The General Board of the Supreme Court, from its own perspective, has resolved one of the procedural disputes that have arisen between courts, judicial and registration authorities by issuing the Binding Precedent No. 794.
However, this Binding Precedent has several ambiguities on the one hand, and on the other hand has created numerous problems for banks and many challenges for third-party beneficiaries and the courts.The sharp and unusual increase in borrowers' claims against banks (even for settled loans), losses incurred by third parties and those in good faith caused by this decision, the perplexity of the courts, and numerous inquiries addressed to the Legal Department of the Judiciary are among the negative effects of this Binding Precedent.The Binding Precedent No. 794 has declared “the condition contained in the contract for granting banking facilities regarding interest in excess of the aforementioned approvals” to be “invalid”.
This clarification, on the one hand, is purely a substantive matter, and therefore, on procedural grounds, the court cannot, on its own initiative, declare the stipulated interest as void unless the beneficiary initiates an appropriate lawsuit and proves his claim, since the presumption is the validity of the banking contract
including the stipulated interest.On the other hand, the invalidity of the stipulated interest should be considered subject to Article 232, Paragraph 3 of the Civil Code, not its Article 233. In fact, even if this stipulation is invalid, it is only invalid to the extent that it is contrary to imperative laws and would not invalidate the main contract or the mortgage contract. Whenever imperative law is silent or ambiguous, the presumption is the validity of the stipulation. However, the function of the registration departments in arbitrarily calculating interest and late payment related to the bank, even if it is based on a certain bylaw or approval of a specific authority, is against the law and against the agreement of the parties and needs to be corrected through a specific mechanism (including judicial precedent).This article examines the challenges of the binding precedent related to banking interest from the perspective of banks and financial and credit institutions, and among other things, it addresses the issue that the issuance of this decision has, from many aspects, opened the door to abuse for borrowers who have benefited from bank facilities.This article also proves that the issuance of such binding precedents practically ties the hands of the courts to issue fair judgments (taking into account the circumstances of each case in particular) and basically, in such cases where each case and each instance has its own specific conditions, the issuance of a binding precedent has no logical and academic basis.