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Conflict of Interest: Judges in Armenia Overseeing Bank Loan Cases are Often Bank Borrowers

In Armenia, judges overseeing civil cases are also responsible for resolving cases involving financial institutions.

They also investigate cases involving the bank or credit organization from which they borrowed or made a deposit. The parties to the lawsuit are not aware of this, as the judges do not state that they have a contractual relationship with the banks.

We investigated the 2019-2020 decisions of judges at the Court of First Instance who examined civil cases involving declarations of property, income, and profit that were submitted to the Commission for Prevention of Corruption. 

It turned out that in 2019, 28 judges had bank and credit union loans and 22 had made deposits or investments. In 2020, 28 judges had loans, while 19 made deposits or investments.

Naira Avetisyan, a judge at the Court of General Jurisdiction in Yerevan, took out a loan of 38,255,000 drams in 2019 from Inecobank CJSC and gave the entirety of this amount to Siams LLC, which is engaged in apartment construction. In other words, Judge Avetisyan took out a mortgage for an apartment.

Avetisyan took out a loan of 18,901,000 drams from Inecobank in 2020.

Through the Datalex information portal, we randomly selected the judge's May 2019 court cases. During this period, 31 cases were found in the judge's proceedings in which the plaintiff was Inecobank. In every case, the lawsuits were settled in favor of the bank.

We tried to find out from the judge whether her large loan obligation to the bank hindered her examination of cases involving the same bank and whether she revealed to the parties engaged in the lawsuits with Inecobank that she had a contractual relationship with the bank.

Some time after listening to the questions, a staff member relayed, “Judge Avetisyan is very overburdened and cannot speak with you for that reason.”

In another case, Judge Samvel Matinyan of the Ararat and Vayots Dzor Marzes Court of General Jurisdiction took out a loan of 49,896,000 drams in 2019 from Inecobank CJSC. At the end of the same year, the judge was given a loan of 49,800,000 drams from the same bank.

In 2020, Matinyan had a loan and deposit of about 49 million drams at Inecobank.

In May 2019, the judge oversaw 38 lawsuits dealing with Inecobank, 34 of which were resolved in favor of the bank, 2 of which were dismissed, and 2 of which are still ongoing.

Judge Matinyan's staff promised to answer questions by the next day, but the judge did not answer.

Manuk Margaryan, a judge at the Aragatsotn Region Court of General Jurisdiction, had a contractual relationship with the bank. More specifically, in 2019 he took out a loan of 24 million drams from Converse Bank CJSC. In one case, he handed over a loan of 24 million and, in another, a loan of 4,800,000 drams to Jaf LLC. The latter is engaged in housing construction projects in Yerevan. In this case, as with the others, it turned out that Judge Margaryan took out a mortgage for an apartment. The judge oversaw 3 lawsuits dealing with Converse Bank in May 2019; the Bank won all the lawsuits.

Manuk Margaryan also did not provide an explanation.

Alfred Vardanyan, a judge at the Lori Marz Court of General Jurisdiction, deposited $3,500 in 2019 and the same amount in 2020. In addition, he took out 4 loans from Inecobank CJSC totalling 7 million drams and around 1,500,000 drams from ACBA Bank CJSC.

In May 2020, the judge oversaw 12 lawsuits against Inecobank, of which 8 were won, 2 were lost, and 2 were returned.

In a conversation with us, Alfred Vardanyan said that there is no need for constraint when it comes to taking out loans and examining cases dealing with the same banks.

“It would be like not using a phone, because we examine cases that deal with telecom service providers, and not drinking water, not using electricity, since we examine cases dealing with water and electrical networks. It would be using the same logic, and there is absolutely no need for constraint,” the judge answered.

As for the disclosure of contractual relations during court sessions, according to Judge Alfred Vardanyan, mandatory self-disclosure is not stipulated by law.

The judge was asked if he saw the need for the judge’s contractual relationship with the bank to be revealed during the hearing, given that the party disputing the bank is not aware of that fact and not all citizens have the ability to uncover that information.

“That’s why I made the comparison with other services: Banks, Veolia Water, electricity networks, Gazprom, and telecom services are all equal. Let’s put aside the position [of a judge]. We are all citizens of this country, and we use the services provided in the country. We have no other choice but to use the services provided in the country. Therefore, all judges use public services that are offered to all citizens equally. Therefore, there is simply no need to demand under law that specific disclosures be made,” replied Judge Vardanyan.

As far as we can tell, it appears that, unlike other service tariffs, which are the same for everyone, banks play by different rules and information is protected under “banking secrecy”. Therefore, the party involved in a court dispute can’t be sure that the bank will not show favor to a judge examining their cases.

“I can say on my behalf that, in my opinion, there is no risk at all. The provision of public services is intended for everyone,” Alfred Vardanyan added.

Here we have put together a list of all the judges who have examined cases related to a bank where they have taken out a loan or made a deposit in 2019-2020. Using this database, readers who are in litigation with banks can find out whether the judge hearing the case has a contract with that bank or not.

Nevertheless, there are risks.

We also sent written questions to the Supreme Judicial Council (SJC) regarding the contractual relationship between the judges and banks/credit unions. SJC member Davit Khachaturyan said that the Council does not have information about the loans and deposits of judges examining civil cases.

As for the question about whether the creditor bank's participation in the case itself carries a corruption risk and constrains the judge, according to Davit Khachaturyan, it depends on the specific circumstances of the case.

According to the SJC member, the situation in which the judge applies for a loan during the hearing but has not yet received it because the application is under consideration is different from the other case, whereby the judge received the loan on equal terms with other borrowers before the hearing.

We inquired into whether the SJC ever discussed the above-mentioned issues and came to any conclusions.

SJC member Davit Khachaturyan responded that the issue was only discussed on a working scale but not the subject of disciplinary proceedings.

“At the same time, we would like to inform you that, on June 1st of this year, a discussion took place at the Academy of Justice Court of Cassation and the Supreme Judicial Council. One of the topics was ensuring the morality and impartiality of judges, including the disclosure of the fact that a judge received a loan from a credit union participating in the case,” notes D. Khachaturyan.

Lawyer Gevorg Gyozalyan told us that he does not see any real risks of a conflict of interest in this case, as banks are service providers, and in this case the judge simply uses the service. The fact that the judge uses the services of the given bank cannot be grounds for self-withdrawal or withdrawal.

“When the judge has a problematic issue with the bank whose case he is examining, that’s different,” said lawyer Gyozalyan, emphasizing that in those cases there is a conflict of interest, because when the judge is a problem borrower, there can be reasonable doubt about shady deals. That is, a reasonable suspicion may arise that the judge may take that step so that his property is not confiscated or for other reasons arising from personal interest.

The lawyer mentioned that, in his practice, there was no recorded case when a judge in court disclosed bank deposits or loans while examining cases of that bank.

Another lawyer, Gevorg Davtyan, mentioned that there are risks but that the risks are mainly around court cases that are problematic. That is, in cases when the court can make a decision in favor of a plaintiff or a defendant based on the data submitted to the court, then in those cases the risk is quite high and those cases require special investigation.

According to the lawyer, the risk especially increases when the judge does not fulfill his obligations. For example, if a judge fails to perform his or her duties for two months and is not fined by the bank in the course of examining the bank's problematic cases, the independent observer may have reasonable doubt as to the impartiality of the judge's decisions. At the same time, Gevorg Davtyan mentioned that the lawsuits filed by the banks are basically the same: They are uncomplicated and very often examined in a simple manner․ The examination of these cases by judges is almost risk-free.

As the information contained in official agreements between judges and banks/credit unions is protected by law, it is not subject to publication. Judges do not report on the relationship, and the risk of bias in the examination of bank cases is not reduced.

Author: Anahit Hovakimyan
Coordinator: Grisha Balasanyan
Photo from Freepik

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