The OGH has rejected the revision of the judgment in the “Model Proceedings of the City Association” of the city of Steyr against KA Finanz AG from the lower court. This means that the judgment of the Court of Appeal is now final and the proceedings are closed (as is well known, parts of the judgment have already become final in the first instance). Despite the rejection, helpful conclusions can be drawn from the reasoning of the OGH. The focus of the referral is on the question of whether the lender (the bank) has to make payments to the borrower (the municipality) in the event of “real negative interest”. As a result, it is again confirmed that the interest rate on a loan cannot generally fall below 0%.
It was not directly stated whether the negative indicator should be deducted from the premium at least up to the value “0”. The reason for this is that the city of Steyr has already received this “overpaid interest” from the first court. Conversely, this interpretation is permitted, which is confirmed by well-known lawyers. Nevertheless, this has to be assessed in individual cases. Any process risk should be “manageable” depending on the initial situation. In retrospect, I would like to make the comment that the initial situation in the present case may not have been ideal for a model process.
In summary, the reasoning of the OGH is the first helpful explanation of municipal loan agreements without an interest rate floor. However, banks will certainly use the individual contractual stipulations of the city of Steyr to refer to the lack of comparability of the case and thus to future OGH judgments (there is currently no OGH judgment on contracts without an interest rate floor). It is also questionable whether and when OGH judgments can be expected in the future for contracts without an interest rate floor. This means that waivers of limitation can also become worthless if the banks are not prepared to negotiate.
Despite the continued lack of clarity, we see the chances of individual solutions for contracts with no lower interest rate as positive. We will therefore continue to pursue the previous path, also as part of our ongoing financing controlling, and bring about individual, partnership-based solutions that also take into account the future tangents; Municipalities and banks, a team based on partnership, but at eye level.
In the case of loan agreements with an interest rate floor, we do not currently see the starting situation for municipalities as very promising, not least on the basis of the OGH judgment from 2019 (cf. 1Ob75 / 19i). Here we expect further OGH judgments and hopefully final clarity soon. Nevertheless, accommodating solutions can also be found here.
Information status June 15, 2020