Estonia's top court discussed the claim brought by a client against Swedbank over the termination of a bank account and payment card agreement. The bank had justified the termination of the contract with the fact that the consumer was connected to companies the bank deemed to have a high money laundering risk.

While Viru County Court dismissed the client's claim, the second-tier Tartu Circuit Court ruled in their favor, prompting the bank to appeal the decision to the Supreme Court.

The Supreme Court's Civil Chamber agreed with the circuit court that the regular termination of a basic payment services contract was not permitted, due to which the client's action must be satisfied.

Only an extraordinary termination of a contract is possible, which a credit institution must substantially justify and to which the consumer is entitled to object, the top court ruled.

The basis of Wednesday's judgment was an action brought by plaintiff Jelena Hripunova against Swedbank, as the bank suspended the provision of basic payment services with the companies Ronfard OÜ and Logowest OÜ, of which Hripunova is a board member, stakeholder and, according to commercial register data, beneficiary.

In response to the action, the defendant, Swedbank, claimed that the activity of the high-risk companies connected to the plaintiff was not readily comprehensible and that on September 2, 2020, money was transferred from Ronfard OÜ to the plaintiff's account in the sum of €1,521,844.52, with which new settlements took place and which, in combination with other circumstances, caused an increase in the client's risk level.

The defendant likewise referenced the fact that the plaintiff has been negatively portrayed in the press in connection with the Magnitsky money laundering affair. An article published in daily Postimees notes that millions of euros were received by Ronfard OÜ and Logowest OÜ accounts from bank accounts directly linked to the Magnitsky money laundering affair.

The bank likewise referred to its obligation to conduct media monitoring and found that it can assess the risks associated with the plaintiff and make decisions based on identified risks, and thus the termination of the contract was therefore valid.

The Supreme Court chamber agreed with the circuit court's conclusion that the first-tier county court had no legal basis for assessing the defendant's notice of termination as an extraordinary termination, as in the course of proceedings, the defendant has relied solely on the regular termination of the contract.

In its judgment, the Supreme Court highlighted that banking services are essentially considered a basic need today. Without a bank account, it is difficult — if not downright impossible — to conduct many vital activities, including get paid or receive state support, pay utility bills and pay for various goods and services. This is why credit institutions are obligated by EU directive (2014/92/EU) and Estonia's Law of Obligations Act to offer consumers basic payment services.

As Estonia's Law of Obligations Act, unlike the EU directive, does not specify under what circumstances it is possible to terminate a basic payment services contract with a consumer, the chamber interpreted the law in accordance with the directive.

Accordingly, a credit institution has the right to unilaterally terminate a basic payment services contract only under exceptional circumstances — such as in the event of the violation of legislation concerning money laundering and terrorist financing or the prevention and investigation of crimes.

The directive even stresses that references to possible legislative violations should not be used by banks as a pretext for rejecting commercially less attractive customers. Therefore, a payment account contract with a consumer may only be terminated if the consumer's unlawful conduct has been duly established, not on the grounds that verification thereof is too burdensome or costly.

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