The dispute between the Bank and the borrower because of the devaluation for the first time reached the Supreme court

Judicial Board of the Supreme court on August 29 will consider the cassation appeal in the case of the Bank “Avangard” against the leasing company “TransFin-M”. The Bank opened the credit line of 4 billion rubles at 9.5% per annum in June 2014, when the dollar was worth only 33,6 RUB And on December 19, 2014, when the rate jumped to 67.8 rubles, the Bank increased the rate to 21%, citing typical terms of credit, the court of first instance. In the conditions of crediting of Bank “avant-garde” does say that the Bank has the right unilaterally with the devaluation of currency or any real threat of it in proportion to the increase rate on the loan.

The company disagreed with the rate increase, as reported by the Bank in the letter, and continued to repay the loan on the original cost. In the end, according to the Bank, the borrower has formed an outstanding debt.

“Avant-garde” appealed to Arbitration court of Moscow in April 2015, trying to recover with 86.2 million rubles of debt and penalties. The Bank won the case in the court of first instance and then on appeal (at this stage the representative of the Bank stated that the rate was reduced to 18.5%) and in cassation. After the appeal of “TransFin” the Arbitration court of the Moscow district has left without satisfaction, the company appealed to the Supreme court. There the judge agreed to send the case to the judicial Board on economic disputes, citing the fact that the Bank is on the stage of the trial did not explain “how it should be determined proportional to the increase in interest rates, as well as in relation to what currencies should be taken into account the devaluation of the ruble.”

Bank “Avangard” at the time of publication of the material did not respond to a request . The company “TransFin-M” has refused comments.

Why is this precedent

In practice, the condition of the possibility of the Bank to change the interest rate on the loan is paid in most of the contracts with the sponsors, says partner BGP Litigation Dmitry Bazarov. According to the law “On banks and banking activities” the Bank has the right to raise rates if it is written in the agreements with legal entities and individual entrepreneurs, and by contracts with individuals the Bank has no such possibility.

Lawyers surveyed indicate that though such disputes are typical for the last fifteen years, judicial practice is not in favor of the debtors, the first since the currency crisis 2014-2015 a dispute about a substantial increase of the rate reached the Supreme court, says the head of the legal Department “MEF-Audit” Alexander Ovesnov. Before that, in April 2016, the Supreme court considered the cassation complaint of the individual businessman of the Penza region, which the savings Bank has increased the rate loan from 11.3 to 14.3%, but in this case the rate went up not because of devaluation but because of the increase in the key rate of the Central Bank.

Case “TransFin-M” I wonder just what as reason to raise interest rates, the Bank has brought no change in the Central Bank rate or the inflation rate and the appreciation of foreign currencies. In many practice cases involving claims of “foreign currency borrowers”, the courts have repeatedly pointed out that the appreciation of foreign currencies against the ruble was to be expected and, accordingly, the risks have been borne by the borrower. But in this case we are talking about a loan in roubles and the associated risks have been borne by the Bank as professional participant of the market of financial services, adds Ovesnov.

This case gives an opportunity for the Supreme court to allow current law enforcement practice issues — for example, what should a conscientious borrower who considers unjustified sharp increase in interest rates, pending resolution of the dispute by the court. Should he make calculations on the basis of the initial rate, the new rate proposed by the Bank, or to determine an increased, but a fair amount of new bet, says head of special litigations at the law firm “YUST” Anton Sirotkin. “The fact that the case was pending before the Supreme court, gives hope that there will be developed a legal mechanism to consider the interests of creditors and interests of debtors affected by the sharp rise in interest rates on loans,” — says the partner of law Bureau “Egorov, Puginsky, Afanasiev and partners” Denis Arkhipov.

Judicial paternalism

The case could help resolve another important question: depending on the verdict of the Supreme court it will become clear whether the courts yourself to find out the presence of an economic component and integrity in the actions of the Bank, or it should do the borrower. In other words, the question, “on whom lies the burden of proof,” says Sirotkin.

“When the proceedings in the court of first instance, the borrower had not submitted their contrastato and referred to the fact that unscrupulous Bank increased the credit rate is more than required by economic relations, that is, the borrower is not protected properly. However, we cannot exclude that the Supreme court considers that the courts had to do, in fact, for him,” he explains.

What happens in court?

Dmitry Bazarov from BGP Litigation believes that it is unlikely the Supreme court will take the side of the borrower. He adds that the constitutional court in 2009 concluded that in the relations with entrepreneurs, the Bank’s right to unilateral change of interest could not be regarded as violating the rights and freedoms of the business. And in 1994 the Supreme arbitration court came to the conclusion that if the Bank provided reasonable justification for increasing interest rates on the loan, then such actions will be deemed legitimate. However, in 2011, YOU have come to the conclusion that the borrower is not deprived of the right to prove that the change in Bank unilaterally rate on the loan violates the principles of reasonableness and good faith.

It can be expected that after the case was forwarded to the judicial Board of review, a significant increase in the interest rate (from 9.5% to 21%) will be found to be unsubstantiated, does not exclude Alexander Ovesnov.