Cristina García Salazar
Its usual purpose is to serve as a hedge or protection against the effects that the evolution of the reference index (eg. Euribor) could have on the costs of a variable rate financing, a mortgage loan or a financial lease.
It is not until the end of 2006 and the beginning of 2007 when banks begin to commercialize swaps as a product of hedges, and they do so under the legal "excuse" of Law 36/2003 on economic reform measures that, in the scenario of continuous rate hikes in loans, recommend to the entities to inform their clients about the risk coverage instruments of the types they hold in their portfolio. That is why a product historically dedicated to large and multinational companies, begins to be marketed to SMEs and individuals.
At the time of contracting and the immediate future, according to the types agreed in the contracts, the results derived from these contracts used to be favorable to the clients. However, when the Euribor evolves and moves away from what was agreed in the contract (beginning of 2009), they become negative results for the client.
Obviously, complaints began to arise because, in the vast majority of cases, the entity had not informed about the risks involved in lowering interest rates, so the client signed the contract believing it was an insurance against rate hikes, but never understanding that it was an investment contract that involved risks.
Consequently, all claims are usually based on the nullity of the contract for vice in the consent. And, in this regard, the jurisprudence is very clear:
· There is error as a cause that invalidates consent when the will to sign the contract is carried out under a misrepresentation of reality.
· There must be requirements to understand that the error in the consent invalidates the effects of the contract:
- That it is essential: The error must fall on the substance or object of the contract. In other words, on the main reason for the hiring.
- That is excusable: Whether the client used due diligence at the time of contracting.
To appreciate the concurrence of these requirements, we must take into account, among other things, if the bank complied with the obligations imposed by the European Directive MiFID (Markets in Financial Instruments Directive), transposed to our order by Law 47/2007 (in force since December 2007) that modifies the Securities Market Law, and incorporates Art. 79 bis.
This regulation introduced mechanisms that ensure sufficient information to customers who contract financial products, prior to contracting. Through a prior evaluation of the client's profile, the entity evaluates the suitability for the contract offered. If, in the light of such evaluation, it is not convenient, the client should be warned.
And in this regard, the recent Sentence No. 222/2018 of the Plenary of the Civil Chamber of the Supreme Court (TS), dated April 17th, declares null and void several swap contracts despite the fact that the clients signed the express knowledge that the product was not convenient for their interests.
The TS raises with this doctrine the level of requirements to the banking at the time of correctly informing the clients of the characteristics and risks of complex financial products.
Specifically, to consider this duty fulfilled, the TS considers insufficient to justify that the client has been informed that the product is not convenient (through the "convenience test"). The "Suitability test" is also required, the bank has to prove that the client is aware of the real risks that the swap implies, so the consent -at the time of signing the contract- does not suffer from vice.
This additional information required by the Supreme Court, through the suitability test, is aimed at reporting on the financial situation, income, expenses and assets and investment objectives, expected duration, risk profile, purpose of the client, to recommend the services or instruments that best suit the client.