A tale of two claims: The Court of Justice questions Poland’s rules for unwinding invalid credit agreements
On 19 June 2025 the Court of Justice of the European Union issued an important ruling for Polish legal practice in C-396/24, Lubreczlik, responding to a request for a preliminary ruling from the Kraków Regional Court on the rules for settling accounts between the parties to an invalidated credit agreement.
The Polish court had doubts in such cases about how to apply the doctrine established in national jurisprudence known as the “theory of two claims” (kondykcje, from the Latin condictiones). Under the theory of two claims, when a credit agreement is set aside, the bank and the consumer each hold a claim for return of the entire monetary consideration exchanged in performance of the invalidated credit agreement.
The state of facts and the questions posed by the Kraków court
The request for a preliminary ruling was submitted in a pair of disputes brought by borrowers against a Polish bank, seeking the refund of amounts paid under a mortgage loan agreement indexed against the exchange rate of the Swiss franc, which was held to be invalid because it contained unfair terms.
In the joined cases, the referring court pondered how the return of the consideration exchanged by the parties should be handled. In this respect, the court questioned whether the theory of two claims, applied by Polish courts since 2021, conflicted with Art. 7(1) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, which provides: “Member States shall ensure that, in the interests of consumers and of competitors, adequate and effective means exist to prevent the continued use of unfair terms in contracts concluded with consumers by sellers or suppliers.”
In two questions referred to the Court of Justice, the court in Kraków sought to determine whether Art. 7(1) of Directive 93/13/EEC should be interpreted as precluding national case law according to which, if a loan agreement is cancelled because it is found to contain an unfair term, the lender is entitled to demand from the consumer reimbursement of the entire nominal amount of the loan (1) irrespective of the value of the repayments made by the consumer in performance of the contract and (2) irrespective of the actual amount remaining to be repaid.
Consistency of the theory of “two claims” with EU law undermined
In its judgment, the Court of Justice pointed out that “the consequences that should follow from the finding that a term in a contract concluded between a seller or supplier and a consumer is unfair must allow two objectives to be achieved. First, the court must ensure that the equality between the parties, which would have been undermined if a term of the contract that was unfair as regards the consumer was applied, is restored. Second, it is necessary to ensure that the seller or supplier is deterred from including such terms in contracts with consumers.”
The Court of Justice pointed out that the determination by a court that a loan agreement is invalid on account of the presence of an unfair term in that agreement has the consequence, under Polish law, that payments made in performance of that agreement, whether by the borrowers or by the financial institution, constitute undue payments, and as such they must be repaid. The Court of Justice also cited the remarks by the referring court that under the case law of the Supreme Court of Poland—based on the “two claims” theory—that each party to such an agreement may claim full repayment of the sums paid in performance of the contract, irrespective of the amount of the repayments made and the amount remaining due under the loan.
It was explained that the case law under the “two claims” theory replaced an earlier line of case law in which most Polish courts adopted the “balance theory.” Under that approach, after the mutual settlement made by the parties to the invalid loan agreement had been determined, a single claim would be retained in favour of the party who had made the largest payment under the agreement.
Under the “balance theory,” in effect, if the borrower has repaid the bank an amount higher than the amount of principal paid out by the bank to the borrower, the borrower should be refunded the difference. In other words, the “balance theory” balances out the amounts due in advance, excluding a separate setoff, which under Polish law always requires some initiative by the entitled party to assert the setoff.
The Court of Justice also pointed out that “national courts must do whatever lies within their jurisdiction, taking the whole body of national law into consideration and applying the interpretive methods recognised by it, with a view to ensuring that Directive 93/13 is fully effective and to achieving an outcome consistent with the objective pursued by it.” The Court of Justice stressed “the obligation for national courts to change established case-law, where necessary, if it is based on an interpretation of national law that is incompatible with the objectives of a directive.”
To put it another way, “a national court cannot validly claim that it is impossible for it to interpret a provision of national law in a manner that is consistent with EU law merely because that provision has consistently been interpreted in a manner that is incompatible with EU law.”
This reasoning led the Court of Justice to conclude that settling the accounts between the parties to an invalid loan agreement using the “two claims” theory is inconsistent with Art. 7(1) of Directive 93/13/EEC.
Consequences of the judgment
A lively public debate has arisen presenting numerous view on the potential impacts of the ruling in C-396/24, Lubreczlik. But there is no doubt that the judgment will diametrically change the current line of case law.
The most likely consequence of the judgment will be the necessity for the Polish courts to return to applying the “balance theory” when settling accounts between the parties to invalidated loan agreements. This theory predominated in the Polish case law until 2021, when a seven-judge panel of the Supreme Court decided to back the “two claims” theory.
The balance theory consists in comparing the amount of the enrichment of both parties to the invalidated loan agreement, and ordering payment from one party to the other only of the excess arising on one side. This method is simpler, and does not generate a series of unnecessary legal steps. It also avoids, at least, the problems connected with one of the claims potentially having become time-barred.
In earlier cases, some of the lower courts explained the essence and advantages of the balance theory. For example, in the judgment of 28 February 2020 (case no. I ACa 50/19), the Łódź Court of Appeal stated: “The invalidity of a contract involving monetary consideration from each of the parties does not give rise to a duty to mutually return the consideration, whether by transferring certain amounts of money in cash or by conducting the relevant banking operations, nor, finally, by asserting mutual declarations of setoff—but only the duty by one of the parties to actually pay the excess on its side.”
And in the judgment of 23 September 2019 (case no. XXV C 13/18), the Warsaw Regional Court held: “There can be said to be undue consideration only in a situation where it was paid without a valid and effective legal basis. Meanwhile, the plaintiff fulfilled the performance consisting of returning funds to the defendant which were received from it. The court has no doubt that the performance on the part of the plaintiffs [i.e. the borrowers] should be regarded as the reimbursement of the previously received funds. That is the only way it could objectively be understood by the defendant [i.e. the bank]. Thus, in this situation, even given that the agreement has been held to be invalid, a legal relationship does exist which constitutes the basis for the asset transfers that were made. This basis is the cited regulations on unjust enrichment. It must be pointed out that if there is a necessity to perform on the basis of a credit agreement, and to return the consideration received on the basis of an invalid credit agreement, there is an identity in the purpose of the performance, that is, the borrower’s return of funds previously received from the bank. … For this reason as well, the monetary consideration in Polish currency paid by the plaintiffs to the defendant has a legal basis, and does not constitute an undue performance until the point where the amount exceeds the sum which the plaintiffs received from the defendant.”
Summary
The return to the “balance theory” should be regarded as advantageous for both lenders and borrowers. This method undoubtedly allows for restoring the equality between the parties, as stressed by the Court of Justice. This change may even reduce the burden on the courts considering cases involving mortgage loans from Polish banks to Polish consumers denominated in Swiss francs. We must observe the further developments in the case law, but the first signals do point to implementation of the balance theory.
The judgment in C-396/24, Lubreczlik, should also be taken into consideration in drafting the “Swiss franc act” to streamline and expedite these types of proceedings.
The current draft provides for the possibility of a one-off settling of claims by the bank and the consumer in a single proceeding, which should improve the efficiency of the courts. Nonetheless, further changes may still be made during the consultation stage (including work in Sejm and Senate committees). In this respect, the future law should also implement the principle of the equality of the parties stressed by the Court of Justice.
Mateusz Kosiorowski, adwokat, Dispute Resolution & Arbitration practice, Klaudiusz Mikołajczyk, Banking & Project Finance practice, Wardyński & Partners
