Annual Report, Yerevan, 2011, 117 Pages

The Office of Financial System Mediator Annual Report, Yerevan, 2011, 117 pages

This book presents the Annual Report of the Office of Financial System Mediator of the Republic of Armenia.

The book is compiled and published for the Office of Fi- nancial System Mediator and is not for sale.

Design by Lilit Harutyunyan | DEEM PRODUCTIONS

Yerevan, Armenia Dear reader,

This is the second year now that the Office of Finan- cial System Mediator has been functioning in the Republic of Armenia. We have spent much effort to earn more recognition and trust of households and financial organizations. Not only was the second year remarkable with an increased number of complaints lodged but also with projects that the Office launched to educate people on financial products. The Office continues its activities consistent with international developments, and in the period under review we kept focus on the cooperation with our foreign counterparts in order to exchange experience and intro- duce best international practice to the Office.

The Office remains committed to enhancing partnership with financial organizations as it held a number of roundtable discussions, in addition to the conference with an involvement of representatives of financial organizations, to address specific issues and find ways on how these could be overcome.

We may state that the Office tracked success in its second year of activities for earning recognition and trust –an increasing amount of clients having come up to the Office even in its passive period of elucidatory activities is quite a case in point. This is very important in a sense that more complaints are expected to come from citizens hence users of financial services – as a result of introduction of the compulsory insurance against civil liability in respect of the use of motor vehicles and the private pension scheme. This is where the Office of Financial System Mediator would come to offer its services in handling complaints and dispute resolutions. 2 I would like to thank all staff members of the Office for their achievements in the previous year and our partners for their professionalism and willingness to a constructive dialog.

Truly yours,`

Vakhtang Abrahamyan, The CBA Board Member, Chairman of the Board of Trustees of the Office of Financial System Mediator

3 Dear reader,

In the previous year when we were summing up the first year of activities, I was certain to announce that the Office of Financial System Mediator had become established, that we had succeeded in creating a body that is able to really protect lawful rights of consumers and oftentimes come out as reconciler, per- suader and explainer. For the second year our primary objective was to increase consumer confidence in the Office and even make it stronger. Now, I am proud to say that the Office of Financial System Mediator is summing up its second year of activities with the recognition and awareness problem considerably defeated. Statistical surveys conducted by the Central Bank of Armenia during 2010 prove the above said statement: 99 percent of respondents were aware of the Office of Mediator and 96 percent assured that they would come into the Office if they had problems with the financial organizations whatever. It should be noted that the second year of the Office saw somewhat a lesser amount of citizens with their calls and visits to the Office unrelated to financial organizations. People started to understand the very nature and objective of the operations of the Office, and I think this is a noticeable achievement for us.

We remained committed to a policy of acting like an intermediary by increasingly offering reconciliation for financial organizations and consumers. Our staff members acted a ‘defender’ to the client and a ‘partner’ to the financial organization. As a result, about 70 percent of cases we handled during the previous year were settled in favor of the client and nearly 60 percent of such cases were settled through reconciliation between the parties, with an outcome of agreed Photo by E-productions loss compensation. 4 Pursuing to be prestigious, open and trusted, our Office has set a task to have financially educated clientele which is protected in the financial market. To this effect, in the year under review apart from being an extrajudicial body that settles disputes, we have done much to educate consumers on financial services and products and explained to them which rights and obligations they have.

We are planning to launch a large-scale campaign for financial education of people in 2011, with an increased emphasis to be placed on the population living in countryside. This is one of the key strategies of the Office, and we are going to call a number of institutions, whether public or non-public, to help us fulfill this objective. This is something that all of us, the stake- holders, and the financial sector on the whole will benefit from since, experience shows, citizens more aware of their rights and obligations trust more and use more of services and products which financial organizations offer.

I believe that this Annual Report will provide enough to demonstrate transparency and openness our Office aspires to and allow you to have a more complete understanding of what we have done.

Sincerely yours,

Piruz Sargsyan, Financial System Mediator

5 The Office of Financial System Mediator The Office of Financial System Mediator is an establishment with an independent management system. The Office has been incorporated as a ‘foundation’, and its founder and stakeholder is the Central Bank of the Republic of Armenia. The Office of Mediator is called to settle out any non-pecuniary disputes arisen between consumers as natural person and financial organizations. The services of Financial System Mediator are free of charge while the process of review of complaint is explicit, fast and transparent.

The Office of Mediator has been established pursuant to the Republic of Armenia Law on Fi- nancial System Mediator, adopted on June 17 2008. Financial System Mediator has launched professional activities since January 24 2009. According to the above said law, Financial System Mediator shall be designated by the Board of Trustees of the Foundation. In the first meeting, which was held on December 22 2008, the Board of Trustees appointed Piruz Sargsyan, a lawyer by profession, in the capacity as Mediator.

Scope of activities

Financial System Mediator has the following objectives: Protection of consumer rights and interests in the financial field; • Fast, effective and free of charge review and handling of claims of clients; and • Enhancement of population'’s confidence in the financial sector.

Management of the Office of Financial System Mediator According to the Law on Financial System Mediator, bodies of management of the Office are: the•• Board of Trustees, and • the Administrator of the Office/Mediator.

7 Further, according to the said law, the Board of Trustees of the Office of Financial System Mediator consists of 7 members, and these members shall be appointed as follows: one• member-by the Republic of Armenia Government; • one member-by the Board of the Central Bank of Armenia; • one member-by organizations that advocate protection of consumer rights; and • four members-by unions of organizations.

According to the said law, Financial System Mediator shall be designated by the Board of Trus- tees for a 4-year term. Furthermore, the law sets forth requirements to Financial System Me- diator, whereby Mediator shall have higher education, shall be of good repute and shall have at least 5 years of work experience. Financial System Mediator shall not be a person who has served in any financial organizations during the last three years.

The Office has an auditor competence. The supervisor is appointed by, and accountable to, the Board. The function of the auditor is to make an independent and unbiased review and assessment of the activity of the Office by carrying out inspection/examination of the activities and operations of the Office.

8 There are two groups in place which make sure that operations of the Office are smooth and functional. These are:

Support Group that takes on an administrative function to ensure uninterrupted performance of the Office. The group includes a personnel management specialist, an accountant, a bookkeeper and a driver;

Case Handling and Investigating group which makes sure professional activities of the Office are in place; this unit includes:

Case Handling Unit or, otherwise, front office, the main function of which is to meet clients and provide primary advice thereto;

Claim Investigating Unit or, otherwise, back office, the main function of which is to review claims, provide explicatory service to clientele and provide legal attendance of the Office.

9 Competence of the Board of Trustees Pursuant to the Law, the Board of Trustees of the Office of Financial System Mediator shall have the following competence:

approve charter of the Office, and amendments and addenda made thereto based on the vote of at least five members of the Board; the charter shall have a statutory responsibility to determine the procedure of appointment of Mediator; make decisions on Mediator and, where other bodies are set up, make decisions on their appointment and premature termination of their competence; approve internal policies of the Office, including procedures that define code of conduct and ethics of the Board Members, Mediator and staff of the Office; these include cases and procedure for delivering, discussing and making decisions regarding rejection and self- rejection; motivation for effective conduct; the procedure for dealing with commercially sensitive information or confidential documents; general principles of Board Member interests and conflict of interests when the Board makes a decision; and provisions on distribution of tasks and competence of work and responsibility of each Board Member; hear reports delivered by Mediator at the frequency specified by the charter of the Office; oversee status implementation of the decisions it has made; oversee day-to-day activities of the Office and its financial and economic performance; approve the budget of the Office, any changes made thereto; oversee the performance against the budget; approve annual financial accounts; approve the procedure for staff pay-roll and remuneration; take on other competence as required by the law.

11 Vakhtang Abrahamyan Chairman of the Board By profession, Mr. Abrahamyan is economist. He graduated from Yerevan Institute of National Economy. Then, he studied Global Commerce: Financ- es and Economy in William Howard Taft University, Boston, Massachusetts. He has been rewarded with certificates from a great many courses and training sessions. Since 1995 he has been working in the Central Bank of Armenia - first as senior specialist-economist and at a later point as chief auditor. Starting from 2008 he has been serving as Board Member. On December 26 2009 Mr. Abrahamyan was appointed as Chairman of the Board of Trustees of the Office of Financial System Mediator.

Abgar Yeghoyan Member of the Board (22.12.2008-24.12.2010) Mr. Yeghoyan graduated from Yerevan Institute of National Economy. He participated in numerous courses and training programs abroad and in Armenia. He worked in a number of private, public and non-governmental organizations, including State Committee of Statistics as head of Contract Construction; Ministry of Industry and Trade as Adviser to Minister and at a later point as Head of Tourism Development; Ministry of State Property Management as Vice Chairman of Enterprise‘ Support Agency ’ state closed joint-stock company. From 1997 he served as Chairman of Protection‘ of Consumer Rights ’ non-governmental organization and, starting from 2008, served as Board Member of the Office of Financial System Mediator.

Abgar Yeghoyan's’ untimely death on December 24 2010 saddened all of us. He has been a good and caring member to the Board of Trustees, and a nice fellow and senior mentor to the staff. He was a highly trusted and respectful person.

12 Artak Shaboyan Member of the Board Mr. Shaboyan is economist-financier. He graduated from Yerevan Institute of National Economy-Finance and Credit Unit of the Financial and Ac- counting Department. He then post-graduated from the same institute by maintaining a candidate (Ph.D.) thesis and earning a degree in candidate of economics. He has participated in many training programs in and outside Armenia as well as attended a great variety of seminars. In the period 1998-2008 he has worked in the Central Bank of Armenia-first as a senior specialist; at a later point as head of the unit and, later on, as head of the department in the field of monetary policy, statistics, supervision and protection of consumer interests. Starting from 1998, he serves as senior lecturer at Customs and Insurance Department of State Economic Univer- sity of Armenia. In the period 2008 - 2010 he has served as Deputy to Chairman of State Customs Committee adjunct to the Republic of Armenia and since March of 2010 he serves as Chairman of State Customs Com- mittee. Since December of 2008 he has been appointed as Board Member of the Office of Financial System Mediator.

Armenuhi Mkrtchyan Member of the Board Ms. Mkrtchyan is the only female member of our Board. She is economist by profession. Graduated from Yerevan Institute of National Economy- – qualification: World Economy. Then, she studied Global Commerce: Finances and Economy in William Howard Taft University, Boston, Massachu- setts. She participated in many courses and received certificates accordingly. Since 1998 she has been working in the Central Bank-first as senior specialist at macroeconomic and bank research and at a later point as senior researcher. At present, she serves as head of Consumer Interest Protection and Market Behavior Unit of the Financial System Policy and Financial Stability Depart- ment of the Central Bank of Armenia.

13 Emil Soghomonyan Member of the Board By profession, Mr. Soghomonyan is economist. He graduated from Yere- van State University-qualification: economist. Work experience has begun from the State Bank first as a loan officer and later on as manager of Vayk branch office of the Bank. In the period 1981-1987, he has served as director of Vayk regional trade cooperative and at a later point as Deputy Manager of Jermukshin‘ ’ Trust. In the period 2007-2009, he has served as Chairman of the Union of Banks of Armenia, and from 1992 to date, he has been serving as Chairman of Executive Board of Prometey Bank LLC. Since December of 2008 he has been appointed as Board Member of the Office of Financial System Mediator.

Ashot Salnazaryan Member of the Board Mr. Salnazaryan graduated from Yerevan Institute of National Economy- – Faculty of Planning and Economics. Maintained a candidate (Ph.D.) thesis and earned a degree in candidate of economics. Then, having maintained a thesis for doctor's’ degree, he earned a degree of Doctor of Economics. In 2004, Mr. Salnazaryan was rewarded a professorial degree. He participated in numerous training programs abroad. Started work experience in the Republic of Armenia National Academy of Sciences as researcher; in the Ministry of Finance as head of Money Cycle and Securities Department; then in ArmRussGazProm‘ ’ CJSC as head of department of economy. From 2003 to date, he works in State Economic University of Armenia serving as head of Faculty of Securities Market and dean of Faculty of Finance. Start- ing from December of 2008, he serves as Board Member of the Office of Financial System Mediator.

14 Paylak Ghukasyan Member of the Board Mr. Ghukasyan graduated from Yerevan State University-Faculty of Me- chanics and Mathematics. He graduated from American University of Armenia: Faculty of Political Science and International Relations; a holder of a master's’ degree. Passed a correspondence course at the Chartered Institute of Insurance of Great Britain in the field of insurance. He served as manager and, at a later point, in the capacity as CEO in HSBC insurance company. In the period 2004-2008, he has served as CEO of First‘ Insur- ance Company ’ and then as Board Member of Ingo‘ Armenia ’ CJSC. In the period 2008 - 2010 he has served as CEO of Association of Insurance Market Participants. From 2009 to date he is representative of the organization ABB / Power and Productivity for a Better World (Armenia). Since December of 2009 serves as Board Member of the Office of Financial

Piruz Sargsyan Mediator By profession, Ms. Sargsyan is lawyer. She graduated from Yerevan State University-Faculty of Law. Maintained a candidate (Ph.D.) thesis and earned a degree in candidate of law. She participated in great number of seminars in and outside Armenia as well as participated in many training programs. In the period 1995-2008, she has worked in the Central Bank of Armenia -first as specialist and, at a later point, as head of unit in Legal Department. Then, she served as head of Legal Department and, after this position, as Legal Counselor. Delivered lectures at a number of educational institutions, including French University of Armenia, State Academy of Management of Armenia and etc. On December 22, 2008 she was appointed in the capacity as Financial System Mediator.

15 What We Have Done in 2010 Awareness campaigns

We have prepared and carried out a large-scale awareness campaign over 2010. Unlike the previous year, the awareness campaign implemented in the second year of the operation of Mediator had been steered into another direction-in addition to explicating the activities of the Office our advertisements also encouraged citizens to use financial services and products thus indirectly facilitating financial intermediation, which has been set as one of our goals.

As part of increasing the Office awareness:

we have had two promotional films prepared in the framework of arrangements concluded with prestigious firms; we have signed agreements with a number of TV channels to have our informational and promotional materials aired; we have signed agreements with radio stations to broadcast information materials regarding the activities of our Office; there were informational boards elucidating the activities of the Office placed at metro stations, public transport; as well as announcements were printed in newspapers and maga- zines; we have participated in many variety of exhibitions, EXPO events, in order to inform households about us and have as much direct contact with people as possible; we have had t-shirts and caps with the Office logo delivered, and have provided some to the participants of the event "Baze-2010"“ ” Youth Assembly, aimed to elucidate the activities of the Office.

17 Seminars in financial organizations

We have conducted seminars at banks, with a total attendance rate of 450-500 employees. The seminars were held by participation of employees from head-offices and branch offices of financial organizations. There were off-site seminars organized in different regions of Armenia.

Seminars at educational establishments

As part of the awareness campaign, we have arranged seminars in a number of higher educational establishments by participation of students, lecturers and administrative staff (Yerevan State University, Yerevan State Medical University, Yerevan State Linguistic University after V. Bryusov, Fondation Université Française en Arménie French“ University of Armenia,” and State Architectural University of Armenia).

In the year under review, we have developed materials with a clear, easier language and interesting questions for seminars designed for school age children. The seminars were predomi- nantly dedicated to financial education of students and higher school pupils with a particular focus on elementary knowledge of selected financial products. To motivate pupils and students further, prizes were awarded to the ones who were most active and who had mastered‘ ’ their lessons best. The staff of the Office has arranged seminars for the pupils of Yerevan School No 123, School No 42 after Shevchenko as well as Musical School after Tchaikovsky.

Seminars were held also at the Office where students from different higher educational establishments of Armenia were invited to learn about the operations of the Office as well as get information on financial products.

18 Visits to regions of Armenia

We have visited a number of regions of Armenia in order to hold an elucidatory seminar for the staff of branch offices of banks and for organizing a meeting for the clients. Our visit was duly announced to the consumers beforehand as well as we cast an announcement by regional TV channels about consumer reception, so that as much broader amount of people as possible would be able to know about this undertaking. In particular, we made visits to the regions of Vayots Dzor and Sjunik (towns of Goris, Kapan, and Meghri).

Surveys

Regular annual statistical queries of the Central Bank of Armenia contained several questions regarding our Office, in order to learn how people were aware of our activities. The team con- ducting the survey was provided with booklets illustrating the activity of the Office, so that they could distribute these to the respondents. Those of 99 percent of respondents were aware of the Financial System Mediator and, further, 96 percent told that they would go the Office of Mediator if they had problems with financial organizations.

Printing and distributing booklets

A total of 40,000 information booklets were printed which have been distributed to banks, insurance companies, credit organizations as well as ministries, educational establishments and elsewhere. The distribution of booklets is an ongoing process.

A booklet explicating the provisions of the Republic of Armenia Law on Consumer Crediting has been developed in cooperation with Protection of Consumer Interest NGO, and distributed with a total issue of 5000 copies.

19 Information wallpapers

To increase public awareness of the activities of the Office, we have ordered a total of 5000 copies of A3 formatted information wallpapers that contain brief information on our operations. The information wallpapers describing the operations of the Office were distributed with universities, other educational establishments and polyclinics. This was an important solution as the patients, while waiting for their medical assignment, are able to get to know which services our Office offers. Furthermore, this is significant in the light of attracting citizens in to our Office as and when they face problems with medical insurance. The distribution of information wallpapers is an ongoing process, too.

Interviews

Interviews with Mediator have been published in a number of important newspapers and mag- azines, such as a business periodical Capital‘ ,’ §‘ Голос Армении¦ ’ (the Voice of Armenia), the weekly newspaper Pioneer‘ ,’ the National‘ Banking Bulletin ’ of the Russian Federation, the Journal of the Union of Banks of Russian Federation, the Journal Economics‘ ,’ the magazine Two‘ Faces,’ at the website www.insurance.am, in the newspaper "168‘ Hours"’ at a pan-Armenian network www.PanARMENIAN.net and elsewhere.

Internship

To enhance awareness of younger population with regard to the activities of the Office and to integrate students with our work, the Office has prepared an arrangement in 2010 to invite a total of 44 students from various higher educational establishments (such as Yerevan State Uni- versity, State University of Economics, Slavonic University, Academy of Management, Fondation Université Française en Arménie) to do practical work. The internees had an opportunity to obtain both theoretic and practical knowledge and understanding of the activities of the Office of Financial System Mediator and the financial system, on the whole.

20 Updating Internet website

We have developed and updated information and news on our website concerning financial market, customary business practices, reports of day-to-day operations of the Office, and so on. Apart from being a broad source of information, our website provides for a possibility to fill in a claim electronically. We have developed and compiled some selected claims in the form of precedent, which we then have published in our website, with names or titles of the counter- parties remained unmentioned.

First-year event celebration

On January 24, 2010, an event dedicated to the first year of the Office was organized and we celebrated this event. A dedicated video material illustrated our activities and operations as well as certificates were granted to best cooperating financial organizations.

Conference

In April 8-9, 2010, the Office of Mediator organized a conference with guest speakers of Financial Ombudsmen from Great Britain and the Netherlands, Insurance Service Ombuds- men from France and Kazakhstan as well as other specialists of establishments of extrajudicial dispute resolution. In addition to Armenian financial market participants (banks, insurance companies, credit institutions, investment companies, professional unions) which constituted the prevailing part out of a total 90 participants, representatives of central banks and financial supervision industry of CIS countries also took part in the conference.

Membership

The Office joins the International Network of Financial Ombudsmen, along with member states, such as the USA, Australia, South African Republic and the EU states.

21 Business trips

Mediator and other staff members of the Office had business trips to London and Paris, to the respective offices of Financial Ombudsmen, in order to exchange experience, and to Beirut, to participate in an annual conference on enhancement of customer awareness of financial products organized by the OECD. The results and outcome of these trips were surveyed and gave birth to some interesting ideas which are reflected in current programs and programs envisaged for 2011.

Cooperation with CIS countries

In August of 2010, Mr. Garegin Tosunyan, Chairman of the Union of Banks of Russian Federa- tion, visited our Office to learn the experience of Mediator, since the Union envisaged a similar establishment in Russian Federation (in October of 2010 a Bank Ombudsman was established in Russia). In the period under review, Mediator has received invitations from Russian Federa- tion, Ukraine and Kazakhstan to share experience.

Discussions/conferences

We have organized seminars-meetings to address the problems and findings in the financial system. Representatives of financial organizations and various specialists of the financial industry took part in this event.

In particular, the Office had arranged a roundtable which was set to explore mutually acceptable possibilities for cooperation. The roundtable invited representatives of insurance companies and insurance agents (brokers) of the Republic of Armenia. The discussion covered the case review procedure of the Office, the results of elucidatory seminars organized by the Office as well as model examples of cases and some disputable areas deriving therefrom. The results of customary business practices were surveyed as well. The roundtable referred also to the Repub- lic of Armenia Law on Compulsory Insurance against Civil Liability in respect of the Use of Motor Vehicles.

22 Some other meetings which we organized were addressed to the 2011-2012 strategy of the Office, the scope, tasks and participant coverage of the conference to be held in 2011. Further, plans included discussing the Program‘ for Increasing Consumer Education/Awareness of Finan- cial Services and Products ’ as well as such aspects like securities market regulation, challenges to insurance market, bank supervision and compulsory insurance.

In the period under review, the Office has arranged a seminar-discussion dedicated to topics, such as: Procedure‘ of Disputing Financial System Mediator Decisions,’ Principles‘ of Civil Proce- dure,’ and Commercial‘ Arbitration.’

Legislative changes

We have drafted an amendment to the Republic of Armenia Law on the Financial System Me- diator in order to defend consumer rights more effectively. We cooperated with legal counsels and the Office of Barristers of the Republic of Armenia, so a number of issues related to the protection of consumer rights were identified and some proposed solutions delivered to the Central Bank for consideration.

Consumer education program

During 2010 we developed the Program‘ for Increasing Consumer Education/Awareness of Financial Services and Products.’ This program is envisaged to be implemented in 2011 and supposed to be target-specific in order to ensure an inclusion of as broader layers of population as possible. The scope of the program will include various elucidation campaigns targeted at consumer education on matters like financial products and services.

Assets stocktaking

In the period under review, the program that keeps record of assets and resources chargeable to the account of the Office has been upgraded.

23 Programs of the Office to be implemented in 2011 Agreement with Car Insurer Bureau of Armenia

In 2010, the staff of the Office drafted an agreement in cooperation with Car Insurer Bureau of Armenia. The signing of an agreement with the Bureau is due in 2011. The agreement covers an aspect of cooperation between the Bureau and the Office in the field of compulsory insurance against civil liability in respect of the use of motor vehicles. The central goal of the agreement is to duly regularize the cooperation between signatories in the light of effective adherence to the requirements as laid down in the Republic of Armenia Law on Financial System Mediator, the Republic of Armenia Law on Compulsory Insurance against Civil Liability in respect of the Use of Motor Vehicles and other legal acts dedicated to the protection of consumer interest in connection with compulsory motor vehicle insurance.

Conference

In autumn of 2011, the Office of Mediator will be organizing an annual international conference titled "Establishment‘ of Financial Ombudsman: Towards Increased Public Confidence and Financial Intermediation-2".’ Lectures are expected to be delivered by the Finnish Financial Ombudsman, the French Insurance Mediator and some other out-of-court dispute resolution establishment representatives from Australia and Denmark. Also, foreign experts in the area of third party motor liability insurance and prevention of plastic card fraud will be guest speakers at the conference. This year too, representatives of financial organizations and CIS supervisory authorities will be the main participation in the conference.

A single database program

Development of the single database software of the Office is underway and is planned to be operational from 2011. The software will be able to provide more accurate and versatile data analysis.

25 Statement of claims There• were 642 complaints against financial organizations which the Office received during 2010, and 192 of them were not eligible under law to be reviewed and/or handled by Me- diator. Complaints unrelated to the financial organizations and the resultant visits to these financial organizations were numerous in spite of the fact that these were notably reduced relative to the previous year. In 2009, the Office received 378 complaints filed against financial organizations (nearly half what has been filed in 2010), 182 of which were not eligible under the law to be reviewed and/or handled by Mediator. In 2010, relative to 2009, the increased number of complaints filed against financial organizations and the tiny difference in the number of non-eligible complaints in 2009 and 2010 is perhaps attributable to the fact that more people are becoming aware of the operations and scope of activities of the Office.

Complaints not eligible for handling were associated with the events occurred before the Law on Mediator has entered into force; some of the claims ended up with court writ issued in respect thereto or with the case pending in court proceedings; part of clients having filed complaints not eligible for handling were legal entities. The rest of complaints were of a general nature and these have not, virtually, contained property-related claims.

Specialists of the Office have given advice to all the clients who applied as well as helped draw up complaints to the financial organizations concerned and explained their rights and obligations. In 2010, 66 complaints (14.67 percent) out of a total 450 eligible for review were treated positively by the organizations, without having to file a request in writing to Mediator; where the client applied to us for request, we helped him/her to complete any complaint-claim filed against that organization. Note, in 2009 that indicator was 20.4 percent (40 complaints out of 196).

Over 2010, a total of 110 claims were received in writing, about 68.75 percent of which were settled out in favor of the client [settlement, partial settlement and results of reconciliation of decisions]; in money terms, the largest compensation amounted to AMD 5.1 million and the smallest, AMD 1 000.

27 In money terms, a total AMD 29,264,354 was compensated through the mediation of the Office in favor of the clients during 2010. Incidentally, this figure does not consider the cases which were settled out with no money actually reimbursed to the client but rather seeking to satisfy another claim of him, for example, by changing the terms in the loan contract or having an overdue loan re-classified in favor of the client, and so on.

By virtue of our central principle of fast and effective review and handling of every claim, after a preliminary review we often explained to our clients and made them clear that action of the organization involved was exemplary and that we would not be going to have success even if we took the claim for review. Normally, in such circumstances, our clients trusted our specialists and agreed to our point. For comparison, a total of 110 complaints out of 642 were accepted for review by the Office in 2010 (which makes up 17.13 percent in total), whereas in 2009 a total of 57 complaints out of 378 were accepted during 2009 (which makes up 15.08 percent in total).

In the year under review, complaints associated with plastic card fraud were a considerable part of total complaints received by the Office. There were much complains related to annulment of payment orders for transactions on international money remittance. In 2010, relative 2009, the number of complaints filed against pawnshops has grown.

28 Statistics, general profile The number of complaints received by the Office during 2010, by quarters:

185 165 164 200 128 150 100 50 0 Q1 Q2 Q3 Q4

The number of complaints received by the Office during 2010, by months:

74 68 68 80 60 59 70 46 50 46 46 60 43 39 43 50 40 30 20 10 0

April May June July January March August October February September NovemberDecember

30 The number of complaints reviewed by the Office during 2010, by quarters

50 26 40 21 30 13 20 10 0 Q1 Q2 Q3 Q4

There was a rapid growth in the number of complaints recorded in Q4, 2010, which was explained by the increased number of complaints/claims filed against pawnshops in that period of time. The decline in the number of complaints reviewed in Q3, 2010 was mostly attributable to lesser complaints due to non-active clientele, typical to summertime.

31 The number of complaints reviewed by the Office during 2010, by months

18 19 20 18 16 13 14 11 10 12 9 10 6 7 8 4 4 4 5 6 4 2 0

April May June July January March August October February September NovemberDecember

The number of complaints filed to and claims received for review by the Office during 2010, by quarters

186 164 165 200 180 128 160 Number of complaints 140 received during 2010 120 Number of claims 100 taken in for review 80 50 during 2010 60 26 21 40 13 20 0 Q1 Q2 Q3 Q4 32 The number of complaints filed to the Office in 2009 and 2010, by quarters

185 200 164 161 165 180 160 128 140 86 120 2009 80 100 2010 67 80 60 40 20 0 Q1 Q2 Q3 Q4

The number of claims reviewed in the Office in 2009 and 2010, by quarters

50 45 40 35 26 24 30 2009 21 25 2010 13 20 10 12 15 8 10 5 0 Q1 Q2 Q3 Q4 unit Total number of complaints received during 2010 642 Not eligible for review by Mediator 192 Eligible for review by Mediator 450 Resolved based on complaint/claim filed against the organization in question 66 Taken in for review upon presentation of a claim in writing 110 Claim satisfied through reconciliation 39 Claim declined 30 Claim partially satisfied 27 Review of the claim suspended 13 Review of the claim declined 1 Review of the claim satisfied 0

Results/outcome of review of complaints/claims

11.8% 0.9% 24.5% 35.5% 35.5% - Claim satisfied through reconciliation 27.3% - Claim declined 24.5% - Claim partially satisfied 11.8% - Review of the claim suspended 27.3% 0.9% - Rewiew of the claim declined

34 Claims settled down in favor of the client (claims satisfied, partially satisfied, reconciliation decisions)

40.9% 59.1% 59.1% - Claim satisfied through reconciliation 40.9% - Claim partially satisfied

Complaints, by type of organizations

unit % Total number of complaints received during 2010, which were filed against 642 100% Banks 419 65.3% Pawnshops 80 12.5% Credit institutions 75 11.7% Insurance companies 63 9.8% Payment and settlement organizations making remittances 3 0.5% Investment companies 2 0.3%

35 Share of claims filed against financial organizations in 2010 in the total number of claims presented to the Office

0.5% 0.3% 9.8% 65.3% - Banks 11.7% 65.3% 12.5% - Pawnshops 11.7% - Credit institutions 12.5% 9.8% - Insurance companies 0.5% - Payment and settlement organizations making remittances 0.3% - Investment companies

Claims presented to the Office in 2010, by content

26 12 117 31 430 - Credit operations 40 4 2 65 - Payment and settlement transactions 41 41 - Sale of collaterals 40 - Vehicle insurance 26 - Depositary operations 65 12 - Credit card frauds 430 11 - Medical insurance 7 - Travel insurance 4 - Accidents insurance 3 - Service quaility 2 - Investments 1 - Liability insurance

36 The number of complaints presented to the Office in 2009 and 2010, by types of financial organizations

419 450 400 350 252 300 2009 250 2010 200 150 80 75 63 100 54 22 46 50 0 3 1 2 3 0 0

Banks Other Pawnshops Credit institutions Insurance companiesInvestment companies Payment and settlement

37 Share of claims filed against selected financial organizations in total complaints presented to the Office in 2009 and 2010

66.7% 65.3% 70.0% 60.0% 50.0% 2009 40.0% 14.3% 2010 30.0% 12.5% 12.2% 11.7% 9.8% 20.0% 5.8% 10.0% 0.0% 0.5% 0.3% 0.0% 0.3% 0.8% 0.0%

Banks Other Pawnshops Credit institutions Insurance companiesInvestment companies Payment and settlement

Claims reviewed, by type of organizations

unit % Total number of claims in writing during 2010, which were filed against 110 100 % Banks 48 43.6 % Pawnshops 39 35.5 % Insurance companies 15 13.6 % Credit institutions 7 6.4 % Payment and settlement organizations making remittances 1 0.9 %

38 Share of claims filed against selected financial organizations in total complaints accepted by the Office for review in 2010

6.40% 0.90% 43.60% - Banks 43.60% 13.60% 35.50% - Pawnshops 13.60% - Insurance companies 6.40% - Credit institutions 0.9% - Payment and settlement organizations making remittances 35.50%

Content of claims filed against banks

unit Total number of claims in writing filed against banks during 2010 in connection with: 48 Credit operations 19 Payment and settlement transactions 21 Depositary operations 6 Other 2

39 Content of claims filed against insurance companies unit Total number of claims in writing during 2010, which were filed against insurance companies, including 15 Vehicle insurance 7 Medical insurance 4 Travel insurance 3 Accidents insurance 1

Reimbursement

AMD % Total value of Client reimbursement during 2010, including: 29,264,354 100% Reimbursement on claims against banks 12,837,593 43,87% Reimbursement on claims against insurance companies 7,472,060 25,53% Reimbursement on claims against credit institutions 3,279,500 11,21% Reimbursement on claims against pawnshops 5,667,201 19,37% Reimbursement on claims against payment and settlement organizations making remittances 8000 0,03%

40 Share of reimbursements as a result of review of the claims filed against financial organizations in total indemnification provided to the clients in 2010

0.03% 11.21% 43.87% - Banks 19.37% - Pawnshops 25.53% - Insurance companies 11.21% - Credit institutions 0.03% - Payment and settlement 25.53% organization making 43.87% remittances

19.37%

Includes the amount of reimbursements granted according to Mediator’'s decisions with which consumers did no’t agree.

41 Share of client reimbursements in 2009 and 2010 in total indemnification, by selected financial organizations

57.87%

60.0% 43.87%

50.0% 34.77% 40.0% 2009 19.37% 25.53% 30.0% 11.21% 2010 20.0% 6.81% 10.0% 0.57% 0.00% 0.03% 0.0%

Banks Pawnshops Credit institutions Insurance companies Payment and settlement

Share of the claims accepted for review in claims filed against selected financial organizations in 2009 and 2010

100.0% 90.0% 80.0% 70.0% 48.75% 60.0% 2009 50.0% 29.63% 33.33% 2010 40.0% 18.18% 23.81% 30.0% 13.10%11.46% 9.33% 20.0% 8.70% 10.0% 0.00% 0.0%

Banks Pawnshops Credit institutions Insurance companies Payment and settlement Share of cases settled down in favor of the client in claims filed against selected organizations in 2010

100% 100.0% 90.0% 76.92% 66.67% 80.0% 70.0% 57.14% 60.0% 45.83% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

Banks Pawnshops Credit institutions Insurance companies Payment and settlement

During 2010: 68.75 % of the cases reviewed have been settled in favor of the client; the largest compensation - AMD 5.1 million; the smallest compensation - AMD 1 000.

43 Cooperation with Financial System Mediator Dispute resolution in court

When publishing an annual report, Mediator undertakes to disclose, in the period under review, the number of cases when financial organizations disputed in court the decisions taken by Mediator. Such disclosure shall include also the judgment of the court issued with regard thereto and the pecuniary value of the payment made by the Office as a result of the judgment. Accord- ing to data available with the Office, no case has been reported in relation to financial organizations having disputed the decisions of Mediator.

Staff members of the Office seek to maintain a feedback to everyone having filed a claim to Me- diator. This allows the Office to know whether the decisions made by Mediator have been com- plied with or get information about further action by those people who have not agreed with the decisions of Mediator. It should be noted that in the year under review the Office had cases of citizens having resorted to court for writ of execution in order to comply with the decisions of Mediator on a compulsory basis (a total of 12 cases known). All these cases were associated with a pawnshop functional in Armenia.

Three of those citizens having not agreed with the decisions of Mediator resorted to the court for the same claim. Based on available data, the proceedings of one these cases has been abated by the court with the reasoning that Mediator had already made a decision in respect to the same claim, one of the claims was under court investigation and the other claim has been declined by court decision and Mediator decision. Further, the client had not agreed with the decision, so he appealed against the decision of the court of first instance to the appeal court and, later on, to the Court of Appeal. That case was still under the Court of Appeal proceedings as this report was getting prepared.

We are pleased to mention that cooperation between Mediator and financial organizations remained strong in the year under review; and no financial organization was recognized as unwill- ing to cooperate. What is more, the Office of Mediator again decided to reward best cooperating organizations. For reward, eligibility criteria were as follows:

45 the ability of an organization to cooperate during review of cases; this involves how fast an organization presents the required documents for consideration, how complete these are and how enthusiastic are representatives of the organization in supporting review of the case in question; the share of cases ended up with a reconciliation outcome in a total number of cases reviewed; an organization's’ response to inquires made for the purpose to identify customary business practices, including frequency, content and integrity of response; the ability of an organization to participate in seminars organized by the Office, including seminars held within the Office, other organizations, and in regions; efforts to provide the public with information on Mediator, including information posted in its Internet website, and so on; other factors (e.g. the extent to which the organization is or has been involved in the review of claims filed against another organization).

Each criterion was measured and a specific weight was prescribed thereto based on the signifi- cance of the criterion concerned.

So, among financial organizations which earned a title of best cooperating institution were: HSBC Bank Armenia CJSC, Byblos Bank Armenia CJSC and VTB Bank Armenia CJSC; and such insurance companies as INGO Armenia and ROSGOSSTRAKH.

In the year under review, more financial organizations joined the Consent by agreeing to waiver the right to dispute the decisions taken by Mediator. Appendix 1 presents the list of financial organizations which have or have not joined the Consent.

46 Case Survey The Republic of Armenia Law on Financial System Mediator establishes that Financial System Mediator shall sum up the precedent created by itself and shall publish it each month before the 15th day of the upcoming month. Financial System Mediator shall not publish the name of the parties engaged in individual cases. We have made available to the public a brief statement of the cases precedent or cases in respect of which Mediator has voiced opinion. As well as we have attempted to take exemplary models and made them available to the financial industry people and general public for judgment.

Below is presentation of some model examples of cases reviewed by the Office. Case 1: Claim filed against a bank – involving a deposit invested in favor of third party

The client opened a deposit account with the bank and signed a deposit contract by investing USD 20.000 with that bank. The client told that his passport was not with him by the time he was signing the deposit contract, so the amount was credited into the account by his friend (citizen A). Months later the client wanted to withdraw money from his deposit account but was told at the bank that there was no money at the bank on his behalf. The bank responded to the client's’ claim that there was a demand deposit contract between the bank and citizen A signed in favor of third party thus making the client a third party. Referring to Article 910 of the Republic of Armenia Civil Code, the bank stated that the right to posses the deposit in question belonged to the person having signed the demand deposit contract and paid the amount of deposit, i.e. citizen A, who has made possession of the amount. The client however found that the bank had breached the requirement of the law, so he filed a USD 20.000 claim against the bank.

The bank told Mediator that the said deposit amount was invested and the contract signed by citizen A who has been treated as the depositor and used his right as provided for in Article 910 (2) of the Civil Code. The bank added that at the moment the deposit was being invested, the contract was being signed and before the claim was filed against the bank, the client failed to voice his intention to use his rights as depositor, which is why the right to possess the invested deposit belonged to citizen A who has signed the deposit contract and paid the money. Re- quested by Mediator to present a copy of deposit account and/or bank account or account service contract signed between the bank and the client (and/or citizen A), the bank told that it had no such contract signed with either the client or citizen A. This means that the client has not opened an account with the bank on his behalf while citizen A could not have opened an account in favor of the client without a duly authorized power of attorney.

49 Main conclusions

According to applicable law, in this case the contract concluded in favor of the third party had to be signed between the bank and citizen A, while the client should have been mentioned as third party. Otherwise, the bank and citizen A should have been mentioned as signatories to the deposit contract signed in favor of the third party. Yet the bank argues that if the deposit money was invested by citizen A and the deposit contract had his name specified as the payer of the amount and his signature, then a customary business practice considers this a deposit contract signed in favor of the third party, regardless of the fact that citizen A was mentioned in the contract as the depositor. In consideration of this, Mediator made a query to all commercial banks functional in Armenia to figure out the customary business practice on this matter.

Opinion from commercial banks generated a customary business practice, since almost all banks had a similar approach. Taking also into account the customary business practice in the banking sector, Mediator reached a conclusion, as follows: as provided by Article 446 (1) of the Civil Code, a contract is in favor of the third party whereby the signatories have established that the debtor must fulfill his obligation not in favor of the creditor but rather in favor of the third party, whether or not mentioned in the contract, who has the right to require the debtor to fulfill his obligation in favor of him. Article 910 (1) of the Civil Code provides that a deposit amount can be invested with the bank in favor of third party. Such third party will acquire depositor rights as soon as he delivers a claim before the bank based on such rights or when the bank is advised in any other manner of his intention to use such rights, unless otherwise provided for in the deposit contract. As an essential term in the deposit contract is the specification of the name of natural person or the title of legal person, on which behalf the deposit amount is invested. According to part 3 of the same Article, terms on third party contract (Article 446) shall be applied in respect of the deposit contract signed in favor of the third party, provided that it does not contradict provisions of the Article and the definition of bank deposit. This infers that provisions of Article 446 pertinent to third party contract have to be applied to the deposit contract signed in favor of the third party. So, a deposit contract in favor of third party shall incorporate as signatory the person who has paid the amount of deposit to the bank (who is considered as depositor), whereas provisions on the third party taking action in favor of the bank must be mentioned in the contract, except when the person who pays the amount of deposit to the bank acts as representative of another person based on a statutory document (power of attorney, contract, and so on); in this case the one who is being represented can only be a signatory to the contract or depositor.

50 In our case, the contract, however improperly executed in the legal point of view, could be treated as a deposit contract signed in favor of the third party if it mentioned additionally that the money was invested in favor of the client. What we had instead was a deposit contract in which the client was mentioned as depositor and signatory to the contract. So, specified as signatory to the contract other than the third party, the client has not signed the contract. Instead, the contract had the signature of citizen A who was mentioned in the contract neither as party (depositor), nor an authorized person, nor even as a third party.

Article 904 (1) of the Civil Code provides that a deposit contract of the bank shall be concluded in writing. As such, a written form of the deposit contract is treated as maintained if the contract was concluded in writing and payment of the deposit amount was attested by statutory document issued from the Central Bank of Armenia, or by passbook or bank certificate or certificate of deposit. Article 296 (1) of the Civil Code provides that a written transaction must be made by the preparation of a document expressing its content and signed by the person or persons making the transaction or persons properly authorized by them. Further, Article 450 (3) establishes that a contract can be concluded in writing when the signatories conclude the contract or when the documents are exchanged via postal, telegraphic, teletype, telephonic, electronic means or otherwise, which make it possible to figure out precisely that the particular document ensues from the contract. In this case, the deposit contract, in fact, has not been signed by the client as signatory (depositor), but rather it has been signed by citizen A who, as it was noted earlier, had not been referred to in the contract context anyway. Article 904 (2) of the Civil Code provides that non-adherence to the written form of a deposit contract shall entail annulment of the contract and such contract is null and void. Article 304 (2) of the Civil Code provides that in case of invalidity of a transaction, each of the parties is obligated to return to the other everything received under the transaction and in case of the impossibility of returning in kind what was received (including when what was received consisted of the use of property, work performed, or services provided) to compensate for its value in money, unless other consequences of invalidity of the transaction are provided by a statute. In this case, when invalidity was a result of non- adherence to the written form of a deposit contract, the bank would be obliged to return money to the person who has paid it to the bank, i.e. citizen A, whereas the client's’ argument that the bank had not have the right to debit money from the account opened on his behalf in favor of another person is legally unfounded, since there is no contract of bank account signed between the client and the bank, or between a client-authorized party and the bank.

Based on the statement above mentioned, Mediator decided to decline the client claim filed against the bank. 51 Case 2: Claim filed against a bank – involving a change in loan interest rate

The client, who had been an employee of the bank against which he filed a claim, entered into a master loan agreement with the bank in 2008. Another agreement on providing loan was signed between the client and the bank in July 2009, in supplement to the master agreement, whereby the bank provided loan amounting to AMD 7.300.000 with an interest rate of 7 percent p/a. As told by the client, in December 2009 the bank employee made a call to him telling that the interest rate of the loan had increased to 17.5 percent due to his dismissal. The client believed that the bank's’ actions were not lawful, so he demanded a return of approximately AMD 200.000, an extra amount paid due to the risen interest rate, and leave the interest rate at 7 percent as it was before. Mediator requested the bank to deliver written explanation, clarification and/or objection and other appropriate information, including the bank's’ internal rules and policies pertinent to the then current terms of account service, terms of concluding and executing loan contracts, all employment contracts signed between the client and the bank. Mediator asked the bank to provide the reason why it had made a unilateral change to the loan contract and, once made, how the bank was supposed to notify the client of the change of any provision of the loan contract or, otherwise, which manner would the bank consider appropriate to notify the client of the change in interest rate, or which was the ground prompting the bank to reset the interest rate, etc.

In its letter to Mediator the bank mentioned that it normally had privileged terms and conditions for its employees to use bank services, which are established under the bank's’ policies for provision of bank services to employees. The bank mentioned that these policies are posted in local electronic systems of the bank so that these are available to all employees. Moreover, the employees read these policies before entering into employment contracts with the bank. An employment contract signed between the bank and the client says that the employee shall, after his employment contract has been dissolved, make interest payments (commissions and other dues) of privileged loans and/or other privileged services of the bank in compliance with terms and conditions applied to the clients other than the employees of that bank.

52 Also, the bank referred to article X of the loan contract signed with the client, providing that the client had read the then current terms and conditions of the bank for provision of account services and that the client cannot pretend claims against further action of the bank. So, the bank told that its actions were entirely lawful when it had raised the loan interest rate to 17.5 percent from 7 percent p/a originally.

The bank had the copy of the client's’ employment contract, the policies for provision of bank services to employees (other than the terms and conditions for provision of account services) and the copy of loan contract attached to its letter. Main conclusions According to Article 440 (1) of the Civil Code, performance of a contract is paid for at a price established by agreement of the parties. The second part of the same article provides that the change in price after conclusion of a contract is allowed in cases and on conditions provided by contract or statute.

Article 466 (1) of the Civil Code provides that change and rescission of a contract are possible by agreement of the parties, unless otherwise specified by statute or contract. The loan contract signed between the bank and the client established that changes and/or supplements to the contract could only be made through another document subject to the signing by the parties. Further, Article 468 (2) provides that an agreement to change or rescind a contract shall be made in the same form as the contract unless it follows otherwise from a statute, other legal acts, contract, or customary business practice.

As was noted before, Mediator had requested the bank to provide the terms and conditions for its employees to use bank services, yet these terms have no provisions on granted insider loans in the event they are dismissed. The procedure, as provided by the bank, telling that the terms and rates of service after expiry and/or rescission of the employment contract will change subject to the terms applicable in any given period of time, was approved after the loan contract had been signed with the client.

According to Article 438 of the Civil Code, a contract must comply with rules obligatory for the parties established by a statute and other legal acts (imperative norms) in effect at the time of its conclusion. The article further establishes that if after the conclusion of the contract a statute is adopted establishing rules obligatory for the parties other than those that were in effect upon conclusion of the contract, the terms of the concluded contract shall remain in force except in 53 cases when it was established in the statute that its effect extends to the aspects arising from contracts previously concluded. In other words, the contracts being concluded are subject to the provisions of then current laws and regulations. Exclusion refers to the laws that can be applied to the contracts signed before these laws have been adopted, provided however that it has been stated expressly that the law concerned applies to the contracts previously concluded. Article 2 (1) of the Republic of Armenia Law on Legal Acts defines the legal‘ act ’ as a formally written document adopted for people, central or local governments, government or local government departments, and their subdivisions; and such a document incorporates rights, obligations, re- sponsibilities, limitations and so on subject to recognition, adherence, maintenance, fulfillment or enforcement. In consideration of what was said above, internal policies and regulations of the bank, applicable as of the date on which the loan contract has been signed with the client, shall apply to the said loan contract.

Further, Article 879 (1) of the Civil Code provides that in a loan contract the amount and procedure for calculation of interest must be expressly stated.

The loan contract signed between the client and the bank and the employment contract are two different papers. In order for provisions of the employment contract to apply to the loan contract, the loan contract needs to anyhow contain a mention of such provisions, e.g. a reference to the employment contract that the loan has been provided to the insider on privileged conditions, or that the interest rate set is subject to change in certain circumstances, which are laid down in the employment contract or internal policies and regulations of the bank. In this case under review it was clear that the contract of the loan with a fixed interest rate was signed with a citizen (other than a bank insider). Nor was there any stipulation in the loan contract in respect of possible change of interest rate or any condition whatsoever. Furthermore, as it was noted earlier, the contract only stipulated that changes and/or supplements to the contract could only be made through another document subject to the signing by the parties. The only stipulation in the contract was the reference to the terms of provision of bank account service.

In consideration of the articles of the Civil Code referred to above and the loan contract signed between the bank and the client, Mediator maintained that the bank would not have the right to change the loan interest rate unilaterally, without a written contract between the client and the bank. Even if the loan contract contained reference to the procedure which the bank had delivered, the bank would, again, not have the right to change the interest rate, under Article 468 of the Civil Code, without a written contract between the client and the bank, since the provisions of the said procedure do not cover aspects of the interest rate change.

Case closed upon reconciliation of the parties. 54 Case 3: Claim filed against a bank – involving a transaction with plastic card

On April 19 2007 the client entered into a contract with the bank on issue of plastic card and service of plastic card account so that it allows him to get salary in Russian Federation. Subse- quently, the bank issued a MasterCard to the client. In December 2007 the client came back to Armenia from Russia. In October 2009 the client was informed by the bank that he had an indebted amount of AMD 40.200, and that the credit register would categorize it as watched‘ loan ’ if he had not redeemed his indebtedness. To prevent his loan from being categorized as watched‘ loan ’ the client made all necessary payments but in March 2010 filed a claim against the bank, requesting a refund from the bank.

The bank told the client that on 05/02/2008 they got from MasterCard a processing of two transactions for debiting card account and one transaction for crediting card account, which had been done at service outlets of another bank (hereinafter bank-2). The client was told that the period within which the transactions were actually executed and processed exceeded 70 days while the period within which the actual execution and processing of transactions via Master- Card system normally does not exceed 5 days. The vast difference in the number of days has been due to the temporary disruption of the processing center of bank-2.

The bank assured that, once these transactions were accepted, the plastic cards unit tried to contact the client, yet in vain. On 07/02/2008 the client's’ card account generated receivables of AMD 40.200 yet a contact with the client was only reached in October 2009. A similar letter of the bank notified the client that the bank-2 provided a copy of the details of a transaction of AMD 20.000 but the client's’ signature was missing. In a complaint presented to Mediator, the client voiced his disagreement over the bank position and required from the bank to compensate the amount of AMD 40.200 because he did not know about withdrawal transactions.

55 Mediator asked the bank to provide:

what policies are in place that deal with situations when the period within which the actual execution and processing of transactions exceeds the period within which that is done via MasterCard system (5 days); whether or not the client's’ card account could have a negative balance; why there has arisen discrepancy between statement of account delivered by the bank and the copy of transaction details provided by the bank-2; information on the transaction details involving AMD 20.000 withdrawn on 17/12/2007 and its copy, if any; why commission fees as charged by the bank-2 are not seen in the column "sums‘ calcu- lated" ’ in the statement of card account, issued by the bank.

The bank told Mediator that MasterCard has chargeback rules providing that the transactions that are presented later on can be appealed based on the client's’ written disagreement over the sums that were charged on him. However, according to paragraph 4.2.5 of the contract on issue of plastic card and service of plastic card account, the cardholder undertook a commitment to come into the bank before the 10th of each month and get a statement of his card account for transactions executed in the previous month and to appeal the transactions in case he disa- greed, which had not been the case though. The bank stated that the disputed transaction was executed via service outlet of the bank-2, so the documents attesting execution of transactions should, accordingly, be found with the bank-2. Similarly, the bank found it difficult to explain the failure to charge commission fees on the transactions (normally, foreign banks and banks that are non-members to ArCa unified card payments system, and in this case the bank-2 too, charge 1 percent of commission for withdrawal of cash; however the commission fee should be not less than AMD 2.500).

To clarify further details with the transaction, Mediator sent a letter to the bank-2, requesting some handy information. The bank-2 informed Mediator that in November 2007 the bank's’ processing center encountered technical malfunction in connection with transaction processing via MasterCard system. As established by internal rules and policies of MasterCard, each bank may, within 120 calendar days, charge back the sums for processing of the transactions that were presented delayed. The bank-2 did not, however, use this window of opportunity. This im- plies that they agreed to the details of transaction processing. Apart from this, when executing the transaction, the cashier committed a violation by not asking the client's’ signature on the 56 transaction details, which cost him an administrative and monetary fine. Such a transaction detail is null and void and cannot be treated as key document, according to MasterCard policies. The bank-2 mentioned that the transaction details are added with information on the sum of and the commission fee charged against, the transaction. This is what the cash withdrawal software IMPEX was capable to do during the execution of the transaction in November 2007. At that time, a 1 percent commission fee for cash withdrawal via other banks' ’ VISA and MasterCard types of plastic cards applied in the bank, therefore the client was charged AMD 20,000 for the transaction of AMD 20,000, as shown in the transaction details. The bank-2 delivered no clarification in respect of the disputed transaction as of 17/12/2007 and of why it had not charged the commission fee as appropriate.

57 Main conclusions

Re: the transaction of AMD 20,200 executed as of 26/11/2007

1. The transaction was executed via POS terminal of the bank-2. The client'’s and cashier’'s signatures are not available on the receipt. According to MasterCard policies, such a receipt is null and void, so is the involved transaction,– especially when no material proof exists to verify the withdrawal of cash by the client. Therefore, AMD 20,200 charged against the transaction needs to be refunded by the bank having initiated that, i.e. the bank-2.

2. The bank shall not bear responsibility for the transaction of AMD 20,200, since:

the client failed to appeal the disputed transaction within the time framework established under MasterCard rules and policies (including within the 15-day period as specified in paragraph 4.1.2 of the contract on issue of plastic card and service of plastic card account on issue of the card); failure of the client to appeal was explained by him being unaware of the charging against the disputed transaction. Further, according to paragraph 4.2.5 of the said contract, a cardholder undertakes a commitment to come into the bank before the 10th of each month and get a statement of his card account for transactions executed in the previous month. The fact that he was not in the country does not exempt him of the obligation bound by the contract, especially when no additional agreement had been signed between the bank and the client in connection thereto.

3. These considerations were delivered to the bank-2, and the latter agreed, after negotia- tions, to refund to the client the disputed amount of AMD 20,200.

Re: the transaction of AMD 20,000 executed as of 17/12/2007 When requested additionally, the bank-2 assured that the transaction as of 17/12/2007 was executed via an ATM by using a PIN, and then promised to present the support documents pertaining to the transaction. However, getting any copy of electronic ledger of the ATM involved was impossible due to certain circumstances (archives, transaction date). Yet, the bank-2 agreed to refund to the client the disputed amount of AMD 20,000.

Case closed upon reconciliation of the parties.

58 Case 4: Claim filed against a bank – involving a transaction via EDC terminal

There was a card service contract signed between the bank and the client, which enabled the client to have an EDC terminal (an electronic information compilation device) installed at his commercial outlet in order to accept payments by cards issued under the license of ArCa and/or MasterCard International. In May 2010, the client traded for a total of AMD 1,800,000 via the EDC terminal at his commercial outlet. The bank, however, did not record that transaction onto the client's’ account.

The bank presented its position to Mediator in connection with the review of the case. In particular, the bank provided the client with required information and verbal instruction on how to use the EDC terminal (including a procedure on HYPERCOM POS terminal operation, a sample receipt of card seizure, the authorization codes table, and so on). The bank noted that a few months before the complaint was sent to the Office of Mediator a transaction of AMD 1,600,000 had been executed via the clients’ EDC terminal and the bank had this sum prelimi- narily credited onto the client's’ account until the receipt of a due authorization by the bank having issued the card.

Before that, the employees of the bank warned the client that his action was non-compliant with the authorization rules established under the contract, and in the event of non-receipt of a due authorization by the card issuer bank, the transaction sum would be charged back from the client's’ account based on paragraph 7 of the contract saying that a commercial outlet must get authorization via EDC terminal for all the transactions executed. Where communication with an authorization center lacks, a commercial outlet will use telephone to get a voice authorization and finalize the transaction by taking an authorization code from the authorization center and inputting it manually to the EDC terminal. Also, according to paragraph 8 of the contract, a commercial outlet will take all reasonable efforts to follow the authorization center's’ instructions accurately.

59 Referring to the information from ArCa company and then to the transaction receipts, the bank mentioned that not only did the client receive a transaction authorization via the EDC terminal but also he failed to get a code of voice authorization by telephone and follow the instructions from the center, which were displayed on the EDC terminal. Instead, the client took the password, which was made available to him by the bank for some other purpose, and got to proceed with the transaction. After the said transaction, the employees of the bank again warned the client to follow strictly the center's’ instructions that appear on the EDC terminal display, and either use a telephone number shown on the display or terminate the transaction and make a call to the bank.

Unheeded of the warnings of the authorization center, the client performed the second transaction of AMD 1,800,000 by again entering personal password to get a transaction authorization. This time the employees of the bank sent a prompt notice to the client requiring him to stop it immediately. The client however made his point, arguing that the transaction had been com- pleted and the goods had already been sold and made available to the buyer.

In its letter, the bank adds that it got the issuer bank's’ request of a chargeback on the above- said two transactions (reason code 4808). Attached to the bank's’ letter were the card service contract signed between the client and the bank, the procedure on HYPERCOM POS terminal operation, the sample receipt of card seizure and the authorization codes table, and a copy of the issuer bank's’ chargeback claims and a copy of receipts of the two transactions.

60 The company declined to compensate the client for the following reasons:

Pursuant to paragraph 16 of the contract signed between the parties, the…“ bank is entitled to decline any time to make a full or partial payment to the commercial outlet (or debit the sums from the account of the commercial outlet, if the payment has already been done), even if there has been an authorization issued and/or authorization code granted from the authorization center; the bank is also entitled to decline payment, whether full or partial, if the commercial outlet has breached any of the contract provision pertaining to the transaction, receipt or whatsoever, not necessarily provided for under this subparagraph.…” For the second transaction of AMD 1,800,000, the client again failed to follow instructions displayed on the EDC terminal but used the password instead to get the transaction going. Because this transaction too did not get the right authorization, the bank declined the client the compensation of the amount requested.

In reference to the chargeback claim by the issuer bank in respect of the two transactions said above, the bank noted that the names of the clients-cardholders shown on the receipts of transactions did not correspond to the actual cardholders'.’ The chargeback claim made it clear that the above two transactions performed by the client had been fake.

The bank mentioned that both transactions were unlawful and performed in violation of paragraphs 7 and 8 of the contract, entailing a circumstance where actual cardholders deny the transactions and the issuer bank declines to pay against the receipts of transactions, as delivered by the client. Moreover, based on the grounds of selected subparagraphs of paragraph 16 of the contract, the bank required the client to return the sum of the first transaction in full, and it declined to pay the sum of the second transaction. Further to its letter, the bank delivered, electronically, the Acquirer Logs of the transactions which was provided by ArCa processing center. The details of the transactions executed via EDC Terminal 1 installed at the client's’ commercial outlet as well as the data of Prime system were shown in these acquirer logs. Also, the bank visited MasterCard Internationals’ website www.mastercardonline.com and delivered the results of search by the use of the first eight digits printed on cards that were reflected in chargeback claims. According to the results, EURO Kartensystem GmbH was the company that issued the cards with which the transactions were done at the client's’ commercial outlet.

61 In a conversation at the Office of Mediator, the client told that in executing the second transaction a buying customer handed a plastic card. Once the card was inputted, the terminal generated code 05, meaning that there were not sufficient funds on the card, and then made a printout of it. He added that, when executing the second transaction, no code other than the said one appeared on the POS terminal. The client further told that the first transaction details had the number ****28 and the second had the number ****30. Inter- estingly, there has been only a single printout which the POS terminal generated between the two transactions, and that printout appeared when code 05 came out, so code 01 could not therefore appear on the POS terminal, as employees of the bank noted.

The client noted that the EDC Terminal 1 accepted the 4-digit password provided by the bank as an authorization code, whereas the authorization code would have to contain 6-digits. So, there are reasons to believe that the transaction kept going due to the defect with the EDC Terminal 1 as the device accepted the 4-digit password as an authorization code.

62 Main conclusions

Having reviewed the available documents and arguments, Mediator came at the following conclusion:

Re: code 05 of the authorization codes table The examination of the authorization codes table made it clear that code 05 means that the transaction has‘ not been honored ’ rather than there‘ are insufficient funds on the account.’ The code which the client referred to is pertinent to the message under code 51 which reads "transaction‘ has been denied: insufficient funds".’ Re: the device accepting the 4-digit code as an authorization and the numbers of the two transaction details The client's’ argument that an authorization code should be a 6-digit password rather than a 4-digit password is true. This is what the glossary of terms of MasterCard International says: an authorization code involves a combination of six digits, provided by the bank that has issued the card as a special message for the authorization, in order to verify authenticity of the account. However, talks with the experts of ArCa processing center and the Central Bank of Armenia helped us to figure out that any combination of digits entered can prompt the device to treat it as an authentic authorization code received from the processing center, since once code 01 is received the device will turn off-line from on-line while keeping the transaction going irrespective of the number of digits (chiefly in case of three and more digits). As for the numbers of the transaction details, experts of the Central Bank told that POS terminals normally do not generate an automatic printout of all the messages displayed. If a transaction clerk wishes to make a printout of any particular message, he should set the device accordingly (e.g. by pressing OK or Enter), so that the required message appears on the printout. Re: the two transactions executed at the client’'s commercial outlet As shown from Acquirer Logs for the transactions provided by ArCa processing center, the payment with plastic card at the client's’ commercial outlet has not been authorized by the authorization center, and the EDC terminal displayed the code 01 which reads "Transaction‘ denied, please go to the issuer bank",’ according to the authorization codes table. The client failed to follow the instruction appeared on the EDC terminals’ display and instead entered the personal password, as had been granted to him by the bank for other purposes, to proceed with the transaction.

63 As the payment with the plastic card was made, the EDC terminal displayed the code 05 which reads "Transaction‘ denied",’ according to the authorization codes table. Once denied by the EDC terminal for the transaction, the client tried to carry on by using another plastic card provided by the buying party. Again, the EDC terminal displayed the code 01 which reads Transaction‘ denied, please go to the issuer bank.’ The card failed to be authorized by the authorization center, and the client again tried using the password manually to proceed with the transaction. Re: MasterCard International operational regulations As established by Chargeback Guide of MasterCard International as of 16/04/2010, subparagraph 3.13.1, the‘ card issuer bank is entitled to make a chargeback under reason code 4808, if the transaction was executed face-to-face, the card was entered through POS terminal which is able to read on-line and magnetic strip yet no due authorization has been received.’ When executing the transaction at the commercial outlet not only did the client receive a transaction authorization via the EDC terminal but also he failed to get a code of voice authorization by telephone and follow the instructions from the center, which were displayed on the EDC terminal. Instead, the client took the password, which was made available to him by the bank for some other purpose, and kept the transaction going. Re: the copies of transaction receipts and MasterCard International chargeback claims Comparing the data of copies of chargeback claims received from the issuer bank with the receipts of the two transactions performed at the client's’ commercial outlet, we found out that the names of the clients-cardholders shown on the receipts of transactions did not correspond to the actual cardholders'.’ So, both transactions performed by the client were fake. Re: card service contract signed between the bank and the client The client failed to follow the instruction that appeared on the display of the terminal and instead entered the personal password, as had been granted to him by the bank for other purposes, to proceed with the transaction. He did it in violation of paragraphs 7 and 8 of the contract. Based on the grounds of selected subparagraphs of paragraph 16 of the contract, the bank required the client to return the sum of the first transaction in full, and it declined to pay the sum of the second transaction.

64 The aforementioned considerations suggest that:

the two transactions were performed by the client in violation of paragraphs 7 and 8 of the card service contract signed between the bank and the client; as shown from Acquirer Logs for the transactions provided by ArCa processing center, the payment with plastic card at the client's’ commercial outlet has not been authorized by the authorization center, and the EDC terminal displayed the code 01 which reads "Transaction‘ denied, please go to the issuer bank",’ according to the authorization codes table. The client failed to follow the instruction appeared on the EDC terminals’ display; as established by Chargeback Guide of MasterCard International approved as of 16/04/2010, the‘ card issuer bank is entitled to make a chargeback under reason code 4808, if the transaction was executed face-to-face, the card was entered through POS terminal which is able to read on-line and magnetic strip yet no due authorization has been received;’ based on the grounds of selected subparagraphs a), m), o), q) and t) of paragraph 16 of the contract, the bank required the client to return the sum of the first transaction in full, and it declined to pay the sum of the second transaction.

Mediator decided to waive the client’'s claim filed against the bank.

65 Case 5: Claim filed against a bank – involving annulment of a payment order

On 31/08/2010, the client went into a bank branch office and effected an outbound SWIFT transfer of USD 2,500 to China. The next morning, 09:43 am, he came back to the same branch office and wrote a letter of request asking to cancel the transfer for which he paid a sum of AMD 25,000. As told by the client, the employee of the bank assured him that the amount transferred would not be withdrawn in China and would be returned. Yet the transfer had not been annulled by the bank and on 03/09/2010 the sum was withdrawn in China. The client believed that action of the bank was not lawful, so he demanded a refund of USD 2,500 as well as AMD 25,000 which he paid for a bank service.

The bank mentioned that on August 31 2010, around 03:00 pm, the client made an order for an international transfer of USD 2,500 to China via SWIFT, and the transfer was made within the same day. The next morning on September 1 the client went in and required to annul the previous day's’ transfer of USD 2,500. As the bank clarified to Mediator, an employee of the bank explained to the client that the notice for annulment of the order of that money remittance would go to the beneficiary bank in the same manner, i.e. electronically, through an intermediary bank, while the beneficiary's’ consent would need to be reached in order to return the money. The bank noted that after having read the rates of services offered by the bank, the client asked whether the bank would guarantee the refund of USD 2,500 if the client paid AMD 25,000 for a letter of request asking to cancel the transfer. The employee explicated that AMD 25,000 had been charged for processing of the letter of request and re-stated that the return of the money would only be possible in case of the beneficiary's’ consent. The bank told that the client had made the payment, and the letter of request had been sent electronically to the intermediary bank.

The bank further told in its letter that on September 9 2010 it received a reply to the client's’ letter of request asking to cancel the transfer from Standard Chartered Bank of New York, the bank's’ correspondent bank. The reply read as follows: Please,‘ be informed that on 01/09/2010 the beneficiary's’ bank made the payment. The beneficiary refused to return the money. We kindly advise the sender to contact the beneficiary personally.’ The bank added that the client had made other money remittances to China formerly but he never had any problems.

66 Attached to the bank's’ letter were the copy of the procedure on service of foreign currency payment orders of clients, the copy of rates of services offered by the bank approved in a new ver- sion, the copy of the request of wire transfer as of August 31 2010 and the copies of electronic communications between the bank and the intermediary bank pertaining to the said transfer and annulment of transfer.

The copies of the letter verifying the transfer of the money, of the letter requesting annulment of the order and of the replies thereto were supposed to be in the list of documents attached to the banks’ letter to Mediator. Yet the bank did not deliver them. Mediator requested additionally to the bank to provide, as soon as practicable, the missing documents along with documents/ information, as follows: Operating Rules of International SWIFT Transfers; the copy of the contract concluded between the bank and the beneficiary, and between the intermediary bank; information on how payment orders and orders to cancel payment orders are accepted with the bank; Mediator asked the bank to deliver a document, if any, that illustrates acceptance of the said documents

The bank presented the copies of the letter verifying the transfer of the money, of the letter requesting the intermediary bank to annul the order and of the intermediary bank's’ replies there- to, Mediator further requested the bank people to specify when the amount was credited onto the beneficiary's’ account and was withdrawn. Accordingly, the bank provided Mediator with its communications to correspondent and beneficiary banks to obtain the information required.

67 Main conclusions

As provided by Article 17 (1) of the Republic of Armenia Law on Funds Transfer through Pay- ment Order, Cancellation‘ of payment order means termination of transfer of the amount of payment order provided that that amount is immediately reimbursed to the sender. If a payment order is canceled its acceptance is annulled and the rights and obligations of parties to funds transfer resulting from the acceptance are terminated. A payment order may be canceled pursuant to this law pursuant to a cancellation order issued by the sender or a court.’ The second subparagraph of the same article establishes that Cancellation‘ order may be transmitted to the receiving bank (orally, electronically, or in writing) in order established by agreement between the sender and the receiving bank or by a funds-transfer system rule. Requisites of cancellation order may be established by an agreement or a funds-transfer system rule.’

At the same time, SWIFT operational rules regarding the annulment of payment orders provide that the annulment or change or permission to change payment orders is beyond the scope of regulation of these rules and that should be established under laws and contracts concluded between the sender bank and the intermediary bank, the scope of regulation of which can be determined from time to time by the participating banks. In a Mediator request to present an agreement that regularizes aspects of the transfer of funds and/or the annulment thereof, as concluded with an intermediary or beneficiary bank, the bank responded that there was not such an agreement in place.

According to Article 17 (3) of the said Law, Acceptance‘ of cancellation order means obligation to cancel the payment order. Acceptance of cancellation order precludes later acceptance of payment order.’ Further on, subparagraph 5 of the same article provides that after‘ a payment order has been accepted, the cancellation order shall be accepted in cases provided for in clauses 6 and 7 of this article, if the receiving bank agrees to accept it or a funds-transfer system rule allows cancellation without agreement of the receiving bank.’

Accordingly, subparagraphs 6 and 7 establish that ‘a cancellation order canceling a payment order accepted by a receiving bank other than the beneficiary's bank, shall not be accepted unless an appropriate cancellation order issued by the receiving bank is accepted by the next receiving bank’; and ‘a cancellation order canceling a payment order accepted by the beneficiary's bank shall not be accepted unless this payment order was issued:

68 in execution of a payment order which was not issued by a person mentioned as sender or by his authorized representative, or because of a mistake by a sender:

the sender has issued a duplicate of a payment order previously issued by him, or the payment order designates by error a beneficiary not entitled to receive payment from the payer, or the payment order designates by error an amount greater than the amount the beneficiary was entitled to receive from the payer.’

It should be also noted that Article 15 of the same Law establishes the following: A‘ beneficiary's bank accepts a payment order: when the bank pays the beneficiary or notifies (orally, electronically, or in writing) the beneficiary of receipt of the payment order or that the account of the beneficiary has been credited with respect to the payment order, unless the notice indicates that funds may not be used by the beneficiary until the sender pays the amount of payment order or that the bank is rejecting the order, when the sender pays the amount of payment order to the beneficiary'’s bank, or the opening of the next business day of the bank following the payment date stated in the payment order if, at that time, the sender has paid the bank the amount of payment order or the credit balance in the sender's’ account covers the amount of the payment order, unless the payment order was rejected before the opening of that business day or is rejected within: one hour after the opening of the business day of the beneficiary's bank, or one hour after the opening of the next business (working) day of the sender following the payment date stated in the payment order if the business (working) day of the sender starts later than the business day of the receiving bank.’

69 Having reviewed the communication regarding the request to annul the client's’ payment order between the bank and the intermediary bank, i.e. Standard Chartered Bank of New York, Me- diator could come at a point, as follows: on August 31 2010, 04:59:49 pm, the bank effected the clients’ payment order for USD 2.500. The next morning on September 1 2010, 10:31:13 am, the bank requested Standard Chartered Bank of New York to annul the client's’ payment order; on the same day, within 03:20 - 03:38, the intermediary in turn requested the beneficiary's bank to authorize the annulment of the payment order but did not get the consent of the beneficiary's’ bank. In consideration of the circumstances above said, and by virtue of the provisions of the Republic of Armenia Law on Funds Transfer Through Payment Order referred to above, Mediator believes that the bank's’ action in connection with the transfer of funds and subsequent efforts to annul the client's’ payment order were compliant with the requirements of the Law.

As mentioned above, the client demanded AMD 25,000 which he paid for a letter of request asking to cancel the transfer. As mentioned above too, the bank told Mediator that the client had read the rates of service offered by the bank while the employee explained to the client that AMD 25,000 was a charge for the clients’ letter of request to be accepted and processed, and that this would not necessarily entail an annulment of the payment order.

It should be noted however that the rates of service offered by the bank are not expressive whether the said charge is only for the annulment of the payment order or it is charged for at- tempting the one, as well. Furthermore, the service rates clearly indicate that AMD 25,000 will be charged for the change of payment order for transfer of foreign currency funds, including the annulment of such payment order, except for the transfers made via the systems for individual remittances. This definition does not fully reflect conditions for a charge but instead it indicates the amount is not chargeable from natural persons. Any user who reads these terms and conditions before he has requested to annul a payment order may be misled. Therefore, taking the above into account, Mediator feels that the bank should return the client the sum of AMD 25,000 charged against the service.

At the same time, Mediator suggested to the bank to re-define the above-said condition, by making it clear that the attempt of annulment of the payment order is chargeable, too.

Mediator decided to satisfy the claim partially.

70 Case 6: Claim filed against an insurance company – involving insuring a motor vehicle

In July of 2008 the client had his personal motor vehicle of Chevrolet‘ ’ make insured at the insurance company by paying a premium of 85.05 percent of real value of the car. In June of 2009 the car crashed in an accident, so the client undertook all necessary action required by the insurance policy. Representatives of the company visited the scene of action. Understandably, the client went to the company to get indemnification against loss caused by the accident. The company explicated to the client that before anything they had to start an examination of the case involved including an assessment of the loss caused by the accident. The client turned to Mediator requesting an indemnification of the entire insurance amount of AMD 4,176,000 as specified by the insurance policy since, it was believed, the insured car would not any way be repaired.

In response to the claim, the company maintained that they had made an assessment of the loss caused by the accident but no conclusion about paying or declining to pay an insurance indemnification had been reached yet, as they believed there were objective and grounded reasons behind. The company added that the same insured motor vehicle encountered a crash in October of 2008 with serious damage incurred as a result. The company then declined to pay an indemnification as the policyholder had breached some provisions of the rules known as appendix to the insurance policy involved. The decline was acknowledged and not disputed by the policyholder. By comparing the photos of the motor vehicle made after the accidents in 2008 and 2009, the company spotted some similarities with regard to the damage. This made the company really suspicious in that the car damaged in the October 19 2008 crash had not been repaired at all and that the next accident on June 19 2009 had been an organized and deliberate action. To find out and check if this was the case, the company was to seek an expert opinion about the matter. By virtue of Article 10001 (1) of the Republic of Armenia Criminal Code, the company contacted an expert center in Russia and asked them to help with the expertise. Mediator was given a copy of the expertise conclusion of the center, a copy of the expertise conclusion of the Republic of Armenia National Academy of Sciences, copies of expertise conclusions from Crimi- nology Unit and Traffic Police Unit of the Republic of Armenia Police as well as a copy of the own conclusion of the company declining to pay an insurance indemnification in connection with the accident occurred on 19/06/2009. The company declined the payment of indemnification for the following reasons: 71 In reference to Article 10031 of the Republic of Armenia Criminal Code and internal operational rules of the company (hereinafter Rules‘ ),’ the company declined to pay an indemnification, believing that the accident had been a deliberate action. The company came at this reasoning based on the expertise conclusion delivered by the expert center in Russia. In particular, the expertise conclusion says that the photos of Chevrolet made in connection with the accidents in 2008 and 2009 illustrate that the damage caused to that motor vehicle are identical; the car has not been repaired after the October of 2008 accident and using the car prior to the accident on 19/06/2009 had not been possible. In reference to the Rules, the company declined paying an indemnification with the reasoning that the policyholder did not enable the company to scrutinize the motor vehicle damaged in the accident and launch an expertise assessment to identify the cause and consequence of the accident. So, the insurer had not been able to know all appropriate circumstances and details related to the accident, which could have helped to make an informed final decision regarding the insurance indemnification. For instance, the National Academy of Sciences ’ National Expertise Bureau, a state non-commercial organization, delivered an opinion which argues that during inspection it would never be possible to determine whether the damages actually seen on the car and the damages as shown in the photos of the injured car are the same, since some parts of the car (e.g. front and back protectors, front right door, decorative engine lid, front headlamps, backlight plates) were missing while inspecting the car by the experts.

72 Main Conclusions

Having reviewed the documents as well as reason to decline the payment of insurance indemnification as provided by the company, Mediator came at a conclusion, as follows:

Re: indemnification declined by the company for reasons of deliberately committed action Based on the National Expertise Bureau's’ opinion, prior to the very accident, the Chevrolet was technically in order and no malfunctions were identified in the cars’ steering, braking and suspension and tire systems that could have led to the occurrence of the accident; Meantime, the conclusion delivered from the Traffic Police Unit of the Republic of Armenia Police reads: in‘… a misty weather the driver of the Chevrolet drove the motor vehicle off the road and turned it over, thus violating the requirements of paragraphs 66 and 67 of Traffic Rules.… With the same conclusion the driver of the Chevrolet was held liable for administrative penalty. In fact, the records of the Republic of Armenia Police show that the accident occurred while the motor vehicle was in use and contain no indication of crash imitation taken place.

The two conclusions described above were not disputed by the company. Article 53 (1) of the Republic of Armenia Law on Administration Fundamentals and Administrative Procedure provides: an‘ administrative act is defined as decision, instruction, decree or individual legal act which an administrative body has made to regularize any particular aspect of the public right; an administrative act is used to determine, alter, revoke or recognize rights and liabilities to people.’ Article 61 of the same law says that an administrative act adopted in writing shall be in affect as long as it has been replaced by another administrative act or revoked or rescinded, or unless it has been terminated under the law for reason whatsoever. Therefore, inasmuch as the rightfulness or lawfulness of the above-said administrative act is not disputed by the company, Mediator shall be guided by the provisions stipulated therewith.

Also, the company's’ argument that what took place was a deliberately fabricated crash imitation is no way legally grounded. Because such a statement of the company may deal with the crime, Mediator must not follow upon the propositions legally ungrounded.

73 Re: policyholder having not enabled the company to scrutinize the motor vehicle The car was only removed from the scene of action a few days after the accident and taken to the owners’ place upon the company's’ instruction. This means that the policyholder obviously gave the company an opportunity to make an inspection of the car and invite expertise as appropriate. As for the lack of spare-parts, the policyholder could not bear responsibility since the motor vehicle had been left in the gorge a few days, under no ones’ watch. Nor there exist photos of the car taken at the moment of removal of the car from the site of accidence that could prove whether or not the said spare-parts were with the car before being taken by the policyholder.

Re: discrepancy of the expertise provided by the expertise center in Russia and the National Expertise Bureau of the Republic of Armenia Academy of Sciences The expertise conclusion of the center in Russia affirms that the photos of Chevrolet made in connection with the accidents in 2008 and 2009 show that the damage caused to that motor vehicle are the same and matching. In the meantime though, the opinion delivered by the National Expertise Bureau argues that determining whether the damages actually seen on the car and the damages as shown in the photos of the injured car are the same is impossible. In a circumstance where there is discrepancy between the two expertise results, coming at a conclusion in favor of the one expert opinion and ignoring the others’ would be impossible.

So, taking into account the above considerations, Mediator reached a conclusion that: the accident occurred while the motor vehicle was in use; the company's’ suspicion over the accident as a deliberately organized action is not grounded; the policyholder gave the company an opportunity to scrutinize the motor vehicle and figure out all necessary circumstances relevant to the accident; in consideration of subparagraphs a) and b) hereinabove, the loss caused from an insurance accident should be indemnified; in consideration of the discrepancy between the two expert conclusions in respect of the loss caused from the 2009 accident, the amount of indemnification needs to be clarified. Case closed upon reconciliation of the parties.

74 Case 7: Claim filed against an insurance company – involving assistance insurance

The company and the client's’ spouse signed a contract on assistance insurance for the people traveling France, for the period June 15 2010 - July 28 2010. On June 24 2010, the client's’ spouse had a heart attack, so he was taken by ambulance to a hospital, where he underwent an operation. Two weeks later he was displaced to a hospital in Belgium, got a medical treatment but, unfortunately, died at the hospital on August 28 2010. The corpse was transported to Ar- menia. The company declined to reimburse the treatment and corpse transportation costs.

In a letter to Mediator the client filed a property claim of AMD 10,000,000 against the insurance company.

The company told Mediator that the decision they made was substantiated and lawful and that the client's’ claim was ungrounded and declined for the following reason. In reference to Arti- cle 996 (5) and Article 999 (2) of the Republic of Armenia Civil Code, the company cited the contract on assistance insurance for the people traveling, signed between the company and the client's’ spouse (hereinafter the‘ policy)’ and the assistance insurance rules that are an integral part of the policy (hereinafter the‘ rules).’ As established by the policy and the rules, insurance events include a sudden ailment, an accident, death of an insured person, provided that these events occurred while the insured person was in the territory of the country mentioned in the policy during the term of the contract. As provided by the rules, sudden ailment is the sickness that came out suddenly during the term of the insurance policy and needs prompt medical intervention. In this case under review, the company noted that medical records showed that back in 2002 the client's’ spouse had complaints of abrupt heart pain, while research identified an ischemic cardiopathy and cardiac infarction. Because of the constant feel of heart pain, the client's’ spouse has been under a cardiologists’ close watch.

75 On 24/06/2010 abrupt heart pain reappeared, and the client's’ spouse was transferred to a hospital and the electrocardiogram diagnosed infarct. The company maintained that what hap- pened on 24/06/2010 was not a feature of sudden ailment since the spouse had had heart problems back in 2002, and the June 24 2010 heart attack and infarct had been a consequence of the illness which he had before the signing of the insurance policy. Based on the rules, the above-said events which dealt with chronic ailment and were known upon the signing of the insurance policy and which dealt with illnesses existing before the signing of the insurance policy, regardless of the treatment or non-treatment of the illness, will not be seen as an insurance event, the company told Mediator. The company referred to another provision of the rules, saying that the insurer will not reimburse costs related to the chronic ailment which was known upon the signing of the insurance policy, regardless of the treatment or non-treatment of the illness.

Rules further establish that the insurer will not reimburse costs related to angiography as well as costs related to heart and cardiovascular operations, including costs related to angioplasty and shunting. Another reasoning of the company was that it had not undertaken commitment to reimburse costs related to coronary arteriography, angioplasty and stunting.

As for the claim to reimburse costs related to repatriation of the body, the company noted that the term of the insurance policy was from June 15 2010 to July 28 2010, whereas the client's’ spouse died on August 28 2010, i.e. after the term of the policy had been expired.

76 Main Conclusions

Article 996 (5) of the Republic of Armenia Civil Code establishes that under an insurance contract the insurer undertakes to pay to the policyholder a non-recurrent or regular sum (the insurance indemnification) as specified in the insurance contract, when i) a damage has been caused to the life or health or work ability of the policyholder or the person specified in the contract (the insured); ii) the insured reaches a particular age; or iii) another insurance event occurs. Article 983 (9) establishes that an insurance event is the occurrence or event provided for in the insurance contract, to the effect of which the insurer undertakes to pay to the policyholder or the beneficiary an insurance indemnification. Paragraph 3.2 of the rules says that insurance events include a sudden ailment, an accident, death of an insured person, provided that these events occurred while the insured person was in the territory of the country mentioned in the policy during the term of the contract. As further provided by the rules (paragraph 3.3), sudden ailment is the sickness that comes out suddenly during the term of the insurance policy and needs prompt medical intervention. Paragraph 3.6 says that the events specified in paragraphs 3.2 - 3.4 of the rules are not insurance events which dealt with chronic ailment and were known upon the signing of the insurance policy and which dealt with illnesses existing before the signing of the insurance policy, regardless of the treatment or non-treatment of the illness. The rules further provide that the insurer will not reimburse: i) costs related to the chronic ailment which was known upon the signing of the insurance policy, regardless of the treatment or non-treatment of the illness; ii) costs related to angiography, heart and cardiovascular operations, including costs related to angioplasty and shunting even when there is medical recommendation to do this. Finally, paragraph 10.2 of the rules says that the insurer has the right to decline the payment of insurance indemnification, wholly or partially, if the accident involved had not been treated as an insurance event.

In consideration of the above-described paragraphs of the rules, reviewing the claim first of all necessitated to find out whether or not what was identified with the patient could be seen as a sudden ailment, and also which illness does medicine consider a sudden ailment in the context of the insurance policy involved. Also, Mediator had to clarify whether or not the illness diagnosed with the patient was associated with the chronic ailment, and whether or not what was done with the patient could be seen as an action of heart and cardiovascular operation.

Explanations of an expert who was involved in the review of the case ended up concluding as follows: on 24/06/2010 the patient was diagnosed with a strong coronary syndrome, an abruptly starting process, which jeopardizes the patient's’ life and requires an immediate intervention. The doctor told that the medical documents, which he had an access to, really showed that previously the patient had had an ischemic heart disease, and the strong coronary syndrome is a possible but not necessarily an inevitable follow-up. Conventional wisdom in medicine defines the sudden ailment as an illness which appears without symptoms but which turn fast into a clinical form. The doctor also told that the diagnosis was clearly related to a chronic ischemic heart disease, although it is known that in order for a strong coronary syndrome to come out, certain provocative factors (such as physical and emotional stress, change in blood coagulation levels, etc) need to be there in the event of coronary arteritis. The doctor further told that the medical intervention to the patient is known as invasive interventions or deep-seated heart operations.

Because the documentation available with Mediator was not complete, not allowing to know every detail and circumstances of the case, Mediator asked the representatives of the company to provide the package of missing documents, such as the ones that relate to the operation of the client's’ spouse and the reasons of death in Belgium. Mediator asked the medical expert to explicate what illness was diagnosed with the patient in Belgium; could that be considered as a sudden ailment; or whether the illness diagnosed with the patient could have been per se the cause of death. The doctor noted that what was diagnosed with the patient in Belgium was indi- gestion, and there was no mention that it existed previously. Nor was there a recorded evidence allowing to maintain that the illness was chronically, i.e. had a lasting or recurring nature. The doctor added that the medical documents available did not allow affirming that what was diagnosed with the patient was to deal with a sudden ailment. However, facts to counter-argue were missing either: existence of the illness was documented nowhere; nor information of the patient having complained about that, so the illness is supposed to have appeared in Belgium.

Notwithstanding the aforementioned, the Belgian doctors, while in operation, found scar transformations which, they believed, could have taken at least 1 to 1.5 years to develop and which only have appeared as a result of a lasting, chronic disease.

In a Mediator question if the illness diagnosed in Belgium could have been a cause of death the doctor said it could. He added that the illness diagnosed in France and the illness diagnosed in Belgium were two different events. In the meantime, other experts believe, the intervention with the heart contributed to an abrupt progression of the pancreatitis of annular pancreas, i.e. the illness diagnosed in Belgium, since in most cases pancreatitis of annular pancreas progresses when there is any intervention involved.

78 Mediator believed that although spotting an indirect or direct connection between the heart operation and deterioration of the patient's’ health conditions is somehow possible in medicine, these are however two different events in the insurance point of view and thus should be treated separately. Paragraph 3.1 of the rules says that an insurance event is the occurrence provided for in the insurance contract – a sudden ailment, accident or death, which brings about an insurer's’ obligation to pay an insurance indemnity. Asked by Mediator about what moment will the illness be considered as existing, the doctor-expert replied that existence of an illness is usually signaled when it has appeared. Referring to subparagraph 3.6.1 of the rules, it should be noted that the illness diagnosed with the patient in Belgium was not known upon the signing of the insurance contract, yet the question whether there are facts that prove the existence of such an illness before the signing of the insurance contract remains uncertain. The fact that there were no recorded complaints that would have actually pointed to the appearance of the illness diagnosed leads to believe that the illness actually appeared in Belgium, during the term of the insurance contract. On the other hand, however, Mediator cannot ignore professional opinion of the doctors that the scar transformations could have been a consequence of a lasting, chronic disease. Therefore, in view of the impossibility to make a firm statement that the illness appeared during the term of the insurance contract, Mediator found it fair to demand a 50 percent of insurance indemnification to be paid by the company.

According to paragraphs 4.1 and 4.4 of the rules, the insurer shall, upon presentation of the documents verifying that payments were made to the professional undertakings, organizers and initiators as well as to persons directly insured, reimburse costs related to the repatriation of the corpse to the home country, provided that the death has been a consequence of insurance event. Considering that the patient's’ death could have been a consequence of both the illness and the operation in France, Mediator found that costs related to the repatriation of the corpse would also need to be reimbursed at half the sum of indemnification. Mediator stressed out that the operation intervention in Belgium after which the patient went into a coma should not be ignored just as much as the doctor's ’ consideration that the illness diagnosed in Belgium could have largely been a result of heart operation. Regarding the illness diagnosed with the client's’ spouse on 24/06/2010, one may say that it was obviously related to a chronic ischemic heart disease, and cannot be called an insurance event and be subject to insurance indemnification especially when heart and cardiovascular operations are clearly beyond the coverage of insurance, as established by the rules.

Mediator decided to satisfy the claim partially.

79 CUSTOMARY BUSINESS PRACTICE The Republic of Armenia Law on Financial System Mediator establishes that the decision by Mediator shall be taken not only on the basis of the requirements of the Armenian legislation but also the rules of business conduct and ethics, and customary business rules. Vesting Media- tor with the right to use guidance of customary business practices gives enough flexibility to the process of decision-making as well as allows using possibly more explicit and effective mecha- nisms for protection of consumer right by evaluating general consideration of most organizations in respect of one or another issue whatsoever.

Below presented are all customary business practices which we have surveyed during 2010 by means of inquiries with financial organizations while reviewing the cases.

81 Customary business practice: form of a deposit contract in favor of the third party

While reviewing a claim filed against one of the banks operating in Armenia, the Office of Me- diator identified a customary business practice on the form of a deposit contract in favor of the third party. The description of the claim read as follows: person A handed money to person B, asking to open an account on his behalf with the bank, without a letter of attorney given to person B. Person B signed a demand deposits contract with the bank, with person A mentioned as depositor but who had no signature as depositor in the contract. In other words, the bank and person A are mentioned as signatories yet the contract has not been signed by person A. Only a signature section in the contract had a mention of person B having paid the sum and signed the contract. The bank has not signed an account contract either, and the deposit account was established on behalf of person A on a basis of the said deposit contract. Person A filed a claim against the bank which, he believed, handed the money to person B without his consent. The bank noted that they signed a deposit contract with person B in favor of the third party and gave the money to person B upon his request, since person A failed to voice his intention to use his rights as depositor. As provided by Article 446 (1) of the Civil Code, a contract is in favor of the third party whereby the signatories have established that the debtor must fulfill his obligation not in favor of the creditor but rather in favor of the third party, whether or not mentioned in the contract, who has the right to require the debtor to fulfill his obligation in favor of him. By virtue of this article, in this particular case the contract concluded in favor of the third party should have been signed by the bank and person B, with person A mentioned as the third party. However, where the money is invested with the bank by person B, and the deposit contract mentions person B as having invested the money and put signature, the conventional wisdom sees that a deposit contract concluded in favor of the third party, regardless of person A mentioned in the contract as depositor, argued the bank.

82 Taking the above said into account, Mediator requested banks to provide their own opinion and approach on the following considerations:

Has there been a contract concluded between the bank and person B in favor of the third party? If not, what kind of contract has been concluded in this particular case? Do banks conclude a deposit contract in favor of a third party in a similar way?

Mediator asked banks to provide what procedure they normally use to conclude a deposit contract in favor of the third party, in particular:

Who are the signatories of the contract? Is there always a mention in the deposit contract in favor of the third party that it is a deposit contract in favor of the third party, and whether the name of the third party is indicated? Can person B open a demand deposit/banking account and invest with that account without a letter of attorney available in the name of person A; and then withdraw that amount without consent from person A?

Opinion received from banks generated a customary business practice as most banks had a similar approach. In particular, Article 446 (1) of the Civil Code provides that a contract is in favor of the third party whereby the signatories have established that the debtor must fulfill his obligation not in favor of the creditor but rather in favor of the third party, whether or not mentioned in the contract, who has the right to require the debtor to fulfill his obligation in favor of him. Article 910 (1) of the Civil Code provides that a deposit amount can be invested with the bank in favor of third party. Such third party will acquire depositor rights as soon as he delivers a claim before the bank based on such rights or when the bank is advised in any other manner of his intention to use such rights, unless otherwise provided for in the deposit contract. As an essential term in the deposit contract is the specification of the name of natural person or the title of legal person, on which behalf the deposit amount is invested. According to part 3 of the same Article, terms on third party contract (Article 446) shall be applied in respect of the deposit contract signed in favor of the third party, provided that it does not contradict provisions of the Article and the definition of bank deposit. This infers that provisions of Article 446 pertinent to third party contract have to be applied to the deposit contract signed in favor of the third party. So, a deposit contract in favor of third party shall incorporate as signatory the person who has paid the amount of deposit to the bank (who is considered as depositor), whereas provisions on the third party taking action in favor of the bank must be mentioned in the contract, except when the person who pays the amount of deposit to the bank acts as representative of another person based on 83 a statutory document (power of attorney, contract, and so on); in this case the one who is being represented can only be a signatory to the contract or depositor. Regarding opening of an account by a person on behalf of another person, most banks noted that the account is only established on behalf of the person who has invested the amount, even in case of a deposits contract in favor of the third party, or only on a basis of the letter of attorney in the name of another person.

84 Customary business practice: indexation of a consumer credit

Indexation of a consumer credit (i.e. attributing the repayment of a consumer credit to the US Dollar or Euro) has been one of the most problematic and disputable matters faced by the Office of Mediator in the area of consumer protection. A loan contract concluded between the client and the organization for consumer purposes established that the company and the borrower agree that on the effective date the sum of the loan is equivalent to USD X and the loan installment, USD Y. Where at the day of repayment of the actual loan or loan installment the Dram de- preciates versus the US Dollar relative to the effective date, these repayments will be indexed and the borrower must pay as provided for and to the extent specified in the contract. As established by the contract, where the repaying loan or loan installment needs indexation, the borrower must repay with the Dram equivalent to USD Y as specified in the contract, using average market exchange rate for that day set by the Central Bank.

Seeking to identify a customary business practice with banks and credit organizations operating in the Republic of Armenia, the Office of Mediator inquired all banks and credit organizations about the situation described above, and whether they use indexation to the consumer credit, or whether they believe that indexation to the consumer credit is a lawful exercise.

The response from almost all banks and credit organizations made Mediator to come to the point, as follows:

Article 877 (2) of the Civil Code establishes that foreign currency and currency valuables may be the subject of a contract of loan on the territory of the Republic of Armenia with the observance of the rules of Articles 142, 143, and 356 of the Code. According to Article 142 (4) of the Civil Code, the cases, procedure and conditions for use of foreign currency on the territory of the Re- public of Armenia shall be determined by statute; and Article 143 says that the types of property that are recognized as currency valuables and the procedure for making transactions with them are determined by the statute on currency regulation and currency control. The right of owner- ship to currency valuables is protected in the Republic of Armenia on a general basis. Further, Article 356 (3) provides that in long term contracts, indexation of payments may be specified on terms agreed by the parties. The same article, subparagraph 4, says that the use of foreign currency and also of payment documents in foreign currency in the making of payments 85 on the territory of the Republic of Armenia for obligations is allowed in the cases and by the procedure provided for by statute.

It should be noted that the interpretation of the term indexation‘ ’ varies across theoretic sources. In particular, the doctrinal sources of the Civil Code of the Russian Federation interpret indexation as a means that allows preventing the adverse effects of inflation. It should be used in the time and environment of non-conventional inflation. In other words, indexation of payments is determined by the inflation in the market. Further, inflation is defined as an annual percentage growth of the general level of prices. There are other sources that define inflation also as condition of an economy, which is characterized by high rate of growth of prices of goods and services and diminished purchasing power of the local currency. So, when the latter approach is used, in the event of inflation prices rise and the purchasing power of the local currency diminishes, and the two of them are correlated. However, regardless of the variation in the above interpretations and of the circumstance whether or not the inflation contains the diminishing of purchasing power of the local currency, all doctrinal interpretations of the Russian Civil Code allow the usage of indexation only in the event of non-conventional inflation. This infers that it cannot be applied in the event of moderate inflation, so before it is applied one should measure the rate and extent of inflation in the domestic market rather than estimate the ratio of local currency to foreign currency.

Also, as it was noted, Article 356 (4) establishes that the use of foreign currency in making settlements for liabilities in the territory of the Republic of Armenia is allowed in the cases and by the procedure provided for by statute. This means that banks and/or credit organizations will use foreign currency in making settlements for liabilities only when explicitly permitted under law.

In the meantime, Article 7 (5) and (8) of the Republic of Armenia Law on Currency Regulation and Currency Control provides that consumer borrowings shall be provided solely in the Republic of Armenia Dram, and banks and credit organizations shall provide consumer borrowings and loans exclusively in the Republic of Armenia Dram.

It is worth mentioning that in its circular communicated to all banks and credit organizations operating in the Republic of Armenia the Central Bank explicated that the revaluation [i.e. indexation in connection with changes in the foreign exchange market] of monthly repayments on consumer loans and interest payable on consumer loans is prohibited.

86 Customary business practice: loss of a payment card

The review of one of the claims which was filed against a bank prompted the Office of Media- tor to identify another customary business practice on how the bank deals with the situation when a client's payment card is lost. The description of the claim was this: the client made a call to the bank after he had lost the plastic card given to him under the card issue and service contract signed with the bank. He notified the bank of the loss and asked the bank to have the card blocked. The bank issued a reference to the client, notifying the card status in online and prime systems as having been lost. Nevertheless, the card was found out to have been used further by the parties unknown to the client. What is more, the bank required the client to pay the negative balance that was generated as a result of the use of the card.

The card issue and service contract concluded between the client and the bank provides that the client shall undertake a financial obligation for transactions on cards without authorization/additional cards, and/or, where necessary, submit a request in writing to the bank to stop presentation of card transactions without authorization (in person, e-mail, facsimile), specifying which parts of the world and for which timeframe he wants the bank to stop presentation of card transactions through international payment systems. It should be noted that the shortest period in order to stop transactions on cards /additional cards is two weeks commencing on Saturday of the working week when the request is received. So, according to the card issue and service contract, the client requesting the bank to block the lost card in online and prime systems is still not immune to the transactions executed in the offline format. So, what we have here is that the client who has lost his payment card is destined to incur the loss, throughout the term of that card, generated/to be generated as a result of the offline format transactions.

87 Banks were requested to provide opinion with regard to the subject matter in order to boil it down to a customary business practice. Questions were posed as follows:

How banks regularize the aspect of responsibility for the negative balance generated as a result of the use of the card in an offline regime? In particular:

a)Which party shall take the risk of the offline format card transactions under the card issue and service contract, when the client had duly notified the bank of the loss of the card?

b)Does the bank envisage another procedure for having card transactions blocked in the offline regime, and will a service like that be chargeable to the client, for in the particular case reviewed by Mediator the client undertakes a financial obligation for transactions on cards without authorization/additional cards, and/or, where necessary, will submit a request in writing to the bank to stop presentation of card transactions without authorization (in person, e-mail, facsimile), specifying which parts of the world and for which timeframe he wants the bank to stop presentation of card transactions through international payment systems?

c)How the bank is supposed to run an oversight of transactions executed in the offline format; how and in which timeframe should it notify the client of any action required?

Should the client take all the risk of transactions executed in the offline format for the term of validity of the card, and does the bank have the right to require the client [when the client has requested the bank to stop the validity of the card and issue a new card] to sign into the commitment of potential risks as a result of the use of the card in an offline regime?

88 Opinion received from banks did not generate a customary business practice as only 11 commercial banks out of 22 responded, even though most of the respondents had similar ap- proaches on the subject matter, as follows: Contracts concluded with cardholders do not incorporate provisions on off-line transactions and the liability arising in connection therewith, since such transactions can no longer be the responsibility of the client, even more so when the client's’ notification of the loss of the card has been received. The matter is, the banks’ cardholder does not need to have deep, professional knowledge and specifics of plastic card industry, nor should he necessarily be aware of all potential risks, particularly to remember or comply with operating rules and schedules of payment and settlement systems related to stop transactions in an offline regime. Cardholders will stop taking responsibility for pays and charges on their cards after the very moment when they have notified, through a registered letter, facsimile or telex, the bank of the loss or theft of the card and the bank has received that notification, except where the cardholder demonstrated negligence or made a mistake. In situations like this, banks will spend their own resources to get cards blocked in international payment systems, yet they consider service charges expensive and card updates difficult and unpractical. A bank placing the lost/stolen card on stop-list of the payment and settlement system will be able to make unaccepted chargebacks on any transactions in the entire duration such cards will be on stop-list. It should be mentioned however that placing all lost/stolen cards on stop-list is practically non-effective. What is more expedient is when the bank is consistent in its efforts and monitors the transactions executed in the offline format in order to identify lost/stolen cards and place their details on stop-lists of the payment and settlement systems elsewhere in the world as appropriate. Member banks of the ArCa System get a special report in a daily package of reports, which contains information on offline transactions. The bank will scrutinize that report and where any transaction in the report has been executed by the use of the card reported as lost/stolen, or where any transaction is otherwise considered suspicious, the bank will contact the cardholder, check the his involvement with the transaction. Where the cardholder refutes his involvement with the transaction and is able to prove that, the bank will take due action, subject to the operating rules of the payment and settlement systems, to recover funds as appropriate.

89 Though the risk of execution of the transaction in an offline regime is attendant in the entire validity of the card, attempts of transactions executed by banks while the card is on stop-list in a particular period of time are declined, and it is the servicing bank which will, from that moment on, take the responsibility for the card transactions. Funds flown on these transactions will be refunded by the servicing bank, too, subject to the operating rules of the payment and settlement systems. Banks won't’ have to get their clients to conditions like that if they are consistent in their work and watchful of the offline environment. Interestingly, complexity of card transactions, especially when executed outside the country, presumes some commitment by the bank to monitor risks and even incur some amount of such risks. Otherwise, if the clients are expected to be loaded with excessive paperwork, responsibility and information, the bank rather risks to hindering the growth of card transactions.

90 STRATEGY PROGRAM 2011-2013 The Office of Financial System Mediator pursues to be of good repute, independent, open and trusted while using best international experience; it tries its best to justify the stake- holders' ’ anticipations as an extrajudicial dispute resolution body, one of its kind, which has become established and develops further. To fulfill its mission and principal objectives in the long run effectively, the Office of Financial System Mediator has outlined the following strategy goals and how to reach them:

Mission of the Office of Financial System Mediator is to have financially educated and protected consumers in the financial market.

Goals: increasing and enhancing confidence in the Financial System Mediator; protecting rights and interests of consumers; increasing people's’ trust in the financial system and boosting financial intermediation.

The Office has identified tasks relevant to each of the goals described above and ways to reach them through policies, programs, undertakings and so on.

92 Core values

Values as core principles should make a basis for activities of the Office and serve the key warrant in acting effectively and winning the peoples’ trust. The Office is guided by virtue of the following core values: Impartiality In reviewing a claim, Mediator follows the requirements of the Republic of Armenia Consti- tution and laws, objective when dealing with each of the claims, and absolutely adherent to the principle of equality and fairness. Equality or equivalence of rights Using best international experience, Mediator not only follows the requirements of the laws and customary business practices but also is guided by the equivalence of rights to prevent the suffering party from the straight impact of legal acts. Caring attitude to the client Each client feels that he/she has merit recognized by the Office. Staff members of the Office endeavor to make the clients feel comfortable, trying to keep them free of inconvenience, red-tape situations and extra expenditures. Reconciliation Mediator seeks to settle a dispute down through reconciliation of the parties involved, with an aim to find a mutually acceptable solution and maintain a sustainable cooperation between the organization and its client. Operational effectiveness One of the merits of Mediator is the ability to organize the review of claims and implementation of programs in such a way so that the efforts spent proved rewarding. Effectiveness is best demonstrated when it is fast and fair for review of the claim and resources and efforts are mobilized for implementation of other programs. Openness Activity of Mediator is open to the general public through reports posted on its website and published in mass media.

93 Partnership and confidentiality Mediator maintains a strong partnership with financial organizations, trying to expand it even further and adhering to the principle of confidentiality, except when the financial organizations commit serious violation in respect of the client, or when non-disclosure of the name of the financial organization could undermine the stability of financial system. Professionalism and teamwork The Office always challenges its staff members to reaching high professionalism and performance standards; takes care of their professional advancement. Teamwork in the Office is an important aspect for a stronger performance and results. Each staff member's’ right to voice opinion about any aspect of activity of the Office is encouraged. International cooperation and innovative solutions The Office maintains an ongoing cooperation with its foreign counterparts, aimed at ex- changing experience and inputting best local experience. The Office tries to combine its programs, services, claim acceptance and review procedures with fresh methods and ap- proaches to raise operational effectiveness of the Office. Taking lead in protection of consumer rights The Office of Mediator should always support creation of offices of financial ombudsman in post-Soviet countries, share its experience with them, and engage financial ombudsmen from such countries or representatives of supervisory bodies in conferences that are held with participation of internationally reputable financial ombudsmen.

94 STRATEGIC GOALS Increasing and enhancing confidence in the Financial System Mediator

1.1 Fast and free of charge review of citizen claims, trying to keep them free of inconvenience, red-tape situations and extra expenditures Needed:

Off-site review of the claim; development of a procedure for presentation of the claim through post and Internet, while trying to keep rural populations off any inconveniences;

Rural population’s accessibility to Mediator services; this may include visits to regions and accepting claims of people at their place;

Strengthening and developing a policy of reconciliation of the parties, so that the case in review is settled down faster;

Fast and impartial review of the claims, while adhering to the principle of equivalence of the rights.

1.2 Effective review of the claims, while preventing, as much as possible, financial organizations and people from resorting to the court for the cases reviewed by Mediator

Needed:

Involvement of reputable experts in the review of the claim;

Development and implementation of a policy that persuades financial organizations and individuals to settle the dispute down with Mediator rather than in court proceedings;

Reasonable, motivated, and informed decision-making, which was explained, clear and coherent;

Inputting best international experience for a fast and effective review and handling of the claim; 96 Expanding the scope of appealed services and increasing eligibility of individuals to come to Mediator; in future, the Office of Mediator intends to carry out review of claims and complaints filed by sole proprietors and legal persons of small business.

Protecting rights and interests of consumers

2.1 Preventing and eliminating violation committed by financial organizations with regard to consumer rights and interests Needed

Recommendations and hints on how to use financial products should be published in mass media and placed on the Office website or blog;

Give a note of warning to the financial organization in the event of violation identified during the review of the claim, and requirement to make an appropriate adjustment to the rest of the contracts or internal policies;

Strengthening and developing a policy of reconciliation of the parties, so that the case in review is settled down faster;

Citizen feedback following the making of remedies of the weaknesses identified;

Identification of unfair, unhealthy, obviously disadvantageous conditions set forth in provisions of templates/subscription agreements or internal regulations and policies that regularize any particular product or aspect, so that these drawbacks could be changed or removed in cooperation with the organizations concerned.

97 2.2 Boosting up quality in services offered by organizations Needed:

Continue the tradition of best cooperating institution and expanding the scope further;

Development and implementation of a program that encourages financial organizations for quality service and good caring of the client;

Involvement of financial organizations with measures as organized by the Office of Me- diator, i.e. conferences, seminars, workshops, trainings, etc.;

Encouraging and motivating the client to tackle the complaint locally before coming to the Office of Mediator; including encouraging establishment of internal mediator within organizations. 2.3 Boosting up quality in services offered by organizations Needed:

Correction and remedy of legislative drawbacks identified in the review of claims, and uniform enforcement of normative regulations;

Building and disclosure of a general position by identifying a customary business practice in the system in the event of aspects not regularized or not completely regularized by the law;

Expansion of cooperation with other bodies to achieve more coordinated protection of consumer rights;

Surveys and studies of protection of consumer rights and publication of such surveys.

98 3. Increasing people’s trust in the financial system and boosting financial intermediation

Since the distrust in the financial system is a consequence of unawareness of financial products as well as of personal rights and obligations, and because risks stemming from such unawareness put a drag on the way of financial intermediation, the Office of Mediator has strategic directions for boosting public confidence in the financial system for 2011-2013 set out as follows: 3.1 Raising financial literacy of citizens

Needed:

Development and implementation of a policy for educating people on financial products;

Identifying target audiences; a tailor-made approach given to each of them and development of special educational programs;

Lifelong financial education programs;

Involvement of financial organizations for consumer education, through motivation and encouragement.

3.2 Financial training of the staff of financial organizations

Needed:

Organizing seminars, conferences, workshops and trainings for the staff of financial organizations, including through visits to branches located in regions;

Identifying and encouraging the best employee or staff of the financial organization;

Arranging contests among support staff of financial organizations designed to enhance knowledge of financial products. 99 3.3 More involvement of government’s role in providing financial information to consumers

Needed:

More involvement of government authorities in introducing educational standards for increasing financial literacy of consumers;

Consistent measures for inclusion of subjects such as financial products and protection of consumer rights and interest in curricula of schools, colleges and higher educational establishments.

100 List of Organizations who have signed an agreement with the Office abdicating their right of appeal against Financial System Mediator’ decision BANKS

1. "Byblos Bank Armenia" CJSC 2. "Unibank" CJSC 3. "ACBA-CREDIT-AGRICOL BANK" CJSC 4. "VTB Bank Armenia" CJSC 5. "ArmSwissBank" CJSC 6. "Converse Bank Corp." 7. "HSBC Bank Armenia" OJSC 8. "ARMECONOMBANK" OJSC 9. "ARMBUSINESSBANK" CJSC 10. "InecoBank" CJSC 11. "Prometey Bank" LLC 12. "Ameriabank" CJSC 13. "ARDSHININVESTBANK" CJSC 14. "Mellat Bank" CJSC 15. "Anelik Bank" Co.LTD 16. "ARARATBANK" CJSC 17. "BTA BANK" CJSC 18. "ProCredit Bank" CJSC 19. "Arstakhbank" CJSC

INSURANCE COMPANIES

1. "INGO ARMENIA" CJSC 2. "NAIRI INSURANCE" LLC 3. "CASCADE INSURANCE" CJSC

INSURANCE BROKERS

“1. "LEADER INSURANCE BROKERS"” LLC “2. "PRIME INSURANCE"” Co.LTD “3. "MITRA BROKERS"” LLC

102 PAWNSHOPS

1. "DIKRISON"” LTD 2. –"VOSKE AMRAN"” LTD 3. –"ADAMAND"” LTD 4. "V=M" LTD 5. "KARTUSH-ART" LTD 6. "TIDO" LTD 7. "Fidelity Iravakan Khumb" LTD 8. "ARSKARE" LTD 9. "VOSKE SHGHTA" LTD 10. "LOMB-FIN" LTD 11. "GRAVICH" LTD 12. "KARMEN" PK 13. "Credia Grko" 14. "Al-Miq" LTD 15. "Azimut" LTD 16. "NARIENA" LTD 17. –"Aida Karin" ”LTD 18. –"Dizak" ”LTD 19. –"Era-Line"” LTD

CREDIT ORGANIZATIONS

1. "Gladzor" Universal credit organization CJSC 2. "ACBA LEASING" Universal credit organization CJSC 3. "National Mortgage Company" Universal credit organization CJSC 4. "“SME Investments"” Universal credit organization LTD 5. "First Mortgage Company" Universal credit organization CJSC 6. "Farm Credit Armenia" Universal credit organization

103 EXCHANGE AGENCIES

1. "Vega World" LTD 2. Avetiq Sargsyan 3. Ara Movsesyan 4. Arayum Musinyan 5. "AMSTER FLOWERS" LTD 6. Anahit Damburajyan 7. Jirayr Hovhannisyan 8. Karapet Khachatryan 9. Lusie Chabalyan 10. Arthur Enokyan 11. "Saleable Goods" LTD 12. Samvel Baljan 13. Karen Hakobyan 14. Grigori Davidyan 15. "Endrue Groop" LTD 16. "M Z" LTD 17. Samvel Hambardzumyan 18. Karen Maloyan 19. Levon Avanesyan 20. Hovhannes Hakobyan 21. Nune Avetisyan 22. Marine Asatryan 23. Arthur Bogomazov 24. Narine Mkrtchyan 25. Ruben Hovhannisyan 26. Samvel Movsisyan 27. "Yerevan's N2 market" LTD 28. "Sub Trast" LTD 29. Arturik Hakobyan 30. Garik Hayrapetyan 31. "Anmar Astgh" LTD 32. Samvel Adamyan 33. "NAT" LTD 34. "HENV" LTD

104 35. "V.A.S. GROUP" LTD 36. Arthur Azatyan 37. Arman Galstyan 38. Artur Gyulnazaryan 39. Gagik Ghardashayn 40. Aram Ghazaryan 41. "HAR-ART" LTD 42. "EVEREST" LTD 43. Garegin Ghardashyan 44. "Spin Top" LTD 45. "SAS GROUP" LTD 46. Levon Karapetyan 47. Vladik Poghosyan 48. "ARAVET" LTD 49. Hasmik Yaghmuryan 50. Gagik Dheryan 51. Arthur Martirosyan 52. Goharik Minasyan 53. Simon Minasyan 54. Alexan Mkhitaryan 55. Araik Baghdasaryan 56. Karen Qeshishyan 57. "HAYK EV ARMEN" LTD 58. "EDMON ARS" LTD 59. Arayik Melkumyan 60. Moris Babajanyan 61. Henrik Avetisyan 62. Murad Mkhitaryan 63. Hovhannes Ghazaryan 64. Henrik Ghazaryan 65. "Levon ev Gegham" LTD 66. "LIMIDA" LTD 67. "ELANJ" LTD 68. Gurgen Melikyan 69. "Anahit Taguhi" LTD

105 70. "SASUN" LTD 71. "Anaknkalneri Ashkharh" 72. Valerik Abrahamyan 73. Gayane Zakaryan 74. Anahit Avagyan 75. Hakob Tandaryan 76. "Gorexart" LTD 77. Hamlet Asatryan 78. –LIA-K GROUP”LTD 79. –PETAK”LTD

INVESTMENT COMPANIES

1. "RENESA" CJSC 2. "Capital Asset Management" CJSC List of Organizations who have not signed an agreement with the Office abdicating their right of appeal against Financial System Mediator’ decision BANKS

1. "AreximBank-Gazprombank Group" CJSC 2. "Armenian Development Bank" OJSC

CREDIT ORGANIZATIONS

1. "ARFIN" Universal Union LTD 2. "SEF INTERNATIONAL" Universal credit organization LTD 3. "AGROLZING" Universal credit organization LTD 4. "AREGAK" Universal credit organization CJSC 5. "FINCA" Universal credit organization CJSC 6. "NOR HORIZON" Universal credit organization LTD 7. "NORVIK" Universal credit organization CJSC 8. "MALATIA" Universal credit organization LTD 9. "GARNI INVEST" Universal credit organization CJSC 10. "ECLOF UCO LLC" Universal credit organization LTD 11. "BLESS" Universal credit organization LTD 12. "G.F.C. General Financial and Credit Company" Universal credit organization CJSC 13. "AVANGARD INVEST" Universal credit organization CJSC 14. "Card AgroCredit" Universal credit organization CJSC 15. "UNILIZING" Universal credit organization CJSC 16. "ANIV" Universal credit organization LTD 17. "FIDES HYPOTHEC COMPANY" Universal credit organization CJSC 18. "Bnakaran Eritasardnerin" Universal credit organization CJSC 19. "Express Credit" Universal credit organization CJSC 20. –"KAMURJ" Universal credit organization LTD 21. –"KILIKIA"” Universal credit organization LTD 22. –"F.I.C.O"” Universal credit organization LTD 23. –"GLOBAL CREDIT" credit organization” CJSC 24. –"G AND A"” Universal credit organization LTD 25. –"CREDIT CORP" ”CJSC

108 MONEY TRANSFER ORGANIZATIONS

1. "HAYPOST" CJSC 2. "DEPI TUN" LTD 3. "ELVER" LTD 4. "MEGA PATNERA" LTD 5. "TANDEM PAYMENTS" LTD 6. "TEL-CELL" CJSC 7. "OSMP" LTD 8. "Kvadrakom" LTD 9. "EDRAM" LTD 10. "“ADALEV RIA" ”LTD

PAWNSHOPS

1. "Leilo" LTD 2. "Garant Plus" CJSC 3. "Vagr" LTD 4. "Malen" LTD 5. "SIKOR" LTD 6. "M.V.M. Ann" LTD 7. "SAVER" LTD 8. "VIGEN-VAHAGN BROTHERS" LTD 9. "ART CREDIT" LTD 10. "GUDAVI" LTD 11. "SUREN GOLD" LTD 12. "GEVORGYAN AND FRIENDS" LTD 13. Artyom Ghahramanyan 14. "Krbulagh" LTD 15. "V.I.A." LTD 16. "VEM and VIG" LTD 17. "AMALIK CREDIT" LTD 18. "GNAHATUM" LTD 19. "CREDIT LAEN" LTD 20. "AR-AT" CJSC 21. "PIROP" LTD 109 22. Jirayr Aharonyan 23. "AMUNI GROUP" LTD 24. "GRAV" LTD 25. "VALGE" LTD 26. "Nomidisk" LTD 27. "Sarigs and Nana" LTD 28. Vardan Ohanyan 29. "ARMAN and GNEL" LTD 30. "SENORA" LTD 31. "MANIOKA" LTD 32. "YANA-GOR" LTD 33. "ROBERT MARUTYAN" LTD 34. "NINELA" LTD 35. "MAMMA-MIA" LTD 36. "LOMBARDSTREET" LTD 37. "VANTIG" LTD 38. "VOLTA" LTD 39. "NOR-SAZ" LTD 40. "WHITE-SOLITER" LTD 41. "MUSOYAN-AAA" LTD 42. Ashot Frangulyan 43. "Avacred" LTD 44. "SIMNOR" LTD 45. "AR-CREDO" LTD 46. "VANY" LTD 47. "FAST-CREDIT" LTD 48. "GR-AV-MO" LTD 49. "Mini Credit" LTD 50. "SERV-EDAR" LTD 51. "ROLAND and EMG" LTD 52. "Artsate Gavat" LTD 53. "R.R.H. BROTHERS" LTD 54. Liana Danielyan 55. "Finansakan Shtap Ognutyun" LTD 56. "DENAYN" LTD 57. Hayk Zohradbyan 58. "M.M. NIKA" LTD 110 59. "MINART LINE" LTD 60. "ASTIK FLORA" LTD 61. "ARAG FINANS" LTD 62. "Easy Credit" LTD 63. "VILMAR MEK" LTD 64. "JANGAY" LTD 65. "PROFFINANCE" LTD 66. "Five Minute" LTD 67. "LERAZ" LTD 68. –"GOLD CHANCE"” LTD 69. –"GOLD AND G.B" ”LTD 70. "“ARDALIN" ”LTD 71. –"AR-TAL" ”LTD 72. –"INRIM-KREDIT" ”LTD 73. –"GOLD IDEA" ”LTD 74. –"GEV-STAR" ”LTD 75. –"AGHDAGH”" LTD 76. –"KLUZH"” LTD 77. –"KBM" ”LTD 78. –"MAX CREDIT" ”LTD 79. –"TRADER" ”LTD 80. "“VOSKE VTAK" ”LTD 81. –"ARANGEL PROVIDER" ”LTD 82. –"ESKO FINANCE" ”LTD 83. –"GEVASAR CREDIT"” LTD 84. –"ISKA CREDIT"” LTD 85. –"FAST CASH" ”LTD 86. –"MARLIA"” LTD 87. –"MONEY AND COMPANY"” LTD 88. –"EXPRESS VIP SERVICE"” LTD 89. "“ARTHUR HOVSEPYAN”SE" 90. –"SSS CREDIT" ”LTD 91. "“KAY-MAN" ”LTD 92. –"JULETA OHANYAN”SE"

111 INSURANCE COMPANIES 1. "Grant Limens" Insurance LTD 2. "SIL INSURANCE" CJSC 3. "RASCO" LTD 4. "ROSGOSSTRAKH-ARMENIA" CJSC 5. "ISG" LTD 6. "RESO" CJSC

INSURANCE BROKERS

“1. "Resolution Insurance Brokers"” LTD

EXCHANGE AGENCIES

1. Albert Papoyan 2. Aram Arakelyan 3. Aram Barseghyan 4. Arthur Arakelyan 5. Arthur Aygunyan 6. Arthur Qochinyan 7. Arthur Danielyan 8. Aristakes Atonyan 9. Arsen Papyan 10. Arsen Torosyan 11. Arsen Shahsuvaryan 12. Arsen Bareghamyan 13. Arsen Galstyan 14. Artak Yesayan 15. Artyom Davdyan 16. Arman Qosyan 17. Armine Khachatryan 18. Armine Marabyan 19. Armen Enokyan 20. Armen Bayramyan 21. Armen Maleryan 22. Armen Davdyan 112 23. Andranik Mkrtchyan 24. Andranik Hakobyan 25. Andrey Shaqaryan 26. Anatoli Sahakyan 27. Anahit Virabyan 28. Anush Zaqaryan 29. Azat Khachatryan 30. Azatuhi Blikyan 31. Julieta Gabrielyan 32. Jemma Baghramyan 33. Hasmik Balasanyan 34. Hasmik Tadevosyan 35. Hakob Hovhannisyan 36. Harutyun Harutyunyan 37. Harutyun Arsenyan 38. Hamlet Asatryan 39. Hamlet Barseghyan 40. Hovsep Haryutyunyan 41. Hovhannes Khachatryan 42. Hrachik Hakobyan 43. Hrachya Hakhverdyan 44. Hrachya Araqelyan 45. Hrachya Minasyan 46. Khachatur Ghahramanyan 47. Sahak Hagoyan 48. Samvel Amirjanyan 49. Samvel Ghazaryan 50. Rafael Voskanyan 51. Rudik Khachatryan 52. Ruzanna Zakharyan 53. Ruzanna Arakhelyan 54. Smbat Aslanyan 55. Sedik Sahakyan 56. Seryoja Melikjanyan 57. Sergey Aghayan 58. Sergey Hovsepyan 113 59. Lena Davdyan 60. Levon Katayan 61. Valeri Navasardyan 62. Vardan Vardazaryan 63. Vardan Ghazaryan 64. Vardan Baghdasaryan 65. Vahan Shahbazyan 66. Vahagn Khachatryan 67. Varujan Avetisyan 68. Karine Araqelyan 69. Vahram Papoyan 70. Vanush Kostanyan 71. Tigran Vahradyan 72. Tigran Sargsyan 73. Manuk Sargsyan 74. Mushegh Khanjyan 75. Nairi Matinyan 76. Norayr Martirosyan 77. Fredik Avetisyan 78. Onik Minasyan 79. Zaven Tshaghatyan 80. Gagik Jndoyan 81. Pharandzem Hakobyan 82. Gorik Stepanyan 83. Gvidon Stepaynan 84. "ARSAG" CJSC 85. "ARGITSHI TUN" LTD 86. "ALS Erzrumtsi" LTD 87. "ARGASAR GROUP" LTD 88. "Ardzaganq" LTD 89. "Arman Baghdasaryan" LTD 90. "Armen Mkhitaryan and Friends" 91. "Armenia Hyuranocain Hamalir" CJSC 92. "ASHOT HARUTYUNYAN AND SONS" LTD 93. "ANDAKO" LTD 94. "VOSKE GETAK" LTD 114 95. "ISHKHAN GOR" LTD 96. "Harasa" LTD 97. "Hayastan" Trading Center Hayrapetyan Brothers" CJSC 98. "HGH-ARENA" CJSC 99. "SUNRISE" LTD 100. "LABEAN" LTD 101. "STAR DIVIDE" CJSC 102. "SONA 79" LTD 103. "Stoik" LTD 104. "SEV KANACH" 105. "KARIN-GOHAR" LTD 106. "KAREN ANNA & FAMILY" LTD 107. "Capital Trade" LTD 108. "Valletta" LTD 109. "VATU" LTD 110. "TUNAR" CJSC 111. "Kon-Brosel" LTD 112. "TIGTAT" LTD 113. "VHM" LTD 114. "Transdealer" 115. "KERAMIKA" LTD 116. "F.S.R." 117. "Mill AG" LTD 118. "DRNER" LTD 119. "MELBROCK" LTD 120. "SHARQ" LTD 121. "SHIRAK Department Store" LTD 122. "Yotnyak" LTD 123. "NORMED" LTD 124. "Fobix" LTD 125. "ZOLUSHKA" LTD 126. "EN. PA." LTD 127. "Gary Group" LTD 128. "GOLDEN AIM" LTD 129. "Gogley" LTD 130. "G.Baghramyan and Friends" LTD 115 131. "Gegham Arqa" LTD 132. "ARMENIA" INTERNATIONAL AIRPORTS" CJSC 133. "DONKA" LTD 134. "Delta Fragment" LTD 135. "United West" LTD 136. "“KAREN HAKOBYAN”SE" 137. –"VARDAN AND MONICA" ”LTD 138. –"SPARAPET"” LTD 139. "“HAGOYAN”CO" 140. –"GRAM GROUP"” LTD 141. –"SIMAO"” LTD 142. –"DJS GROUP" ”LTD 143. "IMEX GROUP" ”LTD 144. –"ALEX GRIG"” LTD 145. –"MSAGORTS”CO" 146. –"FRESH"” LTD 147. –"ROAD LIDER GROUP" ”LTD 148. –"PAP SHINARAR"” LTD 149. –"TASHIR INVEST GROUP"” CJSC 150. –"PARMA"” LTD 151. –"MOLTO BENE" ”LTD 152. –"JAK JAN"” LTD 153. –"VAGHARSH EV VORDINER" ”LTD 154. –"ED-SKY"” LTD 155. –"PRETTY UA" ”LTD

INVESTMENT COMPANIES

1. "Alfa Securities" LTD 2. "Ameria Invest" CJSC 3. "Cascade Investments" LTD 4. "TonTon" LTD 5. "Future Capital Market" LTD 6. "ARMENBROK" LLC FOREIGN CURRENCY EXCHANGE DEALERS-BROKERS 1. "Melgri Union" LTD 116 List of Organizations, who have and who have not signed an agreement with the Office to date 30.05.2011

117