ANNUAL REPORT 2 0 15 · School of “Mkhitar Sebastatsi” Educational Center; Address of Chairman of the Board Address of Financial System Mediator The Office of Financial System

Address of Financial System Mediator

A N N U A LR E P O R T2 0 1 5


A N N U A L R E P O R T2 0 1 5

Address of Chairman of the Board



The Office of Financial System Mediator

Activities in 2015

Activities for 2016

Statistics of complaints and claims

Financial Statement and Audit Opinion

Overview of Customary Business Practice; Case studies

Questions and Answers

Acknowledgements

The List of Organizations Which Did Not Sign the Covenant

TABLE OF CONTENTS

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Address of Financial System MediatorAddress of Chairman of the Board

ADDRESS OF CHAIRMAN OF THE BOARD

ADDRESS OF FINANCIAL SYSTEM MEDIATOR

Sincerely,Armenak Darbinyan

Board Member of the CBA,Chairman of Board of Trustees of the

Office of FSM

Yours truly,Piruz Sargsyan

Financial System Mediator

Dear Reader,

As we sum up the results of 2015 we can state the year under review was marked by new achieve-ments of the Mediator’s office contributing to en-hancement of the Mediator’s reputation both in Ar-menia and in the international arena.

In 2015 too, the Office of FSM saw an increased number of complaints and of the claims resolved in favor of the client. This has been largely attributable to effective cooperation with financial institutions and partnership based on mutual trust. The Office of FSM continued successful implementation of the program for financial education of consumers in the year under review by expanding the program’s ge-ography to include a great number of high schools in capital Yerevan, regions of Arme nia and Republic of Artsakh. Thankfully, large-scale projects and vig-orous elucidatory activities over these years have enhanced the people’s perception of the functions of the Office of FSM as well as their role and impor-tance in defending the rights of consumers of finan-cial services.

Now, seven years of fruitful activity on the track,

Dear reader,

We are pleased to present this report of the Of-fice of Financial System Mediator for 2015. For seven years our Office has been active in the financial sys-tem of Armenia, and the results which we have to-day are really encouraging but also obliging. Since the inception of the Office of FSM, we set a goal before us to not only be a trustworthy and reliable dispute resolution body in financial market, but also to contribute with our daily hard work to the en-hancement of financial literacy of consumers and increasing financial inclusion in our country. After all, an educated and informed consumer is the one who will be able to defend his or her rights, and only a better knowledge of the laws will give a person firm foundation to develop economically and socially.

The outcome of the policy we adopted is observ-able every day. This is primarily reflected in the num-ber of customers who apply to us and a growing share of cases which were resolved in favor clients. In 2015, the Office of FSM received 3263 complaints about financial services, of which 1448 were accept-ed for examination. Note that the figure of claims

the FSM Office’s experience today is considered ex-emplary in the international arena. Pleasant and praiseworthy is the fact that the Office of FSM has been entrusted with the honor to organizing the INFO 2016, an annual conference organized by the In-ternational Network Financial Ombudsman Schemes.

In conclusion, I would like to thank the Mediator and all the staff of the Office for professionalism in performing their everyday duties. I believe that per-sistent and determined work is one sure way to ac-complish the missions of the Office of FSM.

admitted to be examined has increased this year by nearly 13.5% compared to the relevant figure report-ed in the previous year. The share of claims resolved in favor of the client amounts to 77.79%, and out of this 56.32% of cases were resolved through media-tion, rather than Compulsory decision.

The increase in the number of claims is largely explained by an important aspect of the activities of the Mediator – the program for financial educa-tion of consumers. The program is designed in such 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 ex-perience 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-ence, an annual gathering of financial ombudsmen from different parts of the world.

In conclusion, let me thank all our customers for their trust and all our partners and financial institu-tions for efficient cooperation. We will continue to walk confidently towards the achievement of our vi-sion to the benefit and welfare of our country.

The Office of Financial System MediatorThe Office of Financial System Mediator

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The Office of Financial System Mediator (FSM) is a foundation with independent management sys-tem. Its founder is the Central Bank of the Republic of Armenia. The Office of FSM is called to settle out any property disputes that arise between consumers as natural person and financial organizations. The services of FSM are free of charge; the process of review of complaint is explicit, fast and transparent.

The Office of FSM was established pursuant to the Republic of Armenia Law on Financial System Mediator, passed on June 17, 2008. The Office of FSM started professional activity from January 24, 2009. According to the said law, the Financial Sys-tem Mediator is appointed by the Board of Trustees of the Office of FSM. On the first meeting on De-cember 22, 2008 the Board of Trustees appointed Piruz Sargsyan, a lawyer by profession, as Mediator. In 2012, Ms. Sargsyan was reappointed by the Board.

THE OFFICE OF FSM PERFORMS IN PURSUIT OF THE FOLLOWING OBJECTIVES:

• Protection of consumer rights and interests in the financial market;

• Fast, effective and free of charge review and handling of claims of clients;

• Enhancement of the public confidence in the financial sector.

CORE VALUES OF THE OFFICE OF FSM:Effectiveness, competence and openness are

very important pillars which determine how well the Office of FSM functions and how much public trust it has earned so far. The following are core values which underlie day-to-day activities of the Office:

• Impartiality in case review;• Equality or equal rights for the parties;• Caring attitude towards the customers;• Priority to achieving reconciliation of the parties;• Operational effectiveness;• Transparency and openness;• Partnership and confidentiality;• Professionalism and teamwork;• International cooperation and innovative

solutions.

GOVERNANCE OF THE OFFICE OF FSMAccording to the Republic of Armenia Law on Fi-

nancial System Mediator, bodies of management of the Office of FSM are:

• Board of Trustees, and• Manager of the Office, i.e. the Mediator.

According to the Republic of Armenia Law on Fi-nancial System Mediator, the Board of Trustees of the Office of FSM consists of 7 members, and they are appointed as follows:

• one member by the Government of the Republic of Armenia,

• one member by the Board of the Central Bank of the Republic of Armenia,

• one member by organizations that advocate protection of consumer rights, and

• four members by unions of organizations.

The Board of Trustees of the Office of FSM is called to approve internal policies and procedures of the Office, hear the Financial System Mediator reports, control the status of implementation of the decisions it has made, oversee day-to-day ac-tivities of the Office and its financial and economic performance, approve the budget of the Office, any changes made thereto; oversee the performance against the budget, approve annual financial ac-counts and take on other functions as required by the law. According to the law, the Board of Trustees shall not interfere with the professional activities of the FSM.

According to the Republic of Armenia Law on Fi-nancial System Mediator, the FSM shall be required to have higher education, firm authority and at least five years’ work experience. The FSM shall not be a person who has worked in any financial organiza-tion in the last three years. The FSM shall not: i) be engaged in entrepreneurial activity, ii) be a member of management at a party, iii) hold a position in cen-tral or local governments, commercial undertakings, iv) perform other paid work except for scientific, pedagogical and creative activities; the FSM must refrain from any actions that cast doubts over their independence and impartiality.


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THE STRUCTUREThe Office of FSM has an audit function. The

auditor is appointed by the Board and reports to the Board direct. The auditor takes on a function which involves independent and impartial investiga-tion 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 admin-istrative 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 oth-erwise, the back office, with the main function of claim investigation, explanation/clarification, legal attendance of the Office, international cooperation, and

◉ specialists supporting case investigators are primarily responsible for helping with claim investi-gation, making visits to schools and getting involved in activities related to the consumer education pro-gram.

Activities in 2015 Activities in 2015

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On January 24th we met to mark the sixth an-niversary of the activities of the Office of FSM. The press conference arranged on this occasion round-ed up past performance of the Office, as well as we had a communique on the complaints accepted and claims investigated and talked about the projects to be carried out.

In 2015, the Office of FSM took on a number of measures which include seminars and meetings or-ganized within the framework of the program for financial education of consumers, meetings and projects arranged in conjunction with local finan-cial institutions, and strengthening the standing and role of the Office of FSM in the international arena. Now, a brief introduction of the programs we im-plemented during 2015.

Public education of financial services and prod-ucts is a very important aspect in regards to con-sumer protection, increased financial intermedia-tion, and effective functioning of financial markets and the entire economy. To this end, the Office of FSM has been carrying out the “Program for Fi-nancial Education and Increasing Awareness of Consumers” since 2011 in order to raise awareness among the citizens of the various financial instru-ments and the basic rules on how to use them. Vis-its to high schools in different regions of Armenia and the Republic of Artsakh, as well as seminars and meetings with citizens constitute the underlying as-pect of the program.

SEMINARS AT SCHOOLS In the year under review the staff of the Office of

FSM arranged seminars for senior students of high schools in regions of the Republic of Armenia and capital Yerevan, in accordance with the consumer education curriculum and timetable. Specifically, seminars were held in a number of high schools, in-cluding Yerevan High School No. 170; High School No. 139 named after K. Demirchyan; High School No. 142 named after A. Gharibyan; High Vocational

School of “Mkhitar Sebastatsi” Educational Center; High Basic School at State Pedagogical University of Armenia named after Kh. Abovyan; High Ba-sic School at the Institute of Forensic Science and Psychology “Azpat-Veteran”; High Basic School No. 112 named after Sh. Simonyan; High Basic School of Agrarian Academy at State Agricultural Univer-sity of Armenia; High Basic School at the “Northern University”; High Basic School at the State Architec-ture and Construction University of Armenia; High School No. 148 named after M. Galshoyan; High Basic School at the University “Haybousak”; Basic College No. 114 named after Kh. Dashtents; basic colleges in Tavoush, Ijevan, Noyemberyan, Shirak; basic colleg-es No. 2, No. 12, No. 42, No. 45 in Gyumri; Basic Col-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 School named after V. Hambardzumyan in Vardenis; high schools in Chambarak, Dzoragyugh, Aparan, Talin; High School No. 5 in Ashtarak, High School No. 11 named after Griboyedov, High School No. 10 named after Sayat-Nova, High School No. 17 named after M. Khorenatsi in Vanadzor; High School named after H. Shiraz in Gougark; High School named after Stepan Shahumyan, High School No. 8 named after Sayat-Nova in Alaverdi; High School named after H. Toumanyan in Stepanavan; high schools in Ta-shir, Yeghegnadzor, Vayq, Jermuk, Vedi, Dilijan, Ma-sis, Vosketap; High School named after M. Mashtots in Charentsavan; High School named after S. Var-danyan in Byureghavan; High School in Nor Hajin; High School No. 6 in Abovyan; High School No. 10 in Hrazdan; High School No. 4 and High School No. 1 named after Yeghoyan in Armavir; High School No. 5 named after M. Gorky in Vagharshapat.

The project has involved a total of 5,107 students. At seminars, specialists presented information about the structure of the Armenian financial market, ba-sic financial products and the risks associated with their use. During the meetings participants were offered to watch video materials and do financial exercises to strengthen their knowledge.

PROGRAM FOR FINANCIAL EDUCATION AND INCREASING AWARENESS OF CONSUMERS


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SEMINARS AT HIGHER EDUCATION ESTABLISHMENTSStudents are also a target group under the pro-

gram for financial education of consumers. In the year under review the Office of FSM organized two workshops for 70 students from the Foundation of French University in Armenia and 50 students from the Yerevan State University. At the workshop, spe-cialists presented brief information about the Office of FSM and some statistics on the complaints. As well as the participants were offered to play a sim-ulation-exercise which instructed them to learn the content of the client complaint to the Mediator and make a decision thereupon, while trying to provide relevant legislative reasoning.

VISITS TO THE REPUBLIC OF ARTSAKH The 2012 list of target groups under the program

for financial education of consumers was designed to cover senior schoolchildren of high schools in the Republic of Artsakh. Today, the target group has expanded to include students as well as employees of major firms and government agencies. In 2015, the staff of the Office of FSM visited the Republic of Artsakh to hold seminars in High School named after Mouratsan in Shoushi, High Schools No. 8 and No. 11 in Stepanakert, Stepanakert School of Phys-ics and Mathematics, as well as Artsakh State Uni-versity and Mesrop Mashtots University. A total of 410 senior schoolchildren and 181 students have at-tended these seminars. The second round of visits is planned the next year.

“10 DAYS FOR 10 SCHOOLS”A year ago, as one may recall, the Office of FSM

had developed an awareness program “5 Days for 5 Schools” for high school students in the context of financial education, which was aimed to raise the students’ awareness of and literacy in financial ser-vices. The program selected a total of 5 high schools from different regions of Armenia, and relevant workshops were organized for the students at the Office of FSM. Based on the results of the workshop, the Office of FSM arranged workshops this year for 10 schools selected in advance out of different re-gions of Armenia, extending the program’s scope. So, this year’s program covered 40 students from High School named after Mesrop Mashtots in Charentsa-

van; 45 high school students in Nor Hajin, 50 stu-dents from High School No. 5 in Ashtarak; 43 stu-dents from High School No. 2 in Metsamor; as well as 45 students each from high schools in Vedi, Garni (No. 2 named after Atom), Hrazdan (No. 13), Sevan (No. 1), Spitak (No. 3) and Talin, respectively. A semi-nar was organized for these students, and for a clos-ing part of the seminar we took them to the Visitor Center of the Central Bank of Armenia where they had an opportunity to get acquainted with the his-tory of circulation of notes and coins of the Republic of Armenia through interactive exhibitions. In addi-tion to the seminar and hospitality, we took them to the National Gallery of Armenia.

As well as the financial education program for consumers, the Office of FSM has embarked on oth-er programs and took part in many activities that are ultimately aimed at increasing the financial lit-eracy and raising consumer awareness of the activi-ties of the Office of FSM. Thus:

EXPLANATORY CAMPAIGNS In the year under review, agreements were

signed with a number of TV companies to air com-mercial advertisements about the Office of FSM on television. Note also that our customers now have the opportunity to watch infomercials prepared by the Office of FSM on the screen installed in the waiting room.

MASS MEDIA AND THE OFFICE OF FSMIn the year under review, head of the Case Han-

dling and Investigating Group of the Office of FSM had an interview to the TV Channel “AR”, speaking about complaints lodged against credit organiza-tions and the nature of claims reviewed, as well as providing relevant statistics. In the year under re-view, news agencies such as PanARMENIAN.NET,

“Yerevan Today” and other agencies published arti-cles that broadly featured the topics addressed at the 6th Annual Conference, the work done and work planned, and referred to general statistics about the operations of the Office of FSM.

Six years of activity of the Office of FSM, general statistics, the projects and the achievements were the subject on which the Financial System Mediator gave an interview to ARMENPRESS, a news agency.

On May 11, 2015 the Mediator was interviewed at Banks.am, a news portal, regarding auto insurance fraud. The magazine “De facto” published an inter-view with the Mediator in connection with the last year’s operations of the Office of FSM.

In the year under review “Голос Армении” (“Voice of Armenia”), a Russian-language newspa-per, published an interview with the Mediator about their activities, structure of the Office of FSM and statistical data.

On December 17, 2015 the main release of the news program “Horizon” on “Shant” TV Channel spoke of the international conference INFO 2016, which will take place in Armenia, and the Mediator is expected to host nearly 100 financial ombudsmen from 40 countries. The news program also referred to some statistics on the 2015 operations of the Of-fice of FSM. At the same time, a TV program “First Economic Channel” of the Public Television also ad-dressed the activities of the Office of FSM, as well as the results achieved in 2015.

WEBSITE UPDATE Emphasizing the role of the Internet in a modern

society as well as to ensure its transparency, the Of-fice of FSM launched a new, more informative and accessible internet web-page since December 2015. Through the new website, consumers will be able to not only read fresh information about activities of the Office of FSM, the statistics on the complaints received and investigated, news and upcoming events, but also have the opportunity to apply to the Mediator online by filling out a form of request-application placed on the website. Customers now can use the new website to contact a specialist at the Office and ask questions or express opinion on the services provided by the Office.

PROGRESS IN SOCIAL MEDIASocial networking is the modern world’s most

efficient way of disseminating information, and the Office of FSM has embarked on a new social me-dia policy, focusing on expanding in social networks such as Facebook, and later, Twitter, LinkedIn and YouTube. The Office of FSM pursues this policy to give consumers and general public an increased ac-

cessibility to the Office activities and financial prod-ucts by regularly uploading video clips, advice and other information on the Office and various finan-cial products with Facebook and Twitter. Note that, in a short period of time, the number of followers of our site on Facebook has increased dramatically, from 800 to more than 3200.

INTERNSHIPIn 2015, as part of awareness campaign for young

people and student involvement in the Office activi-ties, we arranged practical training/internships for a total of 16 students from various educational estab-lishments in Armenia. The internees had an oppor-tunity to obtain theoretical and practical knowledge of what the Office of FSM does in particular and the financial sector of Armenia on the whole.

INVOLVEMENT IN THE DEVELOPMENT AND IMPLEMENTATION OF THE NATIONAL STRATEGY FOR FINANCIAL EDUCATION IN ARMENIA Back in 2012, the Central Bank of Armenia set up

a “National Financial Education Strategy Develop-ment and Implementation Committee” with the aim of raising public awareness of financial markets and financial products and providing lifelong financial education of consumers in Armenia. The Mediator is involved in the said committee and takes part in the committee’s proceedings as well as in the strategy development and implementation activities.

PARTICIPATION IN DISCUSSIONSIn the year under review, head of Case handling

and investigating Group together with two employ-ees of the Office of FSM took part in the workshop

“Mediation and Arbitration Projects” jointly organized by the Armenian Ministry of Justice and the EU Dele-gation to Armenia. The workshop addressed, among others, the concept of “mediation” and what role it can play and how relevant it is in alternative dispute resolution. A comparative analysis with other ADR institutes (commercial arbitration, financial system ombudsman) was made, as well.

In the year under review, two claim investigat-ing specialists of the Office of FSM participated in a gathering organized in town Tsaghkadzor, Armenia, to discuss the ‘draft law on making amendments to


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Financial System Mediator has always attached importance to the cooperation with financial in-stitutions, which aims to make the review process more efficient and transparent, to identify problems while trying to find ways to solution. In the year un-der review the Mediator, therefore, arranged meet-ings with industry professionals.

A ROUNDTABLE WITH BANKS In November 7 - 8, 2015 Financial System Me-

diator arranged the 3rd roundtable meeting at “Best Western” hotel in Dilijan, Armenia, with commercial banks’ representatives who are responsible for rela-tions with the Office of FSM. A total of 31 participants representing 20 banks attended this meeting. Dur-ing the meeting the Mediator presented the 2014-2015 precedent cases, controversial issues emerged

COOPERATION WITH FINANCIAL INSTITUTIONS

in investigating client claims/complaints, customary business practices identified, and the measures to be implemented in 2016. Bank representatives also de-livered short speeches regarding controversies they had identified. At the closing part of the meeting, the participants, divided into small groups, were offered to play a simulation-exercise which instructed them to review an exemplary case, already examined by the Mediator, and present their position about it, while trying to provide relevant legislative reasoning.

A ROUNDTABLE WITH INSURANCE MARKET PARTICIPANTSIn the year under review, the Office of FSM had a

roundtable meeting, a format organized since 2010, with the domestic insurance market participants. Two representatives from each insurance company and from the Armenian Bureau of Motor Insurers and one representative from insurance brokerage firms attended the meeting. The 2014-2015 prec-edent cases, controversial issues arisen in connec-tion with investigating the client claims/complaints, customary business practices identified as well as measures to be implemented in 2016 were present-ed at the meeting. The insurance market partici-pants, in turn, addressed controversial issues arisen in connection with the review of customer claims filed against them.

BEST COOPERATING PARTNERSIn the year under review, the Mediator an-

nounced the names of “Best Cooperating Company” and “Best Cooperating Officer”. Best cooperating partners are chosen based on the criteria developed by the Office of FSM. These criteria include the level of the organization’s involvement in the case review, the share of cases ended with reconciliation of the parties in total, and etc. Based on the 2015 results, best cooperating bank was “ArdshinBank” CJSC and best cooperating insurance company, “INGO Arme-nia” CJSC.

For demonstrating willingness to support the Office of FSM in the review of claims, the Mediator awarded certificates titled “Best Cooperating Officer” to Ms. Rosa Pedanyan, a specialist of ArdshinBank CJSC (banking), and Mr. Hayk Mangoyan, head of compensations unit of INGO Armenia CJSC (insur-ance).

MEDIATOR’S DECISIONS DISPUTED AT THE COURT According to the Republic of Armenia Law on Fi-

nancial System Mediator, any decision of the Media-tor which is binding to the parties can be appealed to the competent court through submitting an ap-plication to revoke such a decision. In 2015, three applications to revoke the decision of the Mediator were examined by the court.

The first application was submitted by a bank to annul the Mediator decision that required the bank to partially compensate the damage caused to the client as a result of card fraud. Having reviewed the bank’s application, the Court of First Instance of Kentron and Nork-Marash administrative districts of capital Yerevan made a decision to reject the claim of the bank. Similarly, the Court of Cassation re-viewed the case in question and the bank’s applica-tion and issued a decision to reject the appeal.

The next application, again from a bank, was about disputed decision of the Mediator whereby the bank was called to satisfy the client’s claim on card fraud filed against that bank. The case is still under investigation.

An application submitted by an insurance com-pany related to the motor third party liability con-tract. Specifically, the client had lodged a claim to be considered a victim and to get insurance indem-nity for the damage, as prescribed in the Republic of Armenia Law on Compulsory Insurance against Civil Liability in Respect of the Use of Motor Vehicles. The Mediator had reviewed the claim and made a decision to urge the insurance company to satisfy the claim. The insurance company’s application was accepted to the proceedings by the Court of First Instance of Kentron and Nork-Marash administra-tive districts of capital Yerevan. The court, however, decided to suspend the litigation until making an appropriate decision on the criminal case. The court resumed the proceedings by another decision as the circumstances upon which the litigation had been suspended eliminated.

the Republic of Armenia Civil Procedure Code’ with-in the framework of the European Union and Coun-cil of Europe program.

Another claim investigating specialist of the Of-fice of FSM attended a workshop “Current Problems in Armenia’s Payment and Settlement System” in Dilijan, which was organized by the Central Bank of Armenia. Participating as a speaker, the case investi-gating specialist talked about the cases of payment-industry-specific-fraud and the problems associated therewith.

In November 2015, the Central Bank of Armenia arranged a meeting in Tsaghkadzor, getting togeth-er Armenia’s financial market participants, commer-cial banks in particular, to address existing problems and disputes. The Mediator and a case investigating specialist of the Office of FSM participated in the meeting.

In the year under review, town Tsaghkadzor hosted a meeting titled ‘Forum of the Law Firm’, again organized by the Central Bank of Armenia, with participation of the Mediator, as well as repre-sentatives of major law firms active in Armenia. The goal of the meeting was to identify and address the problems in the domestic financial sector.

Since its inception, the Office of FSM has been underscoring the importance of international coop-eration and bringing best international practices of mediation to Armenia. This is why the Mediator has regularly organized various meetings and confer-ences to exchange experience and share knowledge. Luckily, in recent years, leading field professionals at various international meetings have been citing our achievements as an example of best international practice. In the context of international cooperation, the year under review was important as the annual gathering of member financial ombudsmen an-nounced Armenia a hosting country for the annual 2016 Conference for International Network of Finan-cial Ombudsmen (INFO 2016).

Let us briefly present the measures the Office of FSM has taken in the framework of international co-operation.

CONFERENCEOn May 19-20, 2015 the Office of FSM hosted the

6th annual international conference titled “Financial Ombudsman Institute: increasing public confidence and enhancing financial mediation 6” in Hotel Mar-riott, Yerevan. Guest speakers of the conference included Financial System Ombudsmen of Great Britain and Ireland, Banking Ombudsman of Swit-zerland, Credit and Investment Ombudsman of Aus-tralia, investment arbitration and card fraud experts from Russia. The conference addressed such topics as communication strategies with customers and other stakeholders by the use of latest technolo-gies, including the use of social media, the ombuds-man’s reputation and relationship with mass media, international investment arbitration as a means for dispute resolution. The conference made a discourse on the subject of dispute resolution mechanisms in the financial sector of many countries and thematic discussions were held concerning mortgage loan in-surance, the Lloyd’s, card fraud and scams. As a nov-elty this year, the conference participants were of-fered a team game-exercise on the subject ‘Fairness’.

INTERNATIONAL COOPERATION

Activities in 2015

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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 repre-senting 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 confer-ence 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-ties. The Mediator also highlighted the importance of maintaining close cooperation with the regulatory authority and spoke of the financial education pro-gram for consumers the Office of FSM carries out.

On December 10, 2015 the Mediator attended the annual conference of FIN-NET, a financial dispute res-olution network of national out-of-court complaint schemes in the European Economic Area countries, in Brussels, Belgium. At the conference, the Mediator had an opportunity to talk about the INFO 2016 con-ference to be held in Yerevan in September 18-21, 2016, as well as to feature a film about Armenia.




Activities in 2015

Activities for 2016





Acknowledgements


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Activities for 2016Activities for 2016

SEVEN YEARS INTO THE JOB:January 24, 2016 is the date which marks the 7th

years of the Office of FSM. On this occasion, we are planning to hold a press conference during which a detailed account of the complaints and claims han-dled by the Mediator and other activities of the Of-fice for 2015 will be presented. The names of best partners in the category “Best Cooperating Company” and “Best Cooperating Officer” will be announced, as well. To attract more citizens to know even more about the activities of the Office of FSM, the Face-book quiz winners will be awarded during the event.

PREPARING TO HOST INFO 2016 IN YEREVAN: Back in 2013, the Office of FSM had submitted a

bid for hosting an annual conference of the Inter-national Network of Financial Ombudsmen, INFO. In 2015 the financial ombudsmen of the world gathered in Helsinki, Finland, for another great conference, during which Armenia was announced as the host country of the INFO 2016 Conference. The confer-ence will take place in September 18-21, 2016, and we expect financial ombudsmen and representatives of supervisory authorities and financial organiza-tions from around 40 countries. Annual conferences of the International Network of Financial Ombuds-men provide institutions involved in the protection of consumer rights an excellent platform for their co-operation, exchange of experience and professional progress.

PROGRAM OF FINANCIAL EDUCATION FOR CONSUMERS: The Office of FSM will push forward the imple-

mentation of the Consumer Financial Education and 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 par-ticular, with the Stepanakert and Shoushi City Halls, the Republic of Artsakh Government Administration, staff of major employers.

ORGANIZING A STUDENT FORUM:In pursuit of enhancing the students’ interest in

how the Armenian financial market functions and what risks it faces, the Office of FSM has plans to organize a student forum titled “The Financial Sys-tem of Armenia: Problems and Solutions”. The forum, which is scheduled in May of 2016, will give stu-dents an opportunity to present their research and showcase their analytical skills. Best students will be awarded financially during the forum.

INVOLVEMENT IN THE NATIONAL STRATEGY FOR FINANCIAL EDUCATION PROGRAM:The Office of FSM will remain proactive in coop-

erating with the Central Bank of Armenia in the con-text of measures as part of the program of national strategy for financial education, including the “My Fi-nances Month” project. Specifically, April of 2016 will be declared a ‘Month of Finances’ within which the Office of FSM will take part in awareness campaigns, seminars, meetings and discussions.

MORE COVERAGE:In the coming year too, we will be working hard

to broaden the coverage of activities of the Office of FSM. More video advertisements will be developed and aired on leading TV channels of Armenia. For coverage, social media portals will be used as well.

DISCUSSIONS/SEMINARS: We plan meetings in a roundtable format with

domestic bank and insurance company representa-tives to address controversial issues arisen in connec-tion with the review of typical examples of claims of the clients and other matters of relevance.

2120

Statistics of complaints and claimsStatistics of complaints and claims

• In 2015 the Office received a total of 3,829 com-plaints, including 3,263 complaints related to the fi-nancial sector, of which 2,668 were eligible under law to be reviewed by the Mediator. 595 complaints not eligible for review were associated with the events occurred before the Law on Mediator has entered into force; some of the claims ended up with court writ issued in respect thereto or with the case pend-ing in court proceedings; and a few cases were not under the jurisdiction of the Mediator since the con-sumer didn't qualify as "customer" according to the law on the Mediator. The rest of complaints were of a general nature and these have not, virtually, con-tained property-related claims.

• Specialists of the Office delivered advice to all the clients who applied as well as helped draw up complaints to the financial organizations concerned and explained their rights and obligations. Based on the 2015 results, 131 complaints (4.91 percent) out of a total 2,668 eligible for review were treated positively by the organizations without having to file a request in writing to the Mediator; where the client applied to us for request, we helped them to complete com-plaint against that organization. In 2014 this indicator was 4.8 percent (130 complaints out of 2,667) in 2013 5.6 percent (92 complaints out of 1,627), in 2012 2.7 percent (26 complaints out of 951), in 2011 7.8 percent (43 complaints out of 551); in 2010 14.7 percent (66 complaints out of 450); and in 2009 20.4 percent (40 complaints out of 196).

• During 2015 a total of 1,448 claims/complaints were received in writing, 77.79 percent of which were resolved in favor of clients out of which about 56.32 percent were resolved through mediation.

• In monetary terms, consumers were compen-sated 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 hav-ing an overdue loan re-classified in favor of the cli-ent, 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 dur-ing case investigation the complaint was resolved through negotiations and mediation, so the finan-

cial firm agreed to compensate the whole loss of the customer of AMD11,862,500) and the smallest, AMD 1.

In 2014, the total amount of compensation reached AMD 199,147,628, in 2013 AMD 204,578,416, in 2012 AMD 134,087,137, in 2011 AMD 58,137,847; in 2010 and 2009 these indicators were AMD 29,264,354 and AMD 26,062,886, respectively.

• By virtue of our central principle of fast and ef-fective review and handling of every claim, after a preliminary review we often explained to our clients and made them clear that action of the organization involved was exemplary and that we would not be going to have success even if we took the claim for review. Normally, in such circumstances, our clients trusted our specialists and agreed to our point. This perhaps explains the dynamics of the complaints ac-cepted for review by the Office. In 2015 out of 3263 complaints 1448 or 44.38% were transformed into cases for further investigation. In 2014 out of 3,244 complaints 1,276 or 39.33%, in 2013 out of 2,003 com-plaints 818 or 40.48%, in 2012 out of 1,311 complaints 392 or 29.90%, in 2011 out of 803 copmlaints 144 or 17.93%, in 2010 out of 642 complaints 110 or 17.13% and in 2009 out of 378 complaints 57 or 15.08% were transformed into cases for further investigation .

• During the year under review about 62,19 % of total complaints were against insurance compa-nies, among which about 89.21% of complaints were about MTPLI contracts. Most of the clients did not agree with the estimated amount of damage as well as more complaints were received in connection with non-compensation of the damage or delayed compensation.

2322


1000

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

STATISTICS, GENERAL PROFILE

0819 771 828 845

I quarter

II quarte

r

III quarte

r

IV quarter

400

December

260

0

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

The number of complaints received by the Office during 2015, by month:The number of complaints related to financial system

I quarter II quarter III quarter IV quarter

0

339 356 349 404

400

January

206

February

302

March

311

April

261

May

227

June

283

July

225

August

220

September

383

October

322

November

263

2524


January

February

March

April

May

June

July

August

September

October

November

December

68

107

164

128

110

118

122

104

123

123

134

147

0 180

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

The number of complaints to financiaal system received by the Office during 2015

The number of claims received by the Office during 2015

Total number of complaints received during 2015, o/w:

Number of complaints to financial system

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

Taken in for review upon presentation of a claim in writing

• Not eligible for review by Mediator

• Eligible for review by Mediator

• Claim satisfied through reconciliation

• Claim declined

• Claim partially satisfied

• Review of the claim suspended

• Review of the claim declined

• Claim satisfied

3,829

3,263

595

2,668

131

1,448

566

287

408

155

31

1

I quarter II quarter IV quarter

100

0

200

300

400

500

600

700

800

III quarter819 771 828 845339 356 349 404

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

2726


Claim satisfied through reconciliationClaim satisfiedClaim partially satisfiedClaim declinedReview of the claim suspendedReviews declined

Claims settled down in favor of the clientClaims declined

39.09%

28.18%

10.70%

19.82%

2.14%

0.07%

77.79%

22.21%

Results/outcome of review of complaints/claims, by percent:

Cases declined and cases settled down in favor of the client, presented as a ratio:

Claim satisfied through reconciliationClaim satisfiedClaim partially satisfied

40.6%

3.1%

56.3%

Claims settled down in favor of the client, by percent:

Complaints, by type of organizations:

Number of complaints to financial system received during 2015, which were filed against:

Banks

Insurance companies

Credit Organizations

Pawnshops

Armenian Motor Insurers’ Bureau

Other financial institutions

Payment and settlement organizations making remittances

100%

34.17%

60.19%

2.70%

0.43%

0.89%

0.18%

1.44%

3,263

1,115

1,964

88

14

29

6

47

BanksInsurance companiesCredit institutionsPawnshopsArmenian Motor Insurers' BureauPayment and settlement organizations making remittancesOther

60.19%

34.17%

2.7%

0.43%

0.89%

0.18%

1.44%

Share of complaints filed against financial organizations in 2015 in the total number of complaints presented to the Office:

2928


Claims reviewed, by type of organizations:

Total number of claims in writing during 2015, which were filed against

Insurance companies

Banks

Armenian Motor Insurers’ Bureau

Credit organizations

Payment and settlement organizations making remittances

100%

75.35%

22.58%

1.04 %

0.97%

0.07%

1,448

1,091

327

15

14

1

0.07%

Share of claims filed against selected financial organizations in total complaints accepted by the Office for review in 2015:

BanksInsurance companiesCredit institutionsArmenian Motor Insurers' BureauPayment and settlement organizations making remittances

0.97%

75.35%

22.58%

1.04%

Credit operationsPayment and settlement transactionsDepositary transactionsOther

66.36%

21.10%

7.65%

4.89%

Content of claims filed against banks:

Total number of claims in writing filed against banks during 2015 in connection with:

Credit operations

Payment and settlement transactions

Depositary operations

Other

100%

66.36%

21.10%

4.89%

7.65%

327

217

69

16

25

3130


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

Total number of claims in writing during 2015, which were filed against insurance companies and Armenian Motor Insurers’ Bureau, including

Vehicle insurance

Medical insurance

Property insurance

Travel insurance

Mandatory car insurance contracts

Accidents insurance

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

Voluntary liability insurance

100%

6.51%

2.26%

0.63%

0.45%

1.08%

87.34%

1.36%

0.36%

1,106

72

25

7

5

12

966

15

4

Vehicle insuranceMedical insuranceTravel insuranceAccident insuranceProperty insuranceVoluntary liability insuranceMandatory car insurance contractsMandatory car insurance contracts (against Armenian Motor Insurers’ Bureau)

0.36%

2.26%

1.08%

6.51%

87.34%

0.63%

1.36%

0.45%

Total value of Client reimbursement during 2015, including:

Reimbursement on claims against banks

Reimbursement on claims against insurance companies

Reimbursement on claims against credit organizations

Reimbursement on claims against Armenian Motor Insurers’ Bureau

Reimbursement on claims against Payment and settlement organizations making remittances

100%

18.26%

80.90%

0.25%

0.58%

0.01%

198,369,625

36,221,935

160,488,446

494,244

1,145,000

20,000

During 2015: 77.79% of the cases reviewed were settled in favor of the client;- the largest compensation - AMD 11,862,500;- the smallest compensation - AMD 1.

18.26%

0.58%

0.25%

80.90%

Reimbursement on claims agains BanksReimbursement on claims against Insurance companiesReimbursement on claims against Credit institutionsReimbursement on claims against Armenian Motor Insurers Pawnshop BureauReimbursement on claims against Payment and settlement organizations making remittances

0.01%

Reimbursement:

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

3332


Share of claims, which were settled in favor of the client, in total claims, by year:

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

60%

78%

2009 2010 2013 2014 20152011 201266.40% 68.75% 67.69% 70.44%72.14% 76.91% 77.79%

BanksInsurance CompaniesCredit InstitutionsArmenian Motor Insurers BureauPaymen and Settlement organizationsmaking remittances

100

0

70.75

80.33 53.85

62.50

100.00

161

165

193

338

690

930

845

86

128

212

379

445

741

828

80

164

185

345

422

723

771

The number of complaints received by the Office in 2009-2015, by quarter:

0 1000

2009201020112012201320142015 IV quarter

III quarter

II quarter

I quarter

67

185

213

249

446

850

819

Dynamic analysis of some indicators

3534


2009 2010 2013 2014 20152011 2012

3500

57

378

110

642

144

803

392

1311

818

2003

The number of complaints related to finan-cial systemThe number of claims

1276

3244

1448

3263

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

The number of complaints received by the Office in 2009-2015, by type of financial institutions:

0 2500

Banks

2015201420132012201120102009

Insurance Companies

Credit Institutions

Pawnshops

Armenian Motor Insurers Bureau

Paymen and Settlement organizationsmaking remittances

Other

Investment Companies

10291115

706509434419252

20141964

11426892526354

7188

4848607546

2514

1433428022

2829

18101000

7116

1430

30

00121

6347

6821003

3736


70

2009201020112012201320142015

2013 2014 20152010 20122009 2011

250 000 000

0

Share of complaints filed against selected financial institutions in total complaints submitted to the Office in 2009-2015:

Client reimbursement in 2009-2015:Client reimbursement (AMD)

0 70

Banks

Insurance Companies

Credit Institutions

Pawnshops



Other

Investment Companies

65.366.7

5438.8335.2531.7234.17

9.814.3

31.452.5657.0162.0860.19

11.712.2

7.53.662.402.192.7

12.55.8

5.22.521

0.770.43

00

1.20.80.90.860.89

0.50.50

0.080.350.340.18

0.30.3

0.10000

00.8

01.603.392.031.44

29,264,35426,062,886 58,137,847 134,087,137 199,147,628 198,369,625204,578,416

38


584438121014

18.20

35263986878381

71119

0.410.210.410.25

00.03

00

0.010.010.01

002113

0.60

119211

0.060

0 90

2009201020112012201320142015

It should be mentioned that the Repub-lic of Armenia Law on Compulsory Insurance against Civil Liability in Respect of the Use of Motor Vehicles entered into force in January of 2011, and this means that in 2009 and 2010 no claims against the Bureau of Car Insurers of Ar-menia were reviewed and compensation given, accordingly.

Share of Client reimbursement in total reimbursements, by type of financial institutions:

Banks

Insurance Companies

Credit Institutions

Pawnshops






Activities in 2015

Activities for 2016





Acknowledgements


TABLE OF CONTENTS

4

5

6

10

18

20

40

48

62

66

68

4140

Financial Statement and Audit OpinionFinancial Statement and Audit Opinion

4342


4544


46





Activities in 2015

Activities for 2016





Acknowledgements


TABLE OF CONTENTS

4

5

6

10

18

20

40

48

62

66

68

4948

Overview of Customary Business Practice; Case studiesOverview of Customary Business Practice; Case studies

According to Article 14 (3) of the Republic of Ar-menia Law on Financial System Mediator, in mak-ing decision, the Mediator shall not only refer to the requirements of the Armenian legislation but also take into account the rules of business conduct and ethics, and customary business practices. This gives the Mediator enough flexibility for decision-making and allows for each case taking as streamlined ap-proach as possible to protect consumer interests. As the Mediator works on investigating claims, the need to identify a customary business practice arises not only when a particular legal relationship is not regulated by any act but especially when it requires one and the same application of the provision or there is need to find out whether that practice is acceptable in any given situation or circumstance. Below is a customary business practice we came to find out in the year under review.

When investigating a claim submitted to the Of-fice of FSM, the Mediator had to clarify a custom-ary business practice at banks as they deal with the transfer of funds by a payment order.

According to the claim, the Client and the Bank signed a loan, firm pledge and bank account con-tract, under which the Client had received a con-sumer loan. The repayment of the loan amount and accrued interest was to be performed on an annu-ity basis, according to the contract. The contract set a condition whereby the Client had instructed the Bank to channel all funds, so credited on to the Cli-ent’s bank account, to fulfill the obligations of the Client in respect of the Bank under the contract. The Client used another bank to make a money transfer on to his bank account, stating the ‘full re-payment of the loan’ as purpose of the transaction. The transfer order indicated the Bank as a recipient bank from which the Client had received the loan amount. The bank, in implementation of the pay-ment order by the Client, sent a memorial order to the Client’s Bank where the ‘full repayment of the

loan’ had also been stated as purpose of the trans-fer. The Bank serving the Client’s account (i.e. the Bank from which the Client had received the loan amount) has all the funds available on the account of the Client credited on to the Client’s bank ac-count yet it failed to channel the funds to the loan repayment but rather used it on an annuity basis. The Bank serving the Client’s account stated that the Client’s instruction was aimed to the Payer’s Bank and the Beneficiary’s Bank had no right to use all funds, so credited on to the Client’s bank account, for the full repayment of the loan.

Nor has the Bank serving the Client’s account followed the requirement laid down in Article 27 (2) of the Republic of Armenia Law on Funds Transfer by Payment Order, which says that the beneficiary’s bank must inform (whether verbally, in writing or 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-ment order.

For investigation of the claim, the Mediator had to figure out if there is a practice with banks re-garding applicability of the Republic of Armenia Law on Funds Transfer by Payment Order:

• Does the bank (if acting as the beneficiary’s bank) fulf ill the purpose of a payment order issued by the sender’s bank to the payer’s bank OR whether the f ield ‘purpose of payment order’ is mandatory to the ben-eficiary’s bank). For example, if a person gives a pay-ment order to bank A for the transfer of money on to his account at bank B and notes that the purpose of the transfer is full repayment of the loan received from bank B, shall bank B be obliged to channel the amount, which had been credited on to his account, to the full repayment of the loan?

• Does the bank (if acting as the beneficiary’s bank) inform (whether verbally, in writing or electronically) the beneficiary of the fact that it has received a pay-ment order, until the beginning of the next calendar day following the receipt of the payment order?

To shed light on the issue the Mediator sought ex-planations and clarifications provided by 10 commercial banks operating in Armenia. So, the banking practice regarding the applicability of the Republic of Armenia Law on Funds Transfer by Payment Order is as follows:

CUSTOMARY BUSINESS PRACTICE ON APPLICABILITY OF THE REPUBLIC OF ARMENIA LAW ON FUNDS TRANSFER BY PAYMENT ORDER

5150


1. Five banks out of 10 mentioned above do fulfill the purpose of a payment order issued by the sender’s bank to the payer’s bank; the other five do not.

2. Two banks out of 10 mentioned above do inform the beneficiary of the fact that they have received a payment order, until the beginning of the next calendar day following the receipt of the payment order; the other eight do not.

Precedent 1:Client’s right to make a claim to the Bank for non-delivery of the goods under a consumer crediting contract to the buyer

A loan contract signed between the Bank and the Client entitled the Client to purchase a laptop from the seller of electronics (the Vendor), whereby that laptop would serve as an item of collateral. The item of collateral was not provided to the Client, so they went to the Vendor and claimed to annul the loan contract on the basis of the right of time to think. The Vendor’s officer assured that the request would be submitted to the Bank. A month later, the Client learned that the loan contract hadn’t been annulled; moreover, fines accrued on as a result of non-fulfillment of credit obligations. The Client ap-pealed to the Mediator with a request to urge the Bank to cancel the above loan contract, abstain from paying fees arisen in connection with the loan contract and from getting the loan reclassified.

The Bank said they have received no claim on uni-lateral annulment of the loan contract and affirmed that they have duly performed their obligations un-der the contract, i.e. transferred the amount under the loan contract to the Vendor’s bank account, as was instructed by the Client. The Bank also noted that, in this case, after having properly performed their obligations, they remained with no collateral, and because it is impossible to prove whether or not the borrower-pledgee received the goods, the Bank was not in a position to take action.

For investigation, the Mediator had to figure out:• whether the Client is entitled to make a claim

against the Bank in this case, and• if so, what kind of claim it can be and what re-

PRECEDENTS/ CASE STUDIES

sponsibility the Bank will bear in respect of the Client.A comprehensive review of the facts, a number of

legislative norms and the contract signed between the parties allowed the Mediator drawing the fol-lowing conclusions: the Republic of Armenia Law on Protection of Consumer Rights, and other laws and regulations, as well as the contract concerned all en-title the consumer to submit the claims as estab-lished in the aforementioned statutes to the creditor direct under the following circumstances: 1) the consumer crediting contract is concluded with a person who is not a supplier, and the consumer creditor has agreed to provide a loan to the sup-plier’s customers in order to purchase goods from that supplier, and 2) the goods purchased through the loan provided under the consumer crediting contract are not received, and the consumer at-tempted in good faith to realize his rights and make claims entitled by law or contract, but the supplier failed to perform his obligations in the manner and scope as stipulated by the law and the contract.

During investigation, the Bank did not provide any firm evidence of the fact that the Client had obtained the laptop, which was indicated in the contract. Moreover, the Vendor has virtually ceased to operate, and enforcement authorities had under their possession similar claims of the Vendor and the Bank’s customers. So, the issue of good faith of the consumer/Client becomes pointless in such circum-stances. As it follows from the above, all necessary stipulations of the law are in place, in which case the Client has the right to lodge his claims directly to the Bank.

It should also be noted that according to the Ar-menian legislation the seller is exempt from non- fulfillment or improper fulfillment of their ob-ligations, if they prove that the fulfillment or improper fulfillment was impossible due to force majeure circumstances or violation by the consumer of the terms/rules of use, stor-age and transportation of the goods or action of the third parties. Thus, in this case, the Bank failed to prove that the non-fulfillment or improper fulfillment of obligations by the Vendor has resulted from force majeure circumstances or violation by the consumer of the terms/rules of use, storage and transportation of the goods or action of the third parties. So, what implies from the above is that the

Vendor did fail to perform their obligations (hand-ing the goods to the consumer) and, therefore, they have to bear responsibility of handing the item of collateral under the contract to the Client or obliga-tion to compensate the loss the Client has incurred.

Given that all the conditions necessary for the Client to exercise his rights to lodge a claim against the Bank direct are in place, the Client shall be en-titled to make his claims directly to the Bank and the latter shall be obliged to compensate the Client for the damage which, in this case, is the loss of the amount of the loan to obtain the goods, as well as the interest and fines accrued on that loan.

Thus, the Mediator decided to satisfy the Client’s claim against the Bank, urging the latter to withhold from demanding the Client to fulfill his contractual obligations and to reclassify the Client’s loan as it was.

Precedent 2:A changed interest rate of the mortgage loan contract signed with a former employee of the bank and the client claim for missed profit resulting from the change

As an employee of the Bank, the Client signed a mortgage loan contract with the Bank in order to purchase a real estate. After a while, the Client left the Bank (was discharged). This gave the Bank ground to raise the interest rate of mortgage loan to the Client twice as much. Learning of this, the Client undertook full and early repayment of all his contractual obliga-tions under the mortgage loan to the Bank. The liti-gation followed after termination of the employment contract by the Bank resulted in a judgment stating that although the employment relationship was ter-minated in violation of the law, the Client, in this case, should not be restored to his former job position. In this connection, a certain amount of money was con-fiscated from the Bank in favor of the Client. In view of the fact that the Bank had terminated working re-lationship in violation of the law thus changing the nominal interest rate without any legal grounds, the Client turned to the Bank requesting compensation of the lost earnings resulted from the early repay-ment of loan obligations, while providing a couple of mechanisms of how to calculate lost profits.

The Bank considers the Client’s claim for compen-sation of lost earnings unfounded since the Client has

failed to explain in his claim and the documents at-tached thereto what specific measures he has taken to generate income and what steps he has made to that effect. Moreover, the Bank has never required early repayment of obligations from the Client, and it is the Client who decided on an early repayment of his obligations in full.

For investigation of the claim, the Mediator had to review a number of legislative norms and the con-tract signed between the parties, on the one hand, and to study the judicial practice, on the other. As a result, it was found that where the debtor has violat-ed his obligations, he shall be obliged to compensate the creditor for the damage and lost earnings (i.e. un-earned income that this person would have received under normal conditions of civil practice, if his right had not been violated).

Going further in commenting on compensation for damage in the form of lost earnings, the Court of Cassation stated that the plaintiff will, for com-pensation of the lost earnings resulting from breach of contractual obligations, need to provide evidence that substantiates:

• the breach of the obligations under the contract• the real intention and possibility for the gain• the cause and effect of the latter• the extent of damage• the cause-and-effect relationship between

breach of obligations, real intention and possibility for the gain and extent of damage

• the measures the individual whose rights were violated takes to reduce the extent of damage.

Thus, the Court of Cassation of the Republic of Armenia has clearly set out the circumstances prov-ing of which would only give the plaintiff a chance to claim compensation for the lost gain. Moreover, the obligation to prove the existence of the aforemen-tioned circumstances rests with the plaintiff.

In this particular case, the employment relationship has been terminated by the Bank in violation of the law, and the change in the nominal interest rate implies that the Bank has also violated its contractual obligations.

Referring to the real intention and possibility of obtaining a gain, it should be noted that the Client has provided options in his claim about how he would allocate the sum and benefit from, given the lack of the need for early repayment of loan obligations. As mentioned above, the Court of Cassation has estab-

5352


Precedent 3:The impossibility to perform a currency conversion transaction to the extent needed, as the bank issued an instruction internally to limit selling of foreign currency to individuals

The Client wanted to buy dollars from a branch office of the Bank but the branch office employee re-fused to sell the required amount of foreign currency, citing an instruction issued by the Bank’s manage-ment. The Client’s proposal to converting the same amount of money and putting it in his US dollar ac-count was rejected, either. In the evening, the Client attempted an electronic transfer of money from his Armenian dram card on to the US dollar card, which was successfully implemented. Next morning, the Client went to the Bank’s branch office and with-drew the entire amount from his US dollar card. On the same day, the Client again applied to the branch officer, asking to buy dollars, either in cash or non-cash, but could only get part of the required money in cash, with reference to the above mentioned in-struction. Shortly thereafter, the Client made an-other electronic transfer of money from card to card, which was also completed successfully. The Client again went to the same branch office and cashed the entire dollar amount out of his US dollar card.

Two days later, the Client saw his Armenian dram- and US dollar-denominated accounts report nega-tive balances. The Client asked the Bank to clarify on the matter and compensate him for the damage.

The Bank declared its position with regard to the Client’s claim. It says that the foreign currency on the Client’s account is converted on the day the trans-action is processed at the ArCa processing center, which may differ from the date of execution of the transaction, and the transaction amount is convert-ed at an exchange rate set by the Bank for the cur-rency available on card account or at a transit ex-change rate, based on an average market exchange rate published by the Central Bank of the Republic of Armenia in the foreign exchange market and the exchange rate set by the Bank. As a result, using dif-ferent exchange rates for transaction execution and transaction processing and charging withdrawal fees as appropriate led the dollar account of the Client to have reported surcharge.

Turning to the matter of surcharge on the dram account, the Bank said that card to card money trans-

lished that compensation for the lost profit will only work if the owner’s real intention and possibility of obtaining a gain through an appropriate property are at the same time in place. In this particular case, al-though options for possible income through alloca-tion of the sum were provided, the Client however failed to justify his real intention for obtaining a gain by the use of the money. In addition, the Court of Cassation stated that for determining the existence of lost profits, the status of the property that was in normal conditions of civil practice before the viola-tion of the right must be taken into account in the first place. In this case, the Client failed to provide any evidence that before the full repayment of the loan the money was used by the Client to obtain certain income (for example, used as a deposit with a bank). Moreover, the obligation to prove as well as negative consequences of failure to prove the above circum-stances rest with the plaintiff, in this case – the Client. The lack of this condition is sufficient for rejecting the Client’s claim of compensation for the lost profits.

In addition, referring to the cause-and-effect rela-tionship between an unlawful act and the alleged dam-age, it should be noted that an illegal discharge of the employee (the Client) has neither directly led to the loss of the Client’s money or loan repayment nor deprived the Client of the possibility to use the money, but the Client had independently decided on an early loan re-payment, which cannot be a direct consequence of an unlawful act. In other words, the Client has exercised his discretionary right to early repayment of the loan.

To sum up, in the framework of claim investiga-tion the Client has failed to provide evidence to substantiate his real intention to gain certain income by the use of funds or the current sta-tus of the property to enable the Client to gain certain income, nor has there been the cause-and-effect relationship between the unlawful act and the alleged damage. As was outlined in the position of the Court of Cassation, the reason-ing of the existence of the above circumstances is a mandatory condition for compensating the loss of gain due to violation of contractual obligations. Therefore, we can state that the Client’s claim to compensate the lost gain as provided for in Article 17 of the Republic of Armenia Civil Code is not justified and must be rejected. The Mediator decided to reject the claim of the Client against the Bank.

fers charged the Client a transfer fee of 0.3% of the amount transferred, and the dram account reported a surcharge because the said transfer fee had out-stripped the Client’s account balance.

For investigation of the claim, the Mediator first of all examined the contract on bank account open-ing and maintenance signed between the parties, a number of legislative acts relevant to the case, and carried out a detailed analysis of transactions of the Client, reading the account statements. As a result, it became clear that the Client’s dram and dollar card transactions were processed according to the Terms of Provision and Use of Payment Cards, applicable at the Bank, and as per closing procedure of the opera-tional day, applicable at the Processing Center.

Referring to the Client insisting that the Bank did not sell cash foreign currency to the amount request-ed, it is necessary to clearly define the concepts of ‘public offer’ and ‘invitation to make an offer’. An offer is a proposal addressed to one or more specific per-sons, which definitely expresses the bidder’s intention of considering the contract to have been concluded with the addressee who has accepted the proposal. The offer must contain the essential terms of the contract. A proposal containing all essential terms of the contract from which the will of the person who has made the proposal appears to have concluded a contract on the terms indicated in the proposal with anyone who responds shall constitute a public offer., while advertising and other proposals addressed to an indefinite group of persons shall constitute an in-vitation to make an offer, unless explicitly otherwise indicated in the offer. The above implies that an offer is considered a public offer if the following conditions exist simultaneously:

• it involves an offer which corroborates the per-son’s will to enter into contractual relations;

• contains all the essential terms of the contract, which are considered as such by virtue of the peculi-arities of the law or contract, and

• the offer makes it clear that the one making the offer is willing to enter into contractual relations with anyone who responds.

A proposal by a person (acting with a proposal to enter into contract) to a person (persons) cannot constitute an offer if it lacks any of the essential terms of the contract. Therefore, in this case, it is necessary to question whether an exchange rates table at the

premises of the Bank contains all the essential terms of the foreign exchange trading contract and whether or not it constitutes a public offer.

The condition relating to the goods of the trad-ing contract is deemed to be agreed if the contract allows determining the name and quantity of the goods; if the trading contract does not allow deter-mining the quantity of then goods to be delivered, the contract will be considered invalid. Therefore, the proposal containing intention to enter into a con-tract on trading of the goods with specific features (including foreign currency) cannot constitute an offer if it lacks the condition on the quantity of the goods. Because the advertising and other proposals addressed to an indefinite group of persons consti-tute an invitation to make an offer, unless explicitly otherwise indicated in the offer, one may conclude that, in this case, we are dealing not with a public offer, but an invitation to make an offer. Thus, the Bank’s proposal addressed to an indefinite group of persons should be considered an invitation to make an offer, which cannot per se give rise to any liability for the Bank to perform currency exchange at the amount specified by the Client. The Mediator decided to decline the Client’s claim against the Bank.

Precedent 4:Selling jewelry as an item of collateral without notice and at an unreasonable price

The Bank provided a loan to the Client. The loan was secured by jewelry. The Client regularly made loan repayments, but sometimes had overdue li-abilities. Learning from the Bank that only very little money remained due for full repayment of the loan the Client visited the Bank, paid the remaining mon-ey due only to find out that the jewelry as an item of collateral had been sold. The Client insists that he has not received any written notice before the sale of the collateral. In a letter, the Client asks the Mediator to urge the Bank to return the jewelry or the money equivalent to their market value.

The Bank’s position about the claim lodged by the Client is as follows. The Bank says that the Client had been notified of his violation of the terms and con-ditions set out in the loan contract and if the Client fails to redeem his debt to the Bank within a tight timeframe, the latter will be authorized to confiscate

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the collateral without resort to court. In the out-come, although the Bank sold the pledged item, the proceeds of the sale was not enough for full repay-ment of the debt, so the Bank officer contacted the Client to visit and pay the deficient part of the debt.

For investigation of the claim, the Mediator need-ed to determine whether or not the signature shown in the field ‘date and signature’ on the post office receipt of “Haypost” CJSC had been put by the ad-dressee. To figure this out, the Mediator engaged a handwriting examination specialist. The conclusion of the specialist, however, did not allow us to identify if the Client or any other person had put the signa-ture in question. What we can only state is that the investigation did not support the Client claiming that signature shown in the field ‘date and signature’ on the post office receipt belonged not to him.

In effect, the notice was sent by the Bank to the address referred to in the contract, and the notice bears a signature certifying the receipt. In addition, after sending the notice, the Bank followed a stipula-tion in Article 249 (2) of the Republic of Armenia Civil Code, saying that marketing of collateral shall com-mence two months after the notification.

Based on the foregoing, the Mediator believes that the sale of the collateral by the Bank is lawful and in compliance with the terms and conditions of the contract and provisions of the law, while the fact the Client did not receive notification about selling of the item of collateral is considered unconfirmed.

For investigation of the claim, there is need to re-fer to the price of the Client’s jewelry which the Bank has marketed through public auctions. The Bank has established that in case of sale through public auc-tions the starting price of gold items shall correspond to the market value of gold scrap. Moreover, the starting price implies the bottom threshold of selling of jewelry. In turn, paragraph 3 of Part 2 of Article 249 of the Civil Code stipulates that the pledgee shall be obliged to sell the collateral at a reasonable price in the market.

Going further in investigation of the claim, the Mediator involved an expert goldsmith from the con-clusion of who it became clear that the Bank had marketed the Client’s jewelry at approximately 10.1% below real fair market price, which cannot be con-sidered a reasonable current market price.

Given that the Bank had the right to sell the pledged

item, but did so at the price below real fair market price, the Mediator believes that the Bank shall have to compensate the Client the amount of money that is the price of gold scrap as appraised by the expert goldsmith less the selling price of the pledged jew-elry. The Mediator, therefore, decided to partially sat-isfy the Client’s claim against the Bank.

Precedent 5:Client claiming back the fee paid for the right to subsequent pledge

The Client’s property has been pledged under the loan contract signed between the Client and the Bank. The Client applied to the Bank to get permis-sion for subsequent pledge. Although the Client paid a fee of AMD 200,000 and got the permission of the Bank but has neither moved the pledge nor used the right to subsequent pledge. In a letter to the Bank, the Client requested a refund of the paid fee of AMD 200,000 so that the Client is able to use the money for loan repayment, but received a rejection response.

The position of the Bank is as follows: the tariffs and rates published on the Bank’s website denote that for the right to subsequent pledge the Bank charges 0.1% of the loan balance, which shall consti-tute a minimum AMD 200,000, and the Bank’s in-ternal regulations and policies provide no refunding of paid fees when the other bank refuses to displace the property on conditions of a subsequent pledge.

Review of related documentation, explanations and objections of the parties, as well as thorough analysis of the laws and regulations made it possible to arrive at a conclusion, as follows: according to the Republic of Armenia Civil Code, a pledged property can become an item of another pledge (subsequent pledge), which is allowed, if it is not forbidden by col-lateral contracts concluded before. In this case, ac-cording to the contract signed between the parties, the pledger must not allow any significant change in conditions of safety and maintenance of the pledged property without a written consent of the pledgee, including the subsequent pledge.

In connection with a case investigated previously, the Mediator communicated to commercial banks in Armenia with a request to provide if they’re practic-ing applicability of the provision of the subsequent pledge laid in Article 236 (2) of the Civil Code. Based

on the explanations and clarifications provided from the banks, the practice of permitting a subsequent pledge says the following: the contract of collater-al limits the pledger’s capacity to turn the pledged property into a subsequent pledge but provides a stipulation that the bank’s written consent in ad-vance can be sought, provided that such consent is granted i) on a basis of objective and subjective cri-teria, such as the loan-to-value ratio, the financial condition of the borrower; ii) for repayment of finan-cial commitments to the bank or payment of a sum under a contract or under an internal regulation and/or policy, irrespective of the contract.

What is important in reviewing this claim is un-derstand whether the Client is able to claim a refund of AMD 200,000 from the Bank on the grounds that the Client has neither moved nor used the right to subsequent pledge.

Individuals and legal entities are free to define their rights and obligations under the contract, es-tablish any terms/conditions to the contract which are not in conflict with the legislation. Moreover, for selected types of transactions, certain types of con-cluding of transactions have been established by the legislature. Thus, transactions between legal entities and with individuals should be concluded in writing. Moreover, a written form of the contract shall be considered survived also when the proposal in writ-ing to conclude a contract has been accepted by the person who has accepted the offer by taking action (consignment of goods, performance of works, pro-vision of services, payment of fees, etc.) in observance of the terms and conditions of the contract within a timeframe specified for accepting such offer.

In this particular case, the Client asked the Bank to give permission for getting a subsequent pledge. The Bank allowed the Client to pledge the real estate (that served as collateral at the Bank) at another bank as a subsequent pledge, charging the Client the fee for subsequent pledge. The Client paid the fee at the Bank by filling out the field ‘granting the right to sub-sequent pledge’ in the field ‘purpose of payment’. In-deed, by doing so, the Client has actually accepted the offer of the Bank in exchange of getting permission for subsequent pledge by paying the required sum. The Client and the Bank have, in fact, properly signed a contract whereby the Bank permitted the Client mov-ing his pledged property to another bank for subse-

quent pledge and the Client has paid a fee for it.The fact that the Client did not move the item

of collateral and did not use the right to subsequent pledge is not critical, because the contract between the Client and the Bank implies that the Client had paid a fee for getting permission to use the right to subsequent pledge, which the Bank had provided.

What the legislation provides for is that refunding or returning of the fee paid in the framework of the transaction is only possible in case that transaction has been invalidated. It should be noted that in order for a person to be able to get refund from the trans-action or the value thereof, that transaction must be either null and void right upon the conclusion or ren-dered invalid by court and the latter to enforce the consequences of such invalidity.

In this case, the contract between the Client and the Bank has been signed in observance of the re-quirements of the legislation, so it is not null and void nor has it been rendered invalid by court. Therefore, there is no reason to return the sum which the Client paid to the Bank as a fee for a particular service. Based on the foregoing, we can say that the Client’s claim is not lawful and must be rejected.

Precedent 6:Refusal to compensate for the damage caused to the client’s car after power cord of the trolley-bus fell on the car

The trolley-bus power cord fell on the Client’s car while in traffic flow in the city, causing damage to the car. The insurance company, however, refused to compensate the damage, arguing that it was not the trolley-bus driver’s fault in what happened to the power cord. The Client does not agree with the deci-sion of the Company to reject compensation, saying that the driver maneuvered, so the accident was his fault. The Client appealed to the Mediator, asking the latter to demand compensation from the Company for the damage suffered.

For investigation of the claim, the Mediator had to use the service of independent experts to determine if the drivers of the car and trolley-bus – supposedly the two parties involved in crash situation – behaved in a way that contradicted the Road Traffic Rules. If so, it means they were technically involved in the accident. If not so, the question is if the drivers could take action to prevent the accident technically.

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An expertise conducted did not prove that the car or trolley-bus drivers have taken action that contra-dicted RTL requirements and brought about the oc-currence of the accident. The expertise was not either able to answer the question if the drivers could take action to prevent the accident technically.

After a comprehensive study of the documents relating to the claim and relevant legislation require-ments, the Mediator arrived at a conclusion, as fol-lows: legal persons and citizens, whose activity is connected with increased danger for those around (use of means of transport, mechanisms, high-volt-age electrical energy, atomic energy, explosive sub-stances, strongly-acting poisons, etc.) shall be obli-gated to compensate for harm caused by the source of increased danger unless they prove that the harm arose as a result of force majeure or the intent of the sufferer. The duty of compensation for harm shall be placed upon the legal person or citizen who pos-sesses the source of increased danger by the right of ownership or on other legal basis. Moreover, the law may provide for compensation for damage, in the absence of fault of the person who has caused the damage. The damage caused by lawful actions shall be compensated in cases prescribed by law.

In other words, as the statement mentioned above infers, the law separates the damage caused to their possessors as a result of interaction of sources of increased danger from the damage caused as a re-sult of increased danger, establishing that in the first case the damage is compensated on general princi-ples set out in Article 1058 of the Republic of Armenia Civil Code (fault liability) and, in the second case, the damage is compensated in the manner prescribed in Article 1072 of the Civil Code (liability, regardless of the fault of the person who caused the damage).

This means that the law makes a distinction between:1. The damage caused to the possessors as a

result of interaction of sources of increased danger (in this particular case: transport means), in which case the general principles of liability for the causing of harm as established in Article 1058 of the Civil Code shall apply (the above referred stipulation derives from the Republic of Armenia Court of Cassation rul-ings, No. 1097/02/10, dated March 23, 2012, and No. 0959/02/09, dated July 1, 2011); and

2. The increased danger for those around, the liabilities of the person causing the harm (more spe-cifically, the owner and/or possessor of the increased source of danger) of which is available in the follow-ing circumstances:

a/ the fact of harm caused as a result of operating the sources of increased danger is proven,

b/ the person having caused the harm does not prove that the damage occurred due to force ma-jeure or intent of the sufferer,

c/ the person having caused the harm does not prove that the source came out of his control as a result of illegal actions of other persons,

d/ it is not proven that the sufferer’s gross negli-gence contributed to the occurring or increasing of the harm only in which case the court may reduce the amount of compensation, depending on the ex-tent of fault committed by the sufferer and the per-son having caused the harm; and where fault of the person having caused the harm is lacking and avail-ability of gross negligence of the sufferer is proven, the court may reduce the amount of compensation or refuse to pay compensation, unless otherwise pro-vided for by law.

To find out which format is in use by the legisla-ture – whether fault liability or faultless liability, it is necessary to clarify the following matter:

Is the damage caused to the car a consequence of interaction of the trolley-bus and the car, or only interaction of the trolley-bus which is a potential source of increased danger?

Thus, in this particular case, the fact that the trolley-bus – a potential source of increased danger

– caused harm to the Client’s car has been confirmed. The Mediator finds it appropriate to emphasize that although the car has also been the source of danger, there was no interaction of sources of increased dan-ger in this case however, because the car’s proper-ties that could represent a source of increased danger were not per se in place. The car, with its properties that could represent a source of increased danger, had no way influenced the trolley-bus, whereas the trolley-bus, with its properties that could represent a source of increased danger, has caused the harm in the accident. Therefore, the owner/legal possessor of trolley-bus is responsible for the damage caused to the car regardless of his fault. In other words, because

the car did not in any way influence the trolley-bus, the accident cannot constitute as if the sources of in-creased danger interacted but rather that the trolley-bus as a source of increased danger influenced, caus-ing damage to the car in the accident. It therefore infers that the damage shall be compensated in the manner prescribed in Article 1072 of the Civil Code that the prescribed manner (liability, regardless of the fault of the person who caused the damage).

The above implies that, pursuant to Article 1072 of the Civil Code, the owner/legal possessor of trolley-bus bears responsibility for the damage caused to the car and so does insurance company because: i) it faces liability for indemnification against the damage caused, ii) the fact of harm caused to the Client as a result of operating of a source of increased dan-ger, namely the trolley-bus which is duly insured by the Company, has been proven, iii) the person having caused the damage does not prove that the damage has arisen due to force majeure circumstances or in-tent of the sufferer, iv) the person having caused the damage does not prove that the source came out of his control as a result of illegal actions of other per-sons, and v) it is not proven that gross negligence of the sufferer contributed to the occurring or increas-ing of the harm. Therefore, taking the above state-ment into consideration, the Company is obliged to compensate the damage caused to the Client’s prop-erty as a result of the accident.

These considerations were communicated to the parties, after which the Company decided to enter into reconciliation with the Client by paying full com-pensation for the damage.

Precedent 7:Reimbursement of costs of tooth filling under the health insurance policy

The Client had some of his teeth filled. After, the Client applied to the insurance company (the Com-pany) with a request to reimburse the costs of tooth filling. The Company took a decision to refuse the re-imbursement, however. The dental clinic performed the diagnosis of the affected teeth and tooth filling procedures completely and properly, and the Client does not agree with the decision of the Company to refuse cost reimbursement. Based on the foregoing, the Client appealed to the Office of FSM, asking the

Mediator to urge the Company to provide insurance indemnification adequate to the reimbursement of the costs incurred.

The Company presented its position to the Me-diator, according to which the dental clinic has per-formed a double check-up of the teeth and had their panoramic view x-rayed. It turned out that some of tooth filling materials were assessed to be overused and one of the teeth had never been subjected to fill-ing. The tooth filling materials were assessed to be overused as their sticking edges had been pigmented and non-airtight. The Company noted that these changes occur over time. The Client has voiced disa-greement with the opinion of the doctors, who per-formed a double check-up, and insisted on passing re-examination in another dental clinic. The Company arranged the Client’s examination at another dental clinic. The results of the latest examination confirmed the results of previous examinations. Given the facts mentioned above and based on the contract signed between the parties, the Company refused compen-sation because the insured person has submitted false information that affects the insurance risk.

For investigation, it is important to determine whether the case is subject to reimbursement by the Company within the health insurance con-tract.

The Mediator needed to obtain the doctors’ pro-fessional opinion as well as to clear up some other issues in relation to the case in review, the Office of FSM found it appropriate to engage a doctor-spe-cialist so that the latter could answer the questions posed by the Mediator:

1. Whether or not the Client’s teeth are filled, and2. If yes, describe the condition of filling of

each tooth and the condition of teeth filling mate-rial, where possible.

Taking into consideration that visual examination of the Client’s mouth hole might shed light on certain aspects relating to this case, the Office of FSM also ar-ranged that examination for the Client. Combining pan-oramic x-ray pictures before and after treatment and further examination of the Client’s mouth hole made it possible for the doctor-specialist to express opinion that 6 teeth of the Client had been filled and 2 hadn’t.

So, the main question regarding the case is wheth-er the Client has provided the Company with false in-formation that affects the insurance risk. To clarify this,

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Precedent 8:Rejecting the claim for insurance indemnity

in mandatory car insurance scheme because of impossibility to determine the fault of the parties involved in the accident

As a sufferer in a traffic accident, the Client sub-mitted an application to the insurance company (the Company) for compensation. The Company took a decision to reject paying the compensation to which, however, the Client did not agree, since the traffic police had concluded that he was a suffering party in the accident. Moreover, the Client remarks, the re-sults of forensic and auto-technical expertise showed that the results, which served a basis for a decision-making, were incomplete as they did not take into account the additional explanations given by the Cli-ent and the guilty driver.

Below is the Company’s position in respect of the claim of the Client. According to the results of forensic and auto-technical expertise provided from the Re-public of Armenia Center of Expertise, a state non-commercial organization, the accident occurred as a result of actions by the persons responsible for the maintenance of road and engineering structures. In the technical point of view, those actions contradicted the requirements of Article 21 (1) of the Republic of Ar-menia Law on Maintaining Road Traffic Safety. In such conditions of traffic management it was not possible to predict the actions of the drivers of vehicles in-volved in the accident and to clarify the issue whether it was technically possible to prevent the collision. Ac-cording to the Company, since the fault of the driver of the car insured under the motor third party liability insurance policy was not grounded, no responsibility for the damage caused to the Client arose.

The Company sent a letter to the head of the Traf-fic Police, asking to clarify if the police captain ought to take additional explanations. A reply came from the TP saying that the police captain shouldn’t take addi-tional explanations but, in that particular case, an ex-planation would look like a ‘statement’. The Company expressed another opinion, saying that the ‘statement’ cannot be a source data for expertise of insurance ac-cident such as the motor third party liability insurance. Therefore, they were not presented to the expert.

To figure out the circumstances of the accident, the Office of FSM considered involvement of profes-sionals for investigation. It was important to find out

it is necessary to find out:1. Whether the Client has provided the Com-

pany with false information, and2. Whether false information affects the insur-

ance risk.Thus, the information is false when it is partially or

completely untrue. Moreover, to generate any con-sequence, critical impact of the information on the consequence to be generated will be needed1. The regularization provided in the contract implies that the information submitted should be the one that could affect the insurance risk. However, on the one hand, there is an official document issued by the clinical service certifying that 2 teeth of the Client have been filled and, on the other hand, there is the medical spe-cialist’s opinion which does not confirm the fact of in-tervention in these two teeth in the period under re-view. From what we see above, one cannot obviously insist on the fact that the Client/the insured person has submitted false information to the Company. Be-sides, even if we assume that the Client has provided the Company with false information, the disclosure of that information to the Company would serve a ground for rejection only if it, as a consequence, were to influence the insurance risk. The insurance risk is the potential extent of harm arising as a consequence of insurance event occurring at a certain probability and eventuality (Article 9831 (5) of the Republic of Ar-menia Civil Code). In this case, reported ‘false infor-mation’ of the Client could only affect the amount of insurance compensation, but never the insurance risk.

Given the aforementioned, the Mediator believes that the Client did not provide any false information to get insurance indemnity from the Company, and the information submitted by the Client did not have any effect on the insurance risk.

As for the amount of insurance compensation to be paid by the Company to the Client, we should note the following: the examination of the teeth confirmed the filling of 6 teeth whereas the fact of intervention in the 2 teeth has not been confirmed. Therefore, in-surance accident will constitute dental treatment of 6 teeth in which connection the Company will have to reimburse AMD 150,000 (6 (number of teeth treated) x AMD 25,000 (each tooth treatment fee)).

Thus, in view of the above, the Mediator decided to partially satisfy the Client’s claim, calling on the Com-pany to pay AMD 150,000.

2The Court of Cassation of the Republic of Armenia expressed

such a position in its decision No. 3-2440 (CC) with regard to the

presumption of legality of administrative acts.

whether or not the additional explanations provided by the parties of the accident were substantial for ex-amination. Two sets of examinations, which the Of-fice of FSM outsourced, revealed the following:

One of the experts was assigned to learn all source data relating to the accident, including the additional explanations provided by the parties of the accident. The expert arrived at a conclusion that the driver of the car insured under the motor third party liability insurance policy committed action contrary to the requirements of the law thus leading to the occur-rence of collision, depriving himself of the opportunity to prevent it. According to the same conclusion, with the documentation made available to the examina-tion it was not possible to determine if, in the traf-fic accident, the Client had been able technically to follow the requirement of paragraph 67 of RTR and to prevent the collision, as baseline data on technical expertise were not enough.

The other expert was tasked to scrutinize all re-quired documents relating to the accident, except for the additional explanations. According to the conclu-sion reached as a result of the examination, figuring out if the drivers had been able to prevent the colli-sion technically as well as to evaluate their actions in terms of RTR requirements was not possible.

Summing it up, one may state that the problem lies in the source data which were made available for examination, so it is important to put the question in this way: could those additional explanations pro-vided by the drivers involved in the accident be used as a source or baseline data for carrying out the examina-tion?

First, let us note that the expertise carried out as part of this accident should be delegated to a stand-ard compensation process expert, since an agreed fact of statement is lacking.

From what we learned by reading the Rules of the Armenian Bureau of Motor Insurers it became clear that there are not restrictions applied to the stand-ard compensation process expert when dealing with source or baseline data for examination. This means that an expert performing expertise to find out the reasons of traffic accident is able to also examine the motor vehicles involved in the accident. This, in turn, can imply that the expert is able to not only use the documentation which the sufferer party must pre-sent, but also to perform expertise by virtue of his

qualification, using qualified source documents, ma-terials and other deliverables. In such circumstances, the standard compensation process expert has the right to also use additional explanations, which the Client provided to the Company, because there is no limit to it, and it is a document that provides informa-tion on the accident.

Moreover, it is necessary to emphasize that whether the Road Police’s action to seeking addi-tional explanation is lawful shall not be considered by the Office of FSM, as the Mediator believes that action and/or inaction by all government agencies for administration shall, pursuant to Article 5 of the Republic of Armenia Constitution, be considered as lawful, unless the contrary is established by the law2 Note that an administrative act or action and/or in-action of an administrative body are subject to appeal through an administrative procedure or judicially, any one of which has not been exercised in this case. Had an administrative or judicial procedure recognized the unlawfulness of an administrative act, the authorities would only after this have had the right to distrust the action.

In summary, the Mediator finds that the addition-al explanations taken from the drivers as the parties of the accident could be used as evidence for carrying out examination of the cause of the accident, so the Mediator will need to look to the expertise that has used this evidence and arrived at a conclusion about the fault of one of the drivers in the accident.

Thus, the driver of the car insured under the motor third party liability insurance policy committed an il-legal action which caused harm to the Client, and the lack of fault of the latter is not proven, either. In such circumstances, the Company’s obligation to pay insur-ance indemnity will arise, so the Mediator has taken a decision to satisfy the Client’s claim.

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

Court of Cassation.

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Precedent 9:Rejecting an insurance compensation under

the Casco insurance contractThe Client has his own car “Kia Rio” insured at an

insurance company (the Company). A traffic accident occurred in which the Client’s car was damaged. The Client reports that the Company was duly informed about the accident. The Company, however, refused to provide insurance indemnity. According to the Company, somebody contacted the Company, intro-duced himself as the driver of the car “Kia Rio” and informed about the traffic accident, specifying that it had occurred about 5-10 minutes ago. The caller said he was trying to drive past the other car but, unable to control the accelerating car, crashed into the rear of a motor vehicle running the opposite line and making a left turn. The Company said that they have exam-ined all available records of phone calls about the ac-cident. Without any special technical knowledge, the Company argues, it wasn’t hard to distinguish that the person who had reported about the accident was not the policyholder but another person instead, who had provided false or inaccurate information, while the Client failed to report the insurance event to the Company, and the Company has the right not to pro-vide compensation. The Client does not agree with the Company’s position as the information provided about the accident occurred was neither false nor in-accurate. The one who contacted the Company to report about the accident was another person, since the Client was in shock at the moment. The Client said he had kept the Company’s representative (when he arrived at the scene of accident) and the Com-pany’s security officer (after submitting an application for compensation) informed about the one who has made the call and informed about the traffic accident.

For investigating this case, the Mediator had to observe all relevant provisions of the Republic of Ar-menia Civil Code as well as the contract signed be-tween the parties. It turns out that the policyholder (authorized holder) must inform about the traffic ac-cident to the insurer immediately (as soon as possi-ble) upon taking place of the accident; and in all cases the policyholder (authorized holder) must notify of the traffic accident in writing to the insurer within 3 working days upon taking place of the accident. Fail-ure to fulfill this obligation may prompt the insurer to use the right not to pay the insurance compensation

unless it is proved that they were aware of the occur-rence of the insurance event or the lack of information about it with the insurer could not affect their obliga-tion to pay the insurance compensation.

Under the contract, the insurer has the right to refuse performing insurance indemnity as and when the policyholder, beneficiary or authorized holder provide false or inaccurate information about the causes and circumstances of the occurrence of insur-ance event and about parties associated with the oc-currence of that insurance event.

After examining the facts and arguments present-ed by the parties, combining them with legal regu-larization referred to above, the Mediator had to go in detail with the case and clarify:

1. whether the Company is entitled to refuse pro-viding insurance compensation on the ground that the Client didn’t call the Company to inform about the accident, and whether or not the Company was informed about the accident in violation of the estab-lished procedure, and

2. whether the Company is entitled to reject insur-ance compensation on the basis of false/inaccurate information provided by the client.

Thus, the Company learned about the accident not in a long while after occurrence of the accident, and regardless of the fact that the Client did not in-form the Company about the accident personally, the Company does not have the right to refuse insurance indemnity on that ground, with reference to the pro-visions cited.

As regards an insurance policy’s requirement to inform about insurance accident, it should be noted that the documents drawn up by Republic of Armenia Traffic Police indicate that the accident occurred be-tween 9:30-10:00 pm. The Company was informed about the accident the same day at 9:58 pm, which means that the information about the traffic accident was reported to the Company immediately, within a reasonable time.

Considering the circumstances described above, the Mediator believes that the decision of the Com-pany to refuse paying insurance compensation is not valid, and the damage caused to the Client’s car as a result of the accident must be recompensed subject to the terms of currently applicable regularizations. The Mediator has made a decision to satisfy the Cli-ent’s claim.




Activities in 2015

Activities for 2016





Acknowledgements


TABLE OF CONTENTS

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6362

Questions and AnswersQuestions and Answers

In the year under review the Office of FSM got a lot of questions from citizens not only by phone but also via e-mail, the official website of the Office as well as our Facebook page. Citizens contacted us for problems as varying in nature as thinkable, but the prevailing part of their concern was about interpre-tation of the provisions of the contracts concluded with financial institutions or clarifying the rights and obligations of the parties when using one or another financial instrument, and questions about how and when to apply to the Mediator.

Below we have summarized the most frequently asked questions of the citizens and our answers dur-ing the reporting year.

Question:How can I clean up my credit history?

Answer:Credit information or so-called “credit history” is

the credit information about you (the borrower), which provides a categorized description of your debt and payments on credit obligations you have assumed, your payment habits or how you perform your financial obligations. In practice, “cleaning up a bad credit history” means that you no longer have problematic (overdue or categorized on a basis of subjective criteria) loans in your current credit reports.

The credit bureau should not maintain credit in-formation on the borrower if that information is more than 5 years old at the moment a respective credit report on the borrower is provided. Such information shall be archived after the abovementioned five-year period is over (Republic of Armenia Law on Circula-tion of Credit Information and Activity of Credit Bu-reaus, Article 11 (6) 2).

Question:Can I get a loan from a bank with the help

of the Office of Financial System Mediator?Answer:

No, you cannot. The Mediator is not mandated to deal with such issues as the Office of FSM is not authorized to interfere with the relationship between the financial institution and the client. The Office of the Mediator is called to examine the complaint/claim of the client, if the latter’s rights have been vio-lated by the financial institution.

As for providing a loan, it should be noted that the

loan contract does not constitute a public contract, so the lender is free to decide who they will conclude the contract with and who they will not. This means that the lender is evaluating your creditworthiness and ability to repay the loan, so it is up to them to decide whether or not they will sign a loan contract with you.

Question:Concluded a loan contract with the pawn-

shop, with gold which I pledged as security. Non-performance of obligations has resulted in accrued fines. Now, the total amount of liabilities is greater than the market value of the gold pledged. Does the pawnshop have the right to keep back from selling the pledged gold and resort to court, claiming that I need to fulfill my obligations?Answer:

Failure to repay loan, which is secured by collat-eral, in a specified timeframe shall prompt the pawn-shop to market (sell) that collateral through public auction. After this, the pawnshop’s claims on you (the debtor) have to be redeemed, even if the money re-ceived from the sale of the pledged property is insuf-ficient to cover them in full (Republic of Armenia Civil Code, Article 255 (7)). In fact, marketing (selling) the item of collateral is the pawnshop’s right rather than obligation.

Your (the borrower’s) primary responsibility is to return the funds of credit and pay interest for the use of that credit in a timeframe as specified under the loan contract. This provision is laid down in Article 887 (1) of the Republic of Armenia Civil Code, which says, specifically, that under a credit contract, a bank or other credit organization (the creditor) is obligated to provide money funds (credit) to the borrower in the amount and on conditions provided by the con-tract, and the borrower is obligated to return the monetary amount received and to pay interest on it.

Question:I am guarantor under a loan contract. The

borrower does not make timely payments, and I no longer want to be a guarantor. How can I tackle this issue? Answer:

As regards this case, the suretyship may termi-

6564

Questions and AnswersQuestions and Answers

nate by agreement reached between the borrower and the financial institution as well as under circum-stances as determined by the law. In this connection, we would like to mention as follows:

Under the contract of suretyship, the surety un-dertakes the duty to the creditor of another person to be liable for the performance by the latter of its obligation in full or in part. The guarantor will also be liable, jointly with the borrower, for performance of credit obligations under the loan contract. Article 380 (1) of the Republic of Armenia Civil Code says that to a surety who has performed an obligation shall pass the rights of the creditor under this obligation and the rights belonging to the creditor as pledgee to the extent to which the surety satisfied the claim of the creditor. The surety also shall have the right to demand from the debtor payment of interest on the sum paid to the creditor and compensation for other losses borne in connection with liability for the debtor. In other words, the surety having fulfilled the creditor’s claims shall have a right to reclaim to the extent they have performed in respect of the debtor.

In case of nonperformance or improper perfor-mance by the debtor of obligations secured by a surety, the surety and debtor shall be liable jointly and severally to the creditor (bank or credit organization) unless a statute or the contract of suretyship provides for the subsidiary liability of the surety.

According to Article 382 of the Civil Code, the surety shall terminate:

(1) with the termination of the obligation secured by it and also in case of a change without permission of the surety in this obligation entailing an increase in liability or other unfavorable consequences for it;

(2) with a transfer to another person of a debt under an obligation secured by the surety if the surety did not give the creditor consent to be liable for the new debtor;

(3) if the creditor has refused to accept proper performance offered by the debtor or the surety;

(4) at the expiring of the time period for which it was given indicated in the contract. If such time period was not established, the surety shall be ter-minated unless the creditor brings suit against the surety within a year from the day of occurrence of the time for performance of the obligation secured by the surety. When the time period for performance of the principal obligation is not indicated and can-

not be determined or is determined by the time of demand, the surety shall be terminated unless the creditor brings a suit against the surety within two years from the day of conclusion of the contract of suretyship.

In the absence of the above reasons, the surety-ship may terminate by agreement reached between the parties to the contract of guarantee when, for example, the borrower can apply to the financial institution by proposing a new guarantor or other methods (e.g. a pledge) that secure performance of obligations. The financial institution, in turn, has the right to adopt or reject that proposal.

Question:Are banks entitled to keep the motor ve-

hicle’s technical specifications passport with them when making a car loan? Answer:

Yes, they are. When making a car loan, the bank is entitled to hold the original passport of the mo-tor vehicle’s technical specifications and provide the client with the copy of such passport that bears the bank’s seal.

Question:Is the bank or credit organization required

to remind the borrower of the day of repay-ment?Answer:

The loan contract is normally designed to include a schedule for repayment of loan and payment of in-terest fee. By signing the contract, the borrower and the lender (bank or other lending institution) give their consent to the terms and conditions set forth in the contract, including the loan repayment and inter-est payment schedule, which means that they are fa-miliar with the terms and conditions of the contract. In other words, unless otherwise specified in the loan contract, the lender shall bear no such obligation.

Question:Have used my own motor vehicle as a taxi.

The motor third party liability contract points out that the motor vehicle is to be used for per-sonal purposes. As I have been recognized guilty in a traffic accident, what negative consequenc-es can there be as a result of the foregoing?

Answer:An insurance company has the right to subroga-

tion in respect of the owner (the Policyholder) of the motor vehicle as party having caused the damage, if, upon signing of the contract, there has been false information of circumstances communicated to the Insurer, which is critical enough to the Insurer to de-termine the level of insurance risk, provided that such circumstances were not known and could not be known to the Insurer until occurrence of the insur-ance event (Republic of Armenia Law on Compulsory Insurance against Civil Liability in Respect of the Use of Motor Vehicles, Article 27 (2) ‘d’).

An altered way (purpose) of operating of the mo-tor vehicle constitutes a significant change in the in-formation specified in the insurance policy.

In this case, operating the car as a taxi changes the level of insurance risk. In other words, once insur-ance compensation to the sufferer is provided, that insurance company will have the right to subrogation.

Question:When voluntary motor vehicle insurance is

concerned, does the insurance company have the right not to pay insurance compensation in case of vehicle theft until the end of the investigation?Answer:

Within the framework of the insurance contract concluded, the insurer undertakes to pay insurance compensation if the insurance event as specified in the contract occurs.

If the contract concluded between the insurance company and the client has car theft envisaged in the list of insurance risks, the insurer must, by virtue of the fact of the theft, pay insurance compensation to the policyholder or the beneficiary.

Question:After the insurance event has occurred, in

which timeframe one may apply to the insur-ance company (Armenian Bureau of Motor Insurers) to receive compensation under a mo-tor third party liability contract?Answer:

The sufferer or his legal successor may apply for insurance indemnity to the insurance company that insured liability of the person who caused the damage

or, where provided for by law, to the Bureau, within three months after the day of occurrence of the in-surance event (Republic of Armenia Law on Compul-sory Insurance against Civil Liability in Respect of the Use of Motor Vehicles, Article 20 (1)).

6766

AcknowledgementsAcknowledgements

A thank-you letter toASHOT GHOCHIKYAN,Claim Investigating Specialist of the Office of FSM

I express deep gratitude to Mr. Ghochikyan, who examined my complaint, for impartial and efficient work. I am also grateful to the staff of the Office of Financial System Mediator for their work. I wish the Office of FSM will always be there for people.

Anna Rstakyan, 17.04.2015

A thank-you letter toLAURA POGHOSYAN,Claim handling Specialist of the Office of FSM

I am writing to convey my thanks to Laura Pog-hosyan for her warm and consistent handling. My complaint has been met partially.

Naira Sargsyan, 14.08.2015

A thank-you letterThis letter of mine says many thanks to the staff

of the Office of Financial System Mediator, especially Mané Babajanyan, Movses Khachatryan and Hayk Hovhannisyan. These nice people worked hard to get my problem solved.

Asatur Arakelyan, 27.08.2015

A thank-you letter toPIRUZ SARGSYAN,Financial System Mediator

Dear Ms. Sargsyan,I express my deepest gratitude to you for your of-

fice 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 letterI 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-

lated their rights is really amazing. And it is all the same with anyone who comes to the Office of FSM with their needs and complaints in the hope to get their case explained and clarified and to achieve solu-tion to the problems.

I would like to talk of my impression when I first met these people, coming in the Office. I saw that all employees are young, and it caresses the human eye. In dealing with my case all this time, I arrived at a conclusion that these young people, each working in their place and each doing their job, are well aware of their profession.

I would also like to say special thanks to Mané Ba-bajanyan, who accepted my case and made me be-lieve that if my complaint is right, then I will definitely come for justice. The other nice person I want to thank is Hranush Aghayan, head of the case handling and investigating group of the Office who, without giving me a word, clarified that I would get a defini-tive answer after audition and convinced me that it is possible to get to the truth.

I would like to thank Ms. Piruz Sargsyan, the Fi-nancial System Mediator, and all those employees whom I have not met at all. I am happy to know there is a legal institution in Armenia like this that protects the rights of citizens.

Ruben Arsenyan, 10.11.2015

6968

The List of Organizations Which Did Not Sign the CovenantThe List of Organizations Which Did Not Sign the Covenant

3The list has been prepared as of 01.03.2016

BANKS 1. “AreximBank-GazpromBank Group” CJSC2. “Armenian Development Bank” JSC3. “Pan-Armenian Bank” JSC

CREDIT ORGANIZATIONS1. “AGROLEASING Leasing Credit Organization” LLC2. “ANIV” UCO LLC3. “AREGAK” UCO LLC4. “Arfin” Credit Union LLC5. “BLESS” UCO LLC6. “Housing for Youth” RCO CJSC7. “GARNI INVEST” UCO CJSC8. “GOODCREDIT” UCO CJSC9. “Express Credit” UCO LLC10. “ECLOFF” UCO LLC11. “KAMOURJ” UCO CJSC12. “CILICIA” UCO LLC13. “Credit Corp” UCO CJSC14. “Credo Finance” UCO CJSC15. “Unileasing” UCO CJSC16. “Nor Horizon” UCO LLC17. “G & A” UCO LLC18. “SEF International” UCO LLC19. “Parvana Credit” UCO LLC20. “CARD AgroCredit” UCO CJSC21. “F.I.C.O” UCO LLC22. “Fides Mortgage Company” UCO CJSC23. “FINCA” UCO CJSC24. “Export Finance” UCO CJSC

INSURANCE COMPANIES1. “ARMENIA INSURANCE” LLC2. “Armenia Export Insurance Agency” CJSC3. “NAIRI INSURANCE” LLC4. “RESO” CJSC5. “RosGosstrakh - Armenia” CJSC6. “SIL INSURANCE” CJSC7. “ISG” LLC

INSURANCE BROKERS1. “RESOLUTION INSURANCE BROKER” LLC2. “Crescent Global Eurasia” CJSC

PAWNSHOPS1. Alexworld” LLC2. “Aghdagh” LLC3. “Amalik Credit” LLC

4. “Amuni Group” LLC5. “Amuni Credit” LLC6. “AMS” LLC7. “Ashot Frangulyan” Private Entrepreneur8. “First Pawnshop” LLC9. “AS MASTER” LLC10. “AVACRED” LLC11. “AUTO CREDIT” LLC12. “Arag Finance” LLC13. “Arangel Provider” LLC14. “Arbon” LLC15. “Ar-Et” LLC16. “Artzate Gavat” LLC17. “Arman & Gnel” LLC18. “ARS ELITE” LLC19. “Art Credit” LLC | Komitas ave. bld. 23, 4/1, Yerevan, Armenia |20. “ART CREDIT” LLC | P. Sevak str. 51/1, Kanaker-Zeytun, Yerevan, Armenia |21. “Artiom Ghahramanyan” Private Entrepreneur22. “Garrant Credit” LLC23. “Garant Credit” LLC24. “Gev–Star” LLC25. “Gevasar Credit” LLC26. “Gevorgyan and Company” LLC27. “Gnahatum” LLC28. “Gold Idea” LLC29. “Gold & G.B” LLC30. “Gold & Money” LLC31. “Gold Credit” LLC32. “Gold Cash” LLC33. “Gold Consulting” LLC34. “Goodavi” LLC35. “Gr-Av-Mo” LLC36. “DIAMOND CREDIT” LLC | Arshakuniats, 35, office area No. 53, Yerevan, Armenia |37. “Diamond Credit” LLC | Gorki str. bld. 68, office area No. 3, Gyumri, Armenia |38. “Dega” LLC39. “Dramatun” LLC40. “Euro Credit” LLC41. “EuroCredit Capital” LLC42. “Eduardo 2005” LLC43. “MVM Anna” LLC44. “ERA LINE” LLC45. “Express VIP Service” LLC46. “Trust Credit” LLC47. “Trader” LLC

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The List of Organizations Which Did Not Sign the CovenantThe List of Organizations Which Did Not Sign the Covenant

| Tigran Mets., office area No. 13/10, Yerevan, Armenia |48. “Trader” LLC | Tigran Mets ave., bld. 43, office area No. 11, Yerevan, Armenia |49. “Zhirair Aharonyan” Private Entrepreneur50. “Easy Credit” LLC51. “Inrim Credit” LLC52. “Invest Service Group” LLC53. “Isca Credit” LLC54. “Legat Credit” LLC55. “Leylo” LLC56. “Lombardia” LLC57. “LombardStreet” LLC58. “Cay-Man” LLC59. “Karen Mets” LLC60. “Karen Yaralyan” LLC61. “Klouzh” LLC62. “Credit Alliance” LLC63. “Huso Lusniak” LLC64. “Malen” LLC65. “Mamma-Mia” LLC66. “Money & Company” LLC67. “MONEY CREDIT” LLC68. “Manioka” LLC69. “MARIUS” LLC70. “Marlia” LLC71. “Max Credit” LLC72. “Megatron” LLC73. “Micro Capital” LLC74. “Musoyan-AAA” LLC75. “Move Med” LLC76. “Yana-Gor” LLC77. “Umoneyline” LLC78. “Ninella” LLC79. “NK Ninella” LLC80. “Nomidisc” LLC | Hanrapetutyan str. bld. 11, No. 1/1, Abovyan, Armenia | 81. “Nomidisc” LLC | Hatis str. commercial area No. 1/69, Abovyan, Armenia |82. “Shogh” LLC83. “Voske Luma” LLC84. “Voske Vtak” LLC85. “White-Soliter” LLC86. “Proffinance” CJSC87. “Jangai” LLC88. “Real Credit” LLC | Khorenatsi str. bld. 1, Gyumri, Armenia | 89.“Real Credit” LLC

| Sayat-Nova str. bld. 9/9 a, Basement No. 16, Gyumri, Armenia |90. “Robert Marutyan” LLC91. “Royal Credit” LLC92. “REVERSE” LLC93. “ROYAL FINANCE GROUP” LLC94. “S.U.R. - 72” LLC95. “Sargis & Nana” LLC96. “Saver” LLC97. “Serve - Edar” LLC98. “Sicor” LLC99. “Simnor” LLC100. “SSS Credit” UCO LLC101. “V.I.A” LLC102. “Vagr” LLC103. “Vantig” LLC104. “Vardan Ohanyan” Private Entrepreneur105. “Venus Athena” LLC106. “Via-Gold” LLC107. “Wilmar Mek” LLC108. “TER-YESAYAN ASSOCIATION” LLC109. “Five Minute” LLC110. “Fast Cash” LLC111. “Financial Ambulance” LLC112. “LOMBARD PLUS” LLC113. “MVM-FINANCE” LLC114. “VARD GRIG” LLC115. “Hayk Zohrabyan” Private Entrepreneur116. “Aghvan Tevosyan” Private Entrepreneur117. “Armenuhi Arakelyan” Private Entrepreneur118. “Narine Arzumanyan” Private Entrepreneur119. “Sedrak Gagik Muradyan” Private Entrepreneur120. “Arthur Hovsepyan” Private Entrepreneur121. “Lianna Danielyan” Private Entrepreneur122. “Julieta Ohanyan” Private Entrepreneur

FOREIGN EXCHANGE DEALERS AND EXCHANGE OFFICES1. “GROSS REALTOR” LLC2. “Azat Khachatryan” Private Entrepreneur3. “Azatuhi Blikyan” Private Entrepreneur4. “Alex-Grig” LLC5. “ALS Erzrumtsi” LLC6. “Anatoly Sahakyan” Private Entrepreneur7. “Andaco” LLC8. “Anush Zaqaryan” Private Entrepreneur9. “Ashot Harutyunyan and Sons” LLC10. “AUTO PLAZA” LLC

11. “ARBUMPROM” CU LLC12. “Arthur Araqelyan” Private Entrepreneur13. “Arthur Danielyan” Private Entrepreneur14. “Aristakes Atoyan” Private Entrepreneur15. “Ardzaganq” LLC16. “ARM & ART CHANGE MARKET” LLC17. “Arman Baghdasaryan” LLC18. “Armen Bairamyan” Private Entrepreneur19. “Armen Yenoqyan” Private Entrepreneur20. “Armen Mkhitaryan & Friends” JSC21. “Armenia” Hotel Complex CJSC22. “Armenia” International Airports23. “Armine Marabyan” Private Entrepreneur24. “Arsen Papyan” Private Entrepreneur25. “Artak Yesayan” Private Entrepreneur26. “Arpine Taguhi” LLC27. “BASENI GOVQ” LLC28. “BEGO TRANS” LLC29. “Gagik Jndoyan” Private Entrepreneur30. “Gazprom Armenia” CJSC31. “Gegham Arqa” LLC32. “GNTUNIK” LLC33. “Gogly” LLC34. “Gorik Stepanyan” Private Entrepreneur35. “Gvidon Lazaryan” Private Entrepreneur36. “DJS GROUP” LLC37. “Donka” LLC38. “EUROPARK TRADE CENTER” JSC39. “ANN. PA” LLC40. “IMEX GROUP” LLC41. “Khachatur Ghahramanyan” Private Entrepreneur42. “Khachatur Petrosyan” LLC43. “TSIATSAN” LLC44. “CAPITAL TRADER” LLC45. “KAREN ANNA & FAMILY” LLC46. “Karin Gohar” LLC47. “Karine Araqelyan” Private Entrepreneur48. “Kon-Brosel” LLC49. “KRPAK” LLC50. “HAGOYAN” Trade Center51. “Hayastan Trade Center Hayrapetyan Brothers” CJSC52. “HASARA” LLC53. “Hasmik Balasanyan” Private Entrepreneur54. “Hasmik Tadevosyan” Private Entrepreneur55. “Harutyun Harutyunyan” Private Entrepreneur56. “Hrachik Hakobyan” Private Entrepreneur57. “Hrachia Araqelyan” Private Entrepreneur58. “Mill AG” CJSC

59. “Yotniak” LLC60. “Nairi Matinyan” Private Entrepreneur61. “VOSKE GETAK” LLC62. “PARMA” LLC63. “PLAZA SYSTEMS” CJSC64. “GIANT TRADE” LLC65. “Jemma Baghramyan” Private Entrepreneur66. “GH G” LLC67. “R.G.A.T” LLC68. “REGENTS CAPITAL” LLC69. “Rudik Khachatryan” Private Entrepreneur70. “Sahak Hagoyan” Private Entrepreneur71. “Samvel Amirjanyan” Private Entrepreneur72. “Samvel Ghazaryan” Private Entrepreneur73. “Sedik Sahakyan” Private Entrepreneur74. “Sev Kakach” Commercial Enterprise75. “SIMAO” LLC76. “SPARAPET” LLC77. “Stoic” LLC78. “VAGHARSH & SONS CONCERN” LLC79. “Vatou” LLC80. “VARDAN & MONIKA” LLC81. “Vardan Ghazaryan” Private Entrepreneur82. “VLV CENTER” LLC83. “VHM” LLC84. “TASHIR INVEST GROUP” CJSC85. “Tigran Sargsyan” Private Entrepreneur86. “Tigran Vahradyan” Private Entrepreneur87. “TUNAR” CJSC88. “TUREX GOLD” LLC89. “PSR” LLC90. “PRETTY WAY” LLC91. “CATRINE GROUP” LLC92. “Hakob Hovhannisyan” Private Entrepreneur93. “Gayane Askaryan” Private Entrepreneur94. “Zaven Chagharyan” Private Entrepreneur95. “Levon Katayan” Private Entrepreneur96. “Hovsep Harutyunyan” Private Entrepreneur97. “Hrachia Hakhverdyan” Private Entrepreneur98. “Norayr Martirosyan” Private Entrepreneur99. “Ruzanna Araqelyan” Private Entrepreneur100. “Valery Navasardyan” Private Entrepreneur101. “Vahagn Khachatryan” Private Entrepreneur102. “Vardan Baghdasaryan” Private Entrepreneur103. “Parandzem Hakobyan” Private Entrepreneur104. “Albert Papoyan” Private Entrepreneur105. “Aram Araqelyan” Private Entrepreneur106. “Anahit Virabyan” Private Entrepreneur

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107. “Andranik Hakobyan” Private Entrepreneur108. “Andranik Mkrtchyan” Private Entrepreneur109. “Andrey Shaqaryan” Private Entrepreneur110. “Aram Barseghyan” Private Entrepreneur111. “Arthur Qochinyan” Private Entrepreneur112. “Arman Qosyan” Private Entrepreneur113. “Armen Maleryan” Private Entrepreneur114. “Armine Khachatryan” Private Entrepreneur115. “Arsen Bareghamyan” Private Entrepreneur116. “Arsen Galstyan” Private Entrepreneur117. “Artiom Davtyan” Private Entrepreneur118. “Hamlet Barseghyan” Private Entrepreneur119. “Harutyun Arsenyan” Private Entrepreneur120. “Hovhannes Khachatryan” Private Entrepreneur121. “Hrachia Minasyan” Private Entrepreneur122. “Manuk Sargsyan” Private Entrepreneur123. “Julieta Gabrielyan” Private Entrepreneur124. “Sergei Aghayan” Private Entrepreneur125. “Smbat Aslanyan” Private Entrepreneur126. “Vardan Vardazaryan” Private Entrepreneur127. “Varouzhan Avetisyan” Private Entrepreneur128. “Transdealer” LLC

INVESTMENT FIRMS1. “Alpha Securities” LLC2. “Tonton Investment” LLC3. “Renessa” CJSC4. “Future Capital Market” LLC5. “ARMENBROKE” JSC6. “Financial Technologies Laboratory” CJSC7. “Prime Capital Investment” LLC

INVESTMENT FUND MANAGERS1. “Amundi-ACBA Asset Management” CJSC2. “C-Quadrat Ampega Asset Management Armenia” LLC3. “Ameria Asset Management” CJSC

MONEY REMITTANCE ORGANIZATIONS 1. “TELL-SELL” CJSC2. “EASY PAY” LLC3. “Mobi Dram” CJSC4. “HayPost” CJSC5. “MONEYTUN” LLC6. “IDRAM” LLC

CREDIT BUREAU1. “ACRA Credit Reporting” CJSC

Tel.Fax

"Elite Plaza" Business Center 7th floor15 M. Khorenatsi street, 0010 Yerevan, Armenia

(+374) 60 70-11-11(+374) 10 [email protected]

Documents

ANNUAL REPORT 2 0 15 · School of “Mkhitar Sebastatsi” Educational Center; Address of Chairman of the Board Address of Financial System Mediator The Office of Financial System