Chamber: Establishing Extra-Judicial Settlement Unit for Financial Disputes Not Essential

The state wishes to establish at the Financial Supervision Authority a unit that would settle disputes related to financial services extra-judicially. Legal entities and natural persons who use financial services could turn to this unit to settle their disputes with the providers of financial services. According to the draft act, the decisions of the unit would be legally binding for the parties, i.e. subject to performance according to the execution proceedings. According to the plan, the new unit would start on 1 June 2023.

With the establishing of the unit for the settlement of financial disputes, the state wishes to ensure an option for faster and simpler settlement of disputes with providers of financial services for as many clients of financial services as possible. 

Establishing a unit for the settlement of financial disputes is not necessary
In the Chamber’s opinion, establishing such unit for extra-judicial settlement of financial disputes is not essential, because already now, financial disputes between entrepreneurs can be settled in court, through arbitration, but also through the conciliation procedure. For example, customers who are natural persons, can turn to the consumer disputes committee if they have any disputes with the providers of financial services. In the insurance sector, there is a body for insurance conciliation as well as a conciliation body for motor third party liability insurance, which perform their role in extra-judicial settlement of disputes well, and there is no need for an additional unit for extra-judicial settlement of disputes. 

The members of the Chamber have not given feedback that there are great problems with the settlement of financial disputes and there is a need for a unit for extra-judicial settlement of disputes to solve the problem. Although, there are members of the Chamber who do support the establishment of the new unit, the Chamber finds that there is no broader need for such body. 

Independence of the dispute settlement unit from the Financial Supervision Authority is questionable
Financing of the activities of the unit would come from the budget of the Financial Supervision Authority and the costs would mainly be covered from the supervision fees of the subjects of financial supervision. The Chamber is against such financing model, because that does not ensure cost-based and transparent financing. Additionally, companies are worried that covering the costs of the unit from the supervision fees would bring along increasing of the supervision fees. 

Furthermore, it is seriously concerning who independence and separation from the Financial Supervision Authority would be achieved in practice when the independence of the unit is regulated not by the law but with the internal rules of the Financial Supervision Authority. Internal rules are not available for the public and creating independence in this manner does not seem trustworthy. 

Entrepreneurs see here a risk for the principle of separation of powers and a potential for the risk of conflict of interests if the position of the commissioner for financial disputes is established in the manner that is foreseen in the draft act, because on the one hand, the Financial Supervision Authority should in that case be an unbiased settler of disputes and on the other hand is the body of supervision over the punisher of the party to the dispute. 

Decisions should not be binding
The draft act foresees that the decision made solely by the commissioner of financial disputes would be binding for the parties and considered an execution document in the execution proceedings. In the opinion of the Chamber, additional analysis should be made if the planned solution for the unit is in line with the Constitution, especially with Article 146 of the Constitution, according to which only courts can administer justice. Subsequently, the Chamber made a proposal to not to include in the draft act that the decision of the commissioner of financial disputes would be binding and that the decision would be considered an execution document.

The plan for establishing a unit for extra-judicial settlement of financial disputes is available HERE.