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Arbitration is an out-of-court method of resolving disputes. It is regulated by the International Commercial Arbitration Act (ICAA). Essentially, arbitration is a judicial procedure conducted not by a state court, but by arbitrators (private judges) chosen by the parties.<\/p>\n
When is arbitration admissible?<\/strong><\/p>\n According to Article 19, paragraph 1 of the Civil Procedure Code (CPC), the parties may agree that their property disputes will be resolved by arbitration instead of a state court. This is completely legal and is often used between traders (for example, in international transactions).<\/p>\n However, in consumer disputes (such as credit contracts, mobile services, or utility contracts) arbitration is expressly prohibited.<\/p>\n How was arbitration abused?<\/strong><\/p>\n Before 2017, many payday loan companies and debt collection agencies included clauses in their contracts stating that disputes would be resolved by an \u201carbitration court\u201d (usually close to the creditor).<\/p>\n As a result, the debtor had no real opportunity for defense.<\/p>\n The arbitration court would issue an \u201caward,\u201d which was treated as equivalent to a court judgment and could be enforced directly by a bailiff.<\/p>\n Thousands of consumers faced garnishments and liens without ever having the chance to contest their debts.<\/p>\n Changes in the law \u2013 consumer protection<\/strong><\/p>\n With the 2017 amendments to the CPC (SG No. 8\/2017), the legislature put an end to this practice:<\/p>\n Arbitration no longer has the right to hear disputes under consumer contracts.<\/p>\n<\/li>\n Arbitration awards in such cases are null and void and have no legal effect.<\/p>\n<\/li>\n If a bailiff nevertheless initiates enforcement proceedings based on such an award, the debtor may file a complaint under Article 435 CPC and the enforcement proceedings will be terminated.<\/p>\n<\/li>\n<\/ul>\n What should you do if you receive an arbitration award?<\/strong><\/p>\n Check the date \u2013 if it is after 2017 and concerns a consumer dispute, the award is invalid.<\/p>\n<\/li>\n File an objection \u2013 if a collector or bailiff relies on such an award.<\/p>\n<\/li>\n Notify the competent authorities:<\/p>\n Consumer Protection Commission (CPC);<\/p>\n<\/li>\n Prosecutor\u2019s Office, in case of abuse.<\/p>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n Supreme Court practice<\/strong><\/p>\n The Supreme Court of Cassation consistently holds that arbitration clauses in consumer contracts are invalid and arbitration awards are null. This applies even if the debtor initially signed a contract containing such a clause.<\/p>\n Conclusion<\/strong><\/p>\n Arbitration is a legitimate method of resolving disputes between traders, but it is prohibited in consumer relations. If you receive an arbitration award regarding a loan, credit, or service, it is null and void. Do not give in to pressure \u2013 you have the right to contest and request the termination of any enforcement proceedings.<\/p>\n If you face such a case, consult a lawyer specialized in consumer and contract law.<\/p>\n\n
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