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10 January 2008
A recent amendment to the Slovak Civil Code has made it harder to arbitrate consumer disputes. Effective as of January 1 2008, the amendment makes all exclusive arbitration clauses within consumer contracts null and void. The amendment also appears to apply retroactively to all consumer contracts concluded before it came into force.
'Consumer contracts' are broadly defined under Slovak law and include all contracts where the purchaser of goods or services does not act in the pursuit of its regular business activity. It has been argued that the change in the law was required in order to harmonize Slovak law with the EU Unfair Consumer Contract Terms Directive (93/13/EEC). Paragraph q of the annex to the directive provides that a contractual term in a consumer contract shall be considered unfair where its object or effect is to "require the consumer to take disputes exclusively to arbitration not covered by legal provisions".
The Ministry of Justice, which drafted the amendment, has taken the view that the aim of the directive is to consider all exclusive arbitration clauses in consumer contracts to be null and void. It is hard to say whether this view is correct. The directive does not explain the meaning of the term 'arbitration not covered by legal provisions' and no reasoning has been provided in the prepartory works. In the only case to date dealing with arbitral clauses in consumer contracts, the European Court of Justice held that determining whether an arbitral clause constitutes an unfair contractual term is a matter for the national courts to decide (Mostaza Claro C-168/05, Paragraph 23).
In light of this decision, the view that any exclusive arbitration clause contained in a consumer contract constitutes an unfair contractual term can be considered legitimate. However, this view is highly prejudicial to the advancement of arbitration as a quicker and more efficient way of resolving disputes in Slovakia. In recent years, a number of permanent arbitration tribunals have been set up by trade associations and other bodies with the aim of improving the resolution of commercial and consumer disputes. Among these, the Permanent Arbitration Court at the Slovak Banking Association has become the most active arbitration body in Slovakia. Compared to the average delay of one to three years in the general courts, it takes the Permanent Arbitration Court less than 60 days to decide on a dispute.
However, the amendment does not rule out arbitration clauses from consumer contracts altogether. Provided that the consumer is given the choice to pursue his or her claims against the supplier in either the general courts or in arbitral proceedings, an arbitral clause and award relating to consumer contracts should be upheld. However, it is uncertain whether such choice must also be available to the consumer in cases where the supplier brings a claim against him or her.
Faced with the uncertainty of arbitral awards being set aside for breaching the consumer protection legislation, from now on providers of goods and services in Slovakia will be more reluctant to include arbitral clauses in their standard contractual terms. In addition, parties to existing contracts will face uncertainty as to how to treat exclusive arbitral clauses that were entered into prior to the amendment came into force. Given that the amendment appears to apply retroactively, parties may be reluctant to avail themselves of arbitral clauses contained in existing contracts.
For further information on this topic please contact Martin Magal at Allen & Overy Bratislava sro by telephone (+421 2 5920 2400) or by fax (+421 2 5920 2424) or by email (firstname.lastname@example.org).
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