No flood of lawsuits regarding the instructions on the right of withdrawal after all?

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The German Federal Supreme Court’s reaction to the CJEU’s ruling of 26 March 2020

In my blog entry of 2 April 2020 ( ), we looked in detail at the spectacular decision of the Court of Justice of the European Union (hereinafter referred to as the “CJEU”) dated 26 March 2020 (hereinafter referred to as the “CJEU ruling”).

The question remained as to what the German Federal Supreme Court (hereinafter referred to as the “BGH”), and more particularly the IXth Senate of the BGH would do with the CJEU ruling.

The BGH has now positioned itself by handing down three decisions dated 31 March 2020 (cases no. XI ZR 299/19; XI ZR 581/18; XI ZR 198/19), all published at a later date.

By way of a reminder: CJEU ruling of 26 March 2020

In its ruling of 26 March 2020, the CJEU decided that a cascading reference is not sufficiently clear and concise enough as is required for instructions on the right of withdrawal and in order to calculate the withdrawal time period. If you would like to look at a more detailed description of the CJEU ruling, please look at

What was a cascading reference again? The withdrawal instructions under consideration in the CJEU ruling used the wording contained in the withdrawal instructions template. With regard to the withdrawal time period being triggered, the withdrawal instructions template contained a reference to Section 492 para. 2 of the German Civil Code, which in turn contained a reference to the mandatory information pursuant to Article 247 Sections 6 to 13 German Introductory Act to the Civil Code. This chain of references has been termed a cascading reference in the ongoing discussions.

There are two types of withdrawal instructions template that both contain, or have contained, a cascading reference:

  • a withdrawal instructions template for real estate consumer loan agreements; and
  • a withdrawal instructions template for general consumer loan agreements.

The BGH’s position to date

The BGH’s position to date was unambiguous:

The cascading reference in the revocation instructions were clear and concise enough to inform consumers.

The BGH’s reaction – the CJEU’s ruling is of no consequence for various reasons

The BGH’s aforementioned decisions concerned a judicial review of a ruling that no appeals were allowed.

The rulings had been made by the respective Higher Regional Court and each of them decided that appeals were inadmissible. The respective claimants applied for a judicial review of this decision.

Put simply, such an application for judicial review of an inadmissibility decision is justified if the underlying legal issues are of general importance and a decision from the BGH is required in order to develop the law in this area and ensure uniform case law.

As part of this application for judicial review, the BGH considered the CJEU ruling and passed down its judgment.

The interesting question was whether the BGH would review its previous position in light of the CJEU ruling.

The simple answer is: no.

It can be assumed that the BGH already had not seen any reason for putting the issue of cascading references before the CJEU. In its reasons, the BGH draws a distinction between the withdrawal instructions template for real estate consumer loans and the withdrawal instructions template for general consumer loans.

Real estate consumer loans (decisions with case no.: XI ZR 299/19; XI ZR 581/18)

With respect to real estate consumer loans, the BGH’s reasoning is quite simple but effective. It argues that the CJEU ruling does not apply to real estate consumer loan agreements as the cascading reference in real estate consumer loan agreements is not in contravention of any European law and therefore the CJEU ruling is not binding in this regard.

This may seem surprising at first and exposes a contradiction between the CJEU and the BGH that is difficult to reconcile.

The CJEU decides on the interpretation of European law, and in the case under consideration on the interpretation of the consumer credit directive – more precisely, on Art. 10 para. 2 letter p of Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC (OJ 2008, L 133, p. 66, corrected in OJ 2009, L 207, p. 14, OJ 2010, L 199, p. 40, and OJ 2011, L 234, p. 46) (hereinafter referred to as the “Consumer Credit Directive”).

This article in the Consumer Credit Directive stipulates the basic principle that the withdrawal instructions have to be clear and concise.

The Consumer Credit Directive has limited application and explicitly excludes real estate consumer loan agreements.

In its decision, the CJEU set out that it is also responsible for the interpretation of national law to the extent that European law is applicable on the basis of a reference thereto in the relevant national legal provision. The CJEU found that it was also the responsible body in this case, in order to ensure a uniform application and interpretation of European law.

In the BGH’s view, withdrawal instructions contained in real estate consumer loan agreements solely concern national law and do not affect the interpretation of European law. It therefore follows that the CJEU is not responsible. The German legislator did not intend to extend the provisions contained in the Consumer Credit Directive to real estate consumer loans (in which case the CJEU would be responsible) but even before the Consumer Credit Directive came into force, a similar provision had applied under German law and the German legislator had simply combined the provisions. The German legislator did not refer to the Consumer Credit Directive but introduced a new provision with the same content, independent of the Consumer Credit Directive.

In light of this, the BGH found the CJEU ruling of no consequence for the matter at hand, despite the CJEU having found it was responsible.

General consumer loans (Decision with case no.: XI ZR 198/19)

With respect to general consumer loan agreements, the BGH’s arguments are more complex but the result is the same. In the BGH’s view, the CJEU is responsible for the assessment whether cascading references are admissible in general consumer loan agreements or not. Cascading references are not permitted for general consumer loan agreements. However, according to the BGH, this does not mean that borrowers can withdraw from their loan agreement.

The German legislator imposed a legal fiction regarding the withdrawal instructions templates. This means that anyone using the withdrawal instructions template can place their trust therein to the extent that they are fulfilling their legal obligations regarding the withdrawal instructions. The CJEU cannot declare this deemed legality to be invalid. The CJEU can interpret national law in accordance with European law but any interpretation in line with European law cannot turn the intention of a national legislator into the opposite direction. In this matter, the German legislator unequivocally provided this legal fiction. This means that the German legislator violates European law with its withdrawal instructions templates which contain an invalid cascading reference. However, this has no direct effect on the legal relationship between lender and borrower. The revocation instructions therefore remain valid. The borrower only (theoretically) has the possibility to claim that the Federal Republic of Germany has a state liability in this respect but the chances of success are limited.

So what remains of the CJEU ruling? Which questions have been left open?

As things stand now, not much remains. In the BGH’s view the legal question regarding cascading references has been decided.

The only open issue is the following case: If there is a general consumer loan agreement and the lender used a cascading reference in its withdrawal instructions but it cannot rely on the legal fiction provided by the withdrawal instructions template. This is the case if the withdrawal instructions differ from those contained in the withdrawal instructions template. In this case, it stands to reason that the withdrawal instructions would be invalid and the loan agreement could be withdrawn.

Furthermore, there is a possibility that in future another German court puts the issue of a cascading reference before the CJEU, irritating as this may be for the BGH, and thereby force the CJEU to publish its position on the views of the BGH.

It remains to be seen how the CJEU will react to the fact that the BGH does not consider the CJEU to be responsible for the interpretation of real estate consumer loan agreements despite the CJEU finding differently.


Cover picture: Copyright © Adobe Stock /vetre

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