and what happens from here?
1. It is clear to all that the decision in question was based more on the need to solve a real problem than on solid legal reasoning. Not all judges agreed with the prevailing view; 56 judges were in favour of the possibility for Servicers, in claims transferred by the Act, to be able to use the right to claim the claims of the Servicers. 3156/2003, to carry out seizures and 9 judges against.
The minority view is much more convincing and indeed better substantiated. Considerations of expediency seem to have weighed heavily on the decision of the majority of the Justices of the Peace given that the delay or inability to collect on the part of the Servicers would have a serious impact on the financial situation of the Country. Indeed, the majority states the following:
"...it would be contrary to the principle of unity and certainty of the law, which derives from the provisions of Articles 2 para. 1 and 25(1). 1(a) of the Constitution, which requires clarity and predictability in the application of the legislation in question, which must be respected, particularly where the provisions in question are likely to have serious economic consequences for the persons concerned, such as the provisions referred to above". The paradox, however, is that the problem was ultimately caused by the Funds themselves, who knowingly made use of the 2003 law, and not by the legislature or the judiciary. As we wrote in October 2022:
"The responsibility, however, is ultimately theirs, because they chose to circumvent the 2015 law by pulling out of their "drawers" an older piece of legislation that had been passed with a completely different targeting. [...] thousands of debtors were taken by surprise, since their claims were transferred under the 2003 law without giving them the opportunity to settle, but now somehow we have to save the situation" (see
here).
Moreover, the decision in question ends up having the exact opposite effect in terms of the legal certainty it seeks to promote, because it adopts a concept of issuing decisions based on the economic interests at stake rather than on accepted interpretative methods.
2. According to the interesting part of the minority's reasoning:
"Law 4354/2015 has not been effectively implemented, since credit and financial institutions, taking advantage of the legal possibility given to them by maintaining Law 3156/2003 in force, a) in order to avoid the strict regulations of Law 4354/2015, which have been established to protect borrowers and in particular, the strict regulations established by this law (article 3 par. 2) as a necessary condition for the legality of the sale of non-performing consumer loans, a prior invitation of the cooperating borrower and guarantor to settle their debt, based on a written proposal of an appropriate arrangement with specific repayment terms, and b) to take advantage of the tax exemption of Law 435454/2015. 3156/2003 [...] and thus avoid paying the taxes they would have paid if the transfers had been made under Law 4354/2015, they chose, as they were granted the right to do, to transfer their claims against the borrowers in accordance with Article 10 of Law 3156/2003". In May 2021 we highlighted these two issues (see
here):
"Apart from some tax issues, a key reason for preference is the absence in the 2003 law of an obligation in the 2003 law of a prior extrajudicial invitation of the borrower and the guarantor before the sale of the loan to settle their debts".
3. The majority opinion states the following: "The parallel application of the two legislations provided for by the above provision refers to the procedure for the transfer of receivables and intends to facilitate transactions falling within the scope of Law 3156/2003, exempting the parties from the additional specific conditions required for the transfer of receivables under Law 4354/2015". This is indeed an interesting argumentation. As we have written before, so many days of debates in the Parliament, dozens of hours of processing in the relevant Parliamentary Committee with the aim, among others, of protecting borrowers in the context of the adoption of the 2015 law, everything ended up without any practical result; the exemption from the application of the more specific conditions of the 2015 law can simply be achieved through the use of the 2003 law. I do not, of course, think that this was the aim and will of the MPs who passed this particular law in 2015.
4. The decision of the Plenary does not legally bind the lower courts, including the Courts of First Instance, which are mainly responsible for deciding on appeals against seizures. Such a contrary judgment of a lower court could, for example, be supported by the reasoned opinion of the minority, which has carried out a review of legality and not of expediency. Also, any non-compliance with the decision of the plenary does not constitute a disciplinary offence for judges who support opposing positions, provided of course that the corresponding documentation takes place (see also Opinion No 20 of the Consultative Council of European Judges (CCJE): "This departure from the case-law should not lead to disciplinary sanctions or affect the evaluation of the judge's work, but should be regarded as an element of the independence of the judiciary". Moreover, the Code on the Organization of Courts and the Status of Judicial Officers (Law 4938/2022, Article 23) itself considers impermissible any instruction, recommendation or suggestion to a judicial officer on a substantive or procedural matter in a particular case or category of cases. The truth, however, is that the decisions of the Supreme Court Plenary, apart from the didactic function they perform by virtue of their authority, have the main objective of ensuring the unity of jurisprudence and thus the predictability of judicial decisions (legal certainty). On that basis, therefore, I consider it extremely unlikely that in the near future there will be courts which will adhere to the opposite view from that of the full Court.
5. Borrowers' defenses remain as they were before the specific legal issue of the legalization of Servicers arose (see
here). A short respite, moreover, for borrowers in the case of an auction is provided by the Code of Civil Procedure with the remedy of judicial suspension (Article 1000 of the CCP), which provides for the possibility to suspend the auction for up to 6 months on condition of payment of ¼ of the amount for which the seizure took place together with the costs of execution (the deadline for filing the remedy is 15 working days before the auction - see
here).
6. The Code of Conduct and the Out-of-Court Debt Settlement Mechanism are two frameworks that rarely help and always go hand in hand with the attorney as it is almost certain that legal assistance will be required (see and
here for a related article entitled "The Protection (?) of the Extrajudicial Mechanism from Auctions and other Enforcement Acts"). The changes that are being passed this week in Parliament are not expected to change the situation radically. Also, it is indeed possible for vulnerable borrowers to enter the electronic platform of the EIDH and obtain a Vulnerable Debtor Certificate under the Interim Programme of Law 4916/2022. The auction will be suspended but their home will eventually pass after a few months into the ownership of the Property Acquisition and Leasing Agency and they will be required to pay rent. Of course, the strict conditions of the law will also have to be met, e.g. in a single person household the total income must not exceed 7,000 euros and the total value of the property must not exceed 120,000.
7. In practice, once the foreclosure has taken place, in order to suspend the auction, Servicers usually require a payment of about 10-20% of the first bid price of the property, obviously assuming that the debtor has some amount available which is not apparent to his creditors. Such amounts, however, in most cases, cannot be found, so that a consensual suspension of the auction is not possible.
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