The Supreme Court ruled that the conversion agreement has legal effects and is valid in the case where the provisions of the basic variable rate loan agreement and the foreign currency clause are null and void.

The Supreme Court of the Republic of Croatia ruled that the conversion agreement concluded on the basis of the Law on Amendments to the Consumer Credit Act has legal effects and is valid in the case where the provisions of the basic variable rate loan agreement and the foreign currency clauses are null and void.

The Supreme Court has taken a legal view of a matter that is decisive for a large number of lawsuits filed in a vast majority of cases before first instance courts, or is expected to be filed, on a motion filed by the Pazin Municipal Court.

The decision is based on the conclusion that previous judgments of the Croatian courts have established that the provisions of the regarding variable interest rate and foreign currency clause in the CHF of the original agreement are unfair, null and void but they have not been established the original agreement to be  null and void in their entirety.

Furthermore, it was concluded that in order to prevent and eliminate the unfair business practices of credit institutions, as well as due to the deepening of the debt crisis, a special regulation was adopted (Law amending the Consumer Credit Law), which was harmonized with the Constitution and confirmed  in a procedure before the Constitutional Court, according to which credit institutions were obliged to act in accordance with the that  Law amending the Consumer Credit Law, while the borrowers were given the disposition of whether to enter into a new agreement or to maintain the applicable contractual terms. By concluding agreements between credit institutions and borrowers, in accordance with that act, as a separate regulation, a new legal basis has emerged, on which there is no place to apply the general rules of law of obligations on contract novation.