Opposition concerned over mandatory arbitration

The opposition yesterday renewed its concern over an amendment to the Civil Code which provides that in marriage separation cases, a court may decide that the liquidation of the community of acquists be referred to the Arbitration Centre.

Gavin Gulia, opposition spokesman for home affairs, said in Parliament that the government was continuing to distort the concept of arbitration, replacing it by a mandatory form of conflict resolution which did not enjoy the constitutional safeguards of the ordinary courts.

Justice and Home Affairs Minister Tonio Borg, who spoke first, said this Bill fine tuned legislation enacted over the past few years as part of the process to extensively modernise the civil and criminal codes.

For example, up to 1993 a husband was automatically registered as being the father of children born to his wife, and the law made it difficult for him to repudiate a child which was not his own.

He had to prove not only that his wife had committed adultery but also that the birth of the child was concealed from him. In 1993 the law was changed and since then there was no need to prove concealment and it was sufficient to produce other evidence, such as DNA.

This Bill affected fathers who wished to contest the paternity of children born before 1993. It was being laid down that husbands who had evidence that their wives committed adultery and could produce DNA testing, may contest paternity up to the end of 2007. This amendment, Dr Borg said, was being moved following a ruling of the European Court against Malta.

The Bill also included an amendment providing that when a child was born out of wedlock the birth certificate would not show that the mother was single. The birth certificate would specify when the mother was married, but would say nothing otherwise. This clause was retroactive for copies of birth certificates issued for people who have already been born.

Dr Borg said that in amicable marriage separations, the Bill provided that a contract of separation would have the same legal force of a court decree.

Furthermore in separation cases, once a court decided on the main issues, such as responsibility for the marriage failure, custody of the children and maintenance, it may order that the liquidation of the community of acquists be referred to the Arbitration Centre.

Another section of the Bill, provided for actio de in rem verso, action against unjustified enrichment, something which had so far existed only in jurisprudence.

A new feature in this Bill dealt with special and general privileges over movables. To date, a hypothec continued only upon the transfer of ownership of real estate. A hypothec or some other privilege on, say, furniture, ceased to exist if that moveable was sold. Once this Bill was enacted, the justice minister may list movables, such as industrial plant or valuable furniture, upon which hypothecs and privileges would remain attached even if ownership was transferred, as long as such hypothecs were registered at the Public Registry.

Interjecting, Gavin Gulia (MLP) suggested that movables which were already subject to a warrant of seizure may not have new privileges attached to them.

Continuing, Dr Borg said the suggestion could be considered in committee stage.

He said the advantage of this amendment was that it would enable easier access to finance for people who did not own real estate which they could use as collateral.

Dr Gulia said it was important that hypothecs linked to movables were properly registered, so as to ensure that people who bought such items were well aware of the privileges attached to them. The obligation to register such hypothecs should be clear in the law.

It was also worth pointing out that, while there was nothing wrong in the principle of this amendment, one would need to remember that movables, contrary to real estate, tended to depreciate owing to wear and tear.

On the other hand, a benefit of this clause was that a debtor would no longer have to link a hypothec for a small loan to real estate worth much more.

What worried the opposition in the Bill, Dr Gulia said, was how the Arbitration Centre had become something of an octopus which swallowed up many cases which came before the ordinary courts. This Bill was providing that in marriage separation proceedings, a court may decide that the liquidation of the community of acquists may be referred to the Arbitration Centre. This was yet another example of how the government was departing from the concept of voluntary arbitration.

This government had failed in its efforts to attract major international cases for arbitration in Malta, with only about four cases having been considered here since the 1990s. It was, therefore substituting voluntary international arbitration with mandatory arbitration of domestic cases. In effect, Malta now had a parallel to the ordinary courts, with fewer constitutional safeguards.

In was laughable how parts of separation cases would be heard before a judge and the rest, if the judge so decided, before the Arbitration Centre. The plea for liquidation of the community of assets was among the most important parts of separation proceedings and should not be treated in this way. How could the declaration of a separation be kept apart from the liquidation of the community of acquists?

In cases of desertion or adultery, a court was obliged to deny the guilty party from its share of the community of acquists. How would the arbiter know that in the liquidation of the community of acquists he had to deny the guilty partner of his/her share of the acquists?

If the government was to continue on this course, then at least it should be made clear that no liquidation could take place before the court decided on responsibility for the separation.

Another problem in the formula which the government was proposing was that there would be different forms of appeals, with the appeal from the arbitration decision being far too limited, Dr Gulia said.

Parliamentary Secretary Tony Abela underlined the benefits which this Bill had for the business sector, notably the clauses against unjustified enrichment and the facility making it easier for loan guarantees to be made on movable property.

Perhaps companies could be encouraged to draw up an inventory in the form of a contract listing assets which could be hypoteched. If such assets were to be hypoteched, they would be valued by competent persons. Such an inventory would prevent the transfer of such assets during the lifespan of a loan when such assets were used as collateral, Notary Abela said.

In the case of equipment such as trucks and vans, the ADT should have a register listing vehicles that were subject to a hypothec, so that it would made it easier for people buying such vehicles to check if they were burdened with such guarantees.

Another benefit, in terms of the Civil Code, was that in the event of death, the surviving spouse could have immediate access to Lm2,500 from the community of acquists, thus making life somewhat easier until inheritance issues were sorted out.

Dr Abela also welcomed the provision of the Bill where birth certificates would not show that a mother was unmarried.

Stefan Buontempo (MLP) said that while this Bill was generally positive, he would be far happier if, instead of measures for the liquidation of the community of acquists, Parliament was discussing ways to reduce the number of marriage break-ups. There were various causes of marriage break-ups which needed to be discussed, such as the financial burden incurred when couples bought their house. Related issues were the problems which separated people faced, more so because once they divided their community of acquists, neither of them had enough money for decent housing, compounding their problems.

There was also need to improve the service which the people received in court, including easier access to legal aid, lower court tariffs and faster procedures.

Dr Buontempo referred to the clauses on hypothecs on movable property and asked who would establish the value of such property and its depreciation over time.

Referring to birth certificates, he said it would be far better if the status of the mother was not mentioned at all. By having a reference in the certificate to the fact that a mother was married implied that a mother was not married when no reference was made, he said.