The challenge procedure in mortgage foreclosure on the grounds of the existence of unfair terms and the Judgements of the European Court of Justice of 17 July 2014 and 21 January 2015

Abstract

In this article, the author examines the recent ECJ Judgement of 17 July 2014, which has given rise to the amendment of article 695.4 of the Spanish  Civil Procedure Act allowing mortgagors facing foreclosure to appeal to a higher authority  a ruling in which a challenge lodged on the grounds of unfair  terms is dis- missed. The disputed issues raised by the new provision are discussed, in particular the  burden  of proof on the  mortgagor in the  challenge  procedure,  and whether  or not it is possible to seek a plenary declarative ruling in respect of the same unfair terms  alleged  in the  challenge  procedure.  The  author  concludes  that  beyond  any procedural questions, which are merely instrumental in ensuring the protection of the substantive Law, the important issue is still to control  the content of mortgage terms, which may be tested in the procedure for challenging mortgage foreclosure, and culminating with an analysis of the recent Judgement of the ECJ of 21 January 2015. This Judgement rejects the possibility that the 2nd Transitional Provision of Law 1/2013 contravenes Directive 93/13, in so far as its scope of application does not coincide with that of the Directive, and as such it does not prevent a national judge — in addition to applying the measure for the moderation  of default inter- est  envisaged  there  — from  finding  that such a term  is  unfair,  and imposing  the consequences envisaged in the Directive in this case.