Swaps: The Supreme Court restates a nonentity

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The Supreme Court has again swap void a contract by a limited company in Case 7 July 2014.

 

The statement can be download free here.

A company was signed in June 2008 two Contratos with the Savings Bank of Penedes: a basic contract for the provision of investment services and swap entitled "interest rate collar”. The plaintiff had asked the bank insurance, and the director of the branch you visit a product that was offering insurance against increases in interest rates. According to the applicant, signed thinking it was a safe and without receiving timely information what he really was and the risks it entailed. This lacked financial training and I did not test suitability or fitness. Further alleges that the bank knew that interest rates were going down, and therefore, Customer sign made in bad faith. Furthermore there a lack of balance between the benefits. If they had explained the product well, I would not have signed.

The bank claims that explained everything correctly, that contractual obligations are binding and that the error was not excusable.

The Trial Court fully upheld the claim, thus annulling the contract for investment services such as interest rate hedging, condemned to pay the costs of the financial institution. To the judge, contracts offered by the bank as a safe, had not been properly explained the swap because no examples of scenarios that could occur were presented, no test was made, cancellation was not explained and all this caused the error in the consent.

Caja de Ahorros del Penedes resource ante Audiencia Provincial de Tarragona, and it rejects its action imposing the payment of costs.

So the bank Mare Nostrum (procedural successor of the Savings Bank of Penedes) lodged an appeal before the Supreme Court.

In its application, the bank requires fixing doctrine on the following questions:

1.- Mandatory reporting on forecast rate developments.

2.- Existence of defect of consent when the information is missing.

3.- If you can be penalized by the lack contractual invalidity when prior information.

The Supreme Court reaffirms its doctrine laid down in the STS No 840/2013 of 20 January 2014. The entry into force of the Law 47/2007 is the day following its publication in the Official Gazette on 21 December 2007. The 6 months of adaptation is no excuse for immediate enforcement. The information asymmetry between the lender and the client, obligan protect especially experienced in al inverter. The client must be informed, before perfection of the contract, Product Risk. The test should be performed convenience or suitability depending on whether or not financial advice. And there is financial advice (art.52 of Directive 2006/73 when the recommendation "Is presented as suitable for the client or is based on a consideration of your personal circumstances and is not disclosed exclusively through distribution channels or for the public".

As a summary of the doctrine of STS No 840/2013 of 20 January 2014:

1. The breach of the duties of information does not necessarily imply the existence of vice mistake but can influence the assessment of the same.

2. The error of the risks considered substantial.

3. The risk information is essential for the retail client may validly give consent. But the lack of information does not automatically lead to error.

4 . The reporting obligations hanging over the bank makes the error is caused by a lack excusable.

5 . In case of breach of this duty, what is relevant for judging vice is an error if the client knew the risks of the product and lack of test to presume a lack of knowledge.

For particular, the omission of the suitability test to presume ignorance customer risk and therefore the existence of an excusable error on the consent.

In the judgment is repeated up to three times this "presumption": If you need the test, presumed error.

Ultimately, dismissing the appeal of the bank, confirms the void Swap and impose the costs to the bank.

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