WELCOME TO THE 2nd ANNIVERSARY EDITION OF THE DRINSIDER; THE QUARTERLY NEWSLETTER OF THE WOLF THEISS DISPUTE RESOLUTION PRACTICE GROUP:
We are happy to celebrate the 2nd birthday of the DRInsider and to continue to provide our readers with regular updates on recent developments in the various jurisdictions of WOLF THEISS.
The Croatian courts constantly render new interesting decisions in the ongoing dispute between consumers and banks with respect to the fairness and validity of CHF denominated consumer loans. As already reported in the 6th edition of the DRInsider, due to unsatisfactory reasoning, the Constitutional Court repealed the Supreme Court's prior decision with respect to certain aspects.
As regular readers may have noticed, we have also once again addressed the far-reaching and controversial changes under Romanian criminal law.
Please also note that during its annual users' conference on 5 – 6 December, FIDIC launched revised versions of its internationally recognized Red Book, Yellow Book and Silver Book, replacing the renowned 1999 FIDIC Suite of Contracts.
We wish you happy holidays.
BANKING LITIGATION
THE CROATIAN SUPREME COURT RULES ON SWISS FRANC DENOMINATED CONSUMER LOANS
The Croatian Supreme Court rendered a new interesting decision in the ongoing dispute between consumers and banks with respect to the fairness and validity of CHF denominated consumer loans, by partially repealing the first appellate ruling and dragging the dispute into a partial retrial.
These new legal developments gave the consumers further impetus for their judicial initiatives. As already reported in the 6th edition of the DRInsider, due to unsatisfactory reasoning, the Constitutional Court repealed the Supreme Court's prior decision with respect to two issues: (i) the Supreme Court's determination that CHF currency clauses represent clear and valid contractual provisions and, as such, that they are not subject to the fairness test, as well as (ii) the Supreme Court's decision not to request a preliminary ruling on the interpretation of the applicable EU law by the CJEU.
In its new decision, the Supreme Court elaborated that it decided not to request a preliminary ruling from the CJEU due to the fact that EU law does not apply to the subject matter of the dispute, as the dispute relates to the application of CHF currency clauses in the period prior to Croatia joining the EU.
The Supreme Court further determined that only Croatian law applies to the matter at hand, provided, however, that the Croatian courts should interpret the national law in the spirit of EU law, as far as practically possible. This also includes the consideration of CJEU case law.
In this respect, the Supreme Court stated that it appropriately took into consideration the fairness test established under CJEU case law, but that such test was not applicable to the validity of CHF currency clauses, since it was established in relation to a completely different controversy. During the earlier stages of the process both the first appellate court and the Supreme Court established that CHF currency clauses were not subject to the evaluation of fairness and validity under Croatian law, as such clauses were sufficiently clear, easily noticeable and understandable.
Notwithstanding the above, the Supreme Court now took into consideration the reasoning of the Constitutional Court and decided that the competent lower instance courts will have to determine whether all relevant information and warnings have been given by the banks to consumers when entering into loan agreements with CHF denomination. If the banks failed to do so, the Supreme Court held that the trial courts would have to assess whether such conduct resulted in unfair and invalid contractual clauses.
Alongside the Supreme Court's decision, consumers were also encouraged to continue their dispute against banks by the CJEU's recent ruling in the case C-186/16 Ruxandra Paula Andriciuc and Others v Banca Românească SA, which established that currency clauses are not invalid per se, but the banks needed to diligently inform consumers of all relevant circumstances.
Additionally, an interesting new development in relation to this dispute is the fact that the foreign shareholders of three Croatian banks involved in the Swiss Francs saga initiated arbitration proceedings against the Republic of Croatia before the International Centre for Settlement of Investment Disputes due to the coercive conversion of CHF denominated loans.
The Croatian judiciary is certainly expecting an interesting and turbulent forthcoming period.
CONSTRUCTION
LAUNCH OF NEW FDIC CONTRACT CONDITIONS
The "contracts of choice" for the world's most high-profile construction and infrastructure projects have been updated. During its annual users' conference on 5 – 6 December, FIDIC launched revised versions of its internationally recognized Red Book, Yellow Book and Silver Book, replacing the renowned 1999 FIDIC Suite of Contracts.
The newly released contracts reflect a long-awaited update and response to the changing needs of the construction industry. In doing so, FIDIC (the International Federation of Consulting Engineers) adopted best practices and international standards in preparing the FIDIC books to reflect the challenges construction contracts face in a quickly developing and highly digitalized future.
The core aim of the majority of changes is increased clarity and certainty to reduce the risk of disagreements and thereby increase the probability of successful projects. In particular, the following modifications will have the largest impact on parties to international construction agreements based upon the FIDIC books:
- The former Clause 20 [Claims, Disputes and Arbitration] has been split into Clause 20 [Employer's and Contractor's Claims] and Clause 21 [Disputes and Arbitration] to separate 'day-to-day' Parties' claims from Parties' disputes. To highlight the distinction in the contractual approach, Employers' Claims are no longer part of Clause 2 since these are now dealt with in Clause 20 in the same way as Contractors' claims;
- Sub-Clause 3.7 [Determinations] of the Red and Yellow Books 2017, which replaces Sub-Clause 3.5, details the Engineer's role in dealing with Parties' claims and introduces a step-by-step procedure with time limits;
- Sub-Clause 20.2 [Claims for Payment and/or EOT] prescribes the step-by-step procedure to be followed for Employers' and Contractors' claims for time and/or money. If the Engineer (under the Red and Yellow Books 2017) or the other Party's (under the Silver Book) initial response is that the Notice of Claim is time-barred due to the 28 day time-bar provision, but the claiming Party disagrees, the claiming Party is required to include these points in the fully detailed claim and these need to be taken into account in the agreement/determination;
- Sub-Clause 21 [Constitution of the DAAB] provides for a "standing" Dispute Avoidance/Adjudication Board (DAAB), i.e. the board is appointed at the start of the Contract and is in place for the duration of the Contract; furthermore, the procedure to obtain the DAAB's decision and a Party's failure to comply with such decision has been clarified in Sub-Clauses 21.4 [Obtaining DAAB's Decision] and Sub-Clause 21.7 [Failure to Comply with DAAB's Decision].
The above, however, reflects only the most important changes. The new FIDIC books include further extensive changes, both in terms of length and effect. For more information in English or your local language please click here.
CIVIL PROCEDURE
IT COMES TO CIVIL COURTS – DIGITALIZATION OF CIVIL LAW PROCEEDINGS TO ACCELERATE DISPUTE RESOLUTION
The main objective of the new system is to increase efficiency by allowing courts to conduct civil law proceedings online. It will be possible to submit pleadings with appendices and communicate with the court via internet.
The only activities that can currently be performed online are the establishment of limited liability companies or joint stock companies, and carrying out electronic writ of payment proceedings. The success of this last activity has led to the widespread use of information technology in the courts, and new provisions have been adopted.
Electronic submission office
The new provisions of law enable pleadings in all civil, commercial, family and enforcement cases conducted by a bailiff to be submitted via an electronic submission office. If the parties choose to use an IT system as the means of filing pleadings in a particular case, then the court is obliged to serve all correspondence electronically. Each party is required to set up an account in the IT system and submit a statement declaring their wish to be contacted electronically. Filing a pleading via the Electronic Submission Office has the same legal effect as filing it in court.
The IT system will not only enable parties to submit lawsuits or other pleadings, but also to attach other documents to their submissions. E-files will also include judgments and other procedural court orders.
Deadline for implementation
In accordance with the new provisions, all courts must allow parties to file all documents electronically via the Electronic Submission Office by 8 September 2019. This leaves ample time to work on improving the efficiency of court work, simplifying some procedural steps, and increasing access to courts. Are there any consequences of an IT system? From the moment each party chooses to use the Electronic Submission Office, all court correspondence is considered to be served to the parties at the time indicated by the addressee in the electronic acknowledgment of receipt. In the absence of such confirmation, electronic delivery shall be deemed effective 14 days after the date on which the Court placed the information into the IT system.
The use of an Electronic Submission Office will significantly speed up civilian litigation. Thus, Poland has taken the next step towards streamlining the effectiveness of resolving disputes.
HIGHLIGHTS FROM THE AUSTRIAN SUPREME COURT
Beauty knows (no) pain
In 2012 a woman had her beautician inject her with a fat reducing substance. The result? Lasting disfiguration and substantial damage claims.
With the rise of Instagram, Facebook and social networks in general it feels like the importance of appearance is at an all-time high and people go to extreme lengths for that perfect look. Of course, there is no harm in taking time to choose the perfect filter for the selfie in front of the Grand Canyon, even if it is not quite professional quality. However, some undertakings should be considered more carefully if - and especially by whom - they should be done. Trying a new haircut at a new hairdresser may already feel like Forest Gump's box of chocolate where you never know what you going to get, but having an unqualified person giving you injections of a non-permitted substance may be worth thinking about twice – or even thrice. This may sound far-fetched, but in fact it happened in Austria in August 2012, when a woman had her beautician inject her thighs with a fat reducer which left her with inflamed swellings, scars and a 3 cm hole in her thigh. In addition, she also suffered mentally from the disfiguration which finally led to damage claims of EUR 41.540.
While the costumer was ex-ante informed that beauticians in general are not allowed to give injections and that there was a risk of bruising and pain, she was not made aware that the substance was illegal in Austria and could lead to lasting physical damage.
Taking all this into account, the Austrian Supreme Court awarded only two thirds of the claim to the customer as the victim was seen as partially liable. A customer may still be expected to know of the risks of a medical intervention performed by any other than a doctor, the court stated in its decision of 27 September 2017.
"New regulations having impact on claims enforcement by and against Polish state-owned entities"
In Poland the General Counsel to the Republic of Poland (Prokuratoria Generalna Rzeczypospolitej Polskiej) is responsible for representing the interests of the State Treasury before the courts. Until recently, the General Counsel was only obliged to represent central authorities of the State Treasury in disputes exceeding the value of PLN 1,000,000 (approx. EUR 250,000).
By way of provisions in the new Act on the General Counsel to the Republic of Poland, which came into force on 1 July 2017, the General Counsel has been given a broader mandate to represent all entities within the State Treasury, as well as commercial entities where the State Treasury is a shareholder.
The new law broadened not only the competences of the General Counsel but also extended the obligation to represent the State Treasury to every organizational unit of the State Treasury as well as various government administration bodies (around 600 new entities, such as e.g. Polish National Television or various Universities) in all cases under the jurisdiction of the District Courts.
It is highly criticized that the General Counsel can act also on behalf of commercial companies partially owned by the State Treasury selected at the discretion of the Government. The Government selected 24 such companies, many of them being the largest companies on the Polish market, including firms listed on the stock exchange and within the energy, fuel, mining, insurance and banking sectors. The list can be updated any time by way of an amendment to the relevant governmental regulation.
One of the most controversial issues regulated by the new Act is the new arbitration court created at the General Counsel's office which deals with disputes involving units of the State Treasury, including those where the State Treasury is a shareholder. Some have voiced concerns that entities with State Treasury interest will force their counterparties to agree to the arbitration clause and that they will be treated more favorably by the newly established arbitration court.
The criticism of lawyers in Poland is twofold. Firstly, many cases will no longer be handled by law firms. Secondly, it is alleged that the State Treasury is attempting to create a monopoly and centralize the legal services of its units. It has been pointed out that the State Treasury may influence litigation involving entities in which it holds shares. Further, the interests of the State Treasury may not be in line with the interests of the company itself or its remaining shareholders. There is also concern that these companies will gain a competitive advantage over their potential trial opponents since the service of the General Counsel is provided for a relatively small fee. Such companies shall pay an annual general subscription fee (up to approx. EUR 50,000) plus a fixed fee for each case handled, which is significantly lower than market standard fees. The actual impact of this new regulation on the market remains still unclear and will be evaluated by participants in the near future.
AMENDMENTS TO THE CIVIL PROCEDURE CODE – BETTER PROTECTION OR NEW OPPORTUNITIES FOR AVOIDINGANCE OF ENFORCEMET?
At the end of October, a new Bill for the amendment and supplementation of the Bulgarian Civil Procedure Code ("CPC") entered into force ("Bill"). The Bill amends and supplements the CPC in several areas including:
- Debtors' protection under enforcement proceedings – The Bill introduced a cap on the due state fees collected by enforcement officers from debtors. In addition, the scope of the actions an enforcement officer may undertake - and which are subject to appeal by the debtor - was extended to include also the request for an explicit appraisal of the assets of the debtor and also the possibility for the enforcement officer to refuse to do so.
- Summoning of parties – Among many changes to the rules for summoning the parties, the courts are now obliged to appoint a special representative for the defendant at the expense of the claimant, if the defendant was dully summoned but did not appear at court to receive the respective documents. The reason behind this amendment is an attempt to improve the defendant's protection in cases where they are not aware of the proceedings.
- Cassation appeals – The Bill also extends the scope of decisions subject to cassation appeal. Currently, a decision may be appealed before the Supreme Court of Cassation ("SCC") if it is contradictory to the binding case-law of the SCC or acts of the Bulgarian Constitutional Court or the European Court of Justice. The extended scope now covers also decisions which are probably invalid or null and void or are obviously incorrect.
The aim of the Bill is to improve the protection of debtors under enforcement cases and cases initiated by utility companies against consumers. The MPs claim that most of the measures in this respect will serve the desired effect.
However, a closer analysis shows that some of the changes are rather disputable and could have a potentially negative and harmful effect on the interest of the claimants and the creditors.
For example, the requirement to appoint a special representative of the defendant provides another vehicle for debtors to potentially abuse the process and delay the proceedings while incurring additional costs for the claimant. It is expected, by analogy with other similar provisions, that the claimant will be entitled to claim these expenses in the course of the proceedings alongside the other costs. However, the risk that the court will not award those costs still remains of course.
The Bill is also silent on the criteria related to obviously incorrect or probably invalid decisions. Introducing such new terms to the Bulgarian dispute resolution practice will require a deeper analysis by the SCC Judges without any guarantee of the actual extension of the scope of the cassation procedure.
CRIMINAL LAW
THE NEW PACKAGE ON CRIMINAL JUSTICE REMAINS HIGHLY CONTROVERSIAL
On 31 October 2017, the Romanian Minister of Justice submitted a draft law to be debated by the Parliament, regarding the amendment on Law no. 303/2004, 317/2004 and 304/2004, on the organisation and functioning of judicial institutions.
Although the first amendments were introduced by the Government supposedly in order to comply with the decisions of the Constitutional Court, the draft has nonetheless triggered substantial criticism, debates and street protests. Therefore the draft law and proposed amendments thereto continued to be debated in a Special Parliamentary Committee. In addition, the Vice President of the European Commission, Frans Timmermans, intervened and suggested that approval for the draft be first obtained from the advisory body of the Council of Europe for judicial changes, the Venice Commission. The Superior Council of Magistracy (SCM) also rejected the project, criticizing certain measures such as:
- placing the Judicial Inspectorate under the political control of the Minister of Justice, instead of the SCM;
- excluding the President from the procedure to appoint and dismiss the top managing prosecutors; placing the Judicial Inspectorate under the political control of the Minister of Justice, instead of the SCM;
- passing a separate law on judges' liability;
- extending the duration of traineeship of young magistrates and introducing certain new complex professional examinations.
The proposed amendments to the existing laws are regarded by many as infringing the autonomy and independence of the judiciary in general and the magistrates in particular. Furthermore, such new proposed measures are considered to be inconsistent with the recommendations and commitments contained in the Cooperation and Verification Mechanism and not representing the actual priorities for the current judicial system.
Recently the US Department of State also expressed concern over the proposed amendments and urged the Romanian Government to refrain from passing any measures that would allow political influence over the judiciary system.
The debates continue and a final draft of this law is expected soon.
FOCUS: LIFE SCIENCES & HEALTHCARE
LIABILITY FOR MEDICAL MALPRACTICE ON THE GROUNDS OF INSUFFICIENT INFORMATION
A physician's obligation to provide patients with sufficient information to decide upon a certain medical treatment is crucial. There are numerous decisions dealing with the physician's and the hospital's risk of being held liable for damages in such cases. Primarily, it has to be noted that there is no general rule or even template for fulfilling the prerequisite of adequate information. It may differ from patient to patient. Generally, however, each patient needs to be educated
▪ in good time, and
▪ sufficiently contentwise;
to be able to agree or disagree on a medical treatment with the necessary knowledge of the scope and consequences.
The Austrian Supreme Court acknowledges that there cannot be a valid approval by the patient if the cosultation was erroneous, incomplete or generally missing. Thus, physicians or hospitals are liable for all damages resulting out of insufficient information.
Further, the information needs to be provided personally and directly to the patient. Documents may only be of additional help.
The scope of input may vary depending on the patient's own medical expertise and experience. In addition, there is a differentiation between emergency surgery (lower requirements) and cosmetic surgery or diagnostic operations (very high requirements).
Patients must be made aware of the specific and typical risks as well as the chances of success of the medical treatment. In cases where the patient may choose between various and medically equivalent treatments, each with different risks and chances of success, the patient must be provided with enough information to be able to do so. Latest Supreme Court Decision (OGH 8 Ob 27/17d) In March 2017 the Austrian Supreme Court was again confronted with a case of a physician's liability for medical malpractice because of insufficient information on alternative treatments. In the respective case, the patient suffered from back pain and the conservative therapy was not effective. The patient suffered from so called "therapy-resistant pains", which only operative surgery can aid. As a result, the patient agreed to surgery on the guidance provided by the physician; who however only addressed this treatment, but not the conservative therapy anymore. After the surgery the patient was in pain and required home help, thus she claimed for compensation for these damages on the grounds of missing information on alternatives.
In this case, the Court found that the patient in fact did not have the possibility to choose anymore as surgery was the only option left at that stage. Therefore, it was of no relevance if the physician informed the patient about conservative treatments or not.
Nonetheless, the situation and liability always has to be evaluated on a case-by-case basis even though this decision is beneficial for physicians and hospitals.
INSURANCE
WHEN THE PANTS RIP, IT MAY NOT BE AN ACCIDENT
An insured person was climbing the North Face of the Eiger with a climbing partner when a stone broke under his feet and causing him to fall onto the rope. The climber was not injured, but his pants ripped in several places. He and his partner continued the mountain tour nonetheless. Both of them reached the summit, but the insured man suffered frostbite, as his ruined pants were no longer water-repellent. In the end, both feet had to be amputated and consequently, he claimed benefits from his insurance.
The insurance company refused to pay, as under their contractual conditions no actual accident had happened.
For the insurance company an accident only occurs "if the insured person involuntarily suffers damage to health through an event that suddenly affects the body from the outside".
The Supreme Court upheld the insurer’s opinion and stated that an accident only occurs if there has been at least a minor injury to the insured person at the time of the respective incident. Damage to equipment, such as the pants, is not covered by the accident terms.
