Euribor mortgages 2005-2008: are they void?

The manipulation of the Euribor and the consequences on the mortgage.

The order of the Court of Cassation n. had a great resonance. 34889/2023. The Court – after the European Commission ascertained the manipulation of the Euribor rate by some banks – declared the mortgages whose interest was linked to the fluctuations of the Euribor null and void. These are mortgages subscribed in a specific time range: between 2005 and 2008. Since then the question arises whether the 2005-2008 Euribor mortgages are null and void and whether you can get refunds.

The issue has become current again given that the Court of Cassation itself, with sentence no. 12007/2024, expressed its opinion again on the topic. Let’s try to understand what should be done by those who find themselves in the hands of a mortgage contract of this type or have already paid it off (which is why they may want to take action against the credit institution for the repayment of at least the interest).

The nullity of Euribor mortgages and the Supreme Court ruling

On 4 December 2013, the EU Commission ascertained that, among some European banks, there had been a cartel aimed at manipulate the Euribor rate. Not an agreement consecrated with a written document, but a de facto behavior which, as it was aimed at distorting competition, still constituted an agreement prohibited by law. This had led to an increase in the price of all those mortgages whose interest was linked to the fluctuations of the Euribor.

The EU Commission’s investigation took place between 2011 and 2013, but the banking cartel was detected between 29 September 2005 and 30 May 2008.

Which banks manipulated the Euribor?

The investigation focused in particular on four banks:

• Barclays Bank;
• Deutsche Bank;
• Societe Generale;
• Royal Bank of Scotland.

However, all the other banks that signed Euribor mortgage contracts with their customers in the period we have just indicated benefited from this agreement.

The cartel, created with the aim of obtaining illicit advantages in trading operations or of presenting a better financial condition of the banks than the real one, had ended up also influencing the actual cost of credit to the detriment of savers throughout Europe.

Is the Euribor mortgage void?

With sentence no. 34889/2023, the Supreme Court declared void not the contract itself but the interest clause. Which means that the borrower remains obliged to pay the principal, but not the interest. In essence, the financing becomes “free of charge”, with consequent right to reimbursement of what has already been paid previously as interest.

It is worth reporting below

specific words of the sentence in question:

«Given the nullity of the manipulative agreement on the Euribor rate ascertained by the European Commission with a decision of 4 December 2013, ‘downstream’ contracts which refer to the manipulated rate must be considered null and void, making the aforementioned decision a prime proof of an illicit agreement , in which it is irrelevant that the contracting banking institution did not take part».

Precisely on the basis of this, the Supreme Court established the nullity of the interest rate applied to mortgages based on the manipulated Euribor, imposing a new rate calculation. The reimbursement amount would correspond to the difference between the rate applied and a replacement rate, determined according to article 117 of the Consolidated Banking Act and the BOT rate relating to the period in question.

The new ruling from the Supreme Court on Euribor mortgages

As we said at the beginning, the Court of Cassation has once again ruled on the validity of the “Euribor clause” with sentence no. 12007/2024.

The ruling differs from the previous one of 2023. In order – writes the Court – to be able to consider that in a contract (“downstream” of the agreement), “application” of an illicit agreement restrictive of competition existing “upstream” is made, it is necessary that one of the contracting parties (i.e. the bank) is aware of the existence of that agreement and intends to make use of the result thereof.

Therefore, if the borrower intends to have the Euribor interest declared null and void, he must demonstrate in court that the lending bank, at the time of conclusion of the contract, was either directly participant in that agreement or at least, aware of existence of an agreement between other banks to alter the value of the Euribor or of an effective non-negotiation practice in this sense and has intended to make use of the results of this. A particularly difficult if not almost impossible test given that, as mentioned, the cartel was not enshrined in a written agreement but was a “tacit” behavior that some banks voluntarily adopted in order to obtain greater profits.

If it is true that between 2005 and 2008 some European banks pursued an illegal practice to manipulate the value of the Euribor rate – continues the Court – so that this has repercussions on the individual contract in terms of absolute nullity, it is necessary to demonstrate that the bank was at least aware of the alteration of the parameter and its effects and intends to make use of it.

Otherwise, it can only be configured partial nullity. In this case it will be necessary to evaluate on a case-by-case basis:

• whether the manipulative practices did not remain at the level of a mere attempt;
• whether and for what time and to what extent this alteration had an impact;
• what are the consequences of the possible partial nullity of the relevant clauses on the overall negotiation structure and on the possibility of automatic replacement – and in what terms – with minimal provisions of the law.

In short, an uphill road for bank customers but not yet impossible, also because the ruling in question does not save the Euribor clause from nullity but merely imposes a further burden of proof on the citizen, then leaving it to the final judge the assessment of the impact of the cartel on the specific contract brought to its attention.

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