Compulsory financial ombudsman under the regulator’s umbrella: Testing a new model of dispute settlement

Abstract

In post-Soviet countries, the courts are not always effective in resolving consumer disputes. I compare the models of organizing the work of financial ombudsmen in Russia, Kazakhstan, Azerbaijan and Armenia, as well as plans for its implementation in Kyrgyzstan and Belarus. Models of compulsory mediation in a number of European jurisdictions are also analyzed. In some countries there is a tendency towards an increase in the influence of the regulator on the work of financial ombudsmen. The reform of the Russian financial ombudsman is the first attempt at introducing a new compulsory ombudsman model for financial markets. It will be a mandatory stage initiation of a lawsuit in a civil court. The new Russian model is unique, differing both from the models established in the countries of the European Union (centralized, decentralized, professional association), as well as models implemented in other post-Soviet countries. The Russian financial ombudsman model is essentially a combination of Italian compulsory mediation on the basis of coercion before the dispute is considered by the court, and the English financial ombudsman on the basis of a vertical system headed by a sole chairman who is de facto appointed by the financial services regulator, while membership in this system of financial institutions that provide regulated services is generally mandatory. Whether the compulsory financial ombudsman under the Central Bank ‘umbrella’ will manifest itself positively or negatively will determine the possibility of extending this scheme to other categories of consumer disputes in the financial markets and such as housing construction and repair, utilities, and telecommunications with many small and medium consumer claims. Furthermore, since a number of post-Soviet countries continue to rely on the Russian experience, in such countries there may be an expansion of mandatory ombudsmen under the umbrella of regulators as well.