As at 31 December 2013, the total value of court proceedings in which the PKO Bank Polski SA Group entities (including the Bank) are a defendant was PLN 342 658 thousand, of which PLN 12 134 thousand refers to court proceedings in Ukraine (as at 31 December 2012 the total value of above mentioned court proceedings was PLN 404 689 thousand), while as at 31 December 2013 the total value of court proceedings in which the Group entities (including the Bank) are the plaintiff was PLN 525 949 thousand, of which PLN 218 254 thousand referred to court proceedings in Ukraine, mainly related to collection of dues from loan agreements granted by KREDOBANK SA, (as at 31 December 2012 the total value of above mentioned court proceedings was PLN 335 932 thousand). The information above does not include the value of legal claims of KREDOBANK SA concerning taxes described in Note 12 ‘Income tax expense’.
The most significant legal claims of the PKO Bank Polski SA Group are described below:
a) Unfair competition proceedings
The Bank is a party to proceeding before the Court for the Competition and Consumer Protection (SOKiK) initiated on the basis of a decision dated 23 April 2001 of the President of the Competition and Consumer Protection Office (Urząd Ochrony Konkurencji i Konsumentów - UOKiK) upon 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 Visa and Europay/Eurocard/Mastercard 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 SOKiK. On 20 December 2011 a hearing was held during which no factual resolution of the appeals was reached. The Court obligated MasterCard to submit explanations concerning the issue and set the date for another sitting of the Court for 9 February 2012, which upon the application of the plaintiffs’ attorney was postponed for 24 April 2012 and afterwards SOKiK postponed announcing the resolution on the request for suspension of the case 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 MasterCard. 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. The court's decision in this case the Bank’s attorney received in January 2013 and in February 2013, court files were transferred to the court of first instance. Currently, the case is subject to re-proceeding by SOKiK. The hearing was on 29 October 2013 and on 21 November 2013 the judgement was announced, by which SOKiK reduced the penalty imposed on the Bank to the amount of PLN 10 085 thousand. The judgement is invalid. On 7 February 2014 the judgement was appealed. As at 31 December 2013 the Bank had a provision in the amount of PLN 10 359 thousand (the position ‘Provisions’ in the statement of financial position).
As at 31 December 2013 the Bank is a party to proceedings before the Court for the Competition and Consumer Protection (SOKiK):
1. appeal proceedings against the decision of the President of UOKiK:
1) due to the possibility of the use of unfair contractual provisions in forms of individual pension accounts (‘IKE’) agreements.
On 19 December 2012, the President of UOKiK imposed a fine on the Bank in a total fine 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 the amount of 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 a court with jurisdiction over the seat of PKO Bank Polski SA’s branch, carrying the IKE deposit account.
Appeal proceedings are pursued on behalf of the Bank by reputable law offices . The Bank appealed against the decision of the President of UOKiK on 2 and 16 January 2013. As at 31 December 2013 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).
2) due to 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, on which the Bank recognised a provision in the same amount on 30 June 2013 (the position ‘Provisions’ in the statement of financial position).
3) using of unfair contractual provisions in forms of consumer loan agreements, with the exclusion of credit card agreements.
By decision of 31 December 2013, the Bank's activities were considered as practices violating collective interests of consumers and a fine in the amount of PLN 17 236 thousand and PLN 11 828 thousand was imposed on the Bank. The Bank has undertaken actions to appeal against this decision.
Appeal proceedings are pursued on behalf of the Bank by reputable law offices. The Bank appealed against the decision of the President of UOKiK, on 17 January 2014. Proceedings are in progress. As at 31 December 2013 the Bank has a provision for the amount of PLN 10 000 thousand (the position ‘Provisions’ in the statement of financial position).
2. a proceeding initiated by the President of UOKiK to determine the provisions in the form of consumer loan agreements to be illegal.
3. four proceedings initiated by an individual:
1) on recognition of provisions of housing loan agreements concluded with the Bank in 2001 and in 2003 and the Rules of current account of 1997, modified in 1998 to be abusive. The Bank responded to the lawsuit. The first hearing was held on 2 July 2013. Court judgment of 9 July 2013 dismissed the claim against the Bank in all three cases. The plaintiff filed an appeal against the above mentioned judgment, in these cases there is no risk of imposing financial penalties on the Bank.
2) the recognition as abusive the Tariff of fees and charges in sections providing for fees for the monitoring and collection activities in relation with customers delaying the repayment of current debt. The Bank responded to the lawsuit and retorted for another pleading of opponent’s attorney, in this case there is no risk of imposing financial penalties on the Bank.
Moreover, the Bank is a party to proceedings before the President of UOKiK:
1) concerning practices violating collective interests of consumers, consisting the use of a provision, entered in the register of the agreements form provisions recognised as abusive, in the form of the Tariff of banking fees and charges, with content.
2) determining whether the manner of offering mortgage loans by the Bank under the ‘Autumn promotion of mortgage loans’ (‘Jesienna promocja kredytów hipotecznych’) may constitute a practice which violates the collective interests of consumers,
3) preliminary proceedings concerning providing by banks the information constituting the bank secrecy.
Proceedings are in progress
b) Re-privatisation claims relating to properties held by the Group
As at the date of these financial statements, six administrative and court-administrative proceedings are pending to invalidate 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 and one administrative proceeding for the establishment of perpetual usufruct right to a property owned by the Bank. 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 Bank. Moreover, with respect to four properties of the Bank, claims pertaining to release or return the property and regulation of the legal status of the property, were submitted by their former owners (court and administrative proceedings are pending).
The proceedings 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 of 10 April 2001, which stated that the decision of the Council 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 proceedings 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 proceedings 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 prepared and made.
In the opinion of the Management Board of PKO Bank Polski SA, the probability of significant claims arising against the
PKO Bank Polski SA Group entities (including the Bank) in relation to the above mentioned proceedings is remote.