Act on Consumer Arbitration

For several months (since January 1, 2015) a new regulation of arbitration in consumer disputes, based on Act No. 335/2014 Coll. on consumer arbitration, applies in theSlovakRepublic. The Act is a reaction to certain issues, concerning the weaker position of consumers, that in the past have been addressed by the review of the material enforceability of arbitration awards in the course of execution proceedings and the subsequent refusal to grant authorization to carry out the execution, that were allowed by judicial practice. As to its content, the Act in question is based in a substantial part on case law of the Court of Justice of the European Union and the Directive 2013/11/EU on Alternative Consumer Dispute Resolution. The Act applies to disputes between suppliers and consumers arising from a consumer contract or related to it, as to the definition of these entities the Civil Code applies. The most fundamental mechanisms of legal regulation, contained in the Act, include the following.

Arbitrability

In consumer arbitration proceedings under the Act only consumer disputes, regarding which a settlement agreement can be concluded, may be decided. The subject of the consumer arbitration can be also disputes regarding the determination of the existence of a right, but only if the plaintiff is the consumer. The Act defines arbitrability also negatively, when it states that in consumer arbitration no dispute about creation, modification or termination of property rights and other rights in rem, no disputes on civil status, no disputes relating to execution and no disputes arising in the course of or related to the bankruptcy and restructuring proceedings can be decided.

Consumer arbitration agreement

Contrary to the general regulation of arbitration, in consumer arbitration, the competence of the arbitration court may be based exclusively on a stand-alone arbitration agreement and not on an arbitration clause included in the consumer contract. A consumer arbitration agreement is an agreement between a supplier and a consumer that the consumer disputes will be decided by the consumer arbitration court registered on the list maintained by the Ministry of Justice, which arbitration court is also specified in the consumer arbitration agreement.

A consumer arbitration agreement must be in writing, separated, as to content and form, from the consumer contract and shall not include arrangements which are not related to consumer arbitration. The written form of consumer arbitration agreement is deemed to be complied with even if it has been concluded by electronic means which enable capture of content and identification of the contracting parties that concluded consumer arbitration agreement. The Act stipulates the essentials of the consumer arbitration agreement both positively and also negatively.

The mandatory requirements include (i) identification of the Parties to the extent of the business name, registered office and identification number of the supplier and the name, surname and the domicile of the consumer, (ii) identification of a consumer contract or consumer contracts, disputes resulting from which are covered by the consumer arbitration agreement (iii) identification of the permanent arbitration court by its name and registered office, (iv) website of the permanent arbitration court, where the rules of procedure of the permanent arbitration court, as well as current identification data and information and address for electronic communications are published and (v) instructions according to the template forming an annex of the Act, which contains the characteristics and course of the arbitration proceedings.

Among the statutory prohibitions relating to the conclusion of a consumer arbitration agreement is the condition that (i) consumer arbitration agreement must not include an agreement on the person of a particular arbiter and that (ii) the conclusion of a consumer contract must not be conditioned on the conclusion of a consumer arbitration agreement.

In defining the consequences of invalidity, the Act provides that if a consumer contract is null and void, then the related consumer arbitration agreement is null and void if it is covered by the ground for nullity of the consumer contract. If the contracting party withdraws from a consumer contract or otherwise terminates it, such withdrawal does not affect the consumer arbitration agreement, unless the parties agree otherwise. The Act also sets out the obligation of the supplier, who repeatedly concludes with consumers a consumer arbitration agreement or offers its conclusion, to inform the consumer on his website and in paper form in the premises where he concludes consumer contracts and before the conclusion of a consumer arbitration agreement, of the instructions in the scope prescribed by law, which are attached to the consumer arbitration agreement.

Possibility for consumers to exercise their rights before a general court

Differently from the general regulation of arbitration, in consumer arbitration the arbitration agreement does not restrict the consumer's right to apply to a general court. The consumer, despite the conclusion of a consumer arbitration agreement may exercise his rights by bringing actions in court and the contractor or his legal successor can not validly object to the lack of jurisdiction of the court, unless the matter previously become subject to consumer arbitration. It is considered to be initiated at the moment of delivery of the application of the initiation of the proceedings to the consumer. This provision shall not apply to the supplier who may, in case of the existence of an arbitration agreement, apply exclusively to the arbitration court.

Control of activities of arbiters and arbitration courts

The Act foresees the keeping of a list of arbiters and a list of permanent arbitration courts by the Ministry of Justice. The regulation defines the necessary competence of the arbiter for inclusion in the list of arbiters, the competence for the performance of the function of the arbiter an it further defines the examination of professional competence of the arbiter and deals with further training of arbiters. Also defined are the power to issue the authorization for the founder of the permanent arbitration court, the requirements imposed on the founder and the essentials of the statute and rules of procedure of the permanent arbitration court. Currently, according to a publicly available list maintained by the Ministry of Justice, 8 permanent consumer arbitration courts and 52 arbiters carry out activities inSlovakia. The Act also regulates other informing obligations of permanent arbitration courts. The Act gives the Ministry of Justice the power to investigate complaints against the practice of arbiters, and to draw them to disciplinary liability.

Some specifics of consumer arbitration proceedings

The core of the procedural protection of consumer rights in arbitration proceedings is based on the philosophy of protecting the weaker party and is strongly reflected (i) in the definition of applicable law, (ii) in the prohibition of the charging of money for a procedural act of the consumer, (iii) in the obligation of the permanent arbitration courts to investigate unfair contract terms or (iv) in the prohibition to issue an interim measure against a consumer or a decision in summary proceedings. With special importance it is further stipulated that an arbitration court is required, of its own motion, to examine whether the enforcement of claims is not based on unfair contract terms or contract arrangements, which are contrary to the provisions of generally binding legal regulation regarding protection of consumer rights. The permanent arbitration court is also obliged to take into account other grounds of invalidity of a legal act, which the court would reflect of its own motion. In the context of the fact-gathering process a more favorable treatment to the consumer applies, which is expressed in the obligation of any person to provide documents or other evidence or provide information when this is in the interest of protecting the rights of the consumer and also the obligation of the other party to provide any evidence that is not at the disposal of the consumer and which may be of benefit to the evidentiary situation.

Action for annulment of the arbitration award

The means of review of a consumer arbitration award is, similarly to the general regulation of arbitration, the action for annulment of an arbitration award that can be filed with a general court. The reasons for revocation include, inter alia, some reasons specifically provided for consumer arbitration, which allow, differently from the general regulation of arbitration, also for factual and substantive review of an arbitration award. Particularly in cases (i) when the facts of the case were not properly established because the permanent arbitration court wrongly evaluated the submitted evidence, it did not carry out the proposed evidence and it did not allow the consumer to submit evidence, and such error could have affected the outcome of the case, (ii) when the arbitration award obliges a party to the consumer arbitration proceedings to provide performance which by its nature is objectively impossible, illegal or contrary to good morals, or (iii) when the arbitration award is based on an incorrect legal assessment. The period for filing the action for annulment of the arbitral award is established to be three months from its receipt by the respective party. This period may be extended in the event of the filing of an application to carry out the execution, if such a way, that the party to the consumer arbitration is able to file the respective action within the period for filing of the objections to the execution. The consumer has the right to bring the action for annulment of the arbitration award in a prepared template forming an annex of the Act.

Some related changes of the Execution Code

The Act, from its effectiveness, explicitly introduces the obligation of the execution court, before issuing the authorization to carry out the execution on the basis of an arbitration award issued in a consumer dispute, to examine apart from the compliance of the application for the grant of authorization to carry out the execution and the petition to carry out the execution with the law, also whether the consumer arbitration agreement meets the conditions laid down by legal regulation, whether the arbitration award in a consumer dispute was issued by an arbiter, who was at the time of the consumer arbitration on the list of arbiters eligible to decide consumer disputes, and before the permanent arbitration court, which at the time the consumer arbitration was authorized to decide consumer disputes and whether the arbitration award is enforceable. If the court concludes that any of the above mentioned conditions failed to be met, the execution court refuses the application for granting of the authorization.

A new reason for the termination of execution is introduced, which is based on the fact that the enforcement of an execution title would be contrary to public order. The notion of public order, according to the explanatory memorandum, contains all relevant cases based on values ​​of good morals and justice, which establish the basic background of values of the society and the constitutional and legal order of theSlovakRepublic.

For the purpose of a more effective public control, with effect from July 1, 2016, the Act foresees a public launch of a central register of executions. It is to be operated by the Slovak Chamber of Executors and the access to it will be subject to fees. Into the register of executions data on all uncompleted executions shall be entered in the following scope - the specification and the reference number of the execution court, the specification and the reference number of the executor, the specification of the recovered claim, for the recovery of which the court authorized the executor and the specification of the obligor. Into the register of executions shall be also entered the granting of authorization to carry out the execution, the resolution on suspension of the execution and the resolution on partial termination of the execution. The register of executions does not contain information on the obligee in execution proceedings.