Annual Report 2 0 15

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ANNUAL REPORT 2 0 15

Address of Financial System Mediator ANNUAL REPORT 2 0 15

Address of Financial System Mediator TABLE OF CONTENTS

4 Address of Chairman of the Board

5 Address of Financial System Mediator

6 The Office of Financial System Mediator

10 Activities in 2015

18 Activities for 2016

20 Statistics of complaints and claims

40 Financial Statement and Audit Opinion

48 Overview of Customary Business Practice; Case studies

62 Questions and Answers

66 Acknowledgements

68 The List of Organizations Which Did Not Sign the Covenant

Address of Chairman of the Board the FSM Office’s experience today is considered -ex admitted to be examined has increased this year by emplary in the international arena. Pleasant and nearly 13.5% compared to the relevant figure report- praiseworthy is the fact that the Office of FSM has ed in the previous year. The share of claims resolved been entrusted with the honor to organizing the in favor of the client amounts to 77.79%, and out of INFO 2016, an annual conference organized by the In- this 56.32% of cases were resolved through media- ternational Network Financial Ombudsman Schemes. tion, rather than Compulsory decision. In conclusion, I would like to thank the Mediator The increase in the number of claims is largely and all the staff of the Office for professionalism in explained by an important aspect of the activities performing their everyday duties. I believe that per- of the Mediator – the program for financial educa- sistent and determined work is one sure way to action of consumers. The program is designed in such complish the missions of the Office of FSM. a way as to engage more citizens year after year in various seminars and meetings organized by the Of- fice of FSM. I would like to emphasize the achievements of the Office of FSM in the international arena. In 2015 too, the Mediator received invitation to participate in many international conferences at which the experience of Armenia in financial dispute resolution and consumer education was presented. In Septem- ber 18-21, 2016 the Office of FSM will have the honor of hosting in capital Yerevan the INFO 2016 confer- ADDRESS OF CHAIRMAN ADDRESS OF FINANCIAL ence, an annual gathering of financial ombudsmen OF THE BOARD SYSTEM MEDIATOR from different parts of the world. In conclusion, let me thank all our customers for Dear Reader, Dear reader, their trust and all our partners and financial institutions for efficient cooperation. We will continue to As we sum up the results of 2015 we can state We are pleased to present this report of the Of- walk confidently towards the achievement of our vi- 4 the year under review was marked by new achieve- fice of Financial System Mediator for 2015. For seven sion to the benefit and welfare of our country. 5 ments of the Mediator’s office contributing to en- years our Office has been active in the financial -sys hancement of the Mediator’s reputation both in Ar- tem of Armenia, and the results which we have to- menia and in the international arena. day are really encouraging but also obliging. Since In 2015 too, the Office of FSM saw an increased the inception of the Office of FSM, we set a goal number of complaints and of the claims resolved in before us to not only be a trustworthy and reliable favor of the client. This has been largely attributable dispute resolution body in financial market, but also to effective cooperation with financial institutions to contribute with our daily hard work to the en- and partnership based on mutual trust. The Office hancement of financial literacy of consumers and of FSM continued successful implementation of the increasing financial inclusion in our country. After all, program for financial education of consumers in the an educated and informed consumer is the one who year under review by expanding the program’s ge- will be able to defend his or her rights, and only a ography to include a great number of high schools better knowledge of the laws will give a person firm in capital Yerevan, regions of Armenia and Republic foundation to develop economically and socially. of Artsakh. Thankfully, large-scale projects and vig- The outcome of the policy we adopted is observ- orous elucidatory activities over these years have Sincerely, able every day. This is primarily reflected in the num- enhanced the people’s perception of the functions Armenak Darbinyan ber of customers who apply to us and a growing Yours truly, of the Office of FSM as well as their role and impor- share of cases which were resolved in favor clients. Piruz Sargsyan tance in defending the rights of consumers of finan- Board Member of the CBA, In 2015, the Office of FSM received 3263 complaints cial services. Chairman of Board of Trustees of the about financial services, of which 1448 were accept- Financial System Now, seven years of fruitful activity on the track, Office of FSM ed for examination. Note that the figure of claims Mediator

Address of Chairman of the Board Address of Financial System Mediator The Office of Financial System Mediator (FSM) GOVERNANCE OF THE OFFICE OF FSM is a foundation with independent management sys- According to the Republic of Armenia Law on Fi- tem. Its founder is the Central Bank of the Republic nancial System Mediator, bodies of management of of Armenia. The Office of FSM is called to settle out the Office of FSM are: any property disputes that arise between consumers • Board of Trustees, and as natural person and financial organizations. The • Manager of the Office, i.e. the Mediator. services of FSM are free of charge; the process of review of complaint is explicit, fast and transparent. According to the Republic of Armenia Law on Fi- The Office of FSM was established pursuant to nancial System Mediator, the Board of Trustees of the Republic of Armenia Law on Financial System the Office of FSM consists of 7 members, and they Mediator, passed on June 17, 2008. The Office of are appointed as follows: FSM started professional activity from January 24, • one member by the Government of the 2009. According to the said law, the Financial Sys- Republic of Armenia, tem Mediator is appointed by the Board of Trustees • one member by the Board of the Central Bank of the Office of FSM. On the first meeting on De- of the Republic of Armenia, cember 22, 2008 the Board of Trustees appointed • one member by organizations that advocate Piruz Sargsyan, a lawyer by profession, as Mediator. protection of consumer rights, and In 2012, Ms. Sargsyan was reappointed by the Board. • four members by unions of organizations.

THE OFFICE OF FSM The Board of Trustees of the Office of FSM is PERFORMS IN PURSUIT OF THE called to approve internal policies and procedures FOLLOWING OBJECTIVES: of the Office, hear the Financial System Mediator • Protection of consumer rights and interests in reports, control the status of implementation of the financial market; the decisions it has made, oversee day-to-day ac- • Fast, effective and free of charge review and tivities of the Office and its financial and economic handling of claims of clients; performance, approve the budget of the Office, any • Enhancement of the public confidence in the changes made thereto; oversee the performance 6 financial sector. against the budget, approve annual financial ac- 7 counts and take on other functions as required by CORE VALUES OF THE OFFICE OF FSM: the law. According to the law, the Board of Trustees Effectiveness, competence and openness are shall not interfere with the professional activities of very important pillars which determine how well the the FSM. Office of FSM functions and how much public trust According to the Republic of Armenia Law on Fi- it has earned so far. The following are core values nancial System Mediator, the FSM shall be required which underlie day-to-day activities of the Office: to have higher education, firm authority and at least • Impartiality in case review; five years’ work experience. The FSM shall not be a • Equality or equal rights for the parties; person who has worked in any financial organiza- • Caring attitude towards the customers; tion in the last three years. The FSM shall not: i) be • Priority to achieving reconciliation of the parties; engaged in entrepreneurial activity, ii) be a member • Operational effectiveness; of management at a party, iii) hold a position in cen- • Transparency and openness; tral or local governments, commercial undertakings, • Partnership and confidentiality; iv) perform other paid work except for scientific, • Professionalism and teamwork; pedagogical and creative activities; the FSM must • International cooperation and innovative refrain from any actions that cast doubts over their solutions. independence and impartiality.

The Office of Financial System Mediator The Office of Financial System Mediator The Office of FSM has an audit function. The auditor is appointed by the Board and reports to THE STRUCTURE the Board direct. The auditor takes on a function which involves independent and impartial investigation and evaluation of the operations of the Office through checkups/examinations.

THE OFFICE OF FSM HAS TWO PILLARS WHICH MAKE SURE THE OFFICE OPERATES FLUENTLY. THESE ARE: • Support Group which is responsible for administrative tasks to make sure day-to-day activities of the Office of FSM are uninterrupted; and

• Case Handling and Investigating Group which makes sure the Office performs its professional -du ties as prescribed by the law. This group, in turn, consists of:

◉ specialists who accept claims, or otherwise, the front office, which receive the visits of clients and provide primary consulting, ◉ specialists who investigate claims, or otherwise, the back office, with the main function of claim investigation, explanation/clarification, legal attendance of the Office, international cooperation, and 8 ◉ specialists supporting case investigators are primarily responsible for helping with claim investigation, making visits to schools and getting involved in activities related to the consumer education program.

The Office of Financial System Mediator On January 24th we met to mark the sixth an- School of “Mkhitar Sebastatsi” Educational Center; niversary of the activities of the Office of FSM. The High Basic School at State Pedagogical University press conference arranged on this occasion round- of Armenia named after Kh. Abovyan; High Ba- ed up past performance of the Office, as well as we sic School at the Institute of Forensic Science and had a communique on the complaints accepted and Psychology “Azpat-Veteran”; High Basic School No. claims investigated and talked about the projects to 112 named after Sh. Simonyan; High Basic School be carried out. of Agrarian Academy at State Agricultural Univer- In 2015, the Office of FSM took on a number of sity of Armenia; High Basic School at the “Northern measures which include seminars and meetings or- University”; High Basic School at the State Architec- ganized within the framework of the program for ture and Construction University of Armenia; High financial education of consumers, meetings and School No. 148 named after M. Galshoyan; High Basic projects arranged in conjunction with local finan- School at the University “Haybousak”; Basic College cial institutions, and strengthening the standing and No. 114 named after Kh. Dashtents; basic colleges in role of the Office of FSM in the international arena. Tavoush, Ijevan, Noyemberyan, Shirak; basic colleg- Now, a brief introduction of the programs we im- es No. 2, No. 12, No. 42, No. 45 in Gyumri; Basic Col- plemented during 2015. lege at State Economic University of Armenia; High School No. 3 in Artik; High School No. 3 in Spitak; “S. Mkhoyan” Educational Complex in Vardenik; High PROGRAM FOR FINANCIAL School named after V. Hambardzumyan in Vardenis; EDUCATION AND INCREASING high schools in Chambarak, Dzoragyugh, Aparan, Talin; High School No. 5 in Ashtarak, High School AWARENESS OF CONSUMERS No. 11 named after Griboyedov, High School No. 10 named after Sayat-Nova, High School No. 17 named Public education of financial services and prod- after M. Khorenatsi in Vanadzor; High School named ucts is a very important aspect in regards to con- after H. Shiraz in Gougark; High School named after sumer protection, increased financial intermedia- Stepan Shahumyan, High School No. 8 named after tion, and effective functioning of financial markets Sayat-Nova in Alaverdi; High School named after 10 and the entire economy. To this end, the Office of H. Toumanyan in Stepanavan; high schools in Ta- 11 FSM has been carrying out the “Program for Fi- shir, Yeghegnadzor, Vayq, Jermuk, Vedi, Dilijan, Ma- nancial Education and Increasing Awareness of sis, Vosketap; High School named after M. Mashtots Consumers” since 2011 in order to raise awareness in Charentsavan; High School named after S. Var- among the citizens of the various financial instru- danyan in Byureghavan; High School in Nor Hajin; ments and the basic rules on how to use them. Vis- High School No. 6 in Abovyan; High School No. 10 its to high schools in different regions of Armenia in Hrazdan; High School No. 4 and High School No. and the Republic of Artsakh, as well as seminars and 1 named after Yeghoyan in Armavir; High School No. meetings with citizens constitute the underlying as- 5 named after M. Gorky in Vagharshapat. pect of the program. The project has involved a total of 5,107 students. At seminars, specialists presented information about SEMINARS AT SCHOOLS the structure of the Armenian financial market, ba- In the year under review the staff of the Office of sic financial products and the risks associated with FSM arranged seminars for senior students of high their use. During the meetings participants were schools in regions of the Republic of Armenia and offered to watch video materials and do financial capital Yerevan, in accordance with the consumer exercises to strengthen their knowledge. education curriculum and timetable. Specifically, seminars were held in a number of high schools, including Yerevan High School No. 170; High School No. 139 named after K. Demirchyan; High School No. 142 named after A. Gharibyan; High Vocational

Activities in 2015 Activities in 2015 SEMINARS AT HIGHER EDUCATION van; 45 high school students in Nor Hajin, 50 stu- On May 11, 2015 the Mediator was interviewed at cessibility to the Office activities and financial prod- ESTABLISHMENTS dents from High School No. 5 in Ashtarak; 43 stu- Banks.am, a news portal, regarding auto insurance ucts by regularly uploading video clips, advice and Students are also a target group under the pro- dents from High School No. 2 in Metsamor; as well fraud. The magazine “De facto” published an inter- other information on the Office and various finan- gram for financial education of consumers. In the as 45 students each from high schools in Vedi, Garni view with the Mediator in connection with the last cial products with Facebook and Twitter. Note that, year under review the Office of FSM organized two (No. 2 named after Atom), Hrazdan (No. 13), Sevan year’s operations of the Office of FSM. in a short period of time, the number of followers workshops for 70 students from the Foundation of (No. 1), Spitak (No. 3) and Talin, respectively. A semi- In the year under review “Голос Армении” of our site on Facebook has increased dramatically, French University in Armenia and 50 students from nar was organized for these students, and for a clos- (“Voice of Armenia”), a Russian-language newspa- from 800 to more than 3200. the Yerevan State University. At the workshop, spe- ing part of the seminar we took them to the Visitor per, published an interview with the Mediator about cialists presented brief information about the Office Center of the Central Bank of Armenia where they their activities, structure of the Office of FSM and INTERNSHIP of FSM and some statistics on the complaints. As had an opportunity to get acquainted with the his- statistical data. In 2015, as part of awareness campaign for young well as the participants were offered to play a sim- tory of circulation of notes and coins of the Republic On December 17, 2015 the main release of the people and student involvement in the Office activi- ulation-exercise which instructed them to learn the of Armenia through interactive exhibitions. In addi- news program “Horizon” on “Shant” TV Channel ties, we arranged practical training/internships for a content of the client complaint to the Mediator and tion to the seminar and hospitality, we took them to spoke of the international conference INFO 2016, total of 16 students from various educational estab- make a decision thereupon, while trying to provide the National Gallery of Armenia. which will take place in Armenia, and the Mediator lishments in Armenia. The internees had an oppor- relevant legislative reasoning. is expected to host nearly 100 financial ombudsmen tunity to obtain theoretical and practical knowledge As well as the financial education program for from 40 countries. The news program also referred of what the Office of FSM does in particular and the VISITS TO THE REPUBLIC OF ARTSAKH consumers, the Office of FSM has embarked on oth- to some statistics on the 2015 operations of the Of- financial sector of Armenia on the whole. The 2012 list of target groups under the program er programs and took part in many activities that fice of FSM. At the same time, a TV program “First for financial education of consumers was designed are ultimately aimed at increasing the financial lit- Economic Channel” of the Public Television also ad- INVOLVEMENT IN THE DEVELOPMENT to cover senior schoolchildren of high schools in the eracy and raising consumer awareness of the activi- dressed the activities of the Office of FSM, as well as AND IMPLEMENTATION OF THE NATIONAL Republic of Artsakh. Today, the target group has ties of the Office of FSM. Thus: the results achieved in 2015. STRATEGY FOR FINANCIAL EDUCATION IN expanded to include students as well as employees ARMENIA of major firms and government agencies. In 2015, EXPLANATORY CAMPAIGNS WEBSITE UPDATE Back in 2012, the Central Bank of Armenia set up the staff of the Office of FSM visited the Republic In the year under review, agreements were Emphasizing the role of the Internet in a modern a “National Financial Education Strategy Develop- of Artsakh to hold seminars in High School named signed with a number of TV companies to air com- society as well as to ensure its transparency, the Of- ment and Implementation Committee” with the aim after Mouratsan in Shoushi, High Schools No. 8 and mercial advertisements about the Office of FSM on fice of FSM launched a new, more informative and of raising public awareness of financial markets and No. 11 in Stepanakert, Stepanakert School of Phys- television. Note also that our customers now have accessible internet web-page since December 2015. financial products and providing lifelong financial 12 ics and Mathematics, as well as Artsakh State Uni- the opportunity to watch infomercials prepared Through the new website, consumers will be able to education of consumers in Armenia. The Mediator is 13 versity and Mesrop Mashtots University. A total of by the Office of FSM on the screen installed in the not only read fresh information about activities of involved in the said committee and takes part in the 410 senior schoolchildren and 181 students have at- waiting room. the Office of FSM, the statistics on the complaints committee’s proceedings as well as in the strategy tended these seminars. The second round of visits is received and investigated, news and upcoming development and implementation activities. planned the next year. MASS MEDIA AND THE OFFICE OF FSM events, but also have the opportunity to apply to In the year under review, head of the Case Han- the Mediator online by filling out a form of request- PARTICIPATION IN DISCUSSIONS “10 DAYS FOR 10 SCHOOLS” dling and Investigating Group of the Office of FSM application placed on the website. Customers now In the year under review, head of Case handling A year ago, as one may recall, the Office of FSM had an interview to the TV Channel “AR”, speaking can use the new website to contact a specialist at and investigating Group together with two employ- had developed an awareness program “5 Days for 5 about complaints lodged against credit organiza- the Office and ask questions or express opinion on ees of the Office of FSM took part in the workshop Schools” for high school students in the context of tions and the nature of claims reviewed, as well as the services provided by the Office. “Mediation and Arbitration Projects” jointly organized financial education, which was aimed to raise the providing relevant statistics. In the year under re- by the Armenian Ministry of Justice and the EU Dele- students’ awareness of and literacy in financial ser- view, news agencies such as PanARMENIAN.NET, PROGRESS IN SOCIAL MEDIA gation to Armenia. The workshop addressed, among vices. The program selected a total of 5 high schools “Yerevan Today” and other agencies published arti- Social networking is the modern world’s most others, the concept of “mediation” and what role it from different regions of Armenia, and relevant cles that broadly featured the topics addressed at efficient way of disseminating information, and the can play and how relevant it is in alternative dispute workshops were organized for the students at the the 6th Annual Conference, the work done and work Office of FSM has embarked on a new social -me resolution. A comparative analysis with other ADR Office of FSM. Based on the results of the workshop, planned, and referred to general statistics about the dia policy, focusing on expanding in social networks institutes (commercial arbitration, financial system the Office of FSM arranged workshops this year for operations of the Office of FSM. such as Facebook, and later, Twitter, LinkedIn and ombudsman) was made, as well. 10 schools selected in advance out of different re- Six years of activity of the Office of FSM, general YouTube. The Office of FSM pursues this policy to In the year under review, two claim investigat- gions of Armenia, extending the program’s scope. So, statistics, the projects and the achievements were give consumers and general public an increased ac- ing specialists of the Office of FSM participated in a this year’s program covered 40 students from High the subject on which the Financial System Mediator gathering organized in town Tsaghkadzor, Armenia, School named after Mesrop Mashtots in Charentsa- gave an interview to ARMENPRESS, a news agency. to discuss the ‘draft law on making amendments to

Activities in 2015 Activities in 2015 the Republic of Armenia Civil Procedure Code’ within investigating client claims/complaints, customary MEDIATOR’S DECISIONS DISPUTED in the framework of the European Union and Coun- business practices identified, and the measures to be AT THE COURT INTERNATIONAL COOPERATION cil of Europe program. implemented in 2016. Bank representatives also de- According to the Republic of Armenia Law on Fi- Another claim investigating specialist of the Of- livered short speeches regarding controversies they nancial System Mediator, any decision of the Media- fice of FSM attended a workshop “Current Problems had identified. At the closing part of the meeting, the tor which is binding to the parties can be appealed Since its inception, the Office of FSM has been in Armenia’s Payment and Settlement System” in participants, divided into small groups, were offered to the competent court through submitting an ap- underscoring the importance of international coop- Dilijan, which was organized by the Central Bank of to play a simulation-exercise which instructed them plication to revoke such a decision. In 2015, three eration and bringing best international practices of Armenia. Participating as a speaker, the case investi- to review an exemplary case, already examined by applications to revoke the decision of the Mediator mediation to Armenia. This is why the Mediator has gating specialist talked about the cases of payment- the Mediator, and present their position about it, were examined by the court. regularly organized various meetings and confer- industry-specific-fraud and the problems associated while trying to provide relevant legislative reasoning. The first application was submitted by a bank to ences to exchange experience and share knowledge. therewith. annul the Mediator decision that required the bank Luckily, in recent years, leading field professionals at In November 2015, the Central Bank of Armenia A ROUNDTABLE WITH INSURANCE to partially compensate the damage caused to the various international meetings have been citing our arranged a meeting in Tsaghkadzor, getting togeth- MARKET PARTICIPANTS client as a result of card fraud. Having reviewed the achievements as an example of best international er Armenia’s financial market participants, commer- In the year under review, the Office of FSM had a bank’s application, the Court of First Instance of practice. In the context of international cooperation, cial banks in particular, to address existing problems roundtable meeting, a format organized since 2010, Kentron and Nork-Marash administrative districts of the year under review was important as the annual and disputes. The Mediator and a case investigating with the domestic insurance market participants. capital Yerevan made a decision to reject the claim gathering of member financial ombudsmen an- specialist of the Office of FSM participated in the Two representatives from each insurance company of the bank. Similarly, the Court of Cassation re- nounced Armenia a hosting country for the annual meeting. and from the Armenian Bureau of Motor Insurers viewed the case in question and the bank’s applica- 2016 Conference for International Network of Finan- In the year under review, town Tsaghkadzor and one representative from insurance brokerage tion and issued a decision to reject the appeal. cial Ombudsmen (INFO 2016). hosted a meeting titled ‘Forum of the Law Firm’, firms attended the meeting. The 2014-2015 prec- The next application, again from a bank, was Let us briefly present the measures the Office of again organized by the Central Bank of Armenia, edent cases, controversial issues arisen in connec- about disputed decision of the Mediator whereby FSM has taken in the framework of international co- with participation of the Mediator, as well as repre- tion with investigating the client claims/complaints, the bank was called to satisfy the client’s claim on operation. sentatives of major law firms active in Armenia. The customary business practices identified as well as card fraud filed against that bank. The case is still goal of the meeting was to identify and address the measures to be implemented in 2016 were present- under investigation. CONFERENCE problems in the domestic financial sector. ed at the meeting. The insurance market partici- An application submitted by an insurance com- On May 19-20, 2015 the Office of FSM hosted the pants, in turn, addressed controversial issues arisen pany related to the motor third party liability con- 6th annual international conference titled “Financial in connection with the review of customer claims tract. Specifically, the client had lodged a claim to Ombudsman Institute: increasing public confidence 14 15 COOPERATION WITH FINANCIAL filed against them. be considered a victim and to get insurance indem- and enhancing financial mediation 6” in Hotel Mar- INSTITUTIONS nity for the damage, as prescribed in the Republic riott, Yerevan. Guest speakers of the conference BEST COOPERATING PARTNERS of Armenia Law on Compulsory Insurance against included Financial System Ombudsmen of Great In the year under review, the Mediator an- Civil Liability in Respect of the Use of Motor Vehicles. Britain and Ireland, Banking Ombudsman of Swit- Financial System Mediator has always attached nounced the names of “Best Cooperating Company” The Mediator had reviewed the claim and made a zerland, Credit and Investment Ombudsman of Aus- importance to the cooperation with financial in- and “Best Cooperating Officer”. Best cooperating decision to urge the insurance company to satisfy tralia, investment arbitration and card fraud experts stitutions, which aims to make the review process partners are chosen based on the criteria developed the claim. The insurance company’s application was from Russia. The conference addressed such topics more efficient and transparent, to identify problems by the Office of FSM. These criteria include the level accepted to the proceedings by the Court of First as communication strategies with customers and while trying to find ways to solution. In the year un- of the organization’s involvement in the case review, Instance of Kentron and Nork-Marash administra- other stakeholders by the use of latest technolo- der review the Mediator, therefore, arranged meet- the share of cases ended with reconciliation of the tive districts of capital Yerevan. The court, however, gies, including the use of social media, the ombuds- ings with industry professionals. parties in total, and etc. Based on the 2015 results, decided to suspend the litigation until making an man’s reputation and relationship with mass media, best cooperating bank was “ArdshinBank” CJSC and appropriate decision on the criminal case. The court international investment arbitration as a means for A ROUNDTABLE WITH BANKS best cooperating insurance company, “INGO Arme- resumed the proceedings by another decision as the dispute resolution. The conference made a discourse In November 7 - 8, 2015 Financial System Me- nia” CJSC. circumstances upon which the litigation had been on the subject of dispute resolution mechanisms in diator arranged the 3rd roundtable meeting at “Best For demonstrating willingness to support the suspended eliminated. the financial sector of many countries and thematic Western” hotel in Dilijan, Armenia, with commercial Office of FSM in the review of claims, the Mediator discussions were held concerning mortgage loan in- banks’ representatives who are responsible for rela- awarded certificates titled “Best Cooperating Officer” surance, the Lloyd’s, card fraud and scams. As a nov- tions with the Office of FSM. A total of 31 participants to Ms. Rosa Pedanyan, a specialist of ArdshinBank elty this year, the conference participants were of- representing 20 banks attended this meeting. Dur- CJSC (banking), and Mr. Hayk Mangoyan, head of fered a team game-exercise on the subject ‘Fairness’. ing the meeting the Mediator presented the 2014- compensations unit of INGO Armenia CJSC (insur- 2015 precedent cases, controversial issues emerged ance).

Activities in 2015 Activities in 2015 EXCHANGE OF EXPERIENCE In the year under review, the Mediator and three specialists of the Office of FSM took part in the “INFO 2015” Annual Conference in Helsinki, Finland. It was announced at the conference that the “INFO 2016” will be held in Yerevan, Armenia. On this occasion, the Mediator’s delegation had prepared a pavilion representing Armenia, and the Office of FSM was pleased to provide guests with information brochures and small souvenirs. In a separate address, the Mediator called on the participants to attend the next conference to be held in Armenia. Following the address, a short film about Armenia was featured. Invited as a guest speaker to the conference, the Mediator took part in the discussion “Measuring Effectiveness of the Activity of the Ombudsman”. The Mediator was invited to participate as a guest speaker in the “Forum of Financial Well-Being” which was organized by the Organization for Economic Cooperation and Development in Malaysia’s capital Kuala Lumpur from September 27 to October 3, 2015. The Mediator’s speech specified who the main ben- eficiaries of alternative dispute resolution bodies are and how they benefit from the Ombudsman’s activi- TABLE OF CONTENTS ties. The Mediator also highlighted the importance of maintaining close cooperation with the regulatory 4 Address of Chairman of the Board authority and spoke of the financial education pro- 16 gram for consumers the Office of FSM carries out. 5 Address of Financial System Mediator On December 10, 2015 the Mediator attended the annual conference of FIN-NET, a financial dispute res- 6 The Office of Financial System Mediator olution network of national out-of-court complaint schemes in the European Economic Area countries, 10 Activities in 2015 in Brussels, Belgium. At the conference, the Mediator had an opportunity to talk about the INFO 2016 con- 18 Activities for 2016 ference to be held in Yerevan in September 18-21, 2016, as well as to feature a film about Armenia. 20 Statistics of complaints and claims

40 Financial Statement and Audit Opinion

48 Overview of Customary Business Practice; Case studies

62 Questions and Answers

66 Acknowledgements

68 The List of Organizations Which Did Not Sign the Covenant

Activities in 2015 SEVEN YEARS INTO THE JOB: ORGANIZING A STUDENT FORUM: January 24, 2016 is the date which marks the 7th In pursuit of enhancing the students’ interest in years of the Office of FSM. On this occasion, we are how the Armenian financial market functions and planning to hold a press conference during which a what risks it faces, the Office of FSM has plans to detailed account of the complaints and claims han- organize a student forum titled “The Financial Sys- dled by the Mediator and other activities of the Of- tem of Armenia: Problems and Solutions”. The forum, fice for 2015 will be presented. The names of best which is scheduled in May of 2016, will give stu- partners in the category “Best Cooperating Company” dents an opportunity to present their research and and “Best Cooperating Officer” will be announced, as showcase their analytical skills. Best students will be well. To attract more citizens to know even more awarded financially during the forum. about the activities of the Office of FSM, the Face- book quiz winners will be awarded during the event. INVOLVEMENT IN THE NATIONAL STRATEGY FOR FINANCIAL PREPARING TO HOST INFO 2016 IN EDUCATION PROGRAM: YEREVAN: The Office of FSM will remain proactive in coop- Back in 2013, the Office of FSM had submitted a erating with the Central Bank of Armenia in the con- bid for hosting an annual conference of the Inter- text of measures as part of the program of national national Network of Financial Ombudsmen, INFO. In strategy for financial education, including the “My Fi- 2015 the financial ombudsmen of the world gathered nances Month” project. Specifically, April of 2016 will in Helsinki, Finland, for another great conference, be declared a ‘Month of Finances’ within which the during which Armenia was announced as the host Office of FSM will take part in awareness campaigns, country of the INFO 2016 Conference. The confer- seminars, meetings and discussions. ence will take place in September 18-21, 2016, and we expect financial ombudsmen and representatives MORE COVERAGE: of supervisory authorities and financial organiza- In the coming year too, we will be working hard tions from around 40 countries. Annual conferences to broaden the coverage of activities of the Office of of the International Network of Financial Ombuds- FSM. More video advertisements will be developed 18 men provide institutions involved in the protection of and aired on leading TV channels of Armenia. For 19 consumer rights an excellent platform for their co- coverage, social media portals will be used as well. operation, exchange of experience and professional progress. DISCUSSIONS/SEMINARS: We plan meetings in a roundtable format with PROGRAM OF FINANCIAL EDUCATION domestic bank and insurance company representa- FOR CONSUMERS: tives to address controversial issues arisen in connec- The Office of FSM will push forward the imple- tion with the review of typical examples of claims of mentation of the Consumer Financial Education and the clients and other matters of relevance. Increasing Awareness Program over 2016. We intend to welcome senior schoolchildren from a total of 15 high schools in different regions of Armenia (2015: 10 high schools) to capital Yerevan and we’ll continue the tradition to visit high schools in the regions and Yerevan. Also, we’ll start the second phase of visits to the Republic of Artsakh to arrange meetings, in particular, with the Stepanakert and Shoushi City Halls, the Republic of Artsakh Government Administration, staff of major employers.

Activities for 2016 Activities for 2016 • In 2015 the Office received a total of 3,829 com- cial firm agreed to compensate the whole loss of the plaints, including 3,263 complaints related to the fi- customer of AMD11,862,500) and the smallest, AMD 1. nancial sector, of which 2,668 were eligible under law In 2014, the total amount of compensation to be reviewed by the Mediator. 595 complaints not reached AMD 199,147,628, in 2013 AMD 204,578,416, in eligible for review were associated with the events 2012 AMD 134,087,137, in 2011 AMD 58,137,847; in 2010 occurred before the Law on Mediator has entered and 2009 these indicators were AMD 29,264,354 and into force; some of the claims ended up with court AMD 26,062,886, respectively. writ issued in respect thereto or with the case pend- ing in court proceedings; and a few cases were not • By virtue of our central principle of fast and ef- under the jurisdiction of the Mediator since the con- fective review and handling of every claim, after a sumer didn't qualify as "customer" according to the preliminary review we often explained to our clients law on the Mediator. The rest of complaints were of and made them clear that action of the organization a general nature and these have not, virtually, con- involved was exemplary and that we would not be tained property-related claims. going to have success even if we took the claim for • Specialists of the Office delivered advice to all review. Normally, in such circumstances, our clients the clients who applied as well as helped draw up trusted our specialists and agreed to our point. This complaints to the financial organizations concerned perhaps explains the dynamics of the complaints ac- and explained their rights and obligations. Based on cepted for review by the Office. In 2015 out of 3263 the 2015 results, 131 complaints (4.91 percent) out of a complaints 1448 or 44.38% were transformed into total 2,668 eligible for review were treated positively cases for further investigation. In 2014 out of 3,244 by the organizations without having to file a request complaints 1,276 or 39.33%, in 2013 out of 2,003 com- in writing to the Mediator; where the client applied plaints 818 or 40.48%, in 2012 out of 1,311 complaints to us for request, we helped them to complete com- 392 or 29.90%, in 2011 out of 803 copmlaints 144 or plaint against that organization. In 2014 this indicator 17.93%, in 2010 out of 642 complaints 110 or 17.13% was 4.8 percent (130 complaints out of 2,667) in 2013 and in 2009 out of 378 complaints 57 or 15.08% were 5.6 percent (92 complaints out of 1,627), in 2012 2.7 transformed into cases for further investigation . percent (26 complaints out of 951), in 2011 7.8 percent • During the year under review about 62,19 % of 20 (43 complaints out of 551); in 2010 14.7 percent (66 total complaints were against insurance compa- 21 complaints out of 450); and in 2009 20.4 percent (40 nies, among which about 89.21% of complaints were complaints out of 196). about MTPLI contracts. Most of the clients did not • During 2015 a total of 1,448 claims/complaints agree with the estimated amount of damage as well were received in writing, 77.79 percent of which were as more complaints were received in connection resolved in favor of clients out of which about 56.32 with non-compensation of the damage or delayed percent were resolved through mediation. compensation. • In monetary terms, consumers were compensated a total of AMD 198,369,625 as a result of Me- diator’s intervention. 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 theirs, 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. The largest compensation was AMD 11,862,500 (customer’s claim was initially for AMD 10,000,000 since this is the maximum amount the Mediator is eligible to review under the law, but during case investigation the complaint was resolved through negotiations and mediation, so the finan-

Statistics of complaints and claims Statistics of complaints and claims STATISTICS, GENERAL The number of complaints received by the Office during 2015, by month: The number of complaints related to financial system PROFILE 400

The number of complaints received by the Office during 2015, by quarter: The number of complaints relatd to financial system

1000

206 302 311 261 227 283 225 220 383 322 263 260 0

January February March April May June July August September October November December

The number of claims received by the Office during 2015, by quarter: The number of claims

22 23

400

819 771 828 845 0 339 356 349 404

0 I quarter II quarter III quarter IV quarter I quarter II quarter III quarter IV quarter

Statistics of complaints and claims Statistics of complaints and claims The number of claims received by the Office during 2015, by month: The number of complaints filed to and claims received for review by the Office during The number of claims 2015, by quarter

0 180 The number of complaints to financiaal system 800 received by the Office January 68 700 during 2015 600 The number of claims February 107 500 received by the Office 400 during 2015 300 March 164 200 100

April 128 0

819 339 771 356 828 349 845 404 I quarter II quarter III quarter IV quarter May 110

Total number of complaints received during 2015, o/w: 3,829 June 118 Number of complaints to financial system 3,263 24 25 July 122 • Not eligible for review by Mediator 595

• Eligible for review by Mediator 2,668

August 104 Resolved based on complaint/claim filed against the organization in question 131

Taken in for review upon presentation of a claim in writing 1,448 September 123 • Claim satisfied through reconciliation 566

• Claim declined 287 October 123

• Claim partially satisfied 408

November 134 • Review of the claim suspended 155

• Claim satisfied 31 December 147 • Review of the claim declined 1

Statistics of complaints and claims Statistics of complaints and claims Results/outcome of review Cases declined and cases settled Complaints, by type of organizations: of complaints/claims, by percent: down in favor of the client, presented as a ratio:

39.09% 77.79% Number of complaints to financial system received 3,263 100% during 2015, which were filed against:

Banks 1,115 34.17%

28.18% Insurance companies 1,964 60.19%

19.82% 22.21% Credit Organizations 88 2.70%

Pawnshops 14 0.43% 10.70% Armenian Motor Insurers’ Bureau 29 0.89% 2.14% Payment and settlement organizations 6 0.18% 0.07% making remittances

Other financial institutions 47 1.44%

Claim satisfied through reconciliation Claims settled down in favor of the client Claim satisfied Claims declined Claim partially satisfied Claim declined Share of complaints filed against financial organizations in 2015 in the total 26 Review of the claim suspended number of complaints presented to the Office: 27 Reviews declined

Claims settled down in favor of the client, by percent: 60.19% Banks Insurance companies Credit institutions 56.3% Claim satisfied through reconciliation 34.17% Pawnshops Claim satisfied Armenian Motor Insurers' Bureau Claim partially satisfied Payment and settlement organizations 40.6% 2.7% making remittances Other 1.44% 3.1%

0.89%

0.43%

0.18%

Statistics of complaints and claims Statistics of complaints and claims Claims reviewed, by type of organizations: Content of claims filed against banks:

Total number of claims in writing during 2015, 1,448 100% Total number of claims in writing filed against banks during 327 100% which were filed against 2015 in connection with:

Insurance companies 1,091 75.35% Credit operations 217 66.36%

Banks 327 22.58% Payment and settlement transactions 69 21.10%

Armenian Motor Insurers’ Bureau 15 1.04 % Depositary operations 16 4.89%

Credit organizations 14 0.97% Other 25 7.65%

Payment and settlement organizations 1 0.07% making remittances

Credit operations Payment and settlement transactions Depositary transactions Other Share of claims filed against selected financial organizations in total complaints accepted 28 by the Office for review in 2015: 29

75.35% Banks Insurance companies Credit institutions Armenian Motor Insurers' Bureau Payment and settlement organizations making remittances 66.36%

22.58% 21.10%

1.04% 4.89% 0.97%

0.07% 7.65%

Statistics of complaints and claims Statistics of complaints and claims Content of claims filed against insurance companies and the Armenian Reimbursement: Motor Insurers’ Bureau:

Total number of claims in writing during 2015, which were 1,106 100% Total value of Client reimbursement during 2015, 198,369,625 100% filed against insurance companies and Armenian Motor Insurers’ including: Bureau, including Reimbursement on claims against banks 36,221,935 18.26% Vehicle insurance 72 6.51% Reimbursement on claims against insurance companies 160,488,446 80.90% Medical insurance 25 2.26% Reimbursement on claims against credit organizations 494,244 0.25% Travel insurance 7 0.63% Reimbursement on claims against Armenian Motor 1,145,000 0.58% Accidents insurance 5 0.45% Insurers’ Bureau

Property insurance 12 1.08% Reimbursement on claims against Payment and settlement 20,000 0.01% organizations making remittances Mandatory car insurance contracts 966 87.34%

Mandatory car insurance contracts (against Armenian Motor Insurers’ Bureau) 15 1.36%

Voluntary liability insurance 4 0.36%

Share of reimbursements as a result of review of the claims filed 30 against financial institutions in total indemnification provided to the clients in 2015 31

6.51% 2.26% 0.63% 0.45%

Reimbursement on claims agains Banks 18.26% 1.08% 0.36% 87.34% 1.36% Reimbursement on claims against Insurance companies 80.90% Reimbursement on claims against Credit institutions 0.25% Reimbursement on claims against Armenian Motor Insurers Pawnshop Bureau 0.58% Reimbursement on claims against Payment and Vehicle insurance settlement organizations making remittances Medical insurance 0.01% Travel insurance Accident insurance Property insurance During 2015: Voluntary liability insurance 77.79% of the cases reviewed were settled in favor Mandatory car insurance contracts of the client; Mandatory car insurance contracts (against - the largest compensation - AMD 11,862,500; Armenian Motor Insurers’ Bureau) - the smallest compensation - AMD 1.

Statistics of complaints and claims Statistics of complaints and claims Share of claims, which were settled in favor of the client, in total claims, by year: Dynamic analysis of some indicators

0 1000 78% The number of complaints received by the Office in 2009-2015, by quarter: 67

185

213

249

446

850

819 I quarter

164

185 66.40% 68.75% 67.69% 72.14% 70.44% 76.91% 77.79% 2009 2010 2011 2012 2013 2014 2015 345 422

60% 723 771 II quarter

Share of claims, which were settled in favor of the client, in selected financial 86 32 institutions claims (%): 33 128

100 212 379

445

100.00 741

828 III quarter

161

165 62.50 193 2009 80.33 53.85 Banks 2010 338 Insurance Companies 2011 690 70.75 Credit Institutions 2012 Armenian Motor Insurers Bureau 2013 930 Paymen and Settlement organizations 2014 845 making remittances 2015 IV quarter 0

Statistics of complaints and claims Statistics of complaints and claims The number of complaints filed to and claims received for review by the Office in The number of complaints received by the Office in 2009-2015, by type of 2009-2015, by year: financial institutions:

0 2500 1115 1029 706 2009 2010 2011 2012 2013 2014 2015 509 Banks 434 419 252 378 642 803 1311 2003 3244 3263 1964 2014 3500 1142 689 Insurance Companies 252 63 54 88 71 48 48 Credit Institutions 60 75 46 14 25 14 33 Pawnshops 42 80 22 29 34 28 35 18 10 Armenian Motor Insurers Bureau 10 0 0 6 11 7 1 Paymen and Settlement organizations 4 making remittances 3 0 0 3 0 57 110 144 392 818 1276 1448 0 Investment Companies 1 2 2015 1 47 2014 63 2013 68 2012 The number of complaints related to finan- 21 2011 Other 0 cial system 0 2010 The number of claims 3 2009

Statistics of complaints and claims Statistics of complaints and claims 70 Share of complaints filed against selected financial institutions in total complaints Client reimbursement in 2009-2015: submitted to the Office in 2009-2015: Client reimbursement (AMD)

0 70 66.7 65.3 250 000 000 54 38.83 Banks 35.25 31.72 34.17 14.3 9.8 31.4 52.56 Insurance Companies 57.01 62.08 60.19 12.2 11.7 7.5 3.66 Credit Institutions 2.40 2.19 2.7 5.8 12.5 5.2 2.52 Pawnshops 1 0.77 0.43 0 36 0 37 1.2 0.8 Armenian Motor Insurers Bureau 0.9 0.86 0.89 0 0.5 0.5 0.08 Paymen and Settlement organizations 0.35 making remittances 0.34 0.18 0.3 26,062,886 29,264,354 58,137,847 134,087,137 204,578,416 199,147,628 198,369,625 0.3 0.1 0 0 Investment Companies 0 2009 2010 2011 2012 2013 2014 2015 0 2009 0 0.8 2010 0 2011 0 2012 1.60 2013 Other 3.39 2.03 2014 1.44 2015

Statistics of complaints and claims Statistics of complaints and claims Share of Client reimbursement in total reimbursements, by type of financial institutions: 0 90 58 44 38 12 10 14 Banks 18.20 35 26 39 86 87 83 Insurance Companies 81 7 11 19 0.41 0.21 0.41 TABLE OF CONTENTS Credit Institutions 0.25 1 4 Address of Chairman of the Board 19 38 5 Address of Financial System Mediator 2 1 6 The Office of Financial System Mediator 2009 1 2010 0.06 10 Activities in 2015 2011 Pawnshops 0 2012 0 18 Activities for 2016 2013 0 2014 2 20 Statistics of complaints and claims 2015 1 1 40 Financial Statement and Audit Opinion 3 48 Overview of Customary Business Practice; 0.60 Armenian Motor Insurers Bureau It should be mentioned that the Repub- Case studies 0 lic of Armenia Law on Compulsory Insurance 0.03 against Civil Liability in Respect of the Use of 62 Questions and Answers Motor Vehicles entered into force in January of 0 2011, and this means that in 2009 and 2010 no 0 66 Acknowledgements claims against the Bureau of Car Insurers of Ar- 0.01 menia were reviewed and compensation given, 0.01 Paymen and Settlement organizations 68 The List of Organizations Which Did Not accordingly. 0.01 making remittances Sign the Covenant

Statistics of complaints and claims 40 41

Financial Statement and Audit Opinion Financial Statement and Audit Opinion 42 43

Financial Statement and Audit Opinion Financial Statement and Audit Opinion 44 45

Financial Statement and Audit Opinion Financial Statement and Audit Opinion TABLE OF CONTENTS

4 Address of Chairman of the Board

46 5 Address of Financial System Mediator

6 The Office of Financial System Mediator

10 Activities in 2015

18 Activities for 2016

20 Statistics of complaints and claims

40 Financial Statement and Audit Opinion

48 Overview of Customary Business Practice; Case studies

62 Questions and Answers

66 Acknowledgements

68 The List of Organizations Which Did Not Sign the Covenant

Financial Statement and Audit Opinion According to Article 14 (3) of the Republic of Ar- loan’ had also been stated as purpose of the trans- menia Law on Financial System Mediator, in mak- fer. The Bank serving the Client’s account (i.e. the ing decision, the Mediator shall not only refer to the Bank from which the Client had received the loan requirements of the Armenian legislation but also amount) has all the funds available on the account take into account the rules of business conduct and of the Client credited on to the Client’s bank ac- ethics, and customary business practices. This gives count yet it failed to channel the funds to the loan the Mediator enough flexibility for decision-making repayment but rather used it on an annuity basis. and allows for each case taking as streamlined ap- The Bank serving the Client’s account stated that proach as possible to protect consumer interests. the Client’s instruction was aimed to the Payer’s As the Mediator works on investigating claims, the Bank and the Beneficiary’s Bank had no right to use need to identify a customary business practice arises all funds, so credited on to the Client’s bank account, not only when a particular legal relationship is not for the full repayment of the loan. regulated by any act but especially when it requires Nor has the Bank serving the Client’s account one and the same application of the provision or followed the requirement laid down in Article 27 (2) there is need to find out whether that practice is of the Republic of Armenia Law on Funds Transfer acceptable in any given situation or circumstance. by Payment Order, which says that the beneficiary’s Below is a customary business practice we came to bank must inform (whether verbally, in writing or find out in the year under review. electronically) the beneficiary of the fact that it has received a payment order, until the beginning of the next calendar day following the receipt of the pay- CUSTOMARY BUSINESS PRACTICE ON ment order. APPLICABILITY OF THE REPUBLIC OF ARMENIA LAW ON FUNDS TRANSFER BY For investigation of the claim, the Mediator had PAYMENT ORDER to figure out if there is a practice with banks regarding applicability of the Republic of Armenia Law on Funds Transfer by Payment Order: When investigating a claim submitted to the Of- • Does the bank (if acting as the beneficiary’s bank) 48 fice of FSM, the Mediator had to clarify a custom- fulfill the purpose of a payment order issued by the 49 ary business practice at banks as they deal with the sender’s bank to the payer’s bank OR whether the field transfer of funds by a payment order. ‘purpose of payment order’ is mandatory to the ben- According to the claim, the Client and the Bank eficiary’s bank). For example, if a person gives a pay- signed a loan, firm pledge and bank account con- ment order to bank A for the transfer of money on to tract, under which the Client had received a con- his account at bank B and notes that the purpose of sumer loan. The repayment of the loan amount and the transfer is full repayment of the loan received from accrued interest was to be performed on an annu- bank B, shall bank B be obliged to channel the amount, ity basis, according to the contract. The contract set which had been credited on to his account, to the full a condition whereby the Client had instructed the repayment of the loan? Bank to channel all funds, so credited on to the Cli- • Does the bank (if acting as the beneficiary’s bank) ent’s bank account, to fulfill the obligations of the inform (whether verbally, in writing or electronically) Client in respect of the Bank under the contract. the beneficiary of the fact that it has received a pay- The Client used another bank to make a money ment order, until the beginning of the next calendar day transfer on to his bank account, stating the ‘full re- following the receipt of the payment order? payment of the loan’ as purpose of the transaction. The transfer order indicated the Bank as a recipient To shed light on the issue the Mediator sought ex- bank from which the Client had received the loan planations and clarifications provided by 10 commercial amount. The bank, in implementation of the pay- banks operating in Armenia. So, the banking practice ment order by the Client, sent a memorial order to regarding the applicability of the Republic of Armenia the Client’s Bank where the ‘full repayment of the Law on Funds Transfer by Payment Order is as follows:

Overview of Customary Business Practice; Case studies Overview of Customary Business Practice; Case studies 1. Five banks out of 10 mentioned above do fulfill sponsibility the Bank will bear in respect of the Client. Vendor did fail to perform their obligations (hand- failed to explain in his claim and the documents at- the purpose of a payment order issued by the sender’s A comprehensive review of the facts, a number of ing the goods to the consumer) and, therefore, they tached thereto what specific measures he has taken bank to the payer’s bank; the other five do not. legislative norms and the contract signed between have to bear responsibility of handing the item of to generate income and what steps he has made to 2. Two banks out of 10 mentioned above do inform the parties allowed the Mediator drawing the fol- collateral under the contract to the Client or obliga- that effect. Moreover, the Bank has never required the beneficiary of the fact that they have received a payment lowing conclusions: the Republic of Armenia Law on tion to compensate the loss the Client has incurred. early repayment of obligations from the Client, and order, until the beginning of the next calendar day following Protection of Consumer Rights, and other laws and Given that all the conditions necessary for the it is the Client who decided on an early repayment of the receipt of the payment order; the other eight do not. regulations, as well as the contract concerned all en- Client to exercise his rights to lodge a claim against his obligations in full. title the consumer to submit the claims as estab- the Bank direct are in place, the Client shall be en- For investigation of the claim, the Mediator had lished in the aforementioned statutes to the titled to make his claims directly to the Bank and to review a number of legislative norms and the con- creditor direct under the following circumstances: the latter shall be obliged to compensate the Client tract signed between the parties, on the one hand, PRECEDENTS/ CASE STUDIES 1) the consumer crediting contract is concluded with for the damage which, in this case, is the loss of the and to study the judicial practice, on the other. As a a person who is not a supplier, and the consumer amount of the loan to obtain the goods, as well as result, it was found that where the debtor has violat- Precedent 1: creditor has agreed to provide a loan to the sup- the interest and fines accrued on that loan. ed his obligations, he shall be obliged to compensate Client’s right to make a claim to the Bank for plier’s customers in order to purchase goods from Thus, the Mediator decided to satisfy the Client’s the creditor for the damage and lost earnings (i.e. un- non-delivery of the goods under a consumer that supplier, and 2) the goods purchased through claim against the Bank, urging the latter to withhold earned income that this person would have received crediting contract to the buyer the loan provided under the consumer crediting from demanding the Client to fulfill his contractual under normal conditions of civil practice, if his right A loan contract signed between the Bank and contract are not received, and the consumer at- obligations and to reclassify the Client’s loan as it was. had not been violated). the Client entitled the Client to purchase a laptop tempted in good faith to realize his rights and make Going further in commenting on compensation from the seller of electronics (the Vendor), whereby claims entitled by law or contract, but the supplier for damage in the form of lost earnings, the Court that laptop would serve as an item of collateral. The failed to perform his obligations in the manner and Precedent 2: of Cassation stated that the plaintiff will, for com- item of collateral was not provided to the Client, so scope as stipulated by the law and the contract. A changed interest rate of the mortgage loan pensation of the lost earnings resulting from breach they went to the Vendor and claimed to annul the During investigation, the Bank did not provide contract signed with a former employee of of contractual obligations, need to provide evidence loan contract on the basis of the right of time to any firm evidence of the fact that the Client had the bank and the client claim for missed profit that substantiates: think. The Vendor’s officer assured that the request obtained the laptop, which was indicated in the resulting from the change • the breach of the obligations under the contract would be submitted to the Bank. A month later, the contract. Moreover, the Vendor has virtually ceased As an employee of the Bank, the Client signed a • the real intention and possibility for the gain Client learned that the loan contract hadn’t been to operate, and enforcement authorities had under mortgage loan contract with the Bank in order to • the cause and effect of the latter annulled; moreover, fines accrued on as a result of their possession similar claims of the Vendor and the purchase a real estate. After a while, the Client left the • the extent of damage 50 non-fulfillment of credit obligations. The Client ap- Bank’s customers. So, the issue of good faith of the Bank (was discharged). This gave the Bank ground to • the cause-and-effect relationship between 51 pealed to the Mediator with a request to urge the consumer/Client becomes pointless in such circum- raise the interest rate of mortgage loan to the Client breach of obligations, real intention and possibility Bank to cancel the above loan contract, abstain stances. As it follows from the above, all necessary twice as much. Learning of this, the Client undertook for the gain and extent of damage from paying fees arisen in connection with the loan stipulations of the law are in place, in which case full and early repayment of all his contractual obliga- • the measures the individual whose rights were contract and from getting the loan reclassified. the Client has the right to lodge his claims directly tions under the mortgage loan to the Bank. The liti- violated takes to reduce the extent of damage. The Bank said they have received no claim on uni- to the Bank. gation followed after termination of the employment Thus, the Court of Cassation of the Republic of lateral annulment of the loan contract and affirmed It should also be noted that according to the Ar- contract by the Bank resulted in a judgment stating Armenia has clearly set out the circumstances prov- that they have duly performed their obligations un- menian legislation the seller is exempt from non- that although the employment relationship was ter- ing of which would only give the plaintiff a chance to der the contract, i.e. transferred the amount under fulfillment or improper fulfillment of their ob- minated in violation of the law, the Client, in this case, claim compensation for the lost gain. Moreover, the the loan contract to the Vendor’s bank account, as ligations, if they prove that the fulfillment or should not be restored to his former job position. In obligation to prove the existence of the aforemen- was instructed by the Client. The Bank also noted improper fulfillment was impossible due to this connection, a certain amount of money was con- tioned circumstances rests with the plaintiff. that, in this case, after having properly performed force majeure circumstances or violation by fiscated from the Bank in favor of the Client. In view In this particular case, the employment relationship their obligations, they remained with no collateral, the consumer of the terms/rules of use, stor- of the fact that the Bank had terminated working re- has been terminated by the Bank in violation of the law, and because it is impossible to prove whether or not age and transportation of the goods or action lationship in violation of the law thus changing the and the change in the nominal interest rate implies that the borrower-pledgee received the goods, the Bank of the third parties. Thus, in this case, the Bank nominal interest rate without any legal grounds, the the Bank has also violated its contractual obligations. was not in a position to take action. failed to prove that the non-fulfillment or improper Client turned to the Bank requesting compensation Referring to the real intention and possibility of fulfillment of obligations by the Vendor has resulted of the lost earnings resulted from the early repay- obtaining a gain, it should be noted that the Client For investigation, the Mediator had to figure out: from force majeure circumstances or violation by ment of loan obligations, while providing a couple of has provided options in his claim about how he would • whether the Client is entitled to make a claim the consumer of the terms/rules of use, storage and mechanisms of how to calculate lost profits. allocate the sum and benefit from, given the lack of against the Bank in this case, and transportation of the goods or action of the third The Bank considers the Client’s claim for compen- the need for early repayment of loan obligations. As • if so, what kind of claim it can be and what re- parties. So, what implies from the above is that the sation of lost earnings unfounded since the Client has mentioned above, the Court of Cassation has estab-

Overview of Customary Business Practice; Case studies Overview of Customary Business Practice; Case studies lished that compensation for the lost profit will only Precedent 3: fers charged the Client a transfer fee of 0.3% of the premises of the Bank contains all the essential terms work if the owner’s real intention and possibility of The impossibility to perform a currency amount transferred, and the dram account reported of the foreign exchange trading contract and whether obtaining a gain through an appropriate property are conversion transaction to the extent needed, a surcharge because the said transfer fee had out- or not it constitutes a public offer. at the same time in place. In this particular case, al- as the bank issued an instruction internally to stripped the Client’s account balance. The condition relating to the goods of the trad- though options for possible income through alloca- limit selling of foreign currency to individuals For investigation of the claim, the Mediator first ing contract is deemed to be agreed if the contract tion of the sum were provided, the Client however The Client wanted to buy dollars from a branch of all examined the contract on bank account open- allows determining the name and quantity of the failed to justify his real intention for obtaining a gain office of the Bank but the branch office employee re- ing and maintenance signed between the parties, a goods; if the trading contract does not allow deter- by the use of the money. In addition, the Court of fused to sell the required amount of foreign currency, number of legislative acts relevant to the case, and mining the quantity of then goods to be delivered, Cassation stated that for determining the existence citing an instruction issued by the Bank’s manage- carried out a detailed analysis of transactions of the the contract will be considered invalid. Therefore, the of lost profits, the status of the property that was in ment. The Client’s proposal to converting the same Client, reading the account statements. As a result, it proposal containing intention to enter into a con- normal conditions of civil practice before the viola- amount of money and putting it in his US dollar ac- became clear that the Client’s dram and dollar card tract on trading of the goods with specific features tion of the right must be taken into account in the count was rejected, either. In the evening, the Client transactions were processed according to the Terms (including foreign currency) cannot constitute an first place. In this case, the Client failed to provide any attempted an electronic transfer of money from his of Provision and Use of Payment Cards, applicable at offer if it lacks the condition on the quantity of the evidence that before the full repayment of the loan Armenian dram card on to the US dollar card, which the Bank, and as per closing procedure of the opera- goods. Because the advertising and other proposals the money was used by the Client to obtain certain was successfully implemented. Next morning, the tional day, applicable at the Processing Center. addressed to an indefinite group of persons consti- income (for example, used as a deposit with a bank). Client went to the Bank’s branch office and with- Referring to the Client insisting that the Bank did tute an invitation to make an offer, unless explicitly Moreover, the obligation to prove as well as negative drew the entire amount from his US dollar card. On not sell cash foreign currency to the amount request- otherwise indicated in the offer, one may conclude consequences of failure to prove the above circum- the same day, the Client again applied to the branch ed, it is necessary to clearly define the concepts of that, in this case, we are dealing not with a public stances rest with the plaintiff, in this case – the Client. officer, asking to buy dollars, either in cash or non- ‘public offer’ and ‘invitation to make an offer’. An offer offer, but an invitation to make an offer. Thus, the The lack of this condition is sufficient for rejecting the cash, but could only get part of the required money is a proposal addressed to one or more specific per- Bank’s proposal addressed to an indefinite group of Client’s claim of compensation for the lost profits. in cash, with reference to the above mentioned in- sons, which definitely expresses the bidder’s intention persons should be considered an invitation to make In addition, referring to the cause-and-effect rela- struction. Shortly thereafter, the Client made an- of considering the contract to have been concluded an offer, which cannot per se give rise to any liability tionship between an unlawful act and the alleged dam- other electronic transfer of money from card to card, with the addressee who has accepted the proposal. for the Bank to perform currency exchange at the age, it should be noted that an illegal discharge of the which was also completed successfully. The Client The offer must contain the essential terms of the amount specified by the Client. The Mediator decided employee (the Client) has neither directly led to the loss again went to the same branch office and cashed contract. A proposal containing all essential terms of to decline the Client’s claim against the Bank. of the Client’s money or loan repayment nor deprived the entire dollar amount out of his US dollar card. the contract from which the will of the person who the Client of the possibility to use the money, but the Two days later, the Client saw his Armenian dram- has made the proposal appears to have concluded a 52 Client had independently decided on an early loan re- and US dollar-denominated accounts report nega- contract on the terms indicated in the proposal with Precedent 4: 53 payment, which cannot be a direct consequence of an tive balances. The Client asked the Bank to clarify on anyone who responds shall constitute a public offer., Selling jewelry as an item of collateral without unlawful act. In other words, the Client has exercised the matter and compensate him for the damage. while advertising and other proposals addressed to notice and at an unreasonable price his discretionary right to early repayment of the loan. The Bank declared its position with regard to the an indefinite group of persons shall constitute an in- The Bank provided a loan to the Client. The loan To sum up, in the framework of claim investiga- Client’s claim. It says that the foreign currency on the vitation to make an offer, unless explicitly otherwise was secured by jewelry. The Client regularly made tion the Client has failed to provide evidence to Client’s account is converted on the day the trans- indicated in the offer. The above implies that an offer loan repayments, but sometimes had overdue li- substantiate his real intention to gain certain action is processed at the ArCa processing center, is considered a public offer if the following conditions abilities. Learning from the Bank that only very little income by the use of funds or the current sta- which may differ from the date of execution of the exist simultaneously: money remained due for full repayment of the loan tus of the property to enable the Client to gain transaction, and the transaction amount is convert- • it involves an offer which corroborates the per- the Client visited the Bank, paid the remaining mon- certain income, nor has there been the cause- ed at an exchange rate set by the Bank for the cur- son’s will to enter into contractual relations; ey due only to find out that the jewelry as an item and-effect relationship between the unlawful rency available on card account or at a transit ex- • contains all the essential terms of the contract, of collateral had been sold. The Client insists that he act and the alleged damage. As was outlined in change rate, based on an average market exchange which are considered as such by virtue of the peculi- has not received any written notice before the sale of the position of the Court of Cassation, the reason- rate published by the Central Bank of the Republic arities of the law or contract, and the collateral. In a letter, the Client asks the Mediator ing of the existence of the above circumstances is of Armenia in the foreign exchange market and the • the offer makes it clear that the one making the to urge the Bank to return the jewelry or the money a mandatory condition for compensating the loss exchange rate set by the Bank. As a result, using dif- offer is willing to enter into contractual relations with equivalent to their market value. of gain due to violation of contractual obligations. ferent exchange rates for transaction execution and anyone who responds. The Bank’s position about the claim lodged by the Therefore, we can state that the Client’s claim to transaction processing and charging withdrawal fees A proposal by a person (acting with a proposal Client is as follows. The Bank says that the Client had compensate the lost gain as provided for in Article 17 as appropriate led the dollar account of the Client to to enter into contract) to a person (persons) cannot been notified of his violation of the terms and con- of the Republic of Armenia Civil Code is not justified have reported surcharge. constitute an offer if it lacks any of the essential terms ditions set out in the loan contract and if the Client and must be rejected. The Mediator decided to reject Turning to the matter of surcharge on the dram of the contract. Therefore, in this case, it is necessary fails to redeem his debt to the Bank within a tight the claim of the Client against the Bank. account, the Bank said that card to card money trans- to question whether an exchange rates table at the timeframe, the latter will be authorized to confiscate

Overview of Customary Business Practice; Case studies Overview of Customary Business Practice; Case studies the collateral without resort to court. In the out- item, but did so at the price below real fair market on the explanations and clarifications provided from quent pledge and the Client has paid a fee for it. come, although the Bank sold the pledged item, the price, the Mediator believes that the Bank shall have the banks, the practice of permitting a subsequent The fact that the Client did not move the item proceeds of the sale was not enough for full repay- to compensate the Client the amount of money that pledge says the following: the contract of collater- of collateral and did not use the right to subsequent ment of the debt, so the Bank officer contacted the is the price of gold scrap as appraised by the expert al limits the pledger’s capacity to turn the pledged pledge is not critical, because the contract between Client to visit and pay the deficient part of the debt. goldsmith less the selling price of the pledged jew- property into a subsequent pledge but provides a the Client and the Bank implies that the Client had For investigation of the claim, the Mediator need- elry. The Mediator, therefore, decided to partially sat- stipulation that the bank’s written consent in ad- paid a fee for getting permission to use the right to ed to determine whether or not the signature shown isfy the Client’s claim against the Bank. vance can be sought, provided that such consent is subsequent pledge, which the Bank had provided. in the field ‘date and signature’ on the post office granted i) on a basis of objective and subjective cri- What the legislation provides for is that refunding receipt of “Haypost” CJSC had been put by the ad- teria, such as the loan-to-value ratio, the financial or returning of the fee paid in the framework of the dressee. To figure this out, the Mediator engaged a Precedent 5: condition of the borrower; ii) for repayment of finan- transaction is only possible in case that transaction handwriting examination specialist. The conclusion Client claiming back the fee paid for the right cial commitments to the bank or payment of a sum has been invalidated. It should be noted that in order of the specialist, however, did not allow us to identify to subsequent pledge under a contract or under an internal regulation and/ for a person to be able to get refund from the trans- if the Client or any other person had put the signa- The Client’s property has been pledged under the or policy, irrespective of the contract. action or the value thereof, that transaction must be ture in question. What we can only state is that the loan contract signed between the Client and the What is important in reviewing this claim is un- either null and void right upon the conclusion or ren- investigation did not support the Client claiming that Bank. The Client applied to the Bank to get permis- derstand whether the Client is able to claim a refund dered invalid by court and the latter to enforce the signature shown in the field ‘date and signature’ on sion for subsequent pledge. Although the Client paid of AMD 200,000 from the Bank on the grounds that consequences of such invalidity. the post office receipt belonged not to him. a fee of AMD 200,000 and got the permission of the the Client has neither moved nor used the right to In this case, the contract between the Client and In effect, the notice was sent by the Bank to the Bank but has neither moved the pledge nor used the subsequent pledge. the Bank has been signed in observance of the re- address referred to in the contract, and the notice right to subsequent pledge. In a letter to the Bank, Individuals and legal entities are free to define quirements of the legislation, so it is not null and void bears a signature certifying the receipt. In addition, the Client requested a refund of the paid fee of AMD their rights and obligations under the contract, es- nor has it been rendered invalid by court. Therefore, after sending the notice, the Bank followed a stipula- 200,000 so that the Client is able to use the money tablish any terms/conditions to the contract which there is no reason to return the sum which the Client tion in Article 249 (2) of the Republic of Armenia Civil for loan repayment, but received a rejection response. are not in conflict with the legislation. Moreover, for paid to the Bank as a fee for a particular service. Based Code, saying that marketing of collateral shall com- The position of the Bank is as follows: the tariffs selected types of transactions, certain types of con- on the foregoing, we can say that the Client’s claim is mence two months after the notification. and rates published on the Bank’s website denote cluding of transactions have been established by the not lawful and must be rejected. Based on the foregoing, the Mediator believes that for the right to subsequent pledge the Bank legislature. Thus, transactions between legal entities that the sale of the collateral by the Bank is lawful charges 0.1% of the loan balance, which shall consti- and with individuals should be concluded in writing. Precedent 6: and in compliance with the terms and conditions of tute a minimum AMD 200,000, and the Bank’s in- Moreover, a written form of the contract shall be Refusal to compensate for the damage 54 the contract and provisions of the law, while the fact ternal regulations and policies provide no refunding considered survived also when the proposal in writ- caused to the client’s car after power cord of 55 the Client did not receive notification about selling of of paid fees when the other bank refuses to displace ing to conclude a contract has been accepted by the the trolley-bus fell on the car the item of collateral is considered unconfirmed. the property on conditions of a subsequent pledge. person who has accepted the offer by taking action The trolley-bus power cord fell on the Client’s For investigation of the claim, there is need to re- Review of related documentation, explanations (consignment of goods, performance of works, pro- car while in traffic flow in the city, causing damage fer to the price of the Client’s jewelry which the Bank and objections of the parties, as well as thorough vision of services, payment of fees, etc.) in observance to the car. The insurance company, however, refused has marketed through public auctions. The Bank has analysis of the laws and regulations made it possible of the terms and conditions of the contract within a to compensate the damage, arguing that it was not established that in case of sale through public auc- to arrive at a conclusion, as follows: according to the timeframe specified for accepting such offer. the trolley-bus driver’s fault in what happened to the tions the starting price of gold items shall correspond Republic of Armenia Civil Code, a pledged property In this particular case, the Client asked the Bank power cord. The Client does not agree with the deci- to the market value of gold scrap. Moreover, the can become an item of another pledge (subsequent to give permission for getting a subsequent pledge. sion of the Company to reject compensation, saying starting price implies the bottom threshold of selling pledge), which is allowed, if it is not forbidden by col- The Bank allowed the Client to pledge the real estate that the driver maneuvered, so the accident was his of jewelry. In turn, paragraph 3 of Part 2 of Article 249 lateral contracts concluded before. In this case, ac- (that served as collateral at the Bank) at another bank fault. The Client appealed to the Mediator, asking the of the Civil Code stipulates that the pledgee shall be cording to the contract signed between the parties, as a subsequent pledge, charging the Client the fee latter to demand compensation from the Company obliged to sell the collateral at a reasonable price in the pledger must not allow any significant change in for subsequent pledge. The Client paid the fee at the for the damage suffered. the market. conditions of safety and maintenance of the pledged Bank by filling out the field ‘granting the right to sub- For investigation of the claim, the Mediator had to Going further in investigation of the claim, the property without a written consent of the pledgee, sequent pledge’ in the field ‘purpose of payment’. In- use the service of independent experts to determine if Mediator involved an expert goldsmith from the con- including the subsequent pledge. deed, by doing so, the Client has actually accepted the the drivers of the car and trolley-bus – supposedly the clusion of who it became clear that the Bank had In connection with a case investigated previously, offer of the Bank in exchange of getting permission for two parties involved in crash situation – behaved in a marketed the Client’s jewelry at approximately 10.1% the Mediator communicated to commercial banks in subsequent pledge by paying the required sum. The way that contradicted the Road Traffic Rules. If so, it below real fair market price, which cannot be con- Armenia with a request to provide if they’re practic- Client and the Bank have, in fact, properly signed a means they were technically involved in the accident. sidered a reasonable current market price. ing applicability of the provision of the subsequent contract whereby the Bank permitted the Client mov- If not so, the question is if the drivers could take action Given that the Bank had the right to sell the pledged pledge laid in Article 236 (2) of the Civil Code. Based ing his pledged property to another bank for subse- to prevent the accident technically.

Overview of Customary Business Practice; Case studies Overview of Customary Business Practice; Case studies An expertise conducted did not prove that the car 2. The increased danger for those around, the the car did not in any way influence the trolley-bus, Mediator to urge the Company to provide insurance or trolley-bus drivers have taken action that contra- liabilities of the person causing the harm (more spe- the accident cannot constitute as if the sources of in- indemnification adequate to the reimbursement of dicted RTL requirements and brought about the oc- cifically, the owner and/or possessor of the increased creased danger interacted but rather that the trolley- the costs incurred. currence of the accident. The expertise was not either source of danger) of which is available in the follow- bus as a source of increased danger influenced, caus- The Company presented its position to the Me- able to answer the question if the drivers could take ing circumstances: ing damage to the car in the accident. It therefore diator, according to which the dental clinic has per- action to prevent the accident technically. a/ the fact of harm caused as a result of operating infers that the damage shall be compensated in the formed a double check-up of the teeth and had their After a comprehensive study of the documents the sources of increased danger is proven, manner prescribed in Article 1072 of the Civil Code panoramic view x-rayed. It turned out that some of relating to the claim and relevant legislation require- b/ the person having caused the harm does not that the prescribed manner (liability, regardless of the tooth filling materials were assessed to be overused ments, the Mediator arrived at a conclusion, as fol- prove that the damage occurred due to force ma- fault of the person who caused the damage). and one of the teeth had never been subjected to fill- lows: legal persons and citizens, whose activity is jeure or intent of the sufferer, The above implies that, pursuant to Article 1072 of ing. The tooth filling materials were assessed to be connected with increased danger for those around c/ the person having caused the harm does not the Civil Code, the owner/legal possessor of trolley- overused as their sticking edges had been pigmented (use of means of transport, mechanisms, high-volt- prove that the source came out of his control as a bus bears responsibility for the damage caused to and non-airtight. The Company noted that these age electrical energy, atomic energy, explosive sub- result of illegal actions of other persons, the car and so does insurance company because: i) it changes occur over time. The Client has voiced disa- stances, strongly-acting poisons, etc.) shall be obli- d/ it is not proven that the sufferer’s gross negli- faces liability for indemnification against the damage greement with the opinion of the doctors, who per- gated to compensate for harm caused by the source gence contributed to the occurring or increasing of caused, ii) the fact of harm caused to the Client as formed a double check-up, and insisted on passing of increased danger unless they prove that the harm the harm only in which case the court may reduce a result of operating of a source of increased dan- re-examination in another dental clinic. The Company arose as a result of force majeure or the intent of the the amount of compensation, depending on the ex- ger, namely the trolley-bus which is duly insured by arranged the Client’s examination at another dental sufferer. The duty of compensation for harm shall tent of fault committed by the sufferer and the per- the Company, has been proven, iii) the person having clinic. The results of the latest examination confirmed be placed upon the legal person or citizen who pos- son having caused the harm; and where fault of the caused the damage does not prove that the damage the results of previous examinations. Given the facts sesses the source of increased danger by the right of person having caused the harm is lacking and avail- has arisen due to force majeure circumstances or in- mentioned above and based on the contract signed ownership or on other legal basis. Moreover, the law ability of gross negligence of the sufferer is proven, tent of the sufferer, iv) the person having caused the between the parties, the Company refused compen- may provide for compensation for damage, in the the court may reduce the amount of compensation damage does not prove that the source came out of sation because the insured person has submitted absence of fault of the person who has caused the or refuse to pay compensation, unless otherwise pro- his control as a result of illegal actions of other per- false information that affects the insurance risk. damage. The damage caused by lawful actions shall vided for by law. sons, and v) it is not proven that gross negligence of For investigation, it is important to determine be compensated in cases prescribed by law. the sufferer contributed to the occurring or increas- whether the case is subject to reimbursement by In other words, as the statement mentioned To find out which format is in use by the legisla- ing of the harm. Therefore, taking the above state- the Company within the health insurance con- above infers, the law separates the damage caused to ture – whether fault liability or faultless liability, it is ment into consideration, the Company is obliged to tract. 56 their possessors as a result of interaction of sources necessary to clarify the following matter: compensate the damage caused to the Client’s prop- The Mediator needed to obtain the doctors’ pro- 57 of increased danger from the damage caused as a re- Is the damage caused to the car a consequence erty as a result of the accident. fessional opinion as well as to clear up some other sult of increased danger, establishing that in the first of interaction of the trolley-bus and the car, or only These considerations were communicated to the issues in relation to the case in review, the Office of case the damage is compensated on general princi- interaction of the trolley-bus which is a potential parties, after which the Company decided to enter FSM found it appropriate to engage a doctor-spe- ples set out in Article 1058 of the Republic of Armenia source of increased danger? into reconciliation with the Client by paying full com- cialist so that the latter could answer the questions Civil Code (fault liability) and, in the second case, the Thus, in this particular case, the fact that the pensation for the damage. posed by the Mediator: damage is compensated in the manner prescribed in trolley-bus – a potential source of increased danger 1. Whether or not the Client’s teeth are filled, and Article 1072 of the Civil Code (liability, regardless of – caused harm to the Client’s car has been confirmed. 2. If yes, describe the condition of filling of the fault of the person who caused the damage). The Mediator finds it appropriate to emphasize that Precedent 7: each tooth and the condition of teeth filling mate- although the car has also been the source of danger, Reimbursement of costs of tooth filling under rial, where possible. This means that the law makes there was no interaction of sources of increased dan- the health insurance policy Taking into consideration that visual examination a distinction between: ger in this case however, because the car’s proper- The Client had some of his teeth filled. After, the of the Client’s mouth hole might shed light on certain 1. The damage caused to the possessors as a ties that could represent a source of increased danger Client applied to the insurance company (the Com- aspects relating to this case, the Office of FSM also -ar result of interaction of sources of increased danger (in were not per se in place. The car, with its properties pany) with a request to reimburse the costs of tooth ranged that examination for the Client. Combining pan- this particular case: transport means), in which case that could represent a source of increased danger, filling. The Company took a decision to refuse the re- oramic x-ray pictures before and after treatment and the general principles of liability for the causing of had no way influenced the trolley-bus, whereas the imbursement, however. The dental clinic performed further examination of the Client’s mouth hole made it harm as established in Article 1058 of the Civil Code trolley-bus, with its properties that could represent a the diagnosis of the affected teeth and tooth filling possible for the doctor-specialist to express opinion that shall apply (the above referred stipulation derives source of increased danger, has caused the harm in procedures completely and properly, and the Client 6 teeth of the Client had been filled and 2 hadn’t. from the Republic of Armenia Court of Cassation rul- the accident. Therefore, the owner/legal possessor of does not agree with the decision of the Company to So, the main question regarding the case is wheth- ings, No. 1097/02/10, dated March 23, 2012, and No. trolley-bus is responsible for the damage caused to refuse cost reimbursement. Based on the foregoing, er the Client has provided the Company with false in- 0959/02/09, dated July 1, 2011); and the car regardless of his fault. In other words, because the Client appealed to the Office of FSM, asking the formation that affects the insurance risk. To clarify this,

Overview of Customary Business Practice; Case studies Overview of Customary Business Practice; Case studies it is necessary to find out: Precedent 8: whether or not the additional explanations provided qualification, using qualified source documents, ma- 1. Whether the Client has provided the Com- Rejecting the claim for insurance indemnity by the parties of the accident were substantial for ex- terials and other deliverables. In such circumstances, pany with false information, and in mandatory car insurance scheme because amination. Two sets of examinations, which the Of- the standard compensation process expert has the 2. Whether false information affects the insur- of impossibility to determine the fault of the fice of FSM outsourced, revealed the following: right to also use additional explanations, which the ance risk. parties involved in the accident One of the experts was assigned to learn all source Client provided to the Company, because there is no Thus, the information is false when it is partially or As a sufferer in a traffic accident, the Client sub- data relating to the accident, including the additional limit to it, and it is a document that provides informa- completely untrue. Moreover, to generate any con- mitted an application to the insurance company (the explanations provided by the parties of the accident. tion on the accident. sequence, critical impact of the information on the Company) for compensation. The Company took a The expert arrived at a conclusion that the driver of Moreover, it is necessary to emphasize that consequence to be generated will be needed1. The decision to reject paying the compensation to which, the car insured under the motor third party liability whether the Road Police’s action to seeking addi- regularization provided in the contract implies that the however, the Client did not agree, since the traffic insurance policy committed action contrary to the tional explanation is lawful shall not be considered information submitted should be the one that could police had concluded that he was a suffering party requirements of the law thus leading to the occur- by the Office of FSM, as the Mediator believes that affect the insurance risk. However, on the one hand, in the accident. Moreover, the Client remarks, the re- rence of collision, depriving himself of the opportunity action and/or inaction by all government agencies there is an official document issued by the clinical sults of forensic and auto-technical expertise showed to prevent it. According to the same conclusion, with for administration shall, pursuant to Article 5 of the service certifying that 2 teeth of the Client have been that the results, which served a basis for a decision- the documentation made available to the examina- Republic of Armenia Constitution, be considered as filled and, on the other hand, there is the medical spe- making, were incomplete as they did not take into tion it was not possible to determine if, in the traf- lawful, unless the contrary is established by the law2 cialist’s opinion which does not confirm the fact of in- account the additional explanations given by the Cli- fic accident, the Client had been able technically to Note that an administrative act or action and/or intervention in these two teeth in the period under re- ent and the guilty driver. follow the requirement of paragraph 67 of RTR and action of an administrative body are subject to appeal view. From what we see above, one cannot obviously Below is the Company’s position in respect of the to prevent the collision, as baseline data on technical through an administrative procedure or judicially, any insist on the fact that the Client/the insured person claim of the Client. According to the results of forensic expertise were not enough. one of which has not been exercised in this case. Had has submitted false information to the Company. Be- and auto-technical expertise provided from the Re- The other expert was tasked to scrutinize all re- an administrative or judicial procedure recognized the sides, even if we assume that the Client has provided public of Armenia Center of Expertise, a state non- quired documents relating to the accident, except for unlawfulness of an administrative act, the authorities the Company with false information, the disclosure commercial organization, the accident occurred as a the additional explanations. According to the conclu- would only after this have had the right to distrust of that information to the Company would serve a result of actions by the persons responsible for the sion reached as a result of the examination, figuring the action. ground for rejection only if it, as a consequence, were maintenance of road and engineering structures. In out if the drivers had been able to prevent the colli- In summary, the Mediator finds that the addition- to influence the insurance risk. The insurance risk is the technical point of view, those actions contradicted sion technically as well as to evaluate their actions in al explanations taken from the drivers as the parties the potential extent of harm arising as a consequence the requirements of Article 21 (1) of the Republic of Ar- terms of RTR requirements was not possible. of the accident could be used as evidence for carrying of insurance event occurring at a certain probability menia Law on Maintaining Road Traffic Safety. In such Summing it up, one may state that the problem out examination of the cause of the accident, so the 58 and eventuality (Article 9831 (5) of the Republic of Ar- conditions of traffic management it was not possible lies in the source data which were made available for Mediator will need to look to the expertise that has 59 menia Civil Code). In this case, reported ‘false infor- to predict the actions of the drivers of vehicles in- examination, so it is important to put the question used this evidence and arrived at a conclusion about mation’ of the Client could only affect the amount of volved in the accident and to clarify the issue whether in this way: could those additional explanations pro- the fault of one of the drivers in the accident. insurance compensation, but never the insurance risk. it was technically possible to prevent the collision. Ac- vided by the drivers involved in the accident be used as Thus, the driver of the car insured under the motor Given the aforementioned, the Mediator believes cording to the Company, since the fault of the driver a source or baseline data for carrying out the examina- third party liability insurance policy committed an il- that the Client did not provide any false information of the car insured under the motor third party liability tion? legal action which caused harm to the Client, and the to get insurance indemnity from the Company, and insurance policy was not grounded, no responsibility First, let us note that the expertise carried out as lack of fault of the latter is not proven, either. In such the information submitted by the Client did not have for the damage caused to the Client arose. part of this accident should be delegated to a stand- circumstances, the Company’s obligation to pay insur- any effect on the insurance risk. The Company sent a letter to the head of the Traf- ard compensation process expert, since an agreed ance indemnity will arise, so the Mediator has taken a As for the amount of insurance compensation to fic Police, asking to clarify if the police captain ought fact of statement is lacking. decision to satisfy the Client’s claim. be paid by the Company to the Client, we should note to take additional explanations. A reply came from the From what we learned by reading the Rules of the the following: the examination of the teeth confirmed TP saying that the police captain shouldn’t take addi- Armenian Bureau of Motor Insurers it became clear the filling of 6 teeth whereas the fact of intervention tional explanations but, in that particular case, an ex- that there are not restrictions applied to the stand- in the 2 teeth has not been confirmed. Therefore, in- planation would look like a ‘statement’. The Company ard compensation process expert when dealing with surance accident will constitute dental treatment of 6 expressed another opinion, saying that the ‘statement’ source or baseline data for examination. This means teeth in which connection the Company will have to cannot be a source data for expertise of insurance ac- that an expert performing expertise to find out the reimburse AMD 150,000 (6 (number of teeth treated) cident such as the motor third party liability insurance. reasons of traffic accident is able to also examine the x AMD 25,000 (each tooth treatment fee)). Therefore, they were not presented to the expert. motor vehicles involved in the accident. This, in turn, Thus, in view of the above, the Mediator decided to To figure out the circumstances of the accident, can imply that the expert is able to not only use the 2The Court of Cassation of the Republic of Armenia expressed partially satisfy the Client’s claim, calling on the Com- the Office of FSM considered involvement of profes- documentation which the sufferer party must pre- such a position in its decision No. 3-2440 (CC) with regard to the pany to pay AMD 150,000. sionals for investigation. It was important to find out sent, but also to perform expertise by virtue of his presumption of legality of administrative acts.

1See the decision No. CC / 2603/05/10 made by the Court of Cassation.

Overview of Customary Business Practice; Case studies Overview of Customary Business Practice; Case studies Precedent 9: unless it is proved that they were aware of the occur- Rejecting an insurance compensation under rence of the insurance event or the lack of information the Casco insurance contract about it with the insurer could not affect their obliga- The Client has his own car “Kia Rio” insured at an tion to pay the insurance compensation. insurance company (the Company). A traffic accident Under the contract, the insurer has the right to occurred in which the Client’s car was damaged. The refuse performing insurance indemnity as and when Client reports that the Company was duly informed the policyholder, beneficiary or authorized holder about the accident. The Company, however, refused provide false or inaccurate information about the to provide insurance indemnity. According to the causes and circumstances of the occurrence of insur- Company, somebody contacted the Company, intro- ance event and about parties associated with the oc- duced himself as the driver of the car “Kia Rio” and currence of that insurance event. informed about the traffic accident, specifying that it After examining the facts and arguments present- had occurred about 5-10 minutes ago. The caller said ed by the parties, combining them with legal regu- he was trying to drive past the other car but, unable to larization referred to above, the Mediator had to go control the accelerating car, crashed into the rear of in detail with the case and clarify: a motor vehicle running the opposite line and making 1. whether the Company is entitled to refuse pro- a left turn. The Company said that they have exam- viding insurance compensation on the ground that ined all available records of phone calls about the ac- the Client didn’t call the Company to inform about cident. Without any special technical knowledge, the the accident, and whether or not the Company was Company argues, it wasn’t hard to distinguish that informed about the accident in violation of the estab- the person who had reported about the accident was lished procedure, and not the policyholder but another person instead, who 2. whether the Company is entitled to reject insur- had provided false or inaccurate information, while ance compensation on the basis of false/inaccurate the Client failed to report the insurance event to the information provided by the client. TABLE OF CONTENTS Company, and the Company has the right not to pro- Thus, the Company learned about the accident vide compensation. The Client does not agree with not in a long while after occurrence of the accident, 4 Address of Chairman of the Board the Company’s position as the information provided and regardless of the fact that the Client did not in- 60 about the accident occurred was neither false nor inform the Company about the accident personally, the 5 Address of Financial System Mediator accurate. The one who contacted the Company to Company does not have the right to refuse insurance report about the accident was another person, since indemnity on that ground, with reference to the pro- 6 The Office of Financial System Mediator the Client was in shock at the moment. The Client visions cited. said he had kept the Company’s representative (when As regards an insurance policy’s requirement to 10 Activities in 2015 he arrived at the scene of accident) and the Com- inform about insurance accident, it should be noted pany’s security officer (after submitting an application that the documents drawn up by Republic of Armenia 18 Activities for 2016 for compensation) informed about the one who has Traffic Police indicate that the accident occurred -be made the call and informed about the traffic accident. tween 9:30-10:00 pm. The Company was informed 20 Statistics of complaints and claims For investigating this case, the Mediator had to about the accident the same day at 9:58 pm, which observe all relevant provisions of the Republic of Ar- means that the information about the traffic accident 40 Financial Statement and Audit Opinion menia Civil Code as well as the contract signed be- was reported to the Company immediately, within a tween the parties. It turns out that the policyholder reasonable time. 48 Overview of Customary Business Practice; (authorized holder) must inform about the traffic -ac Considering the circumstances described above, Case studies cident to the insurer immediately (as soon as possi- the Mediator believes that the decision of the Com- ble) upon taking place of the accident; and in all cases pany to refuse paying insurance compensation is not 62 Questions and Answers the policyholder (authorized holder) must notify of valid, and the damage caused to the Client’s car as a the traffic accident in writing to the insurer within 3 result of the accident must be recompensed subject 66 Acknowledgements working days upon taking place of the accident. Fail- to the terms of currently applicable regularizations. ure to fulfill this obligation may prompt the insurer to The Mediator has made a decision to satisfy the Cli- 68 The List of Organizations Which Did Not use the right not to pay the insurance compensation ent’s claim. Sign the Covenant

Overview of Customary Business Practice; Case studies In the year under review the Office of FSM got a loan contract does not constitute a public contract, lot of questions from citizens not only by phone but so the lender is free to decide who they will conclude also via e-mail, the official website of the Office as the contract with and who they will not. This means well as our Facebook page. Citizens contacted us for that the lender is evaluating your creditworthiness problems as varying in nature as thinkable, but the and ability to repay the loan, so it is up to them to prevailing part of their concern was about interpre- decide whether or not they will sign a loan contract tation of the provisions of the contracts concluded with you. with financial institutions or clarifying the rights and obligations of the parties when using one or another Question: financial instrument, and questions about how and Concluded a loan contract with the pawn- when to apply to the Mediator. shop, with gold which I pledged as security. Below we have summarized the most frequently Non-performance of obligations has resulted asked questions of the citizens and our answers dur- in accrued fines. Now, the total amount of ing the reporting year. liabilities is greater than the market value of the gold pledged. Does the pawnshop have the Question: right to keep back from selling the pledged How can I clean up my credit history? gold and resort to court, claiming that I need Answer: to fulfill my obligations? Credit information or so-called “credit history” is Answer: the credit information about you (the borrower), Failure to repay loan, which is secured by collat- which provides a categorized description of your eral, in a specified timeframe shall prompt the pawn- debt and payments on credit obligations you have shop to market (sell) that collateral through public assumed, your payment habits or how you perform auction. After this, the pawnshop’s claims on you (the your financial obligations. In practice, “cleaning up a debtor) have to be redeemed, even if the money re- bad credit history” means that you no longer have ceived from the sale of the pledged property is insuf- problematic (overdue or categorized on a basis of ficient to cover them in full (Republic of Armenia Civil subjective criteria) loans in your current credit reports. Code, Article 255 (7)). In fact, marketing (selling) the 62 The credit bureau should not maintain credit in- item of collateral is the pawnshop’s right rather than 63 formation on the borrower if that information is more obligation. than 5 years old at the moment a respective credit Your (the borrower’s) primary responsibility is to report on the borrower is provided. Such information return the funds of credit and pay interest for the use shall be archived after the abovementioned five-year of that credit in a timeframe as specified under the period is over (Republic of Armenia Law on Circula- loan contract. This provision is laid down in Article tion of Credit Information and Activity of Credit Bu- 887 (1) of the Republic of Armenia Civil Code, which reaus, Article 11 (6) 2). says, specifically, that under a credit contract, a bank or other credit organization (the creditor) is obligated Question: to provide money funds (credit) to the borrower in Can I get a loan from a bank with the help the amount and on conditions provided by the con- of the Office of Financial System Mediator? tract, and the borrower is obligated to return the Answer: monetary amount received and to pay interest on it. No, you cannot. The Mediator is not mandated to deal with such issues as the Office of FSM is not Question: authorized to interfere with the relationship between I am guarantor under a loan contract. The the financial institution and the client. The Office borrower does not make timely payments, and of the Mediator is called to examine the complaint/ I no longer want to be a guarantor. How can I claim of the client, if the latter’s rights have been vio- tackle this issue? lated by the financial institution. Answer: As for providing a loan, it should be noted that the As regards this case, the suretyship may termi-

Questions and Answers Questions and Answers nate by agreement reached between the borrower not be determined or is determined by the time of Answer: or, where provided for by law, to the Bureau, within and the financial institution as well as under circum- demand, the surety shall be terminated unless the An insurance company has the right to subroga- three months after the day of occurrence of the in- stances as determined by the law. In this connection, creditor brings a suit against the surety within two tion in respect of the owner (the Policyholder) of the surance event (Republic of Armenia Law on Compul- we would like to mention as follows: years from the day of conclusion of the contract of motor vehicle as party having caused the damage, sory Insurance against Civil Liability in Respect of the Under the contract of suretyship, the surety un- suretyship. if, upon signing of the contract, there has been false Use of Motor Vehicles, Article 20 (1)). dertakes the duty to the creditor of another person In the absence of the above reasons, the surety- information of circumstances communicated to the to be liable for the performance by the latter of its ship may terminate by agreement reached between Insurer, which is critical enough to the Insurer to de- obligation in full or in part. The guarantor will also the parties to the contract of guarantee when, for termine the level of insurance risk, provided that such be liable, jointly with the borrower, for performance example, the borrower can apply to the financial circumstances were not known and could not be of credit obligations under the loan contract. Article institution by proposing a new guarantor or other known to the Insurer until occurrence of the insur- 380 (1) of the Republic of Armenia Civil Code says that methods (e.g. a pledge) that secure performance of ance event (Republic of Armenia Law on Compulsory to a surety who has performed an obligation shall obligations. The financial institution, in turn, has the Insurance against Civil Liability in Respect of the Use pass the rights of the creditor under this obligation right to adopt or reject that proposal. of Motor Vehicles, Article 27 (2) ‘d’). and the rights belonging to the creditor as pledgee An altered way (purpose) of operating of the mo- to the extent to which the surety satisfied the claim Question: tor vehicle constitutes a significant change in the in- of the creditor. The surety also shall have the right Are banks entitled to keep the motor ve- formation specified in the insurance policy. to demand from the debtor payment of interest on hicle’s technical specifications passport with In this case, operating the car as a taxi changes the sum paid to the creditor and compensation for them when making a car loan? the level of insurance risk. In other words, once insur- other losses borne in connection with liability for the Answer: ance compensation to the sufferer is provided, that debtor. In other words, the surety having fulfilled the Yes, they are. When making a car loan, the bank insurance company will have the right to subrogation. creditor’s claims shall have a right to reclaim to the is entitled to hold the original passport of the mo- extent they have performed in respect of the debtor. tor vehicle’s technical specifications and provide the Question: In case of nonperformance or improper perfor- client with the copy of such passport that bears the When voluntary motor vehicle insurance is mance by the debtor of obligations secured by a bank’s seal. concerned, does the insurance company have surety, the surety and debtor shall be liable jointly and the right not to pay insurance compensation severally to the creditor (bank or credit organization) Question: in case of vehicle theft until the end of the unless a statute or the contract of suretyship provides Is the bank or credit organization required investigation? 64 for the subsidiary liability of the surety. to remind the borrower of the day of repay- Answer: 65 According to Article 382 of the Civil Code, the ment? Within the framework of the insurance contract surety shall terminate: Answer: concluded, the insurer undertakes to pay insurance (1) with the termination of the obligation secured The loan contract is normally designed to include compensation if the insurance event as specified in by it and also in case of a change without permission a schedule for repayment of loan and payment of in- the contract occurs. of the surety in this obligation entailing an increase terest fee. By signing the contract, the borrower and If the contract concluded between the insurance in liability or other unfavorable consequences for it; the lender (bank or other lending institution) give company and the client has car theft envisaged in the (2) with a transfer to another person of a debt their consent to the terms and conditions set forth in list of insurance risks, the insurer must, by virtue of under an obligation secured by the surety if the surety the contract, including the loan repayment and inter- the fact of the theft, pay insurance compensation to did not give the creditor consent to be liable for the est payment schedule, which means that they are fa- the policyholder or the beneficiary. new debtor; miliar with the terms and conditions of the contract. (3) if the creditor has refused to accept proper In other words, unless otherwise specified in the loan Question: performance offered by the debtor or the surety; contract, the lender shall bear no such obligation. After the insurance event has occurred, in (4) at the expiring of the time period for which which timeframe one may apply to the insur- it was given indicated in the contract. If such time Question: ance company (Armenian Bureau of Motor period was not established, the surety shall be ter- Have used my own motor vehicle as a taxi. Insurers) to receive compensation under a mo- minated unless the creditor brings suit against the The motor third party liability contract points tor third party liability contract? surety within a year from the day of occurrence of out that the motor vehicle is to be used for per- Answer: the time for performance of the obligation secured sonal purposes. As I have been recognized guilty The sufferer or his legal successor may apply for by the surety. When the time period for performance in a traffic accident, what negative consequenc- insurance indemnity to the insurance company that of the principal obligation is not indicated and can- es can there be as a result of the foregoing? insured liability of the person who caused the damage

Questions and Answers Questions and Answers A thank-you letter to lated their rights is really amazing. And it is all the ASHOT GHOCHIKYAN, same with anyone who comes to the Office of FSM Claim Investigating Specialist of the Office with their needs and complaints in the hope to get of FSM their case explained and clarified and to achieve solu- I express deep gratitude to Mr. Ghochikyan, who tion to the problems. examined my complaint, for impartial and efficient I would like to talk of my impression when I first work. I am also grateful to the staff of the Office of met these people, coming in the Office. I saw that Financial System Mediator for their work. I wish the all employees are young, and it caresses the human Office of FSM will always be there for people. eye. In dealing with my case all this time, I arrived at Anna Rstakyan, 17.04.2015 a conclusion that these young people, each working in their place and each doing their job, are well aware A thank-you letter to of their profession. LAURA POGHOSYAN, I would also like to say special thanks to Mané Ba- Claim handling Specialist of the Office of FSM bajanyan, who accepted my case and made me be- I am writing to convey my thanks to Laura Pog- lieve that if my complaint is right, then I will definitely hosyan for her warm and consistent handling. My come for justice. The other nice person I want to complaint has been met partially. thank is Hranush Aghayan, head of the case handling Naira Sargsyan, 14.08.2015 and investigating group of the Office who, without giving me a word, clarified that I would get a defini- A thank-you letter tive answer after audition and convinced me that it is This letter of mine says many thanks to the staff possible to get to the truth. of the Office of Financial System Mediator, especially I would like to thank Ms. Piruz Sargsyan, the Fi- Mané Babajanyan, Movses Khachatryan and Hayk nancial System Mediator, and all those employees Hovhannisyan. These nice people worked hard to get whom I have not met at all. I am happy to know my problem solved. there is a legal institution in Armenia like this that Asatur Arakelyan, 27.08.2015 protects the rights of citizens. Ruben Arsenyan, 10.11.2015 66 A thank-you letter to 67 PIRUZ SARGSYAN, Financial System Mediator Dear Ms. Sargsyan, I express my deepest gratitude to you for your office employee Anahit Khachatryan (Claim handling Specialist) for her professional, diligent and effective work. I am hopeful that the activities of the Office of FSM will continue and expand. I wish you and your staff success in work. Valery Arzumanyan, 02.09.2015

A thank-you letter I am writing this letter to convey my deepest ap- preciation to all the staff of the Office of Financial System Mediator for their honest and impartial ap- proach to every single customer. The way they deal with the matter, the way they listen to the customer without haste or interrupting, trying to understand how the client wants to achieve the right solution with regard to the financial institution that had vio-

Acknowledgements Acknowledgements BANKS 4. “Amuni Group” LLC 1. “AreximBank-GazpromBank Group” CJSC 5. “Amuni Credit” LLC 2. “Armenian Development Bank” JSC 6. “AMS” LLC 3. “Pan-Armenian Bank” JSC 7. “Ashot Frangulyan” Private Entrepreneur 8. “First Pawnshop” LLC CREDIT ORGANIZATIONS 9. “AS MASTER” LLC 1. “AGROLEASING Leasing Credit Organization” LLC 10. “AVACRED” LLC 2. “ANIV” UCO LLC 11. “AUTO CREDIT” LLC 3. “AREGAK” UCO LLC 12. “Arag Finance” LLC 4. “Arfin” Credit Union LLC 13. “Arangel Provider” LLC 5. “BLESS” UCO LLC 14. “Arbon” LLC 6. “Housing for Youth” RCO CJSC 15. “Ar-Et” LLC 7. “GARNI INVEST” UCO CJSC 16. “Artzate Gavat” LLC 8. “GOODCREDIT” UCO CJSC 17. “Arman & Gnel” LLC 9. “Express Credit” UCO LLC 18. “ARS ELITE” LLC 10. “ECLOFF” UCO LLC 19. “Art Credit” LLC 11. “KAMOURJ” UCO CJSC | Komitas ave. bld. 23, 4/1, Yerevan, Armenia | 12. “CILICIA” UCO LLC 20. “ART CREDIT” LLC 13. “Credit Corp” UCO CJSC | P. Sevak str. 51/1, Kanaker-Zeytun, Yerevan, Armenia | 14. “Credo Finance” UCO CJSC 21. “Artiom Ghahramanyan” Private Entrepreneur 15. “Unileasing” UCO CJSC 22. “Garrant Credit” LLC 16. “Nor Horizon” UCO LLC 23. “Garant Credit” LLC 17. “G & A” UCO LLC 24. “Gev–Star” LLC 18. “SEF International” UCO LLC 25. “Gevasar Credit” LLC 19. “Parvana Credit” UCO LLC 26. “Gevorgyan and Company” LLC 20. “CARD AgroCredit” UCO CJSC 27. “Gnahatum” LLC 21. “F.I.C.O” UCO LLC 28. “Gold Idea” LLC 68 22. “Fides Mortgage Company” UCO CJSC 29. “Gold & G.B” LLC 69 23. “FINCA” UCO CJSC 30. “Gold & Money” LLC 24. “Export Finance” UCO CJSC 31. “Gold Credit” LLC 32. “Gold Cash” LLC INSURANCE COMPANIES 33. “Gold Consulting” LLC 1. “ARMENIA INSURANCE” LLC 34. “Goodavi” LLC 2. “Armenia Export Insurance Agency” CJSC 35. “Gr-Av-Mo” LLC 3. “NAIRI INSURANCE” LLC 36. “DIAMOND CREDIT” LLC 4. “RESO” CJSC | Arshakuniats, 35, office area No. 53, Yerevan, Armenia | 5. “RosGosstrakh - Armenia” CJSC 37. “Diamond Credit” LLC 6. “SIL INSURANCE” CJSC | Gorki str. bld. 68, office area No. 3, Gyumri, Armenia | 7. “ISG” LLC 38. “Dega” LLC 39. “Dramatun” LLC INSURANCE BROKERS 40. “Euro Credit” LLC 1. “RESOLUTION INSURANCE BROKER” LLC 41. “EuroCredit Capital” LLC 2. “Crescent Global Eurasia” CJSC 42. “Eduardo 2005” LLC 43. “MVM Anna” LLC PAWNSHOPS 44. “ERA LINE” LLC 1. Alexworld” LLC 45. “Express VIP Service” LLC 2. “Aghdagh” LLC 46. “Trust Credit” LLC 3. “Amalik Credit” LLC 47. “Trader” LLC

3The list has been prepared as of 01.03.2016

The List of Organizations Which Did Not Sign the Covenant The List of Organizations Which Did Not Sign the Covenant | Tigran Mets., office area No. 13/10, Yerevan, Armenia | | Sayat-Nova str. bld. 9/9 a, Basement No. 16, 11. “ARBUMPROM” CU LLC 59. “Yotniak” LLC 48. “Trader” LLC Gyumri, Armenia | 12. “Arthur Araqelyan” Private Entrepreneur 60. “Nairi Matinyan” Private Entrepreneur | Tigran Mets ave., bld. 43, office area No. 11, 90. “Robert Marutyan” LLC 13. “Arthur Danielyan” Private Entrepreneur 61. “VOSKE GETAK” LLC Yerevan, Armenia | 91. “Royal Credit” LLC 14. “Aristakes Atoyan” Private Entrepreneur 62. “PARMA” LLC 49. “Zhirair Aharonyan” Private Entrepreneur 92. “REVERSE” LLC 15. “Ardzaganq” LLC 63. “PLAZA SYSTEMS” CJSC 50. “Easy Credit” LLC 93. “ROYAL FINANCE GROUP” LLC 16. “ARM & ART CHANGE MARKET” LLC 64. “GIANT TRADE” LLC 51. “Inrim Credit” LLC 94. “S.U.R. - 72” LLC 17. “Arman Baghdasaryan” LLC 65. “Jemma Baghramyan” Private Entrepreneur 52. “Invest Service Group” LLC 95. “Sargis & Nana” LLC 18. “Armen Bairamyan” Private Entrepreneur 66. “GH G” LLC 53. “Isca Credit” LLC 96. “Saver” LLC 19. “Armen Yenoqyan” Private Entrepreneur 67. “R.G.A.T” LLC 54. “Legat Credit” LLC 97. “Serve - Edar” LLC 20. “Armen Mkhitaryan & Friends” JSC 68. “REGENTS CAPITAL” LLC 55. “Leylo” LLC 98. “Sicor” LLC 21. “Armenia” Hotel Complex CJSC 69. “Rudik Khachatryan” Private Entrepreneur 56. “Lombardia” LLC 99. “Simnor” LLC 22. “Armenia” International Airports 70. “Sahak Hagoyan” Private Entrepreneur 57. “LombardStreet” LLC 100. “SSS Credit” UCO LLC 23. “Armine Marabyan” Private Entrepreneur 71. “Samvel Amirjanyan” Private Entrepreneur 58. “Cay-Man” LLC 101. “V.I.A” LLC 24. “Arsen Papyan” Private Entrepreneur 72. “Samvel Ghazaryan” Private Entrepreneur 59. “Karen Mets” LLC 102. “Vagr” LLC 25. “Artak Yesayan” Private Entrepreneur 73. “Sedik Sahakyan” Private Entrepreneur 60. “Karen Yaralyan” LLC 103. “Vantig” LLC 26. “Arpine Taguhi” LLC 74. “Sev Kakach” Commercial Enterprise 61. “Klouzh” LLC 104. “Vardan Ohanyan” Private Entrepreneur 27. “BASENI GOVQ” LLC 75. “SIMAO” LLC 62. “Credit Alliance” LLC 105. “Venus Athena” LLC 28. “BEGO TRANS” LLC 76. “SPARAPET” LLC 63. “Huso Lusniak” LLC 106. “Via-Gold” LLC 29. “Gagik Jndoyan” Private Entrepreneur 77. “Stoic” LLC 64. “Malen” LLC 107. “Wilmar Mek” LLC 30. “Gazprom Armenia” CJSC 78. “VAGHARSH & SONS CONCERN” LLC 65. “Mamma-Mia” LLC 108. “TER-YESAYAN ASSOCIATION” LLC 31. “Gegham Arqa” LLC 79. “Vatou” LLC 66. “Money & Company” LLC 109. “Five Minute” LLC 32. “GNTUNIK” LLC 80. “VARDAN & MONIKA” LLC 67. “MONEY CREDIT” LLC 110. “Fast Cash” LLC 33. “Gogly” LLC 81. “Vardan Ghazaryan” Private Entrepreneur 68. “Manioka” LLC 111. “Financial Ambulance” LLC 34. “Gorik Stepanyan” Private Entrepreneur 82. “VLV CENTER” LLC 69. “MARIUS” LLC 112. “LOMBARD PLUS” LLC 35. “Gvidon Lazaryan” Private Entrepreneur 83. “VHM” LLC 70. “Marlia” LLC 113. “MVM-FINANCE” LLC 36. “DJS GROUP” LLC 84. “TASHIR INVEST GROUP” CJSC 71. “Max Credit” LLC 114. “VARD GRIG” LLC 37. “Donka” LLC 85. “Tigran Sargsyan” Private Entrepreneur 70 72. “Megatron” LLC 115. “Hayk Zohrabyan” Private Entrepreneur 38. “EUROPARK TRADE CENTER” JSC 86. “Tigran Vahradyan” Private Entrepreneur 71 73. “Micro Capital” LLC 116. “Aghvan Tevosyan” Private Entrepreneur 39. “ANN. PA” LLC 87. “TUNAR” CJSC 74. “Musoyan-AAA” LLC 117. “Armenuhi Arakelyan” Private Entrepreneur 40. “IMEX GROUP” LLC 88. “TUREX GOLD” LLC 75. “Move Med” LLC 118. “Narine Arzumanyan” Private Entrepreneur 41. “Khachatur Ghahramanyan” Private Entrepreneur 89. “PSR” LLC 76. “Yana-Gor” LLC 119. “Sedrak Gagik Muradyan” Private Entrepreneur 42. “Khachatur Petrosyan” LLC 90. “PRETTY WAY” LLC 77. “Umoneyline” LLC 120. “Arthur Hovsepyan” Private Entrepreneur 43. “TSIATSAN” LLC 91. “CATRINE GROUP” LLC 78. “Ninella” LLC 121. “Lianna Danielyan” Private Entrepreneur 44. “CAPITAL TRADER” LLC 92. “Hakob Hovhannisyan” Private Entrepreneur 79. “NK Ninella” LLC 122. “Julieta Ohanyan” Private Entrepreneur 45. “KAREN ANNA & FAMILY” LLC 93. “Gayane Askaryan” Private Entrepreneur 80. “Nomidisc” LLC 46. “Karin Gohar” LLC 94. “Zaven Chagharyan” Private Entrepreneur | Hanrapetutyan str. bld. 11, No. 1/1, Abovyan, Armenia | FOREIGN EXCHANGE DEALERS AND 47. “Karine Araqelyan” Private Entrepreneur 95. “Levon Katayan” Private Entrepreneur 81. “Nomidisc” LLC EXCHANGE OFFICES 48. “Kon-Brosel” LLC 96. “Hovsep Harutyunyan” Private Entrepreneur | Hatis str. commercial area No. 1/69, Abovyan, Armenia | 1. “GROSS REALTOR” LLC 49. “KRPAK” LLC 97. “Hrachia Hakhverdyan” Private Entrepreneur 82. “Shogh” LLC 2. “Azat Khachatryan” Private Entrepreneur 50. “HAGOYAN” Trade Center 98. “Norayr Martirosyan” Private Entrepreneur 83. “Voske Luma” LLC 3. “Azatuhi Blikyan” Private Entrepreneur 51. “Hayastan Trade Center Hayrapetyan Brothers” CJSC 99. “Ruzanna Araqelyan” Private Entrepreneur 84. “Voske Vtak” LLC 4. “Alex-Grig” LLC 52. “HASARA” LLC 100. “Valery Navasardyan” Private Entrepreneur 85. “White-Soliter” LLC 5. “ALS Erzrumtsi” LLC 53. “Hasmik Balasanyan” Private Entrepreneur 101. “Vahagn Khachatryan” Private Entrepreneur 86. “Proffinance” CJSC 6. “Anatoly Sahakyan” Private Entrepreneur 54. “Hasmik Tadevosyan” Private Entrepreneur 102. “Vardan Baghdasaryan” Private Entrepreneur 87. “Jangai” LLC 7. “Andaco” LLC 55. “Harutyun Harutyunyan” Private Entrepreneur 103. “Parandzem Hakobyan” Private Entrepreneur 88. “Real Credit” LLC 8. “Anush Zaqaryan” Private Entrepreneur 56. “Hrachik Hakobyan” Private Entrepreneur 104. “Albert Papoyan” Private Entrepreneur | Khorenatsi str. bld. 1, Gyumri, Armenia | 9. “Ashot Harutyunyan and Sons” LLC 57. “Hrachia Araqelyan” Private Entrepreneur 105. “Aram Araqelyan” Private Entrepreneur 89.“Real Credit” LLC 10. “AUTO PLAZA” LLC 58. “Mill AG” CJSC 106. “Anahit Virabyan” Private Entrepreneur

The List of Organizations Which Did Not Sign the Covenant The List of Organizations Which Did Not Sign the Covenant 107. “Andranik Hakobyan” Private Entrepreneur 108. “Andranik Mkrtchyan” Private Entrepreneur 109. “Andrey Shaqaryan” Private Entrepreneur 110. “Aram Barseghyan” Private Entrepreneur 111. “Arthur Qochinyan” Private Entrepreneur 112. “Arman Qosyan” Private Entrepreneur 113. “Armen Maleryan” Private Entrepreneur 114. “Armine Khachatryan” Private Entrepreneur 115. “Arsen Bareghamyan” Private Entrepreneur 116. “Arsen Galstyan” Private Entrepreneur 117. “Artiom Davtyan” Private Entrepreneur 118. “Hamlet Barseghyan” Private Entrepreneur 119. “Harutyun Arsenyan” Private Entrepreneur 120. “Hovhannes Khachatryan” Private Entrepreneur 121. “Hrachia Minasyan” Private Entrepreneur 122. “Manuk Sargsyan” Private Entrepreneur 123. “Julieta Gabrielyan” Private Entrepreneur 124. “Sergei Aghayan” Private Entrepreneur 125. “Smbat Aslanyan” Private Entrepreneur 126. “Vardan Vardazaryan” Private Entrepreneur 127. “Varouzhan Avetisyan” Private Entrepreneur 128. “Transdealer” LLC

INVESTMENT FIRMS 1. “Alpha Securities” LLC 2. “Tonton Investment” LLC 3. “Renessa” CJSC 72 4. “Future Capital Market” LLC 5. “ARMENBROKE” JSC 6. “Financial Technologies Laboratory” CJSC 7. “Prime Capital Investment” LLC

INVESTMENT FUND MANAGERS 1. “Amundi-ACBA Asset Management” CJSC 2. “C-Quadrat Ampega Asset Management Armenia” LLC 3. “Ameria Asset Management” CJSC

MONEY REMITTANCE ORGANIZATIONS 1. “TELL-SELL” CJSC 2. “EASY PAY” LLC 3. “Mobi Dram” CJSC 4. “HayPost” CJSC 5. “MONEYTUN” LLC 6. “IDRAM” LLC

CREDIT BUREAU 1. “ACRA Credit Reporting” CJSC

The List of Organizations Which Did Not Sign the Covenant "Elite Plaza" Business Center 7th floor 15 M. Khorenatsi street, 0010 Yerevan, Armenia

(+374) 60 70-11-11 (+374) 10 58-24-21 Tel. [email protected] Fax www.fsm.am