Disputes involving board members and shareholders will be heard by the Economic Court

Amendments have been adopted to the Civil Procedure Law, expanding the jurisdiction of the Economic Court in civil cases. Henceforth, the court will also hear claims regarding damages caused by board members, council members, and founders of capital companies, the acquisition of shares or stocks in capital companies, termination of operations, claims for insurance payouts, and others. We explain the essence of these changes and what they mean for businesses.

Purpose of the Court’s Establishment

The Economic Court (ELT) commenced operations on March 31, 2021. The main objective of establishing this specialized court is the qualitative and swift review of complex commercial disputes, economic and financial crimes, as well as corruption cases, ensuring efficient and rational use of state budget funds. Initially, the categories of civil cases to be transferred to the court’s jurisdiction were defined based on the specificity of the cases – these were complex and relatively rare claims requiring specific legal knowledge for their qualitative review. Case categories were determined considering expert opinions on which dispute categories potentially have the greatest impact on the development of the business environment and investment attraction, thereby emphasizing the importance of qualitative and swift review of these cases.

In the Ministry of Justice report on the results of the ELT’s first year of operation and its future development opportunities, approved on October 11, 2022, the Cabinet of Ministers indicated that the court’s jurisdiction should be expanded. This would include cases concerning the liability of board or council members, founders, shareholders, procurators, or auditors (Commercial Law (KL) Articles 166, 169, and 172), thereby creating a unified judicial practice in these matters as well. At the same time, the report drew attention to the fact that the ELT had worked effectively in its first year of operation, and its work results demonstrated high professionalism. The conclusions expressed in the report confirm that the court has demonstrably proven its effectiveness and professionalism – this is supported by the stability indicators of rulings, the average case review period, and the complexity and volume of cases reviewed.

Broader Jurisdiction

2027. On April 1, 2027, and September 1, 2029, amendments to the Civil Procedure Law (CPL) will come into force, expanding the ELT’s jurisdiction in civil cases. In addition to its existing jurisdiction and institutional competence of cases according to CPL Article 24, Part 1.1, the court will henceforth also hear the following categories of cases:

1. claims for the acquisition of shares or stocks in a capital company;
2. claims for damages caused to a capital company by its board and council members, procurators, founders, auditors, and shareholders;
3. claims for the termination of a capital company’s operations;
4. commercial claims for insurance payouts;
5. claims for the provision of information to shareholders and stockholders;
6. claims arising from financial instruments;
7. claims arising from consumer collective actions.

The expansion of the ELT’s jurisdiction applies to those categories of civil cases that are primarily related to cases already within the court’s competence and where it is often difficult to distinguish between the subject matters of claims. However, that is not all – completely new competencies and case categories have also been assigned to the ELT.

Currently, the ELT’s jurisdiction includes claims arising from the mutual legal relations of capital company shareholders (stockholders), for example, disputes over share ownership. The boundary between such a subject matter of a claim and a claim for the alienation of shares can often be relatively narrow. Share alienation transactions are high-risk transactions. Thus, to ensure maximum uniformity of judicial practice in claims directly or indirectly related to share ownership, and to prevent fragmentation of court competencies in such cases, the ELT’s jurisdiction is expanded to include claims arising from the alienation of shares.

The ELT also hears claims arising from:

1. mutual legal relations of capital company shareholders (stockholders);
2. transactions of capital companies with related parties within the meaning of the Commercial Law and the Financial Instrument Market Law;
3. transfer of undertakings and company reorganization, excluding employee claims;
4. decisions of capital company shareholder (stockholder) meetings.

The subject matters of the aforementioned claims often border on the liability of board or council members, founders, or auditors. Since the solution in such categories of cases must be economically sound and justified, they are recognized as cases where the judge requires specific knowledge not only in law but also in economics. Therefore, case categories concerning claims against founders, shareholders, board or council members, procurators, or auditors (KL Articles 166, 169, and 172) are also transferred to the ELT.

Insurance Payouts and Collective Actions

The new CPL regulation will improve the current ELT jurisdiction. For example, the existing regulation already includes cases concerning the transfer of undertakings and company reorganization, which is usually how transactions are structured. By including claims for the acquisition of shares or stocks in capital companies within the court’s jurisdiction, all potential disputes over share ownership will be covered.

The amendments expand the regulation regarding cases specified in the Commercial Law where the termination of a capital company’s operations, i.e., compulsory liquidation, can be requested. Such a claim can be filed in court based on an application from a board or council member, any shareholder, the Enterprise Register, or another third party whose legal rights have been infringed. Specifically, by a court judgment, a capital company’s operations can be terminated in cases specified in the Commercial Law, for example, if the company fails to submit information or documents required by law to the commercial register institution.

Similarly, the regulation regarding the provision of information to shareholders and stockholders is expanded, regardless of whether a shareholders’ meeting has taken place and its decision is available, i.e., regardless of whether a shareholder dispute exists. The previous regulation stipulated the ELT’s jurisdiction based on the criterion of whether a shareholders’ meeting decision was disputed or not.

As a new branch of ELT jurisdiction, claims related to financial instruments are defined, for example, disputes over ownership, intermediation in dividend payments, deposits, and the correct execution of orders.

A completely new direction, however, is commercial claims for insurance payouts. The inclusion of this category of cases is explained by the increasing use of transaction risk, property, and various business-related risk insurance in entrepreneurship, and the cases themselves tend to be legally complex and related to underlying transactions. Claims for insurance payouts can only be submitted by commercial entities, thereby distinguishing between subjects. Claims that could arise, for example, on the basis of recourse or subrogation rights, are distinguished from claims for the recovery of paid insurance compensation as damages. That is, the ELT will only hear cases against an insurer if a commercial entity has a dispute with it, and only regarding the payment of insurance compensation.

Collective actions against consumer service providers are a relatively new and topical mechanism for consumer rights protection. This provides an opportunity to file claims for violations across a wide range of sectors, including financial services, data protection, travel and tourism, energy, or telecommunications – insofar as consumer rights protection is concerned. Collective actions are a new category of court cases for which a different procedural mechanism and special ELT competence and jurisdiction are foreseen.

Benefits for Businesses

When evaluating the CPL amendments, it should be noted that they include significant transitional provisions that set different effective dates for the law.

Cases concerning claims for the acquisition of shares or stocks in a capital company, for damages caused to a capital company by its board and council members, procurators, founders, auditors, and shareholders, for the provision of information to shareholders and stockholders, as well as claims arising from consumer collective actions, which were received by the court before the effective date of the amendments – April 1, 2027 – will continue to be heard by the court where the applications were filed.

However, the CPL amendments regarding claims for the termination of a capital company’s operations, commercial claims for insurance payouts, and claims arising from financial instruments will come into force on September 1, 2029. Cases received by the court before August 31, 2029, will continue to be heard by the court where the applications were filed.

The CPL amendments related to the expansion of the ELT’s jurisdiction are to be viewed positively by entrepreneurs. These changes will ensure a unified approach and judicial practice in complex matters, as well as a more qualitative review of cases. Most of the amendments are related to streamlining cases already within the ELT’s jurisdiction and improving their review. As for the completely new competencies, it must be agreed that financial instruments, commercial claims for insurance payouts, and collective actions against consumer service providers all require special knowledge and specialization that would be difficult to provide in courts of general jurisdiction.