Act XVI of 2016, which is now in effect, has paved the way for the creation of the Office of the Arbiter for Financial Services. From a consumer protection point of view, this should be a good thing. This was a Labour electoral promise and a predictable reaction to the fallout and controversies in the wake of the Bank of Valletta property fund and other mishaps. Reno Borg has been appointed as the first arbiter.
The arbiter will assume the roles formerly vested in the Consumer Complaints Manager (CCM) and take them to a new higher level. The CCM has been criticised as being toothless and unable to enforce his own recommendations. This was unfair. The CCM was modelled on the functions that had been assigned to the director of Consumer Affairs in the Consumer Affairs Act of 1994. The director could only mediate in disputes between consumers and traders, and his recommendations were unenforceable.
But judges and arbiters are different. Their decisions are binding, they are not employees and are not subject to anyone’s direction while exercising their core decision-taking function.
It is not clear what role the Arbiter’s Office will play in consumer education, and whether it makes sense to engage in an activity that would distract from its core judicial function. Maybe the CCM should retain this mission.
The Act is a considerable improvement on the original Bill, which was poorly conceived and drafted. The various vital amendments inserted in the committee stage have not, however, succeeded to disguise or resolve all the original deficiencies. The Act remains unsatisfactory in places and unnecessarily overloaded and complex in others; evidently copied from an inappropriately chosen foreign model, not suited to Malta’s much smaller size and particular consumer expectations.
The creation of a board, partly distinct from the Office, seems quite an unnecessary and costly complication. This board’s functions include determining accounting policies and preparing estimates and so-called strategic plans.
The law assigns to the arbiter competence over disputes dating back to 2004. Some disputes may have become prescribed by the passage of time. Ideally, the arbiter’s competence started with the coming into force of the Act.
Rules on prescription cannot be ignored because acquired vested rights need to be considered. It would be most unfortunate to find the new arbiter grappling and struggling from day one with claims and disputes regarding prescription. Endless appeals might ensue.
The attempt to make the arbiter a one-stop-shop does not seem successful
From a practical angle, a temporary or substitute arbiter could have been appointed to deal with the disputes arising prior to 2016. This would allow the arbiter to concentrate exclusively on new cases, and avoid his new office being overwhelmed and burdened by potentially numerous older disputes.
The arbiter need not be a lawyer and he may apply equity (being reasonable, just and fair) rather than apply strict law to decide cases brought before him. Equity as opposed to actual law is not to be resorted to lightly. It is not a sort of easy discretionary solution tailor-made for adjudicators not sufficiently well versed in the law. Equity supplements and complements the law and does not replace it.
In the wrong hands, the distinction between judicious equity and uninformed discretion may become blurred. The responsibility to determine the civil rights of opposing litigating parties requires a steady head and a legally trained mind – it is not the place for amateurs.
Seeing that the competence of the new office extends to €250,000, it becomes even more important and necessary that within our system a person well trained in the law should be responsible to head the adjudicating arm of the office. Happily, Dr Borg is a lawyer.
The attempt to make the arbiter a one-stop-shop does not seem successful. Article 19 requires careful attention. Is the arbiter expected to receive complaints, give information, mediate, advise, assist and then pretend these have not happened and put on his judicial gown and play the independent adjudicator? Independent means one does not find oneself unnecessarily involved in preliminary investigations or assisting parties in any way.
The office will probably have to put in place within its own organisation degrees and measures of segregation unfamiliar to our culture and practice and which may prove insufficient to satisfy constitutional requirements. The different functions shall require specialised skills to be exercised presumably by different people.
Ultimately, the buck stops with the arbiter, the recipient of a potentially confusing and distracting range of duties, including drawing up an annual report and preparing summaries and statistics of complaints received and decisions taken. Moreover, article 12 wrongly renders the office accountable to the Finance Minister.
Consumers are best served by clear, workable and coherent legislation and mechanisms which can guarantee legally sound decisions taken by independent and competent adjudicators in a short time. The consumer is not well-served by the risk of confronting endless, time-consuming and distracting disputes and appeals on jurisdiction, the application of prescription, on the potentially conflicting roles of the arbiter and his assistants, the constitutional independence of this new office, the potentially misguided resort to equity rather than law, etc.
The law is now in force. Time will tell whether problems and difficulties lie in wait for the unsuspecting consumer and whether this new mechanism will prove a success. Hopefully, the arbiter shall prove beneficial to financial services consumers.
David Fabri is head of the University of Malta’s Department of Commercial Law.
Antoine Grima lectures on Consumer Law at the University’s Faculty of Laws.