Swaps: Four basic criteria of the Supreme Court


They have recently made encouraging decisions on controversial Swaps by the Supreme Court.

From the approach to the Courts of First Instance pending resolution by the Supreme Court, the average time is usually about 10 years old.
Swaps are started very actively placed by financial institutions mainly from the years 2006 a 2007 so right now it is producing a large number of Supreme Court decisions on them.

There are many companies and individuals who are considering applying to the courts yet, as well as cases pending appeal before the Provincial Courts. It is therefore very interesting study criteria being applied by the High Court, it should be the guiding approach both cases, as the decisions at first and second instance.

Between the Supreme Court rulings about swaps, highlights of 10 November 2015.

La empresa Cutty S.A. It was a client of Banco Santander since 2002. In December 2006, Cutty arranged with Banco Santander swap during the year 2007 It generated both positive and negative assessments. In November 2007 They canceled the previous swap and celebrated a new swap agreement "With unilateral option and conversion Knock-out".

No evidence that properly report on the risks assumed in the event of falling interest rates.

In 2008, Cutty received positive assessments by 7.103 euros. However, in 2009 losses were negative settlements 48.392 euros.

Cutty filed a complaint with the Court of First Instance of Alicante, requesting nullity of the swap agreement of 2007 error on the consent. The court rejected the claim considering that his manager had a high training by having the same condition three companies and also be seized four others. The Judging took into account that "I had other credit facilities" and that “the normal, if the actor had doubts, It was that it informed or advise understanding its content”. Also he had signed another swap 2006 and several meetings were held to explain the product.

Cutty appealed the judgment to the Provincial Court. Para la sala, The swap is a complex product, speculative and high risk, which requires compliance with special duties of information by the Bank. The test in the first instance was almost exclusively testimonial, and it considered that it was not proven to have made the necessary contractual information on risks of the product. The burden of proof of establishing that has been reported correctly lies with the bank and it did not provide evidence in this regard. So the Court upheld the appeal and declared the invalidity of the swap.

Banco Santander filed with the Supreme Court extraordinary resources procedural infringements and a cassation.

The extraordinary appeal for procedural infringement:

The High Court concluded that:

1.-ASSESSMENT OF THE EVIDENCE: Audience can re-evaluate the evidence adduced in the first instance, and this does not infringe the principles of orality, immediacy and contradiction. Another thing is that no one agrees with it the defendant.

2.- BURDEN OF PROOF: Both before the entry into force of MiFID, and after, when you hire a swap non-professional investors, there is an information asymmetry makes the burden of proof rests with the financial institution.

On appeal:

1.- APPRECIATION OF ERROR: Referring to the STS 20 January 2014, It indicates that there has been proved that the customer be informed of the risks involved. The error is essential as it affects the main assumptions that were hiring cusa swap. And the existence of the duty to inform the Bank determines the error excusability.

2.- OWN ACTS: Se trae a colación la STS de 15 October 2015: The above swap, does not confirm the swap posterior. And so there own actions, They must satisfy the conditions of knowledge and removal of the cause of nullity as required by Article 1311 Civil Code.

Ultimately, Banco Santander's appeal is dismissed, the judgment of the Provincial Court of Alicante that cancels confirmed the swap, and impose costs to the bank.

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