ECJ decision on Croatian loan agreements
In February 2019, the European Court of Justice ruled that Croatia could not retroactively nullify loan agreements that were valid when executed.
The ruling addressed Croatia’s 2017 legislation—the Act on Nullity of Loan Agreements with International Elements—which automatically invalidated loan agreements concluded by foreign lenders lacking proper Croatian financial services authorization. The problematic aspect involved the law’s retroactive application to agreements signed before the statute took effect.
The Legal Challenge
When Croatian borrowers sought court declarations nullifying their loans, a domestic court referred the matter to the ECJ, questioning whether the legislation violated the EU’s freedom to provide services within the internal market.
The Court’s Decision
The ECJ determined that Croatia discriminated against foreign lenders and infringed this fundamental EU freedom. Although Croatia argued the measure protected citizens and financial sector stability, “the court stated that Croatia had failed to provide convincing arguments” supporting these claims. The justices concluded the legislation exceeded what was reasonably necessary to achieve its stated objectives.
Ongoing Impact
Despite remaining formally in force, the ECJ judgment constrains how Croatian courts may apply this law going forward, effectively limiting its retroactive enforcement.