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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.