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Banking sector, Blogs, Macroeconomic policies

Bank behavior comes under scrutiny in first economic and social rights individual complaint before UN body

The Committee on Economic Social and Cultural Rights (“the Committee”), deciding on the first case filed before it using a novel individual complaint mechanism, took the opportunity to address the behavior of a private bank. The body mandated Spain to reform aspects of its legislation that allowed banking entities to get away with abuses in mortgage proceedings thus violating the right to housing consecrated by the International Covenant on Economic, Social and Cultural Rights (ICESCR).

In 2008, States adopted an Optional Protocol to the International Covenant on Economic, Social and Cultural Rights which, among other things, created a remedy allowing individuals to bring a complain before the respective Treaty –monitoring body (the Committee on Economic Social and Cultural Rights).

The adoption and entry into force (later in 2013) of such instrument falls was part, and a crucial hallmark, of the struggle for the progressive development of international human rights law and the remedies available for human rights infringement.

Its special nature as an achievement is due to the fact that it helped end years of unwarranted differentiation with its twin instrument on Civil and Political Rights, for which an Optional Protocol allowing individual complaints existed since 1966.

The case in question that the Committee decided concerned a person who had purchased a house taking a mortgage loan from a bank in 2007. Due to her failure to make several payments, the lending institution called in the full amount of the loan and initiated a special mortgage enforcement procedure in a trial court in Madrid. Due to deficiencies in the notification procedure, the victim only became aware of the existence of the proceedings several months later, when the court’s agent served notice of the auction of her property.

The victim alleged that learning of the proceedings this late prevented her from effective access to the judicial system. Therefore she had been unable to exercise her right of defense in a proceeding where the abusive nature of the contract clauses (including the way the interests were calculated by the bank) could be questioned. The legislation regulating mortgage executions came also under question in the case as the victim alleged it did not adequately protect the right to housing.

The victim exhausted domestic remedies, which proved unable to provide adequate remedy. An appeal filed against the court’s order was dismissed. Subsequently the victim filed a constitutional writ of amparo before the Constitutional Tribunal in which she argued violations of the rights of defense and to an effective remedy. This Tribunal denied it on the basis that there was no violation of a right subject to protection via amparo.

Another novelty feature of the process created by the Optional Protocol that was put in practice in this complaint was the right of third parties to file observations on the case. In use of this prerogative, the International Network on Economic, Social and Cultural Rights, ESCR-Net sought and obtained recognition as a third party in the proceedings.

In its intervention ESCR-Net referred to the context of widespread recession and unemployment crisis in which mortgage executions were taking place in Spain– Spain was and is a country especially hard hit by the global financial crisis of 2008-09, leading to allegedly more than 400,000 mortgage executions since that time to the filing of the complaint.

In this context, it argued that the evictions should only proceed in exceptional circumstances, after evaluating all other possible ways to repay the debt, ensuring full exercise of all judicial guarantees and that those who were being evicted would not be left exposed to some other serious violations of human rights. It also stated that the legislation’s bias benefitted the interests of financial entities at the expense of the interests of affected right holders.

The Committee’s Decision requested Spain to provide the victim with an effective remedy and to ensure that its legislation that regulates foreclosure mortgage proceedings and its application comply with the obligations set forth in the Covenant.

In particular, it said Spain must adopt legislative measures to ensure that the rules concerning mortgage enforcement proceedings contain appropriate requirements and procedures to be followed before going ahead with the auctioning of a dwelling, or with an eviction, in accordance with the rights enshrined in the Covenant.

The way in which the complaint and its ultimate resolution can help put a limit to abuses by financial firms illustrates the potential opened up by the Committee’s Optional Protocol.

Click here to read more on this case, including the full text of the Committee’s decision.

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June 2017
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