Federal Court of Justice on premium-aided saving contracts: beginning of limitation period does not depend on knowledge of the law

In its judgment of 9 July 2024 (Case No. XI ZR 44/23), the German Federal Court of Justice (FCJ) ruled for the first time on the relevance of a specific reference interest rate when performing supplementary interpretation of premium-aided saving contracts. In addition, the FCJ clarified – taking into account EU law – that the beginning of the knowledge-based limitation period (section 199(1) of the German Civil Code (Bürgerliches Gesetzbuch, BGB)) does not depend on legal knowledge of the invalidity of a clause.

I. Background

For some time now, the legal consequences of invalid interest rate adjustment clauses in premium-aided saving contracts (Prämiensparverträge) have been the subject of dispute before courts.

The disputes revolve on the one hand around the choice of the correct reference interest rate as part of the relevant interest rate adjustment parameters which are to be determined by the court (by performing what is know as “supplementary contract interpretation” (ergänzende Vertragsauslegung)), since the invalidity of the clause caused a gap in the contract. On the other hand, there have been controversies about whether and how to take into account the 25 January 2024 judgment by the Court of Justice of the European Union (CJEU) in Cases C-810/21 to C-813/21 (Caixabank). There, the CJEU decided that under Directive 93/13/EEC on unfair consumer contracts the limitation period may only start to run if the consumer has knowledge of the invalidity of the clause in question. Contrary to this, the wording of section 199(1)(2) of the German Civil Code stipulates that the standard three-year knowledge based limitation period only relates to the knowledge of facts and does not require the consumer to have legal knowledge (see on the CJEU ruling and its possible implications in Noerr Insights of 26 January 2024). As a result, there were strong arguments in the case at hand that a consumer would not have to be aware of the invalidity of the interest rate adjustment clause and would not have to have knowledge of a legally binding decision on the parameters of the interest rate adjustment.

II. Decision of the Federal Court of Justice

1. Supplementary contractual interpretation and reference interest rate

The FCJ confirms the decision by a higher regional court of appeals which (supported by a court-appointed expert) found that without recurring to the moving average method (paras. 25–27) the reference interest rate of the current yields for listed federal securities with a remaining term of more than eight to 15 years (former interest rate series WU9554) is to be used to calculate the interest (paras. 28–34) (judgment available in German here).

This is the first time that the FCJ has ruled on a specific reference interest rate. The decisive factor for confirming the interest rate series endorsed by the defendant savings bank was that it did not contain a risk premium and thus took into account the fact that the typical saver did not show any willingness to take risks with the savings product in question. Quite surprisingly, however, the FCJ calls on lower courts take into account interest rate series that did not yet exist at the time the contract was entered into when engaging in the required supplementary contractual interpretation (para. 36).

2. Limitation

With regard to the questions raised regarding the requirements for a start of the limitation period, the FCJ confirms that the limitation period might not start only in established narrow scenarios such as an extremely unclear legal situation or contradictory court rulings. It points out that apart from this, as a general rule, the start of the limitation period only depends on knowledge of the facts underpinning the substantive claim. Based on this general rule, the FCJ decided that in the case at hand neither the knowledge of invalidity of the interest adjustment clause nor the knowledge of the interest adjustment parameters determined was relevant for the start of the limitation period (paras. 41–42).

According to the FCJ, interpreted in such a way, section 199(1)(2) of the German Civil Code does not contradict EU law in general, Directive 93/13/EEC or in particular the relevant CJEU rulings (para. 45). Insofar as the 9th Chamber of the CJEU required legal knowledge in the above-mentioned judgment of 25 January 2024 (Caixabank), the FCJ clarifies that an interpretation in conformity with the Directive in the sense that a “legal assessment” of the facts is required for the start of the limitation period is not possible (para. 46). This is because under German law, interpreting domestic provisions in accordance with an EU directive is not possible if this leads to a result that is contrary to the clear wording and the clear legislative intent behind them. In the case at hand, the FCJ considered the wording and purpose of section 199(1)(2) of the German Civil Code to be clear and in conflict with the CJEU’s judgment. It saw the main reason for this as being that the legislature deliberately linked this start of the limitation period solely to knowledge of the facts and because it is up to the claimant to bring a case in order to clarify what the law is (para. 47).

III. Evaluation and consequences for the German law on limitation

By confirming the specific reference interest rate, the FCJ provides the courts for the first time with specific indications of an appropriate reference interest rate, although references to interest rate series published only after the contract has been entered into are likely to give rise to further discussions.

The FCJ also convincingly rejected an interpretation of section 199(1)(2) of the German Civil Code in line with Directive 93/13/EEC. This also clarifies for similar cases that the general decision of the German legislature in favour of a limitation period starting when the claimant has knowledge of the facts underpinning the claim is respected and that the legislative intention to create legal stability and legal certainty cannot be undermined by an interpretation based on Directive 93/13/EEC. In view of developments observed in the past, however, it would not be surprising if the compatibility of section 199(1)(2) of the German Civil Code with Directive 93/13/EEC were to be the subject of a reference for a preliminary ruling to the CJEU in the near future. In any case, it will be interesting to see whether and how the German legislature will react to the FCJ’s judgment.