48. Legal claims

The Bank is a party to proceedings initiated by the 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 Organization – Employers Association (Polska Organizacja Handlu i Dystrybucji – Związek Pracodawców – POHiD) against operators of the Visa and Europay payment systems and 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 the above cards as well as limiting access to this market for external entities. On 29 December 2006, UOKiK decided that the practices, consisting of joint determination of the ‘interchange’ fee, did limit market competition and ordered that any such practices should be discontinued, and imposed a fine on, among other things, PKO Bank Polski SA, in the amount of PLN 16.6 million. The Bank appealed against the decision of the President of UOKiK to CCCP (Court for the Competition and Consumer Protection / Sąd Ochrony Konkurencji i Konsumentów – SOKiK). By judgement of 21 November 2013 SOKiK reduced the penalty imposed on the Bank to PLN 10.4 million. The parties to the proceedings appealed against the judgement. In its judgement of 6 October 2015, the Court of Appeal in Warsaw restored the original amount of the imposed penalties stipulated in the decision of the UOKiK, i.e. a fine amounting to PLN 16.6 million (fine imposed on PKO Bank Polski SA) and a fine amounting to PLN 4.8 million (fine imposed on Nordea Bank Polska SA). The fines were paid by the Bank in October 2015. As a result of the cassation complaint made by the Bank, in its judgment dated 25 October 2017 the Supreme Court revoked the appealed judgment of the Court of Appeal in Warsaw and submitted the case for re-examination. The fines paid by the Bank were reimbursed to the Bank on 21 March 2018. Currently, the case is being examined by the Court of Appeal in Warsaw. After two hearings, the Court of Appeal adjourned the trial without setting a date. As at 31 December 2018 the Bank set up a provision for this litigation of PLN 21 million.

In a decision of 31 December 2013, the President of the UOKiK held that the Bank’s activities constituted practices breaching the collective interests of consumers and imposed a fine on the Bank at a level of PLN 29 million. The Bank appealed against this decision to the CCCP. In a judgment of 9 July 2015, the CCCP overruled the decision of the President of the UOKiK in whole. The President of the UOKiK appealed against this decision on 21 August 2015. On 31 May 2017, the Court of Appeal in Warsaw upheld the decision of the Court for Competition and Consumer Protection (CCCP), which was advantageous for the Bank, overruling the decision in which the UOKiK acknowledged that the Bank breached the collective interests of consumers by applying the so-called variable interest rate clause in whole and, consequently, cancelled the fine of PLN 17 million. However, as for the second practice, of which the Bank was accused regarding the application of an information form, the Court of Appeal held that a part of the appeal was reasonable, whereby it simultaneously reduced the fine imposed on the Bank by the UOKiK from PLN 12 million to PLN 6 million. The fine was paid on 17 July 2017.  On 23 October 2017, the Bank filed a cassation complaint against the judgment of the Court of Appeal. The President of the UOKiK also filed a cassation complaint. The Bank is waiting for a decision of the Supreme Court on whether or not it will accept the cassation complaints for consideration. The Bank had not established a provision as at 31 December 2018.

Two proceedings have been brought before the President of UOKIK ex officio and are currently in progress:

1. proceedings opened ex officio on 28 June 2017 on the acknowledgement that the provisions of the model contract are inadmissible. The breach, of which the Bank is being accused, involves the use of contractual provisions in model mortgage loan agreements which are revalued/indexed/denominated in foreign currencies and their appendices, presenting the method of setting the foreign currency buy and sell rates, which, according to the President of the UOKiK, may be considered inadmissible in the light of Article 385 § 1 of the Civil Code. On 31 July 2018 the Bank filed a motion for the issuance of a consent decree. The date of conclusion of the proceedings was set for 31 December 2018. Until 31 December 2018 the Bank had not received a notification of the President of UOKiK about extending the term of the proceedings. As at 31 December 2018 the Bank had not established a provision for these proceedings.
2. proceedings initiated on 26 July 2017 ex officio about using practices which violate the collective interests of customers. The violation the Bank has been charged with consists of collecting higher instalments on loans and advances to customers denominated in foreign currencies than those following from the advice about interest rate risk provided to customers before they had concluded the contracts, and transferring possible currency risk to the customers. The Bank presented its position on the claims in its letter dated 23 September 2017. The date of the final conclusion of the proceedings was extended to 31 August 2018. Until 31 December 2018 the Bank had not received the notification of the President of UOKiK about extending the term to the conclusion of the proceedings. As at 31 December 2018 the Bank had not established a provision for these proceedings.

The remaining companies of the Bank’s Group are not handling any significant proceedings on the distortion of competition. The UOKiK proceedings on charges for premature withdrawal from insurance policies with an insurance capital fund, which were conducted with respect to PKO Życie Towarzystwo Ubezpieczeń SA, as described in the previous financial statements of the Bank’s Group, have formally ended, whereby the actions taken by the company as a result of the order issued on the above by the President of the UOKiK in 2015 and the agreement concluded with the President of the UOKiK in 2016 are being continued.

acknowledging that the provisions included in the pro-forma contract covering a portion of the housing loan agreement Nordea-Habitat and the warranty agreement were illicit – on 5 December 2018 the Court of Appeal in Warsaw issued a final judgment dismissing the claim.

1. in October 2013 the Bank received a claim for the payment of PLN 31 million in respect of the losses incurred as a result of an unjustified refusal to grant disaster loans, due to an alleged lack of cooperation on the part of the Bank, which in consequence was to lead to the seizure of the claimants’ family farm. The case is currently being examined by a first instance court. As at 31 December 2018 the Bank set up a provision for this litigation of PLN 1 million.
2. in November 2013 the Warsaw Municipal Consumer Rights Adviser lodged a claim on behalf of 66 persons (a developer’s customers) for determining the non-existence of the regulation relating to the contractual ordinary collective mortgage of PLN 12 million disclosed in the land and mortgage registers of the persons on whose behalf he lodged the claim for the Bank’s potential liability to file a statement of intent to delete the said mortgage. On 30 September 2016 the District Court in Warsaw agreed to the claim and passed a judgement in which it determined the non-existence of the contractual mortgages set up on the apartments, referring to the absence of any contract concluded between the Bank and the developer for the division of the mortgage in the event that separate titles are established for particular apartments. The Bank appealed against the said judgment. In its judgment dated 3 December 2018 the Court largely dismissed the Bank’s appeal. The Court shared the Bank’s position only as to one person, which it considered not to be a consumer. The Bank applied for a copy of the judgment with the justification. After its analysis a decision will be taken as to a potential cassation complaint. As at 31 December 2018 the Bank had not set up a provision for the proceedings.
3. in August 2016 a claim for the payment of PLN 20 million was filed with the Bank in respect of a loss in the assets of the Bank’s customer as a result of– in the Claimant’s opinion – unfair tax information PIT 8C for 2007, 2008 and 2009 being issued by Dom Maklerski PKO BP; currently, the case is being examined by a Court of first instance. As at 31 December 2018 the Bank had not set up a provision for the proceedings.
4. in March 2016 a claim was lodged against the Bank by the Official Receiver of a joint stock company under bankruptcy liquidation for recognizing as ineffective a legal transaction consisting of setting up a contractual collective mortgage of PLN 53 million on real estate on behalf of the Bank to secure four investor loan contracts. On 20 September 2017 the District Court in Warsaw dismissed the claim against the Bank. The Claimant appealed against this judgment, which was accepted by the judgment dated 22 May 2018. On 1 October 2018 the Bank filed a cassation complaint. As at 31 December 2018 the Bank had not set up a provision for the proceedings.
5. in September 2016 the Bank received a claim for the payment of PLN 15 million in respect of compensation for a loss resulting from the fact that the Bank did not disburse the investment loan funds. In the claim the Claimant states that the purpose of the loan agreement was the consolidation of earlier liabilities and determining new terms and conditions for the repayment of the debt, and the fact that the Bank did not disburse the funds led to the liabilities becoming due and covered with the debt restructuring procedure; the said proceedings are currently being conducted before a first instance court. As at 31 December 2018 the Bank set up a provision for this litigation of PLN 15 million for this proceeding.
6. in November and December 2018 the Bank received two claims for finding a writ of execution ineffective, based on the same writ of execution concerning an amount of over PLN 13 million, which had been previously presented to SKOK Wesoła. In respect of both cases the Bank responded questioning the claim. As at 31 December 2018 the Bank had not set up a provision for the proceedings.
7. as at 31 December 2018, 870 court proceedings were initiated against the Bank by its customers in connection with the loan agreements concluded and denominated in Swiss francs. The Bank’s customers’ claims concerned mainly the determination of the invalidity of all or part of the agreement or payment in respect of the refund of allegedly undue benefits in connection with the abusive nature of the foreign currency clauses; the final rulings to-date are favourable for the Bank; no final judgment has been passed in any of the cases which would confirm the validity of the customers’ statements, and none of the provisions used in the agreements was entered in the register of prohibited contractual provisions.

As at the date of the financial statements the following proceedings are being conducted:

• one proceeding is being conducted in respect of the Bank’s properties, relating to reprivatization, including one suspended and one in which a final judgment was passed by the District Court in Kalisz on 8 November 2018;
• ten proceedings, of which one is suspended with respect to the real property of the other companies from the Bank’s Group, the subject matter of which is to confirm that the administrative decisions are invalid or to return the property.

The Management Board of PKO Bank Polski SA is of the opinion that it is unlikely that serious claims may be brought against the Group in these matters.