Loan withdrawal in case of linked transaction: BGH ruling fails to materialize
The Bundesgerichtshof (BGH), Germany’s Federal Court of Justice, was supposed to rule on May 31 on withdrawing from a loan in the case of a so-called “verbundenes Geschäft” (linked transaction). This will no longer happen because the bank has withdrawn its appeal.
GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: Not for the first time, a ruling of Germany’s highest civil court, the Bundesgerichtshof, concerning withdrawal from a loan has failed to materialize. The BGH announced that the trial slated for May 31 has also been cancelled due to the bank withdrawing its appeal at short notice (Az.: XI ZR 511/15).
Having said that, this case differs from others: the loan was taken out to finance joining an investment company. As such, the case turned on whether it is also possible to rescind a linked transaction following a successful withdrawal.
In the instant case, the plaintiff wished to invest in a fund in 2004. Due to the fact that he was only able to finance half of the costs associated with becoming a member out of his own resources, he took out a loan for the other half. He then paid this off in full in 2010 and subsequently withdraw from the loan in 2014, claiming that the bank had made use of flawed guidance pertaining to the right of withdrawal and thus the withdrawal period had never commenced. He therefore brought a legal action for rescission of his capital investment linked to the loan plus compensation for use at a rate of five per cent above the base rate, pari passu with the transfer of the investment. At second instance, the Oberlandesgericht (OLG) Hamburg [Higher Regional Court of Hamburg] awarded him a portion of the desired amount as well as compensation for use at a rate of 1.3 per cent p.a. in exchange for ceding all rights arising from the investment. The bank has since withdrawn its appeal against this ruling.
The case demonstrates that in cases involving these kinds of linked transactions withdrawing from a loan is one way of potentially parting company with a disappointing capital investment. In order to withdraw from a loan, it is necessary for the bank to have used flawed guidance on the right of withdrawal. Lawyers who are experienced in the field of banking law can assess whether the conditions for loan withdrawal have been met. That being said, consumers should take note: the deadline for withdrawal in the case of real estate loans concluded between 2002 and 2010 is set to expire on June 21, 2016.