The Supreme Court delivered today its judgment in the so-called variable interest rate case, in which the legality and fairness of terms in a loan agreement for the purchase of real estate were in dispute.
In its reasoning, the Supreme Court noted that the clause in question differed in important respects from the clause examined in the Court’s judgment of 14 October 2025 in the Íslandsbanki case. That earlier case was also resolved on the basis of the Act on Mortgages Credit, while the Arion Bank case concerned older legislation, the Consumer Loans Act. The Court considered it significant that Arion Bank’s interest rate adjustment conditions were exhaustively listed in the terms of the disputed loan, and that the Consumer Loans Act did not impose stricter requirements regarding the description of procedures for determining interest rates than those set out in the terms of the loan. The Court further noted that the terms were drafted in clear and comprehensible language, with explanations for each of the conditions for interest rate adjustments.
In its discussion of whether the clause was unfair, the Court stated that there was no indication that Arion Bank had taken advantage of its stronger bargaining position when the agreement was concluded, nor that the balance of rights and obligations between the parties had been unduly disrupted. The Court also held that Article 36(c) of the Contracts Act did not require that the borrower be able to fully foresee the exact interest rate that would apply to a variable rate loan, provided that the requirements for the legality of the terms were otherwise met. The Court also took into account that borrowers were afforded certain countermeasures against unpredictability, such as a 30-day notice period for interest-rate changes.
On behalf of Arion Bank, the case was pleaded by Hjördís Halldórsdóttir, Supreme Court Attorney and partner at LOGOS. Assisting her was Guðjón Þór Jósefsson, associate. LOGOS thanks Arion Bank for the excellent cooperation in the case and, not least, for choosing LOGOS to safeguard its interests.