As at 31 December 2015, the total value of court proceedings in which the PKO Bank Polski SA Group entities (including the Bank) are a defendant was PLN 638 019 thousand, of which PLN 45 792 thousand refers to court proceedings in Ukraine (as at 31 December 2014 the total value of the above-mentioned court proceedings was PLN 427 555 thousand), while as at 31 December 2014 the total value of court proceedings in which the entities of the PKO Bank Polski SA Group (including the Bank) are the plaintiff was PLN 697 041 thousand, of which PLN 92 680 thousand referred to court proceedings in Ukraine, mainly related to collection of dues from loans granted by KREDOBANK SA (as at 31 December 2014 the total value of the above-mentioned court proceedings was PLN 767 505 thousand).
The most significant legal claims of the PKO Bank Polski SA Group are described below:
a) Unfair competition proceeding
- Proceedings against practices that restrict competition in the payments market using cards in Poland
The Bank is a party to proceeding initiated by President of the Competition and Consumer Protection Office (Urząd Ochrony Konkurencji I Konsumentów - UOKiK) on the basis of a decision dated 23 April 2001 upon the request of the Polish Trade and Distribution Organisation –
Employers’ association (Polska Organizacja Handlu i Dystrybucji - Związek Pracodawców) against the operators of the Visa and Europay payment systems and the banks issuing Visa and Europay/Eurocard/Mastercard banking cards. The claims under these proceedings relate to the use of practices limiting competition on the market of banking card payments in Poland, consisting of applying pre-agreed ‘interchange’ fees for transactions made using mentioned above cards as well as limiting access to this market by external entities. On 29 December 2006, UOKiK decided that the practices, consisting of joint establishment of ‘interchange’ fee, did limit market competition and ordered that any such practices should be discontinued, and imposed a fine on, among others, PKO Bank Polski SA, in the amount of PLN 16 597 thousand.
The Bank appealed against the decision of the President of UOKiK to Court for the Competition and Consumer Protection (Sąd Ochrony
Konkurencji i Konsumentów - SOKiK) and on 20 December 2011 a hearing was held during which no factual resolution of the appeals was reached. The SOKiK obligated MasterCard to submit explanations concerning the issue and scheduled the date of the next meeting for 9 February 2012. The date was postponed for 24 April 2012, and next SOKiK postponed proceedings with a motion of suspension until 8 May 2012. On 8 May 2012, SOKiK suspended proceedings until the final conclusion of proceedings before the European Union Court in the case MasterCard against the European Commission. On 24 May 2012, the European Union Court upheld the decision of the European Commission banning multilaterally agreed ‘interchange’ fees applied by MasterCard. On 28 May 2012 the participant to the proceedings, Visa Europe Ltd, and on 29 May 2012 the plaintiffs’ attorney, including PKO Bank Polski SA, filed a complaint against the decision of SOKiK dated 8 May 2012. In August 2012, the European Court of Justice received the appeal of MasterCard against the verdict of the EU Court of 24 May 2012 rejecting the appeal of mentioned above. On 25 October 2012, the Court of Appeal in Warsaw changed the decision of 8 May 2012 and dismissed the motion of MasterCard for suspending the proceedings. In January 2013 the Bank’s attorney received the court's decision in this case and in February 2013, court files were transferred to the court of first instance. The matter is currently the subject of a reinvestigation by the SOKiK.
The hearing was on 29 October 2013 and on 21 November 2013 the judgment was announced, by which SOKiK reduced the penalty imposed on the Bank to the amount of PLN 10 085 thousand. The verdict is not binding. On 7 February 2014 the judgment was appealed on behalf of the Bank and eight plaintiffs represented by the Bank’s attorney. The judgment was also appealed by other participants of the proceedings, i.e. by the President of the Competition and Consumer Protection Office (UOKiK) and of the Polish Trade and Distribution Organisation (POHiD) (appeals aimed to impose on the participants of the agreements stricter financial penalties), and: Visa Europe Limited, Bank Pocztowy S.A., Bank Gospodarki Żywnościowej S.A., mBank S.A. (formerly: BRE Bank S.A.), Deutsche Bank PBC S.A., HSBC Bank Polska S.A. (appeals aimed at imposing more strict fines on participants to the agreement). Copies of these appeals have been delivered to the Bank’s attorney, who responded to them. The court files was transferred from SOKiK to the Court of Appeal in Warsaw. After hearing the parties' attorneys and stakeholders at the hearing on 22 September 2015, the Court postponed pronouncing the judgment until 6 October of 2015. In its verdict of 6 October 2015, the court dismissed the appeal of banks and Visa, while the appeal of the UOKiK. The Court restored the original amount of the imposed penalties stipulated in the decision of the OCCP, i.e. the penalty in the amount of PLN 16 597 thousand – penalty imposed on PKO Bank Polski SA instead of the penalty in the amount of PLN 10 359 thousand stipulated in the Court’s judgment of 21 November 2013 and the penalty in the amount of PLN 4 825 thousand – penalty imposed on Nordea Bank Polska SA instead of the penalty in the amount of PLN 2 586 thousand stipulated in the court judgment mentioned above. The penalties were paid by the Bank in October 2015. The Bank has not received the judgment with justification from the Court of Appeal yet.
As at 31 December 2015 the Group (the Bank) is also a party to i.a. following proceedings:
- Before the Court of Appel – as a result of an appeal from the verdict of SOKiK issued in result of the complaint from the President of UOKiK
1) due to suspicion of unfair proceedings violating collective interests of consumers in the presentation in advertising campaigns of consumer loan under the marketing name ‘Max pożyczka Mini Ratka’, information that might not be clear for an average consumer and mislead him as to the availability of loans on promoted conditions.
On 28 December 2012, the President of UOKiK imposed a fine on the Bank in the amount of PLN 2 845 thousand. The Bank appealed against the decision of the President of UOKiK on 16 January 2013. On 13 January 2015 SOKiK issued a verdict , which annulled in full the decision of the President of the UOKiK, ie. cancelled also financial penalty imposed on the Bank. On 26 February 2015 the President of the UOKiK filed an appeal against the verdict. On 20 March 2015, the Bank answered the appeal seeking to dismiss the appeal in its entirety as unfounded. No trial date has been set. The appeal proceeding is pending. The case is in progress. As at 31 December 2015 the Bank has a provision in the same amount (the position ‘Provisions’ in the statement of financial position). ,
2) due to suspicion of using of unfair contractual provisions in forms of consumer loan agreements, with the exclusion of credit card agreements.
In accordance to decision from 31 December 2013, the Bank's activities were considered as practices violating collective interests of consumers and a fine in the amount of PLN 29 064 thousand. The Bank appealed against this decision. By judgment of 9 July 2015 SOKiK fully annulled the decision of the President of the UOKiK. On 28 August 2015 the President of UOKiK appealed against that judgment. On 11 September 2015 the Bank responded to the appeal rejecting the allegations of the President of the UOKiK. No trial date has been set. The appeal proceeding is pending As at 31 December 2015 the Bank had no provision in this respect.
- initiated by Bank - at the conclusion of the appeal proceeding brought by the Bank to SOKiK against the decision of the president of UOKiK in connection with the use of unfair contractual terms in patterns of individual contracts (IKE)
On 19 December 2012, the President of UOKiK imposed a fine on the Bank in a total amount of PLN 14 697 thousand, of which:
- PLN 7 111 thousand for not indicating in the IKE agreements responsibilities of the Bank for timely and proper carrying out the monetary settlements and compensation for the delay in execution of a holder instruction,
- PLN 4 741 thousand for application in the form of IKE agreements, an open list of termination conditions,
- PLN 2 845 thousand for application a clause, entered in the register, defining for disputes with customers a court with jurisdiction over the seat of PKO Bank Polski SA’s branch, carrying the IKE deposit account.
The Bank appealed against the decision of the President of UOKiK on 2 January 2013. SOKiK reduced the penalty imposed on the Bank to the amount of PLN 4 000 thousand by the court judgement of 25 November 2014, as regards to:
- the practice described in the point 1 above, it reduced the penalty to the amount of PLN 2.5 million,
- the practice described in the point 2 above, it reduced the penalty to the amount of PLN 1.5 million,
- the practice described in the point 3 above, the penalty was repealed, as the Court considered that the practice of the Bank did not violate collective interests of consumers.
In January 2015 both the Bank and the President of the UOKiK appealed against the judgment . No trial date has been set. The appeal proceeding is in progress. As at 31 December 2015 the Bank had a provision for the above-mentioned amounts in the amount of PLN 4 000 thousand (the position ‘Provisions’ in the statement of financial position).
- before SOKiK initiated by on individual:
- on the recognition as abusive and prohibiting the respondent from using in trading with customers the provisions in forms of agreements for loans denominated in CHF, indicating that the currency conversion rules used by the Bank for the purpose of loan payment were against good practice and highly violated consumer interests. The lawsuit was delivered to the Bank on 20 April 2015 and on 20 May 2015 the Bank replied to the lawsuit. On 20 November 2015 the individual proxy’s answer for a response to the claim of the Bank was delivered. The case is in progress.
- on the recognition as abusive and prohibiting the respondent from using in trading with customers the provisions in forms of agreements for loans denominated in CHF, indicating that the currency conversion rules used by the Bank for the purpose of loan payment and for the purpose of conversion of installments as well as decisions concerning the amount of interest rate were against good practice and highly violated consumer interest. The lawsuit was delivered to the Bank on 4 February 2015. On 6 March 2015 the Bank replied to the lawsuit, filling motion for its dismissal. The Court ordered the delivery of the Bank’s response to the plaintiff, requiring him to reply to the claims of the Bank – an order in this regard was delivered to the plaintiff on 15 May 2015. On 23 June 2015, the Bank appealed to exclude the judge hearing the case in the Court of Appeal. By resolution of 11 August 2015, the Court cut off the judge and by resolution of 21 September 2015 the court dismissed the request of the Bank for dismissal. The Bank appealed against that decision. The case is in progress.
- to establish invalidity of the clauses contained in the mortgage contract by regarding them as illegal (non-existent) and prohibiting the respondent from using in trading with customers the provisions in forms of agreements used by the defendant in the exercising economic activity. The case was received by the Bank on 7 October 2015 , the Parties exchanged pleadings . At the hearing on 19 January 2016 the court dismissed the proceeding. Bank filed for delivering a copy of the verdict with the justification.
- for recognition as illegal of the provisions in forms of mortgage product Nordea - Habitat and the surety agreement. In the plaintiff's opinion, the provisions concerning substantive an temporal scope of civil surety o the loan shape the rights and obligations of consumers in a manner inconsistent with good practice and grossly violate their interests. These provisions constitute the prohibited clauses. The Bank filed its response to the lawsuit. The case was received by the Bank on 18 August 2015. On 16 September 2015, the Bank responded to the lawsuit. The case is in progress.
- for recognition as illegal and prohibiting the respondent from using in trading with customers the provisions in forms of agreements for a loan denominated in CHF used by Nordea Bank Polska SA indicating that the disputed provisions concerning conversion rules of the FX rates for the purposes of payment of the loan are contrary to accepted principles of morality and grossly violate the interests of consumers. The Bank responded to the lawsuit. Executing the Court’s will, the plaintiff filed a replica to response to the lawsuit. The Court dismissed the proceeding. By letter dated 22 December 2015, the Bank filed for justification of the verdict.
- for recognition as illegal of the provisions of a standard loan agreement. Plaintiff (appraiser) accuses the Bank that it only accepts real estate valuations prepared by designated appraisers which seriously violates the interests of consumers by imposing on consumers, as the weaker party to the contract, onerous conditions by eliminating the right to obtain the valuation services from the chosen company. In response to the lawsuit, which was received by the Bank on 15 December 2015, the Bank gave the answer concerning the lawsuit on 13 January 2016. The case is in progress.
- before the President of UOKiK:
- a preliminary proceeding initiated on 29 August 2014 in order to determine whether the Bank, in the Aurum loan agreement, misled its customers by presenting insurance costs in these agreement and the information forms. The Bank answered to UOKiK;
- a preliminary proceeding initiated on 9 October 2014 concerning the possibility of customers using the ‘chargeback’ complaint procedure. The Bank replied to the UOKiK’s call. There is no such complaint procedure in the Bank’s relationship with its customers (it is typical of the Bank – card organisation relationship);
- preliminary proceeding of 26 January 2015 concerning the provision of information on currently applied policies for securing and conversion of mortgage loans denominated in CHF by the Bank, in the context of the recent changes in the exchange rate of the Swiss franc; Since today, letters were only exchanged as part of the proceedings;
- preliminary proceeding of 5 February 2015 concerning the Bank’s treatment of housing loans secured with a mortgage and expressed in/denominated in/indexed to CHF (negative LIBOR, spread reduction, exchange rate tables); The proceeding is in progress;
- preliminary proceeding initiated on 12 February 2015 concerning whether the Bank applies the fee of PLN 20 to former clients of Nordea Bank Polska SA, as specified in Nordea Bank Polska SA’s Tariff, for servicing a seizure of receivables in case when an enforcement order has been issued. By letter dated 24 February 2015, the Bank gave an answer to UOKiK explaining that The Bank does not use such tariff;
- preliminary proceeding of 2 March 2015 concerning the Bank’s cooperation with property appraisers in the preparation of appraisal report used for the valuation of a property securing a loan. On 23 March 2015 and on 7 May 2015 the Bank answered to UOKiK. By letter dated 26 October 2015 the Bank responded to additional to UOKiK’s call;
- preliminary proceeding of 9 March 2015 concerning the documents specifying fees and commissions applied by the Bank, identification of all amendments to these documents in 2014-2015, the reasons behind the amendments implemented by the Bank and the manner of communicating the amendments to consumers. Respectively on 13 April 2015, 21 April 2015 and 8 May 2015 the Bank submitted required documentation and information to UOKiK;
- preliminary proceeding of 2 April 2015 concerning the analysis of consumer loans market, including specification of its structure and the structure of fees in this group of products. On 29 April 2015 the Bank delivered to UOKiK questionnaire with required information. On 16 October 2015 the Bank submitted additional questionnaires to UOKiK’s call;
- preliminary proceeding of 2 April 2015 concerning the analysis of mortgage loans market. On 24 September 2015 the Bank delivered a questionnaire containing the required information to UOKiK. By letter dated 22 December 2015 UOKiK requested the Bank to deliver additional questionnaire. The Bank submitted the questionnaire to UOKiK;
- preliminary proceeding of 20 April 2015 concerning the fees applied by the Bank for the transactions made by customers using credit cards abroad. On 28 May 2015 the Bank delivered all required information and documents to UOKiK. On 28 May 2015 the Bank submitted required documentation and information to UOKiK;
- preliminary proceeding of 10 September 2015 concerning debit cards, including debit card fees and conditions for exemption from the fees. the Bank submitted required documentation and information to UOKiK.
- As at 31 December 2015, PKO Życie Towarzystwo Ubezpieczeń SA – a subsidiary of the Bank – is a party to:
1) a proceeding before the President of UOKiK concerning liquidation charges and policy redemption value due to insurance agreement cancellation in some forms of life insurance agreements, as well as imprecise information on the total redemption value due to insurance agreement cancellation applied in these forms.
On 15 October 2015 the President of UOKiK issued, at the request of the Company a binding decision which made PKO Life Insurance Company to introduce amendments to 25 forms of the policies of the Insurance Capital Fund in relation to charges for early resignation. The Company's liability resulting from the above-mentioned decision will consist in particular in the fact that with regard to these 25 forms:
a) Llquidating charges incurred by the existing customers in the case of insurance with regular premium will not be higher than 25 % of the value of contributions paid , and 4 % in the case of contracts with one-off premium,
b) PKO Życie Towarzystwo Ubezpieczeń SA will provide consumers with a proposal of an annex to the contract of insurance, or equivalent agreement,
c) PKO Życie Towarzystwo Ubezpieczeń SA will inform customers about the possibility of using the new conditions through the website, applications for customers and directly customer - every time the customer indicates that it intends to terminate the contract.
This decision became final on 17 November 2015. PKO Życie Towarzystwo Ubezpieczeń SA has, in principle, 6 months ( counted from the day the decision becomes final ) for implementation of the obligations. Within nine months from the validation of the decision PKO Życie Towarzystwo Ubezpieczeń SA is required to submit the report on the implementation of the obligations arising from the decision to the President of the UOKiK. The decision does not exhaust the possibility of an pursuing by the existing customers of their rights through civil law. In connection with the decision becoming final, the provision for potential administrative penalty associated with this proceeding in the amount of PLN 8 127 thousand was released. As of 31 December 2015 PKO Życie Towarzystwo Ubezpieczeń SA has no provision for an administrative penalty in respect of the proceeding. At the same time on 31 December 2015 PKO Życie Towarzystwo Ubezpieczeń SA maintains the adequate to the conditions of the decision level of loss provisions.
2) eleven proceedings before SOKiK initiated by individuals to determine some of provisions in the forms of life insurance agreements to be illegal; in all cases the Company responded to the lawsuit and applied for its dismiss due to bringing legal action after 6 months since the day of giving up their application, in this case there is no risk of imposing financial penalty on the Company.
3) a proceeding before the Supreme Court as a result of the cassation complaint brought by the Company against the judgement of the Court of Appeal in relation to the fine imposed on the Company in 2010 by the President of UOKiK for the violation of the collective interests of consumers by the Company (fine was paid in 2013); the Supreme Court issued a ruling reversing the appealed ruling in the part concerning the amount of the fine and referred the case for reconsideration to the court of second instance.
b) Re-privatisations claims relating to properties held by the Group
As at the date of these financial statements the following proceedings are pending:
- five administrative proceedings, of which one is suspended, to invalidate administrative decisions issued by public administration authorities with respect to properties held by the PKO Bank Polski SA Group entities (including the Bank). These proceedings, in the event of an unfavourable outcome for the Group may result in re-privatisation claims being raised. Given the current status of these proceedings as regards stating the invalidity of decisions and verdicts of public administration bodies, it is not possible to assess their potential negative financial effects for the Group,
- five court proceedings, of which one is suspended, in relation to Bank’s two properties pertaining to release or return the premises and the property, payment of fee for non-contractual use of property and regulation of the legal status of the property,
- three administrative and two court proceedings in relation to a part of two properties owned by subsidiaries of the Bank for requesting the return of the property and declaration of adverse possession.
The proceeding concerning a complaint brought by Centrum Finansowe Puławska Sp. z o.o. (‘CFP’) concerning the use of a property located at Puławska and Chocimska street in Warsaw, on which the Bank's office is currently located, are pending before the Regional Administrative Court in Warsaw. The proceedings concern rendering invalid the decision of the Local Government Court of Appeal (SKO) of 10 April 2001, which stated that the decision of the Council of the Capital City of Warsaw of 1 March 1954 was issued in gross violation of the law. Due to the liquidation of CFP and removing it from the register of companies and then distribution of its assets, the transfer of the right to perpetual usufruct of said plot was issued to the Bank, a motion for participation in the proceeding was filed on 23 May 2012 on behalf of the Bank. During the hearing on 18 December 2012, the Regional Administrative Court in Warsaw granted the Bank the right to participate in the proceeding due to the fact that the rights to the property in question had been transferred to the Bank. After the hearing on 7 May 2013, the Court dismissed the complaint. The judgement may be appealed against to the Supreme Administrative Court. A copy of the judgment together with the explanation was served for the Bank on 20 June 2013. A cassation complaint was filed on 17 July 2013. On 3 June 2015 the trial took place during which the Supreme Administrative Court upheld the Bank’s write off from the Regional Administrative Court in Warsaw verdict of 23 August 2012 concerning the re-privatisation of the part of grounds at Puławska 15 street. On 15 September 2015 the letter to hang up the proceedings by the Minister of Infrastructure and Development, was addressed to the Minister of Infrastructure and Development, with a request for remission of the proceedings or the refusal to annul the resolution of governor of the Warsaw of 29 September 1991 and to the Local Government in concerning issuing a decision on refusal to annul the resolution of SKO in Warsaw of 10 April 2001. The case is in progress.
In the opinion of the Management Board of PKO Bank Polski SA the probability of significant claims against the Bank and its direct and indirect subsidiaries in relation to the above mentioned proceedings is remote.