In what could become a landmark ruling, Croatia's Supreme Court decided that local banks have "breached the collective interests and rights" of holders of loans originally pegged to the Swiss franc, the court said on Tuesday.

The court reported that it had refused a motion by the defendant for a review of a case in which the Croatian Consumer Protection Association sued eight domestic banks to protect their collective interests and rights.

Court spokesman Zeljko Pajalic said that the court’s ruling contained the conclusion that “in the period specified the banks breached the collective interests and rights of consumers-loan holders by concluding loan contracts containing unfair and invalid contractual regulations under which the loan principal was tied to the Swiss franc (currency clause), without negotiating the matter with individual loan holders.”

“The contested ruling of the second-instance court has been partly quashed (without ordering a retrial) in the part in which the banks were ordered to suspend the procedure in question as a final ruling on the matter had already been handed down.”

In individual lawsuits physical and legal entities may refer to the plaintiff’s motions that were upheld in this case, and the conclusions are binding for courts in dealing with individual lawsuits, the Supreme Court said.

Association of loan holders said on Tuesday that the ruling clears the way to individual lawsuits, so that some 125,000 loan holders could seek court verdicts against the problem of ballooning loan payments.

Thousands of loans, paid out in local currency but pegged to Swiss franc exchange rate, had been issued to Croatians on the local market in the period from 2003 to 2008. Although they were used for a variety of purposes, most of them were housing loans.

After the Swiss franc exchange rate skyrocketed in the following years, many loan holders were unable to keep up with their monthly payments forcing them into bankruptcy or poverty. After an association of loan holders was formed eight years ago, the issue turned into a marathon court fight pitching loan holders against banks in local courts.