GHEORGHE PIPEREA: "There are some banks that blackmail their clients"

There are some banks on the Romanian market that blackmail their customers into not working with certain law firms, according to lawyer and professor Gheorghe Piperea Law PhD.

"There are some banks on the market that will tell their customers the following: < If you don't want to go through a nightmare for 20 years (ed. note: the duration of the loan which the two parties have entered a contract over) working with me as bank, and keep in mind that I am powerful, then you'd better not work with certain lawyers >".

At the tenth edition of the "Business law" conference, Gheorghe Piperea said that there are many contracts concluded for a period of 25-30 years which contain such harsh terms that they are basically a type of blackmail, which is an offense according to the law. Piperea referred in particular to the restructurings of the banking system, and he stressed: "A characteristic of these years, the economic freedom of the powerful ones degenerates into contract based-terrorism. When there is a side that dominates and another that allows itself to be dominated we are dealing with economic violence. (...) We could also mention a more particular, less brutal type of blackmail, such as providing the customer with the option of not paying their loans for two years, but once that period is elapsed, all of the abusive terms will be set in stone, the penalty interest will increased, the penalties will become very high, the collateral requirements will be increased etc.".

The contracts that Mr. Piperea is talking about are generally concluded over the long term and they stipulate penalties which are excessive compared to the potential losses that the powerful party could incur as a result of the contract.

"Even though theoretically, the contract means freedom, and it represents a freely entered agreement which expresses the will of the two parties, there are currently many contracts in which the contract-based terrorism occurs, and wherein the weak party is dependent on the powerful one.

Either the will to enter the agreement does not exist, or if it does it is vitiated by motivation or by the need to enter that agreement.

There are plenty of contracts that aren't signed so freely, the weak party signs because it has no other choice. For instance, in order to get utilities and to live according to the standard of the 21st century, you have to sign a contract and there is no question of negotiation in that case".

According to professor Piperea, up until 2011, the possibility existed of reducing those penalties, but only if part of the contractual obligation was fulfilled. Now, according to the new regulations in the criminal sector, if a penalty clause is excessive, "it can only be reduced and nothing more".

"The situation where a party to a contract is weak and vulnerable from a financial point of view, being subjected to a powerful dominant party, and the penalties required of the weaker party are disproportionately large for the vulnerable party is an offense stipulated in the Criminal Code of Law and it is carries rather significant sanctions. This applies, for instance, to leasing firms or to banks which apply absolutely extortionate terms to a consumer that has no choice the moment they sign a contract. The same issue can be raised in the case of loan restructuring, for example, and even in the case of labor contracts".

In these situations, the sanctions that can be applied are both civil in nature - the term of the contract in question can be eliminated from the contract, which can thus be made more fair-, as well as criminal in nature - punishable by prison -, as Mr. Piperea told us.

The European Court of Justice advises judges to intervene in commercial contracts and to make them balanced, Piperea further said: "The system that gets implemented by the European Court of Justice, through the very decision issued on April 30 in the Kasler vs OTP Hungary case, is a system that replaces formal fairness with true fairness. Whereas such a thing was never possible before, judges are now allowed to intervene in contracts and to restore balance, and they are even allowed to eliminate abusive terms from contracts. Moreover, judges are even allowed to prevent the application of an administrative act".

According to him commercial contracts contain imbalances of a legal, economic or technical nature, as the balance between the rights of the parties exists only formally.

• Cazanciuc: The judicial system has the duty to support the economy

The legal system has the duty to support the economy, according to minister Robert Cazanciuc, who attended the business law conference.

He said: "The judicial system has a duty to the economy. Its obligation is to support the economy through specialized courts, through reasonable hearing delays, through predictable solutions, just like the Government has the duty elaborate and to keep the legislation cohesive and predictable. Without providing support to the economy through those means it is very difficult to have resources for healthcare, education and why not, for justice. The new Civil codes of law have been mostly drafted due to the signals coming from the real economy that a change was needed".

The Ministry of Justice mentioned that the process for the acquisition of a new headquarters for the future Trade Court is under way and that the Ministry hopes the Court will become operational starting on September 1st and implement procedures which would reduce the time required for resolving cases.

"We have a common interest: helping Romania develop. This development of the country can only be achieved through a dialog between the business sector and the public administration. Unfortunately, over the last few years there have been some conflicts between the public administration and the business sector, as it has been sometimes said, perhaps a little too lightly, that the administration is the one that hinders society's growth. We have implemented a reform to a certain extent and we have realized that we don't always have the best employees in the public sector that would understand the real needs of the business sector and would therefore be capable of providing the adequate answers, because the capable ones have already left".

Gheorghe Piperea also mentioned that business law has underwent a major rewriting process, which has had an "truly overwhelming impact".

Denis Mazeaud, a Ph D and professor at the Paris II, "Pantheon-Assas" University, talked about the reform of contract law in France, and has praised the Romanian Civil Code of Law, as the French Civil Code was established in 1804.

He praised the fact that Romania has integrated into a single Code the economic and judicial development, which is not the case in France. While emphasizing that a reform of the Codes of law is being suggested in France as well, professor Mazeaud mentioned that in Romania, the Civil code of law is modern, pragmatic, and realistic, based on three principles - security, freedom and efficiency.