Province of Famagusta: Unprecedented court decision – Company freed from €850.000 loan

Unprecedented court decision in the province of Famagusta: A company was released from a loan of 850 thousand euros!

vghnj exclusive, Court

From a loan of approx €850.000 a company operating in the Famagusta District was exempted, as was the director of the company who signed as a guarantor. A decision which is considered unprecedented for its legal facts, since for the first time the abusive provisions of the banks were also applied to a company, while until now they only applied to natural persons.

Based on what unfolded in the trial that took place in Famagusta District Court, a company borrowed from the National Bank an amount of approximately one million Swiss Francs in 2007, with an interest rate of up to 6%. The current amount owed in euros, including interest, is estimated at approximately €850.000.

In Cyprus, there are laws that prohibit abusive clauses in loans and according to the instructions of the Central Bank, commercial banks when they provided loans to borrowers which were in foreign currency (as in this case in Swiss Franc), they should receive measures to protect and inform borrowers about the risks of exchange rate fluctuations. However, these laws apply only to natural persons and not to companies.

The borrowers' lawyers, the law firm Giorgos F. Pittatzis LLC, advanced the position that despite the fact that companies (legal entities) are legally exempt, banks nevertheless have an obligation to treat borrowers in good faith and that the circumstances under which the loan was contracted reveal that the bank acted in bad faith.

The President of the Court, Mr. Ilias Georgiou, vindicating the borrowers, stated the following:

Regarding the banks' obligations, he stated the following:

"Considering the above and judging that the bank's conduct was done in bad faith, it rejected the bank's claim for the balance of the loan made in Swiss Francs and fully discharged both the bank and the guarantor (director of the company)."

The Famagusta.News asked us from the Law Office of Pittatzis in Paralimni who represented the entitled borrowers to make statements regarding the above unprecedented case, but they themselves referred us to the text of the Court's decision.

525 15 Decision exclusive, Court