Can a judge impartially rule in the case of a bank from which the judge has taken out a mortgage loan? Is the mere fact of holding a mortgage in Swiss francs a basis for disqualifying a judge from hearing cases seeking invalidation of mortgage loans indexed or denominated in that currency? And why is it easier to disqualify a Supreme Court judge than a lower-court judge?
Recusal or disqualification of judges is intended to guarantee citizens proper standards of adjudication under the rule of law. But sometimes it is difficult to unequivocally identify what violates these standards.
The case law in Poland presents the view that disqualification of a judge serves not only to guarantee a neutral resolution, but also to ensure that the resolution appears neutral to the public (Constitutional Tribunal judgments of 13 December 2005, case no. SK 53/04, and 24 July 2008, case no. P 8/07; Supreme Court judgment of 13 May 2022, case no. II CSKP 989/22). The mere possibility of reasonable doubt being raised over the impartiality of the judge is relevant, not whether the judge can actually be reasonably accused of a lack of objectivity (Supreme Court orders of 18 March 1970, case no. II CO 18/69, 30 April 1975, case no. II CZ 60/75, and 13 May 2022, case no. II CSKP 989/22). Such rigorous attention to delivering a fair ruling in the case is intended to build public confidence in the justice system (Supreme Court order of 13 May 2022, case no. II CSKP 989/22).
Grounds for disqualification of a judge
A judge may be disqualified from hearing a case either by operation of law or upon application. Two grounds for possible disqualification can be considered in cases regarding mortgages denominated in Swiss francs.
The first is Art. 48 §1(1) of the Civil Procedure Code, which provides that a judge is disqualified by operation of law in cases to which he or she is a party, or where the judge is in such a legal relationship with one of the parties that the outcome of the case affects his or her rights or obligations.
The second is Art. 49 §1 of the Civil Procedure Code, pursuant to which, irrespective of the grounds specified in Art. 48, the court shall recuse a judge at the application of the judge or a party if there are circumstances that could raise reasonable doubt as to the impartiality of the judge in the case.
We will consider each of these grounds separately.
Disqualification of a judge by operation of law
Practically, the first ground is limited to situations where the judge is in such a legal relationship with one of the parties that the outcome of the case affects his or her rights or obligations. It is clear that the judge will be disqualified when he or she is a party to the proceedings. But in a case involving mortgage loans in Swiss francs, what if the judge is admittedly not a party, but holds a mortgage loan denominated in Swiss francs?
It is recognised in the case law that under this provision, a judge cannot be disqualified by operation of law in a case against a bank other than the one from which the judge has taken out a mortgage loan. As the Supreme Court of Poland has held, “A circumstance requiring disqualification of a judge cannot be the fact that he is in a legal relationship similar to the relationship under which the dispute arose, as in the case of relationships of a mass nature this would lead to serious disruption of the administration of justice” (order of 8 March 2002, case no. I CSK 6/22).
But the situation where a judge is to rule in the case of a bank from which the judge has taken out a loan can be problematic. The Gdańsk Court of Appeal had doubts in such a case, and in its order 24 November 2021 (case no. I ACa 905/20) sought a ruling on the following legal questions from the Supreme Court:
“1. Does the fact that the judge has entered into a mortgage agreement in Swiss francs (either indexed or denominated) with a bank that is a party to the proceedings, and the basis of the claim of a party to the proceedings is to establish the invalidity of such an agreement with the bank, constitute grounds for disqualification of the judge under Art. 48 §1(1) of the Civil Procedure Code?
“In case of a negative answer to the first question:
“2. Does the fact that the judge has entered into a mortgage agreement in Swiss francs (indexed or denominated) with a bank that is a party to the proceedings, and the basis of the claim of a party to the proceedings is to establish the invalidity of such an agreement with the bank, constitute grounds for disqualification under Art. 49 of the Civil Procedure Code?”
In response, on 13 May 2022, in case no. III CZP 83/22, the Supreme Court adopted the following resolution: “A judge who has entered into a mortgage agreement denominated or indexed in Swiss francs with a bank which is a party to the proceedings is not excluded by operation of law for this reason in a case involving claims related to such an agreement entered into by that bank with another entity (Art. 48 §1(1) of the Civil Procedure Code).” On the second point, the Supreme Court refused to adopt a resolution. The justification for the ruling has not been issued yet.
The solution proposed by the Supreme Court should be evaluated positively. The parties’ claims in any case of a mortgage denominated in Swiss francs are not always equivalent to the judge’s potential claims under his own foreign currency mortgage agreement. If only for this reason, disqualification should not be automatic. The causal connection between the legal relationship in which the judge is involved and the outcome of the case must be understood narrowly. As indicated in the case law, “This means a direct causal relationship, immediately affecting the situation of the judge, while an indirect, contingent or purely hypothetical relationship is not conclusive” (Supreme Court judgment of 27 October 2017, case no. IV CSK 730/16; Administrative Court in Białystok judgment of 14 November 2014, case no. I ACa 464/14). It should also be noted that, unlike a decision to recuse a judge upon application, a decision to exclude a judge by operation of law is declaratory (recognising disqualification that existed from the very beginning of the proceedings). This is significant, as participation in the proceedings by a judge disqualified by operation of law results in invalidity of the proceedings, and also constitutes grounds for reopening the proceedings on the grounds of invalidity. Because the procedural sanctions are so serious, the grounds for disqualifying a judge by operation of law should not raise ambiguity.
Disqualification of a judge upon application
As for the question whether a judge’s holding a mortgage denominated in Swiss francs raises reasonable doubts about his impartiality in a case seeking invalidation of a foreign currency mortgage agreement with the same bank, the answer would have to be, “It depends.”
There is a difference when a party seeks to disqualify a judge of one of the lower courts and when the party seeks disqualification of a judge of the Supreme Court of Poland (Supreme Court order of 13 May 2022, case no. II CSKP 989/22). One of the primary tasks of the Supreme Court is to unify the jurisprudence, i.e. to influence future rulings of the lower courts. Thus recusal orders are more often issued in the case of Supreme Court judges.
It is also relevant whether the judge independently draws attention to the risk of reasonable doubt regarding his own impartiality under Art. 51 of the Civil Procedure Code. Such notice is not binding on the court ruling on disqualification, but it is an argument for disqualification, especially when supported by further facts such as the judge’s negotiating with the bank or hiring an attorney to examine potential claims under the mortgage agreement. Nevertheless, each situation of potential recusal of a judge should be analysed on a case-by-case basis, as not all situations justifying disqualification in one case will provide such grounds in another.
Refusal to disqualify a judge should not be discouraging. It is easy to imagine a situation where a judge files a notice of potential lack of impartiality simply because of an unwillingness to hear the case. This in itself does not constitute grounds for recusal, and indeed recusal on such a basis is inadmissible.
It must be stressed that the Polish Constitution gives a citizen the basis for demanding a fair trial. Everyone has the right to have their case heard by an independent and impartial court (Constitution Art. 45(1)). Therefore, even if the judge referred to in an application is not, for some reason, disqualified from ruling on the case, he must be extremely diligent in maintaining impartiality.
There are two conclusions from our deliberations.
First, that a judge holds a mortgage denominated in Swiss francs does not constitute grounds for disqualification of the judge by operation of law (Art. 48 §1(1) of the Civil Procedure Code). In the case law, there is no dispute that if a judge has entered into a foreign currency mortgage agreement with one bank, there is no basis for excluding him from ruling by operation of law on the case of a loan denominated in Swiss francs issued by another bank. Even if it is the same bank, that does not require disqualification of the judge by operation of law (as the Supreme Court held in this year’s resolution).
Second, it will be possible to disqualify a judge upon application more often in the case of judges of the Supreme Court, due to their direct influence on shaping the jurisprudence.
Dominika Plewa, Dispute Resolution & Arbitration practice, Wardyński & Partners