The regulatory framework of Arbitration in Latvia has experienced important changes this year, as the Special Arbitration Law, adopted by Saeima, the Latvian Parliament, will become effective on January 1, 2015.
Currently, arbitration proceedings are regulated by the Civil Procedure Law which has been in force since 1999. The Civil Procedure Law is equally applicable to both domestic and international arbitration unless an international agreement to which Latvia is bound provides otherwise. Latvia is a member state of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the European Convention on International Commercial Arbitration, and the Washington Convention on the Settlement of Investment Disputes between States and Nations of Other States.
One of the particular features of arbitration in Latvia is a relatively loose regulation for establishing an institutional arbitration court. At present around 120 institutional courts of arbitration are registered in Latvia, which is an excessively large number in comparison with neighbouring Baltic and Nordic countries. While arbitration proceedings are undeniably popular in Latvia, this existing regulation of arbitration has been criticised by peers and business representatives, as the rapid resolution of disputes by the many institutional arbitration panels in some cases was counter-weighed by the poor quality of awards and flaws in proceedings.
On September 11, 2014, the Parliament of Latvia adopted a new Arbitration Law that will enter into effect on January 1, 2015. The aim of the new law is to ensure effective and fair dispute resolution by setting stricter requirements for arbitrators and establishing the procedure for institutional courts of arbitration.
It is apparent that once the new regulation enters into effect, the number of arbitration courts will diminish: only non-business associations, set up for the purpose of organizing arbitration hearings, will be entitled to establish institutional courts of arbitration. Currently, by contrast, any legal entity, including business corporations, can establish an institutional court of arbitration. Where an existing institutional court of arbitration fails to comply with the new requirements during the transitional period prescribed by law, it will be excluded from the registry of institutional courts of arbitration going forward.
The new law requires that each institutional court of arbitration compose a list of at least ten arbitrators. The candidates for one of these arbitrator positions shall agree in writing to serve as an arbitrator, and they must meet certain requirements, including being trained and qualified as a lawyer and having at least three years of legal experience in an academic or professional position. In addition, candidates who have been convicted of an intentional crime or who are suspected or accused of committing an intentional crime will be prohibited from accepting a position as an arbitrator.
The scope of disputes to be exempted from the jurisdiction of the courts of arbitration under the new regulation remains the same as under the current one. These are disputes where the adjudication of cases may infringe on the rights or interests of a person who is not a party to the arbitration agreement. Similarly, no disputes may be handled by arbitration if they relate to amendments to the Civil Records Registry; fall into specific categories of employment relationships; relate to rights and duties of persons who have been declared insolvent; or fall into one of several other categories.
An award of a court of arbitration is final and binding upon the parties and cannot be appealed. The parties must comply with it. If the award adopted by an institutional court of arbitration is not complied with, the party benefiting from the award may apply to a state court and request a writ of execution. The compulsory execution is not available for awards rendered by an ad hoc arbitration unless the arbitral award shall be enforced under the rules of New York convention.
Setting-aside and annulment procedures of arbitral awards are not available under either the current or the new regulation. In order to avoid an unrealistic and unmanageable workload by the state court, the option of involving the state court in such matters as taking evidence or hearing witnesses during the arbitration procedure is also not available. For those and other reasons it must be concluded that the new law is a compromise between the existing regulation, criticized by many practitioners and scholars, and the desired implementation of the UNICTRAL Model Law of International Commercial Arbitration. While Latvia has eliminated a number of deficiencies in its regulation of arbitration proceedings, it remains to be seen how the new regulation will be implemented. In any event, the landscape of arbitration practice will undergo important changes in the course of 2015.
By Lauris Liepa, Partner, and Liga Fjodorova, Attorney at Law, Borenius
This Article was originally published in Issue 5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
