Category: Uncategorized

The efficiency and attractiveness of arbitration depends on several factors: the applicable arbitration laws of the seat of arbitration, the national courts’ attitude towards arbitration as a separate dispute-settlement method, the standard of arbitration fees, the competence of arbitrators, the geographic location and development of the State itself.

Taking all these criteria in mind, Lithuania could be seen as an arbitration-friendly country upholding Western principles regarding international commercial arbitration and its management.

To start with, it is worth mentioning that Lithuania is a signatory of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards since June 12, 1995 (the NY Convention). Moreover, Latvia’s arbitration rules are in harmony with the UNICITRAL Model Law although not explicitly adopted. The Supreme Court of Lithuania (the SCL) in its 2002 ruling concluded that the court when applying and interpreting the NY Convention must analyze and rely on foreign case law, and  in 2010 held that if the parties had entered into an arbitration agreement, in the absence of the plea for the invalidity of such arbitration agreement, neither the party nor the court may modify such agreement – the dispute is not capable of being litigated in the court. 

Between 2010 and 2012 there were around 400 arbitral awards issued, with 28 of them challenged in the Court and only 3 awards being set aside, while one decision to set aside was reversed by the SCL. (The grounds for setting aside the awards were: (1) the transportation of railroad cars is not covered by railroad cargo transportation contract; (2) non-arbitrability of bankruptcy proceedings; (3) an issue regarding contractual term setting the price in a contract entered into through the public-procurement procedure). 

In June, 2012, the Lithuanian Parliament amended the Law on Commercial Arbitration (LCA), which advanced the modern approach of arbitration in Lithuania. The LCA shortened the list of non-arbitrable disputes and provided more situations of court assistance in arbitral proceedings. Recent case-law on the new LCA has upheld the competence-competence doctrine, as the SCL in 2013 stated that the arbitral tribunal has the primary right to decide upon its own competence. Moreover, it is acknowledged that even if the arbitration clause is pathological in some way it shall be interpreted in favor of arbitration (in favor contractus). Lastly, the applicability of the arbitration clause to parties who are not signatories is also accepted.  

According to recent research, approximately 98% of the foreign arbitral awards are recognized in Lithuania. Thus the arbitration laws and courts of Lithuania are becoming more and more pro-arbitration, and reluctance to recognize and enforce an arbitral award is most common in cases where a strong public interest is at stake. This is not a surprise, as all modern arbitration countries, including France, Switzerland, and Sweden, have maintained the relevance of ‘ordre public’ as an exception from arbitral proceedings. 

Referring to arbitral institutions, there are four permanent arbitral institutions established in Lithuania, but for the purpose of this Article the statistics and relevant information of the Vilnius Court of Commercial Arbitration (the VCCA) will be presented, because the VCCA prevails over the other arbitral institutions in terms of the amount and complexity of cases. 

One of the important factors when considering which Arbitral institution could take up this ‘golden mean’ in a particular dispute is the standard of arbitration fee. Whereas the registration fee for the initiation of arbitration in the Stockholm Chamber of Commerce is almost USD 2000  and in the International Chamber of Commerce USD 3000,  the VCCA takes less than USD 400 – 6 to 7 times cheaper. It is cheaper even than in neighboring countries like Russia or Estonia. In addition, there is no differentiation between the fees for national and international disputes.

Last but not least, according to VCCA statistics, business actors are the main participants in the arbitration proceedings. Most of the time, one of the parties in proceedings is an international subject. For example, 50% of disputes came from Eastern and Central Europe, 38% from Western Europe, and North America and Asia each provide 6 %.

Since arbitration is favored by business and commerce, the majority of cases are also of economic character: 48% involve Trade, Construction and Design; 17% involve Services and Finance; and 10% involve Insurance.

To summarize, Lithuania is going hand in hand with modern legal thinking, providing ‘arbitration-friendly’ legislation based on international commercial arbitration principles, and offering arbitration costs which can be described as best for quality. The location of Lithuania between East, West, and Nordic Countries provides cultural commonalities, shared values, and understanding with those regions, so it can be seen as a particularly convenient and neutral forum for businesses from different regions, offering both highly competent arbitrators who have worldwide arbitration experience and a broad, business-promoting point of view. 

By Kestutis Svirinas, Partner, Sorainen

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.

“Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often the real loser — in fees, and expenses, and waste of time.  As a peace-maker the lawyer has a superior opportunity of being a good man.” – Abraham Lincoln

1) What is the role of arbitration in the Moldovan justice system?

Arbitration is central among the alternative means of dispute resolution in the Moldovan justice system. However, the number of commercial disputes settled in arbitration is far below the number of cases examined in national courts.  

Despite the fact that local companies still prefer to settle their disputes in national courts, the number of cases resolved via arbitration has increased substantially during the past 3 years: from 16 cases (14 international and 2 national) considered by the International Commercial Arbitration Court of the Chamber of Commerce and Industry of the Republic of Moldova (the ICAC) in 2010 to 95 cases (7 international and 88 national) in 2013.    

Since Moldova has only a few treaties on recognition of foreign judgments rendered by the national courts of other jurisdictions, most international investors prefer to settle their disputes via arbitration.  At the same time, they usually defer the examination of disputes to international arbitration institutions located outside Moldova. Therefore, the activity of Moldovan arbitration institutions is focused mainly on domestic disputes.  

2) What types of arbitration institutions are active in the Republic of Moldova? 

The ICAC is the country’s main permanent arbitration institution. There are also several specialized arbitration institutions, including: the International Arbitration Court by the Liquidators and Administrators Association of Moldova, the Court of Arbitration by the International Association of Road Hauliers of Moldova, the Court of Arbitration for Sports of the Moldovan Football Federation, and the Arbitration Court Specialized in Industrial Property by the State Agency on Intellectual Property.  

3) Are there any special laws regulating arbitration in Moldova?

The first Moldovan law on arbitration was adopted in 1990. In 1997 Moldova ratified the Convention on the Recognition and Enforcement of Foreign Arbitral Awards and in 1998 it ratified the European Convention on International Commercial Arbitration.  

To fulfill the customary provisions of international treaties, two main laws that transpose the provisions of the above-mentioned treaties were enacted in 2008: the Law on Arbitration and the Law on International Commercial Arbitration.  

4) What kinds of disputes are exempted from arbitration under Moldovan legislation?

National regulations grant wide competences to arbitration, establishing that arbitrators may examine disputes arising from civil relationships “in the broad sense.”  

However, claims related to family law and claims arising from accommodation lease contracts and housing property rights are within the exclusive competence of national courts and may not be subject to arbitration agreements. Arbitration clauses on any such disputes will be unenforceable under Moldovan law.  

Moldovan courts have the jurisdiction to decide on the validity of any arbitration clause, applying foreign law if so compelled by the provisions of the agreement.  

5) Are foreign arbitration awards enforceable in the Republic of Moldova?

As Moldova is a signatory to the New York Convention of 1958, foreign arbitration awards are binding in Moldova. The competence to recognize and enforce foreign arbitration awards belongs to Moldovan courts. Complying with the imperative internal law provisions and observing applicable arbitration procedures are the main requirements for the enforceability of such awards.  

Thus, Moldovan courts may refuse to recognize and enforce an award if: (1) it is issued on a dispute that is exempt from arbitration; (2) it relates to a dispute that is not covered by the arbitration clause; (3) the arbitration procedure was prejudiced by the failure to duly summon the debtor or by the composition of the arbitration panel; (4) the enforcement of the award violates the public order of the Republic of Moldova; or (5) on other grounds specified by the New York Convention.  

6) What are the costs of arbitration in the Republic of Moldova?

Since the Moldovan Parliament voted in 2010 on the stamp duty ceiling to be paid for submission of a claim in court, arbitration lost the advantage of being a more cost effective means of dispute resolution. Currently, the stamp duty for examination of a dispute in court amounts to 3% of the value of the claim and can not exceed MDL 50,000 (EUR 2700) for legal entities and MDL 25,000 (EUR 1350) for natural persons. The arbitration fees are regressive and usually vary between 1% and 5% of the value of the claim.  

However, the rapid and less formal way of dispute settlement in arbitration can reduce the costs of legal assistance, which are often the main financial burden for the client. When it comes to the examination of the dispute in court, the average term of a case is 2-3 years, whereas in arbitration a case may be settled within the term agreed on by the parties. 

Authors: Iulia Furtuna, Coordinator of the Litigation Practice, and Olga Saveliev, Associate, Turcan Cazac Law Firm

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.

Arbitration has a relatively long tradition in Serbia. The first institution for arbitration in the country, the Foreign Trade Court of Arbitration, was founded in 1946 and has administered more than 8,000 cases. Until the early 1990s, this institution regularly registered more than 100 cases per year in what was then Yugoslavia.

The Foreign Trade Court of Arbitration caseload dropped significantly after the dissolution of the former state.  The caseload of the country’s arbitration institution has averaged 15-25 cases per year over the course of the past decade. As the predecessor country, Yugoslavia was among the first states to sign the European Convention of International Commercial Arbitration. The New York Convention has also been applied in Serbia for more than three decades. These facts by themselves speak of the longstanding history of arbitration in Serbia. However, taking into account the commercial court overload in Serbia and the number of Serbia-related disputes arbitrated offshore, arbitration is still very much an underutilized dispute-resolution mechanism in the country.

When negotiating commercial contracts and their dispute-resolution clauses linked to Serbia, parties tend to prefer arbitration to litigation if the project involves a foreign element or complex subject matter. Arbitration is also generally the favored choice in certain economic sectors, such as construction, financial services, insurance, and energy. 

Arbitration is by far the dominant form of Alternative Dispute Resolution (ADR) in Serbia, since other ADR methods are still rather undeveloped. Although a specific legislative framework has been introduced to cover other ADR techniques, notably mediation, the number of commercial disputes in Serbia processed under other ADR forms is insignificant. Commercial parties in Serbia would appear not to believe in the effectiveness of these other ADR methods.

Serbia has a suitable legal framework for effective arbitration. The country’s Arbitration Act is modeled upon the UNCITRAL Model Law on Commercial Arbitration and therefore relies on the general principle of strictly limited court intervention in arbitration proceedings. The court powers to intervene are designed mainly to assist and support the parties and the arbitral tribunal  – for example, the court may appoint an arbitrator in the event that the parties or their agreed mechanism fail in this respect and may assist the tribunal in the taking of evidence. 

An arbitration award rendered in Serbia enjoys the status of a final court judgment and, as such, is directly enforceable in Serbia. The losing party may attack an arbitration award only by an action for setting aside. Much like the UNCITRAL Model Law, Serbia’s Arbitration Act protects the arbitration award by endorsing an exclusive list of very limited grounds for setting aside the arbitral award. Compared to the Model Law list of grounds for setting aside, the Serbian Arbitration Act additionally explicitly sets out that an award may be set aside if it is based on a false witness or expert statement or a forged document or is the result of a criminal act committed by an arbitrator or the parties. Pursuant to the available data, the Serbian court practice in setting aside proceedings has so far been very favorable to arbitration. Over the past decade, there have been only a few actions for setting an award aside and only one challenged domestic arbitral award has actually been set aside.

In addition, much like other modern arbitration statutes, the Serbian Arbitration Act also ensures “indirect enforcement of the arbitration agreement.” If one of the parties initiates court proceedings despite an existing arbitration agreement, the court shall reject the lawsuit and refer the parties to arbitration, unless it determines that the arbitration agreement is manifestly void, inoperable, or incapable of being performed. However, the court does not consider the arbitration agreement on its own motion; the counter-party must raise an objection before it begins to litigate on the merits of the claim.

There are currently two arbitral institutions in Serbia handling disputes with a foreign element: the Foreign Trade Court of Arbitration attached to the Serbian Chamber of Commerce and the newly constituted Belgrade Arbitration Center. The Foreign Trade Court of Arbitration may also administer disputes under the UNCITRAL Arbitration Rules. For those who prefer arbitration under the International Chamber of Commerce (ICC), it is worth noting that the national committee of the ICC in Belgrade has operated since 1927.

Thus, Serbia may be a convenient venue for arbitration not only when the subject matter of a dispute relates to Serbia or one of the parties is Serbian, but also when the parties for any reason need a third country to be the seat of the arbitration. However, this potential is still very much unexploited, since even Serbian parties still frequently provide for arbitration with a seat outside Serbia – most commonly Zurich, London, or Paris. 

By Jelena Bezarevi Pajic, Partner, and Natasa Djordjevic, Attorney, Moravcevic Vojnovic | Partneri in cooperation with Schoenherr

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.

Although arbitration as a form of dispute resolution has been recognized by the legal order since before the First World War, arbitration proceedings in the Slovak Republic are still at an early stage.

Without any doubt the initial idea of having Slovak laws follow the UNCITRAL Model Law on International Commercial Arbitration was more than promising. However, the lack of legal regulation resulted in the establishment of too many permanent courts of arbitration with a low level of neutrality, and as a result the word “arbitration” evokes concern rather than a hope that disputes will be resolved efficiently and fairly. It is therefore not surprising that many negative experiences have occurred, particularly with respect to the resolution of disputes in consumer affairs, and that Slovak businessmen more frequently choose to resolve their disputes via the Vienna International Arbitral Center.

Aware of these weaknesses and influenced by the current pro-consumer direction of EU legislation, the Ministry of Justice of the Slovak Republic has decided to change the current situation. Its most visible and significant move in this direction has been to amend the already existing Act No. 244/2002 Coll. on Arbitration Proceedings, and to introduce a new Act on Consumer Arbitration Proceedings. Although the new regulation has not been adopted yet, it is clear from published drafts that the main goals are to restore confidence in arbitration proceedings, to provide increased (perhaps a bit too much) legal protection for consumers, to relieve the courts from being congested by a large number of cases, and through all these methods to strengthen the right to a prompt and speedy judicial process. 

The amendment of Act No. 244/2002 Coll. on Arbitration Proceedings aims to achieve these goals primarily by imposing stricter requirements on those who found permanent courts of arbitration. While previously almost any legal entity could establish a permanent court of arbitration, leading to the creation of some 150 permanent courts, the new amendment requires that only national sports unions, chambers established by law, or so-called “interest associations of legal entities”  may do so. Existing permanent courts of arbitration that do not meet these new obligations will have six months from the date the amendment comes into effect to adapt to the new requirements. In case they fail to do so, the arbitration agreements will not become invalid; however the nature of the arbitration will be changed from institutional to ad hoc. This measure aims to limit the conflicts of interests between founders of permanent courts of arbitration and the requirement for impartial and fair proceedings.

In addition to these substantial reforms, some minor amendments will also be introduced. For example, arbitral tribunals will now be empowered to render preliminary injunctions with two different effects, and the reasons for judicial cancellation of an arbitral award and for refusal of enforcement of foreign arbitral awards will be changed.

The new Act on Consumer Arbitration Proceedings will, in the interest of enhancing consumer protection, introduce stricter requirements for arbitrators and permanent courts of arbitration. The Act will also regulate consumer arbitration proceedings and establish various ways in which the resulting awards can be examined. The most significant change relating to consumer arbitration proceedings will be the introduction of a so-called “consumer arbitration agreement.” Formal as well as substantial requirements of the consumer arbitration agreement will be strictly regulated by the law. For example, the consumer arbitration agreement must be a separate agreement – an arbitral clause in the main agreement will not suffice. Further, the parties to a consumer arbitration agreement are prohibited from choosing a particular arbitrator in that agreement and although the parties to a consumer contract may have concluded an arbitration agreement, the consumer may still bring a case to the court.

Another significant novelty affecting consumer arbitration proceedings is the extension of the “supervisory” role of the general courts. For example, before issuing a commission to perform an execution, certain aspects of earlier proceedings shall be examined by the court, such as the requirements on the consumer arbitration agreement and the award itself. This increased supervisory role of the general courts will be reflected also in their ability to cancel awards based on various substantial or procedural defects, e.g., an incorrect examination of the factual background of the dispute. At this point a question arises whether the whole concept of alternative dispute resolution will not be overshadowed by the increased judicial supervision of arbitration proceedings in the form of an almost-inevitable second instance, which will diminish the traditional advantages of arbitration (confidentiality, low costs, time frame, and efficiency).

Although we may not get rid of the impression that the regulation of consumer affairs will be a burden rather than an advantage, the rest of the changes appear to be a positive step forward. Only time will show whether the proposed changes will be sufficient to resurrect the good reputation and popularity of arbitration proceedings or whether they become the final nail in the coffin for alternative dispute resolution in the Slovak Republic. 

By Tatiana Prokopova, Partner, and Eva Cibulkova, Registered Legal Trainee, Squire Patton Boggs

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.

Summary: The new Arbitration rules of the Ljubljana Arbitration Centre at the Chamber of Commerce and Industry of Slovenia provide for a more simplified and party-friendly procedure, making the use of arbitration in disputes a more attractive option compared to the court procedure.

On January 1, 2014, the new Arbitration rules (available at the sloarbitration.eu website) of the Ljubljana Arbitration Centre (“LAC”) at the Chamber of Commerce and Industry of Slovenia (“CCIS”) came into force, placing LAC on the arbitration map with a renewed frame for dispute settlement in arbitration proceedings in Slovenia. 

The new rules (the “LAC Rules”) ensure faster and more efficient proceedings, provide high-quality service and greater time/cost optimization for clients, and provide neutral solutions for both Slovene and foreign clients coming from diverse cultural and business environments. 

The LAC is an independent entity established within the CCIS and is composed of the Board and the Secretariat. Both bodies provide support and organization in dispute resolution in compliance with the LAC Rules. Disputes are resolved either by a sole arbitrator or by an arbitral tribunal, both of which are appointed in accordance with the LAC Rules.

An arbitration proceeding in front of the LAC now commences with the submission of a request for arbitration. The introduction of this provision postpones the filing of a lawsuit (which previously marked the commencement of the arbitration proceeding under former rules) to a later point in the proceeding, allowing the parties a more equal position from the start. The request for arbitration serves as a notification, for the Secretariat as well as for the respondent, regarding the description of the dispute and the circumstances giving rise to the claim, as well as the relief or remedy sought by the claimant. 

The difference between the answering period for domestic disputes and disputes with foreign elements is now abolished, as respondents are now given 30 days to answer requests for arbitration in all cases, bringing the answer period for wholly domestic disputes – which had been 15 days – in line with the 30-day period previously provided for disputes with at least one foreign party.   

The power of appointing the arbitrator is given to the parties. In case they fail to nominate or jointly nominate (depending on the foreseen number of arbitrators), the arbitrator is appointed by the Board. The new LAC Rules have abolished the permanent list of arbitrators with the LAC, leaving the parties free to choose the arbitrator they want (though their nomination must still be confirmed by the Secretariat).

As the main advantage, the LAC Rules provide a time limit for issuing an arbitral award. Under the old provisions, the sole requirement was for the arbitral tribunal to issue an award within 60 days of the conclusion of the hearing. The new provisions provide the time limit for the entire proceeding, requiring the tribunal to execute the entire proceeding and issue an arbitral award within nine months from the transmission of the file to the arbitral tribunal. The time frame can only be prolonged, in case of justified reasons, by the Board on its own motion or upon a reasonable request by the arbitral tribunal. 

Further novelty under the LAC Rules is the integration of an “emergency arbitrator” and the possibility of an “expedited arbitration proceeding.” 

In urgent cases where a party is unable to wait for the appointment of the tribunal, the party can demand the initiation of an emergency arbitration for the instatement of an interim measure. In such cases, the arbitrator is appointed by the Board as soon as possible, as a rule within 48 hours of the request. The parties are bound by the decision on the interim measure, although upon the proposal of a party the interim measure can be modified, suspended, or terminated. The Secretariat will only accept the request where costs are paid (as provided by the Rules, EUR 10,000 for the arbitrator and EUR 3,000 as a non-refundable administrative charge). 

In order to provide a faster and more efficient proceeding, the LAC also provides the option of an expedited arbitration proceeding where expressly agreed upon by the parties – either in the arbitration agreement itself or with an agreement at a later point up until the submission of the answer to the request for arbitration. In this expedited proceeding, the case is normally handled by a sole arbitrator. The proceeding is simplified by shorter deadlines, providing a limitation on the manner and number of submissions and, significantly, the nine month limitation for providing an arbitral award is now reduced to six months. 

The implementation of the new LAC Rules provides a new framework, advancing the LAC Rules towards modern arbitration regulation. How the new LAC Rules will work in practice is yet to be seen as the Rules were released only in January 2014 and are still new. It is clear though that the new LAC Rules enable a faster and much more client-intuitive proceeding for parties coming from any part of the world. 

Authors: Luka Fabiani, Local Partner, and Mojca Fakin, Associate, CMS Ljubljana

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.

General

International business always seeks stability and predictability. Legal instruments are reasonably expected to serve this stability and predictability as well. This should not be perceived as a simple requirement and desire of international business. It is also one of the indispensable components of the rule of law.

It is quite understandable that business people in particular prefer arbitration as a dispute resolution mechanism instead of state courts. Although this preference has long been explained by reference concerns about state courts’ practices and impartiality, we believe that the phenomenon is not directly related to impartiality. Instead, both domestic and international investors are inclined to use arbitration because of well-established rules and the long-standing prestige of arbitration, which, combined, ensure a high level of quality and predictability.

Historically, it is fair to say that Turkish legal practitioners have remained aloof from arbitration mostly because of a lack of sufficient knowledge and experience in practice. However, arbitration is now becoming more widespread in Turkey, along with soaring economic figures and legislative initiatives driven by international trends.

Chronological Development of Arbitration in Turkey

Until recently, Arbitration in Turkey was mainly governed by Civil Procedure Law No. 1086 (the “CPL”), which entered into force on October 4, 1927. Nevertheless, application of arbitration was very limited under the CPL. Additionally, the arbitration provisions of the CPL only regulated domestic arbitration but not international disputes. Therefore, Turkish International Arbitration Law No. 4686 (the “International Arbitration Law”) governing disputes with foreign elements was enacted, and entered into force on July 5, 2001. Subsequently, the CPL and the arbitration rules contained therein were replaced by the New Civil Procedure Law No. 6100 (the “New CPL”), which entered into force on October 1, 2011.

Thus, two different laws governing the voluntary arbitration mechanism now exist in Turkey. The New CPL governs, among other things, domestic arbitration, and the International Arbitration Law governs disputes with a foreign element. Both laws are based on the UNCITRAL Model Law. Accordingly, they are indeed compatible with modern practices.

Some Specific Observations on Arbitration Practice in Turkey

Whether arbitration can flourish in a country depends heavily on the attitude of state courts when their intervention is required. As long as state courts employ a liberal interpretation favoring arbitration, the availability of the process can ultimately be a “value” for that country (as it has been for Switzerland for many years, for instance). In contrast, an excessively conservative approach by state courts may decelerate or block the development of arbitration. 

Indeed, arbitral awards rendered under the CPL were subject to the appeal process, and the Turkish Court of Cassations unexpectedly examined the merits of disputes as well. Pursuant to the New CPL, however, arbitral awards can only be subject to set-aside proceedings based on procedural challenges. Substantive issues ruled by the award cannot, in principle, be examined. This is in line with international arbitration practices. 

As set forth above, the International Arbitration Law is applicable to disputes involving foreign elements, where Turkey is designated as the place of arbitration. Similarly, arbitral awards rendered under this law can only be challenged based on procedural grounds (except where the substantive issues affect or contravene matters of public policy).

Needless to say, enforcement of foreign arbitral awards is another ingredient of international arbitration. Turkey is one of the signatories of the 1958 New York Convention. Accordingly, we should stress that there is normally a legal mechanism facilitating enforcement of foreign arbitral awards. Nonetheless, Turkish courts are generally prone to interpret the notion of “local public policy” as widely as possible. This often leads to unexpected enforcement bans in Turkey. We thus believe that Turkish courts should refrain from supervising the merits of foreign arbitral awards and should rather adopt a more liberal approach promoting “universal public policy principles” when they hear enforcement requests.

Istanbul Arbitration Center

The Turkish government intends to ensure that Istanbul become an internationally recognized finance and arbitration center. The government has decided to realize this intention by a law, which is still under debate. In other words, establishment of the Istanbul Arbitration Center (arbitration court) is on the way. Obviously, the potential success of this center will be extremely dependent on what kind of operational, economic, and scientific autonomy it would have. Furthermore, in order for this arbitration center to compete with other eminent arbitration courts worldwide, the arbitration rules to be applied have to be well-defined, rigorous, and transparent, in line with international theory and practice.

Result and Conclusion 

Awareness and consciousness in relation to arbitration have started recently to increase in Turkey. The theoretical mainstay of arbitration has also been fortified, but arbitration practice should also parallel the theory. Accordingly, arbitration should be prioritized in legal education, public officials and judges should be heavily trained, and private sector representatives should also contribute to the development of arbitration by following applicable global trends and regulations in a close manner. 

By Cem Cagatay Orak, Partner, Cakmak Avukatlik Burosu

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.

The legal environment in the Czech Republic can be described as relatively friendly and supportive of arbitration. While the Czech Arbitration Act of 1994 (CAA) is not specifically based on the UNCITRAL Model law, it does recognise the most fundamental principles of modern commercial arbitration, including the doctrines of separability of arbitration agreements and competence-competence, the applicability of which has been tested in Czech Courts.

It is not common for the Czech courts to interfere with arbitration. The CAA gives them a rather standard set of tools to set aside domestic awards and to refuse their recognition and enforcement. On the other hand, in some cases courts may assist with the constitution of arbitral tribunals and, if asked by the arbitrators, take evidence on their behalf. Also, upon request of a party, courts may issue interim measures in cases where future enforcement of an award could be jeopardized. However, Czech courts would not protect arbitration by interfering with foreign court proceedings, for example by issuing anti-suit injunctions.

Nevertheless, the Czech Republic cannot be described as a typical seat of major international commercial arbitrations. There are various reasons for that. First, there are jurisdictions in the region – most notably Austria and Switzerland – which have been traditional choices as arbitration seats for many years and which  parties trust. Secondly, for the conduct of arbitration, the CAA refers to the application of the civil procedure rules of the Czech courts. The character of these rules is very “continental” and as such there is, for instance, almost no disclosure of documents between the parties, and cross-examination of witnesses is limited. Such an approach is not compatible with the modern practice of international commercial arbitration. Thirdly, the main arbitration organization in the country, the Arbitration Court attached to the Economic Chamber of the Czech Republic and the Agricultural Chamber of the Czech Republic, does not seem to be able to fully keep up with current international trends, which is reflected in, among other things, its new rules (effective as of July 1, 2012), which merged the previously divergent rules for international disputes with those for domestic disputes and which consequently do not sufficiently address the specific nature of disputes with an international element.  

Also, the prestige of arbitration as a whole has recently suffered in the Czech Republic from the fact that arbitration clauses were routinely used to decide disputes from consumer contracts by private entities other than permanent arbitration courts established on the basis of a statute. These entities appointed arbitrators, issued “arbitration rules”, etc., which were perceived to be unfair to consumers, and which resulted in 2012 in the most extensive amendment of the CAA to date. This amendment introduced numerous consumer protection provisions, including additional requirements as to the form and content of arbitration clauses and selection of the arbitrators in the area of consumer disputes and two new grounds for setting aside awards issued in such disputes.  

By contrast, the general overhaul of Czech private law (effective as of January 1, 2014) did not have any major impact on the regulation of arbitration in the Czech Republic. The most significant change in this context was that the provisions on various aspects of arbitration with an international element were moved from the CAA into the new International Private Law Act. However, save for a few technicalities, the substance of those provisions did not change.

As regards the recognition and enforcement of foreign arbitral awards, the Czech Republic is a signatory of the New York Convention, which in most cases remains the primary legal basis for recognition and enforcement, despite the fact that: (i) as a result of the Czech Republic’s reservation it only applies to awards from other signatory states; and (ii) more favourable provisions of bilateral treaties on legal aid entered into between the Czech Republic and certain countries on occasion take precedence. It is regrettable that in the context of enforcement of foreign awards Czech courts may from time to time also require other documents than those mentioned in Article IV of the New York Convention, such as extracts from the commercial register, which is in violation of the Convention. Also, doubt has been expressed as to whether the only way to enforce foreign awards in the Czech Republic is through Czech courts, or whether they can also be enforced through private executors, which is usually more efficient.

As for the separate and rather distinct area of investment treaty arbitration, the Czech Republic is currently a signatory of more than 80 investment treaties and has been sued by foreign investors under those treaties at least fifteen times, including famous cases like CME, Saluka, and Phoenix. However, the number of actions filed against the Czech Republic has been dropping, with the notable exception of claims filed by solar investors. On the other hand, Czech investors are becoming increasingly aware of the rights and remedies available under those treaties, and some of them have already taken actions to protect their foreign investments in this way.

Martin Magal, Partner, and Otakar Hajek, Associate, Allen & Overy

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.

The movement of tectonics plates is ordinarily associated with earthquakes, volcanic activity, mountain-building, and oceanic trench formation occurring along the plate boundaries. The present status and prospects of International Arbitration in Ukraine resembles in some respects the movement of the lithosphere resulting in the active landscape formation. The geopolitical situation, the reinforcement of commercial cooperation with the EU, and the significant slow-down of Ukrainian-Russian trade are the driving forces for such movement. The general collapse of the economy and volatile foreign currency rate adds to the seismic activity in the region, which is abundant in disputes. This affects International Commercial Arbitration and International Investment Arbitration. 

Legal framework

To understand fully the arbitration geology of the region some words should be mentioned about the legal framework. Ukraine adopted its International Arbitration Act in 1994, following verbatim the 1985 UNCITRAL Model Law on International Commercial Arbitration. The rules governing the recognition and enforcement of foreign arbitral awards contained in the Civil Procedure Code were drafted in full compliance with the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. The positive image of the legislation, however, is somewhat diluted by the unavailability of interim measures in support of international arbitration in state courts and the fact that efforts to have arbitration awards either set aside or recognized and enforced must be made first to the lower court, with the Appellate Court, the High Specialized Court, and even the Supreme Court available for potential reconsideration, while most other European countries limit the judicial-review process (and expense) considerably.

Since 1992 two permanent arbitration entities have acted under the auspices of the Chamber of Commerce and Industry of Ukraine: the International Commercial Arbitration Court (ICAC) and the Maritime Arbitration Commission (MAC). ICAC earned popularity with more than 300 international disputes resolved each year; its caseload reflects a consistent trend of growth characterized also by prompt resolution.  

Anticipated changes

International arbitration follows the economy. Significant changes in economic activity and the direction of economic relationships influence the number of cases and the preferred choices in arbitration. 

The 2008/2009 crisis provides relevant background for understanding the effect of a slow down in the economy. International arbitration lawyers recollect that 2009 was marked by the proud announcement by a number of arbitration institutes of a dramatic increase in their caseload. On average the increase in the number of cases for European institutes was between 10 and 34%. ICAC experienced an unprecedented increase of 100% – 651 cases registered against the usual number of 300-350. The predominance of trade disputes (over 80%) in the portfolio of ICAC played a significant role in this increase. International sales of goods is traditionally more reactive to economic changes and a volatile foreign-currency exchange rate. Accordingly, the institute may experience an even more significant increase in the number of cases for the same reason in this and the coming year. 

Furthermore, changes in the choices of preferred forums is becoming more evident in recently concluded and negotiated contracts. Less enthusiasm appears to exist for the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation, and a greater preference is expressed for ICAC and European institutions like the Stockholm Chamber of Commerce Arbitration Institute, the International Chamber of  Commerce International Court of Arbitration, the London Court of International Arbitration, and the Vienna International Arbitral Centre.

The level of preferences and referrals remains unaffected by the situation in specific commodities, such as the arbitration institutions of the Grain and Trade Feed Association (GAFTA) and the Fat, Oil and Seed Federation of Associations (FOSFA) for the grain and vegetable oil industries, where Ukraine retains a leading worldwide exporting role. This business is traditionally conducted pro forma in the specialized associations, with ready-made choices for dispute resolution known to Ukrainian companies. 

As to investment arbitration, the changing political situation inside the country has unsurprisingly stimulated the growth of a number of international investment disputes. The International Centre for Settlement of Investment Disputes has already registered two cases (ICSID Case No. ARB/14/17 and No. ARB/14/9). A number of mandatory negotiations preceding filing in Investment Arbitration are pending, so Ukraine risks appearing in the list of the most frequently sued countries again. 

The renewed picture of the International Arbitration landscape in Ukraine will be seen in full some time from now. Although any geological movement brings some level of uncertainty, one thing is beyond any doubt: changes will keep International Arbitration practitioners quite busy. 

By Yuliya Chernykh, Partner, Arbitrade

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.

Arbitration has become an indispensable alternative to often expensive, extended, and inefficient proceedings before state courts. The reasons for the success of (mainly international but also domestic) arbitration include the ability to have the dispute settled by a panel of experts who can be nominated by the parties based on their specific qualifications, and, most significantly, the almost universal enforceability of arbitral awards under the umbrella of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Additional benefits include confidentiality, (cost) efficiency, and the generally shorter duration of arbitral proceedings.

Against this background, competition for international arbitral proceedings has become fierce in recent years, especially from the arbitration institutions’ perspective. Austria’s history as a strategically well-located and neutral country has made it a popular place for international arbitral proceedings – which it remains today. Beyond that – or perhaps because of that – Austria is an arbitration-friendly jurisdiction. Austrian courts in general have a positive approach towards arbitration agreements and show a strong preference for upholding arbitration agreements as valid, provided that formal and minimum content requirements have been met. With the Austrian Arbitration Act of 2006, Austria has adopted (with only minor changes) the UNCITRAL Model Law as its law of arbitration, thereby ensuring that the internationally acknowledged standards for arbitration are incorporated into Austrian law. Furthermore, under Austrian arbitration law there are only a limited number of grounds on which arbitral awards may be challenged. 

However, most recently, international arbitration has been scrutinized, and questions have been raised about whether arbitral proceedings actually are as flexible and time-and-cost efficient as arbitration practitioners have claimed. As a result, Austria took up the challenge of modernizing its procedural rules in order to meet the expectations of parties interested in arbitration. Additionally, the Vienna International Arbitral Centre (VIAC) amended its rules to adapt to recent trends (such as an increase in multi-party proceedings), and to address concerns about a lack of flexibility or efficiency (e.g. by introducing fast track proceedings).

Single Instance to Challenge Awards

By virtue of the Austrian Arbitration Law Reform Act of 2013 (which entered into force on January 1, 2014), the number of court instances empowered to review arbitration matters has been narrowed from three to one. Parties now have direct access to the Austrian Supreme Court, which acts as first and last instance for all appeals to have arbitral awards set aside and for decisions on the validity and existence of awards and procedures regarding constitution of the arbitral tribunals. Arbitration proceedings involving consumers and labor law matters are still regulated under the former regime and thus may pass three court instances.  

VIAC Rules 2013

As of July 1, 2013, the new Vienna Rules of the VIAC apply to all proceedings initiated on or after that date. Particularly by introducing the possibility of a fast track procedure, VIAC has reacted to critical voices saying that arbitral proceedings are not as efficient as they should be. The new VIAC Rules also introduced new regulations regarding the joinder of parties and the consolidation of proceedings, which is now allowed if: (i) the parties agree; or (ii) the same arbitrators were nominated or appointed and the place of arbitration in all of the arbitration agreements on which the claims are based is the same. The responsibility for approving consolidation lies with the VIAC Board after having heard the parties and the arbitrators. Furthermore, the parties can now agree to fast track proceedings, in which the final award will be rendered within six months from the transmission of the file to the arbitral tribunal, unless this time frame is extended. Additionally, the arbitral tribunal now has wider discretion in ordering third parties to join proceedings upon the request of a party or a third party.     

The amendments to Austrian arbitration law and the adoption of the new VIAC Rules are important steps to maintaining and increasing the attractiveness of Austria as a player in the field of international arbitration. From the perspective of Austrian lawyers nowadays it is in any case state of the art to inform and advise clients about the possibility or – depending on the circumstances of the contractual relationship in question and on the parties to the contract – even the necessity of including arbitration clauses in international contracts. With the modernization measures taken over the last two years, Austria is perfectly prepared for new arbitral proceedings to come in the future. 

Arbitration is rapidly paving its way into the Polish market as a fast, efficient, and cost-effective dispute resolution alternative to Polish state courts. In recent years, economic growth in Poland has gone hand-in-hand with the development of arbitration as a dispute resolution method. Meanwhile, the growth of arbitration has also been accompanied by an arbitration-friendly approach of Polish state courts, which have consistently accepted the limited scope of review of arbitral awards.

Katharina Kitzberger and Stefan Weber, Partners, Weber & Co.

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.