Fraudulent brokers will no longer escape you

Have you lost your invested savings due to unfair practices of a foreign broker? Maybe you've resigned yourself to the fact that you'll never get it back. But you don't have to throw in the towel - a major breakthrough in protecting aggrieved investors is coming. The Municipal Court in Prague has confirmed that decisions of the Czech Financial Arbitrator have legal reach across borders and can be effectively enforced throughout the European Union. This means that brokers who deliberately set up offices in other member states, such as Cyprus, can no longer escape liability with impunity. In this article, we show you how this landmark judgment changes the situation and how you can get your money back.

Author of the article: ARROWS (Mgr. Ondřej Cicvárek, office@arws.cz, +420 245 007 740)

How did it work before? A legal trap that played into the hands of fraudsters

Until recently, investors faced a fundamental problem - the financial arbitrator refused to issue the certificate needed to have his decision recognised in other EU countries. This certificate, under Article 53 of the Brussels I bis Regulation, confirms that the verdict can be enforced outside the Czech Republic.

In other words, if you, as an investor, succeeded in a dispute with a broker before a financial arbitrator, you had an official decision in your hand that was in your favour, but if the broker was based abroad, you had no tool to force him to pay damages. The system therefore played into the hands of dishonest companies that deliberately registered their headquarters in other countries to avoid liability.

However, a recent ruling by the Municipal Court in Prague has fundamentally changed that.

A new look at the position of the financial arbitrator in the context of European case law

In its decision, the Prague City Court analysed in detail the previous practice of a financial arbitrator refusing to issue certificates under Article 53 of the Brussels I bis Regulation for final decisions in disputes between investors and foreign securities dealers. The key argument of the Financial Arbitrator was that he was not a judicial authority within the meaning of that Regulation and therefore not entitled to issue certificates under Article 53 Brussels I bis.

However, the City Court relied on the case law of the Court of Justice of the EU (CJEU) and adopted a functional interpretation of the term "court". In doing so, it referred to the opinion of Advocate General Michal Bobek in Case C-551/15 Pula Parking, which emphasises that the status of a 'court' cannot be assessed solely on the basis of its formal designation, but that the functional criteria laid down by the CJEU must be taken into account. These criteria include:

1. Establishment by law - the institution must be formally enshrined in the legal system of the State concerned.
2. Permanent nature - its existence must not be temporary, but it must carry out its activities in a stable manner.
3. Binding jurisdiction - its decision-making power must be binding on the parties to the proceedings.
4. Adversarial nature of the proceedings - the decision-making process must be based on the principle of equality of arms and the possibility of exercising procedural rights.
5. Application of legal rules - decision-making must be based on objectively applicable law, not on the discretionary power of the institution.
6. Independence - the institution must be independent of the executive and the legislature and its decision-making must not be influenced by outside influences.

The Municipal Court in Prague concluded that the financial arbitrator meets these criteria and therefore his decisions must be considered enforceable in other EU Member States. On the basis of this interpretation, the financial arbitrator is obliged to issue a certificate under Article 53 of the Brussels I bis Regulation at the request of the successful party.

This approach represents a major shift in the protection of investors' rights, as it eliminates the previous legal vacuum that allowed foreign brokers to avoid liability through formal obstacles to cross-border recovery. Thus, injured investors have a real possibility to effectively enforce claims confirmed by a financial arbitrator's award not only in the Czech Republic but throughout the EU.

What does this mean for you as an injured investor?

If a foreign broker has deprived you of money by breaking a contract or the law, you can turn to a financial arbitrator. If you are successful, you will not only have a decision in hand (the award of the financial arbitrator), but also a certificate that will allow you to recover the claim in another EU country.

With this step, the City Court has put an end to the practice of fraudulent brokers setting up offices abroad just to avoid liability. You now have an effective legal tool to recover your money, even if your broker is not from the Czech Republic, through the certificate that the financial arbitrator must issue on request under Article 53 Brussels I bis.

Don't wait, act now!

If you have been a victim of unfair investment practices, do not rely on the situation to resolve itself. Time is against you - the longer you wait, the greater the risk that the broker will transfer its assets, change its company structure or close down and you will never see your "invested" money again. So don't lose your chance for justice and take legal action as soon as possible to get back what is rightfully yours.

If you have been a victim of a fraudulent securities trader (broker) do not hesitate to contact our specialist Mgr. Ondřej Cicvárk, attorney at law, phone number +420 770 115 001, e-mail: cicvarek@arws.cz. Contact us as soon as possible and we will help you get your hard-earned money back.