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41. Legal claims

As at 31 December 2014, the total value of court proceedings in which the PKO Bank Polski SA Group entities (including the Bank) are a defendant was PLN 427 555 thousand, of which PLN 6 549 thousand refers to court proceedings in Ukraine (as at 31 December 2013 the total value of the above-mentioned court proceedings was PLN 342 658 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 767 505 thousand, of which PLN 110 825 thousand referred to court proceedings in Ukraine, mainly related to collection of dues from loans granted by KREDOBANK SA (as at 31 December 2013 the total value of the above-mentioned court proceedings was PLN 525 949 thousand, including court proceedings in Ukraine in the amount of PLN 218 254 thousand). The information above does not include the legal claims of KREDOBANK SA concerning taxes described in the note 13 ’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 currently pursued before the Court for the Competition and Consumer Protection (Sąd Ochrony Konkurencji i Konsumentów - 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 appeal of MasterCard against the verdict of the EU Court dated 24 May 2012 rejecting the appeal of MasterCard, was received by the European Court of Justice. 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 on behalf of the Bank and eight plaintiffs represented by the Bank’s attorney. The judgement was also appealed by other participants of the proceeding, 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 primarily to change the decision on the recognition of agreements as violating competition law and impose penalties on their participants). Copies of these appeals have been delivered to the Bank’s attorney, who responded to them. The court files have been transferred from SOKiK to the Court of Appeal in Warsaw. As at 31 December 2014 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 2014 the Bank is a party to i.a. following proceedings:

before SOKiK as a result of appeal against the decision of 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. The proceeding is in progress. As at 31 December 2014 the Bank has a provision in the same amount (the position ‘Provisions’ in the statement of financial position).
  2. due to suspicion of using 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 (PLN 29 064 thousand in total) was imposed on the Bank. The Bank appealed against this decision. The proceeding is in progress. As at 31 December 2014 the Bank has a provision in the amount of PLN 10 000 thousand (the position ‘Provisions’ in the statement of financial position).

before SOKiK initiated by an individual

on the recognition as abusive the Tariff of fees and charges in sections providing the 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. In this case there is no risk of imposing financial penalties on the Bank. There is a risk of entering the provisions relating to monitoring and collection fees into the Register of Prohibited Clauses kept by the President of UOKiK.

before SOKiK in which the President of UOKiK is the plaintiff

to determine some of the provisions in the forms of consumer loan agreements to be illegal. The court proceeding is in progress, there was only exchange of correspondence between the parties. There is no risk of imposing financial penalty on the Bank.

before the Court of Appeal

in which the Bank is the plaintiff - as a result of the completion of the appeal proceeding before SOKiK initiated by the Bank against the decision of the President of UOKiK 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 amount of PLN 14 697 thousand, of which:

  1. 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 compensation for the delay in execution of a holder instruction,
     
  2. PLN 4 741 thousand for application in the form of IKE agreements, an open list of termination conditions,
     
  3. 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.

Appeal proceeding is pursued on behalf of the Bank by reputable law office. 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:

  1. the practice described in the point 1 above, it reduced the penalty to the amount of PLN 2.5 million,
     
  2. the practice described in the point 2 above, it reduced the penalty to the amount of PLN 1.5 million,
     
  3. 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.

The proceeding is in progress. As at 31 December 2014 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 the President of UOKiK:

  1. a preliminary proceeding initiated on 7 January 2012 in order to determine 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,
     
  2. a preliminary proceeding initiated on 23 December 2013 concerning the fees charged by the Bank for providing information which constitutes a bank secrecy,
     
  3. a proceeding initiated on 28 February 2014 in order to determine whether the documents sent by the Bank to UOKiK regarding selected cases contained business secrecy,
     
  4. a preliminary proceeding initiated on 23 January 2014 regarding the provisions in the forms of bank accounts agreement regulating the manner of power of attorney – there is a risk of imposing financial penalty; proceeding is pending and concerns the Bank’s practice (defective in the Office’s opinion) which consists of refusing to accept power of attorney for bank accounts in which account numbers are not specified. The Bank took on the obligation to change this practice and implemented such solutions,
     
  5. a proceeding initiated on 5 March 2014 in order to determine whether the Bank implemented the UOKiK’s decision of 12 December 2008 concerning the advertising message of ‘Max Lokata – with no concealed contractual provisions’ (‘Max Lokata – bez gwiazdek’). The Bank replied that it had fulfilled the obligation by placing an announcement in GPW Parkiet twice,
     
  6. a preliminary proceeding initiated on 29 August 2014 in order to determine whether the Bank, in the Aurum loan agreements, misled its customers by presenting insurance costs in these agreements and the information forms,
     
  7. 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 relationships with its customers (it is typical of the Bank – card organisation relationship),
     
  8. a proceeding initiated on 15 October 2014 to determine whether the Bank, in its advertising leaflet ‘Mini Ratka loan in the blink of an eye based on a bank statement’ (‘Mini Ratka w mgnieniu oka na wyciąg z konta’) misled its customers by presenting the loan amount. On 13 November 2014, the UOKiK initiated the proper administrative proceedings in this matter. The Bank disagrees with the UOKiK’s charges and, in response, is considering taking on the obligation to present it in line with the UOKIK’s assumptions (to make the communication more precise).

As at 31 December 2014, PKO Życie Towarzystwo Ubezpieczeń SA – a subsidiary of the Bank – is a party to:

  1. seven 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,
     
  2. 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, the proceeding is in progress, the value of provision recognised as at 31 December 2014 amounts to PLN 8 172 thousand,
     
  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 proceeding is in the phase before the Supreme Court’s decision on acceptation or rejection of the cassation complaint for consideration,
     
  4. a preliminary proceeding before the President of UOKiK in connection with the advertisement applied in 2014 by the insurers in the sale of life insurance with capital insurance fund agreements; this proceeding is on a preliminary stage.

   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, 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 Bank 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, for which the date of cassation hearing before the Supreme Administrative Court was scheduled for 3 February 2015. 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. Moreover, with respect to two 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 proceedings for release of the property, payment of fee for non-contractual use of property by the Bank, for an acquisitive prescription of property by the State Treasure are pending). The proceedings for the statement of an acquisitive prescription of a part of two properties held by the Bank’s subsidiaries are also pending.

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, is 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 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 judgement together with the explanation was served to the Bank on 20 June 2013. A cassation complaint was filed on 17 July 2013. The date of hearing was not scheduled.
In the opinion of the Management Board of PKO Bank Polski SA, the probability of significant claims arising against the Bank and its direct and indirect subsidiaries in relation to the above-mentioned proceedings is remote.