The International Comparative Legal Guide to International Arbitration 2009 (The International...

International Arbitration 2009

Published by Global Legal Group with contributions from:

A practical insight to cross-border International Arbitration work

www.ICLG.co.uk

The International Comparative Legal Guide to:

Advokaturbüro Dr. Dr. Batliner & Dr. Gasser

ÆLEX

Aivar Pilv Law Office

Alexiou & Kosmopoulos Law Firm

Anderson Mori & Tomotsune

Azar Ortega y Gómez Ruano, S.C.

Baker Botts L.L.P.

Beiten Burkhardt

Blake, Cassels & Graydon LLP

Borislav Boyanov & Co.

Brick Court Chambers

Carey & Allende Abogados

Clayton Utz

Clifford Chance CIS Limited

Coelho Ribeiro & Associados

Consortium Centro América Abogados

Denton Wilde Sapte & Co.

Dr. Colin Ong Legal Services

Elvinger, Hoss & Prussen

Freshfields Bruckhaus Deringer LLP

Guevara & Gutiérrez S.C. Servicios Legales

Homburger

Jenner & Block LLP

Jingtian & Gongcheng

Jones Day

Juridicon Law Firm

Kachwaha & Partners

Kalo & Associates, Attorneys at Law

Karanovic & Nikolic

Lee & Ko

Lombardi Molinari e Associati

M. & M. Bomchil

Matheson Ormsby Prentice

Meitar Liquornik Geva & Leshem Brandwein

Norton Rose (Middle East) LLP

Pachiu & Associates

Pinheiro Neto Advogados

Roschier, Attorneys Ltd.

Shalakany Law Office

Shook Lin & Bok

Stibbe

Werksmans Incorporating Jan S de Villiers

White & Case LLP

Wilmer Cutler Pickering Hale and Dorr LLP

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DisclaimerThis publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations.

Further copies of this book and others in the series can be ordered from the publisher at a price of £200. Please call +44 20 7367 0720

Contributing EditorsSteven Finizio and Wendy Miles, WilmerCutler Pickering Hale andDorr LLP

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EditorCaroline Blad

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Managing EditorAlan Falach

PublisherRichard Firth

Published byGlobal Legal Group Ltd.59 Tanner StreetLondon SE1 3PL, UKTel: +44 20 7367 0720Fax: +44 20 7407 5255Email: [email protected]: www.glgroup.co.uk

Printed byAshford Colour Press Ltd. August 2009

Copyright © 2009Global Legal Group Ltd.All rights reservedNo photocopying

ISBN 978-1-904654-66-7ISSN 1741-4970

The International Comparative Legal Guide to: International Arbitration 2009

General Chapters:

1 Contract Claims in Investment Treaty Arbitrations: Recent Umbrella Clause Case Developments - Ethan G. Shenkman & D. Jason File, Wilmer Cutler Pickering Hale and Dorr LLP 1

Preface:

1 Preface by Gary Born, Head of International Arbitration Group, Wilmer Cutler Pickering Hale and Dorr LLP

Asia Pacific:

2 Overview Dr. Colin Ong Legal Services: Dr. Colin Ong 7

3 Australia Clayton Utz: Doug Jones & Björn Gehle 12

4 Brunei Dr. Colin Ong Legal Services: Dr. Colin Ong 22

5 China Jingtian & Gongcheng: Xuejun Peng & Chungang Dong 29

6 India Kachwaha & Partners: Sumeet Kachwaha & Dharmendra Rautray 38

7 Japan Anderson Mori & Tomotsune: Yoshimasa Furuta & Naoki Iguchi 46

8 Korea Lee & Ko: Jongkwan (Josh) Peck & Jin Soo Han 54

9 Malaysia Shook Lin & Bok: Mohanadass Kanagasabai & Kevin Prakash 64

Europe:

10 Overview Brick Court Chambers: Klaus Reichert 71

11 Albania Kalo & Associates, Attorneys at Law: Sophia Darling & Alban Caushi 74

12 Belgium Stibbe: Vera Van Houtte & Benoît Kohl 82

13 Bulgaria Borislav Boyanov & Co.: Kina Chuturkova & Georgitsa Petkova 91

14 Czech Republic White & Case LLP: Ivo Janda & Magdalena Licková 102

15 England & Wales Wilmer Cutler Pickering Hale and Dorr LLP: Wendy Miles & Anna Holloway 111

16 Estonia Aivar Pilv Law Office: Pirkka-Marja Põldvere & Ilmar-Erik Aavakivi 124

17 Finland Roschier, Attorneys Ltd.: Petri Taivalkoski & Aapo Saarikivi 132

18 France Freshfields Bruckhaus Deringer LLP: Elie Kleiman & Nicolas Brooke 141

19 Germany Beiten Burkhardt: Dr. Denis Gebhardt 152

20 Greece Alexiou & Kosmopoulos Law Firm: Dr. Constantine Alexiou & Christine Derveni 160

21 Ireland Matheson Ormsby Prentice: Bríd Munnelly & Gearóid Carey 168

22 Italy Lombardi Molinari e Associati: Gabriele Crespi Reghizzi & Marco Frigessi di Rattalma 177

23 Liechtenstein Advokaturbüro Dr. Dr. Batliner & Dr. Gasser: Dr. Johannes Gasser & Dr. Helene Rebholz 185

24 Lithuania Juridicon Law Firm: Laimonas Marcinkevicius & Andrzej Czajkowski 193

25 Luxembourg Elvinger, Hoss & Prussen: Yves Prussen & Marc Elvinger 201

26 Netherlands Freshfields Bruckhaus Deringer LLP: Jonathan Gass & Alexandra Schluep 211

27 Portugal Coelho Ribeiro & Associados: Rui Botica Santos & Luís Moreira Cortez 219

28 Romania Pachiu & Associates: Voichita Craciun & Alexandru Lefter 229

29 Russia Clifford Chance CIS Limited: Ivan Marisin & Timur Aitkulov 241

30 Serbia Karanovic & Nikolic: Ivana Rackovic & Milan Lazic 252

31 Slovakia White & Case s.r.o.: Marek Staron & Miriam Galandová 259

32 Spain Jones Day: Gonzalo Stampa 267

33 Switzerland Homburger: Felix Dasser & Balz Gross 273

Continued Overleaf

Latin America:

34 Overview Freshfields Bruckhaus Deringer LLP: Sylvia Noury & Caroline Richard 282

35 Argentina M. & M. Bomchil: Guido Santiago Tawil & Ignacio Minorini Lima 289

36 Bolivia Guevara & Gutiérrez S.C. Servicios Legales: Jorge Luis Inchauste & Ramiro Guevara 297

v

v

v

,

v

The International Comparative Legal Guide to: International Arbitration 2009

Latin America:

37 Brazil Pinheiro Neto Advogados: Gilberto Giusti & Renato Stephan Grion 306

38 Chile Carey & Allende Abogados: Luis Vidal & Nicolás Lama 313

39 Costa Rica Consortium Centro América Abogados Laclé & Gutiérrez: Rolando Laclé Zúñiga & Fabián Fernández Faith 322

40 El Salvador Consortium Centro América Abogados - El Salvador: José Roberto Tercero 328

41 Guatemala Consortium Centro América Abogados Guatemala - Rodriguez, Archila, Castellanos, Solares & Aguilar: Alvaro Castellanos Howell 335

42 Honduras Consortium Centro América Abogados-Honduras: Gustavo León-Gómez & Ulises Mejía 342

43 Mexico Azar Ortega y Gómez Ruano, S.C.: Elsa Ortega & Sofía Gómez Ruano 349

44 Nicaragua Consortium Centro América Abogados Taboada & Asociados: Gerardo Martín Hernández& José Evenor Taboada Arana 358

North America:

45 Overview Baker Botts L.L.P.: Ryan E. Bull & Bryan H. Parr 364

46 Canada Blake, Cassels & Graydon LLP: Joel Richler & R. Seumas M. Woods 369

47 USA Jenner & Block LLP: Robert L. Byman & Lawrence S. Schaner 378

Middle East / Africa:

48 Overview Shalakany Law Office: Dr. Khaled El Shalakany 387

49 Bahrain Norton Rose (Middle East) LLP: Patrick Bourke & Adam Vause 390

50 Egypt Shalakany Law Office: Dr. Khaled El Shalakany 398

51 Israel Meitar Liquornik Geva & Leshem Brandwein: Dr. Israel (Reli) Leshem & Ron Peleg 407

52 Jordan Denton Wilde Sapte & Co.: Safwan Moubaydeen & Laura Reynaud 417

53 Nigeria ÆLEX: ‘Funke Adekoya SAN & Adedapo Tunde-Olowu 424

54 Oman Denton Wilde Sapte & Co.: Abdelrahman El Nafie & Jamie Kellick 431

55 Qatar Denton Wilde Sapte & Co.: Paul Stothard & Julie Tuck 438

56 Saudi Arabia Norton Rose LLP & Abdulaziz Al-Assaf Law Firm in association with Norton Rose (Middle East) LPP: Alain Sfeir & Joe Tirado 445

57 South Africa Werksmans Incorporating Jan S de Villiers: Des Williams 453

58 UAE Norton Rose (Middle East) LLP: Patrick Bourke & Anna Anatolitou 463

EDITORIAL

Welcome to the sixth edition of The International Comparative Legal Guideto: International Arbitration.This guide provides the international practitioner and in-house counsel with acomprehensive worldwide legal analysis of the laws and regulations ofinternational arbitration.It is divided into two main sections:One general chapter. This chapter outlines the recent umbrella clause casedevelopments in investment treaty arbitrations.52 country question and answer chapters, which are further divided into fiveregional sections, each with an introductory overview. Each country chapterprovides a broad overview of common issues in international arbitration lawsand regulations in its respective jurisdiction.All chapters are written by leading international arbitration lawyers and we areextremely grateful for their excellent contributions.Special thanks are reserved for the contributing editors Steven Finizio andWendy Miles of Wilmer Cutler Pickering Hale and Dorr LLP for all theirassistance.Global Legal Group hopes that you find this guide practical and interesting.The International Comparative Legal Guide series is also available online atwww.iclg.co.uk.

Alan Falach LL.MManaging [email protected]

PREFACE

I am pleased to preface this latest Edition of The International Comparative

Legal Guide to: International Arbitration. This work remains the most

comprehensive, global guide of its kind. Wilmer Cutler Pickering Hale and

Dorr is delighted to serve again as Contributing Editor for this edition.

The contemporary practice of international arbitration is global. Those

practising in the field require ready access to information concerning the

legislative frameworks for international arbitration in individual states, as well

as national and regional practices concerning international arbitration. This

latest edition of the Guide provides invaluable reference material, authored by

experienced practitioners, on these topics in key jurisdictions.

The International Comparative Legal Guide to: International Arbitration is

now in its 6th Edition. The Guide's continued growth over the past seven

years, to encompass additional jurisdictions and to expand on the range of

issues covered, is a testament to its practical value to practitioners of

international commercial arbitration.

Gary BornWilmer Cutler Pickering Hale and Dorr LLP

1WWW.ICLG.CO.UKICLG TO: INTERNATIONAL ARBITRATION 2009

© Published and reproduced with kind permission by Global Legal Group Ltd, London

Chapter 1


Contract Claims in InvestmentTreaty Arbitrations: RecentUmbrella Clause CaseDevelopments

This is the third edition of this article since its first publication byICLG in 2007, and developments in investment treaty jurisprudencehave continued to supply additional analysis to the issues coveredhere. This article incorporates these new developments on thisimportant subject in investment arbitration.

Introduction

International investment agreements, ranging from bilateralinvestment treaties (“BITs”) to multilateral agreements such as theEnergy Charter Treaty, the Central American Free Trade Agreement(“CAFTA”), and the 1987 ASEAN investment agreement, provideforeign investors with an important mechanism for resolvingdisputes with sovereigns. Among other things, investmentagreements require host governments to guarantee foreign investorsand their investments treatment in accordance with internationallaw standards. These standards are intended to help protect foreigninvestors and their investments against, inter alia, discriminatorymeasures, uncompensated expropriations of property, and denials ofdue process or fair and equitable treatment. Investment agreementstypically allow foreign investors to enforce their treaty rightsthrough international arbitration -- known as “investor-Statearbitration” -- thus providing foreign investors with a neutral forumfor resolving such disputes. The investment agreement willtypically specify one or more arbitral institutions, such as theInternational Centre for the Settlement of Investment Disputes(“ICSID”), or ad hoc arbitration (often pursuant to the UNCITRALRules, which are widely-used arbitration procedural rules devisedby the United Nations Commission on International Trade Law),that will establish the basic procedures for the arbitration.In addition to affording foreign investors protection underinternational law standards, many investment agreements alsoprovide a right, through “umbrella clauses”, for foreign investors toarbitrate contract disputes with sovereigns. Although umbrellaclauses take many forms, they typically require each State party toobserve any obligation arising from particular commitments it hasentered into with regard to investments. Under the broadinterpretation of these clauses adopted by some arbitral tribunals, asovereign’s breach of contract with a foreign investor or investmentbecomes, by virtue of the umbrella clause, a breach of treatyactionable through investor-State arbitration.The precise scope and meaning of these umbrella clauses, however,can vary, and they have been interpreted differently by differentarbitral tribunals. This article reviews recent developments intribunal decisions and highlights the differences in theirapproaches. These issues merit close attention from companiesdoing international business and their lawyers as they structureforeign investments, particularly when they negotiate with

instrumentalities of foreign States. In the right circumstances,umbrella clauses in investment agreements can play an importantrole in securing the value of foreign investments.

The Debate over the Scope of UmbrellaClauses

Umbrella clauses emerged in the late 1950s in West German andBritish model investment treaties in reaction to various events,including, among other things, the Anglo-Iranian Oil Company’sconcession dispute with Iran following Iran’s revocation of apipeline concession, the Suez Canal nationalisation, and post-warWest German concession disputes with East European states. Thefirst example of such a clause appears to have been in the WestGermany-Pakistan BIT of 1959, Pakistan’s first BIT, whichprovided:“Either party shall observe any other obligation it may have enteredinto with regard to investments by nationals or companies of theother party.”Such clauses thus emerged as an additional layer of internationalprotection for foreign investment contracts. See Thomas W. Wälde,“The ‘Umbrella’ (or Sanctity of Contract/Pacta sunt Servanda)Clause in Investment Arbitration: A Comment on OriginalIntentions and Recent Cases”, 1 Transnat’l Dispute Management 31& n.71, 33 (October 2004).From 1959 onwards, umbrella clauses of various forms and typesbegan to appear in numerous investment treaties. See, e.g.,“Interpretation of the Umbrella Clause in Investment Agreements”,OECD Working Papers on International Investment, No. 2006/3(October 2006). These clauses, however, did not receive in-depthanalysis until a pair of cases in 2003-2004 came to starkly differentconclusions on whether and to what extent such clauses could formthe basis for a treaty claim based on breach of contract. Thesecases, SGS v. Pakistan, Decision on Jurisdiction, ICSID Case No.ARB/01/13 (6 August 2003) and SGS v. Philippines, Decision onJurisdiction, ICSID Case No. ARB/02/6 (29 January 2004),involved contracts between SGS, a Swiss company, and thegovernments of Pakistan and the Philippines, respectively, forpreshipment inspection services of imported goods. In SGS v.Pakistan, SGS filed a request for arbitration with ICSID pursuant tothe Switzerland-Pakistan BIT after the government terminated itsservices contract with SGS. SGS’s arbitration request includedboth treaty-based claims and contract-based claims. SGS’scontract-based claims relied, inter alia, on the BIT’s umbrellaclause, Article 11, which stated: “Either Contracting Party shallconstantly guarantee the observance of the commitments it hasentered into with respect to the investments of the investors of the

D. Jason File

Ethan G. Shenkman

2

Wilmer Cutler Pickering Hale and Dorr LLP Investment Treaty Arbitrations

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other Contracting Party.” In a partial award on jurisdiction, theICSID tribunal ruled that it had jurisdiction over SGS’s treatyclaims, but not its contract claims. Specifically, the tribunal heldthat “Article 11 of the BIT would have to be considerably morespecifically worded before it can reasonably be read in theextraordinarily expansive manner submitted by [SGS]”, namely,that “all breaches of each State’s contracts with investors of theother State are forthwith converted into and to be treated asbreaches of the BIT”. (SGS v. Pakistan, at paras. 171, 173.) Thetribunal reserved the possibility that “a violation of certainprovisions of a State contract” could constitute a violation of anumbrella clause “under exceptional circumstances”. (Id. at para.172.)In SGS v. Philippines, SGS filed a request for arbitration with ICSIDpursuant to the Switzerland-Philippines BIT after a payment disputearose between SGS and the government. This request also includedboth treaty-based and contract-based claims. SGS’s contract-basedclaims relied, inter alia, on the BIT’s umbrella clause, which stated inArticle X(2) that: “Each Contracting Party shall observe anyobligation it has assumed with regard to specific investments in itsterritory by investors of the other Contracting Party.” In contrast tothe tribunal’s decision in the SGS v. Pakistan case, the tribunal in thePhilippines case ruled that it had jurisdiction over both SGS’s treatyclaims and its contract claims. Specifically, the tribunal held that“Article X(2) makes it a breach of the BIT for the host State to fail toobserve binding commitments, including contractual commitments,which it has assumed with regard to specific investments”. (SGS v.Philippines, at para. 128.) The tribunal also observed that theanalysis of the tribunal in SGS v. Pakistan was not only“unconvincing”, but that it “failed to give any clear meaning to the‘umbrella clause’”. (Id. at para. 125.)These two decisions, which came within months of each other,reflect materially different approaches to the interpretation ofumbrella clauses. In the wake of these decisions, there has been asubstantial amount of commentary, but no uniformity of approach,and more recent decisions by other tribunals continue to reflectdifferent approaches to interpreting the scope of these clauses.

Recent Developments in TribunalJurisprudence

Tribunals in more recent cases have reached different results as tohow to interpret umbrella clauses. A hypothetical example will helpto illustrate how these more recent decisions have approached thisissue.Let’s say Company A from State Alpha wins a concession to buildand operate an energy production and distribution system in StateBeta. The concession agreement is between Company A and StateBeta. Company A begins to establish the infrastructure, pouringsignificant resources into the construction and maintenance of theproject in State Beta. Subsequently, the Administration of StateBeta changes and new government regulators launch an arbitraryand politically-motivated investigation into Company A’scompliance with regulatory requirements, causing State Beta towithhold concession contract payments owed to Company A.Company A does not believe that the local courts in State Betaprovide an advantageous forum for settling this dispute -- it believesthey are slow and susceptible to political influence. There is a BITbetween State Alpha and State Beta, which provides for investor-State arbitration. Counsel for Company A knows that it could try tobring claims for expropriation or denial of fair and equitabletreatment using provisions in the BIT, but a breach of theseinternational law standards may be difficult to prove under the facts.The BIT also contains a broadly-worded umbrella clause like those

found in a number of BITs: “Each Party shall observe anyobligation it may have entered into with regard to investments.”

Can Company A submit a breach of contract claim to BITarbitration, without proving a violation of international lawstandards?

In answering this question a tribunal may consider whether theconcession agreement between Company A and State Beta is thekind of contract -- and whether Company A’s dispute is the kind ofcontractual dispute -- that the umbrella clause in question wasdesigned to address.

Is the concession contract covered by the umbrellaclause?

The plain language of the umbrella clause above would suggest theanswer is, “yes”. The clause requires the contracting State toobserve “any obligation” it has entered into with respect to“investments”. The text does not admit any exceptions to its broadscope, and State Beta would be hard-pressed to characteriseCompany A’s substantial capital expenditure to construct an energygrid as anything other than an “investment”.A number of recent decisions have found that all contracts arecovered by umbrella clause language similar to that describedabove, following Eureko B.V. v. Poland, Partial Award, Ad HocArbitration (19 August 2005), where the tribunal interpreted theNetherlands-Poland BIT’s umbrella clause, which states that “EachContracting Party shall observe any obligations it may have enteredinto with regard to investments of investors of the other ContractingParty”. The Eureko tribunal expressly concurred with the SGS v.Philippines tribunal’s holding that the umbrella clause “means whatit says”. (Eureko at para. 256.)Other decisions have reached similar results. For example, inSiemens A.G. v. Argentina, Award, ICSID Case No. ARB/02/8 (6February 2007), involving the Germany-Argentina BIT, the tribunalheld that the umbrella clause “has the meaning that its termsexpress, namely, that failure to meet obligations undertaken by oneof the Treaty parties in respect to any particular investment isconverted by this clause into a breach of the Treaty”. (Id. at para.204.) The tribunal went on to state that it “does not subscribe to theview … that investment agreements should be distinguished fromconcession agreements of an administrative nature, … [because] theterm ‘investment’ … linked as it is to ‘any obligations,’ would coverany binding commitment entered into by Argentina in respect ofsuch investment”. (Id. at para. 206.) See also LG&E Energy Corp.v. Argentina, Decision on Liability, ICSID Case No. ARB/02/01,para. 170 (3 October 2006) (noting that an umbrella clause “createsa requirement for the host State to meet its obligations towardsforeign investors, including those that derive from a contract”); cf.Continental Casualty Co. v. Argentina, Award, ICSID Case No.ARB/03/9, paras. 298-302 (5 September 2008) (distinguishingbetween specific contractual claims, which “could … be consideredas guaranteed by the umbrella clause”, and general obligationsarising from the law of the host state, where the “umbrella clausedoes not come into play”); Noble Energy, Inc. v. Ecuador, Decisionon Jurisdiction, ICSID Case No. ARB/05/12, paras. 156-157 (5March 2008) (citing obligations established in investmentagreement as potentially “falling within the scope of an umbrellaclause”); Enron Corp. v. Argentina, Award, ICSID Case No.ARB/01/3, paras. 273-74 (22 May 2007) (observing that “[u]nderits ordinary meaning the phrase ‘any obligation’ refers toobligations regardless of their nature,” but noting that“‘[o]bligations’ covered by the ‘umbrella clause’ are nevertheless

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limited by their object: ‘with regard to investments’”); NobleVentures, Inc. v. Romania, Award, ICSID Case No. ARB/01/11,para. 61 (12 October 2005) (holding that the text of the U.S.-Romania BIT’s umbrella clause indicates that “the Parties had astheir aim to equate contractual obligations governed by municipallaw to international treaty obligations as established in the BIT”,but reserving question whether “the expression ‘any obligation’,despite its apparent breadth, must be understood to be subject tosome limitation in the light of the nature and object of the BIT”).Other recent decisions, however, have taken a different tack,indicating that only certain kinds of public contracts are covered byumbrella clauses. Some tribunals have drawn a distinction betweencontracts with the “State as a merchant” and the “State as asovereign”. El Paso Energy Int’l Co. v. Argentina, Decision onJurisdiction, ICSID Case No. ARB/03/15, para. 79 (27 April 2006);Pan American Energy LLC v. Argentina (El Paso, Decision onPreliminary Objections, ICSID Case No. ARB/03/13, para. 108 (27July 2006). The El Paso and Pan American tribunals (consisting ofthe same presiding arbitrator and the same state-appointed co-arbitrator) interpreted the umbrella clause in the U.S.-ArgentinaBIT as not extending “[t]reaty protection to breaches of an ordinarycommercial contract entered into by the State or a State-ownedentity”, but only to special “investment protections contractuallyagreed by the State as a sovereign -- such as a stabilisation clause -- inserted in an investment agreement.” (El Paso at para. 81; seealso Pan American at para. 109.) Ultimately, the tribunals held that“an umbrella clause cannot transform any contract claim into atreaty claim, as this would necessarily imply that any commitmentsof the State in respect to investments, even the most minor ones,would be transformed into treaty claims”. (El Paso at para. 82; seealso Pan American at para. 110.)In our hypothetical case, the energy concession agreement betweenCompany A and State Beta could well be covered even under themore limited interpretations suggested by El Paso and PanAmerican, based on the notion that a public concession is not anordinary commercial contract, but involves a granting of rights bythe government acting in a sovereign, rather than a purelyproprietary, capacity. Nevertheless, the ongoing differences inapproach among arbitral tribunals create some measure ofuncertainty as to how these clauses will be interpreted.

Is this kind of contract dispute covered by the umbrellaclause?

A second area of concern for some tribunals has been whether theumbrella clause in question extends to all or only some forms ofcontract disputes.The umbrella clause in our hypothetical case provides that eachState “shall observe any obligation” it has entered into with respectto investments, implying that any breach of such an obligationwould create an actionable claim under the BIT. Most tribunals thathave confronted this issue have resolved it in favour of this broadreading. See, e.g., Eureko at para. 246 (observing that the “plainmeaning” of the phrase “shall observe” in the umbrella clause is“imperative and categorical”); SGS v. Philippines at para. 115(emphasising the umbrella clause’s use of the “mandatory term‘shall’” in finding that even a simple failure to pay what is allegedlyowed under a contract would be incorporated into the treaty’sumbrella clause); cf. Noble Ventures at paras. 56, 60, 61 (holdingthat the U.S.-Romania BIT’s umbrella clause “clearly falls into thecategory of the most general and direct formulations tending to anassimilation of contractual obligations to treaty ones” based in parton its use of the term “shall observe”, but reserving questionwhether the umbrella clause “perfectly assimilates to breach of the

BIT any breach by the host State of any contractual obligation asdetermined by its municipal law”).Nevertheless, some tribunals have suggested that only certain kindsof breaches come within the scope of the umbrella clause. Forexample, in Joy Mining Machinery Ltd. v. Egypt, Award, ICSIDCase No. ARB/03/11 (6 August 2004), the tribunal construed atypical umbrella clause in Article 2(2) of the UK-Egypt BIT. TheClaimant and a government mining organisation had entered into acontract for a British company to provide mining services andsupporting equipment for a mining project. Disputes overperformance, including over certain bank guarantees, ensued. Thetribunal determined that because a bank guarantee is clearly acommercial element of the contract, this was a contractual disputethat should be resolved exclusively pursuant to the contract’sdispute resolution clause: “it could not be held that an umbrellaclause inserted in the Treaty, and not very prominently, could havethe effect of transforming all contract disputes into investmentdisputes under the Treaty, unless of course there would be a clearviolation of the Treaty rights and obligations or a violation ofcontract rights of such a magnitude as to trigger the Treatyprotection . . . .” (Id. at para. 81.) The tribunal then observed,however, that the Claimant had not “credibly alleged that there wasEgyptian State interference with the Company’s contract rights”,suggesting that an umbrella clause claim might have been availableif such interference had taken place. (Id. at para. 82.) Similarly, in CMS Gas Transmission Co. v. Argentina, Award,ICSID Case No. ARB/01/8 (25 April 2005), the tribunal stated that“not all contract breaches result in breaches of the Treaty. Thestandard of protection of the Treaty will be engaged only whenthere is a specific breach of treaty rights and obligations or aviolation of contract rights protected under the treaty. Purelycommercial aspects of a contract might not be protected by thetreaty in some situations, but the protection is likely to be availablewhen there is significant interference by governments or publicagencies with the rights of the investor”. (Id. at para. 299.) (Itshould be noted that the portion of the CMS Award dealing with theumbrella clause was subsequently annulled on the basis that theAward failed to state reasons why CMS could invoke contractualand other obligations owed by Argentina not to CMS but rather toTGN, of which CMS was a minority shareholder. See CMS GasTransmission Co. v. Argentina, Decision of the Ad Hoc Committeeon the Application for Annulment of the Argentine Republic, ICSIDCase No. ARB/01/8 (Annulment Proceeding), paras. 89-99 (25September 2007).) See also Sempra Energy International v.Argentina, Award, ICSID Case No. ARB/02/16, paras. 310-11 (28September 2007) (distinguishing between “mere ordinarycontractual breaches of a commercial nature” and “the kind ofconduct that only a sovereign State function or power couldeffect”).Similar to El Paso and Pan American, the tribunals in Joy Miningand CMS suggest that a line should be drawn between ordinarycommercial contractual disputes, where one party happens to be agovernment entity, and other kinds of governmental interferencewith contract rights. Where exactly they would draw that line isunclear. Turning back to our hypothetical case, a tribunal inclinedto follow the approach of Eureko and SGS v. Philippines -- givingfull effect to the language of a broadly-worded umbrella clause --would likely allow Company A to submit its breach of contractclaim to investor-State arbitration. If, on the other hand, thetribunal were to follow the more limited interpretations suggestedby Joy Mining and CMS, Company A might have a more difficulttime. It could argue that State Beta’s politically-motivated actionsconstitute the kind of state interference with contract rights thatought to be cognisable under an umbrella clause; but if Company A

4



is effectively required to make a showing equivalent toexpropriation or denial of fair and equitable treatment, the umbrellaclause would provide Company A little added protection.

Standing and Jurisdiction: What if the concessionagreement were between State Beta and a locallyincorporated subsidiary established by Company A tooperate the concession in State Beta? Could Company Astill bring a contract claim under the umbrella clause?What if the arbitration involved an agreement betweenCompany A and a State-owned company?

Another important issue is whether the investor must itself be aparty to the contract in question in order to have standing to invokethe umbrella clause. This is particularly important because manyforeign investors do business through locally incorporatedsubsidiaries or affiliates. In our hypothetical case, the umbrellaclause states that: “Each Party shall observe any obligation it mayhave entered into with regard to investments.” It does not specifyto whom the contractual obligation must be owed. That is, the plainlanguage of the clause does not appear to be limited to contractualobligations owed by the Party to the foreign investor (i.e., toCompany A); rather, the plain language suggests that it also coverscontractual obligations owed to investments of the investor (i.e., inthis case, to Company A’s wholly-owned subsidiary). On thisinterpretation, Company A could bring an umbrella clause claimagainst State Beta for breach of the concession agreement betweenthe State and the locally-incorporated subsidiary. See, e.g.,Continental Casualty Co. v. Argentina, Award, ICSID Case No.ARB/03/9, para. 297 (5 September 2008); AMTO LLC v. Ukraine,Final Award, SCC Case No. 080/2005, para. 110 (26 March 2008);Enron Corp. v. Argentina, Decision on Jurisdiction (AncillaryClaim), ICSID Case No. ARB/01/3, paras. 32, 46, 52 (2 August2004). Cf. Noble Energy, Inc. v. Ecuador, Decision on Jurisdiction,ICSID Case No. ARB/05/12, paras. 77-83, 155 (5 March 2008)(avoiding direct holding on umbrella clause but holding generallythat claimant could invoke BIT despite status as indirectshareholder of contracting party).Nonetheless, at least one tribunal construing a similar umbrellaclause has held that the foreign investor must be the contractingparty in order to bring a contract claim pursuant to an umbrellaclause. In Siemens, the tribunal held that “to the extent that theobligations assumed by the State party are of a contractual nature,such obligations must originate in a contract between the State partyto the Treaty and the foreign investor as, for instance, in the SGScases”. (Siemens at para. 205.) Moreover, in a recent ICSIDannulment proceeding, the Ad Hoc Committee annulled theumbrella clause portion of the Tribunal’s Award for failure to statereasons why the claimant could invoke contractual and otherobligations owed by Argentina to the party of which the claimantwas a minority shareholder. In that decision, where the applicableumbrella clause also stated “each Party shall observe any obligationit may have entered into with regard to investments”, theCommittee noted that there are “major difficulties” with such a“broad interpretation” of the umbrella clause. CMS GasTransmission Co. v. Argentina, Decision of the Ad Hoc Committeeon the Application for Annulment of the Argentine Republic, ICSIDCase No. ARB/01/8 (Annulment Proceeding), paras. 89-99 (25September 2007). See also Azurix Corp. v. Argentina, Award,ICSID Case No. ARB/01/12, para. 384 (14 July 2006). Similarissues can also arise where the aggrieved party is part of a jointventure. See, e.g., Impregilo S.p.A. v. Pakistan, Decision onJurisdiction, ICSID Case No. ARB/03/3 (22 April 2005). One othertribunal recently appeared to find a middle ground where both theforeign majority-owner and local subsidiary were claimants,

holding that while the claim was successful, the financial awardwould go only to the local subsidiary because the government’scontractual obligation was owed only to that local company, and thegovernment “had not undertaken any obligation, be it of acontractual or another nature, to the benefit of the” foreign owner.Duke Energy Electroquil Partners v. Ecuador, Award, ICSID CaseNo. ARB/04/19, paras. 323, 487-88 (12 August 2008).On the other side of the coin, if the agreement were not a concessionagreement, but rather a commercial agreement between Company Aand a State-owned company, Company B, the question would alsoarise as to whether Company A could still bring an umbrella clauseclaim against State Beta for an alleged breach of contract byCompany B. This is also an important question because manycompanies doing business with foreign governments end upcontracting with foreign government-owned entities, particularly inthe energy industry. It would appear that, especially in the case ofbroadly-worded umbrella clauses, a government’s obligations withrespect to investments could include obligations of thegovernment’s wholly-owned and controlled commercial entities.However, one recent decision in the Stockholm Chamber ofCommerce reached the opposite result under the particularcircumstances of that case. In AMTO LLC v. Ukraine, Final Award,SCC Case No. 080/2005 (26 March 2008), the tribunal addressed acase where a Latvian investment company (AMTO), which ownedthe majority of a Ukrainian building services company (EYUM-10), sued the Government of Ukraine, which owned a domesticnuclear energy company (Energoatom) that had hired EYUM-10 toperform services and then failed to pay. Although EYUM-10prevailed in court proceedings in Ukraine against Energoatom, itwas prevented from enforcing those judgments due to bankruptcyproceedings in Ukraine. AMTO brought an arbitration againstUkraine under the Energy Charter Treaty (ECT), which has anumbrella clause at Article 10(1) that imposes a duty on theContracting Parties to “observe any obligations it has entered intowith an Investor or an Investment of an Investor of the otherContracting Party”. The tribunal held that AMTO could bring theclaim in place of EYUM-10 because “[t]he so-called ‘umbrellaclause’ of the ECT is of a wide character”, which means that “theECT imposes a duty not only in respect of the investor which isotherwise customary in an investment treaty context, but also vis-a-vis a subsidiary company, established in the host state”. (Id. at para.110.) However, the tribunal went on to hold that even though “anundertaking by Ukraine of a contractual nature vis-a-vis EYUM-10could very well bring into effect the umbrella clause”, in this case“the contractual obligations have been undertaken by a separatelegal entity [i.e. Energoatom], and so the umbrella clause has nodirect application”. (Id.)

Exhaustion of remedies: What if the concessionagreement contains its own arbitration clause? Mustcontract remedies be exhausted as a prerequisite forbringing an umbrella clause claim?

The existence of alternative procedures for pursuing contract claimsmay also create hurdles to submitting a contract dispute to treatyarbitration. Tribunals have considered cases where States haveresisted treaty arbitration of contract claims on the ground that thecontract in dispute contains its own dispute resolution clauserequiring, for example, arbitration under particular rules orprocedures. The majority of these tribunals have held that theexistence of a contract remedy does not affect the jurisdiction of aBIT tribunal, making BIT arbitration available even where thecontract contains its own dispute resolution requirements. Inaddition, they have held there is no need to exhaust alternative

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contract remedies before bringing a BIT arbitration. (See, e.g.,Noble Ventures at para. 53.)There is a minority view, however, exemplified by SGS v.Philippines, which held that a contract claim cannot be pursuedunder an umbrella clause unless the investor, for good reason, wasunable to avail itself of the exclusive domestic remedies providedfor in the contract: “Thus the question is not whether the Tribunalhas jurisdiction . . . . The question is whether a party should beallowed to rely on a contract as the basis of its claim when thecontract itself refers that claim exclusively to another forum. In theTribunal’s view the answer is that it should not be allowed to do so,unless there are good reasons, such as force majeure, preventing theclaimant from complying with its contract.” (SGS v. Philippines, atpara. 154.)

Towards a Text-Based Approach?

As the cases discussed above illustrate, some tribunals have beenwilling to go beyond the plain text of the umbrella clauses inquestion to achieve certain policy results. Thus, for example, theSGS v. Pakistan tribunal acknowledged that “[a]s a matter oftextuality . . . the scope [of the umbrella clause] . . . appearssusceptible of almost indefinite expansion”, yet went on to surmisethat the plain meaning could not have been what the partiesintended. (SGS v. Pakistan, at paras. 166, 171.) The differing approaches taken in recent cases mean somecontinued uncertainty regarding whether, and to what extent,contracts will receive protection under a BIT. This uncertainty canbe costly and can act as a disincentive for investments. Tribunalscould reduce this uncertainty by adopting a text-based approach tointerpretation, in which, as one tribunal put it, the umbrella clause“means what it says”. (Eureko at para. 256.) This approach wouldbetter recognise that “there are differences between the wording of[one] clause and the clauses in the other cases”, and thus that termsshould be given their “ordinary meaning”. (Noble Ventures at para.50; see also Duke Energy at para. 318 (citing Article 31(1) of theVienna Convention, which requires interpretation to be “in goodfaith in accordance with the ordinary meaning to be given to theterms of the treaty”).)

When States negotiating BITs wish to eliminate or limit the scopeof umbrella clauses, they know how to do so. For example, manyU.S. BITs from the 1980s and 1990s contained broad andunrestricted umbrella clause language, such as that discussed in ourhypothetical example. See, e.g., Article II(2)(c), U.S.-ArgentinaBIT (“Each Party shall observe any obligation it may have enteredinto with regard to investments.”). By contrast, the 2004 U.S.Model BIT replaced the standard umbrella clause with a detaileddefinition of the types of contracts for which breach of contractclaims may be submitted to arbitration. See 2004 U.S. Model BIT,Article 1 (covered contracts include those involving naturalresources, the supply of utilities services such as water orelectricity, or the undertaking of civic infrastructure projects). Atext-based approach, which recognises that government negotiatorspay careful attention to the precise wording used in internationalinvestment agreements, would serve to increase certainty andpredictability for investors and governments alike.

Conclusion

As recent tribunal awards illustrate, there is continuingdisagreement among some tribunals as to the precise scope andmeaning of umbrella clauses. Although some of this uncertaintymay be due to differences among arbitrators, it also is the result ofnuances in the text of each treaty, which underscores the importanceof reading the text very closely when evaluating the strength of apotential contract-based treaty arbitration. The umbrella clause canpotentially be a powerful tool for foreign investors in the event of acontractual dispute with a host state. It is essential, however, forinvestors and corporate counsel to stay abreast of continuingdevelopments in the jurisprudence and to seek expert guidancewhere appropriate.

6ICLG TO: INTERNATIONAL ARBITRATION 2009WWW.ICLG.CO.UK


Ethan G. Shenkman

Wilmer Cutler Pickering Hale and Dorr LLP1875 Pennsylvania Ave., NWWashington, DC 20006USA

Tel: +1 202 663 6495Fax: +1 202 663 6363Email: [email protected]: www.wilmerhale.com

Ethan G. Shenkman is a partner in Wilmer Cutler Pickering Hale andDorr’s Litigation Department. His practice focuses on investor-Statearbitration, international disputes and complex litigation.Mr. Shenkman was previously with the United States Department ofJustice, where he was actively involved in the negotiation of bilateraland multilateral investment agreements, the drafting of the newU.S. Model BIT, and the defense of investor-State arbitrations underChapter 11 of NAFTA.Mr. Shenkman received his J.D. from the University of VirginiaSchool of Law (Order of the Coif; Editor-in-Chief, Virginia LawReview) and earned his B.A. from Yale University (summa cumlaude, Phi Beta Kappa). Upon graduation from law school, heclerked for the Hon. Paul V. Niemeyer, US Court of Appeals for theFourth Circuit, and served as a Bristow Fellow in the Office of theSolicitor General.

D. Jason File

Wilmer Cutler Pickering Hale and Dorr LLP4 Carlton GardensLondon, SW1Y 5AAUnited Kingdom


D. Jason File is a New York, D.C. and English qualified lawyer, anda member of Wilmer Cutler Pickering Hale and Dorr’s LitigationDepartment. His practice concentrates on international arbitrationand transnational litigation and investigations. Mr. File’s experienceincludes international arbitrations relating to oil and gas,telecommunications, franchises and computer technology, as well asinvestor-state disputes, U.S. government regulatory and criminalinvestigations, and disputes relating to public international law andhuman rights.Mr. File received a J.D. from Yale Law School (Editor-in-Chief, YaleJournal of International Law; Senior Editor, Yale Law Journal), anM.Phil. in International Relations from the University of Oxford, anda B.A. from Yale University. Upon graduation from law school, heclerked for the Hon. Denise Cote, U.S. District Court for theSouthern District of New York.

Wilmer Cutler Pickering Hale and Dorr LLP is an international law firm with offices in London, Beijing, Berlin, Boston,Brussels, Frankfurt, Los Angeles, New York, Oxford, Palo Alto, Waltham and Washington, D.C. The firm offers one ofthe world’s premier international arbitration and dispute resolution practices, covering virtually all forms of internationalarbitration and dispute resolution. The firm is experienced in handling disputes administered under a wide variety ofinstitutional rules, including the ICC, AAA, LCIA, UNCITRAL, and ICSID rules. The firm also has extensive experiencewith more specialised forms of institutional arbitration and ad hoc arbitrations. Wilmer Cutler Pickering Hale and Dorr’slawyers have been involved in arbitrations sited across the world, and the group has handled disputes governed by thelaws of more than 30 different legal systems. Our international arbitration group has been involved in more than 500proceedings in recent years and we have successfully represented clients in four of the largest, most complexarbitrations in the history of the ICC and several of the most significant ad hoc arbitrations to arise in the past decade.




Chapter 2


Regional Overview andRecent Developments:Asia Pacific

Due to the rich cultural, historical, social and racial diversities in theAsia-Pacific region, it is not easy to give a continental overview toa rich subject like arbitration. The fact that many Asian countrieswere colonised by various European powers has also meant thatdevelopments in the various legal systems had also increasinglydiversified further. Inevitably the practice of internationalcommercial arbitration will be influenced by these various factorsand legal traditions.However, although it would not be entirely correct to separate thevarious countries into two distinct spheres of legal tradition, itwould be convenient to suggest that most of the countries in theAsia-Pacific region can be viewed at as being either of civil lawtradition or common law tradition. Although the laws of both setsof legal traditions will find formal setting in statutes, rules andcodes if law, the influence of judicial decisions which set out theprinciples, standards and rules of law governing arbitration aremore important in the common law tradition whilst the opinions andinterpretations statutes by well known jurists are more important inthe civil law context.The common uniting golden thread that runs throughout most ofmodern arbitration laws in the Asia-Pacific region is theUNCITRAL Model Law, which is applied in whole or in part inmost of the countries in the region. There has also been anincreasing trend in the merging of the civil and common lawtechniques and practice that have been developed by internationalbodies such as the International Bar Association (“IBA”).Important model codes such as the “IBA Rules on the Taking ofEvidence in International Commercial Arbitration” have beendrafted by the most eminent jurists against the background ofcommon law and civil law principles and values with regards toobtaining evidence and discovery.The growth of many national arbitration institutions in the Asia-Pacific region and their increasing experiences in the administrationof international commercial is an important factor in helping fuelthe growth and popularity of commercial arbitration as an importanttool. The emergence of new networks and federations of arbitralinstitutions such as the Regional Arbitral Institutes Forum (“RAIF”)and the Asia Pacific Regional Arbitration Group (“APRAG”) arealso important as the national arbitration institutions have a forumto get together to both improve and to promote the Asia-Pacificregion as a venue for arbitration whilst seeking to assist inorganising training sessions and conferences to share and improveboth the standards and knowledge of international arbitrationinstitutions in the region.This Chapter provides an overview of the most significant andrecent developments in international arbitration in each of thecountries in this Chapter.

Australia

Australian courts are not yet entirely united in their approach toarbitrability of disputes arising under the Trade Practices Act.Although, it has also now became more common to limit thediscovery process in domestic arbitrations to various classes ofdocuments falling within defined clusters, there is still no singleapproach yet with regards to international arbitrations.Australia is a party to a number of bilateral investment treaties andgenerally selects arbitration under the ICSID Convention as thedesignated dispute resolution procedure under most of these treaties.Australia is also a party to a number of Free Trade Agreements which,with the exception of the Australia-US Free Trade Agreement, offerinvestor-state arbitration for the resolution of disputes.Australia has signed the Energy Charter Treaty subject toratification, with declaration pursuant to Art. 45(2) not acceptingprovisional application of treaty and declaration concerning traderelated investment measures. The two most prominent of theAustralian arbitration institutions is the Australia Centre forInternational Commercial Arbitration (“ACICA”) which focusesmore on international arbitrations and The Institute of Arbitrators &Mediators Australia (“IAMA”), which is more of a professionaltraining institute for arbitrators. On the 21st November 2008, the Attorney-General’s Departmentannounced for a review of the Australian International ArbitrationAct 1974. One of the main issues that was raised was whether theAct should be amended to allow for the appointment of a specificarbitral institution to perform a number of the functions as set out inthe UNCITRAL Model Law. The other issue was whether theFederal Court of Australia should have exclusive jurisdiction inmatters concerning international arbitration. This latter issueprovoked a wide divergence of views and some 24 separatesubmissions were made. The state and territory Chief Justices tooka more inward looking territorial approach and each pressedstrongly for the retention of the jurisdiction of their own respectivecourts. The other issue raised was to consider whether the Actshould be amended to ensure it provided a comprehensive and clearframework governing international arbitration in Australia.Another issue that was raised was whether or not Australia shouldadopt “best-practice” developments taking place in main arbitrationjurisdictions outside Australia. It is widely anticipated that theAttorney-General’s department will have the new draft legislationready for Parliament before the end of 2009.

Hong Kong

The legislature and courts in Hong Kong continue to be very

Dr. Colin Ong

8

Dr. Colin Ong Legal Services Asia Pacific Overview


supportive of the arbitration process and they uphold the sanctity ofagreements by parties to arbitrate. Enforcement of arbitral awardsare robustly upheld by the courts. The Hong Kong InternationalArbitration Centre is one of the most eminent arbitration institutionsin the Asia Pacific. It has managed to attract and maintain a pool ofleading international arbitrators who are reasonably remuneratedand have assisted to maintain the HKIAC is the leading arbitrationcentre in the North Asia region. In early 2009, the HKIACAdministered Arbitration Rules came into force. These Rules madereference to the arbitration rules of different internationalarbitration institutions but made improvements by using userfriendly language and it enhanced the concept of party autonomy inadministered arbitrations. The new rules allow the parties to choosewhether the arbitrators are to be compensated on the basis of agreedhourly rates or by way of a fee schedule. At the end of 2008, theHKIAC was appointed by Hong Kong Monetary Authority to dealwith the many disputes involving financial products sold in HongKong by Lehman-Brothers and an Investment Products DisputeMediation and Arbitration Scheme was set up. Further reform of Hong Kong arbitration law is in the final sectionof the pipeline. A unitary system based on the UNCITRAL ModelLaw with minimum amendments and additions to supplementvarious aspects in the operation of the arbitration process has beenformulated into a draft Arbitration Bill, which is expected tobecome law by August 2009. Once the new Act comes into play, allarbitration awards can only be challenged by way of setting aside inaccordance with Article 34 of the UNCITRAL Model Law. Thishas been the current procedure adopted only for internationalarbitrations in Hong Kong. The other greatly anticipated changewill be the new provisions for interim measures that have beenintroduced under the UNCITRAL Model Law by reason of Articles17A to 17J. In a recent decision of Eton Properties Ltd [2008] 4 HKLRD 972,the Court of Appeal continued the arbitration friendly policy of thecourts and rejected an attempt by the respondent to resistenforcement on an alleged ground of public policy. Whilst Hong Kong is not a party to any Bilateral InvestmentTreaties or Multilateral Investment Treaties, allowing for recourseto arbitration under the ICSID regime, with the “One Country, TwoSystems” principle enshrined in the Basic Law, Hong Kong hasestablished its own network of bilateral investment treaties,otherwise known as Investment Promotion and ProtectionAgreements with other countries (15 in all) providing for arbitrationunder the UNCITRAL Arbitration Rules.

India

The Indian Arbitration and Conciliation Act came into force inJanuary 1996 and is largely based on the UNCITRAL Model Law.Recent Indian Supreme Court judgments of particular importance tointernational arbitration include the following:(i) although the Kompetenz-Kompetenz principle is enshrined in

Article 16 of the UNCITRAL Model Law, the SupremeCourt in the case of S.B.P. & Co. v Patel Engineering Ltd(2005) 8 SCC 618, held that in the exercise of its power toappoint an arbitrator, the court is empowered to alsodetermine such issues such as the validity of the arbitrationagreement, the claim and the tribunal’s jurisdiction;

(ii) the Supreme Court in Etsis Chemical Co. Ltd v AkshOptifibre Ltd, 2005 (6) SCALE 561, held that where aninternational arbitration has India as its seat, the court’sdetermination of the merits of a challenge to the validity ofan arbitration agreement is appealable and this couldpossibly require a full trial on the merits;

(iii) in the controversial decision of ONGC v. Saw Pipes Ltd(2003) SSCC 705, the Supreme Court held that a court couldset aside an award if it considered the award patently illegalin that it is contrary to the terms of the contract entered intobetween the parties;

(iv) in the controversial judgment of Venture Global Engineeringv Satyam Computer Services Ltd & Anor, Appeal (Civil) No.309/2008 decided on 10.1.2008, the Supreme Court took theview that even a foreign award could be challenged beforethe courts of the state under the law of which the award wasmade and under section 34 of the Arbitration Act 1996. Thisdecision is damaging to the practice of Arbitration in Indiaand may possibly have repercussions on foreign investmentin India; and

(v) in Delhi Development Authority v. R. S. Sharma (2008) 13SCC 80, the Supreme Court summarised the grounds onwhich a court in India may judicially review an arbitralaward. Unfortunately, it again held that it is open to the courtto consider whether the award is against the specific terms ofcontract and, if so, interfere with it on the grounds that it ispatently illegal and opposed to the public policy of India.

India has not signed or ratified the Washington Convention on theSettlement of Investment Disputes Between States and Nationals ofother States and is not a party to any Bilateral Investment Treatiesor Multilateral Investment Treaties allowing for recourse toarbitrations under ICSID. The London Court of InternationalArbitration (“LCIA”) has for the first time in its history, opened abranch outside London in New Delhi. A large function wasorganised on the 18th April 2009 and was attended by manydignitaries including the Chief Justice of India.

Korea

The Korean Arbitration Act was first enacted in 1996 and lateramended in 1999. It is largely based on the Model Law with somemodifications to allow compliance with the Korean judicial system.Korean courts have generally enforced arbitration agreements andarbitral awards. Despite the fact that Korea is largely a civil-lawcountry, it has developed an arbitration system that appears to bemore similar with American arbitration but is slightly different fromJapanese arbitration laws. Although early Korean arbitration lawwas based upon Japanese laws, its arbitration system and practicesappear to be heavily influenced by American arbitral practices andallow for cross-examination of witnesses and documentsproduction.The key arbitration institution is the Korean CommercialArbitration Board and it has been rather proactive in both updatingits rules and remuneration scales to keep up with internationaldevelopments. Together with Japan, it is the only other country inAsia in which its courts are required to dismiss (as opposed tostaying) any court actions that are brought in respect of a disputewhich formed the subject of an arbitration agreement.The Supreme Court has held that where Korea is the seat ofarbitration and there is in place an agreement between partiesallowing for a choice of either arbitration or the courts for thedetermination of the dispute, such an agreement would not beconsidered by the courts as an agreement to arbitrate and partieswould hence be compelled to litigate their dispute. Korea is asignatory to the Washington Convention as well as a signatory tovarious Bilateral Investment and Multilateral Investment Treatieswhich provide for the resolution of disputes by way of arbitrationunder ICSID.There has been a growing increase of KCAB arbitration in terms ofthe number and size of disputes. In 2008, a total of 262 domesticarbitrations were filed and 47 international arbitrations were filed

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with the KCAB. In June this year the KCAB and KOCIAsuccessfully co-hosted the Asia Pacific Regional Arbitration Group(“APRAG”) Conference in Seoul and they brought together most ofthe leaders in international commercial arbitration from across theworld. The President of KCAB and the Chairman of KOCIA wereappointed as joint co-presidents of APRAG for two years.

Japan

Japanese arbitration law is substantially modeled on theUNCITRAL Model Law. However, whilst it is not unique,Japanese arbitration law also allows the arbitral tribunal or one ormore of its members to attempt an amicable mediation andsettlement of the dispute with the consent of the parties. Manycommercial arbitrations in Japan have been amicably settled in thismanner. In addition to the Model Law, it has special provisions forconsumer arbitration and individual employment arbitration for thefuture dispute by which a consumer has the right to terminate thearbitration agreement entered with a business and the arbitrationagreement between an individual employee and a businessemployer is invalid. The IBA’s Rules on the Taking of Evidence inInternational Commercial Arbitration have seen increasingacceptance and adoption in international arbitrations that have beenrecently conducted in Japan. Japan has signed and ratified theWashington Convention and it is a party to some BilateralInvestment Treaties allowing for recourse to arbitration underICSID. As with Korea, Japanese courts simply dismiss actionsrather than stay these when such an action has been brought inrespect of a dispute which is the subject of an arbitration agreement.The main arbitration institution in Japan for commercial arbitrationis the Japan Commercial Arbitration Association (“JCAA”). Therehas been a few developments in the JCAA recently. Effective from1st July 2009, the JCAA has amended its rules for arbitration andhas adopted the UNCITRAL Arbitration Rules.On the 1st January 2009, the JCAA also implemented itsinternational commercial mediation rules.A recent new financial ADR system has been introduced in Japanunder the revised Financial Products Transaction Law. Under thisnew law, each sector of financial institutions (including as banks,securities firms and insurance companies) will have to establish anindependent ADR system and are obligated to accept the ADRprocedure, submit information and to respect the mediator’sproposals.

China

China’s Arbitration Law is not based on the UNCITRAL ModelLaw although some aspects of adopt similar provisions in someaspects (e.g. some of the provisions relating to foreign-relatedarbitrations. There is centralisation of authority and administrationand as such only institutional arbitration is permitted by the Law inMainland China. Determinations of the validity of an arbitrationagreement may be done either the arbitration commission or thepeople’s court. Arbitration and conciliation between Chinese and foreign parties ineconomic and trade matters are generally handled by CIETAC. TheCIETAC Arbitration Rules have been amended several times overthe years, to accommodate the concerns of foreign parties whilstmaintaining the mandatory requirements of the PRC ArbitrationLaw (1995). Foreigners tend to select CIETAC over other arbitration centres inChina for a variety of reasons. CIETAC maintains practicesconsistent with international standards and unlike other arbitration

institutions in China, CIETAC has allowed for the inclusion offoreign arbitration specialists as well as leading arbitrationspecialists in China on its panel of arbitrators. CIETAC also allowsfor foreign lawyers to participate in its hearing process and allowsforeign and international law to be pleaded as governing law.CIETAC is constantly exposed to international norms andarbitration decisions from CIETAC reflects increased openness toadopt international standards in cases where specific provisions ofChinese law are unavailable or are unclear.Under some arbitration rules (e.g. CIETAC rules) the arbitraltribunal may determine the validity of an arbitration agreement ifthe arbitration commission delegates such powers to the arbitraltribunal. The arbitration commission will decide on the number ofarbitrators (absent any prior agreement between parties on thenumber of arbitrators). The arbitral tribunal is not empowered toorder interim measures of protection. Rather significantly, there arecriminal sanctions for an arbitrator who “intentionally goes againstthe facts or law and makes any wrongful ruling in the process ofarbitration”. Any decisions by the people’s court not to set aside aforeign-related award must first be reported to and approved by theSupreme People’s Court. A new Arbitration Law is in the course ofbeing drafted to replace the current Arbitration Law which has beenin place since 1994 although the time frame for its implementationhas yet to be announced. China has acceded to the WashingtonConvention and whilst it is party to a very significant number ofBilateral Investment Treaties, not all of these have provisionsallowing for ICSID arbitration.The most credible and respected international arbitration institutionin China is the CIETAC. It has recently established new arbitrationcentres throughout China including the SouthWest Sub-commissionand the Tianjin International Economic and Financial ArbitrationCenter and has, on the 1st May 2009, implemented the CIETACOnline Arbitration Rules.

Malaysia

The Malaysian Arbitration Act 2005 (Act 646) is substantiallybased on the UNCITRAL Model Law and came into force inMalaysia on the 15th March 2006, repealing the old 1952Arbitration Act (Act 93). One of the significant changes was theadoption of similar wording to Article 5 of the UNCITRAL ModelLaw, which does not allow the Malaysian courts to intervene in anyof the matters governed by the Act unless otherwise provided. Suchintervention may only include issues of stay of proceedings,appointment of the arbitrator and any challenges to the arbitratorincluding his jurisdiction and scope of authority. The Courts willalso intervene to assist in the taking of evidence as well as thesetting aside of awards and will deal with recognition andenforcement of awards. In the recent decision of I-Expo Sdn Bhd vTNB Engineering Corporation Sdn Bhd [2007] 3 MLJ 53, theMalaysian High Court dismissed TNB’s argument that itsapplication for a stay should be heard first and it granted theinjunction requested for by I-Expo. The High Court held that thepower to grant interim relief before or during the arbitrationproceedings will cover all situations in which court intervention isrequired to maintain the status quo of a dispute so as to preserve thearbitral tribunal’s ability to hear and decide the dispute.The Malaysian Court of Appeal in TNB Engineering Consultancy vBoccard Oil & Gas [2008] 2 MLJ 43 had to deal with a situationwherein a sub-contractor had referred the main contractor toarbitration under an arbitration agreement. The main contractorwho was the Plaintiff in the case claimed that it was moreappropriate for the Court to hear the dispute as it had a dispute withthe client, TBV Power (M) Sdn Bhd. Rather surprisingly, the Court

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of Appeal held that the dispute should be heard by the High Courtand not in arbitration as TBV had in its defence contended that thePlaintiff had failed to fulfill its obligations under the contract andunless the Plaintiff could consolidate its actions with the actionsagainst TBV, the Plaintiff would be prejudiced.

New Zealand

There has been a few main developments taking place concerningNew Zealand.The first is the recent establishment by AMINZ (the Arbitrators andMediators Institute of New Zealand) of a system of privatearbitration appeal tribunals (AATs).There is a right of appeal to the High Court on points of law, wherethe Second Schedule of the Arbitration Act 1996 applies. TheSecond Schedule applies to domestic arbitrations sited in NewZealand (unless the parties expressly agree otherwise) and tointernational arbitrations sited in New Zealand if the partiesexpressly agree. The problem of this mechanism is that itsubstantially destroys the issue of confidentiality in arbitration, asthe appeal proceedings will normally be done in public.Under the new AMINZ system, parties can elect to allow appeals onquestions of law to private AATs, under the AMINZ ArbitrationAppeal Rules. The system is supervised by the AMINZ Court ofArbitration, which acts as an appointing authority under the Rules.The members of the appeal tribunals are selected from an AMINZpanel which will comprise qualified and skilled arbitrationspecialists.The New Zealand Supreme Court (now the highest court in NewZealand’s judicial system, having replaced the Privy Council) has inGeneral Distributors Ltd. v. Casata Ltd. [2006] 2 N.Z.L.R. 721(S.C) held (by a majority of 3 to 2) that the effect of clause 6(1)(a)of the Second Schedule to the Arbitration Act 1996 was that costsare automatically in issue in every arbitration subject to thatprovision, unless the parties otherwise agreed. This has meant thatan arbitral tribunal is required to address costs in its award and, if itdid not, the parties could seek a further award under article 33 of theFirst Schedule.The most important development is the amendment of the NewZealand Act in 2007 to: (i) provide in an extended manner forconfidentiality, both at the arbitration stage and at the court stage;and (ii) incorporate the new UNCITRAL Model Law regime forinterim measures and preliminary orders. The ArbitrationAmendment Act 2007 came into force on the 18th October 2007and has made several changes to the Arbitration Act 1996. Theamendments were intended to bring the 1996 Act in line with recentchanges to the UNCITRAL Model Law and to increase the partiescontrol over the arbitration process and reduce judicial intervention.The main amendments related primarily to interim and preliminaryorders, grounds of appeal and confidentiality. The Amendment Actnow clothes the arbitrators with wide powers to make interim andpreliminary orders. Article 17 of the Amendment Act deals withinterim measures and allows the arbitrator to make orders topreserve assets of which any subsequent award can be satisfied,maintain or restore the status quo of the parties pendingdetermination of the dispute and the power to make an order forsecurity for costs. In the recent decision of General Distributors Ltd v MelanesianMission Trust Board [2008] 3 NZLR 718, the High Court was askedto decide whether a “discovery ruling’’ ordered by an arbitraltribunal during the interlocutory process amounted to an “award’’.It was held that the discovery order was not a decision “on thesubstance of the dispute’’ between the parties, in terms of the

definition of “award’’, and so could not be the subject of an appealto the High Court. The High Court emphasised that such an appealwas only available in respect of decisions touching on the legalrights or duties which arose from the dispute which had beenreferred to arbitration.

Singapore

The Singapore courts have been one of the most robust courts in theregion to enforce both arbitration agreements and awards. TheSingapore Government announced a new tax incentive in its 2007Budget to boost international arbitration in Singapore. From 1 July2007 until 30 June 2012, approved law firms will be granted a 50per cent income tax exemption on ‘qualifying incremental income’from international arbitration work.The Singapore International Arbitration Centre (“SIAC”) wasestablished in 1991 and is the statutory appointing body of arbitratorsin the event of default by the parties in making an appointment of anarbitrator. The SIAC has become one of the most respectedarbitration institutions in the region and has successfully attractedmany parties and end users of arbitration from neighbouringcountries including Malaysia and Thailand. Part of the attractivenessof the SIAC is that it maintains a very high standard panel ofarbitrators and includes a large proportion of foreign arbitrationspecialists on its panel. Although the remuneration fees for the SIACarbitrators is slightly higher than its regional rivals due to the higherquality of SIAC arbitrators, this has in itself attracted many partiesfrom neighbouring countries to nominate the SIAC as the arbitrationcentre of choice in their contracts. Through a shrewd combination ofhaving a pool of well remunerated leading arbitrators and a good casemanagement system, the SIAC has steadily built up a substantial caseload of arbitration cases and is the leading arbitration centre in theASEAN region. The Court of Appeal in Swift-Fortune Ltd v Magnifica Marine SA[2007] 1 SLR 629 was asked to consider the issue as to whether aSingapore court should exercise its judicial powers under theInternational Arbitration Act (CAP 143A) to provide assistance toarbitrations having its seat in Singapore. In a well reasoneddecision, the Singapore Court of Appeal came to the conclusion thatSection 12(7) of the IAA could not apply to endow a Singaporecourt with the power to issue interim measures in aid of anarbitration which had its seat outside Singapore.In the case of NCC International AB v. Alliance Concrete SingaporePte Ltd [2008] 2 SLR 565, the Singapore Court of Appeal held thatSingapore courts would generally play a more interventionist role ingranting interim injunctions in domestic arbitration as compared tointernational arbitration because the domestic arbitration conferredthe power to grant interim injunctions solely on the court, whereasthe International Arbitration Act conferred the same power on boththe court and the arbitral tribunal. The Court of Appeal made itclear that where the court had concurrent jurisdiction with thearbitral tribunal, it would only intervene to support arbitrationwhere matters were very urgent or where the court’s coercivepowers of enforcement were required.Construction work is currently underway in Singapore for anintegrated arbitration complex called Maxwell Chambers that willhouse state-of-the-art hearing room facilities and internationalarbitration institutions under one roof. Maxwell Chambers is theworld’s first integrated dispute resolution complex that has set upstate of the art hearing facilities. The SIAC will be the main tenantof the new integrated arbitration complex, which is expected toready in 2009. The SIAC has launched the new SIAC Rules (3rdEdition 2007), which came into effect on 1 July 2007 and the newrules can be accessed on SIAC’s website, www.siac.org.sg.

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Professor Dr. Colin Ong

Dr. Colin Ong Legal ServicesSuites 2-2 to 2-8, Gadong Properties CentreKm 3-6, Jalan GadongBandar Seri Begawan BE 4119Negara Brunei DarussalamBrunei

Tel: +673 2 420 913Fax: +673 2 420 911Email: [email protected]

Dr Ong holds an LL.B (Hons) from the University of Sheffield University;and an LL.M and PhD in commercial law from the University of London.He is practicing barrister and Chartered Arbitrator at Essex CourtChambers, London (since 1992) and is also a member of the BarristersChambers of 3 Verulam Buildings. He is Arbitration Fellow at variouscountries (FAMINZ (Arb); FCIArb; FMIArb and FSIArb). He is thePresident of the Arbitration Association Brunei Darussalam, which is thenational Brunei arbitration authority. Dr Ong is a Visiting Professor of Lawat the University of Malaya; Visiting Professor of Law at King’s College,University of London; Adjunct Professor of Law and Arbitration at theNational University of Malaysia (Universiti Kebangsaan Malaysia); AdjunctAssociate Professor (Arbitration & Construction) of the National Universityof Singapore and has been a Visiting Fellow of the Centre of CommercialLaw Studies (Queen Mary), University of London (since 1996). He isappointed as a Vice President of the Asia Pacific Regional ArbitrationGroup (“APRAG”) from 2009 to 2011. Dr Ong is also a registered foreignlegal consultant in Singapore since 2003. He was the former PrincipalLegal Consultant for the ASEAN Centre for Energy, ASEAN, Jakarta,Indonesia (2002 -2003). He was one of the 10 Panel Members of theASEAN Protocol on Enhanced Dispute Settlement Mechanism for theASEAN countries. Dr Ong is a Broad-based international arbitrator and commercial lawyerwith extensive court, arbitration counsel, advisory practice andcommercial deals experience with important reported judgments in Bruneiand English Law Reports. He has also received appointments to act asarbitrator in Domestic and in International Commercial Arbitrations in adhoc arbitrations and is also a registered arbitrator with InternationalArbitration centres internationally ranging from ACICA (Australia);AAA/ICDR; BANI (Indonesia); CAM (Mexico); CIETAC (China); HKIAC(Hong Kong); KCAB (Korea); KLRCA (Malaysia); Council Member ofLCIA(London); ICADR (India); Philippine Dispute Resolution Center; ICC,SIAC(Singapore); to being an arbitrator and Neutral Panelist for WIPO andWIPO Domain Names. He is often instructed to advise and act as leadcounsel or co counsel on major commercial arbitrations and alsotransactions within Brunei, England, China, Hong Kong, Qatar, Indonesia,Malaysia, Singapore and Thailand. Dr Ong is the Author of several legalbooks and is often invited to participate at major legal symposiums andalso holds lectures for continuing education programme schemes andprofessional bodies such as The Chartered Institute of Arbitrators.

Dr Colin Ong Legal Services is an internationally recognised leading commercial and dispute resolution law firm inBrunei Darussalam and it acts for a broad spectrum of corporate and high profile clients. It is one of the largercommercially focused law firms in Brunei and has been consistently listed as a leading banking and commercial lawfirm by independent legal publications such as Asia-Legal 500 and IFLR 1000. The Firm and its lawyers is to datethe only Brunei law firm to have been listed in Euromoney’s International Who’s Who Legal Series (4 categories of law)and Guide(s) to the World’s Leading Experts in Commercial Arbitration/Litigation.

Apart from international commercial arbitration and litigation services, other main areas of practice include: bankinglaw and setting up and marketing of funds, company law, oil and gas, aviation, intellectual property; project finance;shipping matters, joint ventures and foreign investments. The firm is often instructed to act for and againstmultinationals and also certain foreign quasi-government bodies within the ASEAN region and for several major globalbanks, and has regularly acted for and against many of the leading international and regional law firms in the World.The Firm is a contributing author to looseleaf works, in the fields of banking, arbitration and litigation, for severalinternational legal journals in Asia, the UK and the US.

Suites 2-2 to 2-8, Gadong Properties CentreKm 3-6, Jalan Gadong, Bandar Seri Begawan BE 4119

Negara Brunei Darussalam, Bandar Seri BegawanTel: +673 2 420 913 Fax: +673 2 420 911

Email: [email protected]


Dr Colin Ong Legal Services

12

Chapter 3


Clayton Utz

Australia

1 Arbitration Agreements

1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Australia?

There are form requirements under each of the InternationalArbitration Act 1974 (Cth) (“IAA”), the UNCITRAL Model Law(“Model Law”), the New York Convention on the Recognition andEnforcement of Foreign Arbitral Awards (“New York Convention”)and the Commercial Arbitration Acts in each of the states andterritories (“CAA”). While all of those laws require arbitration agreements to be inwriting, article 7(2) of the Model Law has a slightly more expansivedefinition in that it specifically provides that arbitration agreementsmay be communicated in any form that provides a record of theagreement. Article II of the New York Convention (as well as theIAA) requires an arbitration agreement to be either signed by theparties or to be contained in an exchange of letters, telex or telegrams.

1.2 Are there any special requirements or formalities requiredif an individual person is a party to a commercialtransaction which includes an arbitration agreement?

Provided the transaction is commercial in nature, there are nospecial requirements or restrictions for an individual person to enterinto an arbitration agreement.

1.3 What other elements ought to be incorporated in anarbitration agreement?

There are no particular requirements under the domestic orinternational legislation. However, in the context of internationalarbitration, it is in the interests of both parties to provide thefollowing details in the arbitration agreement:

a clear indication as to the scope of the arbitration agreementdetermining which (if not all) disputes are referred toarbitration;the seat of the arbitration;the number of arbitrators (unless the parties wish this to bedetermined after the dispute is referred to arbitration);the language of the arbitration; andthe arbitration rules governing the proceedings(recommended).

1.4 What has been the approach of the national courts to theenforcement of arbitration agreements?

Section 7(2) of the IAA requires court proceedings to be stayed inface of a valid arbitration agreement. Australian courts will enforcea valid arbitration agreement broad enough to cover the particularmatter, subject to the matter being arbitrable. In Comandate MarineCorp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192 theFederal Court confirmed that arbitration agreements shall beinterpreted widely, an approach that was subsequently confirmed bythe House of Lords in the Premium Nafta decision. For domestic arbitrations, the court has discretionary power to stayproceedings. In exercising that discretion, a court will commonlyhave regard to whether all aspects of the claim may be referred toarbitration so as to avoid multiple proceedings, a common issuewhich frequently arises in cases in which Australia’s ProportionateLiability legislation applies.

1.5 What has been the approach of the national courts to theenforcement of ADR agreements?

The approach with regard to mediation agreements has not beenuniformly settled. While the Supreme Court of Queensland in AlcoSteel (Qld) Pty Ltd v Torres Strait Gold Pty Ltd refused to stayproceedings on the basis of a mediation agreement between theparties, the Supreme Court of New South Wales took a differentapproach in a similar situation in Hooper Bailie Associated Ltd vNatcom Group Pty Ltd where the Court required the parties to enterinto a mediation. With regard to expert determination, courts will generally interpret anexpert determination agreement as not ousting the jurisdiction of thecourt. However, this approach is not settled and parties cannotconfidently predict that their expert determination agreement will beenforced in the face of court proceedings that have been commenced. However, with ADR receiving increasing recognition and support bythe courts, it is expected that courts will tend to refer, in the firstinstance, parties to the ADR process which they agreed between them.

2 Governing Legislation

2.1 What legislation governs the enforcement of arbitrationproceedings in Australia?

The enforcement of international arbitration agreements is governedby section 7 of the IAA, which implements Australia’s obligationsunder the New York Convention, and article 8 of the Model Law.

Björn Gehle

Doug Jones

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Clayton Utz Australia

2.2 Does the same arbitration law govern both domestic andinternational arbitration proceedings? If not, how do thelaws differ?

Australia’s legislative powers are divided between theCommonwealth of Australia, as the federal entity, and the six States.In addition there are two federal Territories with their owngovernments. International arbitrations are governed by the IAA whichincorporates the Model Law, the New York Convention and theWashington Convention on the Settlement of Investment Disputesbetween States and Nationals of other States (“WashingtonConvention”). Domestic arbitrations are governed by the relevant CAA of eachState or Territory where the arbitration takes place. Followingamendments made in 1984 and 1993, the CAAs of the States andTerritories are now largely uniform. The CAA provides for anarbitration procedure that is quite distinct from that under the ModelLaw. The key differences will be dealt with separately under eachof the relevant topics below.

2.3 Is the law governing international arbitration based on theUNCITRAL Model Law? Are there significant differencesbetween the governing law and the Model Law?

Section 16 of the IAA provides that the Model Law has the force oflaw in Australia and governs all ‘international arbitrations’ asdefined in article 1(1). The parties may, however, choose to opt outof the Model Law under section 21 of the IAA, in which case theproceedings will be governed by the relevant state or territoryarbitration legislation (CAA).

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Australia?

Under both the Model Law as well as the CAA, arbitrators aregenerally free to conduct the proceedings as they think fit, subject towhere the parties agree otherwise. However, there are certainmandatory provisions (or requirements) from which the parties cannotderogate. For example, arbitrators must ensure that the parties aretreated with equality and that each party is given a full opportunity topresent its case (article 18 Model Law). Further, under article 24(2) ofthe Model Law, parties must be given sufficient notice in advance ofany hearing and of any meeting of the arbitral tribunal. This can beregarded as a mandatory provision as it impacts directly on therequirements of due process and natural justice.In respect of domestic arbitrations under the CAA, arbitrators mayconduct proceedings in such a manner as they think fit, subject toprovisions of the CAA (section 14 of the CAA). Although this maybe interpreted to mean that mandatory provisions must be followed, inpractice there are only a few mandatory provisions concerning thearbitral procedure set out in the CAA. At common law there is arequirement that judicial proceedings conform with principles of dueprocess and natural justice. This also applies to arbitral proceedings.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Australia? What isthe general approach used in determining whether or not adispute is “arbitrable”?

There are few statutory provisions that render certain disputes not

arbitrable. One example is section 11 of the Carriage of Goods bySea Act 1991 (Cth) which declares void an arbitration agreement ina bill of lading or similar document relating to the internationalcarriage of goods to or from Australia, unless the arbitrationagreement provides that the place of arbitration is in Australia. In some States arbitration clauses in insurance (and in NSW also re-insurance) contracts are not enforceable.The question of whether a dispute is arbitrable usually arises in thecontext of applications to stay court proceedings. Section 7(2)(b) ofthe IAA provides that the court must stay its proceedings if there isa valid arbitration agreement and the dispute involves thetermination of a matter that, in pursuance of the arbitrationagreement, is capable of settlement by arbitration. There haveoccasionally been refusals by courts to stay proceedings whichinvolve competition, bankruptcy or insolvency matters. However,courts have not found those matters to be not arbitrable per se, butrather that in those particular circumstances the scope of thearbitration agreement did not extend to such matters. For example,in the realm of the Trade Practices Act 1974 (Cth), the Australianconsumer protection and competition legislation, courts are not yetunited in their approach to arbitrability of disputes arising underthese states (see Alstom Power Ltd v Eraring Energy and Hi-FertPty Ltd v Kiukiang Maritime Carriers).

3.2 Is an arbitrator permitted to rule on the question of his orher own jurisdiction?

Yes. Article 16 of the Model Law incorporates the principle ofcompetence-competence which allows arbitrators to rule on theirown jurisdiction.

3.3 What is the approach of the national courts in Australiatowards a party who commences court proceedings inapparent breach of an arbitration agreement?

With regard to international arbitrations, article 8(1) of the ModelLaw provides that where an action is brought before a court in amatter that is the subject of an arbitration agreement, the court shall,upon request of a party, refer the parties to arbitration unless it findsthat the arbitration agreement is incapable or void, or the dispute isnot one that is capable of settlement by arbitration. A party mustraise this objection by the time it makes its first submissions on thesubstance of the dispute.In circumstances where the Model Law does not apply, section 7 ofthe IAA contains a similar provision. Under that provision, a courtshall stay the court proceedings and refer the matter to arbitrationby order upon such conditions (if any) as it thinks fit.With regard to domestic arbitrations, section 53 of the CAA givesthe court a discretionary power to stay proceedings (see alsoquestion 1.4).

3.4 Under what circumstances can a court address the issueof the jurisdiction and competence of the national arbitraltribunal?

The intervention by courts in the arbitral process is limited by virtueof article 5 of the Model Law which provides for greater autonomyof the arbitration. As mentioned above, article 16 of the Model Lawstipulates that the arbitral tribunal has competence to rule on its ownjurisdiction.If, however, the arbitral tribunal has decided the issue of jurisdictionas a preliminary question, either party may, within 30 days, request



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the court to finally decide on the issue (article 16(3) of the ModelLaw).

3.5 Under what, if any, circumstances does the national law ofAustralia allow an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

The jurisdiction of an arbitral tribunal is derived from thearbitration agreement and extends only to the parties to thatagreement. One exception to this rule is sometimes found in relation to groupsof companies where a parent company (or another controllingentity) may be bound by the arbitration agreement entered into byits subsidiary (or controlled entity). Australian courts have been very reluctant to recognise thisdoctrine, but the issue has yet to be finally decided by the courts(see Qintex Australia Finance Limited v Schroders AustraliaLimited).However, there has been Australian authority suggesting that a non-signatory third party can be bound in case of fraud or where thecompany structure used when entering into the arbitrationagreement was a sham or façade, or where the company wasincorporated for the purposes of masking the real purpose of theparent company (see Sharrment Pty Ltd v Official Trustee inBankruptcy and Brewarrana Pty Ltd v Commissioner of Highways).

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Australia and what is thetypical length of such periods? Do the national courts ofAustralia consider such rules procedural or substantive,i.e., what choice of law rules govern the application oflimitation periods?

Each State and Territory has its own act governing limitationperiods. These are:

Limitation Act 1985 (ACT).Limitation Act 1969 (NSW).Limitation Act (NT).Limitation of Actions Act 1974 (Qld).Limitation of Actions Act 1936 (SA).Limitation Act 1974 (Tas).Limitation of Actions Act 1958 (Vic).Limitation Act 1935 (WA).

Although the wording differs between the Acts, in substance theyall stipulate that the limitation period with regard to thecommencement of arbitration proceedings depends on nature of theunderlying cause of action which is the subject of those proceedings(sections 47 (ACT), 70 (NSW), 46 (NT), 41 (Qld), 33 (Tas) and 28(Vic)). In Australia, limitation periods are regarded as a matter ofsubstantive law. This is stipulated by section 5 of the uniformChoice of Law (Limitation Periods) Acts in New South Wales, theNorthern Territory, Queensland, Victoria and Western Australia.The Act also provides that if the substantive law in an arbitration isthe law of an Australian State or Territory, or the law of NewZealand, the limitation periods in those respective places will applyin respect of the arbitration proceedings.

4 Choice of Law Rules

4.1 How is the law applicable to the substance of a disputedetermined?

For international arbitrations under the Model Law, article 28(1)provides that the tribunal should decide disputes in accordance withthe ‘rules of law’ which were chosen by the parties as applicable tothe substance of the dispute, whereby any designation of the law orlegal system of a particular State shall be regarded as directlyreferring to the substantive law of that State and not its conflict oflaw rules (unless otherwise expressed). Failing any designation bythe parties, the arbitrator shall apply the law determined by theconflict of law rules which it considers applicable. An arbitraltribunal may only decide ex aequo et bono or as amiablecompositeur in circumstances where the parties have expresslyauthorised it to do so.With regard to arbitration proceedings conducted under the CAA,an arbitrator is required to make any determination in accordancewith the law (section 22(1) of the CAA). Only in circumstanceswhere the parties have agreed in writing, the arbitrator maydetermine any question that arises for determination in the course ofthe proceedings by reference to considerations of a general justiceand a fairness (section 22(2) of the CAA).

4.2 In what circumstances will mandatory laws (of the seat orof another jurisdiction) prevail over the law chosen by theparties?

There is no universal answer to this question. However, statutes suchas the Trade Practices Act 1974 (Cth) include mandatory provisionsfrom which Australian parties and Australian proceedings may not optout by choosing a foreign law to apply in circumstances where theTrade Practices Act would otherwise be applicable.

4.3 What choice of law rules govern the formation, validity,and legality of arbitration agreements?

Where the parties have chosen the specific laws to apply to theirarbitration agreement, that set of law prevails. In the absence of aparticular choice made by the parties the arbitrator will usually(although not bound to) apply the closest connection test with regardto the law applicable to the formation and validity of the arbitrationagreement. Although this will often point to the law of the seat of thearbitration there have been circumstances in which arbitrators havefound that a different law has a much closer connection to thearbitration agreement and applied the law other than the law of theseat of jurisdiction in respect of the arbitration agreement.

5 Selection of Arbitral Tribunal

5.1 Are there any limits to the parties’ autonomy to selectarbitrators?

No. The parties are free to appoint the arbitrator of their choice, todetermine the number of arbitrators and to set out the procedure to befollowed for their appointment. Furthermore, the parties are free tostipulate particular qualifications which the arbitrators shall possess.

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5.2 If the parties’ chosen method for selecting arbitrators fails,is there a default procedure?

Yes. There are default procedures under both the Model Law andthe CAA.With regard to international arbitrations, article 11(3) of the ModelLaw provides that, subject to the parties agreeing otherwise, eachparty shall appoint one arbitrator, and the two arbitrators thusappointed shall appoint the third arbitrator.In relation to domestic arbitrations, sections 6, 7 and 8 of the CAAtogether provide a default procedure for the appointment. Section7 of the CAA provides that in the absence of an agreed appointmentprocess, the parties shall jointly agree on an arbitrator. (Note thatsection 6 of the CAA provides for a single arbitrator unless agreedotherwise.)

5.3 Can a court intervene in the selection of arbitrators? If so,how?

Under article 11(3) of the Model Law, a court may only intervene inthe selection and appointment of arbitrators if a party fails to appointthe arbitrator within 30 days of receipt of the request to do so from theother party, or if the two party-appointed arbitrators fail to agree on athird arbitrator within 30 days of their appointment. Unless the partieshave agreed to extend this time period, the appointment shall be made,upon the request of the party, by the Supreme Court of the state or theterritory in which the arbitration is held. In addition, article 11(4) of the Model Law provides that where: (i) aparty fails to comply with the agreed appointing procedure; (ii) theparties, or the two arbitrators, are unable to reach an agreementexpected of them under such procedure; or (iii) a third party, includingan institution, fails to perform any function entrusted to it under anysuch procedure, each party may request the Supreme Court of theState or Territory in which the arbitration takes place to take necessarymeasures for the appointment of the arbitrator or tribunal.For domestic arbitrations, in case of persisting default of one party, thecourt has the power to fill any vacancy in the arbitral tribunal pursuantto section 10 of the CAA upon the application of the other party.

5.4 What are the requirements (if any) as to arbitratorindependence, neutrality and/or impartiality?

Under article 12(2) of the Model Law, an arbitrator may bechallenged if circumstances exist which give rise to justifiabledoubts as to their impartiality or independence, or if the arbitratordoes not possess the agreed qualifications.At common law, Australian courts apply the reasonable suspicion orreasonable apprehension test whereby suspicion is established if aparty or the public would reasonably consider the arbitrator not todecide the dispute in a fair and unprejudiced manner (Livesey v NewSouth Wales Bar Association). The test in article 12(2) of the Model Law has now been accepted asa standard for domestic arbitrations in this respect (Gascor v Ellicott).

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Australia?

Article 12 of the Model Law provides that a person who may beappointed as an arbitrator shall immediately disclose potentialconflicts of interest likely to give rise to doubts as to his impartialityor independence. This is a continuing obligation throughout thearbitration.

Although no statutory rules exists which describe the arbitrators’disclosure requirements and guidelines in respect of conflicts ofinterest, the IBA Guidelines on Conflict of Interest are generallyaccepted and applied by arbitrators (and arbitral institutions)throughout Australia.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Australia? If so, do those laws or rules applyto all arbitral proceedings sited in Australia?

The parties are free to tailor the rules of procedure to their particularneeds subject to basic requirements that provide for equality andfairness. Most parties agree to a set of institutional or ad hoc ruleswhich they may modify. There is no restriction on whichprocedural rules may be chosen by the parties for an arbitrationconducted in Australia. In the absence of a choice of a particular setof rules, the Model Law provides the framework for theproceedings. In the event that the parties opted-out of the ModelLaw, the CAA sets out the procedure.

6.2 In arbitration proceedings conducted in Australia, are thereany particular procedural steps that are required by law?

The mechanism for commencing arbitral proceedings dependslargely on what the parties have agreed to, in particular whicharbitration rules they have chosen.International arbitration proceedings are usually initiated by anotice of arbitration which is submitted to the respondent (or theinstitution). The statement of claim is to be submitted within thetime agreed by the parties or as determined by the arbitral tribunal(article 23 of the Model Law). Failure to do so will result in thetermination of the proceedings (article 25 of the Model Law).According to article 21 of the Model Law, the arbitration is deemedto have commenced on the date when the request for arbitration isreceived by the respondent.

6.3 Are there any rules that govern the conduct of anarbitration hearing?

For arbitrations conducted under the Model Law, article 24 requiresa tribunal to hold a hearing upon request by a party. Other thanwhat is required to give effect to the principles of proceduralfairness and natural justice, there are no rules as to how the hearingshall be conducted.For domestic arbitrations, section 14 of the CAA provides that,subject to the arbitration agreement and any mandatory provisionsin the CAA (of which there are few), the arbitrator may conductproceedings in such manner as they think fit.

6.4 What powers and duties does the national law of Australiaimpose upon arbitrators?

Arbitrators have an obligation to ensure that the parties are treatedequally and that each party is given a proper opportunity to present itscase (article 18 of the Model Law). Article 24(2) of the Model Lawmandates that arbitrators give proper notice in advance of any hearingor meeting. Furthermore, arbitrators are under a continuing obligationthroughout the arbitration to immediately disclose any circumstancesto the parties which could give rise to justifiable doubts as to theirimpartiality and independence (see also question 5.5).



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6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Australia and, if so,is it clear that such restrictions do not apply to arbitrationproceedings sited in Australia?

Australian laws do not impose restrictions on the nationality orresidency of arbitrators provided that all arbitrators are independentand impartial.

6.6 To what extent are there laws or rules in Australiaproviding for arbitrator immunity?

Under section 28 of the IAA, arbitrators cannot be held liable innegligence for anything done or omitted to be done in the course oftheir duty. However, an arbitrator may be held liable for fraud. In respect of domestic arbitrations, section 51 of the CAA containsa similar provision.

6.7 Do the national courts have jurisdiction to deal withprocedural issues arising during an arbitration?

The courts’ power under the Model Law is very restricted.However under the Model Law courts may:

appoint arbitrators where the parties or the two party-appointed arbitrators fail to agree on an arbitrator (articles11(3) and 11(4));decide on a challenge of an arbitrator if so requested by thechallenging party (article 13(3));decide, upon request by a party, on the termination of amandate of an arbitrator (article 14);decide on the jurisdiction of the tribunal, where the tribunalhas ruled on a plea as a preliminary question, and a party hasrequested the court to make a final determination on itsjurisdiction (article 16(3));assist in the taking of evidence (article 27);set aside an arbitral award (article 34(2)); andgrant interim measures of protection (article 9).

The powers of the courts under the CAA are slightly broader. Forexample, in addition to the powers in relation to the appointmentand challenge of arbitrators, a court may, on the application of aparty, issue subpoenas under section 17 of the CAA.Further, under section 40 of the CAA, the Supreme Court has thepower to determine any question of law arising in the course of thearbitration, given that the arbitrator has consented to suchapplication by a party, or where all parties have agreed to this.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Australia (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

An arbitration agreement comprising multiple parties must complywith the general form requirements for arbitration agreements and,most importantly, all parties must be party to the arbitrationagreement. Parties should be aware that neither the IAA, the ModelLaw nor the CAA provide for a specific procedure for theappointment of arbitrators in multiparty disputes. In circumstanceswhere multiparty disputes arise, parties should therefore agree on aset of procedural rules that contain special appointment provisionsfor those circumstances - for example, the arbitration rules of the

Australian Centre for International Commercial Arbitration(ACICA).A consolidation of proceedings is envisaged both in the CAA(section 26) and in an optional provision of the IAA (section 24).The requirements for consolidation are set out in great detail inthese provisions and generally require the proceedings to be related.

6.9 What is the approach of the national courts in Australiatowards ex parte procedures in the context of internationalarbitration?

The only context in which a court would directly need to considerex parte proceedings is at the stage of the enforcement ofinternational arbitration agreements and/or foreign awards. Suchproceedings are then subject to the domestic court rules on ex parteproceedings.In relation to ex parte considerations in international arbitrationproceedings, article 25 of the Model Law allows the tribunal tocontinue proceedings in the absence of a party if due notice wasgiven to that party (see paragraph 33 of the explanatory notes on theModel Law). An Australian court will therefore uphold an awardrendered in those circumstances if it finds that the tribunal gave duenotice.

7 Preliminary Relief and Interim Measures

7.1 Under the governing law, is an arbitrator permitted toaward preliminary or interim relief? If so, what types ofrelief? Must an arbitrator seek the assistance of a court todo so?

Unless parties have agreed otherwise, article 17 of the Model Lawallows the tribunal to order any party to take such interim measureof protection as the arbitral tribunal considers necessary in respectof the subject matter of the dispute. The arbitral tribunal mayrequire a party to provide appropriate security in connection withsuch a measure.While the tribunal is not required to seek assistance from a nationalcourt when granting interim relief, the court’s involvement isindispensable:

when an order is sought against a third party that is not asignatory to the arbitration agreement; orwhere a party seeks to enforce an interim order (only if theparties have adopted the optional provision in section 23 ofthe IAA which provides for the enforcement of interimmeasures under chapter VIII of the Model Law).

7.2 Is a court entitled to grant preliminary or interim relief inproceedings subject to arbitration? In whatcircumstances? Can a party’s request to a court for reliefhave any effect on the jurisdiction of the arbitrationtribunal?

Article 9 of the Model Law provides that it is not incompatible withan arbitration agreement for a party to request, before or duringarbitral proceedings, an interim measure of protection from a courtand for the court to grant such a measure.In general, the CAA allows for a higher level of intervention by thecourts than does the Model Law. Section 47 of the CAA confers onthe court the same power to make interlocutory orders for thepurposes of, and in relation to, arbitration proceedings than it doesfor proceedings in the courts. However, as pointed out in NauruPhosphate Royalties Trust v Matthew Hall Mechanical and

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Electrical Engineers Pty Limited, the purpose of section 47 is not toallow courts a greater influence in the arbitral proceedings, butrather to facilitate and support arbitral proceedings.

7.3 In practice, what is the approach of the national courts torequests for interim relief by parties to arbitrationagreements?

Where appropriate, Australian courts have been open to assistingarbitral proceedings whilst preserving and respecting the exclusivejurisdiction of the arbitral tribunal. Accordingly, Australian courtsare very reluctant to interfere with arbitral proceedings (see alsoquestion 7.2).

7.4 Does the national law allow for the national court and/orarbitral tribunal to order security for costs?

Article 17 of the Model Law is worded restrictively in that it allowsinterim measures only with regard to the ‘subject matter’ of thedispute. Therefore, it is unlikely that an arbitrator will be entitledto order security for costs of the proceedings unless the parties haveexpressly agreed so (see, for example, article 28.8(e) of the ACICAArbitration Rules which expressly allows for security for costs to beordered).

8 Evidentiary Matters

8.1 What rules of evidence (if any) apply to arbitralproceedings in Australia?

Arbitrators conducting proceedings under the Model Law are notbound by the local rules of evidence. Instead, they may freelydetermine the admissibility, relevance, materiality and weight of theevidence (article 19(2) of the Model Law).The CAA also provides a liberal approach with regard to applyingthe rules of evidence (section 19(3) of the CAA), in that arbitratorsmay inform themselves in such a manner as they think fit. Partiescan, however, by agreement require the arbitrator to apply certainrules of evidence.

8.2 Are there limits on the scope of an arbitrator’s authority toorder the disclosure of documents and other disclosure ofdiscovery (including third party disclosure)?

Arbitrators may order parties to produce documents. However,arbitrators may only make such orders with respect to the parties tothe proceedings. Further, article 27 of the Model Law allows thetribunal, or a party with the tribunal’s approval, to request a court toassist in the taking of evidence.Under the CAA, a party may obtain a court order compelling aperson to produce documents.

8.3 Under what circumstances, if any, is a court able tointervene in matters of disclosure/discovery?

A court may assist in the process of taking evidence upon request ofthe tribunal or of a party with the tribunal’s approval (article 27 ofthe Model Law). Such court assistance is necessary when thetribunal lacks the coercive power to enforce the order or if a non-party is concerned.

8.4 What is the general practice for disclosure / discovery ininternational arbitration proceedings?

Although there is no single approach with regard to internationalarbitrations, it has become very common in litigation and domesticarbitration in Australia to limit the discovery process by way ofclasses of documents that fall within defined categories.

8.5 What, if any, laws, regulations or professional rules applyto the production of written and/or oral witness testimony?For example, must witnesses be sworn in before thetribunal? Is cross-examination allowed?

Unless the parties have agreed otherwise, article 24 of the Model Lawallows the arbitrator to decide whether evidence is produced in writtenor oral form. The rules regarding evidence procedure in domesticarbitrations are very similar to those in court proceedings. Witnessesare sworn and then examined or cross-examined. Section 19(1) of theCAA provides that, subject to a contrary intention in the arbitrationagreement, evidence before the arbitrator may be given orally or inwriting and shall, if the arbitrator so requires, be given on oath oraffirmation or by affidavit. In practice, written evidence is common.

8.6 Under what circumstances does the law of Australia treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

Questions of privilege of documents are subject to common law aswell as the Evidence Acts. Where Australian law applies to thequestion of privilege of documents in arbitration proceedings, thereare two main categories of privilege that potentially apply:

documents covered by the legal professional privilege/clientlegal privilege (comprising the so-called advice privilege andthe litigation privilege); anddocuments that have been produced for the purpose ofsettlement negotiations (without prejudice privilege).

Generally, where the content of a document (or part thereof) has beendisclosed to another party, this will constitute a waiver of privilege.However, questions in relation to waiver of privilege are far morecomplex and have constantly been the subject of court decisions.

9 Making an Award

9.1 What, if any, are the legal requirements of an arbitralaward?

Article 29 of the Model Law requires that, unless agreed otherwiseby the parties, any decision of the arbitral tribunal shall be made bya majority of its members. Signature of the majority of themembers of the tribunal is sufficient, provided that reasons for theomission of signatures are given (article 31(1) of the Model Law).Form requirements under the CAA and the Model Law differslightly. Article 31 of the Model Law requires the award to be inwriting and signed by the arbitrators. The award must containreasons, state the date and place of arbitration, and be delivered toeach party in original form.For domestic awards, section 29 of the CAA provides that if theparties agree that an award shall not be made in writing, section29(2) of the CAA provides that the arbitrators shall, upon request bya party, within seven days after making the award give that party astatement in writing signed by the arbitrator containing the termsand reasons for making the award. In contrast, the CAA does not



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require the award to mention the date and place it was made.The Supreme Court of Victoria held recently in Oil Basins Limitedv BHP Billiton Limited that insufficient reasons provided in theaward may lead to misconduct by the arbitrator(s) and to the awardbeing set aside. The Supreme Court took a rather narrow view asto what it regards as sufficient reasons. If the award is to be signed and the arbitration is conducted by morethan one arbitrator, it should be noted that the arbitrators shouldexecute the award in the presence of each other. Otherwise it maybe invalid (see Wade v Dowling).

10 Appeal of an Award

10.1 On what bases, if any, are parties entitled to appeal anarbitral award?

Under the Model Law, an application for setting aside the award isthe exclusive recourse against an award. The grounds upon whichan award may be set aside, found in article 34(2) of the Model Law,mirror the grounds for refusing recognition and enforcement of aforeign award under article V of the New York Convention.In relation to domestic arbitrations, section 38(2) of the CAA allowsfor an appeal to the Supreme Court on any question of law arisingout of an award. But an appeal may only be brought either with theconsent of all parties to the arbitration agreement or with the leaveof the Supreme Court (section 38(4) of the CAA). The grounds forgranting such leave are rather narrow.On hearing an appeal, a court may either confirm, vary or set asidethe award, or remit the award together with the Supreme Court’sopinion on the question of law to the arbitrator for reconsideration(section 38(3) of the CAA).

10.2 Can parties agree to exclude any basis of appeal orchallenge against an arbitral award that would otherwiseapply as a matter of law?

While there is no Australian authority suggesting that article 34 ofthe Model Law cannot be excluded in any way by the parties, giventhat the grounds stipulated therein touch upon questions of naturaljustice and fairness, it appears unlikely that an Australian courtwould allow parties to derogate from that provision.Section 40 of the CAA specifically permits parties to exclude orlimit the rights of appeal under section 38(2) of the CAA. Theexclusion agreement must be entered into after commencement ofthe arbitration. For certain types of contracts, such as insurance,transport and commodity contracts, restrictions on exclusionagreements apply (section 41 of the CAA).

10.3 Can parties agree to expand the scope of appeal of anarbitral award beyond the grounds available in relevantnational laws?

No. The grounds for appeal in the CAA are plenary.

10.4 What is the procedure for appealing an arbitral award inAustralia?

Unless the parties consent to the appeal, the party seeking to appealthe award will have to make an application for leave to appeal to thecompetent Supreme Court of the relevant state or territory (section38(4) of the CAA).The Supreme Court will not grant leave unless it considers that the

determination of the question of law concerned would substantiallyaffect the rights of a party to the arbitration agreement and that thereis either a manifest error of law on the face of the award or strongevidence that the arbitrator made an error of law and that thedetermination of the question may add substantially to the certaintyof commercial law (section 38(5) of the CAA).

11 Enforcement of an Award

11.1 Has Australia signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

Australia has been a signatory to the New York Convention since1975. Australia’s accession to the New York Convention is withoutreservations and extends to all of its territories other than PapuaNew Guinea. The New York Convention is annexed to and giventhe force of law by the IAA.

11.2 Has Australia signed and/or ratified any regionalConventions concerning the recognition and enforcementof arbitral awards?

No. Australia is not a signatory to any regional Conventions of sucha nature.

11.3 What is the approach of the national courts in Australiatowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

Australian courts have an excellent track record for enforcingforeign arbitral awards.Section 8 of the IAA is based on article V of the New YorkConvention and provides that foreign awards may be enforced inthe courts of a State or Territory as if the award had been made inthat state or territory in accordance with those laws.However, section 8 of the IAA only extends to awards made in aconvention country outside Australia. Where the enforcementprovisions under the IAA do not apply, enforcement may bepossible under article 25 of the Model Law.Where enforcement of awards is neither covered by the Model Lawnor the New York Convention, section 33 of the CAA may apply,which operates in a similar manner to section 8 of the IAA.

11.4 What is the effect of an arbitration award in terms of resjudicata in Australia? Does the fact that certain issueshave been finally determined by an arbitral tribunalpreclude those issues from being re-heard in a nationalcourt and, if so, in what circumstances?

An arbitral award has the same res judicata effect as a judgment anddisposes of the dispute (procedurally and substantively). Parties areprecluded from resubmitting the dispute in any forum.

12 Confidentiality

12.1 Are arbitral proceedings sited in Australia confidential?What, if any, law governs confidentiality?

In Esso Australia Resources Limited v Plowman, the High Court

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held that confidentiality, in contrast to privacy, is not implied in themere fact that parties agreed to arbitrate. An express agreement ofconfidentiality - whether separate or as part of the arbitrationagreement - is necessary for the arbitration proceedings to beconfidential.

12.2 Can information disclosed in arbitral proceedings bereferred to and/or relied on in subsequent proceedings?

As a general rule, documents produced under compulsion (forexample, by way of discovery) may not be used in any collateral orsubsequent proceedings. However, documents disclosed and/orprovided voluntarily during the arbitration are deemed to be publicunless the parties have agreed for the arbitration to be confidential(see question 11.1).

12.3 In what circumstances, if any, are proceedings notprotected by confidentiality?

In addition to the issues referred to in question 11.1, confidentialityof arbitral proceedings may be overridden by public policyconsiderations, which require that the interest of the public in thedisclosure of certain documents or information prevails over theparties’ interest in confidentiality of proceedings (seeCommonwealth of Australia v Cockatoo Dockyard Pty Ltd).

13 Remedies / Interests / Costs

13.1 Are there limits on the types of remedies (includingdamages) that are available in arbitration (e.g., punitivedamages)?

Subject to any contrary agreement between the parties, there are nolimits to the remedies that an arbitrator can award. However, thequestion whether an arbitrator can award punitive or exemplarydamages has not yet been considered by Australian courts.

13.2 What, if any, interest is available, and how is the rate ofinterest determined?

The Model Law does not contain any provision relating to an awardfor interest.Section 25 of the IAA (optional) enables the arbitrators to make anaward of interest on the whole or any part of a principal claim atsuch reasonable rate as the arbitrator determines. Compoundinterest is not authorised.Under section 26 of the IAA (optional), where the arbitrator hasmade an award for the payment of money, they may direct a partyto pay interest on any unpaid portion from the date of the award ora specified future date.For domestic arbitrations, section 31 of the CAA allows thearbitrator to award interest at a rate which does not exceed thejudgment debt rate of the Supreme Court. Compound interest is notauthorised.

13.3 Are parties entitled to recover fees and/or costs and, if so,on what basis? What is the general practice with regardto shifting fees and costs between the parties?

Section 27(1) of the IAA (optional) provides that, except whereotherwise agreed by the parties, the allocation of costs shall be atthe discretion of the arbitral tribunal.

The allocation of costs under the CAA is very similar and is left tothe discretion of the arbitrator, who may:

make directions as to who should bear the costs and themethod of payment;determine the amount of costs to be paid or arrange for anassessment of costs; oraward costs to be assessed or settled as between the partiesor as between legal practitioner and client.

In exercising discretion, the arbitrator must take into account anyrefusal or failure by a party to do all that is required by the arbitratorto enable a just award to be made (section 37 of the CAA).

13.4 Is an award subject to tax? If so, in what circumstancesand on what basis?

Whether or not an arbitral award attracts Goods and Services Tax(GST) consequences in Australia will depend on a number ofcircumstances including:

whether the payment made under an award constitutesconsideration for supply, rather than damages;if so, whether such supply is taxable, input-taxed or GSTfree;the place of residence of the parties; andthe connection of the underlying dispute with Australia.

14 Investor State Arbitrations

14.1 Has Australia signed and ratified the WashingtonConvention on the Settlement of Investment DisputesBetween States and Nationals of Other States (1965)?

Yes. The Washington Convention is annexed to the IAA (schedule 3).

14.2 Is Australia party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Australia is a party to a number of bilateral investment treaties, forexample, with China (1988), Vietnam (1991), Papua New Guinea(1991), Poland (1992), Hungary (1992), Indonesia (1993), Romania(1994), Czech Republic (1994), Philippines (1995), Laos (1995),Argentine (1997), Peru (1997), Pakistan (1998), India (2000),Egypt (2002), Lithuania (2002) and Uruguay (2003).Bilateral Investment Treaties (BITs) with Turkey, the UnitedMexican Governments and the Democratic Socialist Republic of SriLanka have been signed but are not yet in force.Australia is also party to free trade agreements with New Zealand(1989), Singapore (2003), Thailand (2005), the United States(2005), Chile (1999) and ASEAN (together with New Zealand(2009). Free Trade Agreements are under negotiation with Chinaand Malaysia and are under consideration with the GulfCooperation Council and Japan. With the exception of theAustralia-US Free Trade Agreement, all other Free TradeAgreements offer investor-state arbitration for the resolution ofdisputes.Australia has signed the Energy Charter Treaty with a declarationunder article 45(2) not accepting provisional application of thetreaty and declarations concerning trade-related investmentmeasures. The treaty has not yet been ratified.



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14.3 Does Australia have standard terms or model languagethat it uses in its investment treaties and, if so, what isthe intended significance of that language?

To the extent possible, language used in BITs is largely uniform. Inparticular, dispute resolution clauses in all of the BITs are structuredsimilarly in that they propose negotiation or amicable settlementprocedures before referring disputes to arbitration.

14.4 In practice, have disputes involving Australia beenresolved by means of ICSID arbitration and, if so, whathas the approach of national courts in Australia been tothe enforcement of ICSID awards and how has thegovernment of Australia responded to any adverse awards?

Australia facilitates and supports dispute resolution under ICSID.While to date the practical importance of ICSID in Australia hasbeen marginal, the use of ICSID dispute settlement procedures islikely to rise in the near future due to the increasing number ofinvestment treaties to which Australia is signatory.

14.5 What is the approach of the national courts in Australiatowards the defence of state immunity regardingjurisdiction and execution?

Australia is committed to its obligations under international treaties.National courts are prepared to readily enforce proceedings againstAustralian federal or state entities making any defence of immunitysubject to exceptional circumstances only. Both the IAA (section 2B) and the CAA (section 5) specificallystate that the Crown is bound by the Act.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Australia? Are certain disputescommonly being referred to arbitration?

Due to growing international business networks and Australia’sstrong economic ties with booming Asian countries, Australian (andforeign) companies are becoming increasingly aware of theimportance and advantages of international arbitration.ACICA is arguably the most prominent arbitration institution inAustralia. ACICA administers domestic and internationalarbitrations conducted under the ACICA Arbitration Rules and alsoprovides a range of other arbitration-related services.Disputes in the construction industry are still most commonlyreferred to arbitration and an increasing number of thesearbitrations have the seat within Australia.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Australia, such as pending orproposed legislation that may substantially change the lawapplicable to arbitration?

In late 2008 the government announced a review of Australia’sinternational arbitration legislation. A revised IAA is expected inlate 2009.Further, ACICA recently launched the Australian Maritime andTransport Arbitration Commission, which will provide specialistservices to the business community in this area.

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Doug Jones

Clayton UtzLevel 29, No. 1 O’Connell StreetSydney, NSW 2000Australia

Tel: +61 2 9353 4120Fax: +61 2 8220 6700Email: [email protected]: www.claytonutz.com

Doug Jones is an international infrastructure and dispute resolutionlawyer. He is a Sydney-based partner in the Australian law firm ofClayton Utz where he heads the international arbitration and majorprojects groups. Doug has extensive experience as arbitrator and counsel ininternational and domestic arbitrations under the ICC, LCIA, AAA,KLRCA, SIAC, and ACICA Rules. He has also been regularly involvedin the use of ADR including mediation in construction industrydisputes. He is vice president of the Chartered Institute of Arbitrators(London), president of the Australian Centre for InternationalCommercial Arbitration, a Foundation Fellow and graded arbitratorof the Institute of Arbitrators & Mediators Australia, an arbitratormember of the Society of Construction Arbitrators (London) and amember of the Australian Executive Committee of the DisputeReview Board Foundation. He is co-editor-in-chief of theInternational Construction Law Review, editorial board member ofthe International Trade and Business Law Review, editorial boardmember of Global Arbitration Review, and a member of theMelbourne Juris Doctor Advisory Board of the University ofMelbourne.He is professorial fellow in the Law School of Melbourne University,adjunct professor of the Graduate School of Law, The University ofNotre Dame, Australia and adjunct professor of law, MurdochUniversity, Australia.In January 1999 he was made a member of the Order of Australiain recognition of his services to construction law and disputeresolution.

Björn Gehle

Clayton UtzLevel 29, No. 1 O’Connell StreetSydney, NSW 2000Australia

Tel: +61 2 9353 4783Fax: +61 2 8220 6700Email: [email protected]: www.claytonutz.com

Björn Gehle is a Special Counsel in Clayton Utz’ InternationalArbitration Group. Prior to joining the firm in 2002, Björn workedfor major international law firms in Frankfurt, Munich and London.Björn has advised and represented clients in disputes throughoutAsia, Europe, Africa, the Middle East and Australia, and hasconsiderable experience in conducting arbitrations under variousarbitration rules including ICC, LCIA, ACICA, DIS, SIAC andUNCITRAL. He regularly advises government and private sectorclients in relation to disputes involving major infrastructure projects.Other areas of specialisation include international trade andprotection of foreign investment.He is a member of the CIArb, a member of the global advisory boardof the ICDR Y&I, a member of the German Institution of Arbitration(DIS), the Swiss Arbitration Association, an honorary member of theCentre for Transnational Law (CENTRAL) and a founding memberand co-chair of the Australasian Forum for International Arbitration(AFIA). Björn has published widely on international arbitration topics and isregularly invited as speaker at conferences and university lectures.

Clayton Utz was founded in 1833 and today is one of the largest and most successful commercial law firms in Australia.We have 213 partners, 904 legal staff and 880 shared services staff based in six offices around the country, in Sydney,Melbourne, Brisbane, Canberra, Darwin and Perth. Our clients include Australia’s largest corporations and financialinstitutions as well as Federal and State government agencies. We also maintain strong links with legal firms acrossthe globe through membership of the Lex Mundi and Pacific Rim Advisory Council (PRAC) networks.

Clayton Utz is a full-service firm organised under three core departments: Corporate, Banking & Financial Services;Property, Environment and Construction; and Litigation and Dispute Resolution. Within these departments, specificindustry practice groups focus on the needs of individual sectors of commerce and industry and specific areas of legalpractice. We have been a key player in many of Australia’s largest and most complex projects, with clients includingFederal and State Government departments and many of Australia’s top 100 companies.

The International Arbitration Group at Clayton Utz is one of the leading practices in the Asia-Pacific region. The teamis known for its world-class practitioners. Doug Jones and Michael Pryles are well known throughout the InternationalArbitration community. We have advised and represented clients in major international transactions, projects anddisputes throughout the world under all of the major arbitration rules and regimes.

Clayton Utz is committed to the development and study of International Arbitration and international dispute resolutionin Australia and the Asia-Pacific region. In association with the University of Sydney, Clayton Utz holds an annualInternational Arbitration Lecture, with previous presenters including Lord Mustill, Fali Nariman, Rusty Park, ArthurMarriott QC, Karl-Heinz Böckstiegel, Gabrielle Kaufmann-Kohler and, most recently, Jean-Claude Najar.

For further information on Clayton Utz’ International Arbitration practice, please visit www.claytonutz.com.

For further information on the International Arbitration Lecture, please visit www.ialecture.com.


22

Chapter 4



Brunei


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Brunei?

The enabling Brunei Legislation which gives effect to the 1958 NewYork Convention on the Recognition and Enforcement of ForeignArbitral Awards (‘’New York Convention’’) is the Arbitration Act1994 (CAP 173 Rev. 1999). Section 2 of the Brunei Act requires anarbitration agreement to be in writing. Section 2 of the Brunei Act isinterpreted in a wide and practical manner and it does not mean thatin all cases the written agreement must be signed by both parties. Ifa party were to affirm a contract by suing upon the terms of thecontract and referring to an arbitration agreement clause that was alsorelied upon by the opposing party, they are bound by the arbitrationclause even though one of the parties may not have signed the actualcontract. Part IV of the Act obliges the Brunei courts to uphold andenforce New York Convention awards rendered in a Convention Stateunless there are very clear reasons to the contrary.For the purposes of enforcement of foreign Convention Stateawards under the New York Convention, the legal requirements thatare required are defined and contained in Article II(2) of the NewYork Convention.


No there are no special requirements or formalities that are requiredin such cases.


Parties are generally advised to specify the seat of arbitration, thenumber of arbitrators, language of arbitration, the procedures forthe appointment of the arbitration tribunal, the proper law of thearbitration agreement, the procedural rules of arbitration, and wherepossible, whether there are any institutional or other arbitrationrules the parties wish to rely upon.


Section 8 of the Brunei Act itself makes it mandatory for a Bruneicourt to make an order to stay the proceedings unless the court is

satisfied that “the arbitration agreement is null and void, inoperativeor incapable of being performed or that there is not in fact anydispute between the parties with regards to the matter agreed to bereferred”. Commercial Arbitration is becoming increasinglypopular in Brunei. The Brunei courts have taken a very pro-arbitration stance to the enforcement of arbitration agreements andwill almost always automatically order a stay of court proceedingswhere there is an arbitration agreement e.g., see, Ematco Sdn Bhdv. United Engineers (B) Sdn Bhd [2000] JCBD 44. The courts willnot order a stay if there are strong reasons for doing so such as theinvolvement of fraud, crime or if there is in fact no real arbitrabledispute to be decided.


The Brunei courts are very supportive of ADR agreements such asArbitration agreements. They are also supportive of mediationagreements in general.


2.1 What legislation governs the enforcement of arbitrationproceedings in Brunei?

The Brunei Arbitration Act 1994 (CAP 173 Rev. 1999) governs theenforcement of arbitration agreements in Brunei Darussalam.Another important legislation that may affect the enforcement ofarbitral awards is the Emergency (Limitation) Order, 1991.


The Brunei Arbitration Act applies to both domestic and internationalarbitrations. Part III of the Act deals with the enforcement of domesticBrunei arbitral awards while Part IV of the Act deals withEnforcement of the New York Convention 1958 awards.


The Brunei Arbitration Act is based on the old English Arbitration Act1950 and not on the United Nations Commission on InternationalTrade Model Law on International Commercial Arbitration

Dr. Colin Ong

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Dr. Colin Ong Legal Services Brunei

(UNCITRAL Model Law). Traditionally, many of the statutory lawsof Brunei Darussalam are based upon English Acts. As such, althoughmany of the key principles relating to both the current Brunei Act andthe UNCITRAL Model Law are the same, many of the features are infact very significantly different. For example, there is no Kompetenz-Kompetenz principle under the Brunei Act. Brunei is likely tointroduce two new Arbitration Acts in August 2009 to replace thecurrent Arbitration Act. The widely anticipated Arbitration Order,2009 and the International Arbitration Order, 2009 has adopted theUNCITRAL Model Law and has adopted many of the newrecommendations of the UNCITRAL including the increased powersof the arbitrator to grant Interim Measures.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Brunei?

There are no such mandatory rules governing internationalarbitration proceedings. The provisions in the Arbitration Act applyequally to international arbitrations. Generally, arbitrators inBrunei will adopt international “best practices” and guidelines aspart of the arbitration procedure.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Brunei? What isthe general approach used in determining whether or not adispute is “arbitrable”?

In general, all “commercial” nature disputes are arbitrable. Anymatter that can be arbitrated is capable of being privately decidedby the parties and any remedies and rights over which the partieshave free disposition can be referred to arbitration.Almost all matters can be referred to arbitration except those relatedto issues like citizenship, legitimacy or children, marriage and otherfamily law issues, criminal liability, winding up of companies andmattes where it is contrary to public policy to have such matters tobe determined by way of arbitration.


The short answer is no. Unless parties have agreed to submitthemselves to a seat with a UNCITRAL Model Law in their arbitrationagreement and agree have to have the physical place of arbitration tobe conducted in Brunei, unlike Article 16(1) of the Model Law whichallows the Kompetenz-Kompetenz principle, the current Brunei Actdoes not allow an arbitrator to rule on his or her own jurisdiction.

3.3 What is the approach of the national courts in Bruneitowards a party who commences court proceedings inapparent breach of an arbitration agreement?

The court would usually stay the court proceedings in favour ofArbitration.


Section 33 of the Brunei Act allows the High Court the power toremove an arbitrator if the arbitrator has misconducted himself or

the proceedings of the arbitration agreement. Section 34 of the Actallows the High Court the power to remove an arbitrator if thearbitrator has not acted impartially or if there is an allegation offraud alleged by one of the parties.

3.5 Under what, if any, circumstances does the national law ofBrunei allow an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

Arbitrators in Brunei have no power nor jurisdiction to directly actagainst a person who is not a party to an arbitration agreement. Anarbitrator has to seek the assistance of a High Court Judge to assistordering a subpoena of attendance of a witness or documents.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Brunei and what is thetypical length of such periods? Do the national courts ofBrunei consider such rules procedural or substantive, i.e.,what choice of law rules govern the application oflimitation periods?

There is no specific law or rules that prescribe for limitation periodsfor the commencement of arbitration in Brunei. The Limitation Actprescribes limitation for causes of action and allows a six-yearlimitation for actions for breach of contract. Limitation under theLimitation Act will apply equally to commencing arbitrationproceedings.



Under the current Arbitration Act, where the seat of the arbitrationis in Brunei, a domestic arbitration dispute shall be decided inaccordance with the substantive laws of Brunei. In respect ofinternational arbitration, the dispute will be determined accordingto the choice of law as agreed upon by the parties. Where partieshave not elected any choice of law in an international arbitration,the law applicable shall be determined by the conflict of laws rules


General circumstances and factors such as illegality and mandatoryrules pertaining to public policy will be considered.


Where parties have not elected for any express choice of law in thearbitration agreement, the agreement will be determined inaccordance with the choice of law that has been expressly selectedto govern the substantive agreement. Where no choice of law hasbeen selected, the applicable law governing the arbitrationagreement shall be the law of the country with which thesubstantive contract is most closely connected. This is where thecontract was concluded or is to be performed or is the place ofresidence of one of the parties.



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No. The Parties are free to choose who they wish to have asarbitrator and to select the number of arbitrators.


In the event that the parties fail to agree on selecting an arbitrator orthe procedure of appointing the arbitrator, the current Act will allowthe High Court to appoint the arbitrator.


Yes, but only where the party has failed to agree upon theappointment of an arbitrator.


An arbitrator, who is appointed by a party or by the parties, mustdisclose any circumstances which may give rise to any justifiabledoubts as to his impartiality or independence. The duty of thisperson continues throughout the course of the arbitration. In theevent that there are justifiable doubts as to his impartiality, anunhappy party may attempt to challenge his appointment. Further,an arbitrator may also be challenged where he does not have therequisite qualifications as agreed by the parties. The ArbitrationAssociation Brunei Darussalam prescribes that the IBA Guidelineson the Independence of Arbitrators should be referred to in respectof any challenges to an arbitrator’s independence and impartiality.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Brunei?

There are no specific rules or guidelines in the Act for disclosure ofany potential conflicts of interest by an arbitrator, which areimposed by law or arbitration institution. The ArbitrationAssociation Brunei Darussalam prescribes that the IBA Guidelineson the Independence of Arbitrators should be referred as a guidelinefor disclosure of conflicts of interest.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Brunei? If so, do those laws or rules applyto all arbitral proceedings sited in Brunei?

The current Act is the only governing law relating to all arbitrationproceedings in Brunei.

6.2 In arbitration proceedings conducted in Brunei, are thereany particular procedural steps that are required by law?

The Brunei High Courts have the power to grant such preliminaryor interim relief in proceedings subject to arbitration. The High

Court also has the power to order a writ of habeus corpus adtestificandum and can bring up a prisoner for examination before anarbitrator pursuant to Section 17(5) of the Act. The High Court canalso order a third party to give evidence or to produce documents tobe handed before an arbitrator. It is important to note the limitationon the High Court’s power in Section 17(7) of the Act which makesit clear that the High Court must not prejudice any similar powersthat may be vested in an arbitrator.


The parties are free to agree on the procedure to be followed by thearbitral tribunal in the conduct of the arbitration proceedings. In theevent that the parties fail to agree on the procedure for thearbitration hearing, the arbitrators may then conduct the arbitrationin a manner that it considers appropriate. This may include thepower to make orders for disclosure.

6.4 What powers and duties does the national law ofBruneiimpose upon arbitrators?

The Arbitration Act confers limited powers on arbitrators and doesnot currently allow the arbitrator to rule on its own jurisdiction.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Brunei and, if so, isit clear that such restrictions do not apply to arbitrationproceedings sited in Brunei?

Under the current Act, a person who is not an advocate and solicitorunder the Legal Profession Act and does not hold a valid PracticingCertificate may not appear and act as an advocate and solicitor inany legal matters in Brunei. The Arbitration Association BruneiDarussalam has for years pressed for a change in the currentArbitration Act.

6.6 To what extent are there laws or rules in Brunei providingfor arbitrator immunity?

An arbitrator is not liable for any act or omission in respect of thedischarge of his functions as an arbitrator unless he has been shownto have acted in bad faith.


Under the current Arbitration Act, the national courts do havejurisdiction to deal with procedural issues arising during anarbitration. However, once the new Arbitration legislation isimplemented, there will be very limited powers of the Court tointervene in procedural matters once arbitration has commenced.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Brunei (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

No, there are not.

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6.9 What is the approach of the national courts in Bruneitowards ex parte procedures in the context of internationalarbitration?

The current Act does not encourage ex parte applications to beheard.



No. The Arbitrator has the power to make interlocutory orders orto order disclosure or discovery of the documents sought or to issuesubpoenas to order a witness to appear before the arbitral tribunalwith the assistance of a court. Only the High Court has that powerto order preliminary or interim relief under the current Act.


Yes, a court may order: (a) security for costs; (b) discovery ofdocuments and interrogatories; (c) the giving of evidence byaffidavit; (d) examination on oath of any witness before an officerof the Court; (e) the preservation, interim custody or sale of anygoods which are the subject matter of the reference; (f) securing theamount in dispute in the reference; (g) the detention, preservation orinspection of any property or thing which is the subject of thereference; and (h) interim injunctions or the appointment of areceiver. The party’s request to a court for relief has no adverseeffect on the jurisdiction of the arbitration tribunal.


The Brunei courts tend to intervene only to protect the arbitralprocess. The courts would only use its powers to grant interimrelief where there is a request by the arbitral tribunal.


Yes, the national law allows the national court to order security forcosts.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Brunei?

The arbitrators will have to conduct the proceedings in accordanceto the rules of natural justice. The arbitral tribunal will generallyrefer to and rely on established common law rules of evidence andauthorities.


An arbitrator currently has very limited powers to order disclosureand production of documents within the possession or power of aparty in the arbitration. He cannot make any orders for discoveryagainst third parties.


The Brunei courts will only intervene if the arbitral tribunalrequests for assistance or where there is a complete refusal by theparty against whom an order for discovery is made to comply withthat order.


In practice, the test is that the document is directly relevant to theproceedings. Where a document that is sought for is relevant to theproceedings, discovery would generally be ordered.


Due process must be observed at all times and witnesses must besworn in and be cross-examined by the opposing party.

8.6 Under what circumstances does the law of Brunei treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

A document will be deemed to be protected by privilege if itdiscloses any communications made between a party and hislawyers for the purpose of litigation. Privilege may only be waivedwith the consent of the party.

9 Making an Award


An arbitral award must be made in writing, reasoned and must besigned by the arbitral tribunal. Where there is more than onearbitrator, the majority of the arbitrators must sign the award andstate the reason for any omitted signature.



Currently, all awards are appealable to the High Court.



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Yes, they can.


Yes, they can.

10.4 What is the procedure for appealing an arbitral award inBrunei?

A court judgment or order recognising a foreign award may beexecuted against assets as soon as it is served on the debtor.However, a party may appeal against the court judgment or order bybringing an originating motion. The notice of appeal must be filedand served within one month of the date on which the judgment ororder appealed against was pronounced under the Rules of theSupreme Court 2001, Order 57 R. 4.A party against whom a judgment has been made may apply to thecourt for a stay of execution of the judgment or order due tosubsequent events, and the court may accede on such terms as itthinks fit. Although there are no fixed grounds, this generallyhappens when the appellant can show strong prospects of success inthe appeal or other special circumstances. A payment to the courtmay be required. Under the Rules of the Supreme Court 2001, Order45 R. 11. If the stay is granted, execution is suspended until theappeal has been disposed of or the stay is subsequently lifted by thecourt. Where leave is granted to appeal to the Court of Appeal,execution is automatically stayed pending the resolution of the appealunder the Rules of the Supreme Court 2001, Order 45 and 47.


11.1 Has Brunei signed and/or ratified the New York Conventionon the Recognition and Enforcement of Foreign ArbitralAwards? Has it entered any reservations? What is therelevant national legislation?

Yes, Brunei has both signed and ratified the New York Conventionon the Recognition and Enforcement of Foreign Arbitral Awardsand the only reservation is reciprocity

11.2 Has Brunei signed and/or ratified any regional Conventionsconcerning the recognition and enforcement of arbitralawards?

No, it has not.

11.3 What is the approach of the national courts in Bruneitowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

Order 69 Rule 7 of the Rules of the Supreme Court provide that anapplication for leave to enforce an award may be made ex parte butthe court hearing the application may require an inter partessummons to be issued. In practice, the courts do not generally givepermission to proceed ex parte, unless the enforcing party can

demonstrate exceptional circumstances such as a real danger andlikelihood that the party against whom the award has been madewill attempt or is likely to remove assets from the jurisdiction assoon as it is notified of the enforcement proceedings.

11.4 What is the effect of an arbitration award in terms of resjudicata in Brunei? Does the fact that certain issues havebeen finally determined by an arbitral tribunal precludethose issues from being re-heard in a national court and, ifso, in what circumstances?

Upon the issuance of an arbitral award by an arbitrator in respect ofa dispute, that same dispute cannot be re-litigated in court. Theprinciple of Res Judicata will apply equally to an award or to aruling made by an arbitrator.

12 Confidentiality

12.1 Are arbitral proceedings sited in Brunei confidential?What, if any, law governs confidentiality?

There is no provision in the current Act which specifically stipulatesfor confidentiality. However, confidentiality is generally adopted inpractice in arbitration proceedings in Brunei. The notion ofconfidentiality will extend down to the issued award, except wherenecessary disclosure is required to enforce the award.


No, all such information disclosed in arbitral proceedings aregenerally subject to the confidentiality requirement.


Confidentiality is removed if there is a court order requiring thesame. Also, when the award is to be enforced, confidentiality hasto be removed for the purpose of making an application to the HighCourt.



Although an arbitral tribunal may generally award any civil remedyallowed under the Common law, Brunei law will not recognised orenforce punitive damages.


An arbitral tribunal may award interest on the awarded sum orderedto be paid under the award from the date of award to date ofpayment. The general rate of interest will be the court rate which is6% per annum.

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An arbitral tribunal sitting in Brunei will generally exercise itsdiscretion in favour of the successful party and order costs andexpenses in the award. The general practice of awarding shiftingfees is in the discretion of the arbitral tribunal.


It depends on the circumstances. There is no personal income taxin Brunei but there is tax on corporations. The award itself is notsubject to tax but a limited liability company incorporated in Bruneimay have to pay tax if tax is deemed to be payable under thecircumstances.


14.1 Has Brunei signed and ratified the Washington Conventionon the Settlement of Investment Disputes Between Statesand Nationals of Other States (1965)?

Yes, Brunei has signed and ratified the ICSID Convention.

14.2 Is Brunei party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Yes, Brunei is a party to several BITS but not to the Energy CharterTreaty.

14.3 Does Brunei have standard terms or model language thatit uses in its investment treaties and, if so, what is theintended significance of that language?

No, there are no such standard terms or model language.

14.4 In practice, have disputes involving Brunei been resolvedby means of ICSID arbitration and, if so, what has theapproach of national courts in Brunei been to theenforcement of ICSID awards and how has thegovernment of Brunei responded to any adverse awards?

No, this has not yet taken place. However, it is unlikely that theBrunei courts would refuse to recognise and register and ICSIDawards.

14.5 What is the approach of the national courts in Bruneitowards the defence of state immunity regardingjurisdiction and execution?

Brunei and its courts adopt the doctrines of international comity andstate immunity when a foreign sovereign refuses to submit to itsjurisdiction who declines to submit. However, if it is the case thatthe foreign sovereign has entered into a commercial agreement andhas agreed to undergo arbitration, it is most likely that the stateimmunity defence will not be entertained by Brunei courts.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Brunei? Are certain disputescommonly being referred to arbitration?

In general the bulk of domestic arbitration cases are to be found inthe construction industry. International arbitration is gaining inpopularity in Brunei. Domestic and international contractors andinternational investors who enter into contracts with theGovernment of Brunei Darussalam always insist on arbitration asthe form of dispute resolution. The reason is mainly of a historicalnature but under the revised constitution and laws of BruneiDarussalam, Judicial Review has been abrogated and theGovernment of Brunei Darussalam remains immune from suitbefore the Brunei courts. An arbitration process is therefore theonly means for such contracting parties or investors to resolve theirdisputes. The Arbitration Association Brunei Darussalam(“AABD”) is the arbitral institution in Brunei. It was formed in2004 and as part of its objectives is to assist Brunei Darussalam indeveloping and providing advisory and assistance support in thefield of arbitration. The AABD seeks to assist parties who wish toresolve their disputes by way of arbitration and also tries to arrangeplaces for arbitration hearings, and to ensure that the panel ofinternational arbitrators are kept to a very high standard and there iswide choice of diversity of leading international arbitrators who arecurrently mainly non-Brunei nationals. The Association activelypromotes the adoption of the UNCITRAL Model Law and stronglypromotes for the usage of the UNCITRAL rules.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Brunei, such as pending or proposedlegislation that may substantially change the lawapplicable to arbitration?

The Brunei Attorney General’s Chambers working with theassistance of the AABD had drafted two new Arbitration Acts toreplace the current 1994 Act. It is likely that the new ArbitrationOrder, 2009 (for domestic arbitration) and the new InternationalArbitration Order, 2009 will be introduced and implemented beforeSeptember 2009. The new arbitration legislation will adopt theprovisions of the UNCITRAL Model Law and will as such bringBrunei in line with most other ASEAN countries in adopting theModel Law. The AABD has been designated as the statutoryappointing authority in the event of default appointments underSection 13(8) of the Arbitration Order, 2009 and under Section 8(2)of the International Arbitration Order, 2009.



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Professor Dr. Colin Ong

Dr. Colin Ong Legal ServicesSuites 2-2 to 2-8, Gadong Properties CentreKm 3-6, Jalan GadongBandar Seri Begawan BE 4119Negara Brunei DarussalamBrunei

Tel: +673 2 420 913Fax: +673 2 420 911Email: [email protected]

Dr Ong holds an LL.B (Hons) from the University of Sheffield University;and an LL.M and PhD in commercial law from the University of London.He is practicing barrister and Chartered Arbitrator at Essex CourtChambers, London (since 1992) and is also a member of the BarristersChambers of 3 Verulam Buildings. He is Arbitration Fellow at variouscountries (FAMINZ (Arb); FCIArb; FMIArb and FSIArb). He is thePresident of the Arbitration Association Brunei Darussalam, which is thenational Brunei arbitration authority. Dr Ong is a Visiting Professor of Lawat the University of Malaya; Visiting Professor of Law at King’s College,University of London; Adjunct Professor of Law and Arbitration at theNational University of Malaysia (Universiti Kebangsaan Malaysia);Adjunct Associate Professor (Arbitration & Construction) of the NationalUniversity of Singapore and has been a Visiting Fellow of the Centre ofCommercial Law Studies (Queen Mary), University of London (since1996). He is appointed as a Vice President of the Asia Pacific RegionalArbitration Group (“APRAG”) from 2009 to 2011. Dr Ong is also aregistered foreign legal consultant in Singapore since 2003. Dr Ong is a Broad-based international arbitrator and commercial lawyerwith extensive court, arbitration counsel, advisory practice andcommercial deals experience with important reported judgments inBrunei and English Law Reports. He has also received appointments toact as arbitrator in Domestic and in International Commercial Arbitrationsin ad hoc arbitrations and is also a registered arbitrator with over 15International Arbitration centres. He is often instructed to advise and actas lead counsel or co counsel on major commercial arbitrations and alsotransactions within Brunei, England, China, Hong Kong, Qatar,Indonesia, Malaysia, Singapore and Thailand. Dr. Colin Ong has been described as “Tactically brilliant” Asia PacificLegal 500 (2006)]; “a reputation for strong banking capabilities. …..isregularly consulted on high-profile disputes and arbitrations” [IFLR(2006)]; “frequently involved in high-profile arbitrations relating toBrunei, Singapore and Malaysia.” [Chambers & Partners Global 2006];“Dr Colin Ong has been described by the market as possessing a“complete mastery of the law” and “a brilliant commercial understandingof deals.” [IFLR (2007)]; “Most respected local banking lawexpert…and...active throughout the (ASEAN) region” [AsiaLaw Profiles2007]; “mastery of detail in commercial deals…and ‘an outstanding andtactically lethal advocate’ [Asia Pacific Legal 500 (2008/9)]”.


Dr Colin Ong Legal Services is an internationally recognised leading commercial and dispute resolution law firm inBrunei Darussalam and it acts for a broad spectrum of corporate and high profile clients. It is one of the largercommercially focused law firms in Brunei and has been consistently listed as a leading banking and commercial lawfirm by independent legal publications such as Asia-Legal 500 and IFLR 1000. The Firm and its lawyers is to datethe only Brunei law firm to have been listed in Euromoney’s International Who’s Who Legal Series (4 categories of law)and Guide(s) to the World’s Leading Experts in Commercial Arbitration/Litigation.

Apart from international commercial arbitration and litigation services, other main areas of practice include: bankinglaw and setting up and marketing of funds, company law, oil and gas, aviation, intellectual property; project finance;shipping matters, joint ventures and foreign investments. The firm is often instructed to act for and againstmultinationals and also certain foreign quasi-government bodies within the ASEAN region and for several major globalbanks, and has regularly acted for and against many of the leading international and regional law firms in the World.The Firm is a contributing author to looseleaf works, in the fields of banking, arbitration and litigation, for severalinternational legal journals in Asia, the UK and the US.

Suites 2-2 to 2-8, Gadong Properties CentreKm 3-6, Jalan Gadong, Bandar Seri Begawan BE 4119

Negara Brunei Darussalam, Bandar Seri BegawanTel: +673 2 420 913 Fax: +673 2 420 911

Email: [email protected]

Dr Colin Ong Legal Services



Chapter 5

Jingtian & Gongcheng

China


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Mainland China?

In China (for the purposes of this paper, China refers to mainlandChina, excluding Hong Kong, Macao and Taiwan), the People’sRepublic of China (PRC) Arbitration Law (the “Arbitration Law”),requires that all arbitration agreements be in written form. Pursuantto Article 16, an arbitration agreement may either be stipulated inthe contract or in a separate written agreement, which, according toThe Interpretation of the Supreme People’s Court ConcerningIssues on the Application of the Arbitration Law of PRC (the“Judicial Interpretation of Arbitration Law”), includes separatecontracts, letters, and data messaging (telegraph, telefax, fax,electronic data interchange, e-mail, etc.).As opposed to the United Nations Commission on InternationalTrade Law (UNCITRAL) Model Law on International CommercialArbitration, the Arbitration Law stipulates that a valid arbitrationagreement must include: (1) the expression of the parties’ wish tosubmit to arbitration; (2) the matters to be arbitrated; and (3) theArbitration Commission selected by the parties (Article 16). Theagreed to arbitration forum must be conducted through a standingarbitration institution; ad hoc arbitrations are not allowed. When the parties fail to agree on the forum, procedures or subjectmatter for arbitration or if the arbitration agreement’s terms areunclear and the parties cannot agree on the terms of asupplementary agreement, the arbitration agreement shall bedeemed invalid (Article 18). As a result, the model arbitrationclauses of some international arbitration institutions, such as theInternational Chamber of Commerce (ICC) and StockholmChamber of Commerce (SCC), are likely to be found invalid by aChinese court if they do not stipulate a specific arbitration organ.


There are no special requirements or formalities.


Except for ensuring the legitimacy and validity of arbitrationagreement, it is advisable to improve the arbitration agreement inthe following aspects depending on the nature of the dispute andrelevant parties’ special needs:

Some Chinese arbitration commissions provide various arbitrationrules for different kinds of disputes. To take China InternationalEconomic and Trade Arbitration Commission (CIETAC) as aninstance, besides its general arbitration rules, CIETAC providesparticular arbitration rules for financial disputes. If parties plan tosubmit a financial dispute to CIETAC for arbitration under theArbitration Rules for Financial Dispute, clear reference to theArbitration Rules for Financial Dispute is a must, otherwise generalarbitration rules will apply. Further, lawyers can ensure parties with special needs, more rightsand interests by laying down special agreements. Under CIETACrules, parties can agree on wide-ranging issues, including but notlimited to appointing arbitrators beyond the Panel of Arbitrators,nationality of arbitrators, arbitration language, or application ofUNCITRAL rules. This may help foreign parties to handle aChinese arbitration in a more familiar way.


Chinese courts, especially the Supreme People’s Court, respectparty autonomy and respect the parties’ desire to resolve their civildisputes through arbitration. While in many instances Chinese courts’ validation of arbitrationagreement still appears to be rigid and strict; over the last dozens ofyears, especially since the Judicial Interpretation of Arbitration Lawcame into force in 2005, Chinese courts have made remarkableprogress and gradually adopted a more flexible attitude in favour ofthe validity of arbitration agreements. As a result of the Arbitration Law’s primary focus on arbitrationheld in Chinese arbitration institutions, Chinese courts haveconservative attitude towards the recognition of alternate forms ofarbitral settlement, such as: (1) ad hoc arbitration; (2) China is setas the arbitration locality by foreign arbitration institutions; and (3)Chinese parties concerned in domestic disputes agree on anarbitration at abroad; etc.


In addition to arbitration and negotiation, the forms of ADR widelyused in China are conciliation, Med-ARB, combining conciliationwith arbitration, and court-annexed conciliation. As to conciliation, the most important conciliation organisation inChina is the conciliation centres of China Council for the Promotionof International Trade (CCPIT) / China Chamber of InternationalCommerce (CCOIC), which constitute a nation-wide conciliation

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network throughout China.Med-Arb is a joint method of ADR combining elements ofconciliation and arbitration. The parties must first obtain asettlement agreement through conciliation and then by submittingthe settlement to arbitration to get an award, which is enforceableby the courts.Combining conciliation with arbitration is a significant feature ofarbitration in China. Pursuant to Article 51 of the Arbitration Law,when a settlement agreement is reached by conciliation duringarbitration, the arbitral tribunal shall prepare the conciliationstatement or the award based on the results of the settlementagreement. A conciliation statement shall have the same legal forceas that of an award.With respect to court-annexed conciliation, pursuant to Article 85 ofthe Civil Procedure Law of the People’s Republic of China (the“Civil Procedure Law”), the courts are obliged to conductconciliation unless the parties refuse to do so. A written conciliationstatement shall become enforceable immediately after both partieshave signed to indicate receipt of the statement.


2.1 What legislation governs the enforcement of arbitrationproceedings in Mainland China?

The Arbitration Law of the People’s Republic of China, which cameinto force on September 1, 1995 and the Civil Procedure Law of thePeople’s Republic of China, which was last updated in October 28,2007.


Legislation in China rarely uses the term “international arbitration”and prefers the term “foreign-related arbitration” instead. General provisions of the Arbitration Law apply to both domesticarbitration and foreign-related arbitration; however, Chapter VII ofthe Arbitration Law includes some special provisions exclusivelyrelating to the foreign-related arbitration. The provisions differ inthree aspects: (1) the level of the governing courts; (2) the standardof setting aside an arbitral award; and (3) the standard of refusingthe execution of an arbitral award.


No. The Arbitration Law adopts some fundamental principles andprovisions covered by the UNCITRAL Model Law. Some of themost notable differences between the Arbitration Law and theUNCITRAL Model Law include: 1. the scope of arbitrability; 2. the formal requirement of the arbitration agreement; 3. the institution which is competent for determining the

validity of an arbitration agreement; 4. the arbitral tribunal’s jurisdiction;5. when the parties can raise an objection to an arbitration

agreement and/or jurisdiction over an arbitration case; 6. the appointment of the arbitrator and the procedure a party

may challenge an arbitrator;

7. the court ability to assist in investigating and collectingevidence; and

8. the preliminary relief and interim measures the partiesconcerned deserve.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in MainlandChina?

In China, the parties to the foreign-related arbitration enjoy a highlevel of party autonomy, and arbitration proceedings are subject tothe parties’ agreement in many aspects. However, the mandatoryrules which cannot be violated by the parties include, but are notlimited to the following: the scope of arbitrability prescribed inArticle 3 of the Arbitration Law; the contents of arbitrationagreement prescribed in Article 16 of the Arbitration Law; thequalification of arbitrators prescribed in Article 13 of theArbitration Law; and the single ruling system prescribed in Article9 of the Arbitration Law; etc.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Mainland China?What is the general approach used in determining whetheror not a dispute is “arbitrable”?

Article 3 of the Arbitration Law provides that cases involvingfamily law (i.e. disputes over marriage, adoption, guardianship,child maintenance and inheritance) and those issues reserved foradministrative jurisdiction cannot be arbitrated. Beyond that, pursuant to Article 2 of the Arbitration Law, disputesover contracts and disputes arising from property rights andinterests may be submitted to arbitration.


No. Article 20 of the Arbitration Law provides that if the partiesobject to the validity of the arbitration agreement, they may applyto the arbitration commission for a decision or to a court for aruling. The arbitral tribunal is not empowered to make decisions forthe validity of the arbitration agreement by the law. CIETAC has made a breakthrough over the issue. Pursuant toArticle 6.1 of the CIETAC Arbitration Rules, the CIETAC mayauthorise the arbitral tribunal make decisions.

3.3 What is the approach of the national courts in MainlandChina towards a party who commences court proceedingsin apparent breach of an arbitration agreement?

In such instances, the court is obliged to dismiss the claims of theparty in breach of the arbitration agreement but only if the otherparty does not object and submit to the court a valid copy of thearbitration agreement. However, if the non-breaching party doesnot raise an objection to the court before the first hearing of thecase, the court will consider the arbitration agreement to have beenwaived. The “first hearing” is defined as the first session organisedby the court after the expiration of the reply, excluding all activitiesthat occurred during pre-trial procedures (Judicial Interpretation ofArbitration Law Article 14).

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When the parties concerned object to the validity of the arbitrationagreement and apply to a court for a ruling, a court can address theissue of the jurisdiction and competence of the national arbitraltribunal. (Arbitration Law Article 20.)

3.5 Under what, if any, circumstances does the national law ofMainland China allow an arbitral tribunal to assumejurisdiction over individuals or entities which are notthemselves party to an agreement to arbitrate?

As a general rule, an arbitral tribunal can only assume jurisdictionover the parties to the arbitration agreement. Third parties areconsidered to be bound only as a party’s successor or the assigneeof credits or debts by the operation of law (Judicial Interpretation ofArbitration Law Article 8, 9). Beyond these cases, third parties aregenerally not considered to be bound by the arbitration agreement.Pursuant to Article 402 of the Contract Law of the People’sRepublic of China (the “Contract Law”), in certain circumstancesthe arbitration agreement may be binding upon the principal in theagency relationship even if it is not a party thereto.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Mainland China andwhat is the typical length of such periods? Do thenational courts of Mainland China consider such rulesprocedural or substantive, i.e., what choice of law rulesgovern the application of limitation periods?

Pursuant to Article 74 of the Arbitration Law, if the law hasstipulated a time limitation for arbitration, such provisions of thelaw shall apply. If the law hasn’t done so, the provisions on thelimitation of actions shall apply. And the truth is that the law hasnot specifically stipulated a time limitation for arbitration. As to thelimitation of action, pursuant to the Chapter VII of GeneralPrinciples of the Civil Law of the PRC (the “General Principles ofthe Civil Law”), except as otherwise stipulated by law, thelimitation of actions regarding applications to a court for protectionof civil rights shall be two years which shall begin when the entitledperson knows or should know that his rights have been infringedupon. In addition, pursuant to Article 129 of the Contract Law, fora dispute arising from a contract for the international sale of goodsor a technology import or export contract, the time limit forapplying for arbitration is four years. Chinese courts consider the provisions on the limitation of actionsubstantive, therefore it is generally accepted that the application oflimitation periods should be governed by the substantive law ruleswhich are chosen by the parties concerned or by the choice-of-lawrules on which the substantive law is based.



Parties to a foreign-related contract may choose the law applicableto the settlement of their contractual disputes, except as otherwisestipulated by law. (General Principles of the Civil Law Article 145and Contract Law Article 126.) However, those non-foreign-relatedcontracts are governed by PRC law.


The freedom of choice in the governing law of contracts is subjectto the following limitations: (1) if there is a discrepancy between the international treaty and

legal provisions of the PRC law, the treaty prevails; (2) the application of foreign law cannot be contradictory to the

social and public interest of the PRC; (3) the application of foreign law shall not be conductive to

evading the PRC mandatory or prohibitive legal provisions;and

(4) Sino-foreign equity joint venture contracts, Sino-foreigncontractual joint venture contracts and Sino-foreign contractsfor joint exploitation and development of natural resourcesmust apply PRC law. Therefore, where there are foreignelements, as long as the above rules are complied with,parties shall be free to choose foreign law as the governinglaw of the contracts.


Pursuant to Article 16 of the Judicial Interpretation of Arbitration Law,the applicable law agreed upon by all parties shall govern theexamination of the validity of a foreign-related arbitration agreement.In the event that the concerned parties don’t agree on the applicablelaws but do agree on the place of arbitration, the law of the place ofarbitration shall prevail. In the event that the concerned parties agreeon neither the applicable law nor the place of arbitration, or if the placeof arbitration is ambiguous, the law of the court shall prevail.



Traditionally, the scope of arbitrator selection is limited in that anarbitrator must be appointed from the panel of arbitrators of thespecific arbitration commission. However, this rule has beenchanged by CIETAC to a certain extent, pursuant to Article 21 ofthe CIETAC Arbitration Rules. As such, where the parties haveagreed to appoint arbitrators from outside of the CIETAC’s Panel ofArbitrators, the arbitrators may act as co-arbitrator, presidingarbitrator or sole arbitrator pending the confirmation of theChairman of the CIETAC in accordance with the law.


If the parties fail, within the time limit prescribed by the ArbitrationRules, to select the form of the constitution of the arbitrationtribunal or fail to select the arbitrators, the arbitrators shall beappointed by the chairman of the arbitration commission.(Arbitration Law Article 32.)


Under PRC law, Chinese courts cannot intervene in the selection ofarbitrators by the parties or the chairman of the arbitrationcommission.

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The Arbitration Law stipulates the challenge and withdrawal systemfor arbitrators to secure the arbitrator’s independence, neutralityand/or impartiality. (Arbitration Law Article 34.) Moreover, PRC law also provides a remedy system for securing thearbitrator’s independence, neutrality and/or impartiality. (CivilProcedure Law Article 213.)It is widely criticised and disputed that an arbitrator could beprosecuted for his criminal liability in making an award thatperverted the law. (Article 20 of the sixth Amendment to theCriminal Law.)

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Mainland China?

PRC law does not impose clear rules or guidelines for the disclosureof potential conflicts of interest for arbitrators. Under Article 25 ofthe CIETAC Arbitration Rules, an arbitrator appointed by theparties or by the Chairman of the CIETAC shall sign a declarationand disclose in writing any facts or circumstances likely to give riseto justifiable doubts as to his/her impartiality or independence. Ifcircumstances that need to be disclosed arise during the arbitralproceedings, the arbitrator shall promptly disclose suchcircumstances in writing to the CIETAC. The CIETAC is requiredto be communicated to the parties any such disclosures anddeclarations of the arbitrators.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Mainland China? If so, do those laws orrules apply to all arbitral proceedings sited in MainlandChina?

The arbitration proceedings and institutions are governed by theArbitration Law and the Civil Procedure Law. Furthermore, everyarbitration institution has its own arbitration rules. Arbitrationinstitutions such as the CIETAC allow parties to choose arbitrationrules of foreign arbitration institutions or UNCITRAL rules, butsuch arbitration rules may not violate the mandatory provisions ofPRC law, such as the single ruling system. Whether parties canstipulate an applicable foreign arbitration law, when foreignarbitration institutions take the PRC as their arbitration locality orform ad hoc arbitrations, still remains unclear due to very scarceprecedents.

6.2 In arbitration proceedings conducted in Mainland China,are there any particular procedural steps that are requiredby law?

According to the Arbitration Law, arbitration proceedings shouldfollow procedural steps: application and acceptance for arbitration;composition of the arbitral tribunal; hearing; making arbitralawards; application for setting aside of an award; and enforcementprocedure. Additionally, the Civil Procedure Law also sets forth theprocedures for applying for the denial of the execution of an arbitralaward.


Chapter 4(3) of the Arbitration Law provides specific rules forarbitration hearings, such as the hearing issue.

6.4 What powers and duties does the national law ofMainland China impose upon arbitrators?

PRC law does not provide rules on the powers and duties ofarbitrators. Such rules are almost exclusively the jurisdiction of thearbitration rules set by individual arbitration institutions. Unlikecountries such as the US and UK, China does not grant itsarbitrators the power to make decisions on their own jurisdiction orto adopt provisional measures.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Mainland China and,if so, is it clear that such restrictions do not apply toarbitration proceedings sited in Mainland China?

The Arbitration Law and arbitration rules of Chinese arbitrationinstitutions do not prohibit lawyers of other jurisdictions fromtaking part in arbitrations as arbitration representatives. However,Article 32 of Provisions of the Ministry of Justice on the Executionof the Regulations on the Administration of Foreign Law Firms’Representative Offices in China prohibits foreign lawyers frominterpreting PRC law in Chinese arbitration proceedings. However,in practice, foreign lawyers commonly act as arbitrationrepresentatives in arbitrations in Chinese arbitration institutions.For foreign arbitration institutions that take PRC as the arbitrationlocality or ad hoc arbitrations, it remains unclear as to whether theaforementioned rules will be apply due to a lack of sufficientprecedents.

6.6 To what extent are there laws or rules in Mainland Chinaproviding for arbitrator immunity?

Neither Chinese law nor the arbitration rules of the main arbitrationinstitutions provide a system of arbitrator immunity.


If the parties object to the validity of the arbitration agreement, theymay apply to the arbitration commission for a decision or to a courtfor a ruling. If one of the parties submits to the arbitrationcommission for a decision, but the other party applies to a court fora ruling, the court shall give the ruling. The objection shall be madebefore the start of the first hearing of the arbitration tribunal.(Arbitration Law Article 20.)

6.8 Are there any special considerations for conductingmultiparty arbitrations in Mainland China (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

While the Arbitration Law and the Civil Procedure Law do notprovide for multiparty arbitrations or the consolidation ofproceedings provisions, they are provided for by the individualarbitration rules of Chinese arbitration institutions. Generally,

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parties are entitled to stipulate the issues of consolidation ofarbitration proceedings or third parties joining the proceeding.However, it is not possible to join a third party to arbitralproceedings, or order consolidation, without the consent of all theparties. For instance, pursuant to Article 27 of the Arbitration Rulesof Beijing Arbitration Commission, the arbitral tribunal may, on theapplication of any party and with the approval of all other partiesconcerned, order the consolidation of two or more relatedarbitrations or arbitrations involving a similar subject matter onlywhen the compositions of the arbitral tribunals are same.For multiparty arbitration proceedings, there is no difference with thearbitration proceeding with two parties except as provided in thespecial provisions on appointing arbitrators by arbitration institutionssuch as CIETAC (see Article 24 of CIETAC Arbitration Rules).

6.9 What is the approach of the national courts in MainlandChina towards ex parte procedures in the context ofinternational arbitration?

Unlike in common law systems, Chinese courts do not inform theopposing party when examining or imposing measures of propertypreservation or evidence preservation regardless of whether thecase is urgent or not. Therefore, the measures of propertypreservation and evidence preservation under PRC law are similarin effect to ex parte procedures. During the procedure of arbitralmeditation, the arbitration tribunal can conduct ex parte contactwith claimant and respondent. The award reached under suchcircumstance will be accepted and enforced by Chinese courts. Inaddition, if the respondent party is served with a written notice, butfails to appear before the tribunal without due reasons or leaves thetribunal room during a hearing without the permission of thearbitral tribunal, the arbitral tribunal has the power to make an exparte award. Such awards are immediately effective andenforceable against that absent party.



The Chinese Arbitration Law and Civil Procedural Law do not grantarbitrators the right to award any preliminary or interim relief.However, Chinese law does grant the court the power to take measuresto preserve property and evidence relating to an ongoing case.However, an arbitrator or an arbitration commission does not have theright to exercise this power. (Arbitration Law Article 28, 46.) If a party applies for property or evidence preservation in arbitrationproceedings, the application shall be submitted to the arbitrationcommission, and transferred by the commission to the court for thedetermination of its merits. The parties cannot, without theassistance of arbitration commission, submit their application forpreservation measures directly to the court. The court cannot acceptan application for preservation from a foreign arbitral tribunal.


Except for the aforementioned evidence and property preservation,

neither of the parties is permitted to apply for, nor does the courthave legal basis to grant, any preliminary or interim relief inproceedings subject to arbitration.


Chinese courts will not treat preservation applications transferredby arbitration commissions different from those applicationssubmitted in civil actions. The court shall accept such applicationsif they meet the following criteria: (1) there must be legitimategrounds; (2) the application for preservation is made from thecommencement of arbitration proceedings until the rendering ofaward; (3) the owner of the property which is the subject matter ofpreservation shall be the respondent, or payable to the respondent;(4) the value of the asset which is the subject matter of preservationmust not be larger than the claim or counterclaim; and (5) theapplicant shall provide security.


Chinese law is silent on the issue of security for costs ordered by thenational court and/or arbitral tribunal. Under the Arbitration Law,only institution arbitration is permitted, and every arbitrationcommission requires the applicant to make the prepayment of costsin a lump sum when submitting its application for arbitration. Thisis a prerequisite for the acceptance of an arbitration application.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Mainland China?

Formal rules of evidence applicable to arbitral proceedings cannotbe found in legislation. Provisions on evidence rules in arbitrationproceedings are scattered in the Arbitration Law and the rules ofeach arbitration commission. Under the Arbitration Law, provisions regarding evidence arelimited to general principles. For example, both the claimant andparties are required to produce evidence and identify the source ofhis or her claims. (Article 43.) An arbitration tribunal may on itsown collect evidence it considers necessary, and any evidence shallbe produced at the start of the hearing, and the parties maychallenge the validity of such evidence. (Article 45.) Thearbitration rules of most arbitration commissions in China onlyreproduce the provisions in the Arbitration Law. However, the rulesof some arbitration commissions, such as the Beijing ArbitrationCommission, further require parties to categorise, compile,paginate, and provide a narrative of the evidence to be submitted.Despite these rules, the arbitral tribunal sometimes refers to therules of evidence applicable in civil proceedings, such as theProvisions of the Supreme People’s Court on Evidence in CivilProcedures (hereinafter referred to as “Provisions on Evidence inCivil Procedure”) in arbitration practice.


Rules for discovery or disclosure are not in the Arbitration Law or

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Civil Procedure Law. However, an arbitral tribunal may collectevidence on its own if necessary. (Arbitration Law Article 43.) Thetribunal has the power to investigate the parties of the arbitration andthird parties, and to order the parties to produce and disclose evidence.The law does not impose any limits on the scope of these powers. While the arbitral tribunal may order the parties to produceevidence, the parties are not obliged to produce such evidence and,neither the arbitral tribunal nor the court has the power to compelthe parties to produce evidence. In light of a party’s failure tocooperate with the tribunal’s request for evidence, the tribunal maydraw a negative inference against the uncooperative party unless theparty can provide good cause as to why it is withholding evidence.(Provisions on Evidence in Civil Procedure Article 75.)


With respect to the evidence, the court’s intervention or assistanceis restricted to the preservation of evidence pursuant to Article 46 ofthe Arbitration Law.


Rules of discovery or disclosure are not mentioned in theArbitration Law and Civil Procedure Law. The collection ofevidence conducted by the arbitral tribunal is unusual.


In practice, rules concerning witness testimony in arbitrationproceedings mirror those in civil actions. When a party produceswitness testimony, the witness is customarily expected to attend thehearing and to be cross-examined by the other party and thetribunal. However, the Arbitration Law does not put a legalobligation on witnesses to attend hearings. (Article 45.) Witnessesare not required to swear before the tribunal.

8.6 Under what circumstances does the law of MainlandChina treat documents in an arbitral proceeding as beingsubject to privilege? In what circumstances is privilegedeemed to have been waived?

There is no stipulation about this issue in Chinese law.

9 Making an Award


According to the Arbitration Law, an award shall be based on theopinion of the majority of arbitrators, signed by the arbitrators andsealed by the arbitration commission. If the tribunal fails to form amajority opinion, the award shall be given in accordance with theopinion of the presiding arbitrator. Furthermore, CIETACArbitration Rules provides that the arbitral tribunal shallindependently and impartially make its arbitral award on the basisof the facts, in accordance with the law and the terms of thecontracts with reference to international practices, and incompliance with the principle of fairness and reasonableness.



China has adopted the single ruling system of arbitration, so anarbitration award is final and binding. However, if the parties areunsatisfied with the arbitration award, they may apply to the courtto set aside or reject the execution of an award.The conditions for setting aside a foreign-related award are thesame with that for rejection of executing an award. (CivilProcedure Law Article 258.) The conditions for setting aside a national award are stipulated inArticle 58 of the Arbitration law.The conditions for rejection of executing a national award arestipulated in Article 213 of the Civil Procedure Law.


Where the parties agree specifically on matters of the validity of thearbitration agreement, arbitral procedure, production of evidence,and applicable laws, etc., in an arbitration agreement or in arbitralproceedings, they may not apply for setting aside or rejecting theexecution of the award based on the above specifically agreedmatters. Matters which are against the public interest or exceed thescope of the arbitration agreement may not be excluded as a basisfor applying for setting aside or rejecting the award, nor may theactions of corrupt arbitrators who, e.g., accept bribes, or practisegraft in the arbitral proceedings.


There is no stipulation about this issue in Chinese law.

10.4 What is the procedure for appealing an arbitral award inChina?

For both foreign related or national awards, the parties must applyto the jurisdiction of the intermediate people’s court in the areawhere the arbitration commission is located within six months afterthe award. The application should include evidence to support themotion to set aside the arbitral award. (Arbitration Law Articles 58,59, 70.)


11.1 Has Mainland China signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

China acceded to the New York Convention in 1986, subject to the“reciprocity” and “commercial” reservations. China will be subjectto the Convention only for awards made in the territory of anothersignatory nation, and the Convention only will be applied todisputes arising out of relationships, whether contractual or not, thatare considered “commercial” under Chinese law.

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11.2 Has Mainland China signed and/or ratified any regionalconventions concerning the recognition and enforcement ofarbitral awards?

No, China has not signed any regional conventions of this nature.

11.3 What is the approach of the national courts in Chinatowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

In legal practice, the PRC courts enforce the awards both made inthe territory of other states and made by China’s arbitrationinstitutions. Further, pursuant to the Circular of the Supreme People’s Court onIssues in the People’s Courts’Handling of Foreign-related Arbitrationsand Foreign Arbitrations issued by the Supreme People’s Court inAugust 1995 and the Circular of the Supreme People’s Court on Issuesin the People’s Courts’ Cancellation of Foreign-Related Arbitrationsissued in April 1998, if the PRC courts refuse to enforce, recognise, orenforce awards made by other states or foreign-related awards madeby China’s arbitration institutions, or setting aside foreign-relatedawards made by China’s arbitration institutions, they shall report to theSupreme People’s Court for approval. The winning party may apply to the intermediate people’s courtwith jurisdiction over the other party’s domicile or assets to requestenforcement of the award.

11.4 What is the effect of an arbitration award in terms of resjudicata in Mainland China? Does the fact that certainissues have been finally determined by an arbitral tribunalpreclude those issues from being re-heard in a nationalcourt and, if so, in what circumstances?

Pursuant to the Arbitration Law and the Civil Procedure Law, anarbitration commission shall not accept any application for arbitration,nor shall a people’s court accept any action submitted by the party inrespect of the same dispute after an arbitration award has already beengiven in relation to that matter. If the arbitration award is set aside orits enforcement has been rejected by a people’s court in accordancewith the law, the parties may, in accordance with a new arbitrationagreement between them in respect of the dispute, re-apply forarbitration or initiate legal proceedings with the people’s court.

12 Confidentiality

12.1 Are arbitral proceedings sited in China confidential?What, if any, law governs confidentiality?

Yes, arbitral proceedings are confidential in China. Both theArbitration Law (Article 40) and the rules of most arbitrationinstitutions provide specific stipulations on confidentiality.(CIETAC Arbitration Rules Article 33.)


There are no clear rules in the Arbitration Law concerning thisissue. However, in practice, unless the parties have agreedotherwise, it is common to use information disclosed in arbitralproceedings for other purposes, such as in subsequent arbitral orstate court proceedings, even if the counterparty holds such act in

violation of principle of confidentiality. Any counterpartyobjections must be resolved through a torts action in the people’scourt if the arbitral agreement does not include a specific agreementon this matter.


Pursuant to Article 40 of the Arbitration Law, if the parties agree toa public hearing and there are no national security concerns, thearbitration may proceed in public.



While the provisions of the arbitral agreement can restrict theavailable remedies, the lack of any limitations in the ArbitrationLaw and Civil Procedure Law gives the arbitral tribunal a free handto order remedies as they see fit and allowed by the substantive law. However, it is worth noting that China is a country of continentallaw tradition, and the types of remedies are therefore different fromthose in common law, especially, the concept of punitive damagesis not in existence in Chinese law.


The arbitral tribunal has the power to award interest without limitaccrued from overdue payment or the delay in performance of theaward. The tribunal will, when determining the interest rate,reference the central bank’s loan interest rate of the same period. Ifa party fails to perform his obligations to pay within the time limitspecified in a judgment, ruling or other legal document, he shall paytwice the amount of interest on the debt for the period during whichthe performance is deferred. If a party fails to perform any otherobligations within the time limit specified in a judgment, ruling, orother legal document, he shall pay a fine for the deferredperformance. (Civil Procedure Law Article 229.)


While there is no law on the recovery of fees in China, inaccordance with substantive law and arbitration practice, suchexpenses and costs are usually regarded as part of the loss caused tothe parties, and therefore shall be recovered.It is common practice in Chinese arbitration for the parties toprepay their own costs and expenses, and the arbitral tribunal maydecide that the losing party shall compensate the winning party forthe expenses reasonably incurred. To determine if the reasonabilityof the expenses, the arbitral tribunal will consider such factors asthe facts of the case, the severity of the claim, the workload of thewinning party and/or its representative(s), the amount in dispute, aswell as other relevant factors. If the tribunal finds joint liability, itmay allocate the costs pursuant to each party’s degree of fault.

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In the performance or enforcement of the award, the parties shallpay taxes in accordance with the taxation laws and regulations.


14.1 Has China signed and ratified the Washington Conventionon the Settlement of Investment Disputes Between Statesand Nationals of Other States (1965)?

China signed and ratified the Washington Convention on February9, 1990 and January 7, 1993, respectively. The WashingtonConvention entered into force in China on February 6, 1993. Chinamade a reservation according to Article 25(4), which limits thejurisdiction of the International Center for Settlement of InvestmentDisputes to matters concerning the compensation of victims ofexpropriation or nationalisation.

14.2 Is China a party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral InvestmentTreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

According to the ICSID, China has concluded ninety BITs. Amongthose BITs concluded by China, a large part involves the ICSID orits procedural rules, which can be divided into three categories:

the dispute can be submitted to ICSID by the investor at theirown choice;with advance consent from Chinese government, the disputecan be submitted to ICSID by the investor; andthe dispute can be submitted to an ad hoc arbitral tribunal,and the formation of such tribunal shall make reference toWashington Convention.

14.3 Does China have standard terms or model language that ituses in its investment treaties and, if so, what is theintended significance of that language?

China does not have a set of standard terms or a model by whichinvestment treaties are shaped. This has resulted in Chineseinvestment treaties being, to some extent, different from each other.However, the influence of the American and German model BITsand the effects of most favoured national clauses has had aharmonising effect on Chinese BITs.

14.4 In practice, have disputes involving China been resolvedby means of ICSID arbitration? If so, what has theapproach of national courts in China been to theenforcement of ICSID awards? How has China respondedto adverse awards?

To date, there have been no disputes in ICSID involving China.

14.5 What is the approach of the national courts in MainlandChina towards the defence of state immunity regardingjurisdiction and execution?

Provisions on state immunity such as diplomatic privileges andimmunities for foreigners, foreign organisations, or internationalorganisations are scattered in domestic laws and treaties. Chinaparticipated in the negotiation of the United Nations Convention onJurisdictional Immunities of States and Their Property positively,and signed on the convention on September 14, 2005, but has notapproved it due to the absence of domestic legislation.The Chinese courts’ policies toward state immunity:

are in accordance with the fundamental norm of sovereignequality in international law, China claims state immunityfrom jurisdiction and execution;distinguish the activities of the state itself and those of stateowned companies or enterprises, which do not enjoy stateimmunity; andeliminate the difference on the issues of state immunitybetween countries through international treaties.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in China? Are certain disputescommonly referred to arbitration?

Arbitration has become an established and generally acceptedmeans of commercial dispute resolution in China. CIETAC forexample, in 2008, the CIETAC and its Sub-Commissions accepted1,230 arbitration cases and concluded 1,097 cases. The partiesinvolved came from forty-five countries and regions. The averageamount of disputed capital of individual case rose 70%, the amountof foreign-related arbitration cases grew 27.74%, and the total casevalue involved in the accepted cases reached 20,918 billion RMB. A broad range of disputes are being referred to arbitration,commonly in joint venture, construction, international sales ofgoods, energy cooperation, domain name disputes, etc.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in China, such as pending or proposedlegislation that may substantially change the lawapplicable to arbitration?

According to many news reports the revision of the Arbitration Lawwill come up on the agenda soon. The applicable departments inthe Chinese State Council are actively making preparations forrevising the Arbitration Law.

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Chungang Dong

Jingtian & Gongcheng 15th Floor, The Union Plaza, 20Chaoyangmenwai Dajie Beijing 100020China

Tel: +86 10 6588 2200Fax: +86 10 6588 2211Email: [email protected]: www.jingtian.com

Chungang Dong is partner at Jingtian & Gongcheng. He hasextensive experience in arbitration, litigation, and enforcement ofnational and foreign awards. He has represented clients, many ofwhom are multinationals, in dozens of arbitrations in a variety ofsubstantive areas such as trade, foreign investment, intellectualproperty, construction and product liability. He is member ofChinese Lawyer’s Association, China Academy of Arbitration Lawand the Chartered Institute of Arbitrators. He earned his bachelor’sand master’s degrees from China University of Political Science andLaw. Following law school, he worked for three years in ChinaInternational Economic & Trade Arbitration Commission as casemanager.

Xuejun Peng

Jingtian & Gongcheng 15th Floor, The Union Plaza20 Chaoyangmenwai Dajie Beijing 100020China

Tel: +86 10 6588 2200Fax: +86 10 6588 2211Email: [email protected]: www.jingtian.com

Xuejun Peng is founding partner at Jingtian & Gongcheng. Hispractice areas include litigation and arbitration, investment law,corporate law, international procurement and technology transfer,international aviation law and international trade. He hassubstantial experiences in arbitration, both as an arbitrator andlawyer. He is an arbitrator on the panel list of China InternationalEconomic & Trade Arbitration Commission and he is frequentlyappointed by the commission as sole arbitrator or presidingarbitrator. He earned his bachelor’s and master’s degrees fromBeijing University Law School. Before founding the firm, he wasofficer and counsel in Civil Aviation Administration of China andChina International Trust & Investment Corporation.

Jingtian & Gongcheng ranks among the oldest, largest and most reputable independent partnership law firms in China.Currently led by 51 partners, the firm has a total strength of approximately 200 lawyers nationwide. Operating fromoffices in Beijing, Shanghai and Shenzhen, the firm offers extensive, multilingual commercial and financial legalservices. The firm specialises in domestic and offshore listings, stock and bond offerings, banking and project financing,foreign direct investment services, mergers and acquisitions, private equity, and dispute resolution.

The firm’s litigation and arbitration department handles all contentious issues, calling upon its wide and in-depthexperience in banking, futures and securities, industry and commerce. The firm’s efficiency and effectiveness in bothcivil actions and arbitration have led to comprehensive protection of client interests in China and abroad. Last year,the firm won Asian Legal Business’ award of Dispute Resolution Law Firm of the Year again for its leading practice inthis field.

38

Chapter 6


Kachwaha & Partners

India


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of India?

No particular form is required by law. The agreement however,must be in writing. The arbitration agreement shall be deemed tobe in writing if it is contained in an exchange of letters or othermeans of communication which provide a record of the agreement.Further, the agreement need not be signed and an unsignedagreement affirmed by the parties conduct would be valid as anarbitration agreement. An arbitration agreement would also beconsidered to be in writing if there is an exchange of a statement ofclaim and defence in which the existence of the agreement isalleged by one party and not denied by the other. [Section 7 of theArbitration and Conciliation Act, 1996 - (Act).]


No there are not.


From an Indian point of view the most significant element would bethe seat of arbitration for that would determine as to which part ofthe Act would apply to the proceedings. Domestic arbitrations aregoverned by Part I of the Act, while off-shore arbitrations aregoverned by Part II of the Act. In the controversial and currentlyunder review judgment Venture Global Engineering v. SatyamComputer Services Ltd. (2008) 4 SCC 190, the Supreme Court hasheld that Part I of the Act would apply to foreign arbitrations alsounless there is specific or implied exclusion of its applicability.Hence in the case of foreign arbitrations, it is advisable to expresslyexclude the applicability of Part I of the Act to the arbitration.Otherwise (as per current law) a foreign award can also bechallenged in India, whether or not it is sought to be enforced here. Further, as is well known, the place of arbitration would largelydetermine the procedural law of the arbitration.


Section 8 of the Act states that a judicial authority before which an

action is brought in a matter which is the subject matter of anarbitration agreement, shall refer the parties to arbitration - the onlycondition being that the party objecting to the court proceedingsmust do so no later than his first statement on the substance of thedispute. In the meantime, the arbitration proceedings maycommence and continue and an award can be rendered. TheSupreme Court of India has held in Rashtriya Ispat Nigam Ltd. v.Verma Transport Co. (2006) 7 SCC 275 that once the conditions ofthe Sections are satisfied, the judicial authority is “statutorilymandated” to refer the matter to arbitration. Section 5 supplementsthis and provides, through a non-obstante clause, that in mattersgoverned by the Act, no judicial authority shall interfere exceptwhere so provided for. Thus, a judicial authority seized of a matterwhich contains an arbitration agreement, must refer the parties toarbitration and it is up to the arbitral tribunal to determine any issueas to its jurisdiction including objections in relation to the existenceor validity of the arbitration agreement. However, this provision(Section 8) applies only to arbitrations where the seat is in India.Agreements for off-shore arbitrations are governed by Section 45 ofthe Act which is some what differently worded. Here it is providedthat a judicial authority, when seized of any matter where there is anarbitration agreement, shall refer the parties to arbitration - “unlessit finds that the said agreement is null and void, inoperative orincapable of being performed”. The latter part is borrowed fromArticle 8 of the Model Law. Thus, India has retained courtintervention (to the extent permitted by the Model Law) only inrelation to foreign arbitrations. An issue arose in Shin-EtsuChemical Co. Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC 234, as towhether a ruling by court (in relation to off-shore arbitrations) onthe validity or otherwise of an arbitration agreement is to be on aprima facie basis or is it to be a final decision. If it were to be afinal decision, it would involve a full dress trial and consequentlyyears and years of judicial proceedings which would frustrate thearbitration agreement. Keeping this and the object of the Act inmind, the Supreme Court by a 2:1 decision held that a challenge tothe arbitration agreement under Section 45 on the ground that it is“null and void, inoperative or incapable of being performed” is tobe determined on a prima facie basis. At the same time an issue would remain as to what is to be done incases where the court does in fact come to a conclusion that thearbitral agreement is null and void, inoperative or incapable ofbeing performed. A decision to this effect is appealable underSection 50 of the Act. Thus, a ruling on a prima facie view alonewould not be satisfactory. One of the judges addressed this and heldthat if the court were to arrive at a prima facie conclusion that theagreement is in fact null and void, it would have to go ahead andhold a full trial and enter a final verdict (in order that it can beappealed if need be). In such situation therefore, a foreign

Dharmendra Rautray

Sumeet Kachwaha

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arbitration may well come to a halt pending final decision from anIndian court, but otherwise Section 45 proceedings would not haveany significant impeding effect on progress of a foreign arbitration.


A settlement agreement arrived at between the parties in aconciliation proceeding as per section 73 of the Act was held to bebinding upon the parties and the persons claiming under it, by theSupreme Court in Haresh Dayaram Thakur v. State ofMaharashtra, (2000) 6 SCC 179. It is only when the settlementagreement is signed by the parties to the proceedings that the statusand effect of a legal sanctity of an arbitral award could be conferredupon such agreement in terms of section 74 of the Act. Indeed the Indian Courts are expected to encourage ADR and this isenshrined in Section 89 of the Code of Civil Procedure, 1908(CPC). Section 89 contemplates alternative dispute resolution(ADR) mechanism through arbitration or conciliation or judicialsettlement including settlement through ‘Lok Adalat’ or mediation.‘Lok Adalats’ (literally ‘peoples court’) have a statutory frameworkand are basically a court encouraged settlement through formerJudges and NGOs. The Supreme Court in Salem Advocate BarAssociation v. Union of India, (2003) 1 SCC 49, observed thatwhere it appears to the Court that there exists an element ofsettlement which may be acceptable to the parties, the parties at theinstance of the Court shall be made to apply their mind so as to optfor one or other of the four ADR methods mentioned in the Section.


2.1 What legislation governs the enforcement of arbitrationproceedings in India?

See questions 1.3 and 1.4 above and question 2.2 below.


India has a composite piece of legislation governing both domesticand international arbitration. The Act has two main parts. Part Ideals with any arbitration (domestic as well as international) so longas the seat of arbitration is in India. Part II deals mostly withenforcement of foreign awards. “International commercial arbitration” is defined as an arbitrationwhere at least one of the parties is a national or habitual resident inany country other than India or a body corporate which isincorporated in any country other than India or a company orassociation of an individual whose “central management andcontrol” is exercised in any country other than India (Section 2(f) ofthe Act). However the Supreme Court of India in TDMInfrastructure Private Limited v. UE Development India PrivateLimited, 2008 (2) Arb LR 439 (SC), has held that if both parties areincorporated in India, then even if the control and management isfrom outside India, the arbitration would be “domestic” and not“international”. The difference between domestic and internationalarbitration (conducted in India) is minimal and discussed below.The first difference is that if there is a failure of the parties’envisaged mechanism for constitution of the arbitral tribunal, theappointment shall be made, in the case of a domestic arbitration bythe Chief Justice of the relevant High Court and in the case of

international arbitration by the Chief Justice of the Supreme Courtof India.The second difference is in relation to governing law. Ininternational commercial arbitration the arbitral tribunal shalldecide the dispute in accordance with the rules of law designated bythe parties as applicable to the substance of the dispute and failingany such designation, the rules of law the tribunal considersappropriate given all the circumstances. In domestic arbitration(arbitration between Indian parties) however, the tribunal can onlyapply the substantive law for the time being in force in India.


The law governing international arbitration is based faithfully onthe UNCITRAL Model law (and the UNCITRAL Rules 1976).There are a couple of departures designed to keep out courtintervention. Thus, for instance, Section 8 of the Act departs fromthe Model Law in as much as it does not permit a court to entertainan objection to the effect that the arbitration agreement is “null andvoid, inoperative or incapable of being performed.” (See alsoquestion 1.4 above.)Section 16 (corresponding Article 16 of the Model Law) also makesa slight departure. Unlike the Model Law, no interim Courtrecourse is permissible if the Tribunal declares that it hasjurisdiction. In such case the challenge is permissible only once thefinal award is passed. The Kompetenz Kompetenz principle ofArticle 16 suffered a modification at the hands of the SupremeCourt in S.B.P & Co. v. Patel Engineering Ltd., (2005) 8 SCC 618,where the Court held that when a Court is approached forconstitution of the Arbitral Tribunal (i.e. where the partiesenvisaged mechanism for the same breaks down) the Courts (andnot the tribunal) would have the final say in matters of itsjurisdiction.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in India?

International Arbitration Proceedings taking place in India aregoverned by the same set of provisions as domestic arbitrations.See question 2.2 above.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of India? What is thegeneral approach used in determining whether or not adispute is “arbitrable”?

The Act states that the relationship between the parties need not becontractual. Hence, disputes in tort (relating to the contract) canalso be referred to arbitration. However, matters of public interestsuch as: dissolution and winding up of incorporated companies;family relationships; workers rights; anti-trust matters; rent controllaws etc. may not be arbitrable. The general approach of the court to determine whether or not adispute is arbitrable is to see whether the parties can make thesettlement thereof a subject matter of private contract. This wasindicated by the Supreme Court in the case of OlympusSuperstructures v. Meena Khetan, (1999) 5 SCC 651, where thecourt relied on Halsbury’s Laws of England stating that the



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differences or disputes which may be referred must consist of“…….. a justiciable issue, triable civilly. A fair test of this iswhether the difference can be compromised lawfully by way ofaccord and satisfaction”. (4th Edition, volume 2, para 503.)


An arbitrator is permitted to rule on his or her own jurisdiction.This is provided for in Section 16 of the Act which corresponds toArticle 16 of the Model Law. (See question 2.3 above.)

3.3 What is the approach of the national courts in Indiatowards a party who commences court proceedings inapparent breach of an arbitration agreement?

Section 8 of the Act makes it mandatory on the Court to refer theparties to arbitration where the action brought before the judicialauthority is also the subject matter of an arbitration agreement.However, a party seeking reference to arbitration should file anapplication not later than when submitting his first statement on thesubstance of the dispute. See question 1.4 above.


See questions 1.4 and 2.3 above.Additionally, the issue of jurisdiction can be raised by a party beforethe court by way of an appeal under section 37 (2) (a) on a findingof the arbitral tribunal refusing jurisdiction. On the other hand if thetribunal’s finding is that it has jurisdiction, it can only be challengedafter the award is rendered.

3.5 Under what, if any, circumstances does the national law ofIndia allow an arbitral tribunal to assume jurisdiction overindividuals or entities which are not themselves party toan agreement to arbitrate?

This is not permitted. Indeed the Supreme Court of India inSukanya Holdings v. Jayesh Pandya, (2003) 5 SCC 531, refused tostay a court action when some of the parties had an arbitrationagreement, on the ground that the parties to the arbitrationagreement and to the court action were not the same.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in India and what is thetypical length of such periods? Do the national courts ofIndia consider such rules procedural or substantive, i.e.,what choice of law rules govern the application oflimitation periods?

The Limitation Act, 1963 applies to arbitrations as it does toproceedings in court (Section 43, Act). For these purposes,arbitration proceedings are deemed to have commenced (unless theparties have agreed otherwise) on the date on which a request forthe dispute to be referred to arbitration is received by the respondent(Section 21, Act). The Limitation Act provides that the partyinvoking the arbitration has three years from the date ofcommencement of arbitration proceedings to seek appointment ofarbitral tribunal. The Courts consider the limitation period as partof the substantive law.



If the parties have an Indian nationality (and in the case ofcompanies if they are incorporated in India) the tribunal can onlyapply Indian law to the substance of the dispute. In other cases, theparties may either make an express choice of law or the proper lawmay be inferred from the terms of the contract and surroundingcircumstances. It is the law with which the contract is most closelyconnected with. Factors such as the nationality of the parties, theplace of performance of the contract, place of entering into of thecontract, place of payment under the contract etc. can be looked atto ascertain the intention of the parties.The proper law of the arbitration agreement is normally the same asthe proper law of the contract. Where, however, there is no expresschoice of the law governing the contract as a whole, of thearbitration agreement as such, a presumption may arise that the lawof the country where the arbitration is agreed to be held is theproper law of the arbitration agreement. But this is only arebuttable presumption. (NTPC v. Singer Co. (1992) 3 SCC 551.)


In respect of procedural matters relating to the arbitration proceedingsthe laws of the seat of jurisdiction shall prevail. The Court may,invoking the principle of comity of nations, apply the mandatory lawsof another jurisdiction if the contract is in breach of that law.


The proper law of arbitration (i.e., the substantive law governingarbitration) determines the formation, and legality of arbitrationagreements. Please see question 4.1.



The law does not impose any limits on the parties’ autonomy toselect arbitrators. An arbitrator need not have any specialqualification or training or be a member of the bar. Persons, knownto or in the employment of one or more of the parties may beappointed so long as full disclosure is made (and not objected to).


There is a default provision provided for vide Section 11 of the Act.The Act’s default provisions governing the appointment ofarbitrators are triggered if:

The parties cannot agree on the appointment of an arbitratorwithin 30 days of receipt of a request to do so. Two appointed arbitrators fail to agree on the third arbitratorwithin 30 days of the date of their appointment.The arbitration is to be heard by one arbitrator and the parties

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fail to agree on that arbitrator within 30 days of receipt of arequest to agree on the appointment.The parties’ mechanism for appointment of an arbitrator fails.

If the default is in relation to an international commercial arbitration,the appointment shall be made by the Chief Justice of India. In othercases, the appointment shall be made by the Chief Justice of the HighCourt having jurisdiction in relation to the matter.


The court can intervene only in a default situation (see question 5.2above). After the arbitral tribunal is constituted the jurisdiction of the courtcan be invoked only if an arbitrator has become de jure or de factounable to perform his functions or fails to act without undue delay.If there is any controversy as to these circumstances a party mayapply to court for a decision on the same.


Like Article 12 of the Model Law and Article 10 of the ModelRules, the Act also requires the arbitrators (including partyappointed arbitrators) to be independent and impartial and make fulldisclosure in writing of any circumstance likely to give rise tojustifiable doubts on the same. (See section 12.) An arbitrator may be challenged only in two situations. First, ifcircumstances exists that give rise to justifiable grounds as to hisindependence or impartiality; second, if he does not posses thequalifications agreed to by the parties. The Indian courts have held that “the apprehension of bias must bejudged from a healthy, reasonable and average point of view and noton mere apprehension of any whimsical person. Vague suspicionsof whimsical, capricious and unreasonable people are not ourstandard to regulate our vision”. International Airports Authority ofIndia v. K.D. Bali, (1988 ) 2 SCC 360.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within India?

No there are not.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in India? If so, do those laws or rules apply toall arbitral proceedings sited in India?

The arbitrators are masters of their own procedure and subject to theparties’ agreement, may conduct the proceedings “in the manner theyconsider appropriate” (Section 19). This power includes - “the powerto determine the admissibility, relevance, materiality and weight ofany evidence” (Section 19). The only restrain on them is that theyshall treat the parties with equality and each party shall be given a fullopportunity to present its case, which includes sufficient advancenotice of any hearing or meeting. Neither the Code of CivilProcedure, 1908 nor the Indian Evidence Act, 1872 (Evidence Act)applies to arbitrations. Unless the parties agree otherwise, the tribunalshall decide whether to hold oral hearings for the presentation ofevidence or for arguments or whether to conduct the proceedings on

the basis of documents or other material alone. However, the arbitraltribunal shall hold oral hearings if a party so requests (unless theparties have agreed that no oral hearing shall be held).The arbitrators have power to proceed ex parte where the respondent,without sufficient cause fails to communicate his statement of defenceor appear for an oral hearing or produce evidence. However, suchfailure shall not be treated as an admission of the allegations and thetribunal shall determine the matter on evidence, if any, before it. If theclaimant fails to communicate his statement of claim, the tribunal shallbe entitled to terminate the proceedings.

6.2 In arbitration proceedings conducted in India, are thereany particular procedural steps that are required by law?

See question 6.1 above. The other procedural steps are mostly asenvisaged under the Model law and UNCITRAL Rules 1976.


See questions 6.1 and 6.2 above.

6.4 What powers and duties does the national law of Indiaimpose upon arbitrators?

Apart from the provisions envisaged under the Act, the arbitratorsare bound by the fundamental principles of natural justice andpublic policy in conducting the arbitration proceedings.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in India and, if so, is itclear that such restrictions do not apply to arbitrationproceedings sited in India?

Foreign lawyers have no right of audience before Indian courts.However, they can appear and represent clients in arbitrationproceedings.

6.6 To what extent are there laws or rules in India providingfor arbitrator immunity?

There are none.


No, the courts have no such jurisdiction. The parties can with theapproval of the arbitral tribunal or otherwise, seek the court’sassistance in taking evidence. The court may issue summons towitnesses or order that evidence be provided directly to the arbitraltribunal (Section 27).

6.8 Are there any special considerations for conductingmultiparty arbitrations in India (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

The Act does not provide for multiparty arbitrations orconsolidation of proceedings or third party intervention. Unless theparties so agree, there can be neither consolidation nor third party



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intervention in arbitration proceedings.

6.9 What is the approach of the national courts in Indiatowards ex parte procedures in the context of internationalarbitration?

Before a party can be proceeded ex parte in an internationalarbitration it is necessary for the arbitral tribunal to give notice tothe concerned party of the intention of the tribunal to proceed exparte and after having done so a further notice should be given tothe said party that the arbitral tribunal has proceeded ex parte. Suchnotice has to be duly served on the concerned party and alsoreasonable time should be granted to the party to respond to suchnotices. If a party is proceeded ex parte without due notice orreasonable time to respond to such notices the Courts in India maysee it as a breach of the principles of natural justice and set aside theaward on the ground of breach of public policy of India.



This is provided for vide Section 17 of the Act (corresponding toArticle 17 of Model Law). An arbitral tribunal may order interimmeasures of protection as may be considered necessary in respect ofthe subject matter of the dispute. The order is appealable and notenforceable without recourse to a separate court proceeding.


Section 9 of the Act enables a party to approach a competent courtbefore or during the arbitral proceedings or even after the award ispronounced, but before it is enforced for any interim relief. TheModel Law in fact has a more restrictive provision - it does notcontemplate recourse to a court for an interim measure after theaward is pronounced (Article 9).The Supreme Court in the case of Sundaram Finance v. NEPC,(1999) 2 SCC 479, held that if a court is approached before thearbitral proceedings are commenced, the applicant must issue anotice to the opposite party invoking the arbitration clause oralternatively the court would have to be first satisfied that theapplicant shall indeed take effective steps to commence the arbitralproceedings without delay. Further, the Court would have to besatisfied that there exists a valid arbitration agreement between theparties. The court has power to grant interim relief even inproceedings outside India where parties have neither expressly norimpliedly excluded the applicability of section 9 of the Act (BhatiaInternational v. Bulk Trading SA, (2002) 4 SCC 105).This provision is independent of the arbitrator’s power to grantinterim relief (see question 7.1 above).


Indian courts have very wide powers to grant interim relief.

Usually a three-fold approach is followed: (i) existence of primafacie case in favour of the applicant; (ii) irreparable hardship to theapplicant if the interim relief is not granted; and (iii) balance ofconvenience.Indian courts are perceived to be liberal in granting interim reliefand rarely put an applicant to terms as to security or costs (shouldthey ultimately not succeed in their action).


Yes. Section 9 and section 17 of the 1996 Act envisages the powerof the national court and/or the arbitral tribunal respectively, by wayof an interim measure to order security for costs.


8.1 What rules of evidence (if any) apply to arbitralproceedings in India?

Section 19 of the Act states that the arbitral tribunal shall not bebound by the provisions of the Evidence Act. However, decidedcases have held that certain provisions of the Evidence Act whichare founded on fundamental principles of justice and fair play shallapply to arbitrations.Hence, “fundamental principles of natural justice and publicpolicy” would apply, though the technical rules of evidencecontained under the Indian Evidence Act would not apply (State ofMadhya Pradesh v. Satya Pal, AIR 1970 MP 118).


There are no limits prescribed under the Act on the power of thearbitrator to order disclosure of documents. Section 27 of the Actprovides that the arbitral tribunal, or a party with the approval of thearbitral tribunal may apply to the court for assistance in takingevidence including any disclosure or discovery. Hence, (unless theparties voluntarily comply) disclosure / discovery can only bethrough court and in accordance with the provisions of the CPC. Courts would order discovery if satisfied that the same is necessaryfor fair disposal of the suit or for saving costs.


Please see question 8.2 above.




The Indian Oath’s Act, 1969 extends to persons who may beauthorised by consent of the parties to receive evidence. This Act,thus, encompasses arbitral proceedings as well. Section 8 of the

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said Act states that every person giving evidence before any personauthorised to administer oath “shall be bound to state the truth onsuch subject.” Thus, witnesses appearing before an arbitral tribunalcan be duly sworn by the tribunal and be required to state the truthon oath and upon failure to do so, commit offences punishableunder the Indian Penal Code.Right of cross-examination would necessarily have to be granted asa principle of fairness.

8.6 Under what circumstances does the law of India treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

The arbitral proceedings or record is not privileged. Indian lawrecognises two classes of documents as privileged: (i) lawyer-clientcommunications; and (ii) unpublished official records relating toaffairs of the State if detrimental to public interest. Both arecapable of waiver by the party affected.

9 Making an Award


An arbitral award must be in writing and signed by the arbitrators(or a majority of them) and state the date and place of arbitration. Itshall state reasons upon which it is based, unless the parties haveagreed otherwise.



A challenge to an arbitration award would lie under Section 34 ofthe Act corresponding to Article 34 of the Model law. Toparaphrase, an award can be set aside if:(a) the party making the application was under some incapacity; (b) the arbitration agreement was not valid under the law agreed

to by the parties (or applicable law); (c) the party making the application was not given proper notice

of the appointment of the arbitrator or of the arbitralproceedings or was otherwise unable to present his case;

(d) the award deals with a dispute not contemplated by or fallingwithin the terms of submissions to arbitration or it containsdecisions beyond the scope of the submissions to arbitration;

(e) the composition of the arbitral tribunal or the arbitralprocedure was not in accordance with the agreement of theparties;

(f) the subject matter of the dispute was not capable ofsettlement by arbitration; or

(g) the arbitral award is in conflict with the public policy ofIndia.

In addition to the above grounds, the Supreme Court in ONGC v.Saw Pipes, (2003) 5 SCC 705, has held that a domestic award canbe set aside if it is patently erroneous i.e., if the award is contraryto the terms of the contract entered into between the parties or thesubstantive law.


Though the Act is silent on the point, in law it may be possible toexclude certain grounds of challenge but judicial review as suchcannot be excluded as that would be contrary to Public Policy of India.


No, the courts cannot assume a new jurisdiction (which it otherwisedoes not have) on the basis of the parties’ agreement.

10.4 What is the procedure for appealing an arbitral award inIndia?

An application for setting aside a domestic award can be filed undersection 34 of the Act. Such application must be made within threemonths from the date of receiving of the award. The court if satisfiedthat the applicant was prevented by sufficient cause from making theapplication within the said period of three months may condone delayof a further period of 30 days but not thereafter. No such similarapplication for setting aside a foreign award is contemplated underPart II of the Act. It is only when an application for enforcement of aforeign award is filed, can objections be taken against the same on theNew York Convention Grounds. However a recent controversialjudgment in the case of Venture Global Engineering v. SatyamComputer Services Ltd., (2008) 4 SCC 190 (which is currently underreview) has held that it is permissible to set aside a foreign award alsoeven though a party may not seek to enforce it in India.Application in both cases must be made before the Court havingjurisdiction and this would, inter alia, depend on the place ofresidence or business of the defendant or the place where the assetsof the defendant are located.


11.1 Has India signed and/or ratified the New York Conventionon the Recognition and Enforcement of Foreign ArbitralAwards? Has it entered any reservations? What is therelevant national legislation?

Yes. The relevant legislation is the Arbitration and ConciliationAct, 1996. India has entered the ‘reciprocity’ and ‘commercial’reservations under Article I of the New York Convention. As aresult the Central Government of India must further notify theforeign territory as a territory to which the New York Conventionapplies in order for the foreign award to be enforced. Till date 43countries have been notified and only award rendered in theseterritories would be enforceable in India. However, an award made in Ukraine after the break up of the USSRwas held to be an enforceable foreign award even in absence of aseparate notification recognising the new political entity as areciprocating territory (Transocean Shipping Agency (P) Ltd. v.Black Sea Shipping, (1998) 2 SCC 281).

11.2 Has India signed and/or ratified any regional Conventionsconcerning the recognition and enforcement of arbitralawards?

No it has not.



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11.3 What is the approach of the national courts in Indiatowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

The general approach is to support the arbitral award - see BijendraNath v. Mayank, (1994) 6 SCC 117. The Supreme Court has heldthat, “the court should approach an award with a desire to supportit, if that is reasonably possible, rather than to destroy it by callingit illegal”. In case of a foreign award, a party seeking enforcement would haveto file an application before the court where the defendant residesor has assets along with the original award or a copy dulyauthenticated, original arbitration agreement or a duly certifiedcopy and such evidence as may be necessary to prove that the awardis a foreign award (Section 47(1)).

11.4 What is the effect of an arbitration award in terms of resjudicata in India? Does the fact that certain issues havebeen finally determined by an arbitral tribunal precludethose issues from being re-heard in a national court and, ifso, in what circumstances?

Subject to any challenge to the arbitral award, the same isenforceable as a decree and in such situation, the principles of resjudicata would apply.

12 Confidentiality

12.1 Are arbitral proceedings sited in India confidential? What,if any, law governs confidentiality?

The law does not require the arbitral proceedings to be confidential.Confidentiality would thus, have to be based on general principlesof Common Law or the parties’ agreement.


Yes it can.


See question 12.1 above.



Arbitrators can grant declaratory relief and order specificperformance. Damages can only be compensatory in nature.Liquidated damages must also fulfil the test of reasonableness.Punitive damages are not permitted. (Section 73 and 74 of theIndian Contract Act, 1872.)


Subject to the party’s agreement, the arbitral tribunal may award

interest as it deems reasonable from the date of the award to the dateof payment. Unless otherwise directed by the tribunal the awardshall carry interest at 18% per annum from the date of award till thedate of payment. This provision shall apply only to awardsrendered in India.


Costs are at the discretion of the tribunal. The general principle isthat costs follow the event. (Section 31 (8).)


An award is required to be stamped. The stamp duty depends on theamount involved in the award and varies from State to State. Anaward relating to immovable property must be registered under theRegistration Act, 1908 within four months of its date. Registrationfees also vary from State to State and are ad valorem.


14.1 Has India signed and ratified the Washington Conventionon the Settlement of Investment Disputes Between Statesand Nationals of Other States (1965)?

No it has not.

14.2 Is India party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Although India has signed several BITs with provision ofarbitration under ICSID as one of the mechanism for disputeresolution, India not being a party to the Washington Convention,the said clause is inoperative.

14.3 Does India have standard terms or model language that ituses in its investment treaties and, if so, what is theintended significance of that language?

No it does not.

14.4 In practice, have disputes involving India been resolved bymeans of ICSID arbitration and, if so, what has theapproach of national courts in India been to theenforcement of ICSID awards and how has thegovernment of India responded to any adverse awards?

No they have not.

14.5 What is the approach of the national courts in Indiatowards the defence of state immunity regardingjurisdiction and execution?


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15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in India? Are certain disputescommonly being referred to arbitration?

Civil courts in India are typically bogged down with delays.Arbitrations are thus becoming increasingly popular - nay necessary.Traditionally, they are more common in shipping and construction. The Indian Council of Arbitration (promoted by the CentralGovernment) is the leading arbitration institution in India but agood part of arbitration continues to be ad hoc. The London Courtof International Arbitration has recently set up an institutionalarbitration forum in India. The Delhi High Court is contemplatingsetting up of an arbitration centre with the aim to encouragearbitration and cut down the work load of the Courts. It has alreadyset up a designated arbitration court which would deal with allarbitration matters. The Supreme Court in Union of India v. SinghBuilders Syndicate, 2009 (2) Arb. LR 1 (SC) acknowledged that

cost of arbitration in India can be high if the Arbitral Tribunalconsists of retired Judge/s and viewed institutional arbitration as asolution to bring down the arbitration cost.Generally retired Judges of the High Court or Supreme Court arenominated as arbitrators. India does not have a distinct arbitrationbar. Thus, arbitrations tend to carry the baggage of litigationpractices. There is a great emphasis on oral hearings and a typicalarbitration ends up with a large number of hearings even forprocedural directions and interlocutory matters.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in India, such as pending or proposedlegislation that may substantially change the lawapplicable to arbitration?

The Government is committed to bring about an arbitration friendlyculture as it considers it necessary to facilitated economic reforms.Arbitrations are poised for rapid growth and development.

Sumeet Kachwaha

Kachwaha & Partners 1/6 Shanti NiketanNew Delhi - 110021India

Tel: +91 11 4166 1333Fax: +91 11 2411 0763Email: [email protected]: www.kaplegal.com

Sumeet Kachwaha has over three decades experience in litigationand arbitrations. He has been involved in some of the major casesever to come up in India including the Union Carbide Bhopal gasleak case - the largest damage case in the world. He is the current Chair of the Dispute Resolution and ArbitrationSection of the IPBA and member of the IBA Arbitration SubCommittee on implementation and application of the New YorkConvention by National Courts and Legislatures. Mr. Kachwaha is rated in Band One in both the Dispute Resolutionand Arbitration Sections of Chambers Asia 2009. He figures inWho’s Who Legal as well as a ‘Highly Recommended Individual’ byPLC, U.K. and as a ‘Leading Individual’ by Legal 500 (for DisputeResolution).He has written and spoken extensively on the subject in variousinternational forums.

Dharmendra Rautray

Kachwaha & Partners 1/6 Shanti NiketanNew Delhi - 110021India

Tel: +91 11 4166 1333Fax: +91 11 2411 0763Email: [email protected]: www.kaplegal.com

Mr. Rautray was called to the Bar of England and Wales and is amember of Lincoln’s Inn. He has done his LLM from the LondonSchool of Economics. He has over 15 years standing at the Barchiefly devoted to international litigation and dispute resolution. Hehas authored a full length Book titled “Master Guide to Arbitrationsin India” published by Wolters Kluwer. Mr. Rautray is frequentlyinvited to speak on Arbitration in various forums and was a speakerat the ICC U.K. Arbitration Day in November 2008. Mr. Rautray ispresently handling several multi million dollar arbitrations formultinational companies. He is currently involved with drafting ofRules and setting up of the Delhi Arbitration Centre (the first of itskind in India). This Centre will be affiliated with the High Court ofDelhi.

Kachwaha & Partners is amongst India’s premier law firms in dispute resolution. The firm has its offices in Delhi andMumbai (Bombay) and associate lawyers in most major cities of India. The main office of the firm is in New Delhi,conveniently located, next to the diplomatic mission area. It is easily accessible from all parts of Delhi as well as itssuburbs. The firm has an extensive library and modern office equipment.

Partners and members of the firm are senior professionals with years of experience behind them. They bring the highestlevel of professional service to clients along with the traditions of the profession, integrity and sound ethical practices.

Members of the firm are in tune with the work-culture of international law firms as well as the expectations of largecorporate clients. Several members are active in international law associations, including the International BarAssociation, Inter-Pacific Bar Association and the UIA.

The firm has amongst its clients Multinationals, Embassies and leading Indian Corporations.


46

Chapter 7


Anderson Mori & Tomotsune

Japan


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Japan?

An arbitration agreement must be in writing (Art 13.2 of JapaneseArbitration Act, Act No. 138 of 2003, as amended, “Arbitration Act”).(Unless otherwise indicated, article and chapter numbers referred toin the article are those of the Arbitration Act). An arbitrationagreement is in writing when the agreement is reduced to: (i) thedocuments signed by the parties; (ii) the correspondence exchangedby the parties, including those sent by facsimile transmissions andother communication devices which provide written records of thecommunicated contents to the recipient; and (iii) other writteninstructions. Additionally, electromagnetic records (i.e. emailtransmissions) are deemed to be in writing (Art 13.4).


No, there are not.


The Arbitration Act does not stipulate specific elements to beincorporated in an arbitration agreement. In practice, the minimumelements to be incorporated are: (i) the parties; and (ii) the scope ofthe submission to arbitration. In addition, the following elementsshould be included: (i) applicable arbitration rules; (ii) applicablerules of evidence; (iii) place of arbitration; (iv) number ofarbitrators; (v) language of procedure; (vi) required qualificationand skills of the arbitrator(s); (vii) waiver of sovereign immunity;and (viii) confidentiality agreement.


Japanese courts are generally friendly to arbitration agreements.Unlike the UNCITRAL Model Law, Japanese courts do not referthe case to arbitration, but dismiss the lawsuit if it finds that the caseis brought in breach of an arbitration agreement upon defendant’smotion to dismiss the case prior to oral hearing (Art 14.1).


As to commercial disputes, ADR agreements do not prevent partiesfrom litigating. Courts may, however, stay the proceedings at theirdiscretion or postpone the court sessions once the ADR proceedingsare initiated by either party based on the ADR agreement.


2.1 What legislation governs the enforcement of arbitrationproceedings in Japan?

The Arbitration Act governs the enforcement of arbitrationagreements in Japan. It was enacted in 2003 and became effectiveon March 1, 2004. The English translation of the Arbitration Act isavailable at the following website:www.kantei.go.jp/foreign/policy/sihou/arbitrationlaw.pdfPlease note that amendments made after 2003 have not yet beenincorporated in this English translation.


Yes. The Arbitration Act applies equally to both domestic andinternational arbitration.


Yes, the Arbitration Act basically follows the UNCITRAL ModelLaw. But there are significant differences on the following points:

Arbitrator’s Fee (Art 48). Unless otherwise agreed to by theparties, arbitrators can determine their own fees, while theUNCITRAL Model Law does not have such provisions. Inpractice, since parties usually agree on institutionalarbitration, the fee schedules of such institutions will apply.Accordingly, this provision applies to ad-hoc arbitration.Arbitration Cost and Deposit (Art 49). Unless otherwiseagreed to by the parties, arbitrators may order either or bothparties to deposit preliminary arbitration costs as determinedby the tribunal.Enforcement of Arbitration Agreement (Art 14.1). Thenational court will dismiss a case brought before it if it findsthat the parties’ arbitration agreement is valid. The court will

Naoki Iguchi

Yoshimasa Furuta

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not order the case to be submitted to arbitration. Please seequestion 1.4.Promotion of Settlement (Art 38.4). The Arbitration Actstipulates that the tribunal may attempt to settle the dispute,upon the parties’ consent. Generally speaking, Japanesepractitioners, including arbitrators, prefer to settle the disputethan to make an arbitration award. This provision requiresthe parties’ consent for the tribunal’s attempt to settle, toavoid the situation that arbitrators place unnecessarypressure upon the parties for settling the case. Parties maywithdraw their consent at any time until the settlement isreached.Consumer Dispute Exception (Supplementary Provision Art3). The Arbitration Act confers on consumers a unilateralright to terminate the arbitration agreement, which is enteredinto between the consumer and the business entity.Arbitration proceedings may be proceeded if i) the consumeris the claimant of the arbitration, or; ii) the consumerexplicitly waives the right to discharge after the arbitraltribunal explains the arbitration procedure to the consumer atan oral hearing.Employment Dispute Exception (Supplementary ProvisionArt 4). An arbitration agreement between employer andemployee with respect to future disputes over employment isinvalid.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Japan?

Under the Arbitration Act, there are no mandatory rules specificallyapplied to international arbitration proceedings sited in Japan.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Japan? What is thegeneral approach used in determining whether or not adispute is “arbitrable”?

“Arbitrability” is broadly defined in Japan to cover a variety of civiland commercial disputes. Unless otherwise provide by law, civiland commercial disputes that may be resolved by settlementbetween the parties (excluding that of divorce or separation) are“arbitrable” (Art 13.1). Although there are few laws whichexplicitly deny “arbitrability”, the following subject matters aregenerally considered to be NOT “arbitrable”: (i) anti-trust lawmatters; (ii) validity of intellectual property rights granted by thegovernment, i.e. patents, utility models, and trademarks; (iii)shareholders’ lawsuits against the resolution from the generalshareholders meeting; (iv) administrative decisions of governmentagencies; and (v) insolvency and civil enforcement proceduraldecisions. The matter is not “arbitrable” if the final decision of thedispute may be binding on third parties.


Yes. The Arbitration Act has adopted the Kompetenz-Kompetenzrule. Art 23.1 provides that: “[t]he arbitral tribunal may rule onassertion made in respect of the existence or validity of anarbitration agreement or its own jurisdictions (which hereafter inthis article means its authority to conduct arbitral proceedings andto make arbitral awards).”

3.3 What is the approach of the national courts in Japantowards a party who commences court proceedings inapparent breach of an arbitration agreement?

The court will dismiss the case brought before it upon a motion todismiss by the defendant prior to the oral hearing. Also see question1.4.


Based on the Kompetenz-Kompetenz rule (Art 23.1. Also seequestion 3.2 above), the arbitral tribunal may primarily review itsown jurisdiction. If the arbitral tribunal rules that it has jurisdiction,any party, within 30 days of receipt of the ruling, may request thecourt to review such ruling (Art 23.5).Courts may also address the issue regarding jurisdiction of thearbitral tribunal at the stage of enforcement of and/or enforceabilityof the arbitration award.

3.5 Under what, if any, circumstances does the national law ofJapan allow an arbitral tribunal to assume jurisdiction overindividuals or entities which are not themselves party toan agreement to arbitrate?

As a principle, an arbitration agreement is binding only upon thesigning parties of the arbitration agreement. As to an arbitrationagreement to which a joint-venture is a party, it would be possiblethat respective participant to joint-venture is bound to such anagreement. Furthermore, the court extended the scope of anarbitration agreement with respect to the parties to the arbitrationproceedings as a result of applying New York law, which waschosen by the parties as a governing law, to the interpretation of thearbitration agreement. KK. Nihon Kyoiku Sha v. Kenneth J. Feld,68 Hanrei Jiho 1499 (Tokyo H. Ct., May 30, 1994); appeal to theSupreme Court denied, 51 Minshu 3709 (Sup. Ct., Sept. 4, 1997).

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Japan and what is thetypical length of such periods? Do the national courts ofJapan consider such rules procedural or substantive, i.e.,what choice of law rules govern the application oflimitation periods?

There is no related provision in relation to limitation periods for thecommencement of arbitrations. Japanese law considers such rulesof limitation periods substantive. Accordingly, parties may choosethe law of limitation under the Act on General Rules of Applicationof Laws (Act No. 78 of 2007), which contains basic rules of theconflict of laws in Japan.



Primarily, the arbitral tribunal shall apply the laws as are agreed bythe parties as applicable to the substance of the dispute. If theparties fail to agree on the applicable law, the tribunal shall applysuch law of the State with which the dispute is most closelyconnected (Art 36.1 and 36.2). Notwithstanding these provisions,the tribunal shall decide ex aequo et bono when the parties have



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expressly authorised it to do so (Art 36.3). In addition, where thereis a contract relating to the civil dispute, the tribunal shall decide inaccordance with the terms of such contract and shall take intoaccount the applicable usages, if any (Art 36.4).


Generally speaking, with respect to the circumstances wheremandatory laws prevail over the laws chosen by the parties, thesame principle as of conflict-of-laws apply. For instance, in thosecases involving regulatory issues, i.e. labour law, antitrust law andpatent law, mandatory laws may prevail over the laws chosen by theparties to the arbitration.


According to Art 44.1[2] of the Arbitration Act, validity of thearbitration agreement should be subject to the law agreed upon by bothparties as an applicable law, or, in case of failing, to the laws of Japan.



No. Parties can agree on anything regarding the selection ofarbitrators, including the number, required qualification and skillsof arbitrators and the methods for the selection.


Yes. The Arbitration Act provides a default procedure for selectingarbitrators, which is identical to the UNCITRAL Model Law.


Yes. Courts intervene and assist with the selection of arbitrators ifthe parties and/or party-appointed arbitrators failed to selectarbitrators. Upon either party’s request, courts will select anarbitrator. In selecting an arbitrator, the court will consider thefollowing factors (Art 16.6): (i) the qualifications required of thearbitrators by the agreement of the parties; (ii) the impartiality andindependence of the appointees; and (iii) whether or not it would beappropriate to appoint an arbitrator of a nationality other than thoseof the parties. Recently, in a maritime dispute between a Japanesecompany and an Indian distributor, the court selected an attorney asthe arbitrator from the candidate list of The Japan ShippingExchange, Inc. (“TOMAC”). The court did not see any problemwith the fact that all listed candidates were Japanese nationals. Thecourt might have considered the nature of the case, the place ofarbitration, and that the agreement stipulated a sole arbitrator. CaseNo. Heisei 15 (wa) 21462 (Tokyo D. Ct., Feb. 9, 2005).


Reasonable doubt as to the impartiality and independence of the

arbitrators can be the grounds for challenging them (Art 18.1[1]).In order to secure the effectiveness of such ‘challenge’ system, botharbitrator candidates and arbitrators are obliged to disclose all thefacts which may raise doubts as to their impartiality or theirindependence (Art 18.3 and 18.4).

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Japan?

As mentioned in question 5.4 above, both arbitrator candidates andarbitrators are obliged to disclose all the facts which may raisedoubts as to their impartiality or their independence (Art 18.3 and18.4). Further, the Japan Association of Arbitrators (“JAA”) isexpected to publish the “JAA Guidelines on Professional Liabilitiesof Arbitrators” soon. The JAA Guidelines may not be binding butmay at least provide a useful standard in regard with neutrality andimpartiality of the arbitrators. In the meantime, the “IBAGuidelines on Conflicts of Interest in International Arbitrator” aregradually being accepted among international arbitrationpractitioners in Japan.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Japan? If so, do those laws or rules apply toall arbitral proceedings sited in Japan?

Yes, but they are minimal. The Arbitration Act allows parties tohave broad autonomy and the arbitral tribunal to have broaddiscretion (Art 26). The Arbitration Act’s minimum mandatoryrules include “equal treatment of parties”, “due process” and“public order” (Art 25 and 26.1). In addition, the Arbitration Actprovides “default rules” with respect to certain stages and mattersof arbitration procedure, such as: waiver of right to object (Art 27);place of arbitration (Art 28); commencement of arbitral proceedingsand interruption of limitation (Art 29); language (Art 30); timerestriction on parties’ statements (Art 31); procedure of hearings(Art 32); default of a party (Art 33); expert appointed by arbitraltribunal (Art 34); and court assistance in taking evidence (Art 35).

6.2 In arbitration proceedings conducted in Japan, are thereany particular procedural steps that are required by law?

Yes. In arbitral procedures, certain procedural steps are required tofollow by law, which are: equal treatment and due process (Art 25),tribunal’s authority on Kompetenz-Kompetenz (Art 23.1), timelimitation to parties for arguing on the tribunal’s jurisdiction (Art23.2), prior notice of oral hearings (Art 32.3), accessibility to the otherparty’s brief and all evidence (Art 32.4), form of awards (Art 39) andcompletion of arbitral proceedings (Art 40). In addition, if the arbitralproceedings involve court’s intervention and/or assistance, certainprocedural steps should be followed pursuant to Art 35.


Yes, but they are minimal. Arbitral tribunal should have an oralhearing upon either party’s request, unless otherwise agreed to bythe parties (Art 32.1 and 32.2). When holding oral hearings for thepurpose of oral argument or inspection of goods, other property ordocuments, the tribunal shall give sufficient advance notice to theparties of the time and place for such hearings (Art 32.3).

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6.4 What powers and duties does the national law of Japanimpose upon arbitrators?

The Arbitration Act provides the arbitral tribunal with a wide rangeof powers with respect to arbitral proceedings. For example, ifeither party requests that the national court assist with theexamination of evidence, i.e., witnesses, expert and writtenevidence, such a party needs to have the tribunal’s consent (Art.35.2). The Arbitration Act also gives the arbitral tribunal powers todetermine Kompetenz-Kompetenz (Art 23.1), and to render interimmeasures (Art 24).

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Japan and, if so, is itclear that such restrictions do not apply to arbitrationproceedings sited in Japan?

The Lawyers Act (Act No. 205 of 1950) strictly prohibits non-lawyers (including lawyers admitted in foreign jurisdictions) toperform legal business in Japan (Art 72). If registered in Japan, aforeign lawyer may handle some legal business in Japan but only tothe extent that the Act on Special Measures concerning theHandling of Legal Services by Foreign Lawyers (Act No. 66 of1986, the “Foreign Lawyers Act”) allows them. Meanwhile, as forthe arbitration procedures, the Foreign Lawyers Act explicitly setsout an exception to those restrictions, saying that lawyers admittedin foreign jurisdiction (both registered and non-registered in Japan)may perform representation regarding the procedures forinternational arbitration cases, including the procedures forsettlement (Art 5.3 and 58.2 of the Foreign Lawyers Act).

6.6 To what extent are there laws or rules in Japan providingfor arbitrator immunity?

There are no statutory laws or rules providing for arbitratorimmunity in Japan.


No, courts may only intervene or support arbitration proceedingsupon a party’s request. Once an arbitral tribunal is selected andcomposed, it will determine how to deal with procedural issuesarising during an arbitration procedure (Art 23.1).

6.8 Are there any special considerations for conductingmultiparty arbitrations in Japan (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

Yes, but the Arbitration Act has minimal provisions with respect tothe number of arbitrators. In absence of agreement by the parties,it is fixed at three for a two-party arbitration; and courts may, upona party’s request, determine the number of arbitrators for a multi-party arbitration (Art 16.2 and 16.3). Separation of the arbitration procedures are allowed upon the requestof either party under Art 17 of the JCAA Rules. Consolidation of thearbitration proceedings is possible if all the claims derive from a singlearbitration agreement; otherwise, all parties’ consent is required.Third party participation to an on-going proceeding is possible,provided that all parties consent to it (Art 43 of JCAA Rule).

6.9 What is the approach of the national courts in Japantowards ex parte procedures in the context of internationalarbitration?

The Arbitration Act does not allow ex parte procedures. Even if arespondent does not submit briefs by the deadline decided by thearbitral tribunal, it should not be deemed that the respondent hasadmitted the claimant’s assertions, and that the tribunal shouldproceed to the next steps, unless otherwise agreed to by the parties(Art 32.2). If either party without reasonable cause fails to appearat a hearing or fails to submit evidence, an arbitral tribunal mayrender an arbitral award, unless otherwise agreed to by the parties(Art 33.3). If it was difficult for the claimant to defend itself duringthe procedures, an award should be set aside, or should not beenforced by the court (Art 44 and 45).



Yes (Art 24). The arbitral tribunal can award preliminary andinterim relief when it considers it necessary. Usually, preliminaryrelief is used to protect the status quo. The tribunal can exercisesuch powers without any assistance of the national court. It shouldbe noted, however, that preliminary relief rendered by a tribunalcannot be recognised or enforced by courts, because it is not finaland binding.


Yes (Art 15). Courts can grant preliminary relief before or duringthe arbitral proceedings in respect of any civil dispute which is thesubject of the arbitration agreement, upon request of a party to thedispute.


Upon request for the interim relief, the court will first determinewhether or not they have jurisdiction on the requested preliminaryrelief (Art 12 of the Code of Civil Preliminary Relief, “CCPR”). Indetermining its jurisdiction, courts may consider “factors unique tothe particular case”. Malaysian Airline System v. Goto, 134 Minshu115 (Sup. Ct., Oct. 16, 1981). Recently, in Heisei 19 (wa) 20047,1991 Hanrei Jiho 89 (Tokyo D. Ct., Aug. 28, 2007), the Japanesecourt denied its jurisdiction on the requested preliminary injunction,determining that none of the “unique factors” were located in Japan(in which the parties had agreed to have arbitration in Seoul and theobject of the injunction was not located in Japan).


Yes. Both national courts and arbitral tribunals may order any partyto provide appropriate security in connection with the interimmeasures (Art 24.2 and relevant provisions of the CCPR).



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8.1 What rules of evidence (if any) apply to arbitralproceedings in Japan?

The Arbitration Act does not provide any specific rules of evidence.Instead, it gives arbitral tribunals authority to determine admissibilityof evidence, necessity for taking evidence, and probative value ofevidence (Art 26.3). Generally speaking, most practitioners in Japan,including both attorneys and arbitrators, usually follow Japaneseevidence rules, which do not include full-fledged discovery. In themeantime, the “IBA Rules on the Taking of Evidence in InternationalCommercial Arbitration” are getting to be widely acknowledged byJapanese practitioners in international commercial arbitration.


There is no limitation on the scope of an arbitrator’s authority withrespect to the disclosure of documents. At the same time, it shouldbe noted that full-fledged documentary disclosure is not common inarbitration practice in Japan. Please see question 8.1.


Courts can intervene in or assist with taking evidence upon arequest of the arbitral tribunal or of either party (Art 35.1). Therequesting party needs to obtain the tribunal’s consent prior to therequest. The court’s intervention, including examination ofwitnesses and obtaining expert opinions, are subject to the Code ofCivil Procedure (Law No. 109 of 1996, as amended, “CCP”).


Generally, arbitral tribunals in Japan do not conduct full-fledgedand exhaustive documentary disclosure, unless parties agree to havesuch disclosure. More often than not, the arbitral tribunal requeststhat parties produce specific documents which closely relate to theissues to be determined.


It is left for the arbitral tribunal’s discretion how it handles evidenceand testimony, unless otherwise agreed by the parties (Art 26.3). Aslong as the tribunal finds it necessary and appropriate, writtentestimony may be accepted. If such testimony is admitted, thetribunal usually allows the other party to cross-examine the witnessin a hearing.

8.6 Under what circumstances does the law of Japan treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

As long as the tribunal follows Japanese rules of evidence, attorney-client privilege rarely becomes an issue because full-fledgeddiscovery is not usually conducted. In case where the arbitral

proceedings give rise to such issue, arbitrators will generallyrespect attorney-client privilege.

9 Making an Award


An arbitral award must be in writing. The majority of arbitratorsmust sign the award. If one or more arbitrator(s) cannot sign theaward, reasons must be provided as to why they cannot. Reasonsfor conclusions, the date, and the place of arbitration must beincluded in the award (Art 39). Where the settlement of parties isreduced to the form of arbitral award, the arbitral tribunal shouldexplicitly mention such background information (Art 38).



Technically, no appeal is allowed against an arbitral award.However, parties are entitled to request the court to “set aside” anarbitral award (equivalent to an appeal) on the following basis: (i)the arbitration agreement is not valid; (ii) the party making theapplication was not given notice as required under Japanese lawduring the proceedings to appoint arbitrators or during the arbitralproceedings; (iii) the claimant was unable to defend itself in theproceedings; (iv) the arbitral award contains decisions on mattersbeyond the scope of the arbitration agreement or the claims in thearbitral proceedings; (v) the composition of the arbitral tribunal orthe arbitral proceedings were not in accordance with the provisionsof Japanese law (or where the parties have otherwise reached anagreement on matters concerning the provisions of the law that isnot in accordance with public policy); (vi) the claims in the arbitralproceedings relate to disputes that cannot constitute the subject ofan arbitration agreement under Japanese law; or (vii) the content ofthe arbitral award is in conflict with the public policy or the goodmorals of Japan (Art 44).


So long as the parties’ agreement does not contradict the mandatoryprovisions of the Arbitration Act, Japanese law, or public policyunder Japanese laws, the parties can agree to exclude the possibilityof appeal. For example, among those grounds for appeal listed inArt 45, item 3, 4, and 6, can be fully or partially excluded by theagreement of the parties or by either party’s waiver of his/her rights.


Probably not. There are no explicit provisions in the Arbitration Actwhich restrict parties from expanding the grounds for appealing orchallenging the arbitral award. However, the court, in obiter,rejected the parties’ argument to set aside the award based on anadditional ground set out in the mutual agreement by the parties.Descente Ltd v. Adidas-Salomon AG et al, 123 Hanrei Jiho 1847(Tokyo D. Ct., Jan. 26, 2004).

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10.4 What is the procedure for appealing an arbitral award inJapan?

No appeal is allowed against an arbitral award, while a party canfile with a competent district court a motion to set aside the award.


11.1 Has Japan signed and/or ratified the New York Conventionon the Recognition and Enforcement of Foreign ArbitralAwards? Has it entered any reservations? What is therelevant national legislation?

Yes. Japan singed the New York Convention on June 20, 1959, andratified it on July 14, 1961. The New York Convention becameeffective in Japan from September 19, 1961, with a reservation ofreciprocity. Since the New York Convention has direct effect inJapan, there is no domestic statute implementing the New YorkConvention. On the other hand, foreign awards of a non-signatorycountry to the New York Convention, i.e., Taiwan, can be enforcedaccording to the relevant provision of the Arbitration Act.

11.2 Has Japan signed and/or ratified any regional Conventionsconcerning the recognition and enforcement of arbitralawards?

No. Although several bilateral treaties refer to commercialarbitration, neither of them stipulates simpler procedures than thatof the New York Convention.

11.3 What is the approach of the national courts in Japantowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

Because the New York Convention has direct effect in Japan,parties can simply follow the procedure and requirements stated inthe New York Convention. As required in the New YorkConvention, parties need to prepare a Japanese translation of theaward if it is written in foreign language.

11.4 What is the effect of an arbitration award in terms of resjudicata in Japan? Does the fact that certain issues havebeen finally determined by an arbitral tribunal precludethose issues from being re-heard in a national court and, ifso, in what circumstances?

Arbitral awards, irrespective of whether or not the place ofarbitration is in the territory of Japan, shall have the same effect asa final and conclusive judgment (Art 45.1). This provision isgenerally understood that an arbitral award shall be pled as resjudicata.

12 Confidentiality

12.1 Are arbitral proceedings sited in Japan confidential?What, if any, law governs confidentiality?

The Arbitration Act does not have a particular provision withrespect to confidentiality. It is entirely up to the parties’ agreementor the rules of the respective arbitration body. At the same time, therules of most arbitration bodies in Japan, such as Japan Commercial

Association Arbitration and TOMAC, have provisions in respect ofconfidentiality.


The Arbitration Act does not explicitly prohibit parties fromreferring to information disclosed in the course of arbitralproceedings. Accordingly, unless otherwise agreed to by theparties, or provided for in the relevant institutional rules forarbitration, parties may refer to the information disclosed in theprevious arbitration in subsequent court proceedings.


Because confidentiality of arbitration proceedings relies on therules of each arbitration organisation, the confidentiality ofarbitration proceedings has the same protection as an ordinaryconfidentiality agreement.



No. However, it should be noted that “punitive damages” thatexceed compensatory damages in amount might not be enforced byJapanese courts, as courts may find the concept of punitive damagesis against the “public policy” in Japan. Both the New YorkConvention (Art 2(b)) and the Arbitration Act (Art 45 and 46) allowthe courts to reject the enforcement of an award that is contrary tothe “public order” of the jurisdiction in which the award will beenforced. A foreign judgment which contained punitive damages,claimed separately from compensatory damages, have been rejectedby the court on the ground that the enforcement of which would becontrary to “public order”. Mansei Industrial K.K. v. Northcon [I],51 Minshu 2530 (Sup. Ct., Jul. 11,1997).


It is up to the relevant provisions of the applicable substantive law.Where Japanese law applies to the merits of the case, the arbitraltribunal will award such interest as stipulated in the contract, or inthe Japanese statute (which is 6% per annum in commercial mattersand 5% per annum in civil matters).


Arbitration Acts provides for the rules with respect to the costs ofthe arbitration proceedings. As a general rule, each party to thearbitration shall bear the costs it has disbursed in the arbitralproceedings, unless otherwise agreed by the parties (Art 49.1). If itis so indicated by the agreement of the parties, the arbitral tribunalmay, in an arbitral award or in an independent ruling, determine theapportionment between the parties of the costs (Art 49.2). Theruling on the cost by the tribunal shall have the same effect as anarbitral award (Art 49.3).



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Payment made pursuant to an arbitral award may be subject toJapanese relevant taxes. The basis of such may differ depending onthe nature of the payment and the underlying dispute.


14.1 Has Japan signed and ratified the Washington Conventionon the Settlement of Investment Disputes Between Statesand Nationals of Other States (1965)?

Yes. Japan signed it on September 23, 1965 and ratified it onAugust 17, 1976.

14.2 Is Japan party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Yes. Japan had entered into around 20 BITs by the end July 2008and some of which (including BIT with Korea and Russia)explicitly allow parties to resort their disputes to ICSID.

14.3 Does Japan have standard terms or model language that ituses in its investment treaties and, if so, what is theintended significance of that language?

No, it doesn’t have standard terms or model language.

14.4 In practice, have disputes involving Japan been resolvedby means of ICSID arbitration and, if so, what has theapproach of national courts in Japan been to theenforcement of ICSID awards and how has thegovernment of Japan responded to any adverse awards?

Not yet. However, under the Arbitration Act, ICSID awards will betreated in the same way as the other awards rendered by otherforeign arbitration tribunal.

14.5 What is the approach of the national courts in Japantowards the defence of state immunity regardingjurisdiction and execution?

The Supreme Court of Japan held that, while sovereign activitiesshall be immune from liability, the liabilities arose from non-sovereign activities, such as commercial transactions, of the foreigngovernment will not be exempted. Tokyo Sanyo Trading K.K. v.Islamic Republic of Pakistan, 60 Minshu 2542 (Sup. Ct., Jul. 21,2006). In May 2009, a new legislation with respect to the immunityof the foreign state, which is basically tracing the said SupremeCourt ruling, has passed in the Diet. It will be enacted within a year.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Japan? Are certain disputescommonly being referred to arbitration?

Use of commercial arbitration has been stable in Japan in recentyears. Maritime disputes (domestic or international) andconstruction disputes (most of which are domestic) are two majorareas which frequently see the parties resort to arbitration to resolvedisputes.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Japan, such as pending or proposedlegislation that may substantially change the lawapplicable to arbitration?

Although the use of arbitration has not increased dramatically, theincreasing number of legal professionals as a result of legal reformsmay be affecting the development of international commercialarbitration in Japan.

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Yoshimasa Furuta

Anderson Mori & Tomotsune 6-1 Roppongi i-chome, Minato-kuTokyo 106-6036 Japan

Tel: +81 3 6888 1050Fax: +81 3 6888 3050Email: [email protected]: www.andersonmoritomotsune.com

Admitted: Japan 1991; New York 1996.Education: The University of Tokyo (LL.B 1988), Legal Training andResearch Institute of the Supreme Court of Japan (1991); HarvardLaw School (LL.M, 1995 with Addison Brown Prize). Social Activities: Research Fellow, the Japan Association ofArbitrators (2003 to date); Professor of Law, Seikei UniversitySchool of Law (2004 to date), Adjunct Lecturer; Rikkyo UniversitySchool of Law (2000 to 2008); Adjunct Lecturer, Keio UniversitySchool of Law (2008 to date).Professional Experience: The Japanese Ministry of Home Affairs asa government official (1988 to 1989), the New York law firm ofWhitman Breed Abbott & Morgan (now known as Winston &Strawn) as a foreign attorney (1995 to 1996). He specialises ininternational & domestic litigation, commercial arbitration and otherdispute resolution procedures. He is fluent in English and Japanese.

Naoki Iguchi

Anderson Mori & Tomotsune 6-1 Roppongi i-chome, Minato-kuTokyo 106-6036 Japan

Tel: +81 3 6888 1089Fax: +81 3 6888 3089Email: [email protected]: www.andersonmoritomotsune.com

Admitted: Japan 2000.Education: The University of Tokyo (LL.B 1992, LL.M 1999), LegalTraining and Research Institute of the Supreme Court of Japan(2000); Beijing Language University (language training, 2002);Stanford Law School (LL.M, 2005). Social Activities: Deputy Secretary, Japan Association of Arbitrators(2003-2005); Managing Committee Member, Dai-ni Tokyo BarAssociation Arbitration Centre (2002-2005); Adjunct Lecturer,Rikkyo University Law School (2008 to present; “International Civiland Commercial Dispute Resolution Procedure”); Lecturer, theGraduate School of Economics, Kyoto University (2006);Participated as an arbitrator in “5th ANNUAL WILLEM C. VIS(EAST) INTERNATIONAL COMMERCIAL ARBITRATION MOOT”(2008, Hong Kong, P.R. China).Professional Experience: ICC International Court of Arbitration(Intern), 2007; Saint Island International Law Office, 2006;Finnegan Henderson, Farabow, Garrett & Dunner, LLP 2006-2007;Anderson Mori & Tomotsune, 2000 to present. Naoki Iguchi hasworked for various kinds of international commercial dispute. Headvised clients with various nationalities, the United States, UK,countries of European Union, China, Taiwan, South Korea, HongKong, and Japan, in international commercial disputes, especially ininternational commercial arbitration. He has speciality intechnology related disputes, including patent and product liability.He is fluent in English, Mandarin, Spanish and Japanese.

Anderson Mori & Tomotsune has a wide-ranging litigation, arbitration and dispute resolution practice that encompassesthe many facets of business in Japan. We have extensive experience in areas that closely reflect the international natureof our client base, and the international experience and diversity of our people. We are able to provide a completelitigation service to our client’s ranging from preliminary advice aimed at early resolution and prevention of disputes tothe conduct of complex trials. Our attorneys have experience working in overseas jurisdictions and include two formerjudges, including a Supreme Court Justice. As well as engaging in the day-to-day conduct of litigation, some of ourattorneys are also involved in imparting their experience to students through university lecturing. The types of disputesin which we are regularly involved in protecting our client’s interests include:

Representing clients or acting as an arbitrator in institutional arbitrations filed with and administered under the rules ofthe Japan Commercial Arbitration Association (JCAA); International Chamber of Commerce (ICC); American ArbitrationAssociation (AAA); London Court of (LCIA) and the Daini Tokyo Bar Association; and representing clients or acting asan arbitrator in Ad Hoc Arbitration/ADRs.


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Chapter 8


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Korea


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Korea?

The Arbitration Act of Korea (the “Arbitration Act”) defines anarbitration agreement as “an agreement by the parties to submit toarbitration all or part of certain disputes which have arisen or whichmay arise between them in respect of certain legal relationships,whether contractual or otherwise,” (Article 3, Paragraph 2) but doesnot provide any specific provisions concerning the contents ofarbitration agreements.However, as to the method of entering into an arbitrationagreement, the Arbitration Act provides that an agreement must bein written form (Article 8, Paragraph 2), and the arbitrationagreement is deemed to be in written in the following cases (Article8, Paragraph 3): (i) where an arbitration agreement is contained ina document signed by the parties; (ii) where an arbitrationagreement is contained in letters, telegrams, telex facsimile or otherdocuments which are exchanged by means of telecommunication;or (iii) where inclusion of an arbitration agreement in thedocuments exchanged between the parties is alleged by one partyand not denied by the other party.The Arbitration Act provides that an arbitration agreement may bein the form of a separate agreement or in the form of an arbitrationclause in a contract (Article 8, Paragraph 1), and if an agreementreferences a document which contains an arbitration clause, suchshall be deemed to constitute an arbitration agreement, providedthat the agreement is in writing and the reference is such as to makethat clause a part of the agreement (Article 8, Paragraph 4).


The Arbitration Act does not distinguish between an individualversus a corporate entity as a party to an arbitration agreement, soeven if an individual is a party to a commercial transaction whichincludes an arbitration agreement, the Arbitration Act does not haveany special requirements or formalities in respect thereto.


The Arbitration Act does not prescribe any special elements whichmust be incorporated in an arbitration agreement. But in order for

an arbitration agreement to be workable between the partiesconcerned, it is advisable for the arbitration agreement to containthe following:1) express intent to resort to arbitration;2) designation of the seat and location of arbitration;3) designation of the substantive law applicable to the

underlying agreement and arbitration agreement;4) designation of the procedural law;5) designation of the method of constituting the arbitral tribunal

(i.e., number of arbitrators, qualifications, procedures fordesignation of arbitrators, etc.); and

6) designation of language to be used in arbitral proceedings.


The Korean courts generally take a fairly broad approach torecognising the validity of arbitration agreements, and if there isany written evidence of the parties’ express intent to resort toarbitration for dispute resolution, even absent express languagedesignating the arbitral tribunal, arbitral seat, arbitral location,substantive law, etc., the Korean courts favour recognising thevalidity of an arbitration agreement. Further, to the extent possible,the Korean courts take an inclusive view of what disputes may beresolved pursuant to an arbitration agreement.


a. Enforcement of Arbitration ADR AgreementsPlease see question 1.4 above for the approach of the Korean courtsto the enforcement of arbitration ADR agreements.b. Enforcement of Non-Arbitration ADR AgreementsThere is no law in Korea governing the enforcement of non-arbitration ADR agreements. As a result, a non-arbitration ADR isnot a frequently-used method in Korea for resolving disputesbetween parties.In addition, there is no court precedent in Korea dealing with theissue of whether non-arbitration ADR agreements should beenforced by the courts in Korea. Accordingly, it is difficult tosurmise the approach of the Korean courts to the enforcement ofnon-arbitration ADR agreements.

Jin Soo Han

Jongkwan (Josh) Peck

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Lee & Ko Korea


2.1 What legislation governs the enforcement of arbitrationproceedings in Korea?

The Arbitration Act, which was originally promulgated on 16March 1966, governs the enforcement of arbitration agreements inKorea. Upon accession to the New York Convention on 8 February1973, the Arbitration Act was partially amended, and subsequentlythereafter an extensive amendment was effected on 31 December1999 based on the United Nations Commission on InternationalTrade Law (“UNCITRAL”) Model Law on InternationalCommercial Arbitration of 1985 (the “Model Law”).


The Arbitration Act applies equally to both domestic andinternational arbitration proceedings.


While the Arbitration Act is based on the Model Law, it does notadopt the Model Law in its entirety, but is rather drafted throughpartial amendments or supplementations as necessary to conform tothe judicial system in Korea. The significant differences betweenthe Arbitration Act and the Model Law are as follows.1) While the Model Law limits its applicability to international

arbitration, the Arbitration Act is applicable to both domesticand international arbitration (Article 2). Further, in contrastto the Model Law, the Arbitration Act not only applies todisputes which are “commercial” in nature, but to all privatelaw disputes.

2) While the Model Law requires the same requirements andprocedures regarding the recognition and enforcement ofarbitral awards regardless of whether such awards are foreignor domestic, the Arbitration Act distinguishes betweenforeign and domestic arbitral awards with respect to theirrecognition and enforcement requirements (Articles 38 and39).

3) While under the Model Law, in the event that a petition isinstituted for the cancellation of an arbitral award, the courtmay order the suspension of such petition during the specificperiod in order for the arbitral tribunal itself to correct thecauses of cancellation, the Arbitration Act does not includeany such provision.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Korea?

There are not many mandatory rules governing internationalarbitration sited in Korea. One such rule is found in the ArbitrationAct (Article 38), and concerns enforceability. Under that rule, theKorean court is required to dismiss an application for enforcementof an arbitration award rendered in Korea, in cases where thedispute submitted to arbitration concerns a matter that cannot beresolved by arbitration under Korean law, or where enforcementthereof would violate the “good morals and social order” (i.e.,public policy) of Korea. Disputes which cannot be resolved byarbitration under Korean law include those relating to legalrelationships under public laws (e.g., rights under statutes

governing the procedures of criminal or administrativeproceedings), and relationships under family laws unrelated toproperty rights. Meanwhile, an award is deemed to violate publicpolicy if enforcement thereof would violate a mandatory rule ofKorean law, or if there was a violation of procedural due process inthe arbitration procedures leading to the award.Incidentally, the Foreign Legal Consultants Act, which will comeinto force on September 26, 2009, provides that in case of aninternational arbitration sited in Korea, foreign lawyers may act ascounsel only if they are registered as foreign legal consultants inKorea and have satisfied certain other requirements. This aspect isdiscussed in more detail in question 6.5 below.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Korea? What is thegeneral approach used in determining whether or not adispute is “arbitrable”?

The Arbitration Act limits the scope of arbitrable disputes to privatelaw matters (Article 1, Article 3, Item 1), and defines an arbitrationagreement as an agreement by the parties to submit to arbitration allor part of certain disputes which have arisen or which may arisebetween them “in respect of certain legal relationships, whethercontractual or otherwise” (Article 3, Item 2).Therefore, so long as the arbitral dispute concerns a private lawmatter, regardless of whether the dispute is commercial or civil innature, such dispute generally falls within the scope of arbitrabledisputes under the Arbitration Act. As to legal disputes in relation topublic law, however, such as criminal law, administrative procedurallaw, family law disputes not concerning property issues, and othersuch disputes with respect to compulsory execution, such disputes arenot within the scope of arbitrable disputes under the Arbitration Act.


The Arbitration Act provides that the arbitral tribunal has power torule on the question of his or her own jurisdiction and relatedmatters such as the existence and validity of the arbitrationagreement (Article 17, Paragraph 1). In this regard, any objectionagainst the arbitral tribunal’s jurisdiction must be submitted by nolater than the submission of the statement of defence on the merits(Article 17, Paragraph 2), and any objection that the arbitral tribunalhas exceeded the scope of its authority during the arbitralproceeding must be raised immediately after the occurrence of thematter (Article 17, Paragraph 3). Upon submission of suchobjection, the arbitral tribunal may rule on the objection either as apreliminary question or in an arbitral award on the merits (Article17, Paragraph 5).

3.3 What is the approach of the national courts in Koreatowards a party who commences court proceedings inapparent breach of an arbitration agreement?

Under the Arbitration Act, if a lawsuit which is the subject of anarbitration agreement is filed by a party to such arbitration agreementand the other party asserts the existence of such arbitration agreement,the courts are required to dismiss such lawsuit, unless the arbitrationagreement does not exist, is invalid, has lost its effectiveness or isimpossible to carry out (Article 9, Paragraph 1).



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Under the Arbitration Act, if a party makes an objection against thearbitral tribunal’s jurisdiction, and the arbitral tribunal rules that ithas jurisdiction as a preliminary matter, the party making theoriginal objection may within 30 days of receipt of the arbitraltribunal’s decision petition to a competent court on the jurisdictionof the arbitral tribunal (Article 17, Paragraph 6). If the arbitraltribunal rules that it has the jurisdiction in an arbitral award on themerits, the party making the original objection may within 3 monthsof receipt of such award submit a petition to the court forcancellation of the arbitral tribunal’s award (Article 36, Paragraph2, Item 1, (c) and Paragraph 3).

3.5 Under what, if any, circumstances does the national law ofKorea allow an arbitral tribunal to assume jurisdiction overindividuals or entities which are not themselves party toan agreement to arbitrate?

The Arbitration Act does not have any specific provisions dealingwith the issue of whether an arbitral tribunal may exercisejurisdiction over individuals or entities which are not themselvesparty to an agreement to arbitrate. Therefore, it is generallyinterpreted that the arbitral tribunal lacks the power to exercisejurisdiction over such individuals or entities.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Korea and what is thetypical length of such periods? Do the national courts ofKorea consider such rules procedural or substantive, i.e.,what choice of law rules govern the application oflimitation periods?

The limitation period or prescription period applicable to aparticular claim is determined by the specific Korean (or sometimesforeign) law or rule that governs the relationship between therelevant parties. Such law or rule may be considered procedural orsubstantive, and this must be determined on a case-by-case basis.There is no Korean law or rule specifically addressing the limitationperiod for commencement of arbitration.



The Arbitration Act applies the principle of party autonomy on thisissue. Thus, Article 29 of the Arbitration Act provides:“(1) The arbitral tribunal shall decide the dispute in accordance withsuch rules as are chosen by the parties as applicable to the substanceof the dispute. Any designation of the law or legal system of agiven State shall be construed, unless otherwise expressed, asdirectly referring to the substantive law of that State and not to itsrules on conflict of laws. (2) Failing the designation referred to inparagraph (1), the arbitral tribunal shall apply the law of the Statewhich it considers having the closest connection with the subject-matter of the dispute. (3) The arbitral tribunal shall decide ex aequoet bono or as amiable compositeur only if the parties have expresslyauthorised it to do so. (4) The arbitral tribunal shall decide inaccordance with the terms of the contract and shall take intoaccount the usages of the trade applicable to the transaction.”


One example of such circumstances would be when the Koreancourt dismisses an application for enforcement of an awardrendered in Korea in an arbitration under a foreign law, based onArticle 38 of the Arbitration Act discussed in question 2.4 above -i.e. on grounds that the dispute is one that cannot be resolved byarbitration under Korean law, or that the enforcement of the awardwould violate Korean public policy.


Where the arbitration agreement is not subject to the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards (“New York Convention”) or other internationalconvention, some hold the view that the choice of law rules of theseat of arbitration should apply, while others argue that theapplicable choice of law rules should be determined by the tribunal.Where the arbitration agreement is subject to an internationalconvention, the choice of law rules are determined on the basis ofsuch convention. In case of an arbitration to which the New YorkConvention applies, the choice of law rule is provided in ArticleV(1)(a), as follows: “Recognition and enforcement of the award may be refused, at therequest of the party against whom it is invoked, only if that partyfurnishes to the competent authority where the recognition andenforcement is sought, proof that the parties to the arbitrationagreement were, under the law applicable to them, under someincapacity, or the said agreement is not valid under the law to whichthe parties have subjected it or, failing any indication thereon, underthe law of the country where the award was made.”Since Korea is a party to the New York Convention, the aboveprovision serves as the choice of law rule governing the formation,validity and legality of arbitration agreements, in case of anarbitration to which the New York Convention applies. Under theabove provision, absent allegation of some incapacity of the parties,the applicable law on that subject is primarily the law agreed uponby the parties, or the law of the seat of arbitration if the parties havenot agreed upon the applicable law on that subject.



The parties to arbitration may select the number of arbitrators, theirqualifications, procedures for designation of arbitrators, andprocedures for challenging the arbitration (Article 11, Paragraph 1,Article 12, Paragraphs 1 and 2, Article 14, Paragraph 1). So inprinciple, the parties have the autonomy to select the arbitrators,and there are no particular limitations on such autonomy. However,while there is no express provision in the Arbitration Act, if theparties designate an even number of arbitrators, since the arbitratorswill not be able to make an arbitral award in the event of a split inthe arbitral tribunal, to the extent possible, the number of arbitratorsshould be an odd number. As to the qualifications of the arbitrators,the arbitrators should at least be mentally and physically capable ofundertaking the arbitral proceedings, so parties must not designatearbitrators who are wholly or partially incompetent or bankrupt.

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If the parties fail to agree on the number of arbitrators to an arbitralproceeding, the Arbitration Act provides that 3 arbitrators shallcomprise the arbitral tribunal (Article 11, Paragraph 2). If theparties fail to agree on the procedure for designation of arbitrators,the Arbitration Act sets forth the following procedures (Article 12,Paragraph 3):1) In an arbitration with a sole arbitrator: If the parties are

unable to agree on the arbitrator within 30 days after a partyhas received a request to appoint the arbitrator from the otherparty, the arbitrator shall be appointed by the court uponrequest of a party.

2) In an arbitration with 3 arbitrators: Each party shall appointone arbitrator, and the two arbitrators so appointed shallappoint the third arbitrator. If a party fails to appoint thearbitrator within 30 days after the party received a request todo so from the other party, or if the two arbitrators fail toagree on the third arbitrator within 30 days of theirappointment, the appointment shall be made by the courtupon request of a party.


Under the Arbitration Act, even in the case that the parties agree todesignate the procedures for selection of arbitrators, the courts canintervene in such selection process in the following cases (Article12, Paragraph 4):1) If a party fails to appoint an arbitrator according to agreed

procedures.2) If the parties or the arbitrator selected fail to appoint an

arbitrator according to agreed procedures.3) If a third party, including without limitation an institution

entrusted to appoint the arbitrator(s), fails to appoint anarbitrator(s).


The Arbitration Act does not have any specific provisions dealingwith the issue of whether an arbitral tribunal may exercisejurisdiction over individuals or entities which are not themselvesparty to an agreement to arbitrate. Therefore, it is generallyinterpreted that the arbitral tribunal lacks the power to exercisejurisdiction over such individuals or entities.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Korea?

Under the Arbitration Act, a person who is approached inconnection with a possible appointment as an arbitrator, or hasalready been so appointed, must immediately disclose anycircumstance likely to give rise to justifiable doubts as to his/herimpartiality or independence (Article 13, Paragraph 1). Further, theArbitration Rules of the Korean Commercial Arbitration Boardrequires such person to immediately disclose in writing to theSecretariat any and all circumstances which might cause reasonabledoubt about his/her impartiality or independence (Article 25Paragraph 1).

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Korea? If so, do those laws or rules apply toall arbitral proceedings sited in Korea?

The Arbitration Act governs all procedural aspects of arbitrationproceedings conducted in Korea (Article 2, Paragraph 1). Forarbitration proceedings in Korea, the Korean CommercialArbitration Board is normally designated as the arbitral forum, andin such case, unless the parties agree otherwise, the ArbitrationRules of the Korean Commercial Arbitration Board (the“Arbitration Rules”) will apply to procedural matters in thearbitration proceedings (Article 9 of Arbitration Rules).

6.2 In arbitration proceedings conducted in Korea, are thereany particular procedural steps that are required by law?

Unless contrary to any mandatory provisions of the Arbitration Actin relation to arbitration proceedings, the parties are free to agree onthe procedures applicable to the arbitration proceedings, and if suchagreement on the applicable procedures is absent, the arbitraltribunal may proceed with the arbitral proceedings appropriatelyaccording to the provisions of the Arbitration Act (Article 20). Inthis regard, there are no particular procedural steps required underthe Arbitration Act.


Under the Arbitration Act, the parties to arbitration may agree on theapplicable procedures for arbitration, therefore the parties may freelyagree on the method of arbitration hearings. If the parties do not agreeon the method for hearings, the arbitral tribunal may determinewhether to conduct oral hearings or proceed only with writtensubmissions of the parties. However, unless the parties agreed not toconduct oral hearings during arbitration proceedings, such oralhearings may be conducted at an appropriate stage in the arbitrationproceedings upon a party’s request (Article 25, Paragraph 1). Thearbitral tribunal must notify the parties adequately in advance as to thedate of oral hearing or other such dates for evidentiary hearings(Article 25, Paragraph 2), and upon submission of written briefs,documents or other materials to the arbitral tribunal by a party toarbitration, such items must be delivered to the other party to thearbitration proceedings (Article 25, Paragraph 3), and the parties mustalso receive any expert opinions or evidence upon which the arbitraltribunal will base its arbitral award (Article 25, Paragraph 4).

6.4 What powers and duties does the national law of Koreaimpose upon arbitrators?

Under the Arbitration Act, arbitrators possess (i) the power toconduct arbitral procedures in an appropriate manner if there is noagreement between the parties regarding arbitral procedures, and inthis regard, the arbitrators have the authority to make determinationsregarding the strength, relevance and the evidentiary value of evidencesubmitted by the parties (Article 20, Paragraph 2) and (ii) the power torender a decision on the arbitration case (Article 30).Arbitrators have the duty to treat each party equally during arbitralprocedures and give each party an equal opportunity to present hisor her case (Article 19). A violation of such duty may result in thecancellation by the court of the arbitral decision (Article 36,Paragraph 2).



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6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Korea and, if so, is itclear that such restrictions do not apply to arbitrationproceedings sited in Korea?

The Arbitration Act does not require any particular qualification forlawyers to represent a party in arbitration. However, the LawyersAct of Korea prohibits persons who are not licensed to practice lawin Korea from handling or assisting in the handling of legal work(including arbitration work) for a fee or other benefits, and personsin violation of this prohibition may be subject to criminal sanctions.Therefore, if a person who is not licensed to practice law in Koreaacts as counsel in an arbitration proceeding in Korea in return forfees or other compensation, such person may be in violation of theLawyers Act and may be subject to criminal sanctions.However, it is not certain whether such restrictions under theLawyers Act apply to foreign attorneys acting as counsel ininternational arbitrations that take place in Korea, as there is no caseprecedent on such issue. Meanwhile, with the enactment of the Foreign Legal ConsultantsAct, which will come into force on September 26, 2009, foreignlawyers from jurisdictions that have a free trade agreement withKorea will be able to engage in the following activities in Korea, ifthey are registered in Korea as foreign legal consultants: (i) adviseon the laws of the jurisdiction of his/her qualification; (ii) advise onconventions to which the jurisdiction of his/her qualification is aparty or generally recognised international customary laws; and (iii)representation in an international arbitration case, unless and until itis confirmed that the laws of the jurisdiction of his/her qualification,or conventions to which the jurisdiction of his/her qualification is aparty, or generally recognised international customary laws, will notapply in the international arbitration case (Article 24, Paragraphs 1through 3). The term “international arbitration” as used in theabove provision means an arbitration involving a civil orcommercial dispute, sited in Korea and is or may be subject to thelaws of the jurisdiction of the foreign legal consultant’squalification, or conventions to which the jurisdiction of his/herqualification is a party, or generally recognised internationalcustomary laws (Article 2, Paragraph 7).Accordingly, foreign lawyers from jurisdictions that have a freetrade agreement with Korea will be able to provide representationin international arbitration cases after September 2009, providedthat they are licensed as foreign legal consultants.

6.6 To what extent are there laws or rules in Korea providingfor arbitrator immunity?

The Arbitration Act does not provide in any way for arbitratorimmunity, and as such, the general theories of Korean law includingthe Civil Code would apply in determining this question. Based onthese general legal theories, there is a view that an arbitrator can beheld liable only if he/she has violated his/her duty intentionally orby gross negligence. However, there is no court precedentsupporting this view or otherwise addressing the question as to thestandard for arbitrator immunity.


As discussed in questions 3.2 and 3.3 above, a competent court hasjurisdiction to address procedural issues pertaining to the jurisdictionof the arbitral tribunal arising during arbitration proceedings.Further, under the Arbitration Act, if a party to arbitration submits a

petition to a competent court for prohibition of arbitrationproceedings by claiming the absence or invalidity of an arbitrationagreement, the court has jurisdiction to hear such petition.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Korea (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

The Arbitration Act does not have any specific provisions in respectto multiparty arbitrations or multiple arbitrations, but since thearbitration procedures can be determined upon agreement of theparties (Article 20, Paragraph 1), if multiple parties have agreed toengage in a single arbitration, it should be possible for the parties toconduct a consolidated arbitration proceeding. Further, while theArbitration Act does not include any specific provisions regardinga third party’s right to intervene or join an arbitration proceeding, itshould be possible for a third party to intervene or join thearbitration proceeding if the parties to the arbitration agree as such.This issue is now actively debated in Korea, and the KoreanCommercial Arbitration Board is currently undertaking amendmentof its Arbitration Rules in view of this issue.

6.9 What is the approach of the national courts in Koreatowards ex parte procedures in the context of internationalarbitration?

The Arbitration Act permits arbitrators to render preliminary relief.Specifically, Article 18 of the Arbitration Act states that, unlessotherwise agreed between the parties, the arbitral tribunal maydecide to render a preliminary relief to a party if deemed necessary(note: arbitrators in Korea may use ex parte procedures inconnection with rendering preliminary relief). In this regard,however, such rendering of preliminary relief must be made withinthe spirit of Article 19 of the Arbitration Act which, as mentioned inquestion 6.4 above, requires arbitrators to treat each party equallyduring arbitral procedures and to give each party an equalopportunity to present his or her case. This implies that Koreaconsiders equal treatment of parties by the arbitrators is afundamental principle that should be employed in arbitrations.There is no court precedent in Korea addressing the issue ofwhether it is appropriate for arbitrators to conduct ex parteprocedures. Accordingly, it is difficult to surmise the approach ofthe Korean courts with respect to this issue.



Unless the parties agree otherwise, the Arbitration Act permits thearbitral tribunal to award preliminary relief if deemed appropriateupon the request of a party to arbitration. Further, the arbitraltribunal may order the other party to provide appropriate security inlieu of the grant of preliminary relief (Article 18, Paragraph 1), aswell as order the party requesting the preliminary relief to provideappropriate security in respect thereof (Article 18, Paragraph 2).The Arbitration Act does not provide any specific provisions on the

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types of preliminary relief measures the arbitral tribunal may order,and so the parties may agree on the types of preliminary reliefmeasures to be awarded by the arbitral tribunal. In the absence ofsuch agreement, the arbitral tribunal may order a much broaderarray of preliminary relief measures in comparison to litigationproceedings under a competent court (i.e., preliminary reliefrecognised during litigation proceedings are provisional remedies,and such provisional remedies consist of provisional attachment orprovisional injunction). However, the arbitral tribunal may notorder a preliminary relief measure concerning matters which mustbe made in the arbitral award.The arbitral tribunal may order such preliminary relief measureswithout the assistance of the court, but the arbitral tribunal may not,as a matter of law, enforce such preliminary relief measures eitherby itself or through the courts.


The Arbitration Act permits a party to arbitration proceedings topetition a competent court for provisional remedy either prior to orduring the arbitration proceedings (Article 10).Under Korean law, in order for the court to grant provisionalremedy, it must be shown that there is an actual legal right which isthe basis for order of a provisional remedy (“Right to ProvisionalRemedy”) and a need which requires the order of a provisionalremedy (“Need for Provisional Remedy”). But even if the courtwere to order a provisional remedy, such order would not affect thejurisdiction of the arbitral tribunal.


The Korean courts generally do not distinguish between provisionalremedies arising in respect to arbitration proceedings andprovisional remedies arising in respect to ordinary civil litigationproceedings, and even if the order for provisional remedy is inrelation to arbitration proceedings, if the Right to ProvisionalRemedy and the Need for Provisional Remedy exist, the Koreancourts will broadly order such remedies.


a. Security for Costs Related to Preliminary ReliefUnder the Arbitration Act, before rendering preliminary relief, thearbitral tribunal may order a party seeking preliminary relief toprovide appropriate security (Article 18, Paragraph 2).b. Security for Overall Arbitration CostsIn the case of arbitrations conducted by the Korean CommercialArbitration Board (KCAB), a claimant must, at the time of filing thearbitration application, make an advance payment of arbitrationcosts in the currency designated by the KCAB. If the claimant failsto make such advance payment or the respondent does not pay suchadvance payment on behalf of the claimant, the KCAB may decideto terminate the arbitration proceedings (Article 65 Paragraph 1 ofthe Arbitration Rules of the KCAB).


8.1 What rules of evidence (if any) apply to arbitralproceedings in Korea?

There are no particular rules of evidence applicable to arbitrationproceedings in Korea, and the parties may agree to such applicablerules of evidence. In the absence of such agreement, the arbitraltribunal may apply what it deems to be the most appropriate rulesof evidence (Article 20).


The Arbitration Act does not have any specific provisions dealingwith the scope of an arbitrator’s authority to order the disclosure ofdocuments and other disclosure of discovery. Therefore, unlessotherwise agreed by the parties, the arbitrator may conduct thearbitration proceedings as he deems appropriate (Article 20,Paragraph 2) and order the disclosure of documents and otherdisclosures for discovery without any particular limitations. Thearbitrator, however, may not enforce the disclosure of documents orother discovery as a matter of law.


Under the Arbitration Act, if a party makes a request or if thearbitral tribunal deems it necessary, the arbitral tribunal may requesta competent court to conduct witness hearings, investigations andother such evidentiary procedures (Article 28). In such case, thecourt may intervene in the disclosure/discovery process in thearbitration proceedings.


There is no general practice with respect to disclosure/discovery ininternational arbitration proceedings conducted in Korea, and whilethe parties are free to agree to procedures related todisclosure/discovery, such agreements normally do not occur inarbitration proceedings conducted at the Korean CommercialArbitration Board, and such procedures are rather conducted underthe Arbitration Rules of the Korean Commercial Arbitration Board.The Arbitration Rules provide that the arbitral tribunal may requestthe production of evidence if it deems it necessary (Article 42,Paragraph 2 of Arbitration Rules), and while not enforceable as amatter of law, it can be extended to third parties. But normally,parties will agree to do so.


The Arbitration Act does not specify any provisions in regards totestimonies in arbitration proceedings, so a witness in an arbitrationproceeding is not required to enter an oath before the arbitraltribunal. Further, while cross-examinations are not required underthe Arbitration Act, such cross-examinations are normallyconducted in arbitration proceedings.



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8.6 Under what circumstances does the law of Korea treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

There are no particular provisions under Korean law which treatcertain documents as privileged in arbitration proceedings, but thearbitral tribunal may request the court for compulsory production ofdocuments in the possession of a party to arbitration or a third party.In such case, privilege under the Civil Procedure Act may apply toarbitration proceedings and such categories of privilege are as follows: (i) confidential documents in respect to public officials; (ii) documents related to persons under indictment or documents

which may bring a person into disrepute; and (iii) documents related to persons with an confidentiality

obligation pursuant to relevant laws (e.g., doctors, lawyers,etc.), and such claims for privilege may be applied toarbitration proceedings. In the following cases, however,such privilege can be waived: (1) in the case of (i) and (ii)above, if the party to arbitration or the relevant governmentalauthority consents to production of the privilegeddocuments; or (2) in the case of (iii) above, if privilege isdeemed waived by the relevant person.

9 Making an Award


The legal requirements of an arbitral award under the ArbitrationAct are as follows:1) An arbitral award must be given in written form, and all the

arbitrators must sign such arbitral award, provided that if thearbitral tribunal is composed of 3 or more arbitrators, in theevent that less than a majority of the arbitrators are unable tosign the arbitral award, the other arbitrators must sign thearbitral award and set forth the reasons thereof (Article 32,Paragraph 1).

2) Although there are no specific provisions under theArbitration Act, the arbitral award must set forth the text ofthe judgment, and furthermore the arbitral award must setforth the basis for the award, provided that if there is anagreement between the parties or if the arbitral award isbased on a settlement between the parties, the arbitral awarddoes not have to set forth the basis for the award (Article 32,Paragraph 2).

3) The arbitral award must set forth the date of award and seatof arbitration, and in such case the arbitral award is deemedto have been awarded on such date and at such seat (Article32, Paragraph 3).



Under the Arbitration Act, an appeal of an arbitral award may onlybe made by petition to a competent court for cancellation of theaward (Article 36, Paragraph 1), and the courts may cancel anarbitral award in only the following cases (Article 36, Paragraph 2):1) If the party petitioning for cancellation of the arbitral award

proves: a) the fact that the party to the arbitration agreement was

incompetent under the substantive law at the time the

arbitration agreement was formed or the fact that thearbitration agreement is void under the governing law chosenby the parties to arbitration or, absent such substantive law,the arbitration agreement is void under the laws of Korea;

b) the fact that the party petitioning for the cancellation of thearbitral award did not receive proper notice regardingselection of the arbitrators or the arbitral procedures or anyother cause which prevented a party from participating in thearbitration proceedings;

c) the fact that the arbitral award was made with respect tomatters which are not arbitrable or the arbitral award exceedsthe scope of the arbitration agreement; provided, that if thearbitral award may be divided between that which isarbitrable versus that which is not arbitrable, only the portionof the arbitral award which is not arbitrable shall be void; or

d) the fact that the composition of the arbitral tribunal or thearbitration procedures is not in conformity with thearbitration agreement of the parties which does not violatemandatory provisions of the Arbitration Act, or in the casethat the parties have not entered into any such arbitrationagreement, the arbitral award does not conform withmandatory provisions of the Arbitration Act.

2) If the court recognises any of the following:a) the fact that the dispute in relation to the arbitral award is not

capable of resolution through arbitration under the laws ofKorea; or

b) if the recognition or enforcement of the arbitral awardrequires a violation of the good morals or other social orderof the Republic of Korea.


Under the Arbitration Act, provisions in relation to the cancellationof an arbitral award are mandatory provisions, and the parties maynot agree to exclude the causes for cancelling an arbitral award.


Under the Arbitration Act, causes for cancellation of an arbitralaward are limited to those set forth in the Arbitration Act, and assuch the parties may not agree to broaden the scope of causes forcancelling the arbitral award.

10.4 What is the procedure for appealing an arbitral award inKorea?

An arbitration party may appeal an arbitral award to a court byfiling a petition for cancellation of the arbitral award (Article 36,Paragraph 1), and in certain cases mentioned in question 9.1 above,the court could cancel the arbitral award after reviewing the appeal. Specifically, the appeal must be made within 3 months of the receiptof the arbitral award (Article 36, Paragraph 3). In this regard, if theparties have designated in their arbitration agreement a courtresponsible for handling such appeal, then the appeal must be madeto such court; but on the other hand, if the parties have notdesignated such court in their arbitration agreement, then the appealmust be made to a court having jurisdiction over the arbitration site(Article 7, Paragraph 3, Subparagraph 2). The judgment of the above court may be appealed to a higher court. Upon a final and conclusive judgment for recognition or

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enforcement of the arbitral award by a court, it is no longer possibleto appeal the arbitral award by filing a petition for cancellation ofthe arbitral award.


11.1 Has Korea signed and/or ratified the New York Conventionon the Recognition and Enforcement of Foreign ArbitralAwards? Has it entered any reservations? What is therelevant national legislation?

Korea became a signatory to the New York Convention on 8February 1973, which came into effect on 9 May 1973, but Koreadeclared the reciprocity and commercial reservations in itsaccession to the Convention. Article 39, Paragraph 1 of theArbitration Act provides that the recognition and enforcement of aforeign award which is subject to the New York Convention will begoverned by such Convention.

11.2 Has Korea signed and/or ratified any regional Conventionsconcerning the recognition and enforcement of arbitralawards?

No. Korea has not signed or ratified any regional Conventionsconcerning the recognition and enforcement of arbitral awards.

11.3 What is the approach of the national courts in Koreatowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

The Korean courts have hardly refused the recognition andenforcement of foreign arbitral awards on the basis of lack ofarbitrability or violation of public policy. As such, Korean courts ingeneral tend to take a proactive approach toward enforcement ofarbitral awards.The recognition or enforcement of arbitration awards in Korea iscarried out pursuant to an approval or an execution judgment of acourt. The party seeking an approval or an execution judgmentfrom the court with respect to recognition or enforcement of anarbitration award must submit the following documents to the court:(i) the duly authenticated original arbitration award or a dulycertified copy thereof; and (ii) the original arbitration agreement ora duly certified copy thereof. In this regard, if the arbitration awardor the arbitration agreement is made in a foreign language, a dulycertified Korean translation thereof must accompany the abovedocuments (Article 37, Paragraph 2 of the Arbitration Act).

11.4 What is the effect of an arbitration award in terms of resjudicata in Korea? Does the fact that certain issues havebeen finally determined by an arbitral tribunal precludethose issues from being re-heard in a national court and, ifso, in what circumstances?

The Arbitration Act provides that an arbitral award shall have thesame effect as a court’s final and conclusive ruling on the merits asbetween the parties concerned (Article 35), and therefore an arbitralaward will be res judicata to the same extent as a court ruling. Inthis regard, the arbitral tribunal and the courts may not render anydecision differently in a subsequent dispute from that which wasrendered by a prior arbitral tribunal with respect to a disputeconcerning the same matter decided by the prior arbitral tribunal,and any such subsequent dispute must be dismissed.

12 Confidentiality

12.1 Are arbitral proceedings sited in Korea confidential?What, if any, law governs confidentiality?

The Arbitration Act does not require the confidentiality ofarbitration proceedings, and so the parties are free to agree onwhether to maintain the arbitration proceedings as confidential. Ifsuch agreement is absent between the parties to arbitration, thearbitral tribunal may order the arbitration proceedings to beconfidential if it deems it appropriate (Article 20). Arbitrationproceedings conducted at the Korean Commercial ArbitrationBoard, however, are conducted on a confidential basis (Article 8 ofArbitration Rules).


The Arbitration Act does not specify whether information disclosedin arbitration proceedings may be referred to and/or relied on insubsequent proceedings, and so the parties can agree on suchmatters. We note, however, that parties to arbitration proceedingsconducted at the Korean Commercial Arbitration Board normallydo not agree on such matters.


Parties to arbitration proceedings can agree on the proceduresapplicable to arbitration, so the parties may agree to open thearbitration proceedings to the general public. Further, if the disputeunder arbitration becomes subject to determination by a competentcourt (e.g., if the parties to arbitration petition the court to rule onthe jurisdiction of the arbitral tribunal, or if the parties petition thecourt for the cancellation or enforcement of an arbitral award), thearbitration proceedings may become publicised.



The types of remedies (including damages) available in arbitrationare determined under the substantive law of the arbitrationproceedings, and if Korean law is designated as the substantive law,there are no restrictions under Korean on the types of remedies,except punitive damages are not recognised.


If Korean law is designated as the substantive law in the arbitrationproceedings, in principle, the parties to arbitration can agree on theapplicable interest rate. If the parties do not agree to the applicableinterest rate, however, the applicable rates are 6% for commercialclaims and 5% for civil claims.



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The Arbitration Act does not include any provisions in relation toarbitration fees, and so unless the parties to arbitration agreeotherwise, the arbitral tribunal may award arbitration fees as itdeems appropriate (Article 20).Arbitration at the Korean Commercial Arbitration Board willnormally be conducted under its Arbitration Rules, and in such casethe arbitral tribunal will award arbitration costs in accordance withthe proportionate ratio of the arbitral award between the parties(Article 52, Paragraph 2 of Arbitration Rules).


If a party to arbitration pays the amount under the arbitral award tothe prevailing party, the prevailing party receiving such paymentmay be subject to Korean income tax. However, whether the partyreceiving payment under the arbitral award will be subject toincome tax and, if so, the applicable income tax rates, aredetermined based on the source in respect to which the disputedpayment should originally have been made (e.g., loan repaymentpursuant to a loan agreement, consideration for the purchase ofgoods, wages pursuant to an employment contract, etc.), andwithout regards to the fact that such payment must be made underthe arbitral award.


14.1 Has Korea signed and ratified the Washington Conventionon the Settlement of Investment Disputes Between Statesand Nationals of Other States (1965)?

Korea became a signatory to the Washington Convention on 28January 1967, and it came into effect on 28 March 1967.

14.2 Is Korea party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

The Bilateral Investment Treaties and Multilateral InvestmentTreaties to which Korea is a signatory (e.g., the Agreement betweenthe Government of the Republic of Korea and the Government ofthe United Kingdom of Great Britain and Northern Ireland for thePromotion and Protection of Investment, or the Agreement on theEncouragement and Reciprocal Protection of Investments betweenthe Government of the Republic of Korea and the Government ofthe People’s Republic of China) generally provide to the effect thatany disputes arising between Korean nationals and nationals of thecounterparty State may be resolved under the auspices of theICSID.

14.3 Does Korea have standard terms or model language that ituses in its investment treaties and, if so, what is theintended significance of that language?

Most of the investment treaties to which Korea is a signatoryprovide language similar to the following:

“Settlement of Investment Disputes between a Contracting Partyand an investor of the Other Contracting Party:(1) Any dispute between either Contracting Party and the

investor of the other Contracting Party includingexpropriation or nationalisation of an investment shall as faras possible be settled by the disputing parties in an amicableway.

(2) The legal remedies under the laws and regulations of oneContracting Party in the territory of which the investment hasbeen made are available for the investor of the otherContracting Party.

(3) If any dispute cannot be settled within six (6) months fromthe date either party requested amicable settlement, it shall,by agreement of parties to the disputes upon request of eitherthe investor or the Contracting Party, be submitted to theInternational Centre for the Settlement of InvestmentDisputes established by the Washington Convention of l8March l965 on the Settlement of Investment Disputesbetween States and Nationals of other States.

(4) The arbitration decisions shall be final and binding on thedisputing parties. Each Contracting Party shall undertake toexecute the decisions in accordance with its national law.”

Such provisions can be summarised as providing that, (i) the partiesshall to the extent possible settle disputes amicably; and (ii) if suchsettlement is not possible, the parties shall resort to disputesettlement under the auspices of the ICSID.

14.4 In practice, have disputes involving Korea been resolvedby means of ICSID arbitration and, if so, what has theapproach of national courts in Korea been to theenforcement of ICSID awards and how has thegovernment of Korea responded to any adverse awards?

As of January 2007, there are no cases in which Korea was a partyto ICSID arbitration proceedings.

14.5 What is the approach of the national courts in Koreatowards the defence of state immunity regardingjurisdiction and execution?

There is no law in Korea which provides state immunity to theKorean government (including state immunity with respect tojurisdiction and execution of ICSID arbitral procedures anddecisions).In any event, Korea has never been a party to ICSID arbitralprocedures and, accordingly, has never had the opportunity toexpress its position on whether the Korean government has thesovereign right to exercise state immunity with respect tojurisdiction and execution of ICSID arbitral procedures anddecisions. So, there is no court precedent in Korea regarding thisissue, and it is difficult to state the court’s approach in Korea withrespect to this issue.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Korea? Are certain disputescommonly being referred to arbitration?

While arbitration was not always an active means to disputesettlement in Korea, the number of disputes settled through arbitrationhas rapidly increased since the amendment of the Arbitration Act in1999 and thanks to the proactive promotional efforts of the KoreanCommercial Arbitration Board, which focused on improving the

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Lee & Ko Korea

fairness, speed, and efficiency of arbitration proceedings conductedunder its auspices. Especially with the rise in the number ofarbitration disputes under the auspices of the Korean CommercialArbitration Board, the Board’s domestic and international profile hasincreased accordingly, and government agencies, includinggovernment-invested companies, etc. consistently include provisionsfor settlement of disputes through arbitration in construction contracts,technology license agreements and materials supply agreements towhich they are a party. As such, arbitration is becoming anincreasingly more important means for dispute settlement in the areasof construction, trade, shipping, joint ventures, M&A, intellectualproperty, finance and other commercial sectors.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Korea, such as pending or proposedlegislation that may substantially change the lawapplicable to arbitration?

In Korea, previously the academic texts and lower court decisionswere divided on the issue of whether selective arbitration agreements(i.e., disputing parties have the right to choose between arbitrationversus court litigation) between disputing parties should be deemedvalid. But recently, the Supreme Court ruled that if during arbitrationproceedings a party were to claim that an arbitration agreement did notexist between the disputing parties, a selective arbitration agreementshould be deemed as not to exist in respect to such parties.Consequently, parties should be aware that if Korea is selected as theplace of arbitration, a selective arbitration agreement should not be thedesignated mechanism for dispute settlement.

Jongkwan (Josh) Peck

Lee & Ko18th Floor, Marine Center Main Bldg118, 2-Ka Namdaemun-RoChung-Ku, SeoulKorea

Tel: +82 2 772 4367Fax: +82 2 772 4001/2Email: [email protected]: www.leeko.com

Admitted to Bar 1990 (New York).Represented the Korea Deposit Insurance Corporation in $150billion ICC arbitration against Newbridge Capital (Award byConsent); LS Cable in ICC arbitration against CEPCO (awaitingaward); Samsung Corp. in ICC arbitration against DMM (award fullyin favour of Samsung); Honeywell in ICC arbitration against HyundaiMotor (as Korean counsel); Seoul Commtech in ICC arbitrationagainst MA-COM (award fully in favour of Seoul Commtech);Hanwha Group in ICC arbitration against ORIX (successfullysettled); Oman Gulf Enterprise in ICC arbitration against Kia Motor(as Korean counsel); LG Corp. in ICC arbitration against Namir Tri-Tech (successfully settled); KEPCO in KCAB arbitration againstNexans (successfully settled); and Unison in KCAB arbitrationagainst Suzlon (award fully in favour of Unison).

Jin Soo Han

Lee & Ko18th Floor, Marine Center main Bldg118, 2-Ka Namdaemun-RoChung-Ku, SeoulKorea

Tel: +82 2 772 4366Fax: +82 2 772 4001/2Email: [email protected]: www.leeko.com

Admitted to Bar 1998 (Korea).College of Social Sciences, Seoul National University (B.A. inEconomics, 1996).Judicial Research and Training Institute, Supreme Court of Korea,1996-1998.Columbia University School of Law (LL.M., 2007).Former Judge of Seoul Districit Court. Represented Samsung Corp. in ICC arbitration against DMM (awardfully in favour of Samsung); Unison in KCAB arbitration againstSuzlon (award fully in favour of Unison). Successfully representedvarious multinational companies in litigations before the Koreancourts.

Lee & Ko is a full-service international law firm with expertise in a broad spectrum of legal issues that multinationalenterprises encounter in conducting their business. Lee & Ko strives to provide its clients with legal services with utmostprofessionalism.

Founded in 1977, Lee & Ko has grown steadily in size and now boasts over 300 professionals consisting of attorneys,patent attorneys, certified public accountants and, consultants, who have all distinguished themselves in theirrespective areas of specialty.

Lee & Ko is dedicated in providing its clients with sensible advice and workable solutions to assist in achieving theirobjectives in the unique and fast-changing Korean legal and business environment, bearing in mind that the specificneeds of each particular client.

Primary Areas of Practice:

Dispute Resolution: Arbitration and Litigation

Mergers and Acquisitions

Foreign Investment and Technology Transfer

Corporate Governance and Restructuring

Banking, Finance and Securities

Intellectual Property

Bankruptcy and Reorganisation

Telecommunication and Multi-media

Construction and Plant Delivery Projects

Insurance, Aviation and Maritime Law

Trade and Trade Regulation

Environmental Law

Tax and Tariffs

Labour and Human Resources

Antitrust, Unfair Competition and Consumer Protection

Entertainment

Criminal Law

64

Chapter 9


Shook Lin & Bok

Malaysia


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Malaysia?

The law on arbitration in Malaysia is governed by the ArbitrationAct 2005 (“the Act”).Generally, disputes may be referred by parties to arbitration underan arbitration agreement unless the arbitration agreement iscontrary to public policy.An arbitration agreement may be in the form of an arbitration clausein an agreement or in the form of a separate agreement. Anarbitration agreement must be in writing. An agreement in writingcan be a document signed by both parties, an exchange of letters,faxes or other communication that records the agreement or anexchange of a statement of claim and defence where the existenceof an arbitration agreement is not denied.


There are no special requirements. Any party to a commercialagreement can agree to resolve any dispute arising from thatagreement.


The Act does not specify any specific elements that ought to beincluded. However, it is good practice that the arbitrationagreement states the seat of the arbitration, the number ofarbitrators and the applicable rules to govern the arbitration.


Generally, the Courts will not interfere and will enforce arbitrationagreements between parties except where the arbitration agreementis contrary to public policy. However, the High Court can ruleagainst an arbitration agreement where:(1) the agreement in null and void; or(2) there is in fact no dispute as alleged.(Section 10 of the Act.)


Generally, the Courts will not interfere and will enforce arbitrationagreements as well as other ADR Agreements between parties.


2.1 What legislation governs the enforcement of arbitrationproceedings in Malaysia?

The Arbitration Act 2005 governs the enforcement of arbitrationproceedings. The Act repeals the earlier Arbitration Act 1952.


Yes. The Act governs both domestic and international arbitration.


Yes, but with some modification in language. For example, whileArticle 5 Model Law (in respect of Court intervention) states that“In matters governed by this law, no Court shall intervene in anymatters governed by this Law”. Section 8 of the Act however states“Unless otherwise provided, no Court shall intervene in any mattersgoverned by this Act”.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Malaysia?

There are no mandatory rules governing international arbitrationproceedings. There are statutes, provisions in the Act which wouldapply equally to international arbitrations. It is also commonpractice for arbitrators to adopt international rules and guidelines aspart of the arbitration procedure.

Kevin Prakash

Mohanadass Kanagasabai

WWW.ICLG.CO.UK65


Shook Lin & Bok Malaysia

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Malaysia? What isthe general approach used in determining whether or not adispute is “arbitrable”?

Generally, any dispute can be referred by two parties to arbitrationunder an arbitration agreement for determination unless the arbitrationagreement is contrary to public policy (Section 4 of the Act).


Yes. Section 18(1) of the Act allows the arbitral tribunal to rule onits own jurisdiction including any objections with respect to theexistence or validity of the arbitration agreement.

3.3 What is the approach of the national courts in Malaysiatowards a party who commences court proceedings inapparent breach of an arbitration agreement?

Where proceedings are brought in respect of a matter where there isan arbitration agreement, the Courts will stay those proceedings andrefer the dispute to arbitration but only where a party applies for astay without taking any further step in the proceedings (Section 10of the Act). There are exceptions: where the agreement itself is nulland void or where there is in fact no dispute as alleged, the Courtsmay continue to hear and rule on the dispute.


Since the Act came into force, the High Court can address jurisdictionand competence in the context of a stay application where:(1) The agreement is null and void.(2) There is in fact no dispute as alleged.Alternatively, where an arbitral tribunal rules that it has jurisdiction,any party may appeal to the High Court against that ruling (Section18(8) of the Act).

3.5 Under what, if any, circumstances does the national law ofMalaysia allow an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

There is no provision in the Act for such jurisdiction.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Malaysia and what is thetypical length of such periods? Do the national courts ofMalaysia consider such rules procedural or substantive,i.e., what choice of law rules govern the application oflimitation periods?

There is no law or rule prescribing limitation periods for thecommencement of arbitration in Malaysia. The Limitation Act1953 prescribes limitation for causes of action e.g. a 6-yearlimitation in respect of actions for breach of contract. Limitationunder the Limitation Act applies equally to commencing arbitrationproceedings.



In respect of a domestic arbitration where the seat of the arbitrationis in Malaysia, the dispute shall be decided in accordance with thesubstantive law of Malaysia. In respect of international arbitration,the dispute shall be decided in accordance with the law as agreedupon by the parties. In the event there is no such choice of law bythe parties in an international arbitration, the law applicable shall bedetermined by the conflict of laws rules (Section 30 of the Act).


Generally, factors like illegality and public policy will beconsidered. For example, a choice of a foreign law for purposes ofillegal gaming activity will not be permissible.


Where there is no express choice of law in respect of the arbitrationagreement, the agreement will normally be governed by the choiceof law expressly chosen to govern the substantive contract. In theabsence of such a choice, the applicable law governing thearbitration agreement will, following common law principles, bethe law of the country with which the substantive contract is mostclosely connected, e.g. where the contract was concluded or theplace of business or residence of one of the parties.



No. Parties are free to select the number of arbitrators and aprocedure for appointing arbitrators or the presiding arbitrator(Sections 13(1) and 13(2) of the Act).In the absence of any agreement, the arbitral tribunal shall consistof three arbitrators for an international arbitration, and shall consistof one for a domestic arbitration (Section 12 of the Act).In a three-member panel tribunal, parties are free to agree on aprocedure to appoint an arbitrator (Section 13(2)). If there is noagreed procedure, then each party shall appoint one arbitrator andthe third will be appointed by the two appointed arbitrators. Wherethe two arbitrators fail to agree on the appointment of the thirdarbitrator, then either party may apply to the Director of theKLRCA for the appointment of the third arbitrator.In a single arbitrator tribunal, if the parties fail to agree on thearbitrator, either party may apply to the Director of the KLRCA forthe appointment of an arbitrator. If the Director is not able to act,then either party may apply to the High Court for such appointment.


If parties fail to agree on the procedure of appointing arbitrators theAct states that each party shall appoint one arbitrator and the two

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arbitrators shall appoint the third arbitrator as presiding arbitrator(Section 13(3) of the Act).If a party fails to appoint an arbitrator within 30 days of receipt ofa request to do so from the other party, or if the two appointedarbitrators fail to agree on the appointment of the third arbitrator,either party may apply to the Director of the Kuala LumpurRegional Centre for Arbitration (KLRCA) for such an appointment(Section 13(4) of the Act). Parties may also apply to the Director ofthe KLRCA for the appointment of a single arbitrator if the partiesfail to agree on the procedure for appointment of an arbitrator(Section 13(5) of the Act).


Yes. Where the Director of the KLRCA is unable to act or fails toact in the appointment of an arbitrator within 30 days of anapplication by a party, the party may apply to the High Court forsuch appointment (Section 13(7) of the Act).


A person who may be appointed by a party or the parties to act asan arbitrator must disclose any circumstances which may give riseto justifiable doubts to his impartiality or independence. The dutyof this person continues throughout the course of the arbitration.An arbitrators appointment may be challenged if there arejustifiable doubts as to his impartiality or if the arbitrator does nothave the qualifications agreed by the parties.In Malaysia, the IBA Guidelines on the Independence of Arbitratorsare frequently referred to in respect of an arbitrator’s independenceand impartiality.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Malaysia?

There are no specific rules or guidelines for disclosure of potentialconflicts of interest which are imposed by law or arbitrationinstitution. However, the IBA Guidelines on the Independence ofArbitrators are referred to often as guidelines for disclosure ofconflicts of interest.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Malaysia? If so, do those laws or rules applyto all arbitral proceedings sited in Malaysia?

The Act is the governing law relating to all arbitration proceedingsin Malaysia which include domestic and international arbitration.Parts II and III of the Act set out the procedures after notice ofarbitration has been given.

6.2 In arbitration proceedings conducted in Malaysia, are thereany particular procedural steps that are required by law?

There are no specific procedures. It is important, however, that anynotice of reference by one party of a dispute to arbitration must beproperly communicated to the other party. Failure to properly

communicate such notice is a ground to set aside an award of thearbitral tribunal.


Parties are free to agree on the procedure to be followed by thearbitral tribunal in the conduct of the proceedings (see Section 21(1)of the Act).Where parties fail to agree on the procedure for the hearing, thearbitral tribunal may conduct the arbitration in a manner it considersappropriate. This includes the power to determine admissibility andrelevance of evidence, order security for costs, make orders fordiscovery and interrogatories and generally other orders the tribunalconsiders appropriate.

6.4 What powers and duties does the national law of Malaysiaimpose upon arbitrators?

The Act confers wide powers on arbitrators including the power torule on its own jurisdiction and powers to determine the procedurefor the arbitration. Powers of the Arbitrator may be found inSections 18 to 28 of the Act.The principle duty imposed on arbitrators by the Act is disclosureof any circumstances that will give rise to justifiable doubts as to hisindependence or impartiality. The Act also imposes a duty on thetribunal to treat the parties equally and to give each party a fair andreasonable opportunity to present their case.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Malaysia and, if so,is it clear that such restrictions do not apply to arbitrationproceedings sited in Malaysia?

A person who is not an advocate and solicitor under the LegalProfession Act 1976 and has a valid Practicing Certificate cannotappear and act as an advocate and solicitor in legal matters inMalaysia. However, this restriction does not apply to arbitrationproceedings in Malaysia (see Zublin Muhibbah Joint Venture vGovernment of Malaysia [1990] 3 MLJ 125).

6.6 To what extent are there laws or rules in Malaysiaproviding for arbitrator immunity?

Section 47 of the Act provides that an arbitrator shall not be liablefor any act or omission in respect of the discharge of his functionsas an arbitrator unless bad faith is shown. Section 48 of the Act provides similar immunity for arbitralinstitutions.


There are limited powers of the Court to intervene in proceduralmatters once arbitration has commenced. For instance, a party mayapply to the High Court for the appointment of an Arbitrator wherethe Director of the Kuala Lumpur Regional Centre for Arbitrationfails to appoint an Arbitrator on the application of a party (Section13(7) of the Act).

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6.8 Are there any special considerations for conductingmultiparty arbitrations in Malaysia (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

The Act states that parties may agree to consolidate the arbitrationproceedings with other arbitration proceedings or that concurrenthearings be held, on such terms as may be agreed by the parties.Commonwealth case precedents on this are likely to be followed bythe Malaysian Courts.

6.9 What is the approach of the national courts in Malaysiatowards ex parte procedures in the context of internationalarbitration?

Ex Parte applications may be heard where the circumstances justifyit, if the seat of the international arbitration is in Malaysia.



Unless otherwise agreed by the parties, Section 19(1) of the Actempowers the tribunal (unless otherwise agreed by the parties) togrant various interim orders, including, security for costs, discoveryand interrogatories, interim preservation or custody or sale of anyproperty which is the subject matter of the dispute. There is no needfor assistance from the High Court.Section 19(1) option allows quicker relief if necessary as partiesmay avoid court process. However, enforceability is difficult.


Section 11 of the Act states that the High Court (unless otherwiseagreed by the parties) to grant various interim measures includingsecurity for costs, discovery and interrogatories, appoint an interimreceiver and manager, interim preservation or custody or sale of anyproperty which is the subject matter of the dispute and even interiminjunction.An order for interim relief by the High Court, although it binds theparties, does not affect the arbitral tribunal’s jurisdiction.


Generally, the Courts tend to intervene only in support of or toprotect the arbitral process. It will not use its powers to grantinterim relief which will interfere with the arbitral process or thepowers of the tribunal.


Yes. Sections 11 and 19 of the Act empower the High Court and thearbitral tribunal respectively, to order security for costs.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Malaysia?

The arbitral tribunal may determine the admissibility, relevance,materiality and weight of any evidence (Section 21 of the Act).However, while the arbitral tribunal manages the proceedings, itstill has to conform to the rules of natural justice. In Malaysia, thearbitral tribunal and counsel for the parties often refer to and rely oncommon law rules of evidence and authorities.


The arbitral tribunal may order discovery and production ofdocuments or materials within the possession or power of a party inthe arbitration although enforcing the order may be difficult. Thetribunal cannot make orders for discovery against third parties.


Section 11 of the Act empowers the High Court to make orders asto discovery and disclosure. The Courts will not intervene and willleave the arbitral tribunal to manage conduct of the proceedingsunless there is a failure or refusal by the party against whom anorder for discovery is made to comply with that order.


In practice, the test is that of relevance. If a document or piece ofevidence sought is relevant to the proceedings or a party’s case,discovery would be ordered.


Unless otherwise agreed by the parties, the arbitral tribunal maydetermine and has conduct of the procedures for the hearing(Section 21 of the Act). The arbitral tribunal may fix time limits forpleadings or other various steps in the court of the proceedings,order discovery of interrogatories, determine the admissibility ofevidence and order any evidence to be given on oath.

8.6 Under what circumstances does the law of Malaysia treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

A document is protected by privilege if it discloses anycommunication made by one party to his solicitor in the course and

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for the purpose of his employment as such advocate by or on behalfof his client. Privilege can be waived with the consent of the party.

9 Making an Award


An arbitral award must be made in writing and must be signed bythe arbitrator. Where there is more than one arbitrator, a majorityof the arbitrators in the tribunal must sign the award provided thereason for the omitted signature is stated.Award must state the reasons upon which the award is based unlessthe parties have agreed that no reasons are to be given or if theaward is pursuant to a settlement between the parties (Section 33 ofthe Act).



There is no right of appeal against an arbitral award. Partieshowever, may apply to the High Court to set aside the award onlyif the applicant can show that:(1) A party to the arbitration was under an incapacity.(2) The arbitration agreement is not valid under the law to which

it was subjected to or otherwise, Malaysian law.(3) The applicant was not given sufficient notice of the

appointment of an arbitrator or was not able to present itscase.

(4) The award contains decisions or matters beyond the scope ofthe arbitration.

(5) The composition of the arbitral tribunal was not inaccordance with the agreement between the parties.

(Section 37 of the Act.)


No, they cannot.


No. The grounds are specifically limited by statute.

10.4 What is the procedure for appealing an arbitral award inMalaysia?

There is no appeal procedure. If a party is aggrieved by an awardof the arbitral tribunal, that party may apply to the High Court to setaside the award (Section 37 of the Act). The application must bemade within 90 days from the date the applicant receives the award.


11.1 Has Malaysia signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

Yes. The New York Convention is now enforced through Section38 of the Act and there are 2 reservations entered: (i) reciprocity;and (ii) awards relating to commercial matters.

11.2 Has Malaysia signed and/or ratified any regionalConventions concerning the recognition and enforcementof arbitral awards?

No, it has not.

11.3 What is the approach of the national courts in Malaysiatowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

On an application to the High Court, an award made in respect of adomestic arbitration or an award from a foreign state shall berecognised as binding and enforced by an entry as a judgment of theaward or by action (Section 38(1) of the Act). An application torecognise an award must be accompanied by the duly authenticatedoriginal award or a duly certified copy of the award and the originalor duly certified copy of the arbitration agreement.Where the award or arbitration agreement is in a language other thanthe national language or the English language, the applicant mustprovide a certified translation of the award of arbitration agreement.A foreign state means a State which is a party to the Convention onthe Recognition and Enforcement of Foreign Arbitral Awardsadopted by the United Nations Conference in InternationalArbitration in 1958.

11.4 What is the effect of an arbitration award in terms of resjudicata in Malaysia? Does the fact that certain issueshave been finally determined by an arbitral tribunalpreclude those issues from being re-heard in a nationalcourt and, if so, in what circumstances?

Once an award is made by an arbitral tribunal in respect of adispute, that dispute cannot be re-litigated in Court. Res Judicataapplies equally to an award or ruling by an arbitral tribunal.

12 Confidentiality

12.1 Are arbitral proceedings sited in Malaysia confidential?What, if any, law governs confidentiality?

There is no provision in the Act which governs confidentiality.However, confidentiality is generally accepted and observed inarbitral proceedings in Malaysia especially if the arbitration Rulesunder which the arbitration is governed compels parties to keep theproceedings confidential. For example Rule 9 of the ArbitrationRules of the Kuala Lumpur Regional Centre for Arbitration statesthat unless parties agree otherwise, the parties must keepconfidential all matters relating to the arbitration proceedings.Confidentiality extends to the award, except where disclosure isnecessary for the purposes of implementation and enforcement.

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Generally, such information would be confidential.


Usually, confidentiality is removed if disclosure is necessary for thepurposes of implementation and enforcement of an award, for thepurpose of making an application to any competent court of anyState under the applicable law governing the arbitration or if incompliance with the request or requirement of any regulatory bodyor other authority.



The arbitral tribunal may award any civil remedy.


By Section 33(6) of the Act, the tribunal may award interest on thesum ordered to be paid by the award from the date of award to dateof realisation, as well as determine the rate of interest, unlessotherwise agreed by the parties. However, it seems that unlessagreed by the parties, the Tribunal cannot award interest for the pre-arbitration and arbitration period.It provides the tribunal wide powers in respect of any right tointerest on the awarded sum, including not awarding any interest atall. Even if the tribunal does award interest, it appears that interestis only awardable from the date of the award.


Unless otherwise agreed by the parties in the arbitration, an awardof costs and expenses of is at the discretion of the arbitral tribunal.The tribunal may direct who is to pay costs or part thereof; tax costsand expenses; and award such costs and expenses to be paid asbetween solicitor and client (Section 44 of the Act).Where a tribunal refuses to deliver its award before the payment ofits fees, the High Court may order the tribunal to deliver the awardon such conditions it considers fit.


Yes. An award for a monetary sum will be subject to tax if it fallswithin the definition of an income under Section 4 of the MalaysianIncome Tax Act 1967. Section 4 states that:Subject to this Act, the income upon which tax is chargeable underthis Act is income in respect of:(a) gains or profits from a business, for whatever period of time

carried on;(b) gains or profits from an employment;

(c) dividends, interest or discounts;(d) rents, royalties or premiums;(e) pensions, annuities or other periodical payments not falling

under any of the foregoing paras; and(f) gains or profits not falling under any of the foregoing

paragraphs.Therefore, if an award is in respect of any gain or profit, or evendamages under the Act, the sums may be taxable.


14.1 Has Malaysia signed and ratified the WashingtonConvention on the Settlement of Investment DisputesBetween States and Nationals of Other States (1965)?

Yes, Malaysia has signed and ratified this.

14.2 Is Malaysia party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Yes, this is the case in Malaysia.

14.3 Does Malaysia have standard terms or model languagethat it uses in its investment treaties and, if so, what isthe intended significance of that language?

There are no standard terms or model language.

14.4 In practice, have disputes involving Malaysia beenresolved by means of ICSID arbitration and, if so, whathas the approach of national courts in Malaysia been tothe enforcement of ICSID awards and how has thegovernment of Malaysia responded to any adverse awards?

Yes. One recent award was ICSID Case No. ARB/05/10 betweenMalaysian Historical Salvors Sdn Bhd and the Government ofMalaysia. However there is no reported decision in Malaysia inrespect of an enforcement of an ICSDI Award. However, it isunlikely that the Malaysian courts would not recognise and registerand award by ICSID.

14.5 What is the approach of the national courts in Malaysiatowards the defence of state immunity regardingjurisdiction and execution?

Malaysia adheres to the doctrine of State immunity when it comesto the question of impleading a foreign sovereign who declines tosubmit. In applying the doctrine of State immunity, our courts,whether in the exercise of its civil or criminal jurisdiction, normallywill by international comity disclaim jurisdiction especially if acountry is recognised by Malaysia as a foreign State.

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Mohanadass Kanagaasbai

Shook Lin & Bok 20th Floor, Ambank Group Building55 Jalan Raja Chulan50200 Kuala LumpurMalaysia

Tel: +603 2031 1788Fax: +603 2031 1775/778/779Email: [email protected]: www.shooklin.com.my

Mohanadass has extensive experience in arbitration or arbitrationrelated matters, both domestic and international under severalregimes including the Malaysian Arbitration Act, the Kuala LumpurRegional Centre Rules, the Singapore International ArbitrationCentre Rules, the UNCITRAL Arbitration Rules and the LondonCourt of International Arbitration Rules. He is featured in the AsiaPacific Legal 500 2005/2006, a leading guide to Asia’s law firms,which notes that:“Mohanadass Kanagasabai is noted for his international arbitrationexpertise, particularly in relation to construction and engineering,including LCIA cases.” “Shook Lin & Bok’s Mohanadass Kanagasabai has an establishedname in construction arbitration in both Kuala Lumpur and beyond.”Further, the Asia Pacific Legal 500 2006/2007 edition notes asfollows:“Shook Lin & Bok has in Mohanadass Kanagasabai one of its mostadmired partners, boasting solid experience in constructiondisputes. He has also been involved in several constructionarbitrations throughout Malaysia.”Mohanadass is currently the President of the Malaysian Institute ofArbitrators (MIArb).

Kevin Prakash

Shook Lin & Bok 20th Floor, Ambank Group Building55 Jalan Raja Chulan50200 Kuala LumpurMalaysia

Tel: +603 2031 1788Fax: +603 2031 1775/778/779Email: [email protected]: www.shooklin.com.my

Kevin has wide experience in arbitration or arbitration relatedmatters, both domestic and international. He has experience witharbitrations under several regimes with particular emphasis inconstruction and engineering disputes.

From its humble origins as a sole practitioner established in 1918, Shook Lin & Bok has grown into one of the top threelargest and oldest law firms in Malaysia today. From a litigation oriented practice, the firm has evolved into a leadingfull service firm offering a comprehensive range of legal services to clients spanning the globe.

The firm has twelve departments representing major practice areas, which combine in a complementary andmultidisciplinary practice to serve the needs of clients. Our principle practice areas are:

The firm turned 90 years’ old last year and is headed by Mr Too Hing Yeap, Chief Executive Partner, who has led thefirm since 1997. The Deputy Chief Executive Partner is Dato’ Dr. Cyrus V. Das, who is a former President of theMalaysian Bar Council and was, until recently, President of the Commonwealth Lawyers’ Association. The firm currentlyhas 27 partners and 60 legal assistants.


15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Malaysia? Are certain disputescommonly being referred to arbitration?

It is common in building contracts, for disputes to be referred toarbitration. There are few large building contract disputes thatreach the Courts. There is also a growing trend to incorporatearbitration clauses in Commercial contracts.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Malaysia, such as pending orproposed legislation that may substantially change the lawapplicable to arbitration?

Currently there are no noteworthy issues or events affecting the useof arbitration in Malaysia.

Corporate

Banking and Finance

Property & Conveyancing

General and Civil Litigation

Banking and Finance Litigation

Intellectual Property, Information Technology and Licensing

Insurance, Shipping and Aviation

Employment & Labour

International & Domestic Arbitration

Tax Advisory and Compliance

Probate and Administration

Company Secretarial Services



Chapter 10

Brick Court Chambers

“The Brussels Regulation- Icebergs ahead?”

For international arbitration practitioners in Europe in 2009 there isbut one subject on everyone’s lips, namely, the review beingconducted by the European Commission of Council Regulation(EC) 44/2001 (widely known as the “Brussels Regulation” pointingto its origins in the Brussels Convention 1968). The potential scopeof the review was signalled in October 2007 by what is nowcommonly called “The Heidelberg Report” which was authored bythree distinguished academics from Germany, Prof. Dr. BurkhardHess, Prof. Dr. Thomas Pfeiffer and Prof. Dr. Peter Schlosser. TheHeidelberg Report was commissioned by the EuropeanCommission and the authors took soundings from right across allthe Member States in Europe on all aspects of the BrusselsRegulation. That Regulation, from a litigator’s point of view, hasbeen an outstanding success, notwithstanding the occasional bumpin the road, in creating certainty as to jurisdiction of the courts ofthe Member States in respect of persons domiciled in other MemberStates and the easy enforcement of judgments. The Brussels Regulation is not a panacea for everything and hascertain specific exceptions which exclude its application, mostparticularly Article 1(2)(d), arbitration. The Brussels Convention andits successor-in-title, the Brussels Regulation, do not apply toarbitration. That is an exception established for over forty years andis part of the fabric of every European private international lawyer’sbeing.Only in a small number of cases over that period has the exceptionbeen tested and one might describe these as “border incidents”rather than seismic shifts in European law and practice. Certainlythe arbitration world did not stop revolving in Europe and neitherdid litigation practice suddenly discover a rich vein of possibleinstructions. The plain fact is that the exception is so wellestablished that every lawyer in Europe has known that litigationabout arbitration will not, almost invariably, have as its backdropthe Brussels Regulation.The Heidelberg Report did, notwithstanding the vast majority of thefeedback from Member States which was against adjusting thearbitration exception, state that [A]t the same time, the practicalproblems relating to the exclusion of arbitration can no longer bedissimulated. The Heidelberg Report identified four areas:(1) The enforcement of a (void or valid) arbitration agreement

(including declaratory judgments on the validity of theagreement, but also anti-suit injunctions enjoining partiesfrom seeking redress in ordinary courts).

(2) Ancillary measures such as the appointment of an arbitrator,the granting of supportive provisional relief and the supportfor the taking of evidence by ordinary courts.

(3) Recognition and enforcement of judgments beinginconsistent when arbitration agreements are in thebackground.

(4) Conflicts between arbitral awards and judgments.The Heidelberg Report then made its suggestions for change withtwo possible avenues explored:1. a deletion of Article 1(2)(d) and to preserve the prevalence of

the New York Convention by Article 71; or2. address the interfaces between arbitration and the Judgment

Regulation in a positive, comprehensive way and to includea specific provision on supportive proceedings to arbitrationin the Judgment Regulation.

The first of these suggestions is fairly clear as to what is intended,but was not been viewed as the more likely outcome.The second of these points, which has attracted much moreattention was demonstrated by specific suggested changes to theBrussels Regulation. First, a new Article 22(6):The following courts shall have exclusive jurisdiction, regardless ofdomicile, (…) (6) in ancillary proceedings concerned with thesupport of arbitration the courts of the Member State in which thearbitration takes place.Secondly, a new Article 27A: A court of a Member State shall stay the proceedings once thedefendant contests the jurisdiction of the court with respect toexistence and scope of an arbitration agreement if a court of theMember State that is designated as place of arbitration in thearbitration agreement is seized for declaratory relief in respect to theexistence, the validity, and/or scope of that arbitration agreement.Finally, a new recital: The place of arbitration shall depend on the agreement of theparties or be determined by the arbitral tribunal. Otherwise, thecourt of the Capital of the designated Member State shall becompetent, lacking such a designation the court shall be competentthat would have general jurisdiction over the dispute under theRegulation if there was no arbitration agreement.Following much by way of comment, favourable and unfavourablefrom the international arbitration community, the focus shifted inApril 2009 to the European Commission. It, having considered theHeidelberg Report, published its own Report and Green Paper forthe purposes of Europe-wide public consultation (the deadline forfeedback from interested parties was the end of June 2009). Given the importance and far-reaching possible consequences forarbitration in Europe, the relevant parts are set out in full. First, the Green Paper:7. The interface between the Regulation and arbitrationArbitration is a matter of great importance to international commerce.Arbitration agreements should be given the fullest possible effect and

Klaus Reichert



Brick Court Chambers “The Brussels Regulation - Icebergs ahead?”

the recognition and enforcement of arbitral awards should beencouraged. The 1958 New York Convention is generally perceived tooperate satisfactorily and is appreciated among practitioners. Itwould therefore seem appropriate to leave the operation of theConvention untouched or at least as a basic starting point for furtheraction. This should not prevent, however, addressing certain specificpoints relating to arbitration in the Regulation, not for the sake ofregulating arbitration, but in the first place to ensure the smoothcirculation of judgments in Europe and prevent parallel proceedings.In particular, a (partial) deletion of the exclusion of arbitration fromthe scope of the Regulation might improve the interface of the latterwith court proceedings. As a result of such a deletion, courtproceedings in support of arbitration might come within the scope ofthe Regulation. A special rule allocating jurisdiction in suchproceedings would enhance legal certainty. For instance, it has beenproposed to grant exclusive jurisdiction for such proceedings to thecourts of the Member State of the place of arbitration, possibly subjectto an agreement between the parties. Also, the deletion of thearbitration exception might ensure that all the Regulation’sjurisdiction rules apply for the issuance of provisional measures insupport of arbitration (not only Article 31). Provisional measuresordered by the courts are important to ensure the effectiveness ofarbitration, particularly until the arbitral tribunal is set up. Next, adeletion of the exception might allow the recognition of judgmentsdeciding on the validity of an arbitration agreement and clarify therecognition and enforcement of judgments merging an arbitrationaward. It might also ensure the recognition of a judgment settingaside an arbitral award. This may prevent parallel proceedingsbetween courts and arbitral tribunals where the agreement is heldinvalid in one Member State and valid in another. More generally, thecoordination between proceedings concerning the validity of anarbitration agreement before a court and an arbitral tribunal might beaddressed. One could, for instance, give priority to the courts of theMember State where the arbitration takes place to decide on theexistence, validity, and scope of an arbitration agreement. This mightagain be combined with a strengthened cooperation between thecourts seized, including time limits for the party which contests thevalidity of the agreement. A uniform conflict rule concerning thevalidity of arbitration agreements, connecting, for instance, to the lawof the State of the place of arbitration, might reduce the risk that theagreement is considered valid in one Member State and invalid inanother. This may enhance, at Community level, the effectiveness ofarbitration agreements compared to Article II(3) New YorkConvention. Further, as far as recognition and enforcement isconcerned, arbitral awards which are enforceable under the New YorkConvention might benefit from a rule which would allow the refusal ofenforcement of a judgment which is irreconcilable with that arbitralaward. An alternative or additional way forward might be to grant theMember State where an arbitral award was given exclusivecompetence to certify the enforceability of the award as well as itsprocedural fairness, after which the award would freely circulate inthe Community. Still another solution suggested consists of takingadvantage of Article VII New York Convention to further facilitate atEU level the recognition of arbitral awards (a question which mightalso be addressed in a separate Community instrument). The generalstudy suggests to refer to the agreement of the parties or the decisionof the arbitral tribunal. If the place cannot be defined on that basis, itis suggested to connect to the courts of the Member State which wouldhave jurisdiction over the dispute under the Regulation in the absenceof an arbitration agreement.Question 7: Which action do you consider appropriate atCommunity level: To strengthen the effectiveness of arbitrationagreements; To ensure a good coordination between judicial andarbitration proceedings; To enhance the effectiveness ofarbitration awards?

Next, the Report:3.7 The interface between the Regulation and arbitration Arbitration falls outside the scope of the Regulation. The rationalebehind the exclusion is that the recognition and enforcement ofarbitral agreements and awards is governed by the 1958 New YorkConvention, to which all Member States are parties. Despite thebroad scope of the exception, the Regulation has in specific instancesbeen interpreted so as to support arbitration and therecognition/enforcement of arbitral awards. Judgments merging anarbitral award are frequently (though not always) recognised andenforced in accordance with the Regulation. Provisional measuresrelating to the merits of arbitration proceedings may be granted onthe basis of Article 31 provided that the subject-matter of the disputefalls within the scope of the Regulation. The study shows that theinterface between the Regulation and arbitration raises difficulties.In particular, even though the 1958 New York Convention is generallyperceived to operate satisfactorily, parallel court and arbitrationproceedings arise when the validity of the arbitration clause is upheldby the arbitral tribunal but not by the court; procedural devicesunder national law aimed at strengthening the effectiveness ofarbitration agreements (such as anti-suit injunctions) areincompatible with the Regulation if they unduly interfere with thedetermination by the courts of other Member States of theirjurisdiction under the Regulation; there is no uniform allocation ofjurisdiction in proceedings ancillary to or supportive of arbitrationproceedings; the recognition and enforcement of judgments given bythe courts in disregard of an arbitration clause is uncertain; therecognition and enforcement of judgments on the validity of anarbitration clause or setting aside an arbitral award is uncertain; therecognition and enforcement of judgments merging an arbitrationaward is uncertain; and finally, the recognition and enforcement ofarbitral awards, governed by the NY Convention, is considered lessswift and efficient than the recognition and enforcement of judgments.Apreliminary observation is that the EU Commission were not mindedto go with the first of the Heidelberg Report’s suggestions, namely adeletion of Article 1(2)(d), and the focus was on the second suggestionwhich involved new Recital and new Articles 22(6) and 27A.There have been, to this author’s knowledge, a wealth of submissionsfrom many quarters expressing many different views on this issue. AEuropean Overview such as this is not the appropriate place for thisauthor to express his views on what has been a robust debate, somequestions and thoughts might be worth posing:1. Litigation about arbitration is not, in principle, a desirable

state of affairs. The point of arbitration is that the partiesagree to remove disputes from a national court to a neutralforum with arbitrators of their choice.

2. Litigation concerning arbitration, is of course, a fact of lifefrom time to time. For very good and sound policy reasons,the Courts have the final say, if called upon, in relation tocertain fundamental aspects such as jurisdiction. TheUNCITRAL Model Law has a significant number of specificinstances where Courts may play a role in the arbitralprocess, but, on the whole, cases dealt with by way ofarbitration should begin and end in front of arbitrators.

3. What is also a fact of life is that wholly illegitimate andmischievous litigation is, from time to time, commenced inthe teeth of arbitration agreements by parties and theirlawyers bent securing a perceived advantage.

4. If the Brussels Regulation was changed in line with theHeidelberg Report’s second suggestion, will the effect be thatthere will be more litigation about arbitration? While onecannot predict the future one can say that the ingenuity oflawyers knows no bounds and if a route is open to secure anadvantage through the court room then purist idealspersonally held by counsel concerning arbitration get fairly

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Brick Court Chambers “The Brussels Regulation - Icebergs ahead?”

short shrift. If the route is legally secure then so much thebetter for such counsel.

5. Does the proposed Article 27A improve the present situationwhich pertains in the Member States pursuant to Article II ofthe New York Convention? Is it desirable for there having tobe declaratory proceedings at the courts of the place ofarbitration for the provisions of Article 27A to be triggered inorder to stop proceedings elsewhere in Europe?

6. Does the giving of exclusive jurisdiction in respect ofancillary relief to the Courts of the place of arbitration makethe choice of a European venue better or worse whencompared with, for example, Geneva or New York?

7. Given the range of options available to a plaintiff in theBrussels Regulation via Articles 2, 5(1) and 5(3), does theproposed Recital open the door to forum shopping?

8. Can the continuance of the arbitration exception bereconciled with the proposed new Articles and Recital, orwill the door be opened to arguments about priority withinthe Regulation (as there was under the old BrusselsConvention - Article 16 trumping Article 5(1) and so on)?

These are simply some issues to consider, and there are manyothers. It is hoped that whatever is ultimately done, futureEuropean Overviews will not be devoted to court decisionsinimicable to the arbitral process. In conclusion, the process of the revision of the Brussels Regulation(which encompasses much wider issues of great significance tocross-border litigation) will, it is understood, move forward in thelatter part of 2009 once the European Commission has consideredthe feedback on foot of the Green Paper. What has been mostwelcome has been the frankness and willingness of the EuropeanCommission to engage with practitioners across Europe in thisprocess, and also the clear desire on its part to, if possible, enhancethe arbitral process.

Klaus Reichert

Brick Court Chambers7-8 Essex Street, London, WC2R 3LD, UK OR145-151, Church Street, Dublin 7, Ireland

Tel: +44 20 7379 3550 (UK) +353 1 817 4431 (Ireland)

Fax: +44 20 7520 4182Email: [email protected]: www.brickcourt.co.uk

Klaus Reichert is a barrister specialising in international arbitrationwith numerous appointments as arbitrator (party-appointee,chairman, institutional appointee) across a wide spectrum ofcommercial and treaty disputes. His counsel work is similarly broadin its international scope. He has worked, either as arbitrator orcounsel in matters encompassing: The Netherlands/Czech RepublicBIT, ICC, LCIA, ICDR/AAA, UNCITRAL, ICSID, DIS and ad hoc matterssitting in London, Paris, Zurich, Munich and many other centres. Hefrequently appears before the Courts of Ireland in substantialcommercial litigation matters. He also has appeared in the Courts ofEngland & Wales in a leading case concerning the New YorkConvention. He was admitted to the Bars of Ireland (1992), England& Wales (1996), and Northern Ireland (1998). He is a CharteredArbitrator and was educated at University College Dublin, the KingsInns (Dublin) and Queen Mary, University of London. He was votedby his peers onto the 2006 Global Arbitration Review “45 under 45”leading lights of international arbitration. He is Co-Chair of the IBALitigation Committee, a Board Member of the Editorial Board ofBusiness Law International, a member of the ILA InternationalCommercial Arbitration Committee, the ICC Commission onArbitration (including several of its Task Forces), and the LCIAEuropean Users’ Council. He served as Chair of the Host Committeefor the 2008 ICCA Conference marking the exact 50th Anniversary ofthe New York Convention. He also has represented the IBA at theHague Conference on Private International Law.

Brick Court Chambers is a leading Commercial Barristers Chambers. Its members are involved in many of the leadingInternational Arbitration cases before the National Courts as well as appearing before Arbitral Tribunals around theworld. In the last year our advocates have appeared before International Arbitral Tribunals in Amsterdam, Dubai, Paris,

Zürich, Ohio, Bermuda, Rotterdam, and Trinidad. Members of Chambers who sit as arbitrators are affiliated to LCIA,AAA, ICC, SIAC, HKIAC and ICDR.

Leading National Court cases in the last few years have included Occidental -v- Ecuador (Court of Appeal), Svenska -v- State of Lithuania (Court of Appeal), C -v- D (Court of Appeal), Exxon Mobil -v- Venezuela (Commercial Court) andDallah Real Estate and Tourism Company -v- Ministry of Religious Affairs, Government of Pakistan (Court of Appeal).

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Chapter 11


Kalo & Associates, Attorneys at Law

Albania


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Albania?

The Civil Procedure Code (Law no. 8116, dated 22/03/1996, asamended), (Article 404) provides that the resolving of a dispute byway of arbitration is invalid if it is not provided for in writing in themain agreement itself between the parties or in another writtendocument referring to that agreement, such as a telegram, telex orany other accurate means that constitutes written evidence. Thisprovision is more or less a reiteration of what is provided in therelevant international convention. Law No. 8688, dated 09.11.2000“On the Ratification of the Convention for Recognition andExecution of Foreign Arbitral Awards” (i.e. ratification of the 1958New York Convention on the Recognition and Enforcement ofForeign Arbitral Awards). Article 2 states that each of thecontracting states shall recognise a written agreement wherebyparties undertake to submit each or any of their disputes toarbitration which has arisen or may arise between them inconnection with a certain legal relationship, contractual or non-contractual which is connected in a matter that may be regulated byarbitration. Article 2 (2) provides that a term “written agreement”shall include any arbitration clause in an agreement or an agreementof arbitration signed by the parties or an agreement made up byexchange of letters or telegrams.It is noteworthy to add that oral arbitration agreements also falloutside of the scope of the New York Convention on theRecognition and Enforcement of Foreign Arbitral awards 1958 (the“New York Convention”).


There are no special requirements, beyond the general requirementthat the party to the commercial transaction should have therequisite legal capacity to act (under the general law). Although not entirely clear and not tested to date, Article 24 of theConsumer Protection Law on unfair contractual terms could requirean arbitration agreement to be approved separately in written formto the extent that it is considered to ‘exclude or hinder the exerciseof the rights of the consumer for legal indemnification or to takelegal action to the court’.


The Civil Procedure Code provisions on arbitration that apply onlywhen the place of the arbitration procedure is to be in the territoryof the Republic of Albania, specify that an arbitration agreementmust include the manner in which the arbitrators are to beappointed. Typically you would find that commercial transactionsthat include arbitration agreements would also note the rulesgoverning the procedure e.g. UNCITRAL rules or other.In reference to international arbitration the New York Conventiondoes not specify any particular content requirements of thearbitration agreement beyond evidence that the parties undertake tosubmit to their arbitration.


There is generally no difficulty in seeking recognition and obtainingan executive order on the basis of an arbitral award, which isgenerally accepted as a title in Albania. Our firm has been involvedin the recognition and enforcement of several arbitral awards.Though there may in practice, be some difficulties in enforcing dulyissued executive orders as the enforcement agency, namely theBailiffs’ Office, does not function properly. This is not a problemspecific to the enforcement of arbitral awards, but rather to theenforcement of court judgments in general.


In an attempt to provide alternative means of resolving disputes theRepublic of Albania promulgated Law 9090, dated June 26 2003,‘On Resolution of Disputes through Mediation’ (the “MediationLaw”), which generally reflects the principles of the United NationsCommission on International Trade Law (UNCITRAL).According to this law mediation is established as an activity outsidethe regular court system, whereby the parties in conflict requestmediation by a third individual or group of individuals in order toachieve a solution acceptable to the parties and in compliance withthe law. The mediator or the group of mediators does not have theright to order or oblige the parties to accept the solution. Themediator or the group of mediators are an impartial third party thatdo not have any binding power and do not act as a judge, attorney,or arbitrator for the parties. There is an Albanian Centre for Mediation and CommercialArbitration that is a national, independent, and not-for-profit centre

Alban Caushi

Sophia Darling

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Kalo & Associates, Attorneys at Law Albania

established under the World Bank’s Legal and Judicial ReformProject in Albania to promote, develop, and facilitate the practice ofarbitration, mediation, and other forms of alternative disputeresolution mechanisms.Unfortunately there have been very few cases that have beensubmitted to this Centre, and this practice remains very rare withinthe Albanian jurisdiction.


2.1 What legislation governs the enforcement of arbitrationproceedings in Albania?

According to the Article 393 of the Albanian Civil Procedure Codeforeign court judgments are recognised and enforced followingtheir screening by the Court of Appeal in a summary proceeding.Further, the Constitution of the Republic of Albania recognises thatin the case that Albania has signed and ratified any bilateral ofmultilateral agreement pertaining to the recognition andenforcement of foreign judgments the provisions of the latter shallprevail over those of the domestic laws. Being a signatory of therelevant New York Convention the recognition procedure throughthe Court of Appeal of Albania shall not be applied and thus theaward can be automatically recognised as an executive title andenforcement procedures via court bailiffs may be pursued.


The provisions in the Civil Procedure Code related to InternationalArbitration have been repealed with a view to enable theimplementation of the new law on Commercial Arbitration.Unfortunately there has been some delay in the enactment of thisnew law and it still remains to be in draft form. To dateinternational arbitration proceedings remain to be unregulated bydomestic law though it is still regulated by the ratified internationalconventions, e.g. New York Convention.The provisions in the Civil Procedure Code continue to govern alldomestic arbitration proceedings that take place in the Republic ofAlbania.


The current draft form of the law on Commercial Arbitration wasdesigned to govern all domestic and international commercialarbitration in Albania, and having been drafted with the assistanceof the World Bank in the ambit of the Legal and Judicial ReformProject it follows the UNCITRAL Model Law. With regard to thedomestic arbitration rules that remain in force, the Civil ProcedureCode is more or less in line with the UNCITRAL arbitration rules.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Albania?

The draft law on Commercial Arbitration imposes mandatory rulesgoverning international arbitration. Arbitration is considered to beinternational if:(i) the parties to an Arbitration agreement, at the time of the

conclusion of that agreement, have their places of business indifferent States;

(ii) the designated place of Arbitration, as pursuant to theArbitration agreement is outside the State in which theparties have their place of business;

(iii) the subject-matter of the dispute, or the obligations of thecommercial relationship which gave rise to the dispute, aremost closely connected outside the state in which the partieshave their places of business; or

(iv) the parties have expressly agreed that the subject-matter ofthe Arbitration agreement relates to more than one country.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Albania? What isthe general approach used in determining whether or not adispute is “arbitrable”?

As a general point and as arbitration is a question of agreement byparties, the Albanian Civil Code recognises the principle of freedomof contract. There are currently no provisions that determineprecisely what disputes are ‘arbitrable’, though of course criminalmatters are not capable of settlement by arbitration as matterssubject to arbitration are generally applicable to only civilproceedings. It is also noteworthy that the jurisdiction of Albanian courts cannotbe transferred to a foreign jurisdiction by agreement, except forwhen the trial is related to an obligation between foreigners orbetween a foreigner and an Albanian citizen, not dwelling orresiding in Albania and when such exemptions have been stipulatedin the agreement.The directly applicable New York Convention applies to disputeswhich has arisen or may arise between parties in connection with acertain legal relationship, contractual or non-contractual which isconnected in a matter that is capable of settlement by arbitration. Itdoes not go further to stating what matters are or are not capable ofsettlement by arbitration, probably as this is a matter to bedetermined by the domestic laws of the signatory country to theConvention In the case of domestic arbitration procedures the Civil ProcedureCode (Article 402) provides that any claim to property (i.e.anything of monetary value) or request resulting from a relationshipinvolving property such relationship may be subject of anarbitration trial. It follows to specify that the State or an enterpriseor organisation controlled by the State shall be subject to arbitrationprocedures in the same manner as other person or entities,However, quite different from the New York Convention (applyingto recognition of international arbitral awards) the Civil ProcedureCode (Article 403) limits the application of settlement byarbitration to contractual matters and no mention is made of non-contractual matters. It states that arbitration proceedings may onlytake place when parties agree to submit to such in the event ofdisputes ‘which have arisen or may arise by contract betweenthem’. This would seemingly exclude the permissibility of agreeingto resolve any disputes by way of arbitration for non-contractualmatters.


In the case of domestic arbitration procedures, the Civil ProcedureCode (Article 414) implicitly provides that the dispute beingconsidered by the arbitrator(s) may be sent for trial under anotherjurisdiction and in doing so must declare his/her lack of jurisdiction.



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3.3 What is the approach of the national courts in Albaniatowards a party who commences court proceedings inapparent breach of an arbitration agreement?

To date there are few arbitration agreements that have beensubmitted to the national courts and there is no known binding caselaw in that respect and it remains to be seen how Albanianjurisprudence develops in this regard. Though subject to normal court procedures, if one partycommenced court proceedings there would usually be a preliminaryhearing within which the matter of the courts jurisdiction shall beconsidered, and if there is sufficient evidence to suggest that it doesnot have jurisdiction and the matter ought to have been subject toarbitration proceedings it should dismiss the case. There have beenseveral known cases whereby the national courts have declared lackof jurisdiction in the case of arbitration agreements.


Under the Civil Procedure Code parties to the arbitration agreementmay authorise the arbitral tribunal to decide impartially and in anequal manner for the parties. There appears to be no mention of acourts ability to judge on the jurisdiction and competence of thenational arbitral tribunal except, logically, to the extent that a courtclaim is filed on a dispute that is also claimed to be subject to anarbitration agreement, in which case the court must consider thevalidity of the arbitration agreement and potentially the jurisdictionof the national arbitral tribunal.

3.5 Under what, if any, circumstances does the national law ofAlbania allow an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

The law does not afford the arbitral tribunal the power to assumejurisdiction over a non-consenting third party to an arbitrationagreement.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Albania and what is thetypical length of such periods? Do the national courts ofAlbania consider such rules procedural or substantive, i.e.,what choice of law rules govern the application oflimitation periods?

Statutory limitation periods for the initiation of any court action areprovided in the Civil Code of the Republic of Albania. The typicallength of such periods is 10 years; however specific contractualobligations or non-contractual obligations (i.e. torts) have shorterlimitation periods. According to Albanian law these limitationperiods are considered as substantive rules. The application oflimitation periods in international arbitration are governed byinternational private law on choice of law rules.



Article 26 of the Draft Commercial Arbitration provides thefollowing:

(1) If the Arbitration is international, then the Arbitral Tribunalshall decide the dispute in accordance with such rules of lawas are chosen by the parties as applicable to the substance ofthe dispute. Any designation of the law or legal system of agiven state shall be construed, unless otherwise expressed, asdirectly referring to the substantive law of that state and notto its conflict of laws rules.

(2) For the purposes of paragraph (1) of this Article, if the partiesfail to make a designation, the Arbitral Tribunal shall applythe law determined by the conflict of laws rules which itconsiders applicable.

(3) The Arbitral Tribunal shall decide ex aequo et bono or asamiable compositeur only if the parties have expresslyauthorised it to do so.


The law chosen by the party is applied to the extent the mandatorylaws are not circumvented.


There are no defined rules under Albanian Commercial ArbitrationLaw in this respect; however from a practical perspective thearbitrator may apply the conflicts rules of the country seat, as‘’neutral’’ or appropriate rules.



In the case of domestic arbitration procedures the Civil ProcedureCode provides that the parties may agree in an independent manneron the procedure of non-acceptance of an arbiter, though an arbitermust have full legal capacity. When the parties appoint arbiters ineven numbers, and the agreement does not provide for thedetermination of an additional arbiter, and the chosen arbiters havenot been able to appoint that last arbiter then he/she is appointed bythe chairman of the District Court.


When an agreement between the parties on the acceptance of theselection of the arbitrators is lacking, the party objecting to theappointment of an arbitrator must notify him/her within 10 daysfrom receiving notice of the appointment on the objectionspecifying the reasons for the non-acceptance In the case that the arbitrator whose dismissal is requested does notwithdraw from his appointment, or the procedure determined by theparties does not settle this objection, the arbitral tribunal decideswithout the participation of the arbitrator of which his/her dismissalhas been requested. When the tribunal does not settle the request fordismissal the Court of First Instance shall decide no later than 15days from the date of lodging the dispute for trial (Article 409 of theCivil Procedure Code).

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Please note above question 5.2.


Pursuant to Civil Procedure Code (Article 408) immediately afterthe appointment of the selected arbitrator, he/she must present to theparties all the circumstances which may cast doubt in his/herimpartiality and independence in the process of resolving thedispute. He/she may be not accepted as an arbitrator when the abovementioned doubts are just and grounded as well as when he/shedoes not fulfil the conditions on which the parties have agreed.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Albania?

There are no specific rules or guidelines for the disclosure ofconflict of interest.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Albania? If so, do those laws or rules applyto all arbitral proceedings sited in Albania?

The Civil Procedure Code contains a section on the procedure of thearbitral tribunal and they shall apply to all arbitration proceedingstaking place in the Republic of Albania.

6.2 In arbitration proceedings conducted in Albania, are thereany particular procedural steps that are required by law?

The consideration of the dispute in the arbitration procedure shallcommence by the request of both parties or of the interested party.The arbitral tribunal is considered to have been duly establishedwhen the arbiter(s) has been appointed in conformity with theprovisions of the Civil Procedure Code and they have accepted theappointment in writing.The arbitral tribunal begins its procedural activity from the time thatit is established, except when in the agreement all the arbitratorshave been designated. In this case the activity is considered to havebegun when one of the parties asks the arbitrator(s) to perform theirduties (Article 415).If the arbitration agreement does not designate a time-period thenthe appointment of the arbitrator(s) shall continue only for 6 monthsbeginning from the date when, if applicable, the last of thearbitrators has accepted the appointment. This period may beextended by the chairman of the Court of First Instance upon therequest of at least one of the parties upon the request of the arbitraltribunal.


The parties may themselves determine the conduct of the hearing,by accepting the rules decided for the courts or by referring to theprocedural rules of an arbitration institution selected by them.

In the event that an arrangement is not agreed upon by the parties,the arbitral tribunal itself shall determine it even by referring to aregulation of an arbitration institution.Irrespective of the afore-mentioned the arbitral tribunal is obliged torespect the leading principles of the court process, which guarantee,among other things, the equality between the parties and their rightto be heard in a procedure involving a dispute.

6.4 What powers and duties does the national law of Albaniaimpose upon arbitrators?

Please refer to the third paragraph under Section 5.3 above, andnote that this shall also include duty to be impartial, ensure right offair trial and equality.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Albania and, if so, isit clear that such restrictions do not apply to arbitrationproceedings sited in Albania?

There are no rules restricting the appearance of lawyers from otherjurisdictions before the arbitration which is taking place in Albania.

6.6 To what extent are there laws or rules in Albania providingfor arbitrator immunity?

There are no specific rules providing for the arbitrator immunity.


The courts are entitled to intervene with certain procedural issues,e.g. in the event that the parties have not decided on the rules toimplement for the purpose of the conduct of the arbitral tribunalproceedings.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Albania (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

There are no particular provisions on this issue, though in light ofthe rather wide freedom of parties to determine the conduct andprocedure of the arbitral proceedings one would be inclined to statethat multiparty arbitrations would be permitted, provided that allparties have consented to settlement by arbitration. Suchproceedings would also be subject to the procedures established bythe chosen rules of the arbitration institutions.

6.9 What is the approach of the national courts in Albaniatowards ex parte procedures in the context of internationalarbitration?

In relation to the recognition of foreign arbitral awards the Court ofAppeal shall examine whether the respondent or any party in anarbitration proceeding has been duly notified. In the case of an exparte procedure the Court of Appeal may refuse the recognition ofthe arbitral award in the event that it is found that the other party inarbitration has not been served the notification.



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Under Article 418 of the Civil Procedural Code, unless it has beenagreed otherwise by the parties, the arbitral tribunal may upon theapplication of a party to an arbitration proceeding, grant an interiminjunction. Such relief may take the form of seizure of movable andimmovable properties or any other means that the court may deemfit including abatement of performance of contractual obligations orenforcement (Article 206 Civil Procedure Code).The law suggests that if a party to the arbitration proceedings doesnot voluntarily comply with a decision to impose an interim reliefdecision against it by the arbitral tribunal; the matter must bereferred to the competent court so that the interim relief is thengranted and thus becomes enforceable.


Albanian courts may grant preliminary relief in proceedings subjectto arbitration only to the extent that the arbitration tribunal hasreferred such application to the court due to failure of a party tovoluntary comply with the interim relief decision of the tribunal.(See above question 6.1.)A party’s request to a court for an interim relief shall have no effecton the jurisdiction of the arbitral tribunal.


There is very little practice in the Republic of Albania of domesticarbitration proceedings and of applications for interim relief, but theassumption is that the courts would have no impediment in doing soas they do in normal litigation proceedings.


Yes. The courts and tribunals are at liberty when they deem fit toalso order security on costs.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Albania?

The rules of evidence specifically for arbitral proceedings are quitebroad and minimal. Parties may present as evidence documents inwritten form that are deemed important for the resolution of thedispute or may refer to documents and other means of proof.Parties may add or limit the subject matter of the lawsuit or maychange its legal cause up until the completion of the investigation.This provision is not applied when the parties to the arbitrationagreement or, in its absence, the arbitral tribunal, in its accepted

regulation, have stipulated otherwise. In any event the agreementmust preserve the principles of free acquisition of evidence.It should also be borne in mind that the arbitral tribunal is obligedto respect the leading principles of the court process, so as toguarantee the equality between the parties and their right to beheard in a procedure involving a dispute.


There are no provided limits on the arbiter(s) authority to order thedisclosure of documents. Further, the law vests the arbitrator(s)with the power to request that the Court of the First Instance issuesan order for the provision of evidence at the tribunal.


As noted above in question 7.2, a court shall be under a duty tointervene upon receipt of an application from the arbitral tribunalfor the issuance of an order for the provision of evidence.


The set practice of application and procedure for disclosure anddiscovery is not particular to the legal framework of Albania.


There is no requirement of being sworn before the tribunal, andcross-examination is permitted. As is permitted, if the partiesdecide on the rules of the court, i.e. the Civil Procedure Code thenthe provisions of this Code shall govern the production of writtenand oral testimony.

8.6 Under what circumstances does the law of Albania treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

There are no specific rules under Albanian law to provide for whatwould amount to privileged information in an arbitral proceeding,although where parties (or if they have not done so the arbiters)have chosen to have a set of rules governing the arbitrationproceedings reference must be made to those rules in respect of“documents that are privileged”. However, it is believed that whatis classified as State Secret by Albanian law and applied in litigationshould have same status in arbitration proceedings.

9 Making an Award


The deliberations of the arbitrators on the arbitral proceedings andthe award must be made by the tribunal without the presence of theparties or other persons. The arbitral award is issued by a majority

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of votes and must be signed by at least the majority of the arbiters. The award must contain the names of the arbiters, the date and placewhere it is issued, the identity of the parties, their permanent andtemporary residence address, and the full name of their legalrepresentatives and of course the object of the dispute.The arbitral award must reason the accepted solutions and clearlyaddress the claims of the parties. (Article 429 and 430 of the CivilProcedural Code.)



An arbitral award may be appealed where:the arbitral tribunal was irregularly formed;the arbitral tribunal has in its award exceeded the powersconferred to it by the parties or has failed to deal with one ofthe main requests of the claim form;the arbitral tribunal has unjustly ruled on its competence ornon-competence of judging the dispute;the principles of the equality of the parties and the rights ofthe parties to be heard in a procedure based on the principalof contradictory dispute have not been adhered to; orthe arbitral award is in breach of the law and order in theRepublic of Albania.


The basis of appeal as set out in answer to question 9.1 above maynot be excluded by agreements of the parties.


No, they cannot.

10.4 What is the procedure for appealing an arbitral award inAlbania?

A reasoned appeal form must be lodged with the Court of Appeal inaccordance with the rules and procedures set out in the CivilProcedure Code.


11.1 Has Albania signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

Albania is signatory to the New York Convention and has ratified itso that it has direct effect, as per Law No. 8688, dated 09.11.2000“On the Ratification of the Convention for Recognition andExecution of Foreign Arbitral Awards”.

11.2 Has Albania signed and/or ratified any regionalConventions concerning the recognition and enforcementof arbitral awards?

An arbitral award made under the Geneva Convention 1927 isenforceable, but this has in practice very rarely been utilised in lightof the preference to rely on the New York Convention. Albania hasalso ratified the European Convention on Arbitration through lawno.8687 dated 09.11.2000.

11.3 What is the approach of the national courts in Albaniatowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

The provisions of the Civil Procedure code relating to therecognition and enforcement of foreign court judgments (i.e.Articles 393-398), will apply to equally to the enforcement ofarbitral awards. In the event that a foreign court judgment isobtained, after due service of process, the same would be affirmed,recognised and enforced by the Albanian courts and agencies forenforcement of claims, respectively, subject to cumulativefulfilment of the conditions for recognition and enforcement of thejudgments of the foreign courts defined under the Civil ProcedureCode which, inter alia, provide that: (i) the disputed matter is under jurisdiction of the foreign

court/arbitration that has rendered the judgment; (ii) the person against whom the judgment has been made has

been served the lawsuit and the writ of summons to enablehim to participate in the hearing to present his case;

(iii) no judgment has been rendered by an Albanian court on thesame matter and with the same parties;

(iv) no Albanian court is trying the same case while the foreigncourt judgment has yet to become final;

(v) the foreign court judgment has not become final in violationof the laws of another country; and

(vi) the foreign court judgment does not run against thefundamental principles of the Albanian legislation.

11.4 What is the effect of an arbitration award in terms of resjudicata in Albania? Does the fact that certain issues havebeen finally determined by an arbitral tribunal precludethose issues from being re-heard in a national court and, ifso, in what circumstances?

An arbitral award has the force of a res judicata decision in Albania.Nonetheless, there are exceptions in that any res judicata decisionmay be challenged in a Constitutional Court if it is found that thedecision is in breach of the Constitution of the Republic of Albania.In essence this would include violation of human rights as set out inthe European Convention for Human Rights. An additional exception to this rule which is particularly applicableto Arbitration awards is that the award must not be against theprinciples of the rule of law.

12 Confidentiality

12.1 Are arbitral proceedings sited in Albania confidential?What, if any, law governs confidentiality?

There are no laws or regulations governing confidentiality inarbitral proceedings. If the parties have chosen a particular set ofrules for the arbitration procedure then they may very well contain



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provisions on confidentiality; and of course they may also agree onconfidentiality.


Yes, unless the parties have agreed otherwise.


If the rules of arbitration chosen contain no confidentialityregulations the proceedings would afford no protection forconfidentiality.



There are no restrictions on the types of remedies that are availablein arbitration.


If the Albanian law has been chosen to govern the disputes, than theinterest that may be awarded shall be that indicated by the Bank ofAlbania.


The parties may recover fees and costs on the basis of theirarbitration agreement either through reference to a particular set ofrules or laws or through express mention of the topic.


An award is not particularly subject to tax, as the law do notspecifically provide for the nature of payments subject to tax; if apayment is executed for whatever reason it shall be subject to tax.This should be considered in the light of the specific case at hand,meaning an award may be rendered for an amount of money thatpresents an income or simply a compensation for an expenseincurred by the winner of the case.


14.1 Has Albania signed and ratified the WashingtonConvention on the Settlement of Investment DisputesBetween States and Nationals of Other States (1965)?

Yes Albania has signed and ratified this.

14.2 Is Albania party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Albania has ratified, including that mentioned in question 13.1, theEnergy Charter Treaty.

14.3 Does Albania have standard terms or model language thatit uses in its investment treaties and, if so, what is theintended significance of that language?

This is not applicable in Albania.

14.4 In practice, have disputes involving Albania been resolvedby means of ICSID arbitration and, if so, what has theapproach of national courts in Albania been to theenforcement of ICSID awards and how has thegovernment of Albania responded to any adverse awards?

Several disputes have been resolved using the means of ICSIDarbitration. ICSID awards are generally endorsed for enforcementby the national courts as Albania has ratified the WashingtonConvention on Settlement of Investment Disputes and this is dealtwith in the Foreign Investment Law (1993).

14.5 What is the approach of the national courts in Albaniatowards the defence of state immunity regardingjurisdiction and execution?

Albanian state entities have been sued in Albanian courts regularlyand the courts have not questioned state immunity in relation tojurisdiction and execution. There are many cases in which theAlbanian state or State Entities have been found to havedishonoured their obligations, and the respective party has beenremedied accordingly.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Albania? Are certain disputescommonly being referred to arbitration?

Although, as with may other jurisdictions we increasingly find thatcommercial transactions (particularly the ones involving largeramounts of money) almost always include an arbitration agreement,these tend to be governed and under the jurisdiction of foreign laws.There are very few domestic arbitration proceedings, and indeedquite few number of recognition and enforcement proceedings offoreign arbitral awards. As mentioned above the legal frameworkfor both domestic arbitration and international arbitration is hopingto be consolidated in a law on Commercial Arbitration that is still indraft form.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Albania, such as pending or proposedlegislation that may substantially change the lawapplicable to arbitration?

This is not applicable in Albania.

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Sophia Darling

Kalo & Associates, Attorneys at Law59 Rruga e KavajesTirana Tower, 5th FloorPO BOX 235, TiranaAlbania

Tel: +355 2 2233 532Fax: +355 4 2224 727Email: [email protected] URL: www.kalo-attorneys.com

Sophia, a recently admitted partner in the firm as of 2008, is a UKqualified solicitor now focused on legal projects and CommercialTransactions in Albania (particular cross-border). She has gained avery good knowledge of the Albanian legal system, and in combiningthis successfully with the extensive legal skills acquired throughpractising in England she offers a very valuable service to all clients.

Alban Caushi

Kalo & Associates, Attorneys at Law59 Rruga e KavajesTirana Tower, 5th FloorPO BOX 235, TiranaAlbania

Tel: +355 2 2233 532Fax: +355 4 2224 727Email: [email protected] URL: www.kalo-attorneys.com

Alban Caushi, partner of the firm since 2005, is a respected lawyerof over 12 year’s experience. Having initially practised as an in-house lawyer advising in various legal reform initiatives, Mr Caushijoined Kalo & Associates in 1996, and during his time has workedextensively advising particularly on Mergers and Acquisitions,project financing matter, and has a particular focus on litigation andarbitration. Mr Caushi is also a certified arbiter for the Centre onCommercial Mediation and Arbitration.

The largest law firm in Albania with some 35 lawyers, Kalo & Associates was originally established and founded byPërparim Kalo in 1994. The firm rapidly developed into a prominent and successful practice offering high quality,efficient, and cost-effective legal services. Kalo & Associates now has two offices, six partners, and with the knowledge,professionalism and experience of its lawyers it has demonstrated an unyielding capacity in handling intricate andcomplex legal matters.

Ranked as a leading law firm by Chambers Europe, Chambers Global and IFLR1000 “the always professional and veryefficient Kalo & Associates is one of the largest and most well-established law firms in Albania and highly regarded bythe market for their quick advice” (IFLR1000). We are the only law firm in Albania to be ranked top by ChambersEurope 2009 for all researched categories (corporate/commercial, projects, IP, real estate, litigation). In the field ofdispute resolution Chambers Europe 2009, quotes clients commenting favourably on the team’s extensive resourcesand the “timely and terrifically proficient manner” in which the work is carried out, while peers note that the firm isone of the biggest in the Albanian market.

Clients are keen to emphasise their confidence in the firm’s unshakeable integrity: “this thoroughly reputable groupalways leaves you completely satisfied”, said one.

With its team of highly-proficient lawyers with western university education, international business acumen andexcellent communication skills, the firm is commended as having a “western focus of the practice” and for “consistentquality of advice”.

The firm offers legal services in all core areas of commercial and corporate law for foreign and multinational companies,many of Fortune 500. Key practice areas include Corporate (M&A, JVs), Banking, Project Finance, Energy &Infrastructure, Concessions/PPPs, Dispute Resolution, Tax and Employment.

Languages: Albanian, English, French, German, Greek, Romanian and Serbian.


TIRANAKavaja AvenueG-KAM Business Centre,4th Floor, Tirana- AlbaniaMailing Box: PO Box 235, Tirana, Albania

Tel: + 355 4 233532Fax: + 355 4 [email protected]

PRISHTINABlvd. Mother Tereza 41 Ap 27, 10000 PrishtinaKosova

Tel: + 381 38 225 674Fax: + 381 38 225 [email protected]

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1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Belgium?

Article 1677 of the Judicial Code (hereinafter the ‘Code’) requiresan arbitration agreement to be contained in a written document,signed by the parties or in other documents binding on them andshowing their intention to refer their dispute to arbitration. Thelatter need not necessarily be signed by the parties. An exchange ofletters, fax messages or general trade conditions is sufficient,provided the intent of the parties to resort to arbitration is clear. The arbitration agreement should furthermore meet the generalrequirements of the applicable contract law, e.g. concerning aparty’s consent and capacity. Since 1998, public authorities are alsoauthorised to conclude an arbitration agreement but only if it relatesto a dispute concerning the conclusion or performance of a contract,and subject to the same conditions as applied to the conclusion ofsuch contract. Article 1678 of the Code provides that an arbitration agreement isinvalid if it grants one of the parties a privileged position withregard to the appointment of the arbitrator(s).


There are no specific requirements for arbitration agreements towhich an individual person is a party. However, caution is in orderwhen the individual person is a consumer, as the use of arbitrationin consumer matters is severely restricted.


Strictly speaking, no elements other than the parties’ will to refer toarbitration, are required in order for the arbitration agreement to bevalid and enforceable. In fact, the Code contains default rules forthe determination of the number of arbitrators, of the proceduralrules and of the place of arbitration, as well as for the appointmentof the arbitrators. In practice, however, it is advisable to include inthe arbitration agreement the number of arbitrators, the place ofarbitration, the applicable procedural rules and the language of theproceedings. A clear reference to the rules of an arbitrationinstitution is also advisable when parties wish the arbitrationproceedings to be conducted under these rules.


Generally speaking, Belgian courts have adopted a neutral approachtowards arbitration agreements: they have neither overtly favouredarbitration over other dispute resolution methods, nor shown a biasagainst arbitration. However, several Belgian courts have beenjealously confirming their statutory jurisdiction for disputes relatingto the unilateral termination of distribution agreements, consideringthemselves the guardians of the distributor’s right to terminationindemnities in accordance with Belgian statutory law (see answer toquestion 3.1).


Provided they are valid, Belgian courts enforce ADR agreementsand decline jurisdiction when so requested by one of the parties.


2.1 What legislation governs the enforcement of arbitrationproceedings in Belgium?

General rules on arbitration can be found in the Articles 1676 to1723 of the Code, last amended in 1998. These rules incorporatedin Belgian law the Model Law annexed to the European Conventionon Arbitration signed in Strasbourg on 20 January 1966. Specificstatutes exclude or limit the arbitrability of certain types ofcontracts, such as insurance contracts and employment contracts.


No distinction is made between domestic and internationalarbitration, save that in the latter case, courts will apply the relevantinternational conventions ratified by Belgium. If none of the partiesis a Belgian citizen, resident or corporation with its registered officeor branch office in Belgium, Article 1717-4 of the Code allows theparties to exclude the right to apply for the setting-aside of thearbitral award.

Benoît Kohl

Vera Van Houtte

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Although the UNCITRAL Model Law has not been fullyincorporated in Belgian law, several provisions of the Model Lawhave inspired the most recent revision of the Code in 1998 (e.g.Article 20 regarding the seat of the arbitration and Article 33regarding the correction and interpretation of arbitral awards).Significant differences remain between the Model Law and theprovisions of the Code dealing with arbitration. Among others, thegrounds available to set aside an award differ clearly in the twosystems, with the Belgian rules being more elaborate in this respectthan the Model Law. CEPANI, the major Belgian arbitrationinstitution, is currently examining a possible revision of the Code’schapter on arbitration.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Belgium?

Some of the provisions of the Code dealing with arbitration aremandatory and their violation would allow a national court to setaside the award. These rules are enumerated in Article 1704 of theCode (see question 10.1). However if none of the parties is either aBelgian citizen or resident, or has its head office or a branch officein Belgium, parties are allowed to exclude the right to apply forsetting-aside of the award. Regarding the arbitral procedure, theparties are free to determine the procedural rules which will applyto the arbitration, subject to some limits set forth in Article 1694 ofthe Code, which guarantees that the due process principles arerespected (see question 6.1).

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Belgium? What isthe general approach used in determining whether or not adispute is “arbitrable”?

According to Article 1676-1 of the Code, any dispute which can bethe subject of a settlement, may be referred to arbitration. Thus,disputes relating to a person’s status, such as divorce proceedings orthe civil status of a person, tax disputes or criminal matters areexcluded from arbitration. Arbitration clauses for mattersbelonging to the jurisdiction of the labour courts are null ifconcluded before the dispute arises (Article 1678-2 of the Code),except for employment contracts of high level or managementemployees (Article 69 of the Act on Employment contracts of 3rdJuly 1978). In some cases, it is necessary to distinguish betweendifferent aspects of the same subject matter: even if a criminaldispute cannot be referred to arbitration, an arbitral tribunal maywell rule upon the civil claim for damages resulting from a criminaloffence. The law applicable to the merits of the case determines whether adispute may be referred to arbitration. However, Belgian courtshave in some cases also applied Belgian law in order to assesswhether a dispute is arbitrable, no matter what law governs thecontract. This is the case in disputes relating to the termination ofan exclusive distributor operating in whole or part of the Belgianterritory: courts have often decided that if the distributionagreement is governed by foreign law and provides for arbitration,such a dispute may not be referred to arbitration. The issue is notyet completely settled, though.


Article 1697-1 of the Code confirms the principle of Kompetenz-Kompetenz by empowering the arbitral tribunal to rule on its ownjurisdiction. The same provision further provides that a finding thatthe contract is null and void does not automatically entail the nullityof the arbitration agreement that it contains. In order to preventdilatory challenges, a decision by the arbitral tribunal on its ownjurisdiction may only be challenged together with the award on themerits (Article 1697-3 of the Code).

3.3 What is the approach of the national courts in Belgiumtowards a party who commences court proceedings inapparent breach of an arbitration agreement?

Courts do not decline jurisdiction and refer the parties to arbitrationex officio, but if a party objects to the court’s jurisdiction on thebasis of a valid arbitration agreement, the court is obliged, underArticle 1679 of the Code to decline jurisdiction and refer the partiesto arbitration. Courts will verify on that occasion whether thearbitration agreement is valid or has ceased to exist. No cases areknown yet where a party was condemned to pay damages forbreaching a valid arbitration agreement by having the case broughtbefore a state court.


Courts may address the issue of the jurisdiction provided thedefendant objects against the court’s jurisdiction in limine litis. Inthat case, courts will examine whether the arbitration agreement isvalid and enforceable before referring parties to arbitration. Thereview will not so much focus on the jurisdiction of the arbitraltribunal, but will rather focus on the existence and validity of thearbitration agreement. Courts may also review the jurisdiction ofthe arbitral tribunal when dealing with a request to set aside orenforce an award.

3.5 Under what, if any, circumstances does the national law ofBelgium allow an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

In principle an arbitration agreement is not binding upon thirdparties, which can therefore not be forced to participate inarbitration proceedings. However, parties who did not agree to theoriginal arbitration agreement may nevertheless be held bound bythe agreement following assignment of the original contract, a take-over of the business of the original party or the effect of a third partystipulation. Belgian courts have not yet accepted that a companycan be bound by an arbitration agreement entered into by anothercompany of the same corporate group.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Belgium and what is thetypical length of such periods? Do the national courts ofBelgium consider such rules procedural or substantive,i.e., what choice of law rules govern the application oflimitation periods?

The rules on limitation periods for the commencement of arbitrationsare the same as the rules on limitation periods for the commencement



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of any claim before the Belgian courts. The typical length is ten yearsfor a claim based on a contract and five years for a claim in tort(starting from the appearance of the damage, with a maximum lengthof twenty years starting from the date the tort was committed)(Article 2262 bis of the Civil Code). There are several exceptions tothese typical limitation periods. These rules are substantive,governed by the law applicable to the substance of the dispute.



As from 17th December 2009, the law applicable to the merits ofthe dispute in contractual matters is determined in Belgiumaccording to the rules laid down in the EC Regulation 593/2008 ofthe European Parliament and of the Council of 17th June 2008 onthe law applicable to contractual obligations (Rome I). Article 3.1of the Regulation provides that a contract is governed by the lawchosen by the parties. If the parties have not determined theapplicable law, the law governing the contract is determinedaccording to the rules of Article 4 of the Regulation.


Specific Belgian mandatory laws aiming at the protection of publicpolicy (such as Competition Law, Tax Law etc.) or protecting theweaker contract party (such as employees, consumers or exclusivedistributors) prevail over the substantive law chosen by the parties.


Arbitration agreements are excluded from the scope of the ECRegulation 593/2008 on the law applicable to contractualobligations (Rome I). Belgian law recognises the autonomy of theparties in the choice of the law applicable to the arbitrationagreement. Given the principle of the separability of the arbitrationagreement, the law applicable to the arbitration agreement can bedifferent from the law applicable to the merits of the case. In theabsence of choice, the courts have held that the law chosen togovern the merits of the case also applies to the arbitrationagreement.



As long as neither party has any advantage over the other in thechoice of arbitrators (Article 1678-1 of the Code), parties are free todetermine the number of arbitrators and to select them. They cando so in the arbitration agreement or after a dispute has arisen. Theparties are explicitly authorised to limit their own freedom ofchoice, e.g. by excluding in the arbitration agreement the choice ofan arbitrator belonging to a certain group of persons. Once a partyhas appointed an arbitrator, it cannot withdraw the appointment.Article 1681-1 of the Code requires that, if the dispute is to besubmitted to more than one arbitrator, it be referred to an oddnumber of arbitrators.


Article 1682 of the Code provides that the parties may appoint thearbitrator(s) or request that a third party (such as an arbitralinstitution) makes that appointment. Where the parties have neitherappointed the arbitrators nor agreed on the method of theirappointment, each party shall appoint its own arbitrator. If a party fails to appoint an arbitrator within the one month periodprescribed by the Code, the other party may request the President ofthe Court of First Instance to make the appointment under Article1684 of the Code.


The President of the Court of First Instance may be called to intervenein the selection of arbitrators in a number of cases: first of all, when aparty fails to appoint an arbitrator within the period of one monthprescribed by the Code (Article 1684 Code); second, when thearbitrators appointed by each party fail to reach an agreement on thePresident of the tribunal (Article 1685 of the Code) and finally, whenan arbitrator dies or is unable to carry out his mission and partiescannot agree on a replacement (Article 1687 of the Code). It must be noted that these decisions of the President of the Court ofFirst Instance cannot be appealed or challenged in any way (Article1686 of the Code).


Under Article 1690 of the Code, arbitrators may be challengedwhen circumstances arise which cause legitimate doubts regardingtheir impartiality or independence.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Belgium?

CEPANI has enacted a set of Rules of Good Conduct, which applyto any arbitrator appointed under the CEPANI Rules of Arbitration.Article 3 of these Rules of Good Conduct provides that theprospective arbitrator shall accept his appointment only if he isindependent of the parties and of their counsel; there is also a dutyto immediately inform the Secretariat of CEPANI if any eventsubsequently occurs that is likely to call into question thisindependence in his own mind or in the minds of the parties.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Belgium? If so, do those laws or rules applyto all arbitral proceedings sited in Belgium?

Arbitration proceedings should respect the fundamental principle ofnon-discrimination between the parties who must be granted thesame possibility to assert their rights and put forth their arguments(Article 1694-1 of the Code). Beyond this basic principle, whichcannot be waived by parties, it is up to the parties to determine therules of the arbitral proceedings, including the seat of the arbitration(Article 1693 of the Code). Failing agreement between parties, thearbitral tribunal is entitled to determine the rules of procedure.

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Article 1695 of the Code allows an arbitral tribunal to conductproceedings by default if a party fails to appear or present itsarguments. These rules apply to all arbitration proceedings conducted inBelgium, as Belgian law does not distinguish between domestic andinternational proceedings.

6.2 In arbitration proceedings conducted in Belgium, are thereany particular procedural steps that are required by law?

The Code leaves the widest freedom to parties to design their ownprocedural rules and find an agreement on the various proceduralsteps of the arbitration process. Parties may, for example, decidethat the proceedings will be conducted on a document-only basis.The use of terms of reference is not mandatory under Belgian law,although it is required by the rules of CEPANI. The only mandatory step is that the party requesting the arbitrationmust notify the other party of its intention. In the notification, thisparty should refer to the arbitration agreement, set out the object ofthe dispute and, when appropriate, appoint the arbitrator (Article1683 of the Code).


Except for the fundamental principles of due process and non-discrimination, Belgian law does not impose specific rules for theconduct of arbitration hearings.

6.4 What powers and duties does the national law of Belgiumimpose upon arbitrators?

The power of arbitrators, although broadly comparable to that ofcourt judges, is limited by the scope of the arbitration agreementand any specific duty imposed herein. Arbitrators are vested with the power to issue interim measures, withthe sole exception of attachment orders (Article 1696 of the Code). Although the arbitral tribunal may call witnesses, it cannot force themto appear. When a witness fails to appear or refuses to testify, reliefmust be sought from the Court of First Instance, which has exclusivejurisdiction to compel a party to appear and testify. The arbitraltribunal may likewise not rule on the authenticity of documents. In order to ensure that their award will be duly respected by parties,arbitrators may also order a party to pay a daily penalty fine(‘astreinte’ / ‘dwangsom’) (Article 1709 bis of the Code).

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Belgium and, if so, isit clear that such restrictions do not apply to arbitrationproceedings sited in Belgium?

The existing restrictions on appearance of foreign lawyers (lessstrict for EU lawyers) do not apply to arbitration proceedings,where the parties can be represented by any representative, who canbe a lawyer from any other jurisdiction. The lawyers’ monopoly toact before Belgian courts does not extend to arbitrationproceedings.

6.6 To what extent are there laws or rules in Belgiumproviding for arbitrator immunity?

Arbitrators are not protected by the immunity granted to court

magistrates. They may be held contractually liable for any fault ornegligence committed in their function. They may also be heldliable in case of denial of justice. However, it is generallyconsidered that there is an arbitrator immunity when the allegednegligence relates to the exercise of the strictly jurisdictionalfunction. For other acts or omissions of a non-jurisdictional nature,the arbitrator may be liable. The common rules of contractualprofessional liability are then applicable.


Courts have jurisdiction under the relevant legal provisions to dealwith incidental issues such as the appointment of an arbitrator whena party fails to proceed, the challenge of an arbitrator, theverification of the authenticity of documents, claims for interim andprovisional measures or the calling and hearing of witnesses who donot appear voluntarily before the arbitral tribunal.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Belgium (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

No specific legal rules exist with regard to the conduct of multipartyarbitrations. However, extra attention should be given in multipartyarbitration to ensure that no party is discriminated and that each ofthem has a due process. There are no specific legal rules on consolidation of multiplearbitration proceedings. Such consolidation may therefore onlyoccur if all parties involved agree thereto. Third parties may intervene in existing arbitration proceedings bysubmitting a request to the arbitral tribunal which informs theparties thereof (Article 1696 bis of the Code). A third party mayalso be called by one of the parties to intervene in the proceedings.Each intervention requires the conclusion of an arbitrationagreement between the third party and the other parties. Moreover,the arbitral tribunal must consent unanimously to the intervention.

6.9 What is the approach of the national courts in Belgiumtowards ex parte procedures in the context of internationalarbitration?

Until now, courts in Belgium have not yet been confronted with exparte arbitration procedures arising in the context of internationalarbitration.



Article 1696 of the Code specifically grants arbitrators the power toaward preliminary or interim relief. This power is not otherwiselimited, save for the fact that parties must resort to courts if anattachment order is required.



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As the law presently stands, the courts and the arbitral tribunal haveparallel jurisdiction for summary proceedings in case of urgency.Hence a party may seek such relief from the courts notwithstandingthe agreement to submit disputes to arbitration. Article 1679-2 ofthe Code specifically provides that a claim for conservatory orprovisional measures that is brought before a court is notinconsistent with the arbitration agreement. Bringing such arequest before a court will not be deemed to be a waiver of thearbitration agreement.


In practice, courts have been found willing to assist the arbitrationproceedings by granting the provisional or protective measuresneeded to protect the integrity of the arbitration proceedings.Courts have repeatedly stated that requests for such provisionalrelief do not imply a waiver of the arbitration agreement.


Under Belgian law, courts may require a foreign plaintiff to putsecurity for costs in order to cover the costs and damages that couldfollow on from the proceedings (Article 851 of the Code). However,this requirement is waived in a number of international treaties. Although there is no express provision allowing an arbitral tribunalto order a party to put security for costs, this possibility existsprovided it has not been excluded by parties. When assessingwhether to order security for costs, the arbitral tribunal willexamine whether the situation of the plaintiff justifies such order,without being bound by the criteria developed by courts.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Belgium?

According to Article 1696-2 of the Code, the arbitral tribunal has adiscretionary authority to assess the admissibility and weight of theevidence submitted by the parties. Unless the parties agreeddifferently, the arbitral tribunal is not bound by the rules of evidenceapplicable in court proceedings. The tribunal may order the hearing of witnesses, appoint its ownexpert, order the personal presence of the parties or the productionof documents. Especially when appointing an expert, the tribunalshall hear the parties before proceeding.


The arbitral tribunal may order a party to disclose documents.However, this power is limited by the same strict rules applicable incourt proceedings. This means that disclosure orders are onlypossible if there is a serious reason to believe that the documents are

held by a party and contain evidence concerning a fact which isboth material and relevant for the outcome of the proceedings.Arbitrators should also take into account possible legal privilegeswhich may restrict the production of certain documents. The arbitral tribunal has no jurisdiction to order disclosure ofdocuments or any other type of discovery by third parties. Theparties should seek relief from the courts if it appears that suchdisclosure is necessary to support their case.


In principle, there is no need for court interventions in the processof disclosure, as arbitral tribunals are vested with the same powersas courts. However, arbitrators have no power over third parties.Hence, court intervention may be needed to compel a third party toproduce documents or otherwise disclose information.


Discovery does not exist under Belgian law and disclosure is oftena tribunal-steered process. In arbitration proceedings with seat in Belgium, reference is oftenmade in the Terms of Reference to generally accepted rules such asthe IBA Rules of Evidence. These rules will then mostly be used asmere guidelines for the (limited) disclosure process.


Parties are free to agree on the rules applicable to the production ofevidence and of oral witness testimony in particular. If partiesprovide that witnesses should be sworn in, Article 1696 of the Codeallows the arbitral tribunal to administer the oath. If the parties do not agree on specific issues for hearing witnesses,it is possible that in a domestic arbitration the tribunal would beguided by the rules on witness hearings applicable in state courts,where the judge, rather than the parties, puts questions to thewitnesses and where the witnesses are sworn in by the judge. Cross-examination of witnesses may be agreed upon by parties,who can determine freely how such examination should be carriedout. Belgian professional rules for lawyers prohibit the preparation ofwitnesses but are deemed not to apply in international arbitrationwhen the opposing counsel is not subject to the same prohibition.

8.6 Under what circumstances does the law of Belgium treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

Whether or not a specific document is subject to a legal privilegedepends in the first place on the capacity of the party who is calledupon to disclose the said document. Members of certainprofessions are bound by secrecy obligations (and documents heldby them are often protected by privilege), the violation of which canlead to criminal sanctions. This applies to attorneys, physicians,pharmacists, midwives, accountants and other professions (Article458 of the Belgian Criminal Code).

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Their professional secrecy obligation may be waived in certaincircumstances, e.g. when they are called to testify before a court oflaw. It is not clear whether these professions are similarlyexonerated from their secrecy obligations when called to testifybefore arbitral tribunals.

9 Making an Award


The first requirement is that the award must give reasons. This doesnot imply that the arbitrators should discuss all arguments putforward by the parties or appraise all evidence produced. Article 1701 of the Code provides further that the arbitral awardshould be rendered in writing and signed by the arbitrators. Shouldone or more of the arbitrator(s) be unable to sign the award or refuseto do so, this should be mentioned in the award. In addition, the award should mention the names and domiciles ofthe arbitrators and of the parties, the object of the dispute, the dateon which it is rendered and the seat of the arbitration.



According to Article 1703-2 of the Code, arbitral awards may onlybe appealed if the parties have expressly provided for such apossibility in the arbitration agreement. In practice, arbitralagreements rarely provide for such possibility. An appeal must belodged before another arbitral tribunal, and is not admissible beforea court. Unless the parties agreed otherwise, the appeal is to belodged within one month following the notification of the award bybailiff to the other party. Arbitral awards may be subject to setting aside proceedings beforeBelgian courts. An application to set aside an arbitral award mayonly be made in specific circumstances, which are enumerated inArticle 1704 of the Code:(a) if the award is contrary to public policy;(b) if the dispute was not arbitrable; (c) if there was no valid arbitration agreement;(d) if the arbitral tribunal exceeded its jurisdiction or its powers;(e) if the arbitral tribunal omitted to rule upon one or more issues

in dispute between parties, which cannot be separated fromthe issues in respect of which an award has been made;

(f) if the arbitral tribunal was irregularly constituted;(g) if the arbitral tribunal has breached the principle of due

process;(h) if the award has not been made in writing or has not been

signed by the arbitrators;(i) if the award does not state the reasons for the decision

reached by the arbitrators; (j) if the award contains conflicting provisions;(k) if the award was obtained by fraud;(l) if the award is based on evidence that has been declared false

by a court decision; and(m) if after the award was made, a document or any other

evidence has been discovered which would have had adecisive influence on the award and was withheld by one ofthe parties.

A party is estopped from relying on the grounds mentioned under c,d and f above if it has learned about their existence during thearbitration proceedings without raising them at that time before thearbitral tribunal.


Parties are assumed to have excluded the possibility to appeal thearbitral award, unless they explicitly provided in the arbitrationagreement the right to appeal. On the other hand, parties may not exclude the possibility to setaside an award. Nor may they modify the grounds on which arequest to set aside an award may be filed. However, once an awardhas been issued by the tribunal, they may agree to exclude thegrounds for setting aside proceedings that do not relate to publicpolicy. However, if none of the parties is either a Belgian citizen or resident(when the parties are natural persons) or has its head office or abranch office in Belgium (when the parties are corporate bodies),Article 1717 § 4 of the Code allows the parties to exclude the rightto apply for setting aside of the award.


Parties may not extend the scope of review of arbitral awards bycourts in the framework of setting aside proceedings. However, theparties may agree to allow an arbitral award to be appealed.

10.4 What is the procedure for appealing an arbitral award inBelgium?

Setting aside proceedings must be brought within 3 months after theaward has been notified to parties. Such proceedings are broughtbefore the Court of First Instance. The writ of summons must detailthe grounds on which the plaintiff intends to rely. It is not possibleto add new grounds during the course of the proceedings (Article1706 of the Code). It is unlikely that such proceedings will behandled during the introductory hearing. Rather, the court willinstruct the parties to lodge written briefs detailing their argumentsbefore hearing the case. The court must examine on its own motionwhether the award is contrary to public policy and whether thedispute was arbitrable.


11.1 Has Belgium signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

Belgium has ratified the New York Convention, which entered intoforce in Belgium on 16th November 1975. Upon ratification,Belgium has declared that it will only apply the Convention torecognition and enforcement of awards made in the territory ofanother Contracting State. Enforcement of awards must be refused if the award or itsenforcement is contrary to public policy or if the dispute was notarbitrable. If the award is foreign, its enforcement must also be



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refused if one of the grounds for setting aside an award exists. Therelevant provisions for enforcement of foreign awards can be foundin the Articles 1719 to 1723 of the Code.

11.2 Has Belgium signed and/or ratified any regionalConventions concerning the recognition and enforcementof arbitral awards?

Belgium has entered into five bilateral conventions which can beused to obtain the enforcement of a foreign award: with France(1899); the Netherlands (1925); Germany (1958); Switzerland(1962); and Austria (1959). Furthermore, Belgium has also ratifiedthe 1961 Geneva Convention.

11.3 What is the approach of the national courts in Belgiumtowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

By and large, courts adopt a hands off approach to requests forenforcement of foreign awards, strictly limiting themselves to areview of the grounds for refusal of enforcement without examiningthe award in detail. There is, however, little guidance from theSupreme Court on how these grounds for refusal should be construed. An application to obtain the enforcement of a foreign award mustbe brought before the president of the Court of First Instance of thedistrict in which the party against whom enforcement is sought, hasits domicile. In principle, the request is examined ex parte, withoutthe defendant being heard by the court.

11.4 What is the effect of an arbitration award in terms of resjudicata in Belgium? Does the fact that certain issueshave been finally determined by an arbitral tribunalpreclude those issues from being re-heard in a nationalcourt and, if so, in what circumstances?

As soon as the arbitral award has been notified to the parties and isno longer applicable, it enjoys, according to Article 1703 of theCode, a res judicata effect, provided the award is not contrary topublic policy and the subject matter of the dispute was arbitrable.

12 Confidentiality

12.1 Are arbitral proceedings sited in Belgium confidential?What, if any, law governs confidentiality?

The law does not expressly impose a duty of confidentiality on theparties involved in arbitration proceedings. Parties and arbitratorswill in practice frequently be bound by a duty of confidentiality assuch a duty will be included in the terms of reference or the rules ofthe institution applicable to the proceedings. The CEPANI rules donot contain an explicit duty of confidentiality, but the rules of goodconduct that arbitrators appointed under CEPANI rules are requiredto sign, do.


If the parties agreed on confidentiality of the first arbitralproceedings, information disclosed to them may not be disclosed insubsequent proceedings. Such a contractually agreed confidentialitymay, however, conflict with a duty of disclosure imposed by atribunal, and certainly a court in later proceedings.


If the parties wish confidentiality, they should explicitly require itin the arbitral agreement. Information relating to arbitration proceedings will not be protectedby confidentiality if parties call upon a state court to interveneduring the proceedings, either to appoint an arbitrator, to orderprovisional relief or to enforce or set aside an award. Courtproceedings are not confidential and information used during suchproceedings will hence be available to the public.



Belgian law does not limit in any way the type of relief or remediesthat an arbitral tribunal may award. It is therefore up to parties toagree upon such limitations. Absent such limitations, the arbitratorsmay take into account limitations imposed by the law of the countrywhere the award must be enforced. It must be noted that courts inBelgium may be reluctant to enforce an award granting punitive orother multiple damages.


No specific limitation is imposed by Belgian law on the type ofinterests that arbitrators may award, except for compound interestswhich, if Belgian law applies to them, are due only in specificcircumstances and following compliance with certain formalities:compound interests may be awarded only if interests have accruedduring at least one year and provided they are claimed in a formalrequest.


Parties may freely agree on what basis fees and costs can berecovered. This also includes attorneys’ fees. In general, arbitrators will award costs to the party whose claim hasbeen granted. However, arbitrators retain a large freedom to limitthe fee shifting rule.


As such no tax is levied on arbitral awards. However, a registrationtax will be levied if enforcement of the award is sought throughlegal proceedings. In that case, a registration tax (3% to becalculated on the total amount which a debtor is ordered to pay) isdue, if the sum of money which the debtor is ordered to pay exceedsEUR 12,500. The debtor and the creditor are jointly liable for thepayment of the registration tax, it being understood that thecreditor’s liability is limited to a maximum amount equal to half ofthe amount actually recovered from the debtor. Exemptions fromsuch registration tax may be applicable under an internationalagreement in force in Belgium.

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14.1 Has Belgium signed and ratified the WashingtonConvention on the Settlement of Investment DisputesBetween States and Nationals of Other States (1965)?

The Kingdom of Belgium has ratified the ICSID Convention on27th August 1970. It came into force on 26th September 1970.

14.2 Is Belgium party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Belgium has signed about 70 Bilateral Investment Treaties withcountries in all continents. Most of these treaties provide thatdisputes between an investor and one of the Contracting States maybe referred to arbitration either under the ICSID Convention or toan ad hoc arbitral tribunal established under the UNICTRALArbitration Rules. Belgium is also a party to the Energy CharterTreaty.

14.3 Does Belgium have standard terms or model language thatit uses in its investment treaties and, if so, what is theintended significance of that language?

The terms used in the dispute resolution clause inserted in BITs tendto vary. However, the majority of BITs provide that disputes shallbe settled by ICSID arbitration according to the 1965 WashingtonConvention.

14.4 In practice, have disputes involving Belgium been resolvedby means of ICSID arbitration and, if so, what has theapproach of national courts in Belgium been to theenforcement of ICSID awards and how has thegovernment of Belgium responded to any adverse awards?

Until now, no proceedings have been brought under the ICSIDconvention against the Kingdom of Belgium. It is worth noting,however, that several investors established in Belgium have broughtproceedings against foreign states, such as Burundi (Antoine Goetzand others v. Republic of Burundi, case n° ARB/95/3). In one instance, courts in Belgium have been asked to attach assetsto secure enforcement of a future ICSID award. The request wasdenied on the ground that under Article 26 of the ICSIDConvention, consent to ICSID arbitration precludes any otherremedy (Court of First Instance of Antwerp, 27 September 1985,Republic of Guinea v. Marine International NomineesEstablishment, ICSID Reports vol.4, at p.32)

14.5 What is the approach of the national courts in Belgiumtowards the defence of state immunity regardingjurisdiction and execution?

Although there is no statutory provision on immunity fromjurisdiction and execution, courts have since long accepted thatforeign sovereigns enjoy such immunities. However, immunity ofjurisdiction is only granted when the dispute closely relates to an actor a decision of a sovereign acting in its capacity as a sovereign. Inrecent years, claims for immunity from jurisdiction by internationalorganizations have been challenged on the ground of violation ofArticle 6 of the European Convention on Human Rights.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Belgium? Are certain disputescommonly being referred to arbitration?

The review of the Arbitration Act in 1998 has confirmed the parties’and arbitrators’ freedom to develop arbitration as a flexible tool fordispute settlement which present day commercial relations require.Belgium appears to attract more international arbitrations recentlyand the share of English language arbitration is increasing steadily.It is still too early to know whether the 21st January 2005 Act onmediation will have any notable impact on arbitration practice inBelgium. The most renowned Belgian arbitration institution,CEPANI, reports an average duration for arbitration of 20 months.Finally, CEPANI has created a workgroup that is currentlyexamining a possible revision of the arbitration chapter of theBelgian Judicial Code. A draft text should be available for publicconsultation shortly.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Belgium, such as pending or proposedlegislation that may substantially change the lawapplicable to arbitration?

For years, there has been uncertainty on the possibility to referdisputes relating to the unilateral termination of distributionagreements to arbitration. The Supreme Court held, in 2004 andagain in 2006, that in principle, such disputes may not be referredto arbitration if there is reason to believe that the arbitral tribunalwill not apply mandatory Belgian law, whatever the parties’ choiceof law. However, this issue is not yet finally settled.



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Vera Van Houtte

StibbeLoksumstraat 251000 BrusselsBelgium

Tel: +32 2 533 5259Fax: +32 2 533 5384Email: [email protected]: www.stibbe.be

Vera Van Houtte concentrates on real estate and construction law aswell as energy law. A major part of her activities consists of sittingas an arbitrator in international proceedings (ICC, LCIA, Uncitral, adhoc etc.), involving disputes in these fields as well as in other fields(i.a. investment arbitration). She is a member of the board of theAmerican Arbitration Association (AAA) and is also a vice-presidentof the ICC Court of Arbitration. Vera Van Houtte is a regular speaker at conferences, both in Belgiumand abroad. From 1995 to 2002, she was a lecturer on Europeanpublic procurement and environmental law in the Post GraduateLegal Education Program (‘Pallas’) of the Law Faculty of Nijmegenin The Netherlands. In 2007 Vera Van Houtte was ranked no.4 in an international list ofthe top 30 female arbitrators following research that was performedamong leading arbitrators as well as the wider arbitrationcommunity globally (published in Global Arbitration Review, Volume2, Issue 4).

Benoît Kohl

StibbeLoksumstraat 251000 BrusselsBelgium

Tel: +32 2 533 5259Fax: +32 2 533 5384Email: [email protected]: www.stibbe.be

Benoît Kohl concentrates on real estate law and construction law ingeneral. Besides negotiating agreements, drawing up legal advicesand structuring operations in these matters, he has also successfullydealt with various disputes before state courts and in arbitrationprocedures. He has been appointed member of the board of theCEPANI 40. Benoît Kohl is a professor at the law faculty of the Université deLiège. He also teaches a specialised course on commercial law atthe Ecole de Gestion HEC Liège. Moreover, he is a regular speakerat conferences. Furthermore, Benoît Kohl is a governmentcommissioner at the Belgian Institute for the training of magistrates.Benoît Kohl has published various articles and is also a member ofthe editorial staff of several Belgian legal journals. Moreover, he haswon three scientific awards, including the BVS Award (professionalassociation of the Belgian real estate sector) in 2008.

Stibbe is a leading full-service law firm with 140 lawyers in its Brussels office, 28 of whom are partners.

Stibbe has well reputed arbitration practitioners, who advise on the appropriate arbitration clauses for internationalcommercial agreements in terms of:

place of arbitration;

language of the proceedings;

applicable law;

number of arbitrators; and

administered arbitration or ad hoc.

Our lawyers regularly act as counsel in both national and international arbitration proceedings concerning all types ofdisputes concerning i.a. construction, distribution, IT, energy, sales, share purchase agreements, investments.

Some of our arbitration practitioners sit regularly as arbitrators appointed by either the parties or various arbitrationinstitutions (ICC, Cepani, LCIA). Acting as an arbitrator provides insight in the decision making process of arbitraltribunals and familiarity with other arbitrators which in turn enhances our role as counsel in arbitration.

Stibbe Belgium



Chapter 13

Borislav Boyanov & Co.

Bulgaria


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Bulgaria?

The following legal requirements of an arbitration agreement(“AA”) are provided for by the Bulgarian law:

The parties to the AA must have legal capacity to enter intocontracts. The AA must refer to disputes stemming from or connectedto a specific legal relationship/s. The general agreement thatthe parties shall submit all disputes between them toarbitration shall be null and void.The AA may concern disputes which may arise in future orwhich have already arisen.The AA can be related to disputes on the subject of a contractor non-contractual legal relations.The AA must be in writing. It is deemed to be in writing ifcontained in either a document signed by the parties or in theexchange of letters, telex messages, telegrams or other meansof communication.The AA could be executed either in the form of a clause inthe main contract or as a separate arbitration agreement.The AA is deemed concluded when the defendant in writingor by a statement, included in the minutes of the arbitrationhearing agrees that the dispute be brought to arbitration orwhen the defendant takes part in the arbitration proceedingswithout objecting to the jurisdiction of the arbitral tribunal.


Beyond the general requirement of legal capacity of the parties, theBulgarian law does not provide for any special requirements orformalities in the cases where a physical person is a party toarbitration.


Arbitration agreement should clearly state:scope of the arbitration jurisdiction;choice-of-law clause (substantive and/or conflict of lawrules, if applicable);seat of the arbitration;arbitration institution, if any;

number of arbitrators and rules for formation of the arbitraltribunal;procedural rules, rules of evidence; andspecial confidentiality requirements.


In principle, national courts are not prevented from hearing adispute with respect to which the parties have entered into an AA.However, if the defendant raises an objection that the disputeshould be submitted to arbitration the national court shall be obligedto examine the validity of the AA and terminate the case before it.Should the court finds that the AA is null and void or invalid or non-enforceable, it shall continue the examination of the case.


Under the new Bulgarian Civil Procedure Code (entered into forceon 1 March 2008) during the first hearing and before commencingthe examination on the merits of the case the court is obliged todirect the parties to mediation or another procedure for voluntaryresolution of the dispute. The court shall stay the proceedings incase of such mutual consent of the parties and that is usually thecase when the parties have decided to reach a voluntary settlementof the dispute. If they manage to settle within a term of six monthsthey can either approach the court with the request for courtapproval of their agreement and subsequent termination of the caseor the case shall be terminated if none of the parties has moved forthe resumption of the proceeding within the six-month term.


2.1 What legislation governs the enforcement of arbitrationproceedings in Bulgaria?

Arbitration proceedings in Bulgaria are governed by a special act -the International Commercial Arbitration Act (“ICAA”) whichentered into force on 5 August 1988. Rules related to arbitration arealso provided in the Bulgarian Civil Procedure Code (please seequestion 3.1 below).Bulgaria is also a party to the New York Convention on theRecognition and Enforcement of Foreign Arbitral Awards (“NewYork Convention”) and the European Convention on InternationalCommercial Arbitration, as well as to the Convention on the

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Settlement of Investment Disputes between States and Individualsof Other States (“Washington Convention”). Provisions for the settlement of commercial disputes througharbitration and for recognition and enforcement of foreign arbitralawards are also included in a number of bilateral treaties to whichBulgaria is a party.


The ICAA was initially designated to regulate only internationalcommercial arbitration proceedings. In 1993 the Parliament passeda very important and conceptual amendment of the ICAA wherebysubject to certain exceptions the ICAA became applicable todomestic arbitration proceedings as well. As a result, since 1993domestic and international arbitration proceedings in Bulgaria areboth governed by the ICAA although its name remained unchanged. As mentioned above, not all of the provisions of the ICAA areequally applicable to international and domestic arbitrationproceedings. Paragraph 3 of the Transitional and ConcludingProvisions of the ICAA determines certain exceptions to theapplicability of ICAA to domestic arbitration, and namely:

the parties may not appoint as an arbitrator a person who isnot a Bulgarian citizen, except for the cases where a party tothe dispute is an enterprise with a prevailing foreignparticipation;where the parties have not appointed an arbitrator/s the lattershall be appointed by the Sofia City Court instead of theChairman of the Bulgarian Chamber of Commerce andIndustry (“BCCI”) who would have competence in case ofinternational arbitration. Please note that the competence ofthe Chairman of the BCCI has remained in the law asadopted in 1988, e.g. at the time when the only court ofarbitration (“CA”) in Bulgaria was that at the BCCI. At themoment there a number of institutional arbitrations such asthe CA at the Bulgarian Industrial Association (“BIA”) underthe Rules of which in case of lack of agreement between theparties the Chairman of that CA shall be competent to act;the language of domestic arbitration proceedings shall beBulgarian; the parties are not allowed to agree upon a foreignlanguage/s to be used in the proceeding; the validity and the effective execution of an arbitrationagreement shall be judged on the basis of the ICAAregardless of the law which the parties might have agreedupon to be applicable to their agreement; and the arbitral tribunal shall decide a domestic dispute on thebasis of the Bulgarian substantive law. It could apply aforeign law only in exceptional cases.


The ICAA is based on the UNCITRAL Model Law (“ModelLaw”). The differences that worth mentioning are the following:

Scope of application: The ICAA gives a narrower definitionas to which disputes shall be considered international withinthe meaning of the law as compared to the definitionprovided by the Model Law. The ICAA applies to domesticarbitration proceedings, as well as to disputes that are not ofcommercial character. Jurisdiction of arbitral tribunal: Under the Model Law adecision on jurisdiction of an arbitral tribunal could beappealed against separately before competent national

courts, whereas according to the ICAA, the decision onjurisdiction itself is not subject to appeal. The lack ofjurisdiction of an arbitral tribunal shall be a ground forsetting aside of the arbitral award.Interim measures and preliminary orders granted byarbitral tribunal: Article 21 of the ICAA dealing withinterim measures ordered by an arbitral tribunal is based on1985 wording of Article 17 of the Model Law. The newChapter IVA of the Model Law (adopted in 2006) is notadopted in the ICAA and the new concept of interimmeasures and preliminary orders granted by an arbitraltribunal is not reflected by the ICAA.Making an award and termination of proceedings: Article39 of the ICAA confers additional powers in decision-making process to the presiding arbitrator in a panel ofarbitrators. Thus, where the majority of arbitrators could notreach a decision on the case, the award shall be made by thepresiding arbitrator. According to the Model Law, apresiding arbitrator may render decisions on proceduralissues only. Recourse against award: In contrast to Article 34 of theModel Law, the ICAA does not provide for suspending ofannulment proceedings for a certain period of time in orderto give the arbitral tribunal the opportunity to take thenecessary measures to rectify the grounds for the challengeof the award.Recognition and enforcement of foreign arbitral award:Unlike the Model Law, the ICAA distinguishes betweendomestic and foreign arbitral awards. It provides forrecognition and enforcement only of foreign arbitral awards,whereas domestic arbitral awards are directly enforceable inBulgaria.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Bulgaria?

There are only a few mandatory rules that apply to internationalarbitration in Bulgaria. These rules are designated to ensure theequality of the parties and the due process in arbitrationproceedings. The mandatory rules concern existence and validity ofan arbitration agreement, due notification of parties, defaultprocedures in the appointment of arbitrators, equal treatment ofparties during the proceedings, the cases of interventions bynational courts, the time limits for bringing counter claims,challenging independence and impartiality of arbitrators and raisingother procedural objections.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Bulgaria? What isthe general approach used in determining whether or not adispute is “arbitrable”?

Generally, only civil proprietary disputes, including commercialdisputes, as well as disputes for filling in the gaps in a contract or itsadaptation to changed circumstances shall be considered “arbitrable”.Article 19(1) of the Civil Procedure Code (“CPC”) provides anexhaustive list of the subject matters that cannot be referred toarbitration. These are disputes involving the determination of:

a right in rem or possession over immovable property;an obligation for providing a child support and/or alimony;anda right stemming from an employment legal relationship. (Itshould be noted in this regard that collective labour disputes

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may be settled through mediation and/or voluntaryarbitration by trade union or employer’s organisations and/orby the National Institute for Reconciliation and Arbitration).

Non-monetary disputes and criminal disputes are excluded fromarbitration ab initio. There are recent discussions on arbitrability ofadministrative disputes but for the time being such disputes are notarbitrable under Bulgarian law, either.


According to Article 19 of the ICAA an arbitral tribunal could - andin fact must - rule on its jurisdiction, also in cases where itsjurisdiction is challenged on the grounds of non-existence orinvalidity of the arbitration agreement. The arbitral tribunal shallrule on the objection of lack of jurisdiction either by a specialprocedural ruling or by the arbitral award on merits. Should thearbitration tribunal decide it has no jurisdiction to sit in the case itshall terminate the proceedings. Its decision shall be final and shallnot be subject to appeal before the national courts.The ICAA prescribes strict time limits for questioning thejurisdiction of an arbitral tribunal. The objection on jurisdictionshould precede any plea on merits and should be made at the latesttogether with the response to the statement of claim. The objectionalso could be raised by a party who has nominated or participatedin the nomination of arbitrators. The jurisdiction of the arbitraltribunal as to particular issue raised during the proceedings shouldbe challenged immediately.

3.3 What is the approach of the national courts in Bulgariatowards a party who commences court proceedings inapparent breach of an arbitration agreement?

National courts shall terminate the proceedings before them where theparties have agreed to submit the dispute to arbitration and thedefendant has made an objection to this effect within the time limit forsubmitting the response to the statement of claim (please also seequestion 1.4 above). The ruling for termination of the proceedings issubject to two-instance appeal review by the national courts. In case of termination of the proceedings due to the existence of anarbitration agreement the court shall not reimburse the state fee paid bythe claimant and may order him/her to recover the costs and expensespaid by the defendant, provided that such have been effectivelyincurred and the defendant has made a request to this effect.


The general rule is that it is for the arbitral tribunal to determine itsown jurisdiction. A national court could address the issue only inlimited number of cases where the court is requested to rule on thevalidity and enforceability of an arbitration agreement, and inparticular:1) In cases in which the national court is seized by a claim

which is covered by an arbitration agreement and thedefendant has raised the objection that the dispute should besubmitted to arbitration (please see question 3.3 above).

2) Should the validity of an arbitral award be challenged beforethe Supreme Court of Cassation on one or more of thegrounds listed in Article 47 (1)-(3) of the ICAA, and namely:

the arbitration agreement has been signed by a partywhich lacked capacity to act at the time of conclusionof the arbitration agreement;

the arbitration agreement is null and void; orthe subject matter of the award is not arbitrable.

Should the award be set aside on one of the above grounds,the interested party may bring an action before the competentstate court but could not refer the dispute to arbitration again.

3) In cases of enforcement and recognition of a foreign arbitralaward where the competent national court (which is the SofiaCity Court except it is otherwise provided by a bilateralagreement) shall examine whether the arbitration agreementis valid under the applicable law.

3.5 Under what, if any, circumstances does the national law ofBulgaria allow an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

The Bulgarian law does not provide for the possibility of an arbitraltribunal to assume jurisdiction over third parties which are notthemselves party to the arbitration agreement.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Bulgaria and what is thetypical length of such periods? Do the national courts ofBulgaria consider such rules procedural or substantive,i.e., what choice of law rules govern the application oflimitation periods?

Limitation periods under Bulgarian law are divided into prescriptionperiods which are considered to be a substantive law issue andpreclusion periods which are a procedural law issue. Commencementof arbitration proceedings is subject to prescription periods prescribedby the substantive law chosen by the parties. There are no Bulgarianlaw provisions which preclude parties from filing an arbitration claimand parties are not allowed to agree upon any preclusion period forsubmitting a dispute to arbitration in Bulgaria. According to Bulgarian law, the general prescription period for allclaims is five years, except if it is otherwise provided by law. Tortclaims and claims for rescission of contracts are subject to a five-year prescription period. The prescription period is three years forclaims for damages and liquidated damages from non-performedcontracts and for claims for rent, interest and other periodicpayments. Prescription periods start to run from the date on whichthe obligation became executable, e.g. from the date on which thecause of action occurred. These terms are applied by the court onlyupon objection raised by the defendant. In cases submitted toarbitration the running of a prescription period shall be interruptedas from the day on which the arbitration proceeding starts.According to the ICCA the arbitration proceedings start on the dayon which the defendant receives the claimant’s request the dispute tobe referred to arbitration, except it is otherwise agreed between theparties. If the dispute is referred to an institutional arbitration (CA)the rules of that CA shall determine the opening of the arbitrationproceedings, which could be the day on which the statement of claimwas lodged (for example such is the case under the Rules of CA atthe BCCI, as well as under the Rules of the CA at the BIA - bothcourts of arbitration mentioned in question 2.2 above).



In case of international arbitration the arbitral tribunal shall decide

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the dispute in accordance with the law chosen by the parties,whereas any designation of the applicable law shall be construed -unless otherwise expressed - as referring to the substantive law andnot to the conflict of law rules of that country. (Article 38 (1) of theICAA.) If parties have not designated any particular law to beapplicable in their case the arbitral tribunal shall apply the lawdetermined by the conflict of law rules which it considers applicable.In case of domestic arbitration the arbitral tribunal shall decide thedispute in accordance with the Bulgarian substantive law. It couldapply a foreign law which has been chosen by the parties ordetermined by it according to the applicable conflict of law rulesonly in cases that include an international element which -according to the rules of Bulgarian international private law - wouldlead to the application of a foreign law.


In general, the mandatory rules that shall prevail over the rules ofthe law chosen by the parties are related to the arbitrability of thesubject matter, public order considerations, legal capacity of theparties and requirements of equality and due process.Although the parties are free to choose the substantive and/orprocedural law and/or conflict of law rules that shall govern theirrelationship, they should comply with mandatory rules of Bulgarianlaw where either the seat of arbitration is in Bulgaria or theexecution of the arbitral award shall be sought in the country.Otherwise the parties shall risk that the domestic arbitral award beset aside by the Supreme Court of Cassation or, accordingly, theforeign arbitral award be denied recognition and enforcement by theSofia City Court.


As a principle, formation, validity and legality of an arbitrationagreement shall be governed by the law chosen by the parties or,failing any indications thereon, by the law of the country where theaward is made. However, legal capacity of the parties shall bedetermined in accordance with the law of the state where the partyhas its seat or is domiciled.The assessment of whether the subject mater of the dispute is

arbitrable shall be made under the law of the seat of arbitrationand/or the law of the country where execution of the award shall besought (please see question 4.2).



Generally, selection and appointment of arbitrators is left at the freechoice of the parties. However, selection process must ensure equaltreatment of the parties and the arbitrators should also fulfil therequirements for independence and impartiality and for possessionof the agreed professional qualifications and expertise. It shouldalso be mentioned that according to the ICAA, only physicalpersons (Bulgarian or foreign citizens in case of internationalarbitration and Bulgarian citizens in case of domestic arbitration)could be nominated and appointed as arbitrators. The selection ofarbitrators is also subject to the requirements.

Usually, arbitral institutions impose some additional restrictions tothe autonomy of the parties to select arbitrators. For example,parties to domestic arbitration before the AC at the BCCI mayappoint only arbitrators who are included it the AC’s list ofarbitrators.As already mentioned in question 2.2 above, in domesticarbitrations the parties can appoint as arbitrators only persons whoare Bulgarian citizens, except for the cases where a party to thedispute although seated in Bulgaria is an enterprise with aprevailing foreign participation.


In such cases the arbitral tribunal shall be appointed following theprocedure provided for in Article 12(2) of the ICAA:

if the arbitral tribunal consist of three arbitrators, each partyshall appoint one arbitrator, and these two arbitrators thusappointed shall appoint the presiding arbitrator; if a party fails to appoint arbitrator within thirty days ofreceipt of a request to do so, or if the two arbitratorsappointed by the parties fail to agree on the presidingarbitrator within thirty days of their appointment, theappointment shall be made, upon request of a party, by theChairman of the BCCI in international arbitrationproceedings and by the Sofia City Court in domesticarbitration (please see our note in question 2.2 above); andin a case of arbitration before a sole arbitrator, if the partiesare unable to agree on the arbitrator, he/she shall beappointed, upon request of each of the parties, by theauthority indicated in the preceding paragraph.


Bulgarian courts cannot intervene in the selection of arbitrators.Except for the powers of the Sofia City Court in default procedureunder Article 12 (2) of the ICAA (please see above question 5.2)Bulgarian courts are not allowed to substitute the parties or in anyway to intervene in the selection of arbitrators.


The independence and impartiality are crucial for arbitration process.Although the ICAA does not set forth an express requirement that aperson who is nominated or appointed as an arbitrator shall beindependent and impartial, such requirement is implied in theobligation of an arbitrator to state all circumstances that may raisewell-founded doubts as to his/her independence and impartiality.That obligation shall be in force after the appointment of thearbitrator and throughout the arbitration proceedings. Further theexistence of any doubts in the independence and in the impartiality ofan arbitrator can represent a ground for withdrawal of the arbitratorfrom the case, respectively for his/her challenge by the parties.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Bulgaria?

The law does not provide any particular guidelines for disclosure ofpotential conflicts of interest. According to Article 13 of the ICAAwhen a person is approached with a proposal to be nominated as anarbitrator for a dispute, the person in question shall point out all

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circumstances which may raise any well grounded doubts as to hisor her impartiality or independence. The arbitrator is subject to thisobligation after his/her appointment as well. The Statute of the CA at the BCCI provides for an explicitrequirement that arbitrators shall be independent and impartialwhen perform their duties and shall not act as representatives of theparties. The Statute reiterates the provisions of the ICAA, and inaddition it determines some specific actions and cases that areincompatible with the position of arbitrator, namely, that arbitratorsshall not provide verbal or written opinions or consultations as wellas be attorneys in disputes under the jurisdiction of the CA at theBCCI; arbitrators, practicing in law firms, shall not accept to beelected or appointed for arbitrators on cases which any party to thecase has entrusted to the firm in which they are working; arbitratorsshall not be persons, barred to be arbitrators by any normative actof law, such as members of Parliament, ministers, deputy ministers,heads of state agencies, members of the Constitutional Court. Anindication about what is deemed to be a conflict of interest can befound in the provision of the Rules of CA whereby doubts in theindependence and impartiality of an arbitrator which may ground achallenge of an arbitrator in case the arbitrator personally, directlyor indirectly is interested in the outcome of the dispute. Similar provisions exist in the Rules of CA at the BIA.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Bulgaria? If so, do those laws or rules applyto all arbitral proceedings sited in Bulgaria?

The ICAA provides for a few mandatory procedural rulesdesignated to guarantee the rights to equal treatment and dueprocess of the parties. These rules deal with the time limit forbringing a counter claim and proper communications andnotifications of the parties. Beyond the above provisions parties to both international anddomestic arbitration are free to agree on the procedure to befollowed by the arbitral tribunal. Failing such an agreement, thearbitral tribunal shall examine the case according to a procedure itfinds appropriate but in any case it shall give an equal opportunityto each of the parties to defend its rights and interests.

6.2 In arbitration proceedings conducted in Bulgaria, are thereany particular procedural steps that are required by law?

According to Article 23 of the ICAA, arbitral proceedings inBulgaria start with the service of a request to arbitrate to thedefendant, unless it is otherwise agreed by the parties (e.g.,according to the rules of CA at BCCI an arbitral proceedings startson the date on which the statement of claim is lodged with theregistry of the CA). Then, the other party should be given theopportunity to present its response to the statement of claim withinthe time limit agreed by the parties or determined by the arbitraltribunal. No further specific procedural steps are required by lawfor the conduct of arbitral proceedings in Bulgaria.


The Bulgarian law does not provide for any specific rules thatgovern the conduct of an arbitration hearing. Subject to therequirements of due process and equality of parties, the arbitral

tribunal is free to organise the hearing as it sees fit. It could hold ahearing even if the parties have agreed that their case shall bedecided only on the basis of written evidence and written pleas. Inany case the arbitral tribunal shall be obliged to notify the parties indue course about the date of the hearing.

6.4 What powers and duties does the national law of Bulgariaimpose upon arbitrators?

The Bulgarian law imposes a strong requirement that arbitratorsshall be independent and impartial and shall have the necessary (oragreed by the parties) professional knowledge and experience.Arbitral tribunal must ensure that arbitration proceedings are incompliance with applicable mandatory rules and the agreement ofthe parties. If the parties failed to reach an agreement arbitratorshall conduct the proceedings in a manner it considers appropriate.In any case, the arbitral tribunal shall treat the parties with equalityand each party shall be given the full opportunity to present andargue his/her case. The power conferred upon the arbitral tribunalalso includes the power to determine rules of evidence, as well asadmissibility, relevance and weight of any evidence. The arbitraltribunal is obliged to undertake all admissible and necessary stepsto fulfil what the parties have entrusted to it - to resolve theirdispute by issuing its arbitral award, unless there exist legal groundsfor the termination of the proceedings.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Bulgaria and, if so, isit clear that such restrictions do not apply to arbitrationproceedings sited in Bulgaria?

Appearance of lawyers from other jurisdictions before Bulgariancourts is governed by the Bulgarian Bar Act. In particular, a foreignlawyer may act as defence counsel of nationals of his/her countryupon a prior permission by the Chairman of the Supreme BarCouncil and subject to strong reciprocity requirement. The above restrictions are relevant only to judicial proceedingsbefore national courts and do not apply to arbitration proceedings inBulgaria. Parties to arbitration may be represented by a proxy oftheir own choice and the ICAA does not set forth any requirementas to nationality or professional capacity of the proxies. Of course,it is reasonable to expect that the proxy shall have the necessaryknowledge of law and professional experience to defend the case.

6.6 To what extent are there laws or rules in Bulgariaproviding for arbitrator immunity?

The Bulgarian law does not provide for arbitrator immunity. Anarbitrator shall be held responsible for damages caused to theparties as a result of his/her illegal action in the course ofconducting arbitration proceedings. To the best of our knowledge, there have not been any lawsuitsbrought against arbitrators in Bulgaria, so far.


The Bulgarian courts shall not intervene in arbitration proceedingsand could not rule on any procedural issues arising in the context ofpending arbitration proceedings. Upon request by a party thenational courts shall only rule on challenge of an arbitrator or mayappoint arbitrator if parties fail to do so. During the proceedings for annulment of an arbitral award and the

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proceedings for recognition and enforcement of a foreign arbitralaward the national court shall review certain procedural issuesrelated to the participation of the parties in the proceedings andcomposition of the arbitral tribunal. In particular, according toArticle 47 (4) and (6) of the ICAA the arbitral award shall be setaside by the Supreme Court of Cassation where:

the party has not been dully notified of the appointment of anarbitrator or of the arbitration proceedings or for reasonsbeyond its control it was not in a position to participate in theproceedings; andthe composition of the arbitral tribunal or the arbitrationprocedure were not in conformity with the agreement of theparties.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Bulgaria (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

The Bulgarian law does not provide for any specific rules orguidelines as to multiparty arbitration. Conducting multipartyarbitrations is not restricted either. Bulgarian law does not grant the power of arbitral tribunal to orderconsolidation of arbitrations or joining of third parties to pendingarbitration proceedings. In view of the consensual nature ofarbitration, consolidation and/or joining shall be allowed only if allparties involved have agreed so. The same considerations apply tointervention of third parties in pending arbitration proceedings.Institutional arbitrations in Bulgaria however have certain rules thatguide how multiparty arbitrations should be conducted. Forexample the Rules of CA at the BCCI have explicit provision that ifthe claimants or the respondents are several they shall appoint anarbitrator and his/her deputy by mutual consent. If no agreementcan be reached by the claimants or the respondents, the arbitratorand his/her substitute shall be appointed by the Chairman of the CA.Further the Rules provide that participation (voluntary or invokedby a party) of a third party to the proceedings may be admitted onlywith the consent of the parties, and in the case of being invoked bya party - with the consent of the third party. The same shall applyfor submission of counter claims against a third party. Theparticipation of a third party shall be admissible up to the expiry ofthe time limit for reply to the statement of claim. The consent of thesaid third party to participate shall have to be made in writing.Similar provisions exist in the Rules of the CA at the BIA.

6.9 What is the approach of the national courts in Bulgariatowards ex parte procedures in the context of internationalarbitration?

According to Article 47 (4) of the ICAA an arbitration award shallbe set aside by the Supreme Court of Cassation where the party hasnot been dully notified of the appointment of an arbitrator or of thearbitration proceedings or for reasons beyond its control it was notin a position to participate in the proceedings.Also, the Sofia City Court shall refuse the recognition andenforcement of a foreign arbitral award should the party againstwhom the award is invoked was not given a proper notice of theappointment of the arbitration or of the arbitration proceedings orwas otherwise unable to present its case.



Under Bulgarian law unless the parties have agreed otherwise, thearbitral tribunal may upon request of a party put the opposing partyunder obligation to undertake appropriate preliminary and/orinterim measures for securing the rights of the claimant. Suchmeasures however may not interfere with third parties. In case suchmeasures have been authorised, the arbitral tribunal may set upguarantees to be presented by the claimant.The arbitrator/arbitral tribunal is not entitled to seek the assistanceof the court in awarding interim or preliminary security measures.


Under Bulgarian law before or during arbitration proceedings anyof the (potential) party to the proceedings is entitled to apply infront of the courts for preliminary or interim relief. The granting of preliminary or interim measures shall be governedby the Civil Procedure Code (CPC). National courts are competentto award preliminary or interim relief upon request by the interestedparty. They shall grant the party’s request if:

the claim is supported by convincing written evidence; orthe claimant has provided a guarantee in an amountdetermined by the court.

Upon a request by a party national courts could also grantpreliminary or interim measures for securing evidence necessary forthe proceedings if there is a risk that a piece of evidence may be lostor its collection may be impeded.The party shall have that right to file a request for preliminary orinterim measures in case of arbitration in a foreign country, too.


The practice of Bulgarian court on preliminary and interim relief isnot consistent and it is difficult to make any conclusions in general.We may say however that Bulgarian courts are more reluctant togrant preliminary relief than interim.


Bulgarian law does not allow for the national courts to ordersecurity for costs. The law is silent about arbitral tribunal to doorder such security.

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8.1 What rules of evidence (if any) apply to arbitralproceedings in Bulgaria?

Production of evidence in arbitration proceedings is subject to theprinciples of equality of the parties. Each of the party shall be givenan opportunity to present its evidence and review and comment onthe evidence provided by the other party and collected by thearbitral tribunal. Provided that the equality requirement is met the parties are free tochoose the applicable rules of evidence. They may agree that thecase shall be decided only on the basis of written evidence and/ormay exclude specific documents or materials. In the absence ofagreement, the arbitral tribunal shall employ the rules of evidencewhich it deems appropriate and necessary.


In principle, due to consensual nature of arbitration, the scope ofarbitral tribunal’s authority to order disclosure of documents isalways determined by the will of the parties. Thus, the arbitraltribunal shall be authorised to order disclosure of documents wherethe parties have agreed so. However, it shall have no power torequire production of documents by a third party.


According to Article 37 of the ICAA, the arbitral tribunal or a partyto arbitral proceedings with the approval of the arbitral tribunal mayrequest the competent national court to collect certain evidence thatare relevant to the case. The court shall be obliged to grant therequest and collect the evidence according to the provisions of theCivil Procedure Code (CPC). It should be noted in this regard that the Bulgarian procedural law doesnot recognise a general right to disclosure. According to the CPC,each of the parties is entitled to request the court to order the otherparty to present a specific document which is in his/her possessionafter explaining the relevance of the document to the dispute.


The parties are free to agree on the scope of disclosure ininternational arbitration. In the absence of an agreement the arbitraltribunal may make orders in connection with the scope and methodof any disclosure.There are cases in which parties to international arbitrationproceedings in Bulgaria agree to have as applicable rules ofevidence the IBA Rules on the Taking of Evidence in theInternational Commercial Arbitration. The applicability of anysuch rules however is subject to the agreement of the parties.


Two things should be mentioned in connection with the production of

witness testimony (oral or written) in arbitral proceedings in Bulgaria.First, the arbitral tribunal is not empowered to summon a witness toappear before it or to give written testimonies. The party whichbenefits from the witness’s testimony shall bring him/her before thetribunal or shall collect and present his/her statement in writing. It is also relevant that by virtue of Article 37 of the ICAA thearbitral tribunal or a party to the arbitral proceedings may requestthe state court to examine a witness according to the rules of theCPC. The court shall not be allowed to collect written testimoniesas these are not admissible under the CPC.Second, witnesses shall not take an oath of telling the truth in frontof the arbitral tribunal. Neither shall they bear criminal liability fora false testimony.In principle, cross-examination of witnesses is allowed inarbitration proceedings in Bulgaria. However, the parties shouldhave agreed as to cross-examination. Failing such agreement, itshall be for the arbitral tribunal to decide whether to allow cross-examination or not. The witnesses should also have consented to becross-examined.

8.6 Under what circumstances does the law of Bulgaria treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

Bulgarian law does not provide any rules on privileged documentsin an arbitral proceeding, and respectively no rules on waiver ofprivilege exist. Under the Bulgarian Bar Act attorney-at-law papers, files,electronic documents, computer equipment and other carriers ofinformation shall be privileged and confidential. Correspondencebetween an attorney-at-law and his or her client, irrespective of themanner it is maintained, including electronically, shall be as wellprivileged and confidential. Conferences between an attorney-at-law and his or her client shall not be intercepted and recorded. Anyrecordings, where available, shall not be used as means of evidenceand shall be subject to immediate destruction. Further, any of the parties may refuse to present a document if itscontent concerns his/her private or family life or the presentationwould lead to defamation or self-incrimination of the party orhis/her relatives.In view of the above privilege shall be deemed waived if a partyvoluntarily discloses information and/or documents that areprotected as privileged with respect to that party. Apart from the above rules and although no express legal provisionstipulates it, it is widely accepted that arbitral proceedings as awhole, including all documents presented by the parties should betreated as confidential. This stems from the confidentiality ofcommercial relations and disputes in principle. Because of that it iswidely accepted and undisputed that any information and/ordocuments disclosed in arbitration proceedings shall be consideredconfidential, unless the parties expressly agreed otherwise or theinformation and/or the documents has been made public prior toand out of the context of the arbitration. The arbitrators, as well asthe parties and the expert shall not be allowed to reveal informationand documents they become aware of in the course of arbitrationproceedings.

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9 Making an Award


Arbitral award shall be in writing and shall be decided by a majorityvote unless the parties have agreed otherwise. The arbitrator whodissents from the decision of the majority shall state its dissentingopinion in writing. Should a majority vote not be reached the awardshall be rendered by the presiding arbitrator.The arbitral award shall state the reasons for the decision, unless theparties agreed otherwise. It shall indicate the date and the place ofarbitration and shall be signed by the arbitrators.



Under Bulgarian law as from the delivery to the parties the arbitralaward shall become final, effective and obligatory to the parties andshall be subject to enforcement. No appeal proceedings areprovided for in the law.An arbitral award however can be challenged by means of anapplication for setting aside of the award which shall be lodged withthe Supreme Court of Cassation and be resolved in one-instancecourt proceedings.According to Article 47 of the ICAA the arbitral award shall be setaside by the Supreme Court of Cassation if the applicant proves oneof the following grounds:

the party lacked legal capacity at the time of conclusion ofthe arbitration agreement (Article 47 (1));no arbitration agreement had not been concluded or it wasnull and void pursuant the applicable law chosen by theparties or in the case of absence of such a choice - pursuantto the ICAA (Article 47 (2));the subject matter of the dispute is not arbitrable according tothe Bulgarian law or the arbitration award contradicts thepublic order of the Republic of Bulgaria (Article 47 (3));the applicant has not been duly notified of the appointmentof an arbitrator or of the arbitration proceedings or forreasons beyond his/her control he/she was not able toparticipate in the proceedings (Article 47 (4));the dispute settled by the award has not been provided for inthe arbitration agreement or the award resolves issuesbeyond the subject matter of the dispute and (Article 47 (5));andthe composition of the arbitral tribunal or of the arbitrationprocedure was not complied with the agreement of theparties or - in the absence of an agreement - with theprovisions of the ICAA (Article 47 (6)).


Article 47 of the ICAA, which sets forth the grounds for annulmentof an arbitral award (please see question 10.1 above), is amandatory rule and it shall not be derogated by the will of theparties. The parties are not permitted to exclude any of the groundsfor setting aside of an arbitral award provided thereby. Should suchan agreement be concluded it shall be null and void.


Article 47 of the ICAA (please see question 10.1 above) provides anexhaustive list of the grounds for setting aside an arbitral award.The Supreme Court of Cassation shall be empowered to set aside anarbitral award only on one or more of the grounds prescribedthereby.

10.4 What is the procedure for appealing an arbitral award inBulgaria?

The application for setting aside of an arbitral award shall be lodgedwith the Supreme Court of Cassation within three months from thedate on which the award was served to the applicant. In the case ofa decision for correction, interpretation or supplementation of anarbitral award the time limit for lodging an application forannulment shall start from the date on which the decision isrendered. The Supreme Court of Cassation shall review theapplication according to the rules of the CPC.The application for setting aside an award shall state the names andthe addresses of the parties, the challenged arbitral award, thegrounds for setting aside of the award, the request to the court andthe signature of the applicant. It shall be enclosed with the relevantevidence and a document for payment of the court fee.In case the Supreme Court of Cassation sets aside the arbitral awardon any of the grounds under Article 47 (1) to (3) (please see abovequestion 10.1), the claimant may submit the dispute to thecompetent national court. In cases where the arbitral award is setaside on any of the grounds under Article 47(4) to (6) (please seeabove question 10.1), the Supreme Court of Cassation shall send thecase back to the arbitral tribunal for new examination. The judgment of the Supreme Court of Cassation shall be final.


11.1 Has Bulgaria signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

Bulgaria ratified the New York Convention in 1961, expressing thereservation of reciprocity. The recognition and enforcement of foreign arbitral awards inBulgaria is governed by the New York Convention of 1958 andseveral bilateral international agreements to which Bulgaria is aparty. The procedural rules of recognition and enforcement areincluded into the ICAA and the Private International Law Code ofBulgaria.

11.2 Has Bulgaria signed and/or ratified any regionalConventions concerning the recognition and enforcementof arbitral awards?

Bulgaria is a party to the European Convention on InternationalArbitration of 1961, as far as it is applicable to recognition andenforcement of arbitral awards.

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11.3 What is the approach of the national courts in Bulgariatowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

Under Bulgarian law any final and effective arbitral award issuedby an arbitral tribunal sitting in Bulgaria is directly enforceable andwhen requested by the party the competent court - the Sofia CityCourt - shall issue a writ of execution based on that award. For the recognition and enforcement of foreign arbitral awards anapplication shall be lodged with the Sofia City Court whosecompetence is exclusive. The court may deny recognition andenforcement only on one or more of the grounds listed in Article Vof the New York Convention which is directly applicable into thenational legal order. Proceedings start upon an application by the party seekingrecognition and enforcement. The applicant should also present anauthentic original award or a duly certified copy thereof and theoriginal arbitration agreement or certified copy thereof. Allpresented documents should be enclosed with translation inBulgarian. The judgment of the Sofia City Court on recognition andenforcement shall be subject to appeal before the Sofia Court ofAppeal and the Supreme Court of Cassation.

11.4 What is the effect of an arbitration award in terms of resjudicata in Bulgaria? Does the fact that certain issueshave been finally determined by an arbitral tribunalpreclude those issues from being re-heard in a nationalcourt and, if so, in what circumstances?

Arbitral awards have res judicata in Bulgaria. Therefore issues thathave been resolved by an arbitral award shall not be re-examined inother arbitration or judicial proceedings. The final arbitral awardshall be binding upon the parties and the public authorities in thecountry. Of course, the obligation to respect the binding force of aforeign arbitral award is predetermined by the recognition of theaward in Bulgaria.

12 Confidentiality

12.1 Are arbitral proceedings sited in Bulgaria confidential?What, if any, law governs confidentiality?

Arbitral proceedings in Bulgaria are confidential, unless it isotherwise agreed by the parties. There are no explicit legalprovisions that set forth special requirements in this regard butconfidentiality is considered to be the essence of arbitrationproceedings and in fact it is usually one of the underlining reasonsfor the parties to refer to arbitration.


Any confidential information disclosed in arbitration proceedingsshall not be used in subsequent proceedings, unless the parties haveagreed otherwise. Information which was made public prior to andout of the context of arbitration shall not be subject to the aboverestriction.


Although no express legal provision exist in principle, arbitrationproceedings in Bulgaria are deemed confidential. To the best of ourknowledge all institutional arbitrations in their rules on procedureprovide that arbitration proceedings are confidential and no thirdparties shall be allowed to attend arbitral hearings unless otherwiseexpressly agreed between the parties.



Generally, the parties are free to determine the scope of the powerof an arbitral tribunal to award damages. It should be noted in thisregard that the types of remedies available to the parties shall begoverned by the applicable substantive law. In the cases whereBulgarian law shall apply, the arbitral tribunal shall not awardpunitive damages under the fear of the arbitral award being set asideon public order grounds.


Available interest is determined by the governing substantive law.Where the relationship between the parties is governed by theBulgarian law, the maximum amount of the interest is determinedby the Council of Ministers and it is equal to basic interest ratedetermined by the Bulgarian National Bank for the respectiveperiod plus 10 percent.


The ICAA does not include any explicit provision on the recoveryof costs and expenses in arbitration proceedings. It is for thearbitral tribunal to decide on the costs and expenses of arbitrationunless the parties agree otherwise. Costs and expenses shall includearbitration fees, attorney fees, expert fees.


An arbitral award may be subject to taxation. For example damagesawarded cover lost income or profit may be taxable.


14.1 Has Bulgaria signed and ratified the WashingtonConvention on the Settlement of Investment DisputesBetween States and Nationals of Other States (1965)?

Bulgaria ratified the Washington Convention on 4 October 2000.The Convention entered into force with respect to the country on 15May 2001 (“Washington Convention”).

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14.2 Is Bulgaria party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Bulgaria is a party to approximately 38 BITs that prescribearbitration before the ICSID, provided that the other party to theagreement is a signatory to the Washington Convention. In most ofthe BITs jurisdiction of ICSID is agreed as an alternative toarbitration ad hoc. Bulgaria is also a party to the Energy Charter Treaty and theConvention Establishing the Multilateral Investment GuaranteeAgency.

14.3 Does Bulgaria have standard terms or model language thatit uses in its investment treaties and, if so, what is theintended significance of that language?

Generally, BITs between Bulgaria and another country are executedeither in English or in the official languages of both parties and inEnglish as a third language. It the latter case all texts are deemedto be equally authentic but in case of divergence of interpretation,the English text shall prevail.

14.4 In practice, have disputes involving Bulgaria been resolvedby means of ICSID arbitration and, if so, what has theapproach of national courts in Bulgaria been to theenforcement of ICSID awards and how has thegovernment of Bulgaria responded to any adverse awards?

There has been only one dispute involving Bulgaria before ICSID -Plama Consortium Limited v. Republic of Bulgaria (ICSID CaseNo. ARB/03/24). By a decision of jurisdiction of 8 February 2005ICSID decided it had not competence to hear the dispute.

14.5 What is the approach of the national courts in Bulgariatowards the defence of state immunity regardingjurisdiction and execution?

An arbitral award rendered by the ICSID under the WashingtonConvention shall be considered by the Bulgarian court as a foreignarbitral award within the meaning of the New York Convention. Nodefences of state immunity regarding jurisdiction and executionshall be admissible.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Bulgaria? Are certain disputescommonly being referred to arbitration?

For the recent years there has been certain growth in the use ofarbitration - in both institutional arbitration and ad hoc arbitration -as method for dispute resolution in commercial matters. This is dueto the fact that arbitration proceeding are not so expensive, they arefaster (one-instance) proceedings and give more flexibility as toselection of arbitrators, choice of the applicable rules of procedureand admissibility of evidence, as well as they secure confidentialityof proceedings.There has been also a certain growth in the number of arbitrationinstitutions in Bulgaria.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Bulgaria, such as pending or proposedlegislation that may substantially change the lawapplicable to arbitration?

In March 2008 the new Bulgarian Civil Procedure Code enteredinto force. The CPC was drafted and passed by the Parliament forfew months to answer to the EU accession requirements rather thanto provide for better regulation of civil proceedings in Bulgaria.The introduction of many new rules and the lack of relevantinformation hamper the efficient application of the Code. We maythus expect that more civil proceedings will be referred toarbitration tribunals in the country for final resolution.In respect of expected changes in the law applicable to arbitrationsince the ICAA is based on the UNCITRAL Model Law it could beexpected that the amendments of the latter legal instrument in 2006could be followed by respective amendments in the Bulgarian law.

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BulgariaBorislav Boyanov & Co.

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Borislav Boyanov & Co82 Patriarch Evtimii Blvd. Sofia 1463 Bulgaria

Tel: +359 2 8 055 055Fax: +359 2 8 055 000Email: [email protected]: www.boyanov.com

Kina is a partner and co-head of Litigation Department of the lawfirm. She has joined the law firm in 2002 after more than 20 yearsof practice in the bench, starting from being a junior judge in SofiaCity Court, judge with the Sofia Region Court, judge with the SofiaCity Court, and after that - elected a judge in the Supreme Court ofthe Republic nowadays the Supreme Court of Cassation, where sheended up as Chief of Commercial Department of that court. She isdealing with civil and commercial litigation, IP litigation, judicialreview of administrative acts, including cases in front of theCommission for Protection of Competition. She has been workingon arbitration cases, including international arbitrations, both as anarbitrator with the Arbitration Court at the Bulgarian IndustrialAssociation, as well as representing parties to arbitrationproceedings. She is a member of the Editing Board of the lawmagazine “The Human Rights”, issued by the Foundation“Bulgarian Lawyers for Human Rights”.

Georgitsa Petkova

Borislav Boyanov & Co82 Patriarch Evtimii Blvd. Sofia 1463 Bulgaria

Tel: +359 2 8 055 055Fax: +359 2 8 055 000Email: [email protected]: www.boyanov.com

Georgitsa is an associate at the Litigation Practice Group in BorislavBoyanov & Co. experienced in litigation, real estate and constructionlaw and human rights. She is a member of Sofia Bar and memberof the Executive Board of Bulgarian Lawyers for Human RightsFoundation. She is a graduate of New Bulgarian University - Sofia(2004 (LLM in law) and University of Construction and Architecture- Sofia (2000, LLM in Construction). She gained additional trainingin Strategic Litigation and Litigation in Public Interest (2003, BLHR,Bulgaria); Arbitration Proceedings (2005-2006, AC at BCCI); FairTrial in Criminal Cross-Border Proceedings (March, 2008, Universityof Notingham, the UK); Execution of Judgments of the ECHR(September-November 2008, Council of Europe, Strasbourg,France).

Established in 1990, Borislav Boyanov & Co. has evolved into a leading law firm on the Bulgarian legal market. Bothclients and competitors recognise the firm as an outstanding one stop shop for legal services which is modern, dynamicand business oriented. In the past decade Borislav Boyanov & Co. has always been ranked as a top tier law firm byvarious reputable legal directories. Among the firm’s recognised strengths are extensive national legal expertise, strongregional know-how and contacts based on excellent professional reputation and integrity. The law firm has very strongexpertise in Litigation & Arbitration, Corporate Law/M&A, International Transactions, Public Procurements, Concessions,Banking & Project Finance. It is traditionally ranked in the top tier of the rankings of Chambers & Partners (ChambersGlobal and Chambers Europe), IFLR 1000, Legal 500 and other reputable legal services researchers and directories.Borislav Boyanov & Co. won the International Law Office (ILO) Client Choice Award for Bulgaria in 2008. The rankingstates for the firm that it is “transparent and good value for money”. For more detailed information please visitwww.boyanov.com

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Chapter 14


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Czech Republic


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of the Czech Republic?

In addition to the general conditions related to the validity ofcontracts, an arbitration agreement must be executed in writtenform. If this requirement is not met, the arbitration agreement isvoid. The written form is deemed respected if the arbitrationagreement is concluded by telegraph, telex or by electronic means,provided the contents as well as the parties to the arbitrationagreement are specified (Section 3 of Act No. 216/1994 Coll., asamended, on Arbitral Proceedings and the Enforcement of ArbitralAwards (the “Arbitration Act”)).According to Section 267, Paragraph 3 of Act No. 513/1991 Coll., asamended, the Commercial Code (the “Commercial Code”), thevalidity of an arbitration agreement will be upheld even in cases inwhich the underlying contract is void, unless the cause of invalidityalso affects the arbitration agreement. According to the principle ofautonomy governing both these instruments, the arbitration agreementand the underlying contract can be governed by different laws.


Czech law does not foresee any particular requirements in thiscontext.


It is advisable, although not required by law, for the parties to anarbitration agreement to include the names and number ofarbitrators or the method of their designation. It is alsorecommendable to indicate, in addition to the law governing thecontract, the law applicable to any arbitral procedure, as well thelocation at which such arbitration should be conducted.


The mutual relation between arbitral proceedings and the nationaljudicial system is anchored in Section 7, Paragraph 1 of Act No.99/1963, Coll., as amended, the Code of Civil Procedure (the“Code of Civil Procedure”), which implicitly excludes arbitration

from the competence of the national courts. In practice, the Czechcourts have embraced a non-interventionist approach and display,within the statutory limits, a broad deference to arbitral agreementsand awards.


Czech courts do not display any particular reluctance as regards theenforcement of ADR agreements. In practice, the following formsof ADR appear:

As a specific form of mediation, the Rules of the ArbitrationCourt Attached to the Economic Chamber of the CzechRepublic and Agricultural Chamber of the Czech Republicforesee conciliatory proceedings which the latter arbitralcourt may conduct, upon an application, within the limits ofits competence and irrespective of the existence of anarbitration agreement. The proceedings take place before aconciliatory committee, the aim of which is to reach asettlement. Czech law does not oppose mediation also beingconducted by other entities or individuals.The Code of Civil Procedure provides for a special type of“praetorian settlement”, which can be reached upon a matternot yet pending before a court. However, this procedure isinterconnected with the judicial system in several respects,and thus cannot be considered as typical ADR. Czech law also governs technical expertise, whetherperformed by individual persons or by specialisedinstitutions.


2.1 What legislation governs the enforcement of arbitrationproceedings in the Czech Republic?

Applicable law consists of national as well as international rules.As regards domestic rules, arbitration in the Czech Republicis governed by the Arbitration Act (see question 1.1 above).Generally, the Arbitration Act provides for a procedurerelated to both domestic as well as international propertydisputes. It allows for ad hoc arbiters and for theestablishment of permanent arbitral tribunals. It details therules governing the jurisdiction of the arbitral tribunal, aswell as the stages of the proceedings, the rules for theappointment of arbitrators, the relation between an arbitraltribunal and domestic courts, the adoption and setting asideof awards, their enforcement, as well as the suspensionthereof. The Code of Civil Procedure governs aspects ofarbitral proceedings not covered by the Arbitration Act

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(Section 44 of the Arbitration Act; Decision of the SupremeCourt 32 Odo 1528/2005).As regards applicable international rules, the Czech Republichas signed and ratified the New York Convention on theRecognition and Enforcement of Foreign Arbitral Awards(Decree No. 74/1959 Coll., the “New York Convention”).The Czech Republic is also party to the WashingtonConvention on the Settlement of Investment Disputesbetween States and Nationals of Other States(Communication No. 420/1992 Coll., the “WashingtonConvention”), and the Energy Charter Treaty(Communication No. 372/1999 Coll.). The Czech Republichas also signed and ratified the European Convention onInternational Commercial Arbitration of 1961 (Decree No.176/1964 Coll.).


The Arbitration Act applies to both international and domesticdisputes.


The Model Law has served as the basis for the Czech ArbitrationAct. The latter, however, remains less detailed. If its provisionsallowing for derogation are applied as default rules, they give theparties to the arbitration agreement more room to make individualarrangements. The major differences include the following:

The definition of arbitrability is stricter under the ModelLaw, which only applies to commercial arbitration. Bycontrast, the Arbitration Act applies to property-relateddisputes independently of the commercial nature of theunderlying relation (Section 1, Paragraph 1 of the ArbitrationAct; Article 1, Paragraph 1 of the Model Law).The commencement of the arbitral proceedings isdetermined differently. The Model Law refers, in thiscontext, to the delivery of the request to the respondent. Onthe other hand, arbitral proceedings under Czech law arecommenced upon the delivery of the request to thearbitrator(s) or to the permanent arbitral tribunal (Section 14of the Arbitration Act; Article 21 of the Model Law).The assistance of the competent national court cannot berefused under Czech law, unless the request is unlawful. Bycontrast, the Model Law lays down a mere option for thecompetent court to assist in the taking of evidence (Section20, Paragraph 2 of the Arbitration Act; Article 27 of theModel Law).Interim measures and preliminary orders have receivedvery detailed regulation under the Model Law. This is incontrast to the Arbitration Act being rather laconic on thispoint (Section 22 of the Arbitration Act; Articles 17 to 17J ofthe Model Law).Diverse aspects of the arbitral proceedings are not asdetailed under the Arbitration Act as they are under the ModelLaw. The Arbitration Act does not detail aspects of theproceedings, such as statements of claim and defence, or thedefault of a party without sufficient cause, etc. (Sections 14 to22 of the Arbitration Act; Articles 18 to 27 of the Model Law).If the parties reach a settlement, the latter can be recordedin the form of an award upon the request of the parties. TheModel Law, however, foresees the possibility of thearbitrators objecting to such a request (Section 24 of theArbitration Act; Article 30 of the Model law).

Signing the award can be performed, according to theModel Law, by a majority of the arbitrators only, in whichcase, however, the reasons for the missing signatures must bestated. The obligation to state the reasons in such a situationdoes not exist under the Arbitration Act (Section 25,Paragraph 1 of the Arbitration Act; Article 31, Paragraph 1 ofthe Model Law).Setting aside an award can be requested under similarconditions under both documents. However, the ArbitrationAct specifically foresees, among the reasons for setting theaward aside, the failure to reach a majority when deciding onthe award (Section 31 of the Arbitration Act; Article 34 of theModel Law). Also, the Model Law does not provide for thepossibility for the national court to resume proceedings if theaward was set aside (Section 34, Paragraph 1 of theArbitration Act). Recognition of foreign awards under the Arbitration Act isbased on the principle of reciprocity (Section 38), which theModel Law does not invoke.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in the CzechRepublic?

First of all, mandatory rules of Czech law apply only if internationalarbitration results in an award issued in the territory of the CzechRepublic. In such a case, rules of public policy would prevail if theclaimant asks the award to be enforced in the Czech Republic. Formore details regarding the term of mandatory rules / public policyplease see question 4.2.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of the Czech Republic?What is the general approach used in determining whetheror not a dispute is “arbitrable”?

Both international and domestic disputes can be subject toarbitration under the Arbitration Act. The subject-matter of anarbitration agreement is further framed by the following cumulativestatutory requirements (Sections 1 and 2 of the Arbitration Act):

An arbitration agreement must relate to property disputesbetween parties. These disputes are not, however, limitedexclusively to commercial transactions.An arbitration agreement cannot be concluded in respect ofdisputes related to an insolvency estate.An arbitration agreement must refer to matters with respect towhich the law does not forbid settlement between parties. Suchmatters will typically include issues involving personal status(e.g. matrimonial issues) or matters on which a Court candecide even without an application (e.g. inheritance issues).An arbitration agreement must refer to matters which wouldotherwise fall under the jurisdiction of domestic courts.As regards the personal limitation, the Arbitration Actexcludes from arbitrability any disputes of the public non-profit healthcare facilities (see Section 1, Paragraph 2 of theArbitration Act).

The arbitration agreement can refer to a specific dispute which hasalready arisen, or can be designed to apply to any future disputerelated to a given legal relationship or a category of suchrelationships.Unless stipulated otherwise in the arbitration agreement, thejurisdiction of the arbitrator includes not only the rights arisingfrom the legal relationships subject to arbitration, but also applies to

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the issue of the validity of these relationships. Unless expresslyexcluded, the arbitration agreement also binds the successors of theparties.


The Arbitration Act endows the arbitrator with the competence todecide on his or her jurisdiction (Section 15 of the Arbitration Act).The arbitrator may verify whether he or she has the jurisdiction tohear a particular case. Either party may challenge jurisdictionresulting from the non-existence, invalidity or termination of thearbitration agreement, unless the plea is based on the alleged non-arbitrability of the matter, but no later than during the first steprelated to the merits of the dispute.

3.3 What is the approach of the national courts in the CzechRepublic towards a party who commences courtproceedings in apparent breach of an arbitrationagreement?

According to the Code of Civil Procedure (Section 106) and uponthe request of a party, the court will dismiss a claim in respect ofwhich an arbitration agreement exists. The objection must beraised, however, during the first step related to the merits of thedispute. The parties can prevent such a dismissal by declaring thatthey do not insist on the arbitration agreement being implemented.The court will also proceed with the claim if the subject matter ofthe arbitration agreement is not arbitrable according to Czech law,if the arbitration agreement is void or non-existent, or if the issueunder review is broader than the jurisdiction with which thearbitrator has been endowed. Finally, the court will also proceed ifthe arbitral tribunal has refused to decide.If a party brings a claim before a national court in breach of anarbitration agreement and the court subsequently dismisses theclaim, then the claimant bears all costs of proceedings.


According to the Code of Civil Procedure a party may object thatthe arbitration agreement is void after the introduction of a claim ifthe other party challenges the competence of the court based on theexistence of an arbitration agreement.The possibility for national courts to intervene exists also at thestage of setting aside or enforcing the award (see Sections 9 and 10below.).

3.5 Under what, if any, circumstances does the national law ofthe Czech Republic allow an arbitral tribunal to assumejurisdiction over individuals or entities which are notthemselves party to an agreement to arbitrate?

According to the Arbitration Act, the arbitration agreement alsobinds the legal successors of the initial parties to the arbitrationagreement (Section 2, Paragraph 4 of the Arbitration Act).Recently, the Supreme Court of the Czech Republic confirmed thatan arbitration clause in an agreement on the transfer of businessassets to a shareholder between a dissolved company and the mainshareholder who brings a dispute over the amount of compensationunder the jurisdiction of arbitration proceedings is also bindingupon the other shareholders of the dissolved company.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in the Czech Republic andwhat is the typical length of such periods? Do thenational courts of the Czech Republic consider such rulesprocedural or substantive, i.e., what choice-of-law rulesgovern the application of limitation periods?

General limitation periods apply depending on the subject matter ofarbitration. For commercial matters, the limitation period is 4years, for civil matters the period is 3 years. Also, specificlimitation periods apply for selected subject matters. National courts consider the question of statute limitation asubstantive-law issue. The applicable law governing limitation periodswill depend on the law chosen by the party, i.e. Czech limitationperiods will apply if Czech law governs the arbitration in question.



Czech law is governed by the principle of absolute freedom ofchoice. If the parties do not determine the law applicable to theirdispute, then the applicable law will be determined according to Actno. 97/1963 Coll. on Private International Law and the applicableinternational conventions.


Czech law does not provide any definition of mandatory rules. Rulesconcerning issues of public policy are generally consideredmandatory. Hence, arbitrators will rely on the law chosen by theparties unless the chosen law violates Czech constitutional rules, rulesrelated to criminal, fiscal issues etc. The concept of mandatory rulesis interpreted in accordance with the Rome Convention and theRegulation on Law Applicable to Contractual Relations.


The admissibility of the arbitration agreement is governed by theCzech Arbitration Act. Other requisites of the arbitration agreementare also governed by the Arbitration Act, if the award is to be issuedin the Czech Republic. The form of the arbitration agreement isgoverned by the law that governs the other prerequisites of thearbitration agreement, but it is sufficient that these conform with thelaw of the place where the intention of the parties materialised.



An arbitrator must have Czech citizenship, must be 18 years of age,and must have legal capacity to act. A foreign national can also beappointed as arbitrator, provided that he or she has legal capacityaccording to the laws of the State of his or her citizenship oraccording to the laws of the Czech Republic. Specific laws canexclude a category of persons from the function of arbitrator (e.g.prosecutors, according to Act No. 283/1993 Coll.).

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If the arbitrator is appointed by a court pursuant to a defaultprocedure, additional requirements as regards the qualities of thearbitrators apply. When proceeding with the selection, the courtshould consider the independence and impartiality of the candidates(Section 10 of the Arbitration Act). The acceptance of the function of arbitrator must be done in writing.Even though there is no legal obligation to accept the function, oncethe function is accepted, a resignation can only be based on aserious cause or must be consented to by the parties. The parties are free to choose between an ad hoc arbitrator and apermanent arbitral tribunal. As regards the latter category,currently, in the Czech Republic, several permanent arbitraltribunals operate: the Arbitration Court Attached to the EconomicChamber of the Czech Republic and Agricultural Chamber of theCzech Republic (Rozhodcí soud pri Hospodárské komore Ceskérepubliky a Agrární komore Ceské Republiky), the Stock-exchangeArbitral Tribunal Attached to the Prague Stock Exchange,(Burzovní rozhodcí soud pri burze cenných papíru Praha, a.s.), andthe Arbitral Tribunal Attached to the Czech Moravian CommodityExchange in Kladno (Rozhodcí soud pri Ceskomoravské komoditníburze Kladno).The law lays down the requirement of the number of arbitratorsfrom which the parties cannot depart (Section 7, Paragraph 1 of theArbitration Act).


In such a situation, either party can file an application to acompetent court or to a third person (Section 9 of the ArbitrationAct), which will choose and appoint the arbitrator(s) within 30days. The court has the obligation to consider, while selecting thearbitrator(s), the independence and impartiality of the latter(Section 10 of the Arbitration Agreement). If the parties fail to select the arbitrators, the court will select theminstead upon request.


The court intervenes under circumstances described above (seequestion 5.2 above). At the stage following the adoption of anaward, a court can set the award aside for reasons stemming, interalia, from the improper appointment of an arbitrator.


Domestic law does not contain any specific requirements, and theobligations of the arbitrator are mainly specified in the arbitratorcontract, i.e. in the agreement between the parties and thearbitrator(s). The Arbitration Act specifies the obligation of the arbitrator todecide in accordance with the principles of justice and with the law(Section 5 of the Arbitration Act), and to decide with independenceand impartiality (Section 1 of the Arbitration Act). In this context,the Arbitration Act requires the arbitrator to notify, without delay,any facts that would bring into question his or her impartiality andthat would have excluded him or her from the function of arbitrator(Section 8 of the Arbitration Act). The Arbitration Act foresees thepossibility to exclude an arbitrator (Section 11 of Arbitration Act),but does not specify the reasons. Whether an arbitrator will be

excluded depends on the will of the parties, or, if they cannot agree,on the decision of the national court (Section 12, Paragraph 2 of theArbitration Act).

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within the CzechRepublic?

Czech law does not provide any rules on this issue.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in the Czech Republic? If so, do those laws orrules apply to all arbitral proceedings sited in the CzechRepublic?

The basics of the arbitral procedure are laid down by the ArbitrationAct. These rules apply to all arbitral proceedings sited in the CzechRepublic. To a great extent, they endow the parties with the libertyto shape the specific rules of their arbitral proceedings. The partiesor the arbitrators as a whole can also empower the presidingarbitrator to organise the proceedings. If there is no sucharrangement, the arbitrators conduct the proceedings as they deemappropriate, without formalities and providing each party with thepossibility to assert their rights. They shall aim to gather all factsnecessary to decide the dispute (Section 19 of the Arbitration Act).The statutory rules from which derogation is not permitted includethe requirement of the equal treatment of the parties, who must havethe possibility to present their case. The proceedings are neverpublic. More detailed rules are adopted by the Czech permanent arbitraltribunals (see question 5.1 above). These rules must be publishedin the Commercial Journal (Obchodní vestník), and they are alsoaccessible on the respective internet pages. It is noteworthy that the rules of the Arbitration Court Attached tothe Economic Chamber of the Czech Republic and AgriculturalChamber of the Czech Republic provide, as of June 2004 and asregards domestic disputes, for on-line arbitral proceedings.The Code of Civil Procedure applies as default rule.There is an increasing tendency in the practice of Czech domesticarbitration for the arbitrators to invite parties to choose rules ofequity is the governing law. The arbitrators are, however, notentitled to apply equity rules without an explicit authorisation bythe parties.

6.2 In arbitration proceedings conducted in the CzechRepublic, are there any particular procedural steps thatare required by law?

Beyond the rules referred to in question 6.1 above, there are noparticular procedural steps under Czech law.


The Arbitration Act does not lay down any specific rules in thiscontext. The conduct of an arbitration hearing will, therefore, beorganised in the general procedural framework described above inquestion 6.1.

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6.4 What powers and duties does the national law of theCzech Republic impose upon arbitrators?

For the general obligations of independence and impartiality, seequestion 5.4 above. Furthermore, the permanent arbitral courtshave the obligation to retain awards provided with a legal validityclause, as well as all documents attesting the course of proceedings,for a period of 20 years following the entry into force of the award.The arbitrator has the duty to transmit, within 30 days followingentry into force, an award provided with a legal validity clause, aswell as all of the documents attesting the course of the proceedings,to the district court in whose jurisdiction the award was rendered. The Arbitration Act (Section 6) imposes on the arbitrator the duty tomaintain confidentiality about facts revealed during the arbitralproceedings. The parties can, however, relieve the arbitrator of thisobligation, as can the President of the competent district court ifserious reasons exist.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in the Czech Republicand, if so, is it clear that such restrictions do not apply toarbitration proceedings sited in the Czech Republic?

Regarding arbitrators, general rules of the Arbitration Act arespecified in question 5.1 above. As to the legal representatives, theappearance of attorneys is governed by act no. 85/1996 Coll. (the“Czech Advocacy Act”), which primarily distinguishes betweenthe conditions for practice concerning attorneys qualified in the EU,on the one hand, and “international lawyers” qualified in foreign(non-EU) countries, on the other.

6.6 To what extent are there laws or rules in the CzechRepublic providing for arbitrator immunity?

Czech law does not provide any particular rule on arbitratorimmunity; local legal scholars concur, arguing in commentaries thatarbitrators do not benefit from any immunity because they do notqualify as public authorities (contrary to courts).


National courts intervene by means of a default procedure (seequestion 5.2 above), in terms of which they have the obligation toappoint an arbitrator. Upon the application of either party, the courtmay also exclude an arbitrator from the proceedings (Section 12,Paragraph 2 of the Arbitration Act). The national court can alsorelieve an arbitrator of the obligation of confidentiality (Section 6of the Arbitration Act). The national court can perform proceduralsteps upon the application of arbitrators (Section 20 of theArbitration Act) and can order an interim measure (Section 22 ofthe Arbitration Act). The national court also decides on applicationsaimed at setting an award aside (Section 31 of the Arbitration Act).If the court decides to set an award aside because it declares thearbitration agreement void or observes that the arbitrationagreement has been revoked or does not apply to the given subjectmatter, it can, upon a request by either party, resume theproceedings and issue a final decision. The national court can alsodecide not to grant the enforcement of an award (Section 35 of theArbitration Act; Section 37 of Act No. 102/2000 Coll., on judicialexecutors and on execution) or the recognition and enforcement ofa foreign award (Section 39 of the Arbitration Act).

6.8 Are there any special considerations for conductingmultiparty arbitrations in the Czech Republic (including inthe appointment of arbitrators)? Under whatcircumstances, if any, can multiple arbitrations (eitherarising under the same agreement or different agreements)be consolidated in one proceeding? Under whatcircumstances, if any, can third parties intervene in or joinan arbitration proceeding?

The Arbitration Act does not foresee special rules on multipartyarbitration, on the consolidation of multiples arbitration or onintervention. This means that, to the extent that such a possibilityconforms to the will of the parties, the arbitrators will apply therelevant provisions of the Code of Civil Procedure as default rules.

6.9 What is the approach of the national courts in the CzechRepublic towards ex parte procedures in the context ofinternational arbitration?

Under Czech civil procedure, a party may apply to a national courtfor a preliminary measure (preliminary injunction). The courtdecides within 7 days. The resolution ordering the preliminarymeasure can be subject to an appeal (Section 74 et seq. of the Codeof the Civil Procedure).



If, pending the arbitral proceedings or before their commencement,circumstances appear that are likely to jeopardise the enforcementof the award, a national court may, upon the application of eitherparty, order an interim measure (Section 22 of the Arbitration Act).The wording of the Arbitration Act reveals that the arbitrator mustseek the assistance of the national court in this respect. The nationalcourt will proceed pursuant to the relevant provisions of the Codeof Civil Procedure (Sections 74 et seq.).


A national court can grant preliminary or interim relief undergeneral conditions specified by the Code of Civil Procedure. Thegranting of such a measure will not have an impact on thejurisdiction of the arbitration tribunal.


The national courts order interim measures within the statutorylimits of Section 22 of the Arbitration Act and Sections 74 et seq. ofthe Code of Civil Procedure. When faced with a request formed inthe context of arbitration, the court will apply the samerequirements as in civil proceedings.

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Such measures will be exceptional in the Czech context. Unlessruled out by the parties or by the rules of the given arbitral tribunal,the national court can order a party to deposit security for costsrelated to evidence (Section 141 of the Code of Civil Procedure).


8.1 What rules of evidence (if any) apply to arbitralproceedings in the Czech Republic?

The arbitrator can hear witnesses, experts and parties, providedthese appear voluntarily and do not refuse to testify. If thearbitrators are not able to perform specific procedural steps, theymay request the assistance of the competent court. The court canonly refuse to provide its assistance if the request is unlawful(Section 20, Paragraph 2 of the Arbitration Act). The issue ofevidence can also be subsumed under Section 22 of the ArbitrationAct, if the party requests a competent court to issue a preliminaryorder to secure evidence. The issue is not specifically dealt with inthe Arbitration Act and is hence governed by the default rules of theCode of Civil Procedure (Sections 74 to 77). There is an increasing tendency to bring into the arbitral proceedingevidence which is based on written documents and expertise. Theiruse remains, however, entirely in the hands of the parties, who arefree to decide whether such evidence will be admitted.


It should be noted that the concept of disclosure/discovery does notexist under Czech law. The principles governing the production ofevidence are substantially different. The scope of the arbitrator’spower depends on the will of the parties and on the consent of thirdparties to cooperate. The arbitrator has no power to compel partiesor a third party to produce specific documents or to provide specificinformation. The parties can apply in this context for a preliminarymeasure to a national court (Section 22 of the Arbitration Act) witha view to obtaining an order for the production of specificdocuments. However, national courts will only grant such anapplication in exceptional cases.






Compared to Anglo-Saxon legal tradition, the Czech legal system isshaped by different principles, as explained in question 8.2 above.Cross-examination does not exist before the Czech courts. The

production of evidence is subject to the will of the parties. Theassessment of evidence is managed by the court, who invites theparties to ask questions only after it has finished its ownexamination.

8.6 Under what circumstances does the law of the CzechRepublic treat documents in an arbitral proceeding asbeing subject to privilege? In what circumstances isprivilege deemed to have been waived?

The concept of privileged communication between a party and itscounsel does not exist under Czech law. However, recent case-lawhas recognised the protection of privileged communication, but theopinion was based on EU law and articulated in a competition-lawcontext.

9 Making an Award


The award must be adopted by a majority of arbitrators, must bedone in writing and signed by at least a majority of arbitrators. Theaward must be distinct and must be reasoned. The Arbitration Actprovides for two forms which the decisions of arbitrators may take,an award or a resolution (Sections 23 and 25 of the Arbitration Act).



In the context of Czech law, it is important to distinguish betweentwo procedural avenues. The parties may foresee a proceduresubmitting the award to a review by another arbitrator.Independently of whether such a review is foreseen, the parties maychallenge the award before the competent national court.Review of AwardAccording to Section 28 of the Arbitration Act, the parties mayprovide for a review of the award by another arbitrator(s). Unlessagreed upon differently, the request for a review must be deliveredto the other party within 30 days following the delivery of the awardto the requesting party. Challenge of AwardEither party may apply to a national court seeking to have the awardset aside (Section 31 of the Arbitration Act). The court will grantsuch an application if:

the award has been rendered in non-arbitrable matters;the arbitration agreement is void for other reasons, or hasbeen terminated, or the matter discussed falls beyond thescope of the arbitration agreement;any arbitrator who has participated in the proceedings shouldnot have been called upon under the arbitration agreement orotherwise to decide the dispute, or lacked the eligibility to bean arbitrator;the arbitral award has not been made by a majority ofarbitrators;any party has not been given an opportunity to present itscase;the arbitral award requires the party under obligation torender performance not claimed by the beneficiary party, or

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to render impossible performance, or to render performancenot allowed under domestic law; orgrounds appear likely to justify an application for thereopening of the case in civil proceedings.

The Arbitration Act provides for the possibility for the nationalcourt to resume proceedings if the award was set aside because thearbitration agreement was void or revoked, or does not cover thesubject matter of the dispute (Section 34, Paragraph 1 of theArbitration Act). The application must be made within 3 monthsafter the award was delivered to the appellant.


The grounds on which an award can be reviewed are contractualand hence subject to the will of the parties and, when applicable, tothe rules of the particular arbitral tribunal. Conversely, the partiescannot derogate from the list of grounds based on which an awardcan be challenged before a national court (for the distinctionbetween the review and challenge of an award, please see question10.1 above).


The explanation in question 10.2 above applies mutatis mutandis.

10.4 What is the procedure for appealing an arbitral award inthe Czech Republic?

If the parties foresee a review of the award by another arbitrator,according to Section 28 of the Arbitration Act, the request for areview must be delivered to the other party within 30 daysfollowing the delivery of the award to the requesting party, unlessthe parties or the rules of the particular arbitral tribunal stipulateotherwise. As regards the challenge of the award, an application must be madewithin a 3-month period, counted as of the date on which theappellant party received the award. The filing of an appeal does nothave a suspensive effect in respect of the enforcement of the arbitralaward. Upon the application of the obliged party, the court maysuspend the enforcement if it is likely to cause serious harm(Section 32 of the Arbitration Agreement).


11.1 Has the Czech Republic signed and/or ratified the NewYork Convention on the Recognition and Enforcement ofForeign Arbitral Awards? Has it entered any reservations?What is the relevant national legislation?

The Czech Republic has signed and ratified the New YorkConvention which applies directly in the Czech domestic legalorder, without the need for transposition into domestic law. Uponratification in 1958, the Czech Republic (Czechoslovakia) issued adeclaration pursuant to Art. I (3) First Sentence of the New YorkConvention. In the light of the succession declaration of the CzechRepublic made in 1993, this declaration is still valid.

11.2 Has the Czech Republic signed and/or ratified any regionalConventions concerning the recognition and enforcementof arbitral awards?

The Czech Republic has signed and ratified the Energy CharterTreaty, including the Energy Charter Treaty Protocol on EnergyEfficiency and Related Environmental Aspects, and is a member ofthe Energy Charter Conference (Communications Nos. 372/1999and 7/2000 Coll.).The Czech Republic has also signed and ratified the EuropeanConvention on International Commercial Arbitration of 1961(Decree No. 176/1964 Coll.).

11.3 What is the approach of the national courts in the CzechRepublic towards the recognition and enforcement ofarbitration awards in practice? What steps are partiesrequired to take?

The Arbitration Act specifies the recognition and enforcement of anaward in Sections 35 and 39. The court limits its review to thoseaspects specified by law. As regards the recognition of foreignawards, the Arbitration Act is based on the principle of reciprocity(Section 38).

11.4 What is the effect of an arbitration award in terms of resjudicata in the Czech Republic? Does the fact that certainissues have been finally determined by an arbitral tribunalpreclude those issues from being re-heard in a nationalcourt and, if so, in what circumstances?

The arbitral award produces the effect of res iudicata. In 2002 theConstitutional Court held that an arbitral award issued by theArbitration Court Attached to the Economic Chamber of the CzechRepublic and Agricultural Chamber of the Czech Republic cannotbe subject to a constitutional complaint (IV.ÚS 174/02).

12 Confidentiality

12.1 Are arbitral proceedings sited in the Czech Republicconfidential? What, if any, law governs confidentiality?

The Arbitration Act (Section 6) imposes on the arbitrator the duty tomaintain confidentiality about facts revealed during the arbitralproceedings. The parties can, however, relieve the arbitrators ofthis obligation, as can the President of the competent district courtif serious reasons exist (Section 6 of the Arbitration Act).


Not automatically, but in a subsequent procedure, a party can referto a particular document within its knowledge.


The arbitrator can be relieved of the obligation of confidentiality bythe parties or the President of the competent district court if seriousreasons exist.

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A party to arbitration can claim any right recognised by domesticsubstantive law. Accordingly, a party will not be allowed to claimpunitive damages, which are not known in Czech law.


The interest can be agreed upon by the parties. If there is no suchagreement, statutory interest applies.


The costs are generally accorded to the winning party. However,the arbitrator may decide not to grant the compensation of costs ifserious reasons command. Compared to the judicial disputeresolution, there is one important exception as regards the paymentof fees of the attorney. Whereas the fees of the attorney inproceedings before national courts are limited by statutory caps, inarbitration, the obliged party will have to reimburse the full amountof contractual fees. Also, the fees to be paid to the arbitrator or tothe arbitral tribunal will differ from the fees applicable in theproceedings before national courts.


Receivables obtained by virtue of an award can be subject to a taxobligation. Whether a tax obligation applies depends on the reasonsfor which fulfilment is made.


14.1 Has the Czech Republic signed and ratified theWashington Convention on the Settlement of InvestmentDisputes Between States and Nationals of Other States(1965)?

The Czech Republic has both signed and ratified the WashingtonConvention (see question 2.1 above).

14.2 Is the Czech Republic party to a significant number ofBilateral Investment Treaties (BITs) or MultilateralInvestment treaties (such as the Energy Charter Treaty)that allow for recourse to arbitration under the auspices ofthe International Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

As of July 2008, the Czech Republic is party to more than 70 BITs.Except for five of them, they foresee recourse under ICSID. In thevast majority of cases, there is a possibility to choose betweenICSID arbitration, arbitration under UNCITRAL rules and recourseto a national court.The Czech Republic has signed and ratified the Energy CharterTreaty, including the Energy Charter Treaty Protocol on Energy

Efficiency and Related Environmental Aspects, and is a member ofthe Energy Charter Conference. The Czech Republic has alsosigned and ratified the New York Convention and the EuropeanConvention on International Commercial Arbitration of 1961 (seequestion 2.1 above).

14.3 Does the Czech Republic have standard terms or modellanguage that it uses in its investment treaties and, if so,what is the intended significance of that language?

The Czech Republic uses a model language which traditionallysupports investment and guarantees the proper and just treatment ofinvestments, as well as full protection and security thereof.Traditionally, the Czech BITs include guarantees of nationaltreatment and the most favoured nation clauses, guarantees ofindemnification if the investment suffers damages in specified cases,guarantees of non-nationalisation, except for situations commandedby public interest, based on law, in a non-discriminatory manner andagainst an immediate and proportionate indemnity. The BITstraditionally also guarantee the transfer of capital.

14.4 In practice, have disputes involving the Czech Republicbeen resolved by means of ICSID arbitration and, if so,what has the approach of national courts in the CzechRepublic been to the enforcement of ICSID awards andhow has the government of the Czech Republic respondedto any adverse awards?

So far, there has been only one case which is still pending, PhoenixAction Ltd v. Czech Republic. The proceedings were resumed inMay 2008.

14.5 What is the approach of the national courts in the CzechRepublic towards the defence of state immunity regardingjurisdiction and execution?

As regards the jurisdiction and execution of awards against theCzech Republic, the court will not refer to state immunity. As regards foreign states, the assertion of jurisdiction and theenforcement of an award must be distinguished. Pursuant toSection 47 of Act No. 97/1963 Coll, on international private andprocedural law, Czech courts can assert jurisdiction over a foreignstate if the latter voluntary submits to such jurisdiction. However,as regards the enforcement of an award, state immunity may cometo play, unless waived by the obliged state.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in the Czech Republic? Are certaindisputes commonly being referred to arbitration?

The Arbitration Court Attached to the Economic Chamber of theCzech Republic and Agricultural Chamber of the Czech Republichas amended its rules to allow on-line proceedings, which in such acase take place at www.arbcourtonline.cz.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in the Czech Republic, such as pendingor proposed legislation that may substantially change thelaw applicable to arbitration?

There has been a recent growth in the number of entities,

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established under diverse corporate forms (registered in the CzechTrade Register), that call themselves “arbitration centres” andwhose purpose is to provide logistic and administrative support,such as the maintenance of lists of arbitrators, for ad hoc arbitrationin general.

There are some initiatives in the Czech Parliament according towhich stricter rules should be enacted based on which sucharbitration centres could be set up, operate and issue bindingawards.

Ivo Janda

White & Case LLPNa Príkope 8110 00 PragueCzech Republic

Tel: +42 255 771 237Fax: +42 255 771 122Email: [email protected]: www.whitecase.com

Ivo Janda is a member of the Czech bar and specialises in disputeresolution, as well as in EU law. He has acquired broad expertisein domestic as well as international arbitration. He was involved inthe White & Case team representing a major Czech bank,Ceskoslovenská obchodní banka, before the International Center forthe Settlement of Investment Disputes in Washington, D.C. in thecase of CSOB vs. Slovak Republic. In addition, Mr. Janda advisesvarious companies in their commercial disputes before domesticcourt. Ivo Janda also has very rich experience in the field of bothdomestic and EU competition, and issues of State aid law. He hasbeen the leading figure of major ongoing cartel cases currentlypending before the Court of the First Instance of the EU. Ivo Jandagraduated from Masaryk University School of Law, where heobtained his PhD. He speaks Czech, English and French.

Magdalena Licková

White & Case LLPNa Príkope 8110 00 PragueCzech Republic


Magdalena Licková graduated from Harvard Law School, UniversityParis I Sorbonne, University of Toulouse and University of WestBohemia in Plzen. She is a member of the dispute resolution andregulatory group of the Prague office of White & Case. She hasadvised clients involved in cartel investigations in the context of bothEU law and Czech national law, and has also been involved indomestic commercial litigation. In addition, her expertise includesa range of issues related to international arbitration, publicinternational law and external relations of the European Union.

White & Case has provided a wide range of Czech and cross-border legal and tax advisory services in the CzechRepublic since early 1991, and is now the largest international law firm in Prague.

For many years, White & Case has been one of the most significant dispute resolution players on the Czech legal market.The Prague dispute resolution team, comprised of experienced lawyers, provides a full range of services to many leadingCzech and foreign corporations, financial institutions and State-owned entities on a variety of domestic and internationallitigation and arbitration cases.

Our recent arbitration highlights include our successful involvement in the largest-ever arbitration in the Czech Republic.The Prague and Washington DC offices of White & Case represented Ceskoslovenská obchodní banka, as. (CSOB), amajor Czech bank owned by Belgian KBC Bank, in arbitration relating to the collection of a major outstanding receivableowed by Slovenská inkasná and guaranteed by the Slovak Republic. The victory represents the culmination of eightyears of hard-fought battles resulting in a number of precedent-setting decisions in favour of our client involvingjurisdiction, the availability of provisional measures, the interaction between national courts and ICSID arbitration, anda complex merits phase.

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Chapter 15


England & Wales


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of England and Wales?

Arbitration proceedings in England and Wales and Northern Irelandare governed by the Arbitration Act 1996 (the “1996 Act”). The 1996 Act applies only to arbitration agreements that are inwriting (section 5(1)). Although oral arbitration agreements arerecognised at common law, the 1996 Act does not apply to whollyoral arbitration agreements (section 81(1)(b)). Such agreementswill not benefit from the default procedures or various otherstatutory powers conferred on the tribunal under the 1996 Act. Oralarbitration agreements also fall outside the scope of the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards 1958 (the “New York Convention”).An agreement is deemed to be in writing if it is: (i) made in writing(whether or not signed by the parties) (section 5(2)(a)); (ii) made byexchange of communications in writing (section 5(2)(b)); or (iii)evidenced in writing (section 5(2)(c)). An agreement is evidenced inwriting pursuant to section 5(2)(c) if recorded by one of the parties orby a third party with the authority of the parties to the agreement(section 5(4)). An exchange of written submissions in arbitrationproceedings in which the existence of an agreement (other than inwriting) is alleged by one party, and not denied by the other party, willconstitute an agreement in writing as between those parties (section5(5)). Under the 1996 Act, parties also may orally agree to arbitrateby referring to terms that are in writing (section 5(3)). Writingincludes “being recorded by any means” (section 5(6)).As to the content of an arbitration agreement, the 1996 Act simplyrequires that the parties agree “to submit to arbitration present orfuture disputes (whether they are contractual or not)” (section 6(1)).Parties may agree the specific terms of a written arbitrationagreement or, alternatively, refer to a document containing anarbitration clause. Such reference will constitute an arbitrationagreement if the effect of it is to make that clause part of theagreement (section 6(2)).


Beyond the general requirement that an individual have the capacity(under the relevant law) to enter into a contract, there are no specialrequirements or formalities required if an individual is a party to acontract containing an arbitration agreement. In fact, section 82(2)of the 1996 Act states that “references … to a party to an arbitration

agreement include any person claiming under or through a party tothe agreement”. The 1996 Act does provide, however, for additional consumerprotections. Specifically, sections 89 through 91 extend theapplication of the Unfair Terms in Consumer Contracts Regulations1994 to a term which constitutes an arbitration agreement.Furthermore, section 90 states that the Regulations “apply wherethe consumer is a legal person as they apply where the consumer isa natural person”.


English courts generally take a broad view as to what constitutes an“arbitration agreement” under the 1996 Act; it suffices for theparties to have recorded in writing nothing more than an intentionto refer any disputes to arbitration (section 6). The various defaultprovisions of the 1996 Act provide detailed procedures, designed toenable parties to use and enforce arbitration agreements incircumstances where the clauses themselves provide little or nopractical assistance.


The 1996 Act promotes party autonomy and the courts are expectedto take a non-interventionist approach where parties have agreed tosubmit their disputes to arbitration. The English courts also take afairly broad view as to what matters will be deemed arbitrable underan arbitration agreement, with a view to promoting internationaltrade and comity.Most recently, the House of Lords has held that the time has comefor a “fresh start” to the approach courts ought to take to theconstruction and enforcement of jurisdiction and arbitration clausesin international commercial contracts, and that such clauses oughtto be more liberally construed (Fiona Trust Corp v Privalov [2007]4 All ER 951; [2008] 1 Lloyd’s Rep 304).


Following the introduction of the English Civil Procedure Rules in1998, there has been a definite public policy shift in favour ofparties submitting to ADR in an attempt to resolve their disputesand avoid costly and timely litigation (see for example, Dunnett v.Railtrack plc [2002] EWCA Civ 303; Burchell v. Bullard [2005]EWCA Civ 358).

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The English court therefore approaches the enforcement of ADRagreements in the same broad and permissive way as it doesarbitration agreements and would need “strong cause … before [it]could be justified in declining to enforce such an agreement” (Cable& Wireless plc v. IBM United Kingdom Ltd [2002] EWHC 2059).


2.1 What legislation governs the enforcement of arbitrationproceedings in England and Wales?

The 1996 Act (which came into force with effect from 31 January1997) governs the enforcement of arbitration agreements inEngland and Wales or Northern Ireland. The 1996 Act implementsthe New York Convention (signed and ratified by the UnitedKingdom in 1975, subject to the reservation that it applies only toawards made in the territory of another contracting party), insofaras it requires that contracting States recognise agreements in writingunder which the parties undertake to submit disputes to arbitration(Article II(1) and (2)).


The 1996 Act does not distinguish between domestic andinternational arbitration proceedings and applies equally to both.


The 1996 Act is, in large part, based on the United NationsCommission on International Trade Law (UNCITRAL) Model Lawon International Commercial Arbitration of 1985 (the “ModelLaw”). However, in a number of important respects, the 1996 Actdoes not adopt the Model Law in its entirety. Perhaps mostsignificantly, the Model Law is intended to apply only tointernational commercial arbitration (Article 1(1) of the ModelLaw). In contrast, the 1996 Act applies equally to all forms ofarbitration and is not limited to international commercialarbitration. In addition, in contrast to the Model Law, under the1996 Act:

the document containing the parties’ arbitration agreementneed not be signed;an English court is only able to stay its own proceedings andcannot refer a matter to arbitration;the default provisions for the appointment of arbitratorsprovide for the appointment of a sole arbitrator as opposed tothree arbitrators;a party retains the power to treat its party-nominatedarbitrator as the sole arbitrator in the event that the otherparty fails to make an appointment (where the parties’agreement provides that each party is required to appoint anarbitrator);there is no time limit on a party to oppose the appointment ofan arbitrator;parties must expressly opt out of most of the provisions ofthe 1996 Act which confer default powers on the arbitratorsin relation to procedure; andthere are no strict rules for the exchange of pleadings.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in England andWales?

The 1996 Act makes mandatory for all arbitrations sited in Englandand Wales those provisions listed in Schedule 1 of the Act (section4(1)). These provisions apply whatever the parties may haveagreed. The provisions listed in Schedule 1 include (by way ofexample) provisions relating to the court’s powers to stay legalproceedings (sections 9 to 11), extend agreed time limits (section12), remove arbitrators (section 24), secure witnesses’ attendance(section 43), and to enforce an award (section 66). In addition,provisions relating to challenges to an award (sections 64 and 68)as well as the basic duties of tribunals and parties (sections 33 and40) are similarly included in the Schedule 1 list of mandatoryprovisions.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of England and Wales?What is the general approach used in determining whetheror not a dispute is “arbitrable”?

The 1996 Act does not seek to define or describe those matters thatare capable of settlement by arbitration (i.e., arbitrable). The 1996Act simply preserves the common law position in respect ofarbitrability (section 81(1)(a)). However, the 1996 Act expresslyapplies to non-contractual as well as contractual disputes (section6(1)).Under English common law, a multitude of non-contractual claims(including claims in tort, disputes concerning intellectual propertyrights and certain statutory claims) are capable of settlement byarbitration. Arbitration is, however, limited to civil proceedings.Criminal matters are not capable of settlement by arbitration.More recently, the Court of Appeal drew a line under some of theolder English cases on the question of arbitrability and declared thenecessity for a more liberal approach to the construction ofarbitration agreements (Fiona Trust & Holding Corp v. Privalov[2007] EWCA Civ 20. See also Film Finance Inc v. Royal Bank ofScotland [2007] EWHC 195 (Comm)). The aim of the Court ofAppeal was to eliminate future disputes about the meaning ofparticular phrases (such as ‘arising out of’ and ‘arising under’). TheCourt of Appeal’s views were resoundingly endorsed by the Houseof Lords on appeal in Fiona Trust & Holding Corp v. Privalov[2007] 4 All ER 951; [2008] 1 Lloyd’s Rep 304. There, LordHoffman held (for the unanimous bench) that “the construction ofan arbitration clause should start from the assumption that theparties, as rational businessmen, are likely to have intended anydispute arising out of the relationship into which they have enteredor purported to enter to be decided by the same tribunal. The clauseshould be construed in accordance with this presumption unless thelanguage makes clear that certain questions were intended to beexcluded from the arbitrator’s jurisdiction” (at 958).


The 1996 Act (section 30(1)) confers upon the arbitral tribunal(subject to the parties agreeing otherwise) the competence to rule onits own substantive jurisdiction as to:

whether or not there is a valid arbitration agreement;whether or not the tribunal has been properly constituted; and

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what matters have been submitted to arbitration inaccordance with the arbitration agreement.

3.3 What is the approach of the national courts in Englandand Wales towards a party who commences courtproceedings in apparent breach of an arbitrationagreement?

Pursuant to section 9 of the 1996 Act, a party to an arbitrationagreement against whom legal proceedings are brought in relationto a matter under the arbitration agreement may apply for a stay ofproceedings in the court in which those proceedings were brought.The Court is required to grant the stay unless satisfied that thearbitration agreement is null and void, inoperative, or incapable ofbeing performed (section 9(4)). This requirement applies even ifthe seat of the arbitration is outside of England and Wales andNorthern Ireland (section 2(1)).The House of Lords’ decision in Fiona Trust & Holding Corp v.Privalov & ors [2008] 1 Lloyd’s Rep 254, held that arbitrationclauses are to be given a broad interpretation, in accordance withthe principle that parties will be taken to have intended to have alltheir disputes in one forum, unless clear words exist to indicate acontrary intention. Accordingly, the ability of parties tosuccessfully resist a section 9 stay application has been significantlyreduced.Under section 72 of the 1996 Act, a party who takes no part in thearbitral proceedings may challenge: (i) the validity of an arbitrationagreement; (ii) whether the arbitral tribunal has been properlyconstituted; or (iii) the matters that have been referred to arbitration,and may seek an injunction restraining arbitration proceedings. TheCourt of Appeal has recently tackled the relationship betweensections 9 and 72 of the 1996 Act, stating firmly that where thecourt is faced with applications under both section 9 and 72, thesection 9 application should be determined first (along with anyrelated issues, such as the validity of the arbitration agreement). Inaddition, it held that if there is a valid arbitration agreement,proceedings cannot be launched under section 72 at all (Fiona Trust& Holding Corp v. Privalov [2007] EWCA Civ 20). This case wasaffirmed by the House of Lords in Fiona Trust & Holding Corp v.Privalov & ors [2008] 1 Lloyd’s Rep 254 (although the House ofLords did not explicitly consider this issue).The English court is also empowered to grant an anti-suit injunctionagainst a person who has initiated proceedings in some otherjurisdiction in breach of an agreement to arbitrate by virtue ofsection 37 of the Supreme Court Act 1981 (Welex AG v. RosaMaritime Ltd [2003] 2 Lloyd’s Rep 509). In contrast, the English court may not grant an anti-suit injunctionto uphold an exclusive jurisdiction clause where the judicialproceedings complained of have been commenced in an EU orEFTA State, because the Brussels Convention 1968, LuganoConvention 1989 and Council Regulation 44/2001 confer exclusivejurisdiction on the court first seized of the action (Case C-159/02Turner v. Grovit [2004] 1 Lloyd’s Rep 216). Until very recently, it was not clear whether this limitation alsoapplied to proceedings brought in breach of an arbitrationagreement (as opposed to an exclusive jurisdiction clause).However in 2007, the House of Lords in West Tankers Inc. v. RASRiunione Adriatica di Sicurta SpA [2007] UKHL 4 referred thismatter to the ECJ. The ECJ returned its decision in February 2009,ruling that anti-suit injunctions may not be issued by the Englishcourts to restrain proceedings brought in the courts of the Memberstates of the EU or EFTA where those proceedings are incontravention of an arbitration clause (Allianz SpA v West TankersInc, Case C-185/07 [2009] All ER (D) 82).


Under the 1996 Act, and unless otherwise agreed by the parties, thearbitral tribunal may rule on its own substantive jurisdiction(section 30). However, a party to arbitral proceedings may request that the courtdetermine questions as to the substantive jurisdiction of the tribunal(section 32(1)). Such applications must be made either with theagreement in writing of all parties to the proceedings or,alternatively, with the permission of the arbitral tribunal incircumstances where the court is satisfied that:

the determination of the question is likely to producesubstantial savings in costs;the application was made without delay; andthere is good reason why the matter should be decided by thecourt (section 32(2)).

The arbitral proceedings may continue, and an award may begranted, at the same time that an application to the court for thedetermination of a preliminary point of jurisdiction is pending(section 32(4)). The right to object to the substantive jurisdiction ofthe court may be lost if the party takes part or continues to take partin the arbitral proceedings without objection (section 73).In addition, the Court has the ability to address the question ofjurisdiction and competence pursuant to section 67, which a partymay use to challenge an award on the basis of the tribunal’ssubstantive jurisdiction, and section 72, which enables a personalleged to be a party to the proceedings but who takes no part inthese to question, inter alia:

whether there is a valid arbitration agreement;whether the tribunal is properly constituted; andwhat maters have been submitted to arbitration in accordancewith the arbitration agreement.

3.5 Under what, if any, circumstances does the national law ofEngland and Wales allow an arbitral tribunal to assumejurisdiction over individuals or entities which are notthemselves party to an agreement to arbitrate?

English law does not afford a tribunal power to assume jurisdictionover individuals/entities not actually a party to the arbitrationagreement. Arbitration is considered to be, first and foremost, aconsensual process. While a tribunal may invite a non-party tosubmit testimony or produce documents willingly, it cannot itselfcompel that individual or entity to do so (although the court haspowers to so order in certain circumstances in support of the arbitralprocess). In various jurisdictions, a number of legal theories (e.g., agency,alter ego principles and the group of companies doctrine) have beenadvanced to seek to bind non-signatories to arbitration agreements.English law, however, is circumspect in embracing these legaltheories, and there has been a general refusal to accept the group ofcompanies doctrine in the absence of consent on the part of the thirdparty or possibly an estoppel (Bay Hotel v. Cavalier [2001] UKPC34). For example, in Peterson Farms Inc. v. C & M Farming Ltd[2004] All ER (D) 50, an English court set aside an award in whichthat doctrine had been recognised, stating, inter alia, that it “formsno part of English law”. Until recently, however, there remained some scope under Englishlaw of reaching results not dissimilar from the group of companiesdoctrine by concluding that the non-signatory to an arbitrationagreement was claiming “through or under” that agreement, and



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permitting the piercing of the corporate veil (Roussel-Uclaf v. GDSearle & Co. [1978] 1 Lloyd’s Rep. 225). However, in November 2008 the Court of Appeal in City of Londonv Sancheti [2008] EWCA Civ 1283; [2008] All ER (D) 204 (Nov);[2009] 1 Lloyd’s Rep 117 closed the door on this possibility, rulingthat Roussel-Uclaf was wrongly decided on this point and shouldnot be followed. The defendant in Sancheti was accordingly denieda section 9 stay, because the Claimant (the Mayor and Commonality& Citizens of the City of London) was not a party to the relevantarbitration agreement (the UK-India BIT) - the relevant party wasthe UK Government.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in England and Wales andwhat is the typical length of such periods? Do thenational courts of England and Wales consider such rulesprocedural or substantive, i.e., what choice of law rulesgovern the application of limitation periods?

Section 13 of the 1996 Act provides that the Limitation Acts applyto arbitral proceedings as they apply to legal proceedings.Limitation Acts include the Limitation Act 1980 (which providesthat the time limit for commencing arbitration proceedings for acontract case is six years from the date of the breach (section 5)),as well as the Foreign Limitation Periods Act 1984. That legislationprovides that where a dispute is being determined in England andWales is governed by foreign law, the laws of the foreign countryrelating to limitation shall apply as a matter of substance.Where an arbitration award has been set aside, the court may orderthat the lapse of time between the commencement of the originalproceedings, and the date of the court order, be disregarded forlimitation purposes (section 13(2)).



Section 46 of the 1996 Act is largely similar in effect as Article 28of the Model Law, providing that the dispute shall be decided inaccordance with the parties’ choice of law, or, if the parties agree,in accordance with “other considerations”, and that a choice of thelaws of a particular country is limited to the substantive laws of theforeign country, and not the foreign country’s conflict of laws rules.(The law applicable to the procedure of the arbitration is governedby the 1996 Act (section 2).)The law applicable to the substance of the dispute is accordinglydetermined by the arbitrator(s) on the basis of the underlyingagreement. Where the parties have made a choice of law, thearbitrator(s) are required to determine the choice-of-law inaccordance with the Rome Convention as enacted in English Lawby the Contracts (Applicable Laws) Act 1990. The RomeConvention provides that a choice of law will be valid if expressed,or, if demonstrated “with reasonable certainty” by the terms of thecontract or the circumstances of the case (Art 3 (1)), a conceptwhich encompasses implied choice of law as recognised bycommon law (Halpern and others v Halpern and another [2007]EWCA Civ 291). A choice of seat can operate as a choice ofapplicable law for this purpose (King v Brandywine ReinsuranceCo (UK) Ltd [2004] 2 Lloyd’s Rep 670).Where no choice or agreement is made, the tribunal is givenconsiderable latitude, and is required to apply the law “determinedby the conflict of laws rules which it considers applicable” (section

46(3) of the 1996 Act). This grants the tribunal broad power toapply a system of conflict of laws rules that it concludes is mostappropriate to the case.


Article 7(2) of the Rome Convention (which applies in England andWales pursuant to Contracts (Applicable Laws) Act 1990), providesthat the other provisions of the Rome Convention do not restrict theapplication of the rules of the law of England and Wales where theyare mandatory irrespective of the law otherwise applicable to thecontract. Accordingly, where a rule of law of England and Wales istruly mandatory, it must prevail over the law chosen by the parties(Ingmar GB Ltd v Eaton Leonard Technologies Inc (Case C-381/98) [2001] All ER (EC) 57). Examples of such mandatory rulesin England and Wales include the Employment Rights Act 1996, theUnfair Contract Terms Act 1977 and the Carriage of Goods by SeaAct 1981.England and Wales did not incorporate Art 7(1) of the RomeConvention into its domestic law; accordingly, there is no scope forthe mandatory laws of some other jurisdiction to prevail over theparties’ choice of law (section 2(2), Contracts (Applicable Laws)Act 1990).


The Rome Convention (which applies in England and Walespursuant to Contracts (Applicable Laws) Act 1990), expresslyexcludes from its scope “arbitration agreements” (Article 1(2)(d)Rome Convention). Accordingly, in England and Wales, thequestion of which law is applicable to the formation, validity andlegality of the arbitration agreement itself is determined by theapplication of general common law choice-of-law principles. Theexistence of an express choice, provisions of the contract whichcontain necessary implications, or, in the absence of this, thesurrounding circumstances, will be relevant in this determination(e.g. XL Insurance Ltd v Owens Corning [2000] 2 Lloyd’s Rep500). The question to be asked is which jurisdiction the arbitrationagreement has a close and real connection with. Generally, the lawapplicable to the formation, validity and legality of the arbitrationclause will follow the law of the seat of the arbitration rather thanthe law applicable to the underlying agreement (where the twodiffer) (C v D [2007] EWCA Civ 1282).



English law gives parties wide autonomy in their selection ofarbitrators. The majority of the 1996 Act only operates as a fallbackprovision where express written agreement (section 5(1)) has notbeen reached. The only mandatory rules are that the death of anarbitrator brings his or her authority to an end and the court has theability to remove arbitrators who are not performing their functionsproperly (section 24).Therefore, parties are free to agree on the number of arbitrators,whether there is to be a chairman or an umpire, the arbitrators’qualifications, and the method of appointment (section 15). Theconsent of the arbitrators is required to ensure the validity of their

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appointment. Unless otherwise agreed, an agreement that thenumber of arbitrators shall be two (or any other even number) shallbe understood to be an agreement that an additional arbitrator is tobe appointed to act as chairman of the tribunal (section 15(2)). In the absence of the parties’ agreement as to the number ofarbitrators, the tribunal will be made up of a sole arbitrator (section15(3)).As indicated above, the court has the power to remove an arbitratoron several grounds, including: (i) justifiable doubts as to hisimpartiality; (ii) in the event that he or she does not possess thequalifications required by the parties’ arbitration agreement; (iii)physical or mental incapability; or (iv) failures in conducting theproceedings (section 24(1)(a) to (d)).


Parties are free to agree on the procedure for appointing arbitrators(including the chairman or umpire) (section 16(1)). If the partiesfail to agree an appointment procedure, the 1996 Act sets outdetailed provisions for the appointment of: a sole arbitrator (jointappointment by the parties within 28 days of a written request byone party, section 16(3)); a tribunal comprised of two arbitrators(each party to appoint one arbitrator within 14 days of a writtenrequest by one party to do so, section 16(4)); a tribunal comprisedof three arbitrators (as with two, but the two party-appointedarbitrators shall forthwith appoint a chairman, section 16(5)); and atribunal comprised of two arbitrators and an umpire (as with three,subject to differences as to the timing of the umpire’s appointment,section 16(6)). Where the parties have failed to even agree as to thenumber of arbitrators, by default, the tribunal shall consist of a solearbitrator (section 15(3)).In the event that the parties’ agreed appointment procedure (or thesection 16 default procedure) fails because of the failure to complyby one of the parties, the 1996 Act sets out a detailed defaultprocedure, which enables the other party to give notice that itintends to appoint its arbitrator to act as sole arbitrator, and to makesuch an appointment (section 17(1)). For other failures inappointment procedure, either party may apply to the court toexercise its powers, including to give directions, or to make thenecessary appointments itself (section 18(2)).


In the event that a sole arbitrator is appointed under section 17 ofthe 1996 Act, the party in default may apply to the court to set asidethat appointment (section 17(3)). In all other cases where theappointment procedure has failed, unless the parties have agreedotherwise, they are entitled to apply to the court to: exercise itspowers to give directions as to the making of appointments (section18(3)(a)); direct that the tribunal be constituted by suchappointments (section 18(3)(b)); revoke any previous appointments(section 18(3)(c)); or make the necessary appointments itself(section 18(3)(d)). See Through Transport Mutual AssuranceAssociation (Eurasia) Ltd v. New India Assurance Co Ltd [2005]All ER (D) 351 for confirmation of the English High Court’sexercise of such powers.


The impartiality of arbitrators is central to the arbitration process.

The 1996 Act states that “the object of arbitration is to obtain thefair resolution of disputes by an impartial tribunal” (section 1(a)).Section 24(1)(a) of the 1996 Act permits a party to apply to thecourt for the removal of an arbitrator on the basis that circumstancesexist that give rise to justifiable doubts as to that arbitrator’s“impartiality”. Furthermore, section 33(1)(a) of the 1996 Actrequires that the tribunal shall act fairly and impartially as betweenthe parties.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within England andWales?

The 1996 Act did not incorporate the Model Law provisionscontained in Articles 12 and 13 thereof, requiring disclosure ofpotential conflicts, and providing for a challenge procedure. TheDepartmental Advisory Committee preferred instead to retain therule that the only issue is whether the arbitrator has actedimpartially, and not whether they are “independent in the full senseof that word”. This is consistent with the long-standing Englishpractice of having party-appointed arbitrators (AT & T Corporationv Saudi Cable Co [2000] Lloyd’s Rep 127).Under the London Court of International Arbitration (“LCIA”)Rules, arbitrators are required to sign a declaration before beingappointed by the LCIA, “to the effect that there are nocircumstances known to him that are likely to give rise to anyjustified doubts as to his impartiality or independence, other thanany circumstances disclosed by him in the declaration” (Article 5.3,LCIA Rules).

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in England and Wales? If so, do those laws orrules apply to all arbitral proceedings sited in England andWales?

The provisions of Part I of the 1996 Act, which govern theprocedure of an arbitration pursuant to an arbitration agreement,apply to arbitration proceedings that have their seat in England andWales or Northern Ireland (section 2(1)). Under the 1996 Act, the“seat of the arbitration” is the juridical seat, which is the placewhere the arbitration has its formal legal seat and where thearbitration award will be made. Although it is usually the case, it isnot essential that the physical hearings take place at the seat of thearbitration.The parties are free to agree the seat of the arbitration in theirarbitration agreement (section 3). If the parties fail to agree the seatof the arbitration, an arbitral (or any other) institution or personvested by the parties with powers to do so may designate the seat(section 3(b)). Alternatively, if authorised to do so by the parties,the arbitral tribunal may designate the seat (section 3(c)).Where no arbitral seat has been designated or determined, and thereis a connection with England and Wales or Northern Ireland, thecourt may still exercise its powers under the 1996 Act for thepurpose of supporting the arbitral process (section 2(4)). Theprovisions relating to stay of proceedings and enforcement ofarbitral awards apply regardless of the location (or evendesignation) of the seat (section 2(2)).



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6.2 In arbitration proceedings conducted in England andWales, are there any particular procedural steps that arerequired by law?

Essentially, the mandate of an arbitral tribunal in England andWales or Northern Ireland is to obtain the fair resolution of disputesby an impartial tribunal without unnecessary delay or expense. Theparties are free to agree how their disputes are to be resolved,subject only to those safeguards necessary to protect the publicinterest. By virtue of section 33(1)(a) of the 1996 Act, the tribunalis required to act fairly and impartially as between the parties,giving each a reasonable opportunity to put its case and deal withthat of its opponent (i.e., due process). The tribunal is required toadopt procedures suitable to the circumstances of a particular case(section 33(1)(b)) and must comply with that general duty inconducting the arbitral proceedings and in making all decisionsrelating to matters of procedure and evidence (section 33(2)).


The 1996 Act does contain a number of mandatory provisions(listed in Schedule 1 to the 1996 Act) out of which the parties maynot contract and that apply to all arbitrations sited in England andWales or Northern Ireland. The mandatory provisions relate to stayof legal proceedings, time limits (including the application of theLimitation Act 1980), matters relating to the arbitrators (includingthe power of the court in relation to the removal of arbitrators, theeffect of the death of an arbitrator, the liability of the parties inrelation to arbitrators’ fees and expenses, the power to withhold anaward in the event of non-payment of arbitrators’ fees and thegeneral duty of the tribunal), jurisdictional issues (including theright to object to the substantive jurisdiction of the tribunal anddetermination of a preliminary point of jurisdiction), the securing ofwitnesses, the enforcement of awards, and the right to challenge anaward on the basis of substantive jurisdiction and seriousirregularity.In all other respects, the parties are free to agree to the applicationof any other procedural rules, either by reference to an arbitral orother institution or otherwise. In particular, the parties are entitledto agree in relation to any procedural or evidential matters and, inthe absence of agreement, the tribunal may decide on such matters(section 34(1)). Procedural and evidential matters include locationof hearings, languages used, form of statements, documentproduction, examination and cross-examination of witnesses andform of submissions (section 34(2)).

6.4 What powers and duties does the national law of Englandand Wales impose upon arbitrators?

Under the 1996 Act, the parties are free to agree on the powersexercisable by the arbitral tribunal in relation to the proceedings(section 38). Unless otherwise agreed by the parties, however, thetribunal may order a claimant to provide security for the costs of thearbitration (section 38(3)); give directions in relation to anyproperty which is the subject of the proceedings or as to which anyquestion arises in the proceedings, and which is owned by or is inthe possession of a party to the proceedings (section 38(4)); directthat a party or witness shall be examined on oath or affirmation, andmay for that purpose administer any necessary oath or take anynecessary affirmation (section 38(5)); or give directions to a partyfor the preservation for the purposes of the proceedings of anyevidence in his custody or control (section 38(6)).In addition, the parties are free to agree that the tribunal shall have

the power: to order on a provisional basis any relief which it wouldhave power to grant in a final award (section 39(1)); to dismiss anyclaim where there has been inordinate and inexcusable delay(section 41(3)); or to dismiss any claim where a party fails tocomply with a peremptory order of the tribunal to provide securityfor costs (section 41(6)). Where a party fails to comply with anyother kind of peremptory order, the tribunal may: (a) direct that theparty in default shall not be entitled to rely upon any allegation ormaterial which was the subject matter of the order; (b) draw suchadverse inferences from the act of non-compliance as thecircumstances justify; (c) proceed to an award on the basis of suchmaterials as have been properly provided to it; or (d) make suchorder as it thinks fit as to the payment of costs of the arbitrationincurred in consequence of the non-compliance (section 41(7)).

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in England and Walesand, if so, is it clear that such restrictions do not apply toarbitration proceedings sited in England and Wales?

In England and Wales, only solicitors of the Supreme Court ofEngland and Wales, and barristers called to the Bar in England andWales, holding practicing certificates from the respective Englishbodies regulating these professions (the Solicitor Regulation AuthorityBar Council and respectively) can have rights of audience in EnglishCourts, or rights to the “conduct of litigation” in proceedings issued inthese courts. Appearing in Court without one of these qualificationscan render a person liable to a criminal charge (section 21 SolicitorsAct 1974, sections 14(1) and 181(1) Legal Services Act 2007),contempt of court (section 14(4) Legal Services Act 2007) and thatperson will be precluded from recovering any fees from his putativeclient (section 25, Solicitors Act 1974). (These restrictions are subjectto certain limited exceptions.)An arbitration sited in England is not covered by these variousprovisions; accordingly, foreign lawyers are free to appear before anarbitration tribunal in England without restriction. Indeed, arepresentative need not necessarily be legally qualified in anyjurisdiction; the 1996 Act specifically provides that, unless the partiesotherwise agree, each party may be represented in the proceedings“by a lawyer or other person chosen by him” (section 36).

6.6 To what extent are there laws or rules in England andWales providing for arbitrator immunity?

Arbitrators acting in arbitrations sited in England and Wales haveimmunity for any act or omission made in the discharge of thearbitrator’s functions unless the act or omission is shown to havebeen in bad faith (section 29), although the parties may agree withan arbitrator regarding liability to be incurred by him as aconsequence of his resignation (section 25(1)).


In principle, intervention by national courts in the arbitral processshould be minimal. Nevertheless, the national courts havejurisdiction to act in support of arbitral proceedings and, inparticular, may deal with procedural issues in relation to: theenforcement of peremptory orders of the tribunal (section 42);securing the attendance of witnesses (section 43); the taking andpreservation of evidence, making orders relating to property, sale ofgoods, granting of interim injunctions or the appointment of areceiver (section 44); and the determination of a preliminary pointof law (section 45).

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It is worth noting that the parties may agree to exclude a large partof the national courts’ powers (Mantovani v Caparelli SpA [1980] 1Lloyd’s Rep. 375; section 44 of 1996 Act).

6.8 Are there any special considerations for conductingmultiparty arbitrations in England and Wales (including inthe appointment of arbitrators)? Under whatcircumstances, if any, can multiple arbitrations (eitherarising under the same agreement or different agreements)be consolidated in one proceeding? Under whatcircumstances, if any, can third parties intervene in or joinan arbitration proceeding?

Under the 1996 Act, parties are free to agree that arbitralproceedings shall be consolidated with other arbitral proceedings orthat concurrent hearings shall be held (section 35(1)). The partiesare also free to agree the terms of consolidation or concurrenthearings. Unless the parties agree to afford the tribunal this power,however, the tribunal does not have the authority to orderconsolidation or concurrent hearings (section 35(2)). If the partiesdo agree, section 18 of the 1996 Act governs the procedure for theappointment of arbitrators. In such instances, “the parties are freeto agree what is to happen” (section 18(1)). A number of institutional rules (e.g., ICC, LCIA) providespecifically for the situation where there are several parties to thesame contract and allow for multiple claimants or respondents (asthe case may be) jointly to nominate an arbitrator. Ostensibly,section 18 of the 1996 Act affords parties the same freedom. The position is a little more complicated when there are a numberof agreements with different parties, each of which has someconnection to the issues being arbitrated. Unlike in English courtproceedings, it is not possible to join a third party to arbitralproceedings, or order consolidation, without the consent of all theparties (Wealands v CLC Contractors Ltd [1999] 2 Lloyd’s Rep.739 (Q.B.)). As such, and in order to avoid conflicting decisions,the English courts have circumvented the problem in at least oneinstance by applying a practical solution; namely, appointing thesame arbitrator in each of the connected arbitrations. (See AbuDhabi Gas Liquefaction Co. Ltd v Eastern Bechtel Corp. [1982] 2Lloyd’s Rep. 425.)

6.9 What is the approach of the national courts in Englandand Wales towards ex parte procedures in the context ofinternational arbitration?

The court is empowered to act in support of arbitral proceedings onthe application of a party or the tribunal, unless otherwise agreed bythe parties (section 44). Any such application may be made ex parte(or “without notice”) if the matter is urgent (section 44(3)). Wherean application is made without notice, it must be accompanied by awitness statement setting out the nature of the urgency (rule62.4(1)(f)(ii) Civil Procedure Rules). Otherwise, the court will actin support of arbitral proceedings only where notice is given to theother party and the tribunal, and the permission of the tribunal, orthe agreement in writing of the other party, has been obtained(section 44(4)). In addition, an application seeking recognition of a New YorkConvention award may be made without notice, although the courtsmay nevertheless require that it be served on the other party (CivilProcedure Rules, Rule 62.18(2)).In practice, the English courts take a conservative approach to theexercise of the power to grant ex parte interim relief under section44(3), granting such applications only where it would be likely todefeat the purpose of seeking injunctive relief if forewarning were

given (Petroleum Investment Co Ltd v Kantupan Holdings Ltd[2002] 1 All ER (Comm) 124).



Unless the parties have agreed otherwise, the tribunal is permittedto make preliminary orders in certain circumstances. In particular,the tribunal may order a claimant to: provide security for costs inthe arbitration (section 38(3)); give directions relating to propertywhich is the subject matter of the proceedings or as to which anyquestion arises in the proceedings (section 38(4)); direct a party orwitness to be examined (section 38(5)); or give directions for thepreservation of evidence (section 38(6)). In addition, the parties may agree that the tribunal shall be entitled tomake an order for provisional relief (section 39) (e.g., disposition ofproperty or payment on account of the costs of the arbitration). In theabsence of agreement between the parties, the tribunal shall not havesuch power. The tribunal is authorised to grant such interim reliefwithout having to seek the assistance of the court to do so.


The court is empowered to act in support of arbitral proceedings,unless otherwise agreed by the parties (section 44(1)). In particular,unless otherwise agreed by the parties, the court has power to makeorders in support of arbitral proceedings in relation to: the taking ofevidence (section 44(2)(a)); the preservation of evidence (section44(2)(b)); and the making of orders relating to property relating tothe proceedings (section 44(2)(c)). The court shall only act to theextent that the tribunal (or other institution) has no power to do soeffectively, e.g., the tribunal is not yet constituted (section 44(5)).These powers are not mandatory and the parties are thereforeentitled to agree that these provisions will not apply.In addition, unless otherwise agreed by the parties, the court maymake an order requiring a party to comply with a peremptory ordermade by the tribunal (section 42).The request of a party for relief will not impact on the jurisdictionof the arbitral tribunal in respect of the subject-matter of the request,where the court has stipulated that an order may be varied or setaside by the arbitrators themselves (section 44(6)).


In practice, the courts do not intervene in arbitral proceedings inEngland and Wales or Northern Ireland, except within the relativelynarrow confines of the 1996 Act, where it is both necessary andappropriate for them to do so.The object of the 1996 Act is to recognise and uphold partyautonomy to choose the procedure for the resolution of disputes andto prevent unnecessary intervention by the courts. To that end, the1996 Act confers as many powers of the court as possible onto thetribunal. Under the 1996 Act, the court has powers in relation to the



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enforcement of peremptory orders of the tribunal and the exerciseof other court powers in support of arbitral proceedings (and inrelation to securing the attendance of witnesses and thedetermination of a preliminary point of law).Generally, the English courts will take a conservative approach tothe exercise of its powers to grant relief under section 44. As notedabove, the court shall only act to the extent that the tribunal (orother institution) has no power, or is unable for the time being, todo so effectively (section 44(5)); if the arbitrators have already beenappointed, the court is unlikely to intervene unless satisfied that anyorder the arbitrators might make would have little value (forexample, because it cannot be enforced, or involves a third party)(Pacific Maritime (Asia) Ltd v Holystone Overseas Ltd [2008] 1Lloyd’s Rep 371).


If the parties agree that it is empowered to do so, the tribunal mayorder security for costs (section 38(1)). Furthermore, unless theparties exclude the possibility, the tribunal has a statutory powerunder section 38(3) to order security for costs. It should be noted that if the parties exclude the right of the tribunalto order security for costs, the courts will also have no jurisdictionto order security for costs except in relation to specified judicialproceedings under the 1996 Act (on applications and appeals undersections 67 to 69).


8.1 What rules of evidence (if any) apply to arbitralproceedings in England and Wales?

England has an extensive body of common law that establishes thegoverning rules of evidence. However, in the absence of agreementby the parties, the tribunal has the power to decide whether or notto apply the strict rules of evidence under English common law (orany other rules) as to the admissibility, relevance or weight of anymaterial (oral, written or other) sought to be tendered on anymatters of fact or opinion (section 34(2)(f)). The 1996 Act doesprovide that parties are entitled to agree any procedural orevidential matter (section 34(1)) and the tribunal may determine thetime, manner and form in which evidence is to be exchanged andpresented (section 34(2)(f)). It is not uncommon for the parties toagree to the application of a set of ‘international’ evidentiary rules,such as the International Bar Association (IBA) Rules on the Takingof Evidence in International Commercial Arbitration (June 1999).


The tribunal has some power to order disclosure of documents butit is not unlimited. Unless otherwise agreed, the tribunal has powerto order a party to produce documents (section 34(2)(d)) and thetribunal may determine whether or not documents are relevantand/or privileged (section 34(2)(f)). The tribunal has no power toorder production of documents by a third party, although any partyto the proceedings may use those court procedures that are availablein relation to legal proceedings to secure the attendance of a witness(including a third party witness) in order to produce documents(section 43).


The court may make orders requiring a party to comply with aperemptory order made by the tribunal (section 42). In addition,unless otherwise agreed by the parties, the court has powers that areexercisable in support of arbitral proceedings and these includepowers in relation to the preservation of evidence and makingorders for inspection, photographing, preservation, detention orsampling of property that is the subject of the proceedings (section44(2)). Parties to the proceedings may also use the same courtprocedures as are available in relation to legal proceedings to securethe attendance of a witness (including a third party witness) toproduce documents (section 43).


The standard disclosure requirements that are automatic incommercial court proceedings in England and Wales do not strictlyexist in, or apply to, arbitral proceedings. Parties are free to agreethe scope of disclosure in arbitral proceedings. In the absence of anagreement, the tribunal may make orders in relation to the scopeand method of disclosure. In practice, disclosure decisions will beinfluenced by the nationality (and therefore the experience andexpectations) of the members of the arbitral tribunal (as well as theparties’ counsel). Additionally, the norms of English procedurallaw (as the law of the seat of arbitration) may influence thepractices of the tribunal. Frequently, parties to internationalcommercial arbitration proceedings agree to the application of theIBA Rules on the Taking of Evidence in International CommercialArbitration in proceedings sited in England, thereby limiting thebroader scope of disclosure under English law.


Parties are free to agree whether there should be oral or writtenevidence in arbitral proceedings (section 34(1)). Otherwise, thearbitral tribunal may decide whether or not a witness or party willbe required to provide oral evidence and, if so, what questionsshould be put to, and answered by, the respective parties and themanner in which that should be done (section 34(2)(e)). Unlessotherwise agreed, the tribunal also has power to direct that aparticular witness or party may be examined on oath or affirmationand may administer the necessary oath or affirmation (section38(5)). There is no strict requirement that oral evidence beprovided on oath or affirmation; it is a matter for the tribunal’sdiscretion. The tribunal does not have the power to force theattendance of a witness. On the application of a party, the court mayorder the attendance of a witness to give oral testimony or producedocuments in arbitral proceedings in accordance with the provisionsin the 1996 Act (section 43).The 1996 Act also permits the arbitral tribunal to appoint experts orlegal advisors to report to it and the parties, or to appoint assessorsto assist it on legal matters, unless otherwise agreed by the parties(section 37(1)).English solicitors (or foreign lawyers registered in England)participating in arbitrations sited in England and Wales, are boundby the Solicitors Code of Conduct 2007 compiled by the SolicitorsRegulation Authority. English qualified barristers, on the otherhand, are governed by the Code of Conduct of the Bar Council.

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8.6 Under what circumstances does the law of England andWales treat documents in an arbitral proceeding as beingsubject to privilege? In what circumstances is privilegedeemed to have been waived?

Where the parties have not agreed on evidential matters in theirarbitration agreement, the arbitral tribunal has the discretionarypower to order a party to produce documents or classes ofdocuments (section 34(d)). In so doing, the tribunal may determinethat a document (or class of documents) is protected fromdisclosure on the ground of legal, professional or other privilege(assuming the precondition of confidentiality exists). In suchsituations, the tribunal may be guided by generally applicableprinciples of English law. For example, privileged documents mayinclude documents attracting Crown privilege, “without prejudice”correspondence between the parties (including settlement offers),and documents passing between lawyer and client. Once a document has been produced by a party, it is generallyrequired to be disclosed both to the other party and to the arbitraltribunal. This constitutes an express waiver of privilege. Impliedwaiver of privilege, on the other hand, is only likely to arise inarbitral proceedings involving a relationship creating that privilegein the first place, e.g., an arbitration between a client and hissolicitor.

9 Making an Award


The parties are free to agree on the form of any arbitral award(section 52(1)). In the absence of agreement, the award shall be inwriting and signed by all of the arbitrators or all those assenting tothe award (section 52(3)); it shall contain the reasons for the award(unless it is an agreed award or the parties have agreed to dispensewith reasons) (section 52(4)); and it shall state the seat of thearbitration and the date when the award was made (section 52(5)).There is a specific requirement under the New York Conventionthat awards must be “duly authenticated”. Therefore, an unsignedaward may not be enforceable in another contracting State.A tribunal is entitled to make a single, final award or, by virtue ofsection 47 of the 1996 Act, an award relating only to part of theclaims submitted to it for determination. It is not uncommon for atribunal to separate issues of liability and damages and to provideseparate awards in respect of each.The 1996 Act provides that the parties are free to agree that thetribunal shall have power to order on a provisional basis any reliefthat it would have power to grant in a final award (section 39(1)).This includes the power to order payment of money, disposition ofproperty, or security for costs or fees and costs. Unless agreed bythe parties in writing (and subject to the court’s power to extend it),there is no statutory time limit for making an award. Any timelimit, however, must avoid unnecessary delay.



There are three bases upon which a party may appeal to the courtagainst an arbitral award made in England and Wales or NorthernIreland.

First, a party may argue that the tribunal lacked substantivejurisdiction to make the award (section 67). A tribunal will have“substantive jurisdiction” where: (i) there was a valid arbitrationagreement; (ii) the tribunal was properly constituted; and (iii) thetribunal ruled on matters “submitted to the arbitration in accordancewith the arbitration agreement (section 30). A hearing under section67 is by way of complete retrain (Azov Shipping Co v BalticShipping Co (No 1) [1999] 1 Lloyd’s Rep 550).Secondly, a party may appeal on the grounds of serious irregularity(section 68). Under the 1996 Act, serious irregularity may arisewhere: the tribunal has failed to comply with its general duty underthe 1996 Act (including its duty to act fairly and impartially) (section68(2)(a)); the tribunal has exceeded its powers (section 68(2)(b)); thetribunal has failed to conduct the proceedings in accordance with theparties’ agreed procedure (section 68(2)(c)); the tribunal has failed todeal with all of the issues put to it (section 68(2)(d)); there isuncertainty or ambiguity as to the effect of the award (section68(2)(f)); the award was obtained by fraud or otherwise contrary topublic policy (section 68(2)(g)); the award does not comply withrequirements as to form (section 68(2)(h)); or there was irregularityin the conduct of the proceedings, and the court considers that this hascaused or will cause substantial injustice to the applicant (section68(2)(i)). An “error of law” on the part of the arbitrators will not giverise to “substantial irregularity,” sufficient to uphold an appeal undersection 68 (Lesotho Highlands Development Authority v. ImpregiloSpA [2006] 1 A.C. 221 (HL)). More generally, as the Court of Appealhas recently noted, the authorities “place a high hurdle in the way ofa party to an arbitration seeking to set aside an award or its remissionby reference to s 68” (Bandwidth Shipping Corp v Intaari [2008] 1All ER 1015).Finally, unless the parties agree otherwise, a party to arbitralproceedings may (in certain circumstances) appeal to the court on aquestion of law arising out of an award made in the proceedings(section 69). An appeal on a point of law may not be broughtwithout either the agreement of all the other parties to theproceedings or the leave of the court (section 69(2)), which will begranted only if the conditions in section 69(3) are satisfied.


Parties may agree to exclude the right to appeal to the court on aquestion of law arising out of an award made in the course ofarbitral proceedings (section 69(1)). For the purposes of section 69of the 1996 Act, an agreement that the tribunal does not need to givereasons for its award will be deemed an agreement between theparties to exclude this base of appeal (section 69(1)).Sections 67 and 68 are mandatory provisions of the 1996 Act (aslisted in Schedule 1 to the 1996 Act); parties may not exclude theirapplication.


The 1996 Act provides that an award made by the tribunal is finaland binding unless otherwise agreed by the parties. Therefore, theparties are free to agree to challenge the award under anyprocedures set out in the arbitration agreement (or otherwiseagreed), in addition to the grounds for challenge set out in the 1996Act. Equally, the parties are free to agree that an award bedisregarded entirely in order that they may re-arbitrate their dispute(in which case the first award cannot be enforced).



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10.4 What is the procedure for appealing an arbitral award inEngland and Wales?

An appeal against an arbitral award must be commenced by theissue of an arbitration claim form (in accordance with Part 62 of theEnglish Rules of Civil Procedure, or “CPR”). The claim form muststate under which section of the 1996 Act the application is broughtand give details of the award being challenged, identifying whichpart or parts of the award are challenged and specifying the groundsfor the challenge (CPR Rule 62.4(1)).


11.1 Has England and Wales signed and/or ratified the NewYork Convention on the Recognition and Enforcement ofForeign Arbitral Awards? Has it entered any reservations?What is the relevant national legislation?

The United Kingdom is a party to the New York Convention, whichit signed and ratified in 1975, subject to the reservation that itapplies only to awards made in the territory of another contractingparty. Part III of the 1996 Act deals with the recognition and enforcementof New York Convention awards (i.e., awards made, in pursuanceof an arbitration agreement, in the territory of another state which isalso a party to the New York Convention).

11.2 Has England and Wales signed and/or ratified any regionalConventions concerning the recognition and enforcementof arbitral awards?

An arbitral award made under the Geneva Convention 1927 isenforceable pursuant to section 99 of the 1996 Act. Section 99 ofthe Arbitration Act 1996 has in practice been all but superseded byenforcement under the subsequent New York Convention.However, there remain a limited number of countries which havenot yet acceded to the New York Convention that neverthelessremain party to the Geneva Convention 1927. Other than legislation regarding the enforcement of awards incertain, former Commonwealth countries, England is not asignatory to any other Conventions regarding the recognition andenforcement of awards.

11.3 What is the approach of the national courts in Englandand Wales towards the recognition and enforcement ofarbitration awards in practice? What steps are partiesrequired to take?

Generally speaking, the English courts exhibit a strong bias infavour of enforcement. The enforcement procedure prescribed bythe 1996 Act distinguishes between foreign awards and awardsmade in England and Wales (as opposed to international anddomestic awards) for this purpose. An award made in England may be enforced as a judgment or anorder of the court by leave of the court (section 66). The 1996 Actprovides that leave will not be given where the tribunal is shown tohave lacked substantive jurisdiction to make the award.A foreign award, rendered in another New York Conventioncountry, will be recognised and enforced in the courts of Englandand Wales, subject to the limited exceptions set out in Part III of the1996 Act (section 101). The grounds for refusing to recognise orenforce foreign awards are limited to: incapacity of a party;invalidity of the arbitration agreement; lack of proper notice; lack

of jurisdiction; procedural irregularity in the composition of thetribunal; the fact that the award has been set aside or not becomebinding in the country where it was made; the non-arbitrability ofthe subject matter of the arbitration; or the fact that it would becontrary to public policy to enforce the award (section 103). TheEnglish courts retain a discretion to enforce an award that otherwisesatisfies one of these grounds, but this discretion is very narrowlyconstrued (Yukos Oil Company v. Dardana Ltd [2002] 2 Lloyd’sRep 326). The English courts take a broad view of arbitrability and,for the most part, appear to be reluctant to refuse to enforce aforeign award on the grounds of public policy (which is deliberatelynot defined in the 1996 Act). Recently, the Court of Appeal has held that the word ‘award’ insections 101 to 103 of the 1996 Act should be construed to mean the‘award or part of it’, and accordingly, that the court is permitted toenforce part of an award (IPCO (Nigeria) Ltd v Nigerian NationalPetroleum Corporation [2008] All ER (D) 197 (Oct)).

11.4 What is the effect of an arbitration award in terms of resjudicata in England and Wales? Does the fact that certainissues have been finally determined by an arbitral tribunalpreclude those issues from being re-heard in a nationalcourt and, if so, in what circumstances?

In general, the English common law principles of res judicata andissue estoppel apply to arbitrations sited in England (section 100).A final and binding award, therefore, precludes the successful partyfrom bringing the same claim(s) again, either in a fresh arbitrationor before the national courts, and precludes both parties fromcontradicting the decision of the arbitral tribunal on a question oflaw or fact decided by the award (Sun Life Insurance Company ofCanada and others v The Lincoln National Life Insurance Company[2006] 1 All ER (Comm) 675). In practice, the Privy Council has affirmed (in Associated Electricand Gas Insurance Services Ltd v. European Reinsurance Co. ofZurich [2003] 1 WLR 1041) that a prior award may be used by oneof the parties to raise a defence of issue estoppel in a new arbitrationbetween the same parties.

12 Confidentiality

12.1 Are arbitral proceedings sited in England and Walesconfidential? What, if any, law governs confidentiality?

Subject to the parties’ express agreement in relation toconfidentiality, under English common law there is an implied dutyof confidentiality in all arbitration agreements. This duty arisesfrom the concept of the essentially private nature of internationalarbitration (Emmott v Michael Wilson & Partners Ltd [2008] 1Lloyd’s Rep 616).


There are exceptions to the implied duty of confidentiality.Disclosure may be permitted outside the arbitral proceedings wherethe party that originally produced the material has consented todisclosure, the court has ordered or given leave for disclosure on thebasis that it is reasonably necessary for the protection of thelegitimate interests of an arbitrating party, or it is otherwise in theinterests of justice (Emmott v Michael Wilson & Partners Ltd[2008] 1 Lloyd’s Rep 616). The interests of justice are not confinedto the interests of justice in England, thus, the Court of Appeal in

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Emmott took into account the fact that a New South Wales courtwould be misled in the absence of the disclosure sought, holdingthat the international dimension of the case demanded a broaderview of interests of justice.


The confidentiality of arbitral proceedings is not protected in theevent that: the parties agree otherwise; matters relating to thearbitration are the subject of court proceedings (e.g., as a result of aparty’s application to the court for preliminary relief, enforcementproceedings or appeal); disclosure is reasonably necessary for theprotection of the legitimate interests of an arbitrating party; ordisclosure is otherwise in the interests of justice (Emmott v MichaelWilson & Partners Ltd [2008] 1 Lloyd’s Rep 616).



The parties are free to agree the scope of the tribunal’s power togrant remedies (section 48(1)). In the absence of agreement by theparties, the tribunal is permitted to order the payment of a sum ofmoney, in any currency (section 48(4)), and has the same powers asthe court to order a party to do or refrain from doing anything,specific performance, or rectification, setting aside or cancellationof a deed or other document (section 48(5)). In the absence of theparties’ agreement to the contrary, there is no power to awardpunitive damages for breach of contract under English law.However, where the parties’ agreement is sufficiently wide toencompass claims under a foreign statute, and that foreign statuteprovides for special damages or punitive damages (e.g., tripledamages in U.S. anti-trust claims), an arbitral tribunal may be ableto award such damages in an arbitration sited in England and Walesor Northern Ireland. A tribunal cannot assume sovereign powers,such as the power to order imprisonment or the payment of fines tothe state, as these powers are reserved for certain courts, and thepowers of the courts in section 48(5) are limited to those possessedby both the High Court and a county court (Kastner v Jason [2004]2 Lloyd’s Rep 233).


The 1996 Act provides that parties are free to agree on the powersof the tribunal as regards the award of interest (section 49(1)). Inthe absence of the parties’ agreement, the tribunal will be entitled toaward simple or compound interest from such dates, at such ratesand with such rests as it considers meets the justice of the case, onthe whole or part of any amount awarded by the tribunal or claimedand outstanding at the commencement of the proceedings but paidbefore the date of the award (section 49(3)). Interest may beawarded from the date of the award up until payment on the amountof any award and any interest or costs (section 49(4)).


The 1996 Act provides that a party may be entitled to recover the

costs of the arbitration (section 61). These include: the arbitrators’fees and expenses (section 59(1)(a)); the fees and expenses of anyarbitral institution (section 59(1)(b)); and the legal or other costs ofthe parties (section 59(1)(c)). The general principle in Englisharbitration is that costs should “follow the event” (i.e., thesuccessful party will be entitled to its costs) (section 61(2)). Theparties are entitled to agree any costs formula but, in the absence ofagreement, the tribunal may make an award allocating costs asbetween the parties in accordance with the general principle. Anarbitral tribunal may depart from the general principle in relation tothe whole or part of the costs, in the event that it concludes that inthe circumstances it is not appropriate. In practice, a tribunal maytreat interim steps or applications separately for the purpose of costsconsiderations, potentially resulting in an unsuccessful partyrecovering its costs in relation to an unnecessarily expensive andonerous interim step in the proceedings taken by the successfulparty.


An arbitral award may be subject to earnings-related tax, but thepayment of tax is a personal matter for the party to whom damagesare paid. Essentially, damages intended to replace lost income orprofit may be taxable.


14.1 Has England and Wales signed and ratified theWashington Convention on the Settlement of InvestmentDisputes Between States and Nationals of Other States(1965)?

The United Kingdom (which incorporates England and Wales andNorthern Ireland) signed and ratified the Washington Conventionon 26 May 1965 and 19 December 1966, respectively. TheWashington Convention ultimately entered into force in the UnitedKingdom on 18 January 1967.

14.2 Is England and Wales party to a significant number ofBilateral Investment Treaties (BITs) or MultilateralInvestment treaties (such as the Energy Charter Treaty)that allow for recourse to arbitration under the auspices ofthe International Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

In the United Kingdom, BITs are described as InvestmentPromotion and Protection Agreements (“IPPAs”). According to theDepartment of Business, Enterprise and Regulatory Reform’swebsite, the United Kingdom has concluded 106 IPPAs, of which94 are in force. The Foreign and Commonwealth Office Economic Departmentleads the negotiation of new IPPAs and IPPA policy in general. The United Kingdom is also a signatory to the Energy CharterTreaty, having deposited its instruments of accession andratification on 16 December 1997.

14.3 Does England and Wales have standard terms or modellanguage that it uses in its investment treaties and, if so,what is the intended significance of that language?

The United Kingdom has a model BIT. Key elements of UnitedKingdom BITs include provisions for equal and non-discriminatory



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treatment of investors and their investments, compensation forexpropriation, transfer of capital and returns and access toindependent settlement of disputes.The main objective of the United Kingdom’s model BIT was toprovide legal protection for British foreign property in a rapidlydeveloping international context. It is similar to the model BITs ofother European countries. Its language tends to emphasiseinvestment protection rather than the liberalisation of theinvestment policies of developing countries.

14.4 In practice, have disputes involving England and Walesbeen resolved by means of ICSID arbitration and, if so,what has the approach of national courts in England andWales been to the enforcement of ICSID awards and howhas the government of England and Wales responded toany adverse awards?

To date, there have been no concluded ICSID arbitrations involvingthe United Kingdom as a party. Nor are there any pendingarbitrations in which the United Kingdom is a party. Generallyspeaking, there has also been very little treatment of ICSID awardsby the English courts. In the circumstances, therefore, it is difficultto generalise about the approach English courts might take to theenforcement of ICSID awards. Nevertheless, in AIG Capital Partners Inc and another v. Republicof Kazakhstan (National Bank of Kazakhstan intervening) [2005]EWHC 2239 (Comm), the English Commercial Court consideredissues relating to the enforcement of an ICSID award, even thoughthe dispute had been submitted to ICSID arbitration pursuant to aBIT between the United States and the Republic of Kazakhstan. Inthat case, the Commercial Court found that, under certaincircumstances (e.g., enforcing an ICSID award against the propertyof a central bank), section 14(4) of the State Immunity Act 1978may apply in order to conclude that the property of a state’s centralbank shall not be regarded as “in use or intended for use forcommercial purposes”. Accordingly, in the context of an ICSIDaward, certain assets can enjoy immunity from the enforcementjurisdiction of the English courts. (See also Alcom Ltd v. Republicof Colombia and others [1984] AC 580.)

14.5 What is the approach of the national courts in Englandand Wales towards the defence of state immunityregarding jurisdiction and execution?

Under section 9 of the State Immunity Act 1978, where a state hasagreed in writing to submit disputes to arbitration it will be deemedto have waived its right to jurisdictional immunity. This will berelevant in respect of signatories to the Washington Convention andIPPA signatories. A state may nonetheless claim immunity from execution in order toprevent enforcement of an arbitral award. Under section 13(2)(b)of the State Immunity Act 1978, this immunity from execution maybe waived by written consent but not by merely submitting to thejurisdiction of the courts.As noted above, there is no immunity in respect of property whichis for the time being in use or intended for use for commercialpurposes. However, English and international courts historicallyhave been reluctant to deem State assets to be used for exclusivelycommercial purposes (Alcom Ltd v. Republic of Colombia andothers [1984] AC 580).

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in England and Wales? Are certaindisputes commonly being referred to arbitration?

England (and, more precisely, London) continues to be a popularchoice as an arbitral situs given the relatively non-interventionistapproach of the English courts and the respect afforded to thefinality of an award. The reputable international arbitral institutionsrepresented in England and Wales continue to explore methods ofensuring the speed, low cost and efficacy of internationalarbitration. A broad range of international commercial contracts arebeing referred to arbitration, including in the areas of construction,insurance, energy, telecommunications, aviation and investment.According to information released by the London Court ofInternational Arbitration (LCIA) in November 2008, 158 cases hadbeen referred to it in the 11 months of 2008, up from 137 cases in2007, 130 cases in 2006 and 118 cases in 2005. Arguably,England’s growing popularity as an arbitral venue can be attributed,in large part, to the success of the 1996 Act. The fact that the 1996Act allows parties to determine the path of the arbitral process,while simultaneously limiting the intervention of the Englishcourts, represents a significant incentive for individuals or entitiescontemplating arbitrating in England.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in England and Wales, such as pendingor proposed legislation that may substantially change thelaw applicable to arbitration?

There are no pending or proposed legislative changes that maysubstantially change the law applicable to arbitration in Englandand Wales.The recent development which has received by far the mostattention in the past year in England has been the handing down bythe European Court of Justice of its decision in Allianz SpA v WestTankers Inc, Case C-185/07 [2009] All ER (D) 82, in February2009, affirming the preliminary ruling of Advocate-General Kokott,delivered in September 2008. The ECJ heard this case after it wasreferred to it by the House of Lords (West Tankers Inc. v. RASRiunione Adriatica di Sicurta SpA [2007] UKHL 4), putting to theECJ of the question of whether anti-suit injunctions are available toenforce arbitration agreements in favour of litigation commenced inanother EU Member State. In making its referral, the House ofLords sought to give the ECJ a strong steer, suggesting thatconsiderable harm could be done to arbitration within Europe if theEnglish Courts lost their power to grant anti-suit injunctions.However, the ECJ ruled that it is inconsistent with Regulation (EC)No 44/2001 (the Brussels Regulation) for courts to issue an anti-suitinjunction in relation to proceedings brought in the courts of EU orEFTA Member States, where those proceedings are in contraventionof an arbitration agreement. Although it has been the subject ofmuch discussion in the United Kingdom, the long-term impact andconsequences of this decision remain to be seen.

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Wendy Miles

Wilmer Cutler Pickering Hale and Dorr LLP4 Carlton GardensLondon SW1Y 5AAUnited Kingdom


Wendy Miles is a partner at Wilmer Cutler Pickering Hale and DorrLLP in London. Her practice focuses on international disputeresolution matters, dealing with matters of both private internationallaw and public international law. Ms. Miles has acted as advisorand advocate to a number of international companies in energy,telecommunications, aviation, and other international commercialdisputes. She has conducted arbitrations in several jurisdictions,under various governing substantive and procedural laws, dealingwith both institutional (including ICC, LCIA and AAA) and ad hocarbitrations, and been involved in enforcement proceedings invarious national courts. She also sits as arbitrator on a regularbasis. Ms. Miles is currently alternate New Zealand representativeon the ICC Commission on International Arbitration. She is qualifiedas a Solicitor in England and Wales, with Rights of Audience in theHigher Courts, and a Barrister and Solicitor in New Zealand. Ms.Miles is a graduate of the University of Canterbury (B.A., 1994;LL.B. 1994; LL.M., first class honours, 1998).

Anna Holloway

Wilmer Cutler Pickering Hale and Dorr LLP4 Carlton GardensLondon SW1Y 5AAUnited Kingdom


Anna Holloway is a graduate of the University of Otago and HarvardLaw School. Prior to joining Wilmer Cutler Pickering Hale and DorrLLP in 2007 as an English qualified associate in the firm’sinternational arbitration group, she clerked at the New ZealandCourt of Appeal and the New Zealand Supreme Court, and practicedcommercial law as a barrister of the High Court of New Zealand. Ms Holloway’s international arbitration practice has involvedrepresentation in ICC, PCA and UNCITRAL arbitrations, covering arange of industries, including the energy, oil and gas and bankingsectors. Her practice includes representation in public internationallaw arbitrations, and she has also represented clients in proceedingsbefore the English High Court.

Wilmer Cutler Pickering Hale and Dorr LLP is an international law firm with offices in London, Beijing, Berlin, Boston,Brussels, Frankfurt, Los Angeles, New York, Oxford, Palo Alto, Waltham and Washington, D.C. The firm offers one ofthe world’s premier international arbitration and dispute resolution practices, covering virtually all forms of internationalarbitration and dispute resolution. The firm is experienced in handling disputes administered under a wide variety ofinstitutional rules, including the ICC, AAA, LCIA, UNCITRAL, and ICSID rules. The firm also has extensive experiencewith more specialised forms of institutional arbitration and ad hoc arbitrations. Wilmer Cutler Pickering Hale and Dorr’slawyers have been involved in arbitrations sited across the world, and the group has handled disputes governed by thelaws of more than 30 different legal systems. Our international arbitration group has been involved in more than 500proceedings in recent years and we have successfully represented clients in four of the largest, most complexarbitrations in the history of the ICC and several of the most significant ad hoc arbitrations to arise in the past decade.


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Estonia


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Estonia?

Arbitration is mainly regulated by the Articles 712 to 757 of theEstonian Code of Civil Procedure (CCP). The arbitrationagreement (for solving a dispute which has arisen or which mayarise in respect of a defined contractual relationship) may beconcluded in the form of a clearly separate agreement or as a clearlyseparable clause in an agreement. It shall be in the form that can bereproduced in writing (i.a. expressed in a confirmation letter). Non-compliance with the form requirements does not affect the validityof the arbitration agreement, if the parties consent to arbitration.Otherwise, the general requirements for agreements apply.


If a party to an arbitration agreement is a consumer, the consumershall sign the document that includes the arbitration agreement byhand or by using the digital signature.


Pursuant to the Supreme Court of Estonia, an arbitration agreementmust be clear, since by it the parties waive their right to haverecourse to ordinary civil courts. In practice the arbitrationagreement should indicate the scope of the arbitration agreement,the seat, applicable law, the number and appointment of arbitratorsand the language of the arbitration. A mere agreement on referringa dispute to an arbitral institution is sufficient for an arbitrationagreement to be valid.


Pursuant to the CCP, courts shall not commence proceedings orshall terminate them if the parties have agreed on resolving thedispute in arbitration, except if the validity of the arbitrationagreement is disputed in the statement of claim. The same appliesif there is an effective arbitral award recognisable in Estoniabetween the same parties on the same subject matter and grounds orif respective arbitral proceedings are being conducted.

The Supreme Court has specified that the court, having received aclaim arising from an agreement that contains an arbitrationagreement, has jurisdiction to assess the validity of the arbitrationagreement in accordance with Article 2 of the 1958 New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards (New York Convention) and relevant provisions ofEstonian law.The courts apply these principles and enforce valid arbitrationagreements.


Unlike the cases of arbitration agreement/arbitral award, the CCPdoes not stipulate that the court shall not commence proceedings orshall terminate them if the parties have agreed on resolving thedispute by way of ADR methods other than arbitration. However,pursuant to the CCP, during proceedings the court shall take allpossible measures to settle the case if this is reasonable. We are notaware of any practice of Estonian courts enforcing other ADRagreements than arbitration agreements.


2.1 What legislation governs the enforcement of arbitrationproceedings in Estonia?

Please refer to question 1.1.


The provisions of the CCP on arbitration apply to arbitralproceedings conducted in Estonia, except if otherwise provided bylaw or international agreement. Certain provisions apply even if theplace of arbitration is a foreign country or if the place has not yetbeen determined. The same provisions regulate both domestic andinternational arbitrations.


The CCP is largely based on the Model Law.

Ilmar-Erik Aavakivi

Pirkka-Marja Põldvere

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2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Estonia?

There is no clear practice on the matter. However, certainprocedural rules of CCP regulating arbitration should be deemedmandatory (e.g. equal treatment).

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Estonia? What isthe general approach used in determining whether or not adispute is “arbitrable”?

The object of an arbitration agreement may be a proprietary claim.An arbitration agreement over a non-proprietary claim is valid onlyif it is capable of settlement. An arbitration agreement is void if itsobject is a dispute over the validity and/or termination of aresidential lease agreement, or a dispute over moving out from adwelling or over the termination of an employment contract. Aproprietary claim of a public nature is arbitrable only if anadministrative contract can be concluded with respect to thedisputed matter. Certain other types of disputes may not besubmitted to arbitration, or such right may be restricted, if soprovided by law. There is no clear court practice on arbitrabilityunder the CCP which has been effective since 2006 (please see alsoreference in question 3.3).


The arbitrators have the right to determine their own jurisdiction anddecide on the existence and validity of an arbitration agreement. Forsuch purposes, the arbitration agreement shall be deemed to be aseparate agreement from the rest of the contract terms.

3.3 What is the approach of the national courts in Estoniatowards a party who commences court proceedings inapparent breach of an arbitration agreement?

If it is apparent to courts that a party tries to initiate courtproceedings in apparent breach of an arbitration agreement, thecourts generally shall not commence proceedings (please seequestion 1.4). The Supreme Court has noted that a party cannotinitiate court proceedings in breach of an arbitral agreement even ifthe applicable legal act is claimed to be unconstitutional (regularcourts could decide not to apply the act and refer it to the SupremeCourt for constitutionality analysis; the arbitral tribunal does nothave this right and could refuse to apply the act only if theapplication would be in violation of good faith).


Such circumstances are as follows:if a party submits its claim to the court and the court ascertainsthat the parties have concluded an arbitration agreement;if a party submits its claim to the court and the other partyobjects to the court’s jurisdiction on the basis of an effectivearbitration agreement;when requesting the court to ascertain the existence of anarbitration agreement;

if the arbitrators have found in a separate decision that theyhave jurisdiction and a party has requested review of suchdecision;if a party has made an appeal to the circuit court to set asidea final award on the grounds that no arbitration agreementexisted; and if a party rejects enforcement on the grounds that there is novalid arbitration agreement.

3.5 Under what, if any, circumstances does the national law ofEstonia allow an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

Neither the CCP, nor other laws, specifically regulate the bindingeffect of an arbitration agreement on non-parties to the arbitrationagreement. The court practice on the issue is also yet to bedeveloped. However, the Supreme Court has noted that anarbitration agreement is binding only on its parties and the courtsshall accept claims against non-parties (i.a. against a managementboard member of a party).

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Estonia and what is thetypical length of such periods? Do the national courts ofEstonia consider such rules procedural or substantive, i.e.,what choice of law rules govern the application oflimitation periods?

Under Estonian law, rules on limitation periods are considered to besubstantive law. Courts/tribunals shall apply a limitation periodonly upon the request of a party. Therefore, the expiry of thelimitation period does not in itself exclude the submission of aclaim to court/arbitration but it is a valid objection of the defendant.The general limitation period is 3 years but there are exceptions.



An arbitral tribunal shall apply the legislation agreed on by theparties. In making reference to the law of a state, an agreement isnot presumed to include the conflict of laws rule of such state unlessthe parties have expressly agreed otherwise. An arbitral tribunalshall apply Estonian law if the parties have not agreed on anapplicable law and the applicable law does not arise from law. Atribunal shall take account of the terms and conditions of contractsand of customary practices regarding contracts in so far as this ispossible under the legislation which is applied. A dispute may beresolved based on the principle of justice if the parties haveexpressly agreed on it.


Pursuant to the CCP, in resolving a dispute based on the principle ofjustice, a tribunal shall not deviate from the imperative provisionsof the law of the state which would be applied in case the disputewould be resolved without the agreement on application of theprinciple of justice. In other aspects there are neither clear rules norpractice regarding arbitration.



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The law is silent on the question. Therefore, unless the parties haveagreed on the law applicable, it is likely the law of the seat prevails(though it could also be argued that the law applicable to thecontract as a whole applies). There is no clear practice.



The parties may agree on the number of arbitrators and theprocedure for appointing arbitrators. If the arbitration agreementgives one party an economic or other benefit that significantlyharms the other party regarding composition of the tribunal, theother party may submit to the court an application to determine thearbitrator/tribunal by following other rules.Arbitrators shall have active legal capacity. The parties may agreeon qualification requirements. Judges are not allowed to act asarbitrators elected by parties. Arbitrators may be appointed onlyupon their consent.


If the parties have not agreed on the number of arbitrators, thedispute shall be resolved by three arbitrators. If the parties have notagreed on the appointment procedure, either party shall appoint anarbitrator who shall jointly appoint the chairman. If a party has notappointed an arbitrator within 30 days from receiving the otherparty’s respective request, or if the appointed arbitrators are unableto appoint the chairman within 30 days from their appointment, thearbitrator shall be appointed by court upon a party’s request. If theparties have agreed on appointing one arbitrator but they are unableto agree on the appointment procedure, the arbitrator shall beappointed by the court upon a party’s request. If the parties haveagreed on the appointment procedure and one party breaches it or ifthe parties or both arbitrators are unable to reach agreement or if athird person does not fulfil appointing tasks, either party mayrequest appointment by court, except if the appointment procedureprovides otherwise.


Courts can appoint an arbitrator only upon a party’s respectiverequest (see question 5.2), the appointment must be made within 30days from receiving the request, taking into consideration theparties` agreement regarding the arbitrator and circumstancesguaranteeing the appointment of an independent impartial andcompetent arbitrator.


An arbitrator may be challenged if circumstances exist that give riseto justifiable doubts as to his impartiality, dependence orincompetence or if (s)he does not comply with the arbitrationagreement. A party may challenge an arbitrator appointed by it onlyif it has become aware of the ground after the appointment.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Estonia?

At any stage of the proceedings, an arbitrator shall immediatelydisclose all circumstances that might give rise to justifiable doubtsas to his impartiality, dependence or might otherwise be a groundfor challenge. Similar rule stems from the rules of the ArbitrationCourt of the Estonian Chamber of Commerce and Industry.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Estonia? If so, do those laws or rules applyto all arbitral proceedings sited in Estonia?

Parties shall be treated equally and they shall be given anopportunity to present their case. The parties may agree on theprocedure or refer to the rules of an arbitral institution. If theprocedure does not stem from an agreement or the law, it shall bedetermined by arbitrators. Provisions of the CCP regarding arbitrations apply to arbitralproceedings conducted in Estonia, except if law or foreign treatystipulates otherwise.

6.2 In arbitration proceedings conducted in Estonia, are thereany particular procedural steps that are required by law?

The CCP regulates the content of the statements of claim anddefence, the conduct of hearings and written proceedings. Exceptif otherwise agreed by the parties, the arbitral proceedingscommence and the claim is deemed to have been submitted whenthe respondent receives the statement of claim (no separate requestfor arbitration is required).


The tribunal organises the proceedings orally or in writing, exceptif otherwise agreed. Unless the parties have agreed that no hearingsshall be held, the tribunal shall hold hearings at an appropriate stageof proceedings, if so requested by a party. The parties shall be givenimmediate notice of any hearing and meeting for inspection ofevidence.

6.4 What powers and duties does the national law of Estoniaimpose upon arbitrators?

Pursuant to the CCP, the arbitral tribunal has:the right to determine its competence;the right to apply interim measures that do not restrictpersonal freedom;the duty to treat the parties equally and provide equalpossibilities to present their case;the right to determine the procedure (incl. place ofarbitration, language etc.), if this has not been agreed on bythe parties;the right to decide on the admissibility of evidence and freelyassess evidence;the right to appoint an expert, if necessary;the right to request court assistance in evidentiary mattersand participate in such court activities, incl. asking questions;

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the duty of confidentiality; andthe right to correct the award, if necessary.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Estonia and, if so, isit clear that such restrictions do not apply to arbitrationproceedings sited in Estonia?

The CCP does set forth certain restrictions to the appearance oflawyers in court. However, such restrictions do not apply inarbitration proceedings.

6.6 To what extent are there laws or rules in Estonia providingfor arbitrator immunity?

Both the law and the rules are silent on arbitrator immunity


If the tribunal lacks authority for taking evidence or conductingother court procedure, the tribunal or, at its consent, a party mayrequest court assistance. The court shall follow the CCP. Thearbitrators may participate and ask questions in the taking ofevidence by court. The courts may carry out court activities only incases and to the extent provided by law.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Estonia (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

The CCP is silent on multiparty arbitrations. It can be concluded thatany consolidation etc. is possible only upon the parties’ consent.

6.9 What is the approach of the national courts in Estoniatowards ex parte procedures in the context of internationalarbitration?

No clear court practice can be established on the matter. The CCPstipulates that if the defendant fails to respond to the claim by thedue date, the tribunal shall continue its proceedings. If a party failsto appear at a session or fails to submit documentary evidence bythe due date, the arbitral tribunal may continue the proceedings andmake an award based on the facts already established. If thetribunal considers the above failures to be sufficiently justified, thetribunal shall disregard the failure to act.



Unless otherwise agreed, and upon a party’s application, thetribunal may apply interim measures that do not restrict personalfreedom. The tribunal may demand from both parties the provisionof reasonable security. The tribunal’s decision to apply interimmeasures shall be enforced upon a court’s ruling made upon a

party’s application. The court allows the interim measure only ifthe same measure has not been already requested from the court.For applying the interim measure, the court may rephrase thetribunal’s decision. Upon application of a party, the court mayamend or annul its ruling. If the interim measure turns out to beunjustified, the party that requested it shall compensate the damagesto the other party.A competent organ of an arbitral institution may, until the tribunal’scomposition, submit to the court a party’s application for interimmeasures.


A party may request from court the application of interim measuresprior or after the commencement of the arbitration (see question7.1). A party’s request to a court for interim relief does not affectthe tribunal’s jurisdiction.


Justified requests for interim relief by parties to arbitrationagreements are generally granted.


The CCP is silent on securing the costs specifically. However, inprinciple, the costs may be secured under the general provisions oninterim relief, if justified.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Estonia?

The CCP provides few evidentiary rules and the parties may agreeon such rules. The CCP only stipulates that if a party has filed adocument, then the tribunal shall immediately inform the otherparty thereof and send a copy. The tribunal shall also inform theparties of expert opinions and other documents that it might rely on,and send a copy.


The tribunal has the right to decide on the admissibility of evidence,and to examine and freely assess evidence. In other aspects theparties may agree on evidentiary rules. The tribunal has the right torequest the submission of evidence necessary to resolve the disputeonly from the parties.


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activities, the tribunal or, at the tribunal’s consent, a party mayrequest court assistance (see question 6.7).


For taking evidence abroad, the tribunal can request courtassistance and the court can, under international law, requestassistance from a foreign court.


The CCP does not regulate the production of written/oral witnesstestimony in arbitration. If witnesses are heard by a court, thegeneral rules of the CCP apply. Witnesses are not sworn in beforethe tribunal. Parties may agree on the respective rules, providedthat the principles of equal treatment and right to be heard are notviolated. Cross-examination is allowed.

8.6 Under what circumstances does the law of Estonia treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

The arbitration provisions of the CCP do not regulate privileges.With respect to the submission of documents in court proceedings(also upon the request for court assistance), the CCP provides that adocument shall not be presented to court: (1) by an attorney if (s)hehas received the document in connection with providing legalservices; (2) if the document contains data with respect to which thepossessor of the document (e.g. a counsel, notary, physicianregarding matters known to them ex officio) may not be questioned,or with respect to which the possessor (e.g. child, parent of eitherparty) may refuse to give statements (e.g. if the statement wouldincriminate the person); or (3) by a person who may refuse givingstatements for some other reason. Third persons may submitobjections that stem from law, including material law.

9 Making an Award


Awards shall be in writing and signed by arbitrator(s). Thesignatures of the majority suffice, if the reason for omitted signatureis stated. The dissenting opinion signed by the dissenting arbitrator,if any, is presented after the signatures. The award shall state itsdate and the place of arbitration. Awards shall be reasoned, exceptif the parties have agreed otherwise or if the award is based on asettlement.



A court shall annul an award made in Estonia upon a party’sapplication if the party proves that: (1) the legal capacity of a partyto the arbitration agreement was limited; (2) the arbitration

agreement is invalid under Estonian law or other applicable law; (3)a party was not given proper notice of the appointment of arbitratorsor of the arbitral proceedings or was otherwise unable to present itscase; (4) the award deals with a dispute not contemplated by thearbitration agreement or exceeding its scope; or (5) the compositionof the tribunal or the procedure was not in accordance with the CCPor the parties’ agreement, which has presumably significantlyinfluenced the outcome. The court shall annul the award made inEstonia upon a party’s application or on its own initiative if itascertains that: (1) the subject-matter of the dispute was non-arbitrable under Estonian law; or (2) the award conflicts with publicpolicy or the good morals of Estonia. If the annulment is requestedbecause the dispute was outside the scope of the arbitrationagreement and the award deals with several claims, some within thescope, the award shall be annulled only regarding the claims outsidethe scope. Upon a party’s application, a court may, if reasonable,annul the award and send the case back to the tribunal. Theannulment of the award does not presumably bring along theinvalidity of the arbitration agreement.


No, they cannot.


No, they cannot.

10.4 What is the procedure for appealing an arbitral award inEstonia?

An application for annulment of an arbitral award may be submittedto the court within 30 days after the date of delivery of the award.If an application for correction, supplementation or clarification ofthe award is filed after the award has been delivered, the term ofannulment application shall be extended for 30 days as of the dateof delivery of the award pertaining to the application. Anapplication of annulment cannot be filed if the court has recognisedthe award or declared it enforceable.


11.1 Has Estonia signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

The Act of Ratification of the 1958 New York Convention wasadopted by the Estonian Parliament on 16 June 1993. Estonia hasnot entered any reservations.

11.2 Has Estonia signed and/or ratified any regionalConventions concerning the recognition and enforcementof arbitral awards?

No, it has not.

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11.3 What is the approach of the national courts in Estoniatowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

An arbitral award made in Estonia is recognised in Estonia only ifa court has recognised the award and declared it enforceable.Awards of arbitral institutions are recognised and enforced withoutrecognition and declaration by court. In cases of a ground forannulment, the court shall not declare the award enforceable butshall annul it, except if the award can, under such ground, beannulled only upon a party’s application, but the party has notrequested it within 30 days from receiving the award.Foreign arbitral awards are recognised and enforced in Estonia onlyin accordance with the New York Convention and otherinternational agreements. If not stipulated otherwise in law orforeign treaty, the provisions of the CCP regulating recognition andenforcement of foreign judgments apply. If a foreign arbitral awardthat has been declared enforceable is annulled abroad, the obligatedperson may apply for the annulment of the court judgment declaringthe award enforceable.The parties shall file the respective application (together with theaward or a certified copy thereof and the arbitration agreement) tothe county court specified in the arbitration agreement or, in theabsence of it, to the county court of the place of arbitration. If theplace of an arbitration proceeding is not in Estonia, the applicationshall be filed to Harju County Court.

11.4 What is the effect of an arbitration award in terms of resjudicata in Estonia? Does the fact that certain issues havebeen finally determined by an arbitral tribunal precludethose issues from being re-heard in a national court and, ifso, in what circumstances?

Courts shall not initiate proceedings if an effective arbitral awardexists between the same parties on the same subject matter andsame ground.

12 Confidentiality

12.1 Are arbitral proceedings sited in Estonia confidential?What, if any, law governs confidentiality?

Unless the parties agree otherwise, an arbitrator shall maintain inconfidence any information obtained in fulfilling the obligations ofan arbitrator, if the parties have a legitimate interest in maintainingsuch confidentiality. The CCP does not regulate the confidentialityobligation of the parties.


The CCP does not preclude the use of information disclosed inarbitration in subsequent proceedings.


See questions 12.1 and 12.2.



There is no established court practice but certain punitive damagesmay qualify as unacceptable.


Under Estonian (substantive) law, a party may claim interest of2.5% p.a. and penalty interest 7+2.5% p.a. The rates may change.


Unless otherwise agreed by the parties, the tribunal shall decide inthe award on the division of the costs of the arbitral proceedings andthe necessary expenses borne by the parties. If the amount of thecosts has not been ascertained or if it can be ascertained only afterthe end of the proceedings, the division of costs shall be decided ina separate award. In practice, the costs of the winning party aregenerally fully compensated at the expense of the other party.


An award itself is not subject to tax.


14.1 Has Estonia signed and ratified the WashingtonConvention on the Settlement of Investment DisputesBetween States and Nationals of Other States (1965)?

Yes, it has.

14.2 Is Estonia party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Estonia has executed more than 20 BITs. Estonia joined the EnergyCharter Treaty in 1998.

14.3 Does Estonia have standard terms or model language thatit uses in its investment treaties and, if so, what is theintended significance of that language?

Estonia has used the so-called Anglo-Saxon model of investmenttreaties. The treaties are continuously being amended pursuant toOECD’s suggestions.



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14.4 In practice, have disputes involving Estonia been resolvedby means of ICSID arbitration and, if so, what has theapproach of national courts in Estonia been to theenforcement of ICSID awards and how has thegovernment of Estonia responded to any adverse awards?

Altogether 3 ICSID cases have been brought against Estonia, all ofwhich have been concluded: 1 dispute settled; 1 claim dismissed;and 1 claim satisfied. Thus no practice can be established. In thecase where the award was against Estonia, the state has paid theamounts due.

14.5 What is the approach of the national courts in Estoniatowards the defence of state immunity regardingjurisdiction and execution?

No clear practice can be established. In principle Estonia isfollowing the restrictive state immunity doctrine. This can also beindirectly concluded from a Supreme Court Decision in which aforeign embassy was not exempted from state fee payment whensubmitting a claim to court because the claim did not concerndiplomatic relations (in which case the exemption would haveapplied).

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Estonia? Are certain disputescommonly being referred to arbitration?

There have been no noteworthy trends within the last year but, ingeneral, arbitration is continuously gaining popularity.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Estonia, such as pending or proposedlegislation that may substantially change the lawapplicable to arbitration?

There are no issues related to arbitration. However, there isproposed legislation on conciliation.

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Pirkka-Marja Põldvere

Aivar Pilv Law OfficeVabaduse väljak 1010146 TallinnEstonia

Tel: +372 6 191 630Fax: +372 6 404 653Email: [email protected]: www.apilv.ee

Pirkka-Marja Põldvere is a graduate of the University of Tartu,Faculty of Law, and holds a degree of Master of Laws inInternational Commercial Arbitration Law (LL.M) from StockholmUniversity (2004). Before joining Aivar Pilv Law Office she workedfor 6 years for Law Office Raidla Leijins Norcous (RoschierRaidla).Since 2006 Pirkka-Marja has given lectures on arbitration at theUniversity of Tartu (as part of the private international law course).She is also a co-author of the 3rd ed of the book Rahvusvahelineeraõigus (Private International Law), 2008 (Juura, Tallinn),contributing to the chapter on arbitration. Pirkka-Marja has been amember of the Estonian Bar Association since 2003.

Ilmar-Erik Aavakivi

Aivar Pilv Law OfficeVabaduse väljak 1010146 TallinnEstonia

Tel: +372 6 191 630Fax: +372 6 404 653Email: [email protected]: www.apilv.ee

Ilmar-Erik Aavakivi is a graduate of the University of Tartu, Facultyof Law (1995), and holds a scientific degree of magister iuris fromUniversity of Tartu (1999). He joined Aivar Pilv Law Office in 1998having previously worked for Tallinn City Government and Law OfficeEhasoo & Benevolenskaja. Ilmar-Erik Aavakivi has experience inrepresenting the client, the Republic of Estonia, in an investor-statedispute initiated by Finnish and German banks under ICSIDConvention. Ilmar-Erik has been a member of the Estonian BarAssociation since 1996 and fellow (member) of the Center forInternational Legal Studies since 2003.

Aivar Pilv Law Office was founded in 1993. During our more than 15 years of activities we have thoroughly exploredthe wishes and needs of our clients. Our main aim is to render high-quality legal assistance on an internationallyrecognised level, which can be characterised by flexible and client-orientated service. Aivar Pilv Law Office hasrendered legal assistance to Estonian and international business enterprises, as well as to public institutions. Ourattorneys have diverse experience in representing the interests of the clients in different fields of law, including:

civil law (contract law, property law (also real estate), corporate law, private international law, insurance law etc.);

litigation and arbitration;

bankruptcy and reorganisation;

mergers and acquisitions;

intellectual property and trademarks;

tax and customs law;

building and planning law;

public procurement and competition law; and

administrative (court) proceedings.

Aivar Pilv Law Office is a member of the international law offices’ chain TAGLaw which guarantees the availability oflegal assistance to our clients through trustworthy partners in different parts of the world.

For more information please visit our website at www.apilv.ee


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Finland


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Finland?

The formal legal requirements for an arbitration agreement to beenforceable under Finnish arbitration law are in essence identical tothose of the UNCITRAL Model Law on International CommercialArbitration (the “UNCITRAL Model Law”). Therefore, anarbitration agreement needs to be made in writing. An arbitrationagreement is also considered to be in writing when contained in anexchange of communications between the parties, provided that awritten record of the agreement to arbitrate can be produced. In addition, Finnish arbitration law provides that arbitration clausescontained in, e.g., testaments, bills of lading and articles ofassociation of corporate entities, shall have the same effect asarbitration agreements, provided that the parties or the party againstwhom claims are being asserted are bound by them.


There are no special requirements or formalities to be taken intoaccount when an individual person concludes a commercialtransaction including an arbitration agreement (whereas there arelimitations as regards consumer contracts). All persons who havethe legal capacity to conclude a contract concerning the subjectmatters in question also have the capacity to enter into an arbitrationagreement.


It is advisable to address and explicitly determine the followingmatters when drafting an arbitration agreement:

the parties to the agreement;the scope of the agreement (most often determined in thebroadest possible way, i.e. “any disputes arising out of or inconnection to this agreement…”);the law governing the main agreement (the law on the basisof which the substance of a possible future dispute should beassessed);the seat of the arbitration;the applicable institutional rules, if any;the number of arbitrators;

the way in which the arbitrator(s) should be appointed;the language(s) to be used in the arbitral proceedings; andconfidentiality (as between the parties).


Finland has a long tradition of arbitrating disputes. A remarkablyhigh number of commercial disputes are referred to arbitration andarbitral clauses are very frequently included in domestic as well asinternational business agreements. Arbitration is therefore a well-known device in Finland and the environment, including theapproach of national courts, can in general be said to favour andrespect arbitration agreements. Recent Supreme Court decisionsreaffirm the supportive attitude of Finnish courts to arbitration.Finnish courts will not ex officio decline jurisdiction in respect ofdisputes falling under the scope of an arbitration agreement.Therefore, if a defendant intends to invoke an arbitration agreementas a bar to court proceedings, it must do so at the latest whensubmitting its first statement on the substance of the dispute (i.e.corresponds to Art. 8(1) of the UNCITRAL Model Law).


There is no reported case law on the enforcement of ADRagreements or clauses. Since 1 January 2006, parties may submittheir dispute to court-annexed mediation, i.e. request the Finnishcourts to assist them in solving their disputes amicably. Thisscheme differs fundamentally from e.g. the UK model, as itenvisages that judges themselves will engage in conductingmediation and excludes the use of non-judges as mediators. In casea settlement is reached during court-annexed mediation, the judgehaving conducted the mediation may, upon request, confirm thesettlement agreement by decision. Such confirmed settlement isdirectly enforceable in the same way as a judgment.


2.1 What legislation governs the enforcement of arbitrationproceedings in Finland?

Arbitration in Finland is governed by a specific act, the ArbitrationAct (967/1992, as amended) (the “Arbitration Act”), which enteredinto force on 1 December 1992. The Arbitration Act governsarbitrations taking place in Finland in general, as well as the effects

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in Finland of an arbitration agreement providing for arbitrationabroad and the recognition and enforcement in Finland of arbitralawards rendered abroad.Finland has signed and ratified the New York Convention on theRecognition and Enforcement of Foreign Arbitral Awards (the“New York Convention”).


The Arbitration Act is divided into two parts: the first part (Sections2-50) applies to all arbitral proceedings having their seat in Finland,i.e. irrespective of whether they are related to a national or aninternational dispute; and the second part (Sections 51-55) appliesto all “foreign awards”, i.e. arbitral awards rendered outside ofFinland. The provisions of the Arbitration Act concerning recognition andenforcement of foreign arbitral awards deviate slightly from thoseapplicable to awards rendered in Finland, but comply with therequirements of the New York Convention and the UNCITRALModel Law, and are in certain respects more favourable torecognition and enforcement than said international instruments.


The Finnish legislation on arbitration was reformed in 1992. Themain purpose of the reform was to modernise the then-existingarbitration act (dating back to 1928) and adapt it to internationalstandards. The present act reflects the provisions of theUNCITRAL Model Law, although the UNCITRAL Model Law hasnot as such been implemented into Finnish law.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Finland?

As indicated above (question 2.2), the first part of the ArbitrationAct (Sections 2-50) applies to all arbitration proceedings havingtheir seat in Finland irrespective of whether they are related to anational or an international dispute. This first part of the Arbitration Act contains a fairly small numberof procedural rules and arguably only one mandatory provision,reflecting the principle of audiatur et altera pars (the parties’ rightto be given sufficient opportunity to present their case). Otherwisethe parties are free to arrange proceedings as they see fit.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Finland? What isthe general approach used in determining whether or not adispute is “arbitrable”?

Under the Arbitration Act, any dispute in a civil or commercialmatter, which is capable of being settled between the parties, can besubmitted to be finally resolved in arbitration by an agreementbetween the parties. The decisive criterion is whether the recoursesought could be obtained without the intervention of publicauthorities.


Once arbitral proceedings have been instituted, the arbitral tribunalis permitted, and obliged, to rule on its own jurisdiction. In case thearbitrators find that the disputed matter(s) fall within theirjurisdiction, the arbitral proceedings will consequently continue. Ifthe defendant believes that the arbitration agreement is invalid orthat the disputed matter(s) fall outside the scope of the arbitrationagreement, it may, however, institute a declaratory action to thiseffect before the Finnish courts. The validity and scope of anarbitration agreement may therefore also be tried by the courts,even during pending arbitral proceedings.

3.3 What is the approach of the national courts in Finlandtowards a party who commences court proceedings inapparent breach of an arbitration agreement?

As stated above (question 1.4), the legal environment, including theapproach of national courts, can in general be said to favourarbitration and respect arbitration agreements. The courts cantherefore be expected to dismiss court proceedings initiated in anapparent breach of a valid arbitration agreement, provided that thearbitration agreement is invoked in a timely manner.


As indicated above (question 3.2), the arbitrators do not haveexclusive jurisdiction as to the determination of their jurisdiction.A Finnish court can be requested to address the issue under thefollowing four circumstances:

In case proceedings are initiated before a Finnish court andthe defendant, prior to addressing the merits of the dispute,objects to the court’s jurisdiction, the court shall decide thisissue as a preliminary question and is obliged to declinejurisdiction in favour of arbitration, if it finds that thematter(s) in dispute is covered by an arbitration agreement.A separate action can be instituted before a Finnish courtwith the purpose of obtaining the court’s assessment ofwhether a specific arbitration agreement is valid or ofwhether a certain matter(s) in dispute is covered by sucharbitration agreement.An arbitral award may, upon request of a party, be set asideor denied enforcement by a Finnish court, if the court findsthat the arbitrators have exceeded their authority.Lack of jurisdiction may, in certain circumstances, constitutegrounds for refusing recognition and enforcement of anaward.

3.5 Under what, if any, circumstances does the national law ofFinland allow an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

Under Finnish law, an Arbitral Tribunal has, as a general rule, onlyjurisdiction to decide disputes as between the parties to thearbitration agreement. However, under limited circumstances, non-signatories may also be bound by an agreement to arbitrate. Forexample, the Finnish Supreme Court has in individual cases(2007:18 and 2007:39) held that the claimants basing their claimsupon alleged contractual rights under contracts to which they werenot parties were also bound by arbitral clauses contained in suchcontracts.



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3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Finland and what is thetypical length of such periods? Do the national courts ofFinland consider such rules procedural or substantive, i.e.,what choice of law rules govern the application oflimitation periods?

Finnish law does not require that any specific limitation period beobserved in relation to the institution of arbitral proceedings. Underthe Finnish Limitations Act (728/2003) regulating limitationperiods in general, the limitation period of a monetary claim is, as amain rule, three years beginning from the due date of the monetaryclaim in question (if the parties have agreed on a due date).Statutory limitation provisions are considered to be substantive,and, reasoning under Finnish conflict of laws rules, the applicationof limitation periods is accordingly governed by the law applicableto the merits of the dispute.



Under Section 31(1) and (3) of the Arbitration Act, the arbitraltribunal shall found its award on the law, and may only decide exæquo et bono if the parties have expressly authorised it to do so..If the parties have chosen the law of a given State as applicable tothe substance of the dispute, the arbitrators shall apply that law(Section 31(2)). Absent express authorisation from the parties, ithas been held that arbitrators would not be entitled to decide acommercial dispute under e.g. “general principles of internationaltrade law” or “lex mercatoria”. According to the preparatory works of the Arbitration Act, when thedispute is connected to more than one country, and failing a choiceof law by the parties, the applicable law shall be determined inaccordance with the conflict of law rules which the arbitrators deemapplicable.


An arbitral tribunal resolving an international dispute and having itsseat in Finland may consider and under limited circumstancespossibly give effect to mandatory provisions of laws other than theapplicable substantive law. In order not to render an unenforceable award, the arbitral tribunalis well advised to take into account and rule in compliance withFinnish public policy as well as rules regularly constituting publicpolicy internationally.


The doctrine of separability is recognised in Finland, and, accordingly,an arbitration clause is considered autonomous and separate from themain contract. Likewise, the Finnish Supreme Court has confirmedthat the law applicable to the main contract is not necessarilyapplicable to the arbitration agreement (ruling 2007:39). In theabsence of any express party agreement on the law applicable to thearbitration agreement (which is rare), the arbitration agreement islikely to be governed by the law of the seat of the arbitration (inconformity with Article V(1)(a) of the New York Convention).



Under the Arbitration Act, any natural person may be appointed toact as arbitrator, including non-Finnish nationals. The parties arealso free to agree on the arbitrators’ qualifications, the only generalrequirement being legal capacity (which means that the person inquestion must be of age and may not be under guardianship or inpersonal bankruptcy).


Where the method chosen by the parties fails, the parties are free toagree on a different method. If a mutually acceptable solutioncannot be reached, a party or the parties may request a court of lawto appoint an arbitrator or arbitrators under certain circumstances,e.g. where one party has refused to appoint an arbitrator as agreed.


It is generally considered that a court cannot intervene in arbitralproceedings other than when specifically stipulated in the law.According to the Arbitration Act, a court may intervene byremoving an arbitrator at the request of a party if the arbitrator failsto perform his functions or if he delays the arbitration without justcause. Similarly, a court may appoint a new arbitrator upon requestif a previously appointed arbitrator dies, resigns or is removed (seealso the answer to question 5.2 above).


According to the Arbitration Act, an arbitrator must be independentand impartial (Section 9). A person who has been approached forthe purposes of being appointed arbitrator is, unless he or sherefuses the appointment, under a duty to immediately disclose allcircumstances likely to give rise to justifiable doubts as to his or herimpartiality or independence (Section 9(2)). A person having beenappointed arbitrator is further subject to a continuing obligation,throughout the arbitral proceedings, to disclose without delay allsuch relevant circumstances of which the parties have notpreviously been informed (Section 9(3)). Under Section 10 of theArbitration Act, an arbitrator may be challenged by a party if he orshe would have been disqualified to handle the matter as a judge orif circumstances exist which give rise to justifiable doubts as to hisor her impartiality of independence.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Finland?

As stated above (question 5.4), the Arbitration Act imposes anexpress duty on arbitrators to disclose any circumstances likely togive rise to justifiable doubts as to their impartiality andindependence. No other rules or guidelines are available.

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6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Finland? If so, do those laws or rules applyto all arbitral proceedings sited in Finland?

Sections 2-50 of the Arbitration Act are applicable to all arbitrationshaving their seat in Finland. The Act contains a fairly small numberof procedural rules and, as mentioned under question 2.4, only onemandatory provision, reflecting the principle of audiatur et alterapars (the parties’ right to be given sufficient opportunity to presenttheir case). Otherwise, the emphasis is on the parties’ wishes,impartiality and expedience. It is widely recognised that theFinnish Procedural Code does not apply to arbitral proceedings, noteven in a complementary manner.

6.2 In arbitration proceedings conducted in Finland, are thereany particular procedural steps that are required by law?

As mentioned above (under question 6.1), the Arbitration Actcontains only one mandatory procedural rule: the parties’ right to begiven sufficient opportunity to present their case. In practice thismeans that both parties, as a main rule, shall be allowed (i) to filetheir own written pleadings and reply to written pleadings filed bythe other party; (ii) to present written and oral evidence, includinghearing witnesses and/or experts; (iii) to comment on evidencepresented by the other party, including conduct cross-examinationof such party’s witness(es)/expert(s); and (iv) to argue their case.


The Arbitration Act contains no specific rules on how hearingsshould be conducted. The arbitrators are under a general obligationto ensure impartiality and expediency throughout the arbitralproceedings. Arbitral proceedings conducted in Finland aregenerally characterised by flexibility and driven by the parties’individual wishes.The Central Chamber of Commerce of Finland (the “CCCFArbitration Institute”) provides institutional arbitration servicesdomestically as well as internationally. The CCCF ArbitrationInstitute has issued a set of arbitration rules which, when applicable,supplement the Arbitration Act. These rules correspond generallyto those of other international arbitration institutes and arepublished in Finnish, Swedish, English and Russian on theinstitution’s home page: www.arbitration.fi.

6.4 What powers and duties does the national law of Finlandimpose upon arbitrators?

Arbitrators have, under the Arbitration Act: (i) an ongoing duty todisclose circumstances likely to give rise to justifiable doubts as totheir impartiality and independence; (ii) powers to determine theplace of the arbitration in the absence of a party agreement; (iii)powers to rule on the tribunal’s jurisdiction if relevant; (iv) a dutyto give the parties sufficient opportunity to present their case; (v) aduty to otherwise conduct the arbitral proceedings in accordancewith what the parties have agreed; (vi) powers to conduct thearbitral proceedings in such a manner as they consider appropriatesubject to due process requirements and possible party agreements;(vii) powers to hear parties, witnesses and experts and makeinspections where appropriate, including outside of Finland; (viii)

powers to require (but not to coerce) a party, a witness or any otherperson to appear for examination and request (but not order)production of one or more specified written documents or otherobjects which may have relevance as deemed needed; (ix) powersto appoint an expert if deemed needed; (x) powers to renderseparate arbitral awards under certain circumstances; and (xi) a dutyto issue an order for the termination of the arbitral proceedings or torender an arbitral award in accordance with the applicable law (aspossibly designated by the parties), if not expressly authorised todecide ex aequo et bono.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Finland and, if so, isit clear that such restrictions do not apply to arbitrationproceedings sited in Finland?

Finnish law does not restrict the appearance before a court of law ofpersons serving as either counsel or attorney, provided that suchpersons are entitled to practice advocacy in other Member States ofthe European Economic Area or in other States with which the EUand its Member States have concluded an agreement of mutualrecognition. Further, there is no obligation under Finnish law to usean attorney (a member of the Bar) in legal proceedings. The above,however, only applies to court proceedings. The parties to anarbitration taking place in Finland may appear in person or may berepresented by any person of their choosing, regardless of his/hernationality, education, experience etc.As regards arbitrators, it follows from Section 8 of the ArbitrationAct that, unless otherwise agreed by the parties, anyone who hasfull legal capacity may act as an arbitrator (i.e. the person inquestion must be of age and may not be under guardianship or inpersonal bankruptcy). The law imposes no requirements as to thearbitrator’s education, ability, skill, or experience. It is alsoexpressly stated in Section 8(2) of the Arbitration Act that a personwho is not a Finnish citizen may act as an arbitrator in Finland.

6.6 To what extent are there laws or rules in Finland providingfor arbitrator immunity?

Under Finnish law, an arbitrator may be held liable for possibledamages under exceptional circumstances if he/she, e.g., is guilty ofmanifest procedural errors or omissions. The Finnish SupremeCourt has (in case 2005:14) held an arbitrator liable to compensatethe arbitral costs incurred by a party in a case where the arbitralaward had been set aside on the basis of said arbitrator’s conflict ofinterest which had not been duly disclosed to the parties. In itsdecision, the Supreme Court held that the relationship between anarbitrator and a party is generally comparable to a contractualrelationship and that the liability of an arbitrator must therefore beassessed under the rules of contractual liability.


The courts have no general right to intervene during arbitralproceedings in case e.g. the arbitrators have deviated from what hasbeen agreed by the parties (but this can constitute grounds for thecourts to set aside an arbitral award afterwards). However, if thearbitral tribunal deems it necessary, a party may request the courtsto provide assistance in certain evidentiary matters. Furthermore,the courts may have a role in the choice and removal of arbitrators(see the answers to questions 5.2 and 5.3).



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6.8 Are there any special considerations for conductingmultiparty arbitrations in Finland (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

The Arbitration Act does not contain specific provisions onmultiparty arbitration. The Arbitration Rules of the CCCFArbitration Institute, however, provide that if more than two partiesare involved in the arbitration, the institute may appoint allarbitrators in the case. Consolidation of multiple arbitrationsrequires the consent of all of the involved parties. The joining of orintervention of a third party also requires the consent of bothparties.

6.9 What is the approach of the national courts in Finlandtowards ex parte procedures in the context of internationalarbitration?

No reported case law exists in this respect.



Finnish law does not prohibit an arbitral tribunal with its seat inFinland from deciding on interim measures. However, interimmeasures granted by an arbitral tribunal are not enforceable andcannot be rendered enforceable by party agreement. Furthermore,it follows explicitly from the Arbitration Act that an arbitral tribunalcannot impose conditional fines or use other means of constraint inorder to e.g. secure compliance with interim measures.


Finnish courts may grant such interim measures as they alsoordinarily have the power to grant in support of arbitrationproceedings, regardless of whether the seat of arbitration is situatedin Finland or abroad. Interim measures may be granted both beforeand during an arbitration. The filing of an application for interimrelief does not affect the jurisdiction of an arbitral tribunal.


In practice, Finnish courts approach a request for interim reliefmade in connection to arbitral proceedings in the same way asrequests for such relief made in disputes where the underlyingclaim(s) is subject to litigation before a court of law. In Finland, theprocedure for obtaining interim relief to secure a monetary claim isgenerally rather straightforward and expedient. However, there arevarious mechanisms to protect the interests of the defendant, suchas the applicant’s strict liability for damages, an obligation to lodgea full security to cover such possible damage and an obligation to

initiate proceedings with regard to the underlying claim within ashort period of time.


The Arbitration Act allows for the arbitrators to require a deposit ora security for their fees and expenses. Arbitrators normally requesteach party to pay half of the amount of the security, but the partiesremain jointly and severally liable for the entire amount.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Finland?

No specific rules of evidence exist. Arbitrators are allowed torequest that a party, a witness or another person appear before themin order for the arbitral tribunal to promote an appropriate andexpedient examination of the dispute. The arbitrators have,however, no authority to take testimony under oath or solemnaffirmation. The arbitrators are further, upon request of a party orex officio, allowed to request a party or other person to submit suchdocuments or other objects in their possession that the arbitratorsdeem relevant for the assessment of the dispute. The above requestsare not enforceable, and arbitrators have no authority to imposepenalties for non-compliance.


Finnish law does not prevent arbitrators from ordering disclosure.Despite this, orders for disclosure are not enforceable under Finnishlaw. Adverse inferences drawn by the arbitrators are the onlypossible consequence of non-compliance with such an order. Asdescribed below (question 8.3), courts can order production ofspecified documents at the request of arbitrators.


As a main rule, arbitral proceedings are driven by the parties. If thearbitral tribunal deems it necessary that a witness or an expert beexamined in court, that a party be examined under oath or that aparty or any other person be ordered to produce evidence ofrelevance, a party may request court assistance in the matter. Suchrequests have been rare, but it is assumed that a court wouldgenerally provide assistance expeditiously. Pursuant to theArbitration Act, the court shall comply with the request wherepossible, but following the rules of Finnish civil procedure. TheFinnish Procedural Code does not provide for a broad disclosuremechanism comparable to “discovery”, but it does provide Finnishcourts with the authority to order the production of specifieddocuments under certain circumstances, provided that theproduction does not result in the disclosure of a business secret.


The Arbitration Act does not contain any specific rules ondisclosure or discovery. Traditionally, it has been the role of each

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party to produce the evidence it intends to rely on. During recentyears, however, requests for the production of documents havebecome increasingly common. As mentioned above (question 8.2),an arbitral tribunal is not prevented from ordering the production ofdocuments. Nevertheless, such orders are not enforceable underFinnish law. The procedure for the production of documents is,absent an agreement by the parties, to be determined by the arbitraltribunal.


The Arbitration Act does not contain specific rules regarding theproduction of written and/or oral witness testimony. Writtenwitness statements are often used in international arbitralproceedings conducted in Finland. Witnesses are not sworn inbefore the arbitral tribunal. If the arbitral tribunal finds it necessarythat a witness be examined under oath, a party may, however,request court assistance. Cross-examination is allowed andgenerally considered as a part of due process.

8.6 Under what circumstances does the law of Finland treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

Finnish law does not specifically regulate the treatment ofdocuments which have been submitted in the context of arbitralproceedings.

9 Making an Award


As mentioned above (question 4.1), the arbitral tribunal shall foundits award on the law applicable to the substance of the particulardispute in question and may only decide ex aequo et bono if theparties have expressly authorised it to do so. The award shall be made in writing and shall be signed by each ofthe arbitrators. The date and the place of arbitration shall be statedin the arbitral award. If all of the arbitrators are not in agreement ofthe outcome, the award shall be rendered in accordance with theopinion of the majority of the arbitrators. If no majority vote can beattained for any opinion, the opinion of the chairman shall prevail,unless otherwise agreed by the parties.If the parties manage to settle their dispute during the arbitralproceedings, the arbitral tribunal may record such settlement in theform of an arbitral award (by consent).The arbitral tribunal may render a separate partial award on anindependent matter in a case where several claims have been madeor decide separately a part of a claim. However, a claim formonetary relief and a set-off claim made against it shall be decidedtogether.If the parties so agree, the arbitrators may separately render anarbitral award regarding an issue on which the resolution of otherparts of the dispute depends.When the award has been made, a copy of the signed award shall begiven to each party at a session of the arbitral tribunal or deliveredto them in a verifiable way.



Under Finnish law, an arbitral award cannot be appealed as to itsmerits.Notwithstanding the above, the amount of compensation due to thearbitrator(s) (if it has been fixed in the award, as is commonlydone), can be appealed by the parties within a certain time limitafter having received the award.Otherwise, the only recourse available to a party against an arbitralaward rendered in Finland is an application to set aside the award onthe grounds specified in the Arbitration Act. An award can be setaside by a court if: (i) the arbitral tribunal has exceeded its authority;(ii) an arbitrator was not duly appointed; (iii) an arbitrator could havebeen disqualified from acting as arbitrator, but a challenge to thiseffect has not been accepted before the award was given, or the partyhas only become aware of the grounds for disqualification at such alate stage that it has not been able to challenge the arbitrator beforethe arbitral award was given; or (iv) the arbitral tribunal has not givena party sufficient opportunity to present its case. In addition, an arbitral award rendered in Finland shall be null andvoid to the extent that the arbitrators have decided a non-arbitrableissue or to the extent that the award violates the public policy ofFinland (ordre public).


As mentioned (question 9.1), Finnish law does not provide for anyform of appeal against an arbitral award on the law or on the factsof the case. The Arbitration Act does not provide the parties with apossibility to enter into exclusion agreements by which they inadvance waive their right to seek remedies against arbitral awards.


In theory, the parties may in their arbitration agreement provide foran appeal on the merits of the award to a second arbitral instance,but such agreements have been extremely rare and are, as such, notenvisaged in legislation.

10.4 What is the procedure for appealing an arbitral award inFinland?

As indicated above (questions 10.1 and 10.2), Finnish law does notprovide for any form of appeal against an arbitral award on the lawor on the facts of the case.


11.1 Has Finland signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

Finland has ratified the New York Convention. Finland has not



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made any reservations regarding reciprocity or otherwise, norrestricted the convention’s application to awards in commercialdisputes. The Arbitration Act contains provisions on theenforcement of arbitral awards rendered in Finland (Sections 43-45)and separate provisions (Sections 52-55), reflecting the New YorkConvention on the recognition and enforcement of arbitral awardsrendered outside of Finland.

11.2 Has Finland signed and/or ratified any regionalConventions concerning the recognition and enforcementof arbitral awards?

Finland has not entered into any regional conventions concerningrecognition and enforcement of arbitral awards.

11.3 What is the approach of the national courts in Finlandtowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

All arbitral awards made in Finland, irrespective of whether relatedto a national or an international dispute, are subject to the same setof enforcement and recourse rules. The grounds for refusing theenforcement of an arbitral award rendered outside of Finland areslightly different from those applying to awards rendered inFinland, whereas the enforcement procedure as such is identical.The enforcement of an arbitral award shall be initiated before thecompetent court of first instance (a District Court), most often thecourt having jurisdiction in the area where the losing party isdomiciled or has assets. No time limit exists. The application forthe enforcement of an arbitral award shall be accompanied by theoriginal arbitration agreement and the original award or a dulycertified copy (and translations, unless the documents are already inthe Finnish or Swedish languages or a special exception has beengranted by the court). The court is not entitled to require any otherdocuments or evidence in support of the application forenforcement. The courts may only dismiss an application for the recognition andenforcement of an arbitral award ex officio if the court finds that theaward violates the public policy of Finland. Finnish arbitration lawis more favourable to the recognition and enforcement of foreignawards than the New York Convention and the UNCITRAL ModelLaw in that non-arbitrability of a given disputed matter does not initself constitute a ground for refusing the recognition orenforcement of a foreign arbitral award.

11.4 What is the effect of an arbitration award in terms of resjudicata in Finland? Does the fact that certain issues havebeen finally determined by an arbitral tribunal precludethose issues from being re-heard in a national court and, ifso, in what circumstances?

A final arbitral award on the merits of a dispute constitutes resjudicata immediately when rendered. It is binding on the partiesand must be recognised by courts, other authorities and arbitraltribunals as a final decision on the issue subjected to arbitration.

12 Confidentiality

12.1 Are arbitral proceedings sited in Finland confidential?What, if any, law governs confidentiality?

Arbitral proceedings conducted in Finland are not public. No

statutory provisions ensuring the confidentiality of arbitralproceedings exist, but it is generally accepted in Finland thatarbitrators are not allowed to disclose what has come to theirknowledge during the proceedings.In the event that an arbitrator is a member of the Finnish BarAssociation, it is conceivable that he or she would be considered tobe bound by the confidentiality obligations applicable to membersof the Bar also when acting as an arbitrator.With respect to the parties in dispute, the legal position is less clear.In order to make sure that a counterparty would be subject to aconfidentiality obligation, it is therefore recommendable that theissue is addressed and determined in the arbitration agreement or atthe latest when the arbitral proceedings are instituted.


As mentioned above (question 8.3), Finnish law does not providefor any mechanism comparable to “disclosure” or “discovery”. Asalso mentioned above (question 12.1), Finnish law does not containany statutory provisions ensuring the confidentiality of arbitralproceedings. The question of whether information disclosed duringarbitral proceedings can be referred to and/or relied on insubsequent proceedings is complex as a variety of differentsituations can be envisaged. It is, in general, conceivable that suchinformation can be used in subsequent proceedings.


See the answer to question 12.1 above.



Damages are available, but punitive damages cannot as such besought under Finnish substantive law. In case the parties, however,have agreed that a law, which does recognise punitive damages,should be applicable to the substance of the dispute and suchdispute is dealt with in an arbitration having its seat in Finland, it isconceivable that the arbitrators would award punitive damages.However, it is possible that awarding punitive damages, under somecircumstances, might violate the public policy of Finland andtherefore could result in the award being set aside or declaredunenforceable in Finland.


As a main rule, interest can be awarded in accordance with the lawapplicable to the merits, if requested by the parties.


Unless otherwise agreed or decided, the parties are jointly andseverally obliged to pay a reasonable fee to the arbitrators andcompensate their expenses. The arbitral tribunal may order the

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losing party to partly or fully compensate the expenses incurred bythe other party in connection to an arbitration (including alsoreasonable fees and expenses of legal counsel), unless otherwiseagreed by the parties.


The award in itself is not subject to tax.


14.1 Has Finland signed and ratified the WashingtonConvention on the Settlement of Investment DisputesBetween States and Nationals of Other States (1965)?

Finland has ratified the Convention on the Settlement of InvestmentDisputes between States and Nationals of other States (the “ICSIDConvention”) and attained status as Contracting State to the ICSIDConvention on 8 February 1969.

14.2 Is Finland party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Finland has signed Bilateral Investment Treaties (BITs) with over50 countries. Most of these BITs have entered into force and allowfor recourse to arbitration under the auspices of the InternationalCentre for the Settlement of Investment Disputes (ICSID). Finlandhas also ratified the Energy Charter Treaty.

14.3 Does Finland have standard terms or model language thatit uses in its investment treaties and, if so, what is theintended significance of that language?

Finland has developed a Draft Model Agreement on the Promotionand Protection of Investments.

14.4 In practice, have disputes involving Finland been resolvedby means of ICSID arbitration and, if so, what has theapproach of national courts in Finland been to theenforcement of ICSID awards and how has thegovernment of Finland responded to any adverse awards?

There is no record of any investment dispute involving Finland as aState having been resolved by means of ICSID arbitration to date.

14.5 What is the approach of the national courts in Finlandtowards the defence of state immunity regardingjurisdiction and execution?

The Finnish Supreme Court has sanctioned the principle of stateimmunity in at least two decisions from 1993 and 2007 (1993:120and 2007:49), ruling that as a point of departure a foreign State isunder no obligation to submit to the jurisdiction of Finnish courts.The Supreme Court has further held that this principle is by nomeans absolute, and drawn a distinction between the public andprivate law functions of a State. Although Finland is not a signatoryto the European Convention on State Immunity, the Supreme Courthas held in 1993 that the provisions of this Convention mayfunction as a source of international customary law even in Finland.Finland has signed but not ratified the UN Convention onJurisdictional Immunities of States and Their Property, which hasyet to enter into force. There is no reported Finnish case lawrelating to investor-state arbitrations.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Finland? Are certain disputescommonly being referred to arbitration?

As already stated above (answer to question 1.4), Finland has a longtradition of arbitrating disputes and a very high number ofcommercial disputes are referred to arbitration. Arbitral proceedings, including international arbitral proceedings,conducted in Finland as well as in other Nordic countries, are ingeneral characterised by pragmatism and informality and focusedon accommodating the needs and wishes of the specific parties indispute in a flexible and case-by-case oriented manner.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Finland, such as pending or proposedlegislation that may substantially change the lawapplicable to arbitration?

The Arbitration Act explicitly provides that an arbitration clause inthe bylaws of a limited liability company or of any other companyor corporate entity shall have the same effect as an arbitrationagreement. Under the present Finnish Companies Act, whichentered into force on 1 September 2006, a provision included in thearticles of association of a limited liability company after such dateshall be binding not only as regards disputes involving the company(which was the case under the former companies act), but also withregard to disputes, e.g., as between shareholders or as between ashareholder and a member of the board. This further reaffirmsFinland’s supportive attitude to arbitration.



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Petri Taivalkoski

Roschier, Attorneys Ltd.Keskuskatu 7 AFIN-00100 HelsinkiFinland

Tel: +358 20 506 6237Fax: +358 20 506 6100Email: [email protected]: www.roschier.com

Petri Taivalkoski is a partner and one of the senior practitioners inRoschier’s Dispute Resolution practice. Mr. Taivalkoski is anexperienced litigator and provides services as both institutionally orad hoc appointed arbitrator or counsel for one of the parties indomestic as well as international disputes. Mr. Taivalkoski has gained an LL.M. from the University of Helsinkiin 1990 and a DEA degree from l’Université Panthéon-Assas ParisII in 1996. Mr. Taivalkoski joined the firm in 1990 and became apartner in 2000. He has been a member of the Finnish BarAssociation since 1995. Mr. Taivalkoski is a member of the ICC Commission on Arbitrationand AIJA (having acted as president of the AIJA Civil LitigationCommission from 2000 to 2005). Mr. Taivalkoski is also a memberof the Finnish Arbitration Association and a chairman of theMediation Board of the Finnish Bar Association. Mr. Taivalkoski isfurthermore secretary of the Guild of Law and Ethics of Advocatesof the Finnish Bar Association (since 2001). Mr. Taivalkoski’s working languages are Finnish, Swedish, English,French and German.

Aapo Saarikivi

Roschier, Attorneys Ltd.Keskuskatu 7 AFIN-00100 HelsinkiFinland

Tel: +358 20 506 6577Fax: +358 20 506 6100Email: [email protected]: www.roschier.com

Aapo Saarikivi is an associate lawyer at Roschier’s DisputeResolution practice. After joining the firm in 2007, Mr. Saarikivi hasdivided his time between domestic and international arbitrations,acting both as counsel to parties as well as secretary to arbitraltribunals. Mr. Saarikivi has gained an LL.M. from the University of Helsinki in2007 as well as studied law at Université Paul Cézanne Aix-Marseille III. He gives lectures on international trade law at theUniversity of Helsinki and is a member of the Finnish ArbitrationAssociation. Mr. Saarikivi’s working languages are Finnish, Swedish, English andFrench.

Roschier, as a leading law firm in Northern Europe, operates in the international marketplace. The firm’s clients includeleading domestic and international corporations, financial service and insurance institutions, investors, growth and otherprivate companies with international operations, as well as governmental authorities.

Roschier’s Dispute Resolution practice focuses on prevention and handling of disputes and is one of the largest disputeresolution practices in the Nordic region. The lawyers in the practice regularly work on the major commercial disputesin the region, with particular emphasis on international arbitration and complex commercial court disputes, includingIPR litigation and white-collar crime. They also regularly serve as arbitrators in international and domestic arbitralproceedings. Preventive risk counseling and legal risk and liability management form important parts of the practice.

Please visit www.roschier.com or www.roschierraidla.com for more information.




Chapter 18


France


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of France?

An arbitration agreement will be upheld as valid even if theunderlying contract is void. The arbitration agreement is indeedseverable from the contract in which it is included and is thereforenot necessarily governed by the law applicable to the contract, orany other State law. Moreover, the French Supreme Court went astep further in the Omenex judgment of 25 October 2005, byholding that pursuant to the principle of autonomy, the invalidity, orthe non-existence of the main contract, has no impact on thearbitration agreement.Arbitration agreements are deemed valid and binding as a mere resultof the parties’ agreement to have recourse to international arbitration.However this implies legal capacity and entitlement to conclude theagreement, and unequivocal consent of each party. These issues aregoverned by the law applicable to the arbitration agreement. There is no specific requirement as to the form and the content ofthe international arbitration agreement. Arbitration agreements caneven be made orally in international matters, although proof of thearbitration agreement will be required in order to enforce the award(see question 3.1 below for Arbitrability). The rules in domesticarbitration are stricter. The arbitration agreement must be made inwriting. If it is concluded before the dispute arises, it must beinserted in the main agreement or in a document that is identified inthe agreement (this is referred to as a clause compromissoirepursuant to Article 1443 of the French Code of Civil Procedure,CCP). If it is concluded after the dispute has arisen, it must beagreed in an agreement signed by the parties and describing thesubject matter of the dispute (this is referred to as a compromispursuant to Article 1449 of the CCP).


No. (See question 1.1 above.)


For practical purposes, it is highly recommended in internationalcases to include information such as the number and nationality ofthe arbitrators, the seat and language of arbitration, the rules andlaw applying to procedural matters (in addition to the law governing

the merits of the dispute). The parties may also wish to anticipatedifficulties that may arise in connection with provisional relief, andinsert provisions in this respect in the agreement.


The French courts have endorsed a liberal attitude towardsarbitration agreements, in particular by ruling that arbitrationagreements are valid as a matter of principle in internationalmatters. The courts are also protective of the arbitrators’jurisdiction regarding the enforceability of the arbitrationagreement (see question 3.2 below).


French law recognises two ADR procedures other than arbitration:conciliation (Articles 21, 127 et seq. of the CCP); and mediation(Articles 131-1 et seq. of the CCP).On 9 November 2006, the French Supreme Court ruled thatproceedings instituted on the merits, whereas the parties had agreedto resort to conciliation, were inadmissible (fin de non-recevoir)(Cour de cassation, 9 November 2006)A settlement that is reached as a result of a conciliation isimmediately enforceable if the parties and a judge have signed it(Articles 130 and 131 of the CCP). Agreements reached as a resultof a mediation are enforceable by applying to the judge whoauthorised the mediation (Article 131-12 of the CCP).The CCP also recognises a procedure called amiable composition(Articles 12 and 1474 of the CCP). By resorting to amiablecomposition, the parties agree that the person charged withresolving the dispute (the amiable compositeur) will be entitled toapply rules that are not strictly legal. For example, commercialpractice, or general principles of fairness, can be applied by theamiable compositeur. The agreement reached by the parties isimmediately binding and does not require a judge’s intervention(Articles 12 and 1474 of the CCP).


2.1 What legislation governs the enforcement of arbitrationproceedings in France?

Arbitration agreements are governed by provisions contained bothin the French Civil Code (Articles 2059 et seq.) and in the CCP,

Nicolas Brooke

Elie Kleiman



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which contains a chapter on arbitration (Articles 1442 et seq.),including a specific section on international arbitration (seequestion 2.2 below). Other miscellaneous provisions may beincluded in specific regulations, notably with respect to localcommunities or entities in charge of public utilities.


The distinction between domestic and international arbitration isexplicitly recognised by the CCP, which contains two specificsections on international arbitration (Articles 1492 et seq.) andenforcement of foreign or international arbitral awards (Articles1498 et seq.). The CCP also contains a specific definition ofinternational arbitration: arbitration is “international” when itinvolves the interests of international trade (Article 1492).Generally, the rules governing international arbitration aresignificantly more flexible than in domestic arbitration. This is thecase not only for arbitration agreements (see question 1.1 above),but also with respect to the procedure itself, where considerablediscretion is granted to the arbitrators and the parties.If the international arbitration proceedings are governed by Frenchlaw, most of the rules governing domestic arbitration may apply;however, this will be the case only if the parties have made noarrangements to the contrary (Article 1495 of the CCP). Some ruleswill, in any event, remain specific to international arbitration, suchas the procedure for challenging awards.


France has not adopted the provisions of the UNCITRAL Model Lawof 1985. Nevertheless, there are no significant differences betweenFrench international arbitration law and the Model Law, apart from themanner in which international arbitration is defined (the Model Lawplaces more emphasis on the location in different States of the place ofbusiness of the parties to the agreement, the seat of the arbitration orthe place of performance of the contract). Although the Model Law isnot applicable, the French courts occasionally take account ofcommonly accepted principles that are articulated in it.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in France?

Article 1494 of the CCP provides that the parties to an internationalarbitration are free to define their own rules of procedure. Theymust not, however, derogate from mandatory procedural principles(e.g., due process, or treating the parties on an equal footing). Thiswould lead to the annulment of the arbitral award. By way ofexample, Article 1502 of the CCP provides that a breach of theprinciple of adversarial procedure (principe du contradictoire) is aground for setting aside an award or refusing its enforcement.Article 1502 also provides that an award must be set aside if itsrecognition and enforcement would, generally speaking, beoffensive to public policy. This would indisputably by the case ifthe arbitral proceedings had been conducted in breach offundamental rules of procedure.Another mandatory rule which is worth mentioning here, wasarticulated by the French Supreme Court in a judgment made on 13March 2007, where it held that Article 1504 of the CCP ismandatory and cannot be varied by contract (Cour de cassation, 13

March 2007). As explained in more detail below (see section 10),Article 1504 allows a review of arbitral awards on five, very limitedgrounds, which do not include a review of the merits of the award.It impossible, therefore, to agree that the parties will be entitled toappeal an arbitral award, in order to challenge the merits of theaward on points of law or fact.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of France? What is thegeneral approach used in determining whether or not adispute is “arbitrable”?

The general approach in determining whether or not a dispute is“arbitrable” is to assess whether individual entities are entitled tosubmit their dispute to arbitration (this is referred to as subjective“arbitrability”) and whether the subject matter of the dispute is“arbitrable” (this is referred to as objective “arbitrability”).Subjective arbitrability mainly concerns public entities, which aregenerally prohibited from referring their disputes to arbitration.However, this prohibition does not apply in matters of internationalarbitration. Specific provisions address this issue in the context ofdomestic arbitration.Whether or not a dispute is objectively “arbitrable” is an issue thatis governed by the French Civil Code, which provides that one isentitled to agree to arbitration in relation to rights that can bedisposed of (Article 2059 of the French Civil Code). Morespecifically, it is explicitly provided that disputes relating to civilstatus, the capacity of individuals or divorce cannot be submitted toarbitration (Article 2060). Article 2060 also provides moregenerally that arbitration is prohibited in all matters that concernpublic policy. This prohibition is not, however, as broad as it mayappear. In international arbitration, the mere fact that a publicpolicy rule applies to the matter does not deprive the arbitraltribunal of jurisdiction. An arbitral tribunal cannot make a ruling ona matter of public policy itself (e.g. render an insolvency judgmentor give clearance for a transaction under competition rules);however, it can apply rules of law that are a matter of pubic policy,if this is required by the resolution of the dispute (e.g. an award canbe made for restitution and compensatory damages owed by a partyto a contract which is null and void pursuant to insolvency, antitrustor patents regulations).


French law specifically provides that if a party challenges the basisor the scope of the tribunal’s jurisdiction, the tribunal is under aduty to rule on the validity or the limits of its jurisdiction (Article1466 of the CCP). The competence-competence principle is one ofthe best established rules of French arbitration law.

3.3 What is the approach of the national courts in Francetowards a party who commences court proceedings inapparent breach of an arbitration agreement?

French law contains various mechanisms that deal with this type ofsituation.If a dispute is pending before an arbitral tribunal, Article 1458 of theCCP provides that the national courts must decline jurisdiction tohear the same dispute. The courts must also decline jurisdictionwhen a claim is made before the arbitral tribunal is constituted,

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unless it is shown that the arbitration agreement is manifestly nulland void. The national courts will not decline jurisdiction of theirown motion and it is therefore up to the parties to rely on thearbitration agreement and challenge the courts’ jurisdiction.When the parties have agreed to submit a dispute to arbitration, thearbitration may go ahead in spite of a party’s refusal to participatein the proceedings, or in certain aspects of the proceedings (such asthe appointment of the arbitral tribunal, or the submission of briefsand evidence) and assistance may be sought from the courts in thatregard. By way of example, if a party refuses to appoint anarbitrator, the President of the Tribunal de grande instance has thepower to step in and appoint an arbitrator (Article 1493 of the CCP).Likewise, a subsequent refusal to participate in the proceedings willnot paralyse the arbitration. However, if the constitution of the arbitral tribunal appears to beimpossible (for example as a result of flaws in the arbitrationagreement), French law provides that the dispute should be referredto the courts. The French courts hold in such situations that bothparties are deemed to have waived the arbitration agreement inorder to prevent a denial of justice (Court of Appeal of Paris, BritishLeyland International Services v. Société d’Exploitation desEtablissements Richard, 6 June 1978).


According to the competence-competence principle (Article 1466of the CCP for domestic arbitration and Article 1495 of the CCP forinternational arbitration, see also question 3.2 above), only anarbitral tribunal can entertain and rule on challenges to itsjurisdiction. As discussed at question 3.3 above, Article 1458 provides for anexception in this regard. Before arbitral proceedings havecommenced, a party can indeed apply to the courts to have thearbitration clause declared manifestly null and void (Cour decassation, Uni-Kod v. Ouralkali, 30 March 2004).Otherwise, the national courts will review the arbitral tribunal’sjurisdiction only when an action is brought to set aside or preventenforcement of the award. Thus, jurisdiction of the arbitral tribunalis an issue that will only be addressed by a national court after thetribunal has made a ruling itself in this regard.

3.5 Under what, if any, circumstances does the national law ofFrance allow an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

When a contract has been negotiated in whole or in part by a partythat did not actually sign the contract, the French courts have takenthe view that such involvement can give rise to a presumption thatthe contracting parties’ true intention was for the non-signatoryparty to be bound by the arbitration agreement (Court of Appeal ofParis, V 2000 v. Renault, 7 December 1994).This issue commonly arises with respect to the members of groupsof companies or sates and State-owned entities. The French courtshave displayed a tendency to extend the arbitration clause to entitieswho are members of the same group as the signatory of thearbitration agreement where the parties’ express or impliedintention justified such a solution (Court of Appeal of Paris, Isover-Saint-Gobain v. Dow Chemical France, 21 October 1983, where thecourt based its ruling on the role played by the parent company insigning, performing and terminating the contracts; as for States and

State-owned entities, see Court of Appeal of Paris, Swiss Oil v.Petrogab, 16 June 1988, where the court looked again at what theparties’ true intention appeared to have been in light of all thecircumstances).In M. Tinnes v. Société U Centrale Régionale Est, the Cour decassation held on 8 November 2005 that the arbitration clause,which initially applied to a company, could be extended to itsmanaging director, who owned shares in the company and was heldto be directly and personally involved in the company’s business.Moreover, in the ABS judgment of 27 March 2007, and in a furtherdecision made on 9 January 2008, the Cour de cassation held thatarbitration clauses are deemed to be transferred automatically inchains of contracts that achieve a transfer of title to a good, as anancillary element of the right to sue pursuant to the contracts.Finally, in a decision made on 25 November 2008, the Cour decassation appears to have implicitly recognised that an arbitrationagreement could be extended to parties that had not expresslyagreed to submit their disputes to arbitration, when the contractsfrom which the dispute originates are part of a group of agreementsthat have a common purpose. The Cour de cassation hadpreviously ruled on 16 July 1992 that an arbitration agreementcould not be extended, even in presence of a group of contracts. Itis therefore unclear, for now, whether the law is settled on this issue.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in France and what is thetypical length of such periods? Do the national courts ofFrance consider such rules procedural or substantive, i.e.,what choice of law rules govern the application oflimitation periods?

No time limit applies under French law for bringing arbitralproceedings. However, the parties will of course have to complywith the relative statute of limitations applying to the substantiveright which is in dispute.



Article 1496 of the CCP states that arbitrators should apply the lawchosen by the parties to govern their relationship (e.g., by insertinga choice of law clause in the agreement that contains the arbitrationclause). If the parties fail to make a choice of law, the arbitratorsmust apply the law that they consider to be the appropriate one inthe circumstances. In doing so, arbitrators are not bound to applythe rules of conflict of the country of the seat of the arbitration.


In France, Article 7.1 of the Rome Convention of 1980 states “whenapplying under this Convention the law of a country, effect may begiven to the mandatory rules of the law of another country withwhich the situation has a close connection, if and in so far as, underthe law of the latter country, those rules must be applied whateverthe law applicable to the contract”. Therefore, the courts of thecontracting states can choose whether or not to take mandatoryrules into account.The same principle applies to arbitrators: they have no obligation toapply mandatory rules, but can take account of the mandatory rules



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contained in a law that is not the one chosen by the parties aselements of fact (for example, mandatory rules that hinder theperformance of an agreement). They may also take account of themandatory rules of the country where the award is likely to beenforced, in order to avoid a refusal by the courts of that country togrant leave to enforce the award.


In the Dalico decision of 20 November 1993 (which was confirmedby the Uni-Kod judgment made in 2004), the Cour de cassationdecided that arbitration agreements are independent from theagreements which contain or refer to it, pursuant to a substantiverule of international arbitration. In addition, the existence andeffectiveness of the arbitration agreement are to be assessed inaccordance with what the parties’ common intentions were,independently from any national law. The formation, validity andlegality of an arbitration agreement are not, therefore, assessedpursuant to the law governing the agreement.



There are no specific limits to the parties’ autonomy to selectarbitrators in international arbitration. However, general principlesapply. In particular, the selection process must respect the parties’right to an equal treatment, a fundamental principle of due processand a principle of public policy. Arbitrators must also beindependent and impartial. Any breach of these fundamentalprinciples may jeopardise the validity and recognition of an awardrendered by arbitrators who were inappropriately selected andappointed by the parties.


The parties to arbitration proceedings governed by French lawand/or with a seat of arbitration in France can apply to the Presidentof the Tribunal de grande instance if difficulties are encountered inthe constitution of the arbitral tribunal, in particular in order tonominate an arbitrator (Article 1493, §2 of the CCP). Theapplication is dealt with in the same manner as urgent proceedings(référé) and the President’s order is, in principle, not open tochallenge (Article 1457 of the CCP).The French Cour de cassation recently ruled that parties to aninternational arbitration may apply to the courts for assistance in thenomination of an arbitrator in order to prevent a denial of justice(given that the claimant could not apply to another court to have itscase heard). Although the seat of arbitration was not located inFrance, and the proceedings were not governed by French law, thecourt ruled that a remote connection with France was sufficient tojustify assistance from the French courts (Cour de cassation, Israelv. NIOC, 1 February 2005).The parties may also have agreed to address the issue by referenceto the rules of an arbitration institution, notably those of theInternational Chamber of Commerce, pursuant to which theInternational Court of Arbitration may handle the selection of anarbitrator if a party fails to nominate one (Article 9.6 of the ICCRules of Arbitration).


A court can intervene in the selection of arbitrators as highlighted inquestion 4.2. By way of example, the French Cour de cassationruled on 20 June 2006 that the court could enjoin a party to disclosewhether it had appointed in previous arbitrations the co-arbitrator ithad nominated, given that the other party had doubts as to thearbitrator’s independence and was refusing to appoint its co-arbitrator as a result (Cour de cassation, Prodim v. Pierre Nigioni,20 June 2006).


French law does not explicitly require an arbitrator to beindependent and impartial. However, any breach of thefundamental principles of due process may lead to an annulment ofthe award or a refusal to recognise it in France. An arbitrator whosuspects that there may be grounds for objection to his appointmentis under a duty to inform the parties in this regard.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within France?

Arbitrators must act independently and impartially. Severaldecision by the Court of Appeal of Paris make it plain that this is anessential duty, and “an absolute requirement in all arbitralproceedings” (Court of Appeal of Paris, 13 June 1996; Court ofAppeal of Paris, 6 April 1990, Court of Appeal of Paris, 28November 2002).For domestic arbitration, Article 1452 of the CCP provides that anarbitrator who is aware of a ground for challenging his appointmentmust disclose this information to the parties. A number ofprecedents show that this rule also applies in international arbitralmatters (Court of Appeal of Paris, 29 January 2004; Cour decassation, Prodim v. Pierre Nigioni, 20 June 2006). By way ofexample, on 12 February 2009, the Court of Appeal of Paris heldthat arbitrators must disclose a conflict of interest to the partieswhen they are appointed, and must also do so if a conflict arosesubsequently during the arbitration proceedings. The duty todisclose is not only owed by the arbitrators, but also by the party tothe proceedings who has a prior or on-going relationship with thearbitrator or the law firm that employs him (Court of Appeal ofParis, Tecnimont S.p.A v. J&P Avax, 12 February 2009). This approach is consistent with the International Bar AssociationGuidelines on Conflict of Interest in International Arbitration,which sets forth a list of circumstances which ought to be disclosedby an arbitrator. This includes, notably, a significant financialinterest of the arbitrator in one of the parties, or the fact that one ofthe arbitrators acted as counsel for one of the parties.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in France? If so, do those laws or rules apply toall arbitral proceedings sited in France?

International arbitration proceedings are subject to few legalconstraints. The arbitration agreement may determine the procedureas well as the procedural law to be followed. If the agreement issilent in this respect, the arbitral tribunal shall determine the

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procedure, either directly or by reference to a national law or thearbitration rules of an institution (Article 1494 of the CCP).In any event, French rules governing domestic arbitration proceduredo not apply merely because the seat of arbitration is in France: theyapply only where the arbitration itself is governed by French law. Inaddition, in such an event, the parties are entitled to makearrangements differing from the legal provisions (Article 1495),notably by referring to institutional rules of arbitration.In Omenex (25 October 2005) and Société SNF SAS (4 June 2008),the Cour de cassation held that Article 4 of the French Code ofCriminal Procedure (which provides that civil proceedings must bestayed if criminal proceedings are brought with respect to the sameset of facts and parties) is optional in international arbitrationproceedings, and in proceedings relating to the recognition andenforcement of an arbitral award.

6.2 In arbitration proceedings conducted in France, are thereany particular procedural steps that are required by law?

No specific procedural steps are required by law for arbitrationproceedings conducted in France. In practice, however, arbitrationproceedings are initiated by service of the request for arbitration,followed by the submission of an answer by the defendant and thesignature of terms of reference by both parties and the arbitrators.A procedural order may replace the terms of reference and/ordetermine the subsequent procedural steps to be followed by theparties, notably with one or two exchanges of memorials andultimately a hearing before the arbitrators.


No specific rules govern the conduct of an arbitration hearing.Arbitrators are free to organise the proceedings as they see fit, andcan even decide not to hear the parties at all but rather make theirdecision on the basis of the parties’ written submissions. However,arbitrators must respect the principles of equal treatment of theparties and of due process. Each party must be given a fairopportunity to present and argue its case.

6.4 What powers and duties does the national law of Franceimpose upon arbitrators?

The members of an arbitral tribunal have statutory and contractualduties. Pursuant to French law, arbitrators must be independent and actimpartially with respect to the parties. The French Cour decassation held that the parties could only challenge an arbitrator onthe basis of Article 341 of the CCP, which sets forth the grounds forchallenging a judge (Cour de cassation, 29 October 1991). TheFrench courts also refer to the general requirement of independenceas being of paramount importance.As regards contractual duties, arbitrators are usually required to actequitably and impartially with respect to the parties throughout theproceedings (see for example, Article 15 of the UNCITRAL rulesand Article 15(2) of the ICC rules). Arbitrators are also usuallyrequired to comply with the time limits imposed upon them, andmust pursue their functions until the arbitration comes to aconclusion (Article 1462 of the CCP). In a decision made on 6December 2005, the Cour de cassation held that arbitrators mustcomply strictly with this duty, and that a failure to do so entailsliability for the damage suffered by the parties as a result of thedelay in making the award.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in France and, if so, isit clear that such restrictions do not apply to arbitrationproceedings sited in France?

French law does not prevent lawyers from other jurisdictions fromacting in arbitral proceedings that are seated in France.

6.6 To what extent are there laws or rules in France providingfor arbitrator immunity?

There are no rules in France that provide for immunity in favour ofthe members of an arbitral tribunal. Arbitration is a private form ofjustice, arbitrators are bound in contract with the parties, and cantherefore face liabilities if they violate their contractual obligations(for example, if they fail to comply with their duty to disclose apotential lack if independence), or, generally, behave in a mannerthat is inconsistent with their judicial functions (Court of Appeal ofParis, 22 May 1991).


As a matter of principle, the French courts have no jurisdiction tohear disputes covered by an arbitration agreement (see Tribunal ofFirst Instance of Paris, Chambre Arbitrale de Paris v. Républiquede Guinée, 30 October 1986). However, the courts can play a roleat various stages of the arbitral process. First, when the procedureagreed by the parties for constituting the tribunal ends up in adeadlock, the parties can apply to the courts for assistance in thisregard. Second, where a party applies for provisional andconservatory measures, the court may grant such measures. Finally,an award may, as a matter of principle, only be enforced after leaveto do so has been sought and obtained from the courts.

6.8 Are there any special considerations for conductingmultiparty arbitrations in France (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

There are no special considerations in French law for conductingmultiparty arbitrations other than the rule that each party has a rightto equal treatment. This rule is of utmost importance and was held,by the French Cour de cassation to be a matter of Frenchinternational public policy. By way of example, where two co-respondents cannot agree on the appointment of an arbitrator, thenominating institution should also appoint an arbitrator for theclaimant. Otherwise, the claimant would enjoy the advantage ofhaving chosen one of the arbitrators, in breach of the respondents’right to equal treatment.Multiple arbitrations can be consolidated only with the consent ofall the parties involved. Practical constraints such as the identity ofthe arbitrators should also not be underestimated.Third parties can join an arbitration only if the arbitration clause canbe deemed to apply to them and to the claim that they want tosubmit to the arbitrators, and if their intervention does not interferewith due process and diligent accomplishment by the arbitrators ofthe mission that was entrusted to them by the initial parties to thearbitration. Such an intervention would most often require theagreement of the initial parties.



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6.9 What is the approach of the national courts in Francetowards ex parte procedures in the context of internationalarbitration?

Ex parte proceedings are exceptional in French civil procedure andare allowed only where due process would be detrimental to aparty’s rights. Such proceedings can be brought before the nationalcourts in the context of international arbitration, whetherproceedings are pending before an arbitral tribunal or not. Thus, asdiscussed in more detail below (see section 7 below), the parties toan arbitration are entitled to apply ex parte to the courts to obtaininterim measures (e.g. to obtain security, or to gather evidence).



There is no restriction under French law to the arbitrators’ ability toaward preliminary or interim relief, e.g. protective measures aimedat preventing irreparable harm to a party’s interests. There is agrowing consensus on the possibility for arbitrators to order a dailypenalty for any failure to comply with such interim measure. In addition, institutional rules (ICC, AFA) provide for specific pre-arbitral procedures for interim relief. The Court of Appeal of Parisrecently ruled that ICC pre-arbitral referee does not culminate in anaward, enforceable as such, but rather in a decision of a contractualnature that is not open to challenge before the Court of Appeal.In any event, since the arbitrators have no authority for the purposesof enforcement, any decision that amounts to an award (includingdecisions granting preliminary or interim relief) would have to besubmitted to the national courts for recognition and enforcement ifthe party against whom the award is made refuses to perform itspontaneously. The parties may therefore decide to apply directlyto the national courts for preliminary or interim relief, since theirdecisions will be immediately enforceable (see question 7.2 below).

7.2 Is a court entitled to grant preliminary or interim relief inproceedings subject to arbitration? In what circumstances?Can a party’s request to a court for relief have any effecton the jurisdiction of the arbitration tribunal?

The French courts may have jurisdiction to order preliminary orinterim measures in cases of urgency. Applications are generallyheard in the presence of all parties. Ex parte applications are indeedalways subject to a later inter partes hearing. The courts have broadpowers regarding the nature of the interim relief granted, that mayinclude: freezing orders; restraining and positive orders; andprovisional payment by a party of amounts manifestly due to theother (référé-provision), in the event of urgency, where the arbitraltribunal is not constituted yet and cannot accordingly hear such arequest (Court of Appeal of Paris, Sygma France v. Camair -Cameroun Airlines, 27 April 2007).In these cases, the request for provisional measures does not implya waiver of the arbitration agreement.


French courts are not reluctant to order interim relief sought by

parties in appropriate circumstances, since applying to an arbitraltribunal for such measures may cause delays that are incompatiblewith interim relief. However, the courts are cautious not to interferewith the arbitrators’ exclusive jurisdiction to rule on the merits ofthe case, notably through requests for interim relief that are notcompletely separable from an appreciation of the merits.


There is no specific provision regarding security for costs in Frenchlaw. However, arbitrators have a broad jurisdiction to orderprovisional and interim measures (see question 6.1 above), whichcan include orders to provide security for costs. As to the nationalcourts, there is no specific provision or legal theory that appears toprevent a party from making this type of application in the courseof arbitral proceedings. However, this is not common practice inFrench litigation, and the chances of success of such an applicationwould be uncertain.


8.1 What rules of evidence (if any) apply to arbitralproceedings in France?

No specific rules of evidence are applicable in internationalarbitration. The arbitral tribunal may order any legally admissiblemeasures to obtain evidentiary material, e.g., by ordering a party tosubmit a document in its possession. It would most probably beentitled to order a (daily) penalty if the said party does not complywith the order. In most cases, arbitrators would simply draw anegative inference from this party’s refusal to produce thedocument in question.


The arbitrators’ authority to order the disclosure of documents maybe limited by the fact that the documents in question areconfidential. Generally, the arbitrators will have to determine themerits of objections made by a party as to the disclosure ofdocuments in its possession.In any event, arbitrators have no authority to issue an order directedat a third party to the proceedings and the arbitration agreement.However, they may order a party to take the relevant steps to ensurethat the said third party cooperate in the production of evidence,notably where this third party is a subsidiary of an entity that is aparty to the proceedings.


It is debated whether, in the absence of any legal provision to thateffect, the tribunal may seek assistance from a local court in order toobtain the production of evidence. A solution may consist in issuingan interim award ordering the measure at stake and leaving it for theparties to have it recognised and enforced by the French courts.The parties may also file an application in court for evidentiarypurposes. However, such an application may raise issues ofjurisdiction, given that there may be some overlap with thearbitrators’ remit.

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The general practice in arbitration cases involving France consistsof avoiding discovery and limiting the disclosure of documents.This mirrors French civil procedure, where discovery as such doesnot exist and forced disclosure of documents is possible only wherethere is evidence that a given document is in the possession of aparty (or a third party), and that its production is directly relevantfor the case.


The only explicit rule regarding witness testimony contained in theCCP is that third parties shall be heard without taking an oath(Article 1461 §2 of the CCP). This rule, which applies to domesticarbitration, reflects a general trend allowed by the non-existence ofcompulsory rules in this matter: witnesses are generally heardwithout being sworn in before the tribunal. However, the arbitratorsmay draw the witnesses’ attention to the fact that they are requestedto tell the truth and should not mislead the arbitral tribunal.Unless the parties have agreed otherwise, the tribunal can decide ona discretionary basis whether to allow testimony, set the deadlinefor submitting the names of the parties’ witnesses and determine theway witnesses are to be examined.A party may cross-examine another party’s witness, but the arbitraltribunal does not have to follow this practice, unless the parties havedecided that this should be the case.

8.6 Under what circumstances does the law of France treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

No privilege is attached to the documents submitted in the arbitralproceedings. However, the confidentiality of the arbitrationproceedings may be deemed to apply also to the documentsproduced during the proceeding (see question 12.1 below). In thiscontext, the arbitrators and the parties may make arrangements toguarantee full discretion in the handling of the documents.

9 Making an Award


No specific requirements are imposed in the context of internationalarbitration. However, in practice, the arbitral award shall beconsistent with the legal requirements necessary for its recognitionand enforcement, or in order to avoid annulment. This may includea requirement that the award be made in writing and includestatements to the effect that due process has been complied with.The requirements are much more stringent in domestic arbitration,where the CCP notably provides that the award must give thereasons for the decision and set out the respective claims of theparties and the grounds on which they are based (Article 1471); theaward must also indicate the names of arbitrators, its date, the placeit was made, the names and place of residence of the parties and thenames of counsels (Article 1472); the award has to be signed by allarbitrators (Article 1473). As discussed above, these rules

governing domestic arbitration may apply to internationalarbitration where it is governed by French law and the parties havenot made different arrangements (see question 2.2 above).



An arbitral award made in France in international arbitration maybe subject to an application for annulment on five limited grounds:(i) if the arbitral tribunal decided the case in the absence of anarbitration agreement or on the basis of an agreement that was voidor had expired; (ii) if the arbitral tribunal was improperlyconstituted or the sole arbitrator was improperly appointed; (iii) ifthe arbitral tribunal decided the case otherwise than in accordancewith the terms of the mission conferred on it; (iv) if the rules of dueprocess were breached; and (v) if the recognition or enforcement ofthe award would be contrary to French international public policy(Articles 1502 and 1504 of the CCP).No recourse can be lodged against an arbitration award renderedabroad. However, the order that recognises and grants leave toenforce (exequatur) a foreign award is subject to the same reviewas described above (Article 1502 of the CCP). More generally, ininternational arbitration, no appeal (i.e. submission of the case tothe Court of Appeal for a new determination of the merits of thecase) can be filed, whatever the seat of or the law governing thearbitration: parties are only entitled to seek annulment of the awardon the limited grounds listed above. This ensures the efficiency ofthe international arbitration process, unlike domestic arbitration,where an appeal may be filed against an arbitral award (unless theparties have waived their right of appeal in the arbitrationagreement, Article 1482 §1 of the CCP).The application for annulment can be instituted immediately afterthe award is made, but not after the expiry of a one-month period(three months where the defendant resides abroad) starting from thedate of official service of the award bearing the order granting leavefor enforcement (Article 1486 of the CCP).


Since there is no right of appeal against an arbitral award in Frenchinternational arbitration law, the only issues left to be determinedrelates to the annulment of awards made in France and to thechallenge of orders granting leave to enforce an award.With regards to arbitral awards made in France, any exclusion ofthe right to ask for their annulment before the national courts wouldnot be enforceable, whether contained in the arbitration agreementor in the rules of the relevant arbitral institution.It has not yet been decided whether a similar exclusion wouldoperate to prevent a party from challenging an order for theenforcement of an award made abroad. However, it seemsreasonable to consider that any such exclusion would also be nulland void.


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is therefore impossible for the parties to add to these grounds inorder to extend the scope of the review and to change the nature ofthe mission that is explicitly conferred on the judge by the CCP.

10.4 What is the procedure for appealing an arbitral award inFrance?

Applications to set aside an award are made before the Court ofAppeal of the place where the award was made. Appeals against anorder granting leave to enforce an award made abroad are broughtbefore the Court of Appeal of the place where the order was made. The Court of Appeal applies the ordinary rules of procedure inhearing such applications (Article 1487 of the CCP). The processis based on an exchange of written submissions and culminates in ahearing where brief oral submissions are made. One of the practical effects of making an application to set aside anaward or appealing an order granting leave to enforce an award, isthat execution of the award is stayed (Article 1506 of the CCP).However, in limited circumstances, the Court of Appeal may grantleave to enforce the award on a provisional basis. Definitiveexecution of the award on the debtor’s assets is possible only afterthe deadline for bringing an action to set it aside - or for appealingthe order granting leave to enforce the award - has expired and noaction has been taken. If such an application or appeal is brought,execution will in theory be possible only after the Court of Appealhas made its ruling. In any event, the award creditor is not prevented from takingprotective measures - for example, freezing the award debtor’s assetson a provisional basis (saisie conservatoire) - that will assist inexecuting the award when the time comes. In this regard, the FrenchCour de cassation held on 12 October 2006 in Deutz-Fahr group SPAv Motokov France SA et al. that assets could be frozen on a provisionalbasis without asking for leave to do so in court, thereby treatingarbitral awards in the same way as court decisions. Moreover, theCourt of Appeal’s decision regarding the validity of an arbitral awardcan be appealed on points of law before the Cour de cassation. Thisappeal does not stay the execution of the award where the Court ofAppeal denied the application to set aside or dismissed the appealagainst the order granting leave to enforce the award.Finally, Article 1479 of the CCP (which applies to internationalarbitral proceedings) provides that it is possible to apply forimmediate execution of the award. The test is set forth at Article515 of the CCP, which provides that provisional execution will beauthorised if the judge considers that it is necessary (for example,to prevent a dispersal of assets) and when the nature of the caseimposes it (for example, to prevent the damage suffered by theaward debtor from worsening).


11.1 Has France signed and/or ratified the New York Conventionon the Recognition and Enforcement of Foreign ArbitralAwards? Has it entered any reservations? What is therelevant national legislation?

France has signed the New York Convention on the recognition andenforcement of foreign awards of 1958. Article 7, paragraph 1 of the New York Convention provides thatwhenever the Convention proves to be less favourable to therecognition and enforcement of a foreign award than the treatmentprovided for it in the law of the host country, the more favourabletreatment shall prevail. Thus, the New York Convention does notpreclude a party from relying on the more favourable provisions of the

relevant French domestic legislation that is set forth at Articles 1498et seq. of the CCP. For example, the Cour de cassation rulesconsistently on the basis of Article 1502 of the CCP that an action toset aside an award pending before the courts of the seat of arbitration,or even a judgment by the courts of the seat setting aside the award donot, in and of themselves, provide valid grounds for refusing leave toenforce the arbitral award in this jurisdiction (see the Norsolor andHilmarton cases). The French Cour de cassation confirmed thisapproach on 29 June 2007 in PT Putrabali Adyamulia v. Rena Holdingand Mnogutia Est Epices. By contrast, the New York Conventionprovides at Article 5, paragraph 1 (e) that recognition and enforcementof an award may be refused when “the award has been set aside orsuspended by a competent authority of the country in which, or underthe law of which, that award was made”. The general rule under French law is that an arbitral award shall berecognised in France if its existence is proved, unless suchrecognition is not manifestly contrary to French international publicpolicy. The first instance court hearing the application is seized byway of an ex parte request and reviews the award on a prima faciebasis (Article 1498). It can either refuse or grant leave to enforce,but can never modify the decision issued by the arbitrators. Inpractice, this first-stage process is mostly administrative and maytake less than a week.The procedure may become adversarial at the appeal stage, sincethe order granting the leave for enforcement of a foreigninternational arbitration award may be challenged, on the samegrounds as those defined for the annulment of the award itself. Theappeal suspends the enforcement of the award (Article 1506),except if the provisional enforcement of the award is ordered by thearbitrators, or by the President of the Court of Appeal,notwithstanding the filing of a recourse against the award.When the seat of the arbitration is in France, the enforcement ordercan be challenged only by bringing annulment proceedings againstthe award itself. Such a recourse automatically entails an appealagainst the enforcement order (Article 1504). France has put acondition of reciprocity to the application of the Convention, inaccordance with Article 1, §3 of the Convention, which providesthat “when signing, ratifying or acceding to this Convention, ornotifying extension under Article X hereof, any State may on thebasis of reciprocity declare that it will apply the Convention to therecognition and enforcement of awards made only in the territory ofanother Contracting State”.France has also reported that the words “commercial relations” towhich the Convention applies should be construed pursuant toFrench law.Finally, with reference to Article 10 §1 and 2 of the Convention,France declared that the Convention applies in all the territories ofthe French Republic.

11.2 Has France signed and/or ratified any regional Conventionsconcerning the recognition and enforcement of arbitralawards?

France is a party to the European Convention on InternationalCommercial Arbitration of 1961, which was signed on 21 April1961, and ratified on 16 December 1966.

11.3 What is the approach of the national courts in Francetowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

Leave for enforcement of the Award must be sought from the

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Tribunal de grande instance (see Articles 1477 and 1500 of theCCP). The French courts consider that when an arbitral award wasmade abroad, the applicant can choose to apply to the Tribunal degrande instance of the district where assets belonging to the awarddebtor are located and where execution of the award will thus beperformed, or to the President of the Paris Tribunal de grandeinstance (Court of Appeal of Paris, 10 July 1992).The judge performs a purely supervisory function which, pursuant toArticle 1498 of the CCP, consists of checking prima facie whether: (i)the document filed before him is an arbitral award; and (ii) whether itis not manifestly in breach of international public policy (see Article1498 of the CCP). In the vast majority of cases, the French courtstherefore grant leave to enforce the arbitral award in France.

11.4 What is the effect of an arbitration award in terms of resjudicata in France? Does the fact that certain issues havebeen finally determined by an arbitral tribunal precludethose issues from being re-heard in a national court and, ifso, in what circumstances?

The arbitral award is res judicata as of the date it is rendered(Article 1476 of the CCP). Therefore, the issues determined by anarbitral tribunal cannot be reheard in a national court. However,they may be discussed if a party argues that the recognition of theaward in France would characterise a blatant breach of Frenchinternational public policy (Article 1498 of the CCP).

12 Confidentiality

12.1 Are arbitral proceedings sited in France confidential?What, if any, law governs confidentiality?

No specific provisions of the law deals with confidentiality of thearbitration proceedings. Nevertheless, most authors consider thatthe agreement to arbitrate carries an implicit agreement to treat theproceedings as confidential and the French courts have on occasionrecognised the existence of such a duty (Court of Appeal of Paris,Aïta v. Ojjeh, 18 February 1986).In a more recent decision, however, the Court of Appeal of Parisheld that a party claiming for damages with respect to a breach ofthe confidentiality of arbitral proceedings must show that such aduty is owed in the circumstances (Court of Appeal of Paris,Nafimco v. Foster Wheeler Trading Company AG, 22 January2004). In other words, the Court of Appeal appears to have ruledthat arbitral proceedings are not confidential per se.As for the members of arbitral tribunals, they are under a duty torefrain from disclosing confidential information acquired during theproceedings and must treat all matters relating to the arbitration orthe award as confidential. The disclosure of such information maygive rise to liability under French criminal law, at least theoretically,for breach of professional secrecy.


There is no formal prohibition against referring to informationdisclosed in a previous arbitration in subsequent court proceedings.However, a party doing so may be held liable for breach ofconfidentiality (see question 12.1 above) or more generally in tort forhaving wrongly used confidential information (notably in connectionwith unfair competition). A party willing to prevent the use of suchinformation may also institute summary proceedings before the

French courts, seeking an order precluding such use, notably on thegrounds of urgency and/or the imminence of irreparable damage thatwould be caused by the use of such information.


The parties may provide for exceptions to confidentiality. Publicpolicy rules may also limit the scope of confidentiality, notably inthe event of listed companies. Practitioners are currently debatingwhether arbitrators are able to disclose, or to refuse to disclose,information gathered in the context of arbitration proceedings,under the constraints of criminal law.



The law applicable to the merits of the case governs the issue of thedamages ordered by the arbitrators. The general rule under French lawin that respect consists of a full compensation of the claimant for thedamage suffered. All types of damages are taken into account,including costs incurred, lost profits or moral damages. French lawdoes not authorise punitive damages and although there is no reportedcase law on this issue, an award granting this type of damages undera foreign applicable law would be likely to be considered contrary toFrench international public policy by the French courts.As to other types of remedies such as payment in kind or specificperformance, no provision in French law restricts the power ofarbitrators to grant them. Arbitrators may thus grant the sameremedies as those granted by the French courts, in accordance withFrench law (Article 1474 of the CCP).


Interest is normally a matter of substantive law to the extent that itis part of the relief sought by the claimant in the proceedings. Inthis respect, where French substantive law governs the merits of thecase, arbitrators may grant interest for late payment (Article 1153 ofthe French Civil Code). Arbitrators, however, tend to consider thatthey have a discretion in this respect, and therefore often ignore theapplicable law provisions and simply refer to the interest rate of thecreditor’s State or of the State of payment.Interest accruing in accordance with the French statutory rate mayalso apply to international awards, even if they are rendered abroad,where a party does not comply with an order made against it to paycertain amounts, and enforcement of the award is sought in France.

13.3 Are parties entitled to recover fees and/or costs and, if so,on what basis? What is the general practice with regard toshifting fees and costs between the parties?

No specific provision addresses this issue. Arbitrators haveconsiderable discretion in the ultimate allocation of the costs ofarbitration. Arbitral tribunals usually order the defeated party to bearall or part of the costs of arbitration. In doing so, arbitrators may takeinto account the attitude of the parties during the proceedings.



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An award is not subject to any particular tax in France, exceptwhere it contains provisions that characterise in themselves anoperation that is subject to taxation.


14.1 Has France signed and ratified the Washington Conventionon the Settlement of Investment Disputes Between Statesand Nationals of Other States (1965)?

France is a party to the Washington Convention of 1965. TheConvention came into force on 20 September 1967.

14.2 Is France party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

France is a party to about 72 Bilateral Investment Treaties. Most ofthese treaties expressly provide for recourse to ICSID arbitration.France is a party to the Energy Charter Treaty.

14.3 Does France have standard terms or model language thatit uses in its investment treaties and, if so, what is theintended significance of that language?

France has a model language on the basis of which it negotiates itsindividual treaties. Generally, France uses a very broad definition ofboth investments and investors. Otherwise, French investmenttreaties are quite straightforward and provide for just and equitabletreatment, national treatment, and a most favoured nation clause.

14.4 In practice, have disputes involving France been resolvedby means of ICSID arbitration and, if so, what has theapproach of national courts in France been to theenforcement of ICSID awards and how has thegovernment of France responded to any adverse awards?

There has been to date no ICSID case involving France. However,the French Cour de cassation ruled in SOABI v. Senegal in 1991,that Article 53 and 54 of the ICSID Convention establish anautonomous system, which excludes the application of Frenchprocedural rules.

14.5 What is the approach of the national courts in Francetowards the defence of state immunity regardingjurisdiction and execution?

The French courts hold that by becoming a party to an arbitrationagreement, State or public entities are deemed to have waived theirimmunity. The French Cour de cassation held that a foreign State,which had consented to arbitration, had thereby agreed toenforcement of the resulting award (Cour de cassation, SOABI v.Sénégal, 11 June 1991). The court held that the State or State-owned entity’s agreement to submit disputes to arbitration would bemeaningless if this could be circumvented simply by refusing toparticipate in the constitution of the arbitral tribunal and by relyingon its own immunity from jurisdiction to avoid any legal action.

Regarding immunity from execution, the French courts held that asovereign State’s immunity is set aside where the asset attached by thecreditor is used by the State in carrying on commercial activities whichare normally governed by private law and which gave rise to thedispute (Cour de cassation, Sté Eurodif v. Rép. Islamique d’Iran, 14March 1984). Under French law, judgments can be executed on assetsdetained by foreign public entities “when they are assets that areemployed in the course of the entity’s principle activities, where suchactivities are private in nature” (Cour de cassation, Sonatrach v.Mingeon, 1 October 1985). The Cour de cassation also recentlyexplained that the mere acceptance of Rules of Arbitration containingan Article similar to Article 28(6) of the ICC Rules (which providesthat “Every Award shall be binding on the parties. By submitting thedispute to arbitration under these Rules, the parties undertake to carryout any Award without delay and shall be deemed to have waived theirright to any form of recourse insofar as such waiver can validly bemade.”) which amounts to a waiver of the immunity of execution(Cour de cassation, Sté Creigthon v. Qatar, 6 July 2000).On 6 February 2007, the French Cour de cassation also restated thecriteria required for an entity to be considered a “State-owned” one:the entity’s capital must be owned by a State; the entity must act onbehalf of the State in question and perform a mission which is in theinterest of the public; the entity must be funded by the State; itsmanagement must not be autonomous from the State; and it mustnot keep independent records (Cour de cassation, Société Nationaledes Pétroles du Congo v. Société Walker International Holding Ltd.,6 February 2007).

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in France? Are certain disputescommonly being referred to arbitration?

International arbitration has been commonly accepted, and evenfavoured, in France, for many years. The French practice ofinternational arbitration has entered into a phase of maturity. Thereare solid grounds under French law to further broaden the scope ofinternational arbitration.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in France, such as pending or proposedlegislation that may substantially change the lawapplicable to arbitration?

As a result of the increasing recourse to arbitration, the practice issomehow evolving towards a more judicial approach of thearbitration proceedings and an increasing number of challenges ofawards before State courts. To some extent, the parties’ andcounsels’ behaviour and strategies before the arbitrators tend tobecome similar to litigation before State courts. In an effort to deterparties from using court challenges as a dilatory tool, it is envisagedthat applications to set aside awards or execution orders should notautomatically operate as a stay of execution.Moreover, a working group on arbitration and administrative law,which was set up by the Minister of Justice, issued a report on 13March 2007 recommending that public bodies should no longer beprevented from agreeing to arbitration (which they are currentlyprevented from doing pursuant to Article 2060 of the Civil Code).

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Elie Kleiman

Freshfields Bruckhaus Deringer LLP2/4 rue Paul Cézanne75375 Paris Cedex 08France

Tel: +33 1 4456 3318Fax: +33 1 4456 4400Email: [email protected]: www.freshfields.com

Elie Kleiman is a partner in the dispute resolution group ofFreshfields Bruckhaus Deringer. Based in Paris, he has broadexperience in the fields of cross-border as well as domesticarbitration, mediation and litigation, in particular on matters ofcorporate law (M&A, corporate governance, joint ventures), energy,banking and distribution. He has trial experience before the courtsof France and the European Court of Justice. He has acted ascounsel in numerous arbitral proceedings (including ICC, NAI andICSID) and has sat as an arbitrator in a number of ad hocarbitrations. He attended the University of Paris and was admittedto the Paris Bar in 1990. He is also a Legal Consultant in the Stateof New York where he practised for two years in the period 1998-2000. He speaks French and English.

Nicolas Brooke

Freshfields Bruckhaus Deringer LLP2/4 rue Paul Cézanne75375 Paris Cedex 08France


Nicolas Brooke is a member of the Paris Bar and of FreshfieldsBruckhaus Deringer’s Dispute Resolution Group. He specialises ininternational arbitration and cross-border litigation, and has beeninvolved in many ICC and UNCITRAL cases, representing clients inthe fields of Energy, Telecommunications, Pharmaceutical Productsand Construction and Procurement. Nicolas Brooke read law at theSorbonne in Paris and at King’s college, London. His nativelanguages are French and English and he has a working knowledgeof German and Spanish.

Freshfields Bruckhaus Deringer Paris was established in 1972 and is now one of the largest law firms in France, withover 240 lawyers of whom 39 are partners.

The firm combines the expertise and resources of an international law firm with an in-depth understanding of Frenchlaw and business practices. It advises national and international corporations as well as governments, financialinstitutions, public companies and state-owned institutions.

Freshfields Bruckhaus Deringer is regarded as one of the world’s top arbitration firms, advising clients on institutionaland ad hoc arbitration in cases involving energy, telecoms, financial services, construction, intellectual property, jointventures and sports. There is also a significant practice in investment disputes arising from multilateral and bilateralinvestments treaties and disputes between states.


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Germany


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Germany?

The rules of German arbitration law have been incorporated in theGerman Act of Civil Procedure (“ZPO”). Pursuant to Section 1025(1) ZPO, the German arbitration law is applicable to all arbitrationproceedings which have their place of arbitration within Germany.The legal requirements of an arbitration agreement are either setforth in Sections 1025 et seq. ZPO or follow from the general rulesfor the formation of contracts. Generally, the formation of a validarbitration agreement requires that the parties making theagreement have legal capacity. Entities must be duly represented.In addition, the subject matter of the dispute must be arbitrablewhereby German law distinguishes between so-called objective andsubjective arbitrability (for more details see question 3.1). Content-wise it is required that the arbitration agreement is linked to aspecific legal relationship or to a specific dispute. In addition, itmust be clear from the arbitration agreement that the dispute shallbe decided exclusively by arbitration.In the commercial area, it is necessary that the arbitration agreementis made in writing (Section 1031 ZPO). Such requirement is metwhen the arbitration agreement is (i) laid down in a separate documentwhich is signed by the parties, (ii) incorporated as an arbitration clausein a written agreement among the parties, or (iii) can be taken from awritten correspondence exchanged between the parties, such as letters,telefaxes etc. Pursuant to the majority view in the legal literature theexchange of e-mails is sufficient. There is, however, no court decisionin this respect available yet so that it is recommendable to refer to thetraditional means of communication until one can refer to precedencefrom German courts.


Provided that the individual is to be regarded as a consumer, i.e. aperson who concludes a transaction for non-commercial purposes(Section 13 German Civil Code, “BGB”), it is required that thearbitration agreement is incorporated in a document other than thecontract to which it applies.


Even though not required with respect to the validity of the

arbitration agreement, it is always recommendable to include atleast stipulations as to the number of arbitrators, language of theproceedings, applicable substantive law and place of arbitration.


The statutory provision of Section 1032 (1) ZPO expressly providesthat state court proceedings are inadmissible if the dispute is subjectto an arbitration agreement and the defendant objects against thestate court proceedings. When deciding on a respective objectionby the defendant the courts review whether the arbitrationagreement is void or unenforceable. German courts apply thisstatutory provision to the full extent and declare the state courtproceedings inadmissible in favour of arbitration if the relevantarbitration agreement is valid and enforceable. In addition, a partyhas the option pursuant to Section 1032 (2) ZPO, to request (as longas the arbitration tribunal is not fully constituted) the state court torule on the admissibility or inadmissibility of arbitrationproceedings.


Unlike for arbitration agreements there is no statutory provision inGerman law under which an ADR agreement other than anarbitration agreement would render state court proceedingsinadmissible. However, in the German legal literature it isdiscussed whether the parties by entering into an ADR agreementimpliedly agree to waive the commencement of state courtproceedings as long as the mediation lasts. There is no precedenceavailable yet so that it cannot be determined whether the Germancourts would follow the approach that proceedings before them areinadmissible if commenced while mediation proceedings regardingthe same dispute are pending.


2.1 What legislation governs the enforcement of arbitrationproceedings in Germany?

The enforcement of arbitration proceedings is governed by Section1032 ZPO when a party commences state court proceedings inbreach of an arbitration agreement. Apart from this rule, theenforcement of arbitration agreement is not subject to expresslegislation.

Dr. Denis Gebhardt

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The German arbitration law does not distinguish between domesticand international arbitration proceedings.


German arbitration law is based on the UNCITRAL Model Law.There are no significant differences between the governing law andthe Model law.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Germany?

Mandatory rules governing international arbitration proceedingshave been incorporated in Sections 1042 (1) and (2) ZPO. Pursuantto such provision, the parties must be treated equally and must begiven full opportunity to present their case. Furthermore, it isprohibited to exclude that the parties are represented by counsel. InSection 1042 (3) ZPO it is stated that subject to such mandatoryrules the parties are free to determine the proceedings bythemselves or by reference to a set of arbitration rules.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Germany? What isthe general approach used in determining whether or not adispute is “arbitrable”?

The general approach to arbitrability as laid down in Section 1030ZPO is that disputes involving a so-called “economic interest” arearbitrable. The term “dispute involving an economic interest” isdefined as a dispute which relates to a proprietary relationshipbetween the parties and to all claims for money or money-like rightsand obligations. Even if the dispute does not involve an economicinterest as set out above it may be arbitrable as long as the partiesare entitled to enter into a settlement on the issue in dispute.Examples for issues regarding which the parties are not entitled toenter into a settlement are disputes relating to family law, criminallaw and private housing lease agreements. In the area of labour lawthe German Act on Labour Law Proceedings (“ArbGG”) providesan exclusive set arbitration rules which must be applied in this areaand substantially limit the scope of labour law disputes which arearbitrable.


Pursuant to Section 1040 (1) ZPO, an arbitrator is permitted to ruleon the question of his or her own jurisdiction. The opinion of thearbitrator is, however, not binding for German state courts.

3.3 What is the approach of the national courts in Germanytowards a party who commences court proceedings inapparent breach of an arbitration agreement?

Based on Section 1032 (1) ZPO the national court will declare thestate court proceedings to be inadmissible upon a respective

objection by the defendant if the plaintiff commences such courtproceedings in apparent breach of an arbitration agreement.


A German state court can address the issue of the jurisdiction andcompetence of the national arbitral tribunal in two instances. Thefirst instance is that a party files a motion pursuant to Section 1032ZPO, i.e. requests the state court prior to the constitution of thearbitral tribunal to declare the arbitral proceedings admissible orinadmissible. In this context the court will also review whether ornot the arbitral tribunal has jurisdiction. The second instance isproceedings for the recognition of an arbitral award or, in turn, forsetting an arbitral award aside. When a party seeks to have anarbitral award recognised and declared enforceable by the Germanstate court and the opponent in such proceedings raises the defencethat the arbitral tribunal did not have jurisdiction, the German statecourt will deal with the issue in this context. The same is true forproceedings with the request to set an arbitral award aside.

3.5 Under what, if any, circumstances does the national law ofGermany allow an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

The general approach under German arbitration law is that thearbitration agreement is binding only on those parties who havesigned it. However, German courts have developed a number ofexceptions to such general rule. If the parties, for example, haveconcluded a so-called third-beneficiary contract the beneficiary(even though not being a signatory to the agreement) is bound to anarbitration agreement relating to such contract. Furthermore,German courts have been permitted that an arbitration agreementcan be extended to partners of a partnership even though only thepartnership itself is a party to the arbitration agreement as long asthe respective partner is personally liable without limitation. Itshould be noted in this context that the German courts have not(yet) accepted the so-called Group of Companies Doctrine pursuantto which an entity is bound to an arbitration agreement simply bybelonging to a certain group of companies. In the event of a legalsuccession the arbitration agreement may also be extended to a non-signatory. Thus, insolvency receivers are bound to an arbitrationagreement signed by the insolvent company and the same ruleapplies to executors of a will with regard to arbitration agreementssigned by the deceased person. Apart from such cases of legalsuccession by law, legal succession can occur through assignmentof rights and the takeover of a debt or a contractual relationship andthe legal successor is bound to the respective arbitrationagreements. However, regarding guarantees and suretyships anextension of the arbitration agreement contained in the contractwhich shall be secured by the guarantee or surety is not possible asthose contracts are separate from the main contract.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Germany and what is thetypical length of such periods? Do the national courts ofGermany consider such rules procedural or substantive,i.e., what choice of law rules govern the application oflimitation periods?

There are no laws or rules prescribing limitation periods for thecommencement of arbitrations in Germany. However, the GermanCivil Code (“BGB”) contains limitation periods for rights and



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claims and provides, for example, that the general prescriptionperiod is three years. Such limitation periods can only besuspended by commencing an arbitration provided that therespective claim or right is subject to an arbitration agreement. Thelimitation periods are considered to be substantive and areapplicable if the relevant choice of law rules determine that theclaim or right is subject to German substantive law.



Pursuant to Section 1051 ZPO, the arbitral tribunal is bound toapply the substantive law agreed upon by the parties. The statuteexpressly states that, unless otherwise agreed among the parties, thereference by the parties to the substantive law is to be understood ina way that it shall not include the choice of law rules of such law.In the absence of an agreement made among the parties, the arbitraltribunal shall apply the law of the country to which the dispute hasthe closest connections. The arbitral tribunal may only decide exaequo et bono or as amicable compositeur if authorised to do so bythe parties (Section 1051 (3) ZPO).


In Germany, it is still a matter of controversy if and - as the casemay be - to what extent mandatory laws of another jurisdictionprevail over the laws chosen by the parties. The German FederalSupreme Court (BGH), i.e. the highest German court for civilmatters, has held in 1984 in a case relating to stock exchangetransactions that German mandatory rules for such transactionsmust be applied even though the parties had agreed on theapplicability of UK law. In the German legal literature, the viewsrange from an exclusion of the duty to apply mandatory rules ofanother jurisdiction to a limited application depending on therespective area of law.


As for the applicable substantive law, German law provides that theparties have the autonomy to agree on the rules governing theformation, validity, and legality of arbitration agreements. In theabsence of a relevant agreement the arbitration agreement isgoverned by the law which the parties have “impliedly chosen”.The issue of how to determine such choice is a matter ofcontroversy. Pursuant to one view, it can be assumed that the choiceof law for the main agreement is also relevant for the arbitrationagreement. Another view taken is that the law at the place ofarbitration shall be relevant.



The German arbitration law does not provide for any statutorylimits to the parties’ autonomy to select arbitrators. In particular,there is no requirement that the arbitrators must have a legal

education or have to be admitted to the German bar. While partiesare generally free in appointing judges or civil servants asarbitrators they should be aware that this group must obtain theapproval of their appointment as arbitrator from their respectivesupervising authority. Without such approval the agreementbetween the parties and the arbitrator is null and void which mighthave a negative impact on the proceedings. Moreover, it must betaken into account that judges and civil servants may only beappointed as a chairman or sole arbitrator.


In order to assist the parties, Section 1035 ZPO provides for adefault procedure for the appointment of a sole arbitrator as well asfor the appointment of arbitrators in a panel consisting of threearbitrators. If the parties fail to agree on the appointment of a solearbitrator, the competent German state court will appoint the solearbitrator upon the request of one of the parties. In a panelconsisting of three arbitrators, the state court may be called upon ifeither a party fails to appoint its arbitrator within the time limitagreed or provided by law or if the parties or the party-appointedarbitrators fail to agree on the chairman.


Pursuant to Section 1035 (3) ZPO, a state court can intervene in theselection of arbitrators if requested to do so by at least one of theparties. The predominant ground for the intervention of a statecourt is that a party or the arbitration institution chosen either failedto appoint an arbitrator at all (see question 5.2 above) or did foranother reason not comply with the applicable appointmentprocedure. However, the state court can also be requested tointervene if the appointment procedure as originally agreed amongthe parties is (i) disadvantageous to one of the parties to the extentthat it violates public policy or (ii) does not provide for a defaultmechanism. The intervention proceedings are commenced by filinga written submission with the competent German state court whichthen will decide by issuing an order after having given the opposingparty an opportunity to reply.


The potential arbitrator must disclose to the parties anycircumstances which are likely to give rise to justifiable doubts asto his impartiality or independence (Section 1036 ZPO). In theevent that such circumstances arise after the appointment of thearbitrator they must also be disclosed to the parties. If a party hasdetected that an arbitrator has failed to disclose relevantcircumstances it may request that the arbitrator is removed.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Germany?

Apart from the rule set forth in question 5.4 above, there are noexpress statutory rules or guidelines for disclosure of potentialconflicts of interest for arbitrators. When determining whether ornot an arbitrator has breached his disclosure obligation, Germancourts, however, may refer to the statutory material applicable to theremoval of judges (Sections 41 et seq. of the German Code of CivilProcedure) and the case law developed in connection with such

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rules. In addition, it can be observed that also in Germanyarbitrators more and more refer to the IBA Guidelines on Conflictsof Interest in International Arbitration when determining whetheror not they have to disclose a specific circumstance.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Germany? If so, do those laws or rules applyto all arbitral proceedings sited in Germany?

German arbitration law in Section 1025 et seq. ZPO provides forseveral rules governing the procedure of arbitration in Germany.Such rules, in particular, relate to the place of arbitration, thelanguage of the proceedings, the exchange of submissions, oralhearings and written proceedings, the taking of evidence and thedefault of a party. However, it should be noted that the respectiverules are not mandatory and do only apply if the parties have notstipulated rules to govern the proceedings. Thus, the parties have,to a large extent, flexibility for structuring the kind of proceedingsthey would like to have and at the same time can rely on a set ofrules in the event that they cannot agree on respective regulationswithin the arbitration agreement.

6.2 In arbitration proceedings conducted in Germany, are thereany particular procedural steps that are required by law?

Apart from the rule that the parties must have an opportunity topresent their case and that they cannot be denied to retain counselthere are no particular procedural steps that are mandatory forarbitration proceedings conducted in Germany.


Pursuant to the rule incorporated in Section 1047 (1) ZPO theparties have the option to choose whether or not they would like tohave an oral hearing as part of their proceedings. Unless theywould like to have the proceedings expedited through waiving anoral hearing, parties in most cases do not make such an agreement.In this case, the arbitral tribunal may decide whether the case isdecided based on an oral hearing or based on the submissions andwritten evidence filed. Only if one of the parties’ requests to holdan oral hearing the arbitral tribunal is bound to such request and isnot permitted to decide based on the file only.

6.4 What powers and duties does the national law of Germanyimpose upon arbitrators?

The arbitrator to be appointed must disclose to the parties anycircumstances which are likely to give rise to justifiable doubts asto his impartiality or independence (Section 1036 ZPO). In theevent that such circumstances arise after the appointment of thearbitrator they must also be disclosed to the parties. Even thoughnot expressly stated in Sections 1025 et seq. ZPO, the GermanSupreme Court (BGH) has held that the arbitrator is obliged toadminister to the best of his abilities orderly and expeditiousproceedings in accordance with the law and the arbitrationagreement. Arbitral tribunals are not permitted to force a witness toappear and to take the oath from a witness. In both instances thecompetent state court must render assistance. As regards powers ofthe arbitrator, German arbitration law grants the arbitrator in severalways the power to structure the proceedings and to make certain

determinations in the event that the parties did not agree on therespective issues, e.g. to determine the place of arbitration, thelanguage of the proceedings, the applicable law etc.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Germany and, if so,is it clear that such restrictions do not apply to arbitrationproceedings sited in Germany?

Before most of German state courts the permission to appear ascounsel requires the admittance as attorney at law (Rechtsanwalt) inGermany which in turn requires that one has passed the so-calledSecond State Law Examination. However, this restriction does notapply to arbitration proceedings sited in Germany.

6.6 To what extent are there laws or rules in Germanyproviding for arbitrator immunity?

Unless excluded in the contract between the arbitrators and theparties, arbitrators are liable for negligence and wilful conduct.They are, however, not liable for specific performance and unlessacting intentionally for the fact that they have made a mistake onthe merits in the award.


Upon the request of at least one of the parties, a national court mayhave to deal with procedural issues during an arbitration as long asthe law grants them jurisdiction to do so. Thus, the state courts mayrender assistance in connection with the taking of evidence and actswhich are reserved to the national courts. The state courtspredominantly render assistance in connection with the subpoena ofwitnesses and the taking of the oath from a witness.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Germany (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

The issue of multiparty arbitrations is not dealt with in Germanarbitration law. However, Section 1034 ZPO permits the parties toagree on the number of arbitrators so that the parties have flexibilityin adapting the number of arbitrators to the number of partiesinvolved as long as they observe the rule that the composition of thearbitral tribunal may not be to the detriment to one of the parties.

6.9 What is the approach of the national courts in Germanytowards ex parte procedures in the context of internationalarbitration?

German arbitration law permits arbitral tribunals to renderinjunctive relief decisions based on ex parte procedures and thenational courts accordingly recognise such decisions. Apart fromthis exception, ex parte procedures are not permitted and would beregarded by the national courts as a breach of the right to be heard.



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Under German law, an arbitrator is permitted to award preliminaryor interim relief (Sections 1033, 1041 ZPO). However, arbitraltribunals are prevented from enforcing their respective decision asthis is reserved to the national courts. The arbitrator may at his owndiscretion order such measures which he deems to be necessary inthe light of the subject of the dispute. Another important rule is thata party who moved for the issuance of an interim relief order isobliged to pay damages to the other party in the event that it turnsout that the request for injunctive relief was unfounded from theoutset (Section 1041 (4) ZPO).


A national court is entitled to grant preliminary or interim relief inproceedings subject to arbitration since under German law thenational courts and arbitral tribunals have parallel jurisdiction in thearea of interim relief. A respective request by a party to a state courtdoes, however, not have an effect on the jurisdiction of thearbitration tribunal.


German courts fully respect the jurisdiction of arbitral tribunalswith regard to interim measure and also do not decline to acceptrespective requests by parties in the event that the dispute is subjectto an arbitration agreement.


German law does allow for the national court and the arbitraltribunal to order security for costs.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Germany?

Unless otherwise agreed among the parties, the arbitral tribunal hasthe power to structure the taking of evidence and to decide whichevidence is to be taken. The arbitral tribunal has therefore greatflexibility in this respect.


Based on the flexibility granted to arbitrators in connection with thetaking of evidence, arbitrators have the authority to order the

disclosure of documents by the parties to the arbitration. Suchauthority does not extend to third parties so that no disclosure canbe ordered in this respect. Furthermore, it should be noted that inproceedings before the German state courts, the disclosure ofdocuments can only be requested in very limited instances. Thus,in domestic arbitrations it is uncommon that the arbitrators use theirdiscretion in a way that the evidentiary proceedings involve theproduction of documents.


The national court is not able to intervene in matters ofdisclosure/discovery.


German arbitration law does not expressly address the issue ofdisclosure/discovery. As a consequence, there is no general practiceobservable and it is up to the arbitrators in international proceedingstaking place in Germany to structure and to decide ondisclosure/discovery proceedings.


There are no laws, regulations or professional rules applying to theproduction of written and/or oral witness testimony in arbitralproceedings. Before German state courts, a witness is remindedthat he has to tell the truth. The witness, however, is only sworn inat the end of his testimony if the taking of the oath is requested byat least one of the parties. Furthermore, the witness is primarilyquestioned by the judge. The counsel have the opportunity toquestion the witness once the examination by the judge iscompleted but the questions must be related to the subject regardingwhich evidence is taken. Thus, the questioning by counsel cannotbe regarded as a U.S.-style cross-examination.

8.6 Under what circumstances does the law of Germany treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

German arbitration law does not address the issue of privilege inconnection with the production of documents in arbitralproceedings. However, documents exchanged between counsel andparty are subject to the general attorney-client-privilege and, even ifso ordered by the arbitral tribunal, need not to be produced.

9 Making an Award


In the absence of a respective agreement made among the parties,the arbitral award must be made with the majority of the votes ofthe arbitrators (Section 1052 (1) ZPO). Furthermore, it must be inwriting and has to be signed by the arbitrators (Section 1054 ZPO).In the event that an arbitrator obstructs the making of the award byrefusing to sign it, Section 1054 (1) ZPO provides that the signature

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of the majority of the arbitral tribunal is sufficient. Provided thatthe parties have not waived this requirement by agreement, thearbitral award must contain the reasons for the decision made.



The grounds for challenging an award under German arbitrationlaw are identical to the ones contained in the New York Conventionon the Recognition and Enforcement of Foreign Arbitral Awards of1958, i.e. (i) arbitration agreement invalid, (ii) violation of dueprocess, (iii) unauthorised excess of authority, (iv) impropercomposition of arbitral tribunal and violation of proceduralarbitration rules and (v) violation of public policy.


Under German law, a general waiver of any basis of appeal orchallenge against an arbitral award is null and void. The sameapplies to a waiver of grounds for an appeal which relate to publicpolicy and are not in existence at the time of the waiver. Partiesmay, however, waive a ground for an appeal which is to bereviewed by the state court only upon request by a party and isalready in existence.


Parties may agree to expand the scope of appeal of an arbitral awardbeyond the grounds available in German law.

10.4 What is the procedure for appealing an arbitral award inGermany?

In order to appeal an arbitral award a party must file a writtensubmission with the competent German court in which it expresses theappeal. The submission must be accompanied by the arbitral awardand a translation in the event that the award is in a language other thanGerman. The other party is notified by the court of the request madeand is given an opportunity to present its argument. Subsequently, thecourt will order to hold an oral hearing and finally issues a judgment.


11.1 Has Germany signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

Germany has signed and ratified the New York Convention on theRecognition and Enforcement of Foreign Arbitral Awards of 1958.

11.2 Has Germany signed and/or ratified any regionalConventions concerning the recognition and enforcementof arbitral awards?

Germany has signed/ratified bilateral agreements relating to the

recognition and enforcement of arbitral awards with Switzerland,Belgium, Austria, Israel, Norway, Spain, the USA and the formerSoviet Union.

11.3 What is the approach of the national courts in Germanytowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

German courts have developed a high level of expertise in connectionwith the recognition and enforcement of arbitral awards. Theirrespective decisions are often published so that parties can rely onthem when presenting their case. In order to have an arbitral awardrecognised and declared enforceable a party must file a writtensubmission with the competent German court in which it expresses therequest. The submission must be accompanied by the arbitral awardand a translation in the event that the award is in a language other thanGerman. The other party is notified by the court of the request madeand is given an opportunity to present its argument. If the other partyopposes the request to recognise the award and to declare itenforceable which might include the request to set aside the award (incases where the place of arbitration was Germany) the court will orderto hold an oral hearing and finally issues a judgment.

11.4 What is the effect of an arbitration award in terms of resjudicata in Germany? Does the fact that certain issueshave been finally determined by an arbitral tribunalpreclude those issues from being re-heard in a nationalcourt and, if so, in what circumstances?

An arbitral award which has been recognised and declaredenforceable deploys res judicata effects between those parties whoare bound to the underlying arbitration agreement. Thus, certainissues which have been finally determined by an arbitral tribunalpreclude those issues from being re-heard in a national court as longas the proceedings before the national court involve parties who arebound to the arbitration agreement.

12 Confidentiality

12.1 Are arbitral proceedings sited in Germany confidential?What, if any, law governs confidentiality?

Arbitral proceedings sited in Germany are confidential to the extentthat hearings are generally not open to the public. Furthermore, itis common view that the arbitrators have the obligation to keepsecrecy. There are, however, no statutory rules in this respect.Thus, the parties should enter into a confidentiality agreement(which can be part of the arbitration agreement) in order reach ahigher level of confidentiality. In the absence of such an agreementthe parties are not obliged to secrecy.


Failing an agreement to the contrary, information disclosed inarbitral proceedings may be referred to and/or relied on insubsequent proceedings.


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enforcement proceedings, and the state court orders to hold an oralhearing such hearing is open to the public. Thus, anything said in thecourse of the hearing with respect to the arbitral proceedings as wellas to the merits of the dispute might become public if the oral hearingis attended by people in the audience. In addition, it must be taken intoaccount that state courts may publish their decisions and this does alsoapply to decisions made in enforcement proceedings relating toarbitral awards. Furthermore, the parties must be aware that witnessesunless bound by a non-disclosure agreement or ethical rules aregenerally not under an obligation to keep secrecy. Even the parties areunder German law not under a general obligation to keep facts aboutor in connection with the arbitral proceedings confidential unless theyhave entered into a respective agreement.



The remedy of punitive damages is not supported by German lawand German courts have held that decisions awarding punitivedamages violate public policy.


Interest is available under German substantive law, i.e. the GermanCivil Code (“BGB”). The applicable interest rates are fivepercentage points over the German Base Rate if consumers areinvolved and eight percentage points over the German Base Rate intransactions between non-consumers, e.g. business entities.


Pursuant to Section 1057 ZPO, the parties may find an agreement onthe allocation of costs. The arbitral tribunal may decide on theallocation of costs in the event that the parties have not made suchagreement. In making such decision the arbitral tribunal hasdiscretion. It is difficult to determine a general practice in this context.The mandatory rule in state court proceedings according to which thedefeated party has to bear the costs of the prevailing party is notnecessarily applied in arbitral proceedings. Apart from the allocationof costs in terms of percentage the arbitral tribunal also has discretionas to which extent it deems costs to be reimbursable.


In Germany, an award itself is not subject to tax. It might, however,be that a party must pay tax on an amount awarded in an arbitralaward.


14.1 Has Germany signed and ratified the WashingtonConvention on the Settlement of Investment DisputesBetween States and Nationals of Other States (1965)?

Germany has signed and ratified the Washington Convention on the

Settlement of Investment Disputes Between States and Nationals ofOther States.

14.2 Is Germany party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Germany is party to a significant number of Bilateral InvestmentTreaties and it is also a party to the Energy Charter Treaty.

14.3 Does Germany have standard terms or model languagethat it uses in its investment treaties and, if so, what isthe intended significance of that language?

Germany has a model BIT containing standard terms or modellanguage for usage in its investment treaties. The intendedsignificance of the respective language is to balance investor rightswith state rights.

14.4 In practice, have disputes involving Germany beenresolved by means of ICSID arbitration and, if so, whathas the approach of national courts in Germany been tothe enforcement of ICSID awards and how has thegovernment of Germany responded to any adverse awards?

Most recently, Germany has been sued by the company Vattenfallunder the Energy Charter Treaty which is the first ICSID case everagainst Germany. The arbitration is still pending so that nostatement can made as to whether the government of Germany willrespond to any adverse awards.

14.5 What is the approach of the national courts in Germanytowards the defence of state immunity regardingjurisdiction and execution?

German courts follow the approach that a state has waived theimmunity defence through signing the arbitration agreement. Inaddition, proceedings relating to the recognition and declaration ofenforcement are not regarded by the German courts to be as ameans of enforcement but as a preparation of such enforcement sothat a state is precluded from raising the defence anyway.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Germany? Are certain disputescommonly being referred to arbitration?

The success story of arbitration in Germany is continuing which isdemonstrated by the fact that more and more commercialagreements are made subject to arbitration agreements. It is,furthermore, demonstrated by the fact that in some areas of law theuse of arbitration is either introduced or increased. The GermanInstitution for Arbitration (DIS), for example, recently introduced aset of arbitration rules dedicated to disputes in the area of sportslaw. Disputes commonly referred to arbitration involve, inter alia, post-M&A disputes as well as conflicts in construction, distribution andlong term agreements.

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Dr. Denis Gebhardt, LL.M.

Beiten Burkhardt Uerdinger Str. 90 40472 Duesseldorf Germany

Tel: +49 211 518989 200Fax: +49 211 518989 29Email: [email protected]: www.bblaw.com

Dr. Denis Gebhardt is a partner in the Duesseldorf office of theindependent German firm Beiten Burkhardt. He is a member of thepractice group Litigation & Dispute Resolution and represents clientsbefore German state courts as well as before domestic andinternational arbitral tribunals and also is appointed as arbitrator.Being admitted to practice law both in Germany and in New York Dr.Gebhardt has a special focus on disputes involving transatlanticissues. He is lecturer at the German Federal Tax Academy on US-American law and for the Association of German Engineers (VDI) ondistribution law. He is a member of the German Institution forArbitration (DIS), the New York State Bar Association (NYSBA) andthe German-American Lawyers Association (DAJV). For 2009 Dr.Gebhardt has been included by Best Lawyers in the list ofrecommended attorneys in the area arbitration and mediation.

BEITEN BURKHARDT is an independent international commercial law firm. The professionals of BEITENBURKHARDT advise medium-sized companies, large corporations, banks and groups of various industries as well asthe public sector comprehensively on all aspects of commercial law. Apart from offices in Germany, BEITENBURKHARDT has a strong international presence in Eastern Europe, China and Brussels. BEITEN BURKHARDTcooperates closely with excellent law firms in other key markets. Teams managed by partners are developing solutionsfor clients on performance-minded terms. With around 370 lawyers and tax advisers in 13 locations in 6 countriesBEITEN BURKHARDT able to provide comprehensive legal and tax advice in national and international mattersthroughout the world. The practice group Litigation & Dispute Resolution: For every dispute the team members findthe most efficient settlement technique. They prepare the settlement procedures and represent clients in the procedure.The members of the practice group furthermore represent clients in court and before arbitral tribunals and act asarbitrators.


15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Germany, such as pending orproposed legislation that may substantially change the lawapplicable to arbitration?

The completely modernised German arbitral law has taken effect onJanuary 1, 1998. Thus, while regarding certain provisions might beinsignificantly amended in the future one should expect majorlegislative initiatives within the next years.

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Greece


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Greece?

An arbitration agreement must be in writing, regardless of whetherit refers to already existing or to future disputes (Articles 869 §1and 868, respectively, of the Greek Code of Civil Procedure,hereinafter “GCCP”). If, however, the parties to an oral arbitrationagreement voluntarily participate in the arbitration proceedings, thelack of a written arbitration agreement is cured (Article 869 GCCP).Furthermore, arbitration agreements for future disputes mustspecify the legal relationship to which disputes or differencessubmitted to arbitration relate (Article 868 GCCP).


The only such requirement is that the parties to the arbitrationagreement have the proper capacity to enter into contracts. Inrespect of legal entities, it is advisable that entry into an arbitrationagreement be specifically authorised by means of a specialresolution of the Board of Directors or equivalent managementboard.


No other elements are necessary.


If an arbitration agreement meets the aforementioned legalrequirements, it shall be upheld by Greek courts.


ADR methods other than arbitration cannot override the jurisdictionof courts and cannot result in an effective stay of litigation,regardless of whether an ADR clause requires a party thereto to firstsubmit a dispute to the ADR process. However, if an ADRagreement satisfies the requirements of a valid arbitrationagreement and the relevant dispute is resolved by means of a

decision of the mediator or other designated expert, the ADRagreement would generally be regarded as an arbitration clause(regardless of the parties’ designation of the process) and Greekcourts would enforce it.


2.1 What legislation governs the enforcement of arbitrationproceedings in Greece?

The GCCP governs the enforcement of domestic arbitrationagreements, as well as of international non-commercial arbitrationagreements, while the New York Convention governs theenforcement of international commercial arbitration agreements.


Domestic arbitration proceedings and international non-commercialarbitration proceedings sited in Greece are governed by the GCCP.International commercial arbitration proceedings are governed byLaw 2735/1999 which transposed the UNCITRAL Model Law intothe Greek legal system. There are no major differences between thetwo laws.


There are no significant differences between Law 2735/1999 andthe UNCITRAL Model Law.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Greece?

The two fundamental mandatory rules which are applicable toarbitration proceedings sited in Greece relate to due process andcomprise the equality of the parties and the right of each party to beheard in the arbitration proceedings, so that it can defend itself.

Christine Derveni

Dr. Constantine Alexiou

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3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Greece? What isthe general approach used in determining whether or not adispute is “arbitrable”?

In principle, any dispute is “arbitrable”, to the extent that thearbitrands have the right to dispose freely of the object of thedispute (Article 867 GCCP). Disputes that may not be submittedfor resolution to arbitration include, but are not limited to: (i)administrative disputes specified in sections 94 and 95 of theConstitution of the Hellenic Republic; (ii) disputes for which thelaw prescribes special competence of courts; (iii) disputes betweenemployers and employees (Article 663 GCCP); and (iv) disputesrelating to matters of personal status of individuals, such as divorce,relations between spouses or between parents and children.


The arbitral tribunal may rule on its own jurisdiction, unless theparties to the arbitration agreement have otherwise agreed (Article887 §2 GCCP). The arbitral tribunal’s decision may be challengedbefore the Court of Appeals sitting in the region where the awardwas made, by means of an application to set aside the arbitral award(Article 897 GCCP) or an application to have such award declarednull and void (Article 901 GCCP) (see below under question 10.4).

3.3 What is the approach of the national courts in Greecetowards a party who commences court proceedings inapparent breach of an arbitration agreement?

If a party commences court proceedings in apparent breach of anarbitration agreement, the other party must invoke the arbitrationagreement at the first hearing of the case, before it presents anyother defence, otherwise the court may proceed with the case(Articles 870 and 264 GCCP). The court shall then decide whetherthere is such a breach or not and, if it rules that the arbitrationagreement is valid, it shall refer the case to the arbitral tribunal(Article 264 GCCP).


The jurisdiction and competence of the national arbitral tribunalmay be addressed by the Greek courts and more specifically by thecompetent Court of Appeals, only if a party to the arbitrationproceedings submits an application to set aside the decision of thearbitral tribunal (Article 897 GCCP) or declare it as null and void(Article 901 GCCP), due to its lack of jurisdiction and/orcompetence.

3.5 Under what, if any, circumstances does the national law ofGreece allow an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

Greek law does not allow an arbitral tribunal to assume suchjurisdiction. Individuals or entities which are not party to anarbitration agreement may not become parties to the arbitrationproceedings initiated by means of the relevant arbitration

agreement, unless the parties and the arbitral tribunal accept suchparticipation.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Greece and what is thetypical length of such periods? Do the national courts ofGreece consider such rules procedural or substantive, i.e.,what choice of law rules govern the application oflimitation periods?

The commencement of arbitration proceedings in Greece is not initself subject to limitation periods. However, if the right, theprotection of which is the subject matter of the arbitrationproceedings, has fallen under the applicable statute of limitation andthe respondent invokes the prescription of the substantive right, thearbitral tribunal shall reject the relevant lawsuit for that reason. Rulesprescribing limitation periods are substantive rules. According toGreek law, the typical limitation period for claims deriving from acontract is generally twenty (20) years. Various exceptions apply,including most notably those enumerated in Article 250 of the GreekCivil Code (“GCC”), as well as in respect of claims arising in tort,which are subject to a five-year limitation period.



The choice of law rules depends on the nature of the dispute.(i) If the dispute arises out of a contract, the parties’ choice is

generally upheld. Specifically:In international commercial arbitrations, the choice of law isgoverned by Article 28 § 2 of Law 2735/1999.If the parties are EU residents, that choice is governed by theprovisions (including Articles 3 and 4) of Regulation593/2008/EC (Rome I).In all other arbitration proceedings, Article 25 of the GCCapplies, which provides that the parties are free to choose thelaw which shall govern their relations and, if no such choicewas made, then the court applies the law, which, consideringall relevant circumstances, is appropriate for the contract.

(ii) If the dispute arises out of an unlawful act (tort)In international commercial arbitrations the choice of law isgoverned by Article 28 § 2 of Law 2735/1999.If the parties are EU residents, that choice is governed byRegulation 864/2007/EC (Rome II).In all other arbitration proceedings, the tribunal would applythe law of the country in which the tort was perpetrated(Article 26 GCC).

(iii) If the dispute refers to real estate, the case is governed by thelaws of the country where the real estate lies (Article 27GCC, lex rei sitae).


The parties’ choice of the applicable law cannot preclude theapplication of: (i) Overriding mandatory provisions of Greek law, as defined in

Article 9 of Regulation 593/2008/EC or Article 16 ofRegulation 864/2007, respectively, to the extent each suchRegulation applies.



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(ii) Greek rules of public order (Article 33 GCC), now generallyconstrued to refer to international public order (ordre publicinternational).


In international commercial arbitrations the formation, validity andlegality of arbitration agreements is governed by Article 34 § 2 ofLaw 2735/1999.According to Article 11 GCC, the formation of contracts (includingarbitration agreements) is governed by the law applicable to suchcontract, or the law of the country where the contract was made, orthe national law of all parties thereto. The purpose of the provisionis to help uphold the proper formation of a contract by reference toany of the above sets of rules (favorem validitatis). The validity andlegality of an arbitration agreement is governed by the lawapplicable to it (see question 4.1 above), subject to the limitationsof overriding mandatory provisions and provisions of public order(see question 4.2 above).



Greek law does not impose any such limits. If, however, the partieschoose one or more judges as members of the arbitral tribunal, thentheir selection is governed by Article 871A GCCP.


If the parties’ method for selecting arbitrators fails, the missingmember(s) of the arbitral tribunal may be appointed by the Single-Member First Instance Court, according to Articles 878 and 879 GCCP.


In addition to the appointment of the member(s) of the arbitraltribunal who could not be appointed by the parties’ method forselecting arbitrators, the Greek courts have the power to remove amember of the arbitral tribunal, against whom a party has submitteda request for removal for the reasons foreseen in Article 52 GCCP(the same grounds apply to judges sitting on a Greek court), or whomay not participate in the arbitral tribunal for the reasons foreseenin Article 871§ 2 GCCP.


Although arbitrator independence, neutrality and/or impartiality arenot prerequisites for his/her appointment to the arbitral tribunal, thelack of these qualities may lead to the arbitrator’s removal from itin accordance with Articles 52 and 883 GCCP.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Greece?

According to Article 883 §2 GCCP, the arbitrators must disclose

any reason which may lead to their removal according to Article 52GCCP.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Greece? If so, do those laws or rules applyto all arbitral proceedings sited in Greece?

Parties are free to agree upon the rules applicable to the arbitrationprocedure. In the absence of such an agreement, the arbitraltribunal is at liberty to set the procedural framework. The onlyprocedural rules that must be followed by all arbitral tribunals sitedin Greece are those mentioned hereinabove under question 2.4.

6.2 In arbitration proceedings conducted in Greece, are thereany particular procedural steps that are required by law?

The procedural steps required by the GCCP are:The formation of the arbitral tribunal.The submission by the parties of their statements on the case.The taking of evidence.The issuance of the arbitral award.


The conduct of the arbitration hearing is governed by the relevantprovisions of the arbitration agreement. If no such provisions exist,the arbitral tribunal determines freely the arbitration procedure.

6.4 What powers and duties does the national law of Greeceimpose upon arbitrators?

The powers of the arbitrators according to Greek law are restrictedin comparison to those granted to regular courts. For instance,arbitral tribunals do not have the power to order injunctions, to takeinterim measures or to compel the testimony of witnesses. As to theduties of the arbitrators, Greek law imposes no specific duties uponarbitrators other than the duty to perform impartially in thearbitration proceedings.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Greece and, if so, isit clear that such restrictions do not apply to arbitrationproceedings sited in Greece?

According to Article 3 §2 of Presidential Decree 258/1987, onlylawyers from other EU Member States may appear before Greekcourts and only together with a Greek lawyer.Such restriction should not be applied to arbitration proceedingssited in Greece, particularly because of the freedom of the parties todetermine the arbitration procedure, as well as because Article 3 §2of P.D.258/1987 refers only to the appearance of foreign lawyersbefore Greek courts (and other public authorities), not beforearbitral tribunals.

6.6 To what extent are there laws or rules in Greece providingfor arbitrator immunity?

Arbitrators are liable only for wilful misconduct and grossnegligence (Article 881 GCCP). Consequently, if an arbitrator’s

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conduct causes damages to a party to the arbitration, that party mayfile an action against the arbitrator in accordance with theprovisions of Article 73 of the Introductory Law to the GCCP. Suchlawsuit must be filed within six months from the day of the act oromission of the arbitrator.Furthermore, acceptance by an arbitrator of bribes is a criminaloffense punishable by imprisonment of at least one year (Article239 of the Greek Penal Code).


During the arbitration proceedings, the national courts may onlyappoint arbitrator(s), who could not be appointed through theprocedure foreseen in the arbitration agreement, and removearbitrators who fall under the provisions of Article 52 GCCP.Furthermore, the competent Justice of Peace may assist the arbitraltribunal with the collection of evidence, provided that suchassistance was requested by the arbitral tribunal. After the issuanceof the arbitral award, the national courts may set it aside or declareit null and void in accordance with the provisions of Articles 897and 901 GCCP.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Greece (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

There are no special considerations for conducting multipartyarbitrations in Greece, or for consolidating multiple arbitrations inone proceeding. Such a consolidation would be in principlepossible, if all involved parties agree to it. Third parties may neitherintervene nor join an arbitration, unless the parties and the arbitraltribunal accept such intervention or joinder.

6.9 What is the approach of the national courts in Greecetowards ex parte procedures in the context of internationalarbitration?

A foreign international arbitral award has the power of res judicataand may be enforced in Greece (after a relevant decision of thecompetent Single Member First Instance Court - Article 906GCCP), only if all the conditions enumerated in Article 903 GCCPare fulfilled. One of these conditions is that the losing party was notdeprived of due process, including the right to defend itself. Exparte procedures generally fail to satisfy such test. This rule does not apply to interim measures which were awardedin extremely urgent cases or to address an imminent danger (Article687 §1 GCCP), provided that the defendant is entitled to request therevocation of the relevant award.



Under Greek law the arbitral tribunal is not entitled to awardpreliminary or interim relief (Article 889 §1 GCCP).


Greek courts may grant preliminary or interim relief in proceedingssubject to arbitration (because of the arbitral tribunal’s inability todo so), in the same circumstances that would permit the award ofsuch relief in cases in which the ordinary courts would haveexclusive jurisdiction. Such award by a regular court has no effecton the jurisdiction of the arbitral tribunal.


The existence of an arbitration agreement does not influence in anyway the handling of requests for interim relief by Greek courts.


No such order is allowed by Greek law either for regular courts orarbitral tribunals.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Greece?

No specific rules of evidence apply to arbitral proceedings inGreece.


Greek law does not provide for full discovery in the common lawsense, but only for specific discovery: a party to a litigation mayrequest that the other party deliver specific documents. Suchrequests are judged at the court’s discretion. The arbitral tribunalhas no authority to order the disclosure of documents or otherdiscovery of evidence. If a party to an arbitration proceduresubmits a request for the production of specific documents, thearbitral tribunal shall refer such request to the competent Judge ofPeace (Article 888 GCCP). Third party disclosure is possible underthe same conditions as party disclosure.


Under the circumstances foreseen in Article 888 GCCP, i.e. whenthe arbitral tribunal requests the competent Judge of Peace to issuean order regarding the taking of evidence, or to conduct evidentiaryproceedings, may a court intervene.


As already indicated, international non-commercial arbitrationproceedings are regulated by the GCCP. Consequently, onlyspecific disclosure is allowed. The UNCITRAL Model Law on



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International Commercial Arbitration does not include anyprovisions on disclosure/discovery.


It is up to the parties (by means of relevant provisions in thearbitration agreement) and to the arbitral tribunal (if the arbitrationagreement is silent on such matters) to determine the rules applyingto the production of written and/or oral witness testimony, includingthe admissibility of affidavits and the obligation or not to impose anoath to the witnesses who give oral testimony before the arbitraltribunal. The arbitral tribunal must observe the rules of due processdiscussed in question 2.4 above. Such rules would be severallybreached if no cross-examination were allowed.

8.6 Under what circumstances does the law of Greece treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

The notion of documents being subject to privilege is not known toGreek law as such. Certain documents or information may besubject to rules of professional or other secrecy; however, breach ofan obligation of confidence by a person giving evidence does notaffect the admissibility of such evidence.

9 Making an Award


The decision of an arbitral tribunal must be in writing and must bemanually signed by each arbitrator. The award must further containthe mandatory elements foreseen in Article 892 GCCP, i.e.:

The full name and address of all the arbitrators.The place and time of issuance of the award.The full names of all arbitrands or other participants in thearbitration proceedings.The arbitration agreement on which the award was based.The reasoning of the award.The executory provisions of the award.



As a rule, the parties do not have the right to appeal an arbitralaward (Article 895 §1 GCCP). However, the parties may foresee inthe arbitration agreement their right to challenge the arbitral awardbefore a different arbitral tribunal, provided that they determine theconditions, the time limits and the procedure applicable to thesubmission and the examination of such a challenge.


Such an agreement, if it refers to the request to set aside an arbitral

award, is forbidden (Article 900 GCCP).


As indicated in question 10.1, the GCCP does not allow for anappeal against an arbitral award, unless the parties have specified soin the arbitration agreement, in the manner specified in Article 895GCCP.

10.4 What is the procedure for appealing an arbitral award inGreece?

The GCCP foresees the following remedies against an arbitralaward:

The application for setting aside the award. Such applicationmay be lodged by a party before the competent Court ofAppeals and within 3 months as of the award being servedupon such party, for the reasons foreseen in Article 897GCCP. If the application is successful, the arbitral award isannulled. The decision of the Court of Appeals may bechallenged before the Supreme Court (Areios Pagos) bymeans of a revision. The following grounds may be acceptedas part of an application to set aside the award: a) thearbitration agreement is null and void; b) the arbitrationaward was made after the expiration of the validity of thearbitration agreement; c) the arbitrators were appointed inviolation of the arbitration agreement or of the provisions ofthe law or were revoked by the parties or made their award,notwithstanding the fact that they were successfullychallenged; d) the arbitrators exceeded the authority vestedupon them by the arbitration agreement or the law; e) theprinciple of equal treatment of the parties or the provisionsregarding the issuance and the contents of the arbitral awardwere violated; f) the arbitral award violates mandatoryprovisions of law or is contrary to bonos mores; g) thearbitral award is unintelligible or contains contradictoryprovisions; and/or h) there are grounds for reopening the casein accordance with Article 544 GCCP. The application for recognising that the arbitral award is non-existent for one of the reasons foreseen in Article 901 GCCP.The application is submitted to the competent Court ofAppeals. The decision of the Court of Appeals may bechallenged before the Supreme Court by means of a revision.The grounds for such an application are the following: a) noarbitration agreement was ever concluded; b) the subject-matter of the dispute is not “arbitrable”; and/or c) the arbitralaward was rendered in an arbitral procedure which wasconducted against a non-existing person.


11.1 Has Greece signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

Greece has signed the New York Convention and it has ratified it bymeans of Legislative Decree 4220/1961 with only two reservations,namely, that it applies only to awards made in the territory ofanother contracting party and only to disputes arising out ofcommercial relations.

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11.2 Has Greece signed and/or ratified any regional Conventionsconcerning the recognition and enforcement of arbitralawards?

Greece is not a party to any such regional conventions, but it hassigned and ratified a number of bilateral conventions on therecognition and enforcement of arbitral awards. Many of theseConventions refer to the New York Convention of 1958.

11.3 What is the approach of the national courts in Greecetowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

No special steps are required for the recognition or enforcement ofnational arbitration awards; these are fully recognised and they areenforced in exactly the same way as the decisions of the regular courts. Foreign arbitration awards that fall under the ambit of the New YorkConvention of 1958 are recognised and enforced in accordance withthe provisions of the Convention. The remaining foreign arbitration awards, for which nointernational conventions are applicable, are automaticallyrecognised (i.e. they do not need to be “ratified” or re-examined onthe merits by a separate decision of the Greek courts, in order toconstitute res judicata), provided that the conditions of Article 903GCCP are satisfied, namely: a) the arbitration agreement is validaccording to the applicable law; b) the subject matter of thearbitration award is “arbitrable” according to Greek law; c) there isno remedy or other means of redress against the arbitral award noris there a pending procedure to set aside the award; d) the losingparty was not deprived of due process and was afforded the right todefend itself in arbitration proceedings; e) the arbitration award isnot contrary to a decision of the Greek courts, issued in the samecase and having the power of res judicata against the parties to thearbitration proceedings; and f) the arbitration award is not contraryto Greek public policy or to bonos mores. For the enforcement ofsuch arbitration awards, the interested party must follow theprocedure foreseen in Article 905 GCCP for the enforcement of thedecisions of foreign regular courts. The conditions applicable tosuch enforcement are the same as the conditions for the recognitionof arbitration awards (Article 903 GCCP).

11.4 What is the effect of an arbitration award in terms of resjudicata in Greece? Does the fact that certain issues havebeen finally determined by an arbitral tribunal precludethose issues from being re-heard in a national court and, ifso, in what circumstances?

Arbitration awards are equivalent to the decisions of the regular courts(with the distinctions discussed in question 11.3 above) and constituteres judicata, to the same extent as court decisions. The issuesdetermined by an arbitral award may not be reheard or re-examined bya national court, provided of course that the parties before the nationalcourt are the same as those in the arbitration proceedings and that thedispute relates to the same factual and legal basis.

12 Confidentiality

12.1 Are arbitral proceedings sited in Greece confidential?What, if any, law governs confidentiality?

Arbitral proceedings are in principle confidential. The arbitralawards are published in the secretariat of the Single Member First

Instance Court of the region where the arbitration award was issued.Only those persons who can establish a lawful interest may obtaincopies of the award. The other documents of the arbitrationproceedings (witness examination protocols, pleadings of theparties, documents submitted by the parties to the arbitral tribunal,etc.) are not accessible to the public.


Parties to the arbitration proceedings are entitled to invokeinformation disclosed in such proceedings in subsequentproceedings between the same parties. Such information shall befreely evaluated by the court, except if it constitutes res judicata.


Arbitral proceedings are always protected by confidentiality.



Such limits are determined by the law (both substantive andprocedural) which governs the relations between the parties to thearbitration proceedings, subject to the limitations discussed inquestion 4.1 above. For instance, the notion of punitive damages istotally alien to Greek law, meaning that no punitive damages couldbe sought as part of arbitration proceedings governed by Greek law.


If Greek substantive law is applicable and if the conditions foreseenin Articles 345 and 346 GCC for the award of interest are satisfied,the arbitral tribunal may award interest (including, whereapplicable, pre-judgment interest). The rate of interest is a matterfor the applicable substantive law and generally determined byreference to the agreement of the parties. If no such agreementexists or the rate agreed by the parties exceeds lawful maxima, thetribunal would apply the maximum permissible statutory rates eachtime in effect in Greece (currently set and revised by the Board ofDirectors of the ECB).


Unless the arbitration agreement (or institutional rules incorporatedby reference therein) specifies otherwise, arbitration costs(including arbitrators’ and attorneys’ fees) are divided between theparties according to the extent that each party has won or lost,respectively. However, arbitral awards quite often divide the feesand costs between the parties in an arbitrary way.


If the amount awarded to the winning party by an arbitral award



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issued in Greece is considered by Greek tax legislation as taxable inGreece, it shall be taxed by using the tax rates which are applicableto such income.


14.1 Has Greece signed and ratified the Washington Conventionon the Settlement of Investment Disputes Between Statesand Nationals of Other States (1965)?

Greece is a signatory to the Washington Convention and it hasratified it by means of Law 608/1968, which came into force on21.05.1969.

14.2 Is Greece party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Greece is a party to 38 Bilateral Investment Treaties, as well as tothe Energy Charter Treaty.

14.3 Does Greece have standard terms or model language thatit uses in its investment treaties and, if so, what is theintended significance of that language?

Most BITs to which Greece is a party have similar terms.

14.4 In practice, have disputes involving Greece been resolvedby means of ICSID arbitration and, if so, what has theapproach of national courts in Greece been to theenforcement of ICSID awards and how has thegovernment of Greece responded to any adverse awards?

According to the ICSID site, there have been no cases resolved bynor are any cases pending before ICSID arbitration in which Greeceis a party.

14.5 What is the approach of the national courts in Greecetowards the defence of state immunity regardingjurisdiction and execution?

Greek law does not recognise state immunity regarding jurisdictionand execution. However, a court decision or an arbitral award (orany other enforceable title) against a foreign state may be enforcedin Greece only after the Greek Minister of Justice has given hispermission (Article 923 GCCP).

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in? Are certain disputes commonlybeing referred to arbitration?

The main noteworthy trend is the continuous increase ofinternational arbitration being chosen as the means of disputeresolution by parties to international agreements. Furthermore, theGreek State has repeatedly had some of its more importantagreements with national or foreign counterparties (particularly inrespect of concessions) ratified by formal law. Such agreementstypically envisage arbitration as the method of resolution ofeventual disputes.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Greece, such as pending or proposedlegislation that may substantially change the lawapplicable to arbitration?

There is proposed legislation regarding the introduction ofmediation as a means of dispute resolution. In its present form, itforesees that a compromise concluded by the parties to themediation procedure shall become enforceable by its simple depositto the secretariat of the competent regular court. There is currentlyno indication as to the final form or time of enactment of suchprovisions.

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Dr. Constantine Alexiou

Alexiou & Kosmopoulos Law Firm 23A Vas. Sofias Avenue106 74 Athens Greece

Tel: +30 210 339 2600Fax: +30 210 362 8320Email: [email protected] URL: www.aklawfirm.gr

Dr. Constantine Alexiou is the managing and founding partner ofAlexiou & Kosmopoulos Law Firm. He holds a PhD from the Facultyof Law of the University of Freiburg, Germany. He specialises ininsolvency, recovery and reconstruction, public works and litigation.He has frequently represented arbitrands before national and ICCtribunals on a wide range of business disputes. He is fluent inEnglish, French and German.

Christina Derveni

Alexiou & Kosmopoulos Law Firm 23A Vas. Sofias Avenue106 74 Athens Greece

Tel: +30 210 339 2600Fax: +30 210 362 8320Email: [email protected] URL: www.aklawfirm.gr

Christina joined the firm in 2006. She holds a postgraduateDiploma (LL.M.) in Civil Procedure Law from the Athens UniversityLaw School. Her legal expertise mainly focuses on Procurement &Projects and Litigation. She is fluent in English and German.

ALEXIOU & KOSMOPOULOS LAW FIRM builds on the foundation of over a century and four consecutive generations ofpractitioners to provide modern full-service capabilities to international and domestic clients across diverse industries.The Firm has earned prominence in Greece through its consistent quality legal advisory and consultancy and isrespected for its efficiency. The Firm’s expansion in recent years has permitted a growing circle of loyal clients to benefitfrom integrated services for their full range of activities. In 2007, the Firm enhanced its capabilities by adding a strongbanking & finance practice and strengthening its M&A, commercial and IT practices. A team of select professionals ina variety of fields, with solid experience and business awareness, work seamlessly to realise the firm’s vision ofexcellence in today’s increasingly complex business environment.


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Ireland


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Ireland?

For domestic arbitrations (as to which see question 2.2 below),Section 2(1) of the Arbitration Act, 1954 sets out the restrictiverequirements of an agreement to arbitrate. It states that an“arbitration agreement” means “a written agreement to refer presentor future differences to arbitration, whether an arbitrator is namedtherein or not”.In respect of international arbitrations (as to which see question 2.2below), Article 7 of the UNCITRAL Model Law, applied by theArbitration (International Commercial) Act, 1998, governs thesituation. It provides that, whilst an arbitration agreement may takethe form of an arbitration clause in a contract or the form of aseparate agreement, it “shall be in writing”. In this regard, however,an agreement will be considered to be in writing if it is contained ina document signed by the parties or in an exchange of letters, telex,telegrams or other means of telecommunication which provide arecord of the agreement, or in an exchange of statements of claimand defence in which the existence of an agreement is asserted byone party and not denied by the other.Accordingly, if an arbitration agreement is not in written form, it isnot governed by the provisions of the Arbitration Acts and theparties’ options are limited. In practice, however, notwithstandingthe statutorily restrictive approach, the Courts are satisfied to referparties to arbitration once an intention to be bound by an arbitrationagreement can be determined from documentation as between theparties when forming their contract.


There are no special requirements or formalities if one (or more) ofthe parties to an arbitration is an individual person.


Various matters which facilitate the progression of the dispute tohearing before the arbitrator should be included in the arbitrationagreement at the outset and, in order to avoid rancour as to aparticular approach at a later stage, it is often best to have asreasonably detailed an arbitration agreement as possible in placebefore any dispute does arise.

Things which the parties should consider making provision forinclude setting the number of arbitrators, their qualification(s) andother criteria relevant to their appointment, as well as how they areto be chosen. The agreement should also set out a defaultmechanism in the event that the parties cannot agree on thearbitrator (such as referring the question of who is to be appointedto a relevant professional body). Equally, the parties should alsoconsider whether they wish to make provision for a replacementarbitrator in the event that the arbitrator appointed cannot continue,for whatever reason.The agreement should also specify what arbitral rules, if any, are tobe chosen, to govern the progress of the matter to hearing and theagreement should also confirm the place, language and governinglaw.


Irish courts have historically been very supportive of arbitration.Accordingly, they have displayed a strong policy of staying Courtproceedings in favour of agreements to arbitrate where suchagreements exist. However, it is important to ensure that, if adispute is subject to an arbitration agreement and one partycommences Court proceedings, the other party must object to theCourt proceedings in a timely manner, as they could otherwise bedeemed to have waived the right to arbitrate. A stay in favour of anarbitration agreement is almost always ordered by the Irish Courtsand it is very rare for a Court to refuse a stay once the existence ofan arbitration agreement has been established on a prima faciebasis.Section 5 of the Arbitration Act, 1980 provides that, where anarbitration agreement exists in relation to a particular dispute, andwhere a party seeks a stay, the Court is obliged to stay any courtproceedings regarding that dispute unless satisfied that thearbitration agreement is null and void, inoperative or incapable ofbeing performed, or that there is in fact no dispute between theparties. In addition, it is important to note that any application fora stay must be made in a timely fashion, after any appearance hasbeen entered, but before any pleading delivered or taking any step.However, Section 18 of the Arbitration (International Commercial)Act, 1998 does set out an exception in that nothing in Section 5 ofthe 1980 Act shall prevent a party to an arbitration agreement frombringing civil proceedings under the small claims procedure of theDistrict Court. With regard to international arbitrations, Article 8 of the Model Lawsets out the relevant principles. It provides that if an action isbrought before the Court in a matter which is the subject of an

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arbitration agreement, the Court shall refer the parties to arbitrationunless it finds that the agreement is null and void, inoperative orincapable of being performed. However, a party seeking a stay ofCourt proceedings brought in breach of an arbitration agreementmust act with haste and, in any event, must act not later than whensubmitting his first statement on the substance of the dispute.


No reported cases regarding ADR agreements have come before theIrish Courts, so it is not clear what the approach would be. It seemsunlikely, however, that the Courts would compel a party unwillingto go through an ADR process to waste time and money in doing so,but there is provision under the Commercial Court Rules for thatcourt to adjourn proceedings to facilitate ADR.


2.1 What legislation governs the enforcement of arbitrationagreements in Ireland?

Three pieces of legislation currently govern arbitrations in Ireland:the Arbitration Act, 1954; the Arbitration Act, 1980; and theArbitration (International Commercial) Act, 1998. A new piece ofconsolidating legislation to deal with arbitration (and mediation)was being considered prior to the election of a new government in2007, but it is not clear whether that remains on the legislativeagenda.


Not currently, although a unitary regime is under consideration.Currently, different regimes apply to international and domesticarbitration. International arbitration is governed by the Arbitration(International Commercial) Act, 1998 which adopts theUNCITRAL Model Law. “International arbitrations” for thepurposes of the Act are those arbitrations to which the UNCITRALModel Law on International Commercial Arbitration applies, asdetailed in Article 1 of that Model Law. Domestic arbitration isgoverned by the Arbitration Act, 1954 (which resembles the EnglishArbitration Act 1950). The Arbitration Act, 1980 made some minoramendments to the 1954 Act, as did Part III of the 1998 Act.


Yes. The Arbitration (International Commercial) Act, 1998 adoptsthe UNCITRAL Model Law and it is reproduced in its entirety as aschedule to the Act. However, Section 4 of the 1998 Act providesthat, subject to Part II of that Act, “the Model Law shall apply in theState”. Part II of the Act goes on to clarify inter alia the functionsof the High Court, the Court powers exercisable in support ofinternational commercial arbitration proceedings, the tribunal’spowers in relation to the examination of witnesses, consolidation ofarbitral proceedings and the holding of concurrent hearings,interest, costs, fees and expenses, time limits for setting aside anaward, and effects of the award.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Ireland?

As stated above, any agreement providing for arbitration must be inwriting. In addition, basic principles of natural justice, such as audialtarem partem and nemo iudex in causa sua, are also applicable.For international arbitrations conducted pursuant to the Arbitration(International Commercial) Act 1998, which adopts theUNCITRAL Model Law as Irish law, that Act is applicable.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Ireland? What isthe general approach used in determining whether or not adispute is “arbitrable”?

In general, the position is no, but there are a few exceptions.Employment disputes are not arbitrable, in that there is a specificstatutory regime for separate tribunals to deal with such disputes(such as the Employment Appeals Tribunal). Equally, unwrittenarbitration agreements do not fall within the scope of the ArbitrationActs. In addition, Section 39(2) of the Arbitration Act, 1954removes jurisdiction from an arbitrator to deal with questions offraud which, under Irish law, must be very fully pleaded and aretherefore not likely to be raised simply in order to circumvent anarbitration clause. Equally, pursuant to Section 26 of theArbitration Act, 1954, an arbitrator does not have the power to orderspecific performance of any contract relating to land or any interestin land and, therefore, such disputes are not arbitrable.In addition to those specific areas outlined above, there are anumber of other factors that should be borne in mind whenconsidering whether a dispute is arbitrable or not. For instance,there may be public policy reasons why certain issues must be dealtwith by the Courts or other tribunals, or the arbitration agreementmay be unenforceable, in which cases the dispute may have toproceed to resolution by a different method.


In domestic arbitrations, the arbitrator does not have jurisdiction todecide on his own jurisdiction and there is no provision in the 1954Act providing otherwise. Accordingly, if there is a genuine disputeas to the arbitrator’s jurisdiction, the question of the arbitrator’sjurisdiction can only be determined by the Court.In respect of international arbitrations, Article 16 of the Model Lawgoverns the situation. It provides that the “arbitral tribunal mayrule on its own jurisdiction”. However, any assertion that thetribunal does not have jurisdiction must be raised no later than thesubmission of the statement of defence, whilst a plea that thetribunal is exceeding the scope of its authority must be raised assoon as possible as the matter arises in the proceedings. The 1998Act designates the High Court in Dublin as the relevant court forpurposes of Article 16(3) and any subsequent challenge to atribunal’s determination on jurisdiction.

3.3 What is the approach of the national courts in Irelandtowards a party who commences court proceedings inapparent breach of an arbitration agreement?

As set out above at question 1.4, the Irish Courts are supportive ofagreements to arbitrate and, where an arbitration agreement exists,



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the Courts will grant stays in respect of court proceedings so longas the application for stay is brought sufficiently speedily and thearbitration agreement is effective.


In relation to jurisdiction, see question 3.2 above. As regards competence, with respect to domestic arbitrations, theHigh Court is empowered by Section 24 of the 1954 Act to removean arbitrator who “fails to use all reasonable dispatch in enteringon and proceeding with the reference and making an award”. Inaddition, Section 37 of that Act empowers it to remove an arbitratorfor “misconduct”, which could in theory encompass competenceissues, although typically it relates to questions of jurisdiction orimpartiality (also covered in Section 39). In relation to international arbitrations, Article 14 of the Model Lawprovides that if an arbitrator becomes de facto or de jure unable toperform his functions, or for other reasons fails to act without unduedelay, his mandate terminates if he withdraws or the parties agreeupon termination. However, if a controversy remains, the HighCourt may decide upon the termination of the mandate. Equally,Article 12 of the Model Law provides that an arbitrator may bechallenged if circumstances exist that give rise to doubts as to hisimpartiality, independence, or if he does not possess thequalifications agreed upon by the parties. That latter issue, inparticular, could touch upon issues of competence.

3.5 Under what, if any, circumstances does the national law ofIreland allow an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

Not at all. The tribunal cannot exercise any jurisdiction over a partywho is not a party to the arbitration agreement nor can the Courtcompel it.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Ireland and what is thetypical length of such periods? Do the national courts ofIreland consider such rules procedural or substantive, i.e.,what choice of law rules govern the application oflimitation periods?

The Statute of Limitations Act 1957 applies to arbitration in thesame way as it applies to actions taken in the courts. Therefore, thelimitation periods for the commencement of arbitrations are thoselimitation periods applicable to causes of action in the courts. Thelimitation period as such will depend on the particular cause ofaction in law which is the subject matter of the dispute. As ageneral principle, the limitation period for contractual claims is sixyears from the date of commencement or accrual of the cause ofaction. However, it should be noted that, unlike a court (whichviews these rules as procedural), an arbitral tribunal does not haveany power to extend the limitation periods laid down by the Statuteof Limitations. However, the parties may, by agreement,circumscribe and foreshorten the limitation periods applicable totheir dispute.



Generally, and in the first instance, by reference to the choice of lawgoverning the agreement. If there is no express choice of law, thearbitrator may determine the governing law by reference toapplicable international standards (such as the Rome Convention onLaw Applicable to Contractual Obligations, to be supplanted byRegulation 593/2008 in December 2009) for determining same andcommon law principles.


As a general principle, no, save that certain provisions of local lawwill be mandatory in terms of the existence or otherwise of abinding arbitration clause, and the conduct of the arbitration itself.However, these may be construed as being procedural in nature andthe principle substantive issue may arise where the agreementbetween the parties about which the dispute arises may be said to bepublic policy.


If the arbitration is being conducted in Ireland under the ArbitrationAct, 1954 or the Arbitration (International Commercial) Act, 1998,Irish law governs the formation, validity and legality of arbitrationagreements.



There are no limits on the parties’ autonomy to select arbitrators.Given that agreement upon the arbitrator(s) can be difficult to reach,many agreements provide for a default mechanism in the event ofdisagreement, which typically involves an application by eitherparty to the president of a named professional body requesting thathe or she appoint an arbitrator.


In domestic arbitrations, where the arbitration agreement makes noprovision for appointment, or where the parties fail to agree upon anarbitrator in circumstances where there is no default mechanism,Section 18 of the 1954 Act empowers the High Court to appoint anarbitrator. For international arbitrations, Article 11 of the ModelLaw deals with the appointment of arbitrator(s) where the partiescannot agree.


The Courts cannot intervene in the selection of arbitrators, save incircumstances where the parties cannot agree upon an arbitrator and

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do not provide for a default mechanism, such as that outlined inquestion 4.1 above, in their agreement. There are other specificscenarios covered by Section 18 of the 1954 Act, but they reflectsimilar principles, e.g. where two arbitrators are required to appointan umpire or third arbitrator and do not appoint one.


For domestic arbitrations, there is no specific statutory principleregarding independence or impartiality, but Section 37 does permitthe High Court to remove an arbitrator for misconduct, whichincludes impartiality, and, pursuant to Section 39, the Court haspower to order reliefs where the arbitrator is not impartial,including the revocation of his authority. However, there is norequirement for independence on the part of the arbitrator.Importantly, the challenge for misconduct under Section 37 canonly be invoked in respect of the conduct of the arbitration and,therefore, a party would actually have to conduct the arbitrationbefore seeking to invoke the procedure. For international arbitrations, the position is addressed by Article 12of the Model Law, which provides that “An arbitrator may bechallenged only if circumstances exist that give rise to justifiabledoubts as to his impartiality or independence…”. Accordingly, it isonly under the 1998 Act and the international arbitration regime inIreland that ‘impartiality’ and ‘independence’ are required.Moreover, in respect of such requirements, an arbitrator is obliged,also pursuant to Article 12, to disclose without delay anycircumstances that could give rise to doubts regarding his or herimpartiality or independence, not only at the time of theirappointment but throughout the arbitral proceedings.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Ireland?

See discussion above at question 5.4.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Ireland? If so, do those laws or rules applyto all arbitral proceedings sited in Ireland?

For arbitrations under the 1998 Act, Article 19 of the Model Lawconfirms that the parties are entitled to set their own procedure and,failing agreement on that, it is for the tribunal to conduct thearbitration in such manner as it considers appropriate. However,pursuant to Article 18 there is a requirement that the parties betreated equally and each party is to be given a full opportunity topresent their case. More generally, Chapter V of the Model Lawsets out the basic principles regarding the conduct of internationalarbitration proceedings. There is no specific provision in the 1954Act regarding the procedure to be adopted, but Sections 37 and 39give the Court the power to remove an arbitrator for impartiality ormisconduct, which indirectly imposes a duty to ensure that theparties are treated equally and that basic principles of natural justiceare applied.In general, it will be for the parties to determine the procedure theywant adopted, particularly through the adoption in the arbitrationagreement of specific institutional or trade association rules.However, if no rules are chosen and the parties cannot subsequentlyagree upon how the procedure is to be conducted, the arbitrator can

set the procedure, which will generally be done at a preliminarymeeting between the parties and the arbitrator, following which heor she will issue an order for directions. It is unusual for domesticarbitrations to be conducted in a manner which is not similar to themanner in which Irish court litigation is pursued.

6.2 In arbitration proceedings conducted in Ireland, are thereany particular procedural steps that are required by law?

No, save that, as a basic principle, and as outlined above at question5.1, the arbitrator is required to conduct the proceedings in amanner which treats each side equally and in accordance with thebasic principles of natural justice. Chapter V of the Model Law setsout the basic principles regarding the conduct of internationalarbitration proceedings. Very often the conduct of the hearing willdepend on the nature and size of the dispute and, very often, theapproach of the arbitrator. It will usually follow the form of IrishHigh Court procedure, with full oral hearings on evidence. Somearbitrations may be conducted on a ‘documents only’ basis, or onthe basis of written submissions.


No. There is nothing in the Arbitration Acts that governs how thearbitration is to be conducted. This will be for the parties to agreeand if there is no agreement as to the procedure to be adopted orrules to be applied, the arbitrator will determine the procedure to beadopted. Chapter V of the Model Law sets out the basic principlesregarding the conduct of international arbitration proceedings.

6.4 What powers and duties does the national law of Irelandimpose upon arbitrators?

In respect of international arbitrations, the arbitrator has the power,pursuant to Section 8 of the 1998 Act, unless the parties otherwiseagree, to direct that a party to an arbitration agreement or a witnessbe examined on oath or affirmation. With regard to an arbitrator’spowers to order preliminary or interim relief in either domestic orinternational arbitrations (see question 6.1 below).The arbitrator is expected to treat both parties equally and to giveeach side the opportunity to put their case. Article 18 of the ModelLaw sets out that obligation in respect of international arbitrations.In relation to domestic arbitrations, Sections 37, 38 and 39 deal withsituations where the arbitrator is alleged to have acted with a lackof impartiality or is alleged to have misconducted himself. Inpractice, these provisions impose an indirect obligation on thearbitrator to act fairly and to apply basic principles of naturaljustice. Section 24 also permits a Court to remove an arbitrator forfailing to use all reasonable dispatch in entering on and proceedingwith a reference.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Ireland and, if so, isit clear that such restrictions do not apply to arbitrationproceedings sited in Ireland?

There are restrictions on foreign lawyers not admitted in Irelandappearing in litigation matters before the Irish Courts. However, nosuch restrictions apply with regard to arbitrations. For instance, inrelation to international arbitration, Section 12(7) of the 1998 Actgives lawyers from other jurisdictions the traditional immunityfrom suit enjoyed by a barrister or solicitor for things said or unsaid

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as the case may be while before a court. Section 12(7) providesthat:“A person who:(a) is a barrister or solicitor or holds qualification that have been

obtained in another jurisdiction and are the equivalent tothose of a barrister or solicitor, and

(b) appears in proceedings before an arbitral tribunal, shall havethe same privileges and immunities as barristers andsolicitors have in proceedings before the High Court.”

6.6 To what extent are there laws or rules in Ireland providingfor arbitrator immunity?

In relation to international arbitration, Section 12 of the Arbitration(International Commercial) Act, 1998 provides that an arbitratorshall not be liable for anything done or omitted in the discharge orpurported discharge of his or her functions as arbitrator unless theact or omission is shown to have been in bad faith. There is noexpress immunity granted to arbitrators under the Arbitration Act,1954, but there is authority to indicate that an arbitrator appointedthereunder acts in a quasi-judicial capacity sufficient to attractimmunity from suit at common law in the absence of having actedin bad faith. In any event, it is usual for arbitrators in Ireland toprovide for immunity from suit in their standard retentionagreements.


Yes, they do. The High Court has broadly the same powers underthe domestic and international arbitration regimes (Sections 22 ofthe 1954 Act and Section 7 of the 1998 Act respectively). The HighCourt can make orders in respect of:(a) preservation, interim custody or sale of any goods which are

the subject matter of the reference;(b) securing the amount in dispute in the reference;(c) security for costs;(d) interim injunctions;(e) the appointment of a receiver;(f) detention, preservation or inspection of any property which

is the subject of the reference;(g) examination on oath or affirmation of any witness and the

issue of a commission or request for an examination of awitness out of the jurisdiction;

(h) the giving of evidence on affidavit; and(i) discovery and inspection of documents and interrogatories.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Ireland (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

No special considerations apply. Such arbitrations may only occursubject to the agreement of the parties.

6.9 What is the approach of the national courts in Irelandtowards ex parte procedures in the context of internationalarbitration?

Where an application is made to the court ex parte, the Court will

deal with it as appropriate in the circumstances of the relief sought.In one specific ex parte regard, for example, Mareva injunctions inaid of arbitrations, a high burden of proof has been set by the HighCourt for obtaining such an injunction. In all ex parte applications,there is a duty of full and frank disclosure. However, as a generalprinciple, it is preferable to make any applications on notice to theother side.



In domestic arbitration, there is no clear empowerment for atribunal to order preliminary or interim relief. However, Section 25of the 1954 Act states that, unless a contrary intention is expressedin the arbitration agreement, every arbitration agreement shall bedeemed to contain a provision that the arbitrator may make aninterim award. In addition, Section 2(2), dealing with definitionsclearly envisages interim awards by providing that reference in theAct to “an award” includes references to “an interim award”.Accordingly, to the extent that interim and preliminary relief can bestructured into the form of an interim award, such reliefs can beobtained. Section 22 of the Act also provides that the Court maymake various orders of a preliminary nature, which are expressed tobe without prejudice to any power vested in an arbitrator to makesuch orders.For international arbitrations, Article 17 of the Model Law providesthat, unless otherwise agreed by the parties and upon the applicationof one of the parties, the arbitral tribunal has the power to orderinterim measures of protection as may be considered necessary.Furthermore, the tribunal can require the provision of appropriatesecurity in respect of any such measure. In addition, Article 9, incombination with Section 7 of the 1998 Act, provides that before orduring arbitral proceedings a party may also request from the IrishHigh Court an interim measure of protection.


As set out in question 6.1 above, in domestic arbitrations, Section22 of the Act provides that the Court may make various orders of apreliminary nature. Equally, in respect of the international regime,Article 9, in combination with Section 7 of the 1998 Act, providesthat before or during arbitral proceedings a party may also requestfrom the Irish High Court an interim measure of protection. Thepowers of the High Court under both regimes are broadly similarand, in truth, such powers in aid of arbitration are more importantthan those available to the arbitrator. An application to the Courtwould not prejudice the arbitration agreement or the jurisdiction ofthe arbitral tribunal under either regime (save where, in respect ofdomestic arbitrations, the Court determines the question ofjurisdiction - see question 3.2 above).


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rare. However, the Irish High Court is empowered to order interimrelief in respect of both domestic and international arbitrations and,if the facts of the case warrant it, will grant such relief.


Yes. In respect of domestic arbitrations, the 1954 Act at Section 22provides that the High Court has the power, inter alia, to ordersecurity for costs. For international arbitrations, Section 7 of the1998 Act, which deals with powers exercisable in support ofinternational arbitration proceedings, provides that the High Courtmay inter alia make an order for security for costs.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Ireland?

In domestic arbitrations, the procedure usually adopted is themanner in which court litigation is conducted. For internationalarbitrations, under Article 19 of the Model Law, the arbitral tribunalis empowered to determine the admissibility, relevance and weightof any evidence. The standard international arbitration practice isgenerally followed in Ireland, namely two rounds of memorials foreach side and the use of the IBA Rules on the Taking of Evidencein International Commercial Arbitration. Importantly, Section12(6) of the 1998 Act provides that witnesses before arbitraltribunals have the same rights and privileges as witnesses inproceedings in the High Court. Therefore, by way of example, theprivilege against self-incrimination is available to witnesses inarbitral proceedings.


Absent any specific provisions in the arbitration agreement, thearbitrator has those powers set out in the Arbitration Acts. For domestic arbitrations, Section 19 of the 1954 Act sets out thepowers of the arbitrator as to witnesses, including discovery ofdocuments. This provides that the parties shall produce before thearbitrator all documents within their possession or power which maybe required or called for. However, the obligation to make discoveryis limited such that discovery need not be made of documents whichcould not be compelled on the trial of the action. In addition, Section22(1)(b) of the Act provides that the High Court may make an order inrelation to the discovery and inspection of documents.In respect of international arbitrations, Chapter V of the Model Lawsets out the basic principles regarding the conduct of internationalarbitration proceedings, but has no specific provision regardingdiscovery/disclosure. However, Section 7(1)(j) of the 1998 Act doesmake provision for the High Court to make any order in respect ofdiscovery and inspection of documents. Article 27 of the Model Lawempowers the tribunal (or a party, with the approval of the tribunal) torequest assistance from the Court in the taking of evidence.


For both domestic or international arbitrations, either party mayrefer matters of disclosure/discovery to the High Court pursuant to

Section 22(1)(b) of the 1954 Act or Section 7(1)(j) of the 1998 Actrespectively.


There is no absolute approach, but in general the practice is tofollow the procedure for making discovery under the Rules of theSuperior Courts. Following that approach will involve a partyidentifying those categories of documents they require and, to theextent the other side is willing to provide them, the documentsfalling within those categories will be listed and made available tothe other side. Any dispute as to whether documents sought arediscoverable may be determined by the arbitrator or, if necessary,the Court. Privileged documentation is not to be discoverable.


For domestic arbitrations, Section 19 confers powers on arbitrators inrelation to witnesses. Unless otherwise agreed, the Act provides thatan arbitration agreement shall contain a provision to the effect that,subject to legal objection, the parties shall submit to be examined bythe arbitrator on oath or affirmation. Moreover, pursuant to Section20, any party may apply to the High Court for a subpoena to compelthe attendance of a witness (including prisoners - Section 21). UnderSection 22 the High Court also has the power to compel the provisionof witness evidence for the tribunal.In international arbitrations, Section 7 of the 1998 Act empowers theHigh Court to compel the attendance of witnesses before the tribunal,to order the examination on oath or affirmation of any witness, or toissue a commission or request for the examination of a witness outsidethe jurisdiction. Article 27 of the Model Law empowers the tribunal(or a party, with the approval of the tribunal) to request assistance fromthe Court in the taking of evidence. Article 26 also empowers thearbitrator to appoint an expert (or more than one) to report to him orher on specific issues to be determined.

8.6 Under what circumstances does the law of Ireland treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

Documents will be privileged if they can be said to fall into arecognised category of privilege. The most common privilege arisingin the context of an arbitration will be legal professional privilege,which covers documents prepared in contemplation of or in relation tolegal proceedings (often known as litigation privilege) and documentsprepared for the purpose of giving or obtaining legal advice (oftenknown as legal advice privilege). Privilege in such documents may bewaived by the party who prepared the document or the party for whomit was prepared, and will be waived where openly made available.

9 Making an Award


For domestic arbitrations, there are no specific obligations as toform in the 1954 Act, although domestic arbitration awards areusually in written form in order to facilitate enforcement in the



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Courts. In practice, reasoned awards are not generally given and,usually, the dispositif only is given. However, if the parties wish toobtain a reasoned award, they may deal with this at the outset byproviding for same in their arbitration agreement. For awards in international arbitrations rendered in Ireland, Article31 of the Model Law, which is applicable pursuant to the 1998 Act,applies. This Article applies to both the form and content of suchawards. Accordingly, such awards must be in writing, be signed by(at the least) the majority of the arbitrators, stating the reasons, dateand place of arbitration. Moreover, a signed arbitral award is to bedelivered to each party once the award is made.



In respect of the statutory regimes governing domestic andinternational arbitration, there is no provision for appeal of arbitralawards. Awards may be set aside or remitted, but only on specificstatutory bases.


Not applicable. See question 9.1.



10.4 What is the procedure for appealing an arbitral award inIreland?



11.1 Has Ireland signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

Ireland has ratified the New York Convention and it is incorporatedinto Irish domestic law by the Arbitration Act, 1980. Noreservations were entered.

11.2 Has Ireland signed and/or ratified any regional Conventionsconcerning the recognition and enforcement of arbitralawards?

Ireland has not signed or ratified any such regional Conventions.

11.3 What is the approach of the national courts in Irelandtowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

The Irish courts have shown a supportive approach to the

enforcement of arbitral awards. Unless there is reason to set asideor remit the award, enforcement is generally not problematic and isundertaken by making an application to the Irish High Court. TheCourt rules specify the nature, form and content of thedocumentation required for enforcement of an arbitral award inIreland. Enforcement is dealt with by the Irish High Court onaffidavit evidence only which, in a contested application, caninvolve a series of exchanges of affidavits between the partiesbefore the hearing.Depending on the award involved, different statutory provisions forenforcement will apply. A domestic award is enforced pursuant tothe 1954 Act, which provides at Section 41, that an award may beenforced in the same manner as a judgment or order to the sameeffect and, where leave is given, judgment may be entered in termsof the award. Foreign awards may be enforced under the New YorkConvention (Section 7 of the 1980 Act), or where the Convention isnot applicable to the award, foreign awards may be enforcedpursuant to Sections 55 and 56 of the 1954 Act. Finally, for theenforcement of awards given pursuant to the international regime inIreland under the 1998 Act, Section 14(2) provides that the awardshall be treated as binding for all purposes on the parties betweenwhom it is made, consistent with Article 35 of the Model Law.

11.4 What is the effect of an arbitration award in terms of resjudicata in Ireland? Does the fact that certain issues havebeen finally determined by an arbitral tribunal precludethose issues from being re-heard in a national court and, ifso, in what circumstances?

Given that, in respect of both the domestic and internationalarbitration regimes currently applicable in Ireland, arbitral awardsare “binding” on the parties (see Section 27 of the 1954 Act andSection 14 of the 1998 Act), and there is no possibility of appeal,awards cannot be re-opened (although, in limited circumstances,they may be set aside or remitted). However, in circumstanceswhere there may be some overlap between the issues considered inan arbitral award and separate proceedings, it would be for thesubsequent tribunal to satisfy itself that, in determining its ownissues, it would not be trespassing on an award properly made.

12 Confidentiality

12.1 Are arbitral proceedings sited in Ireland confidential?What, if any, law governs confidentiality?

There is no statutory provision in any of the Arbitration Acts whichexplicitly provides that arbitration proceedings are to be confidentialand that the parties are subject to an implied duty of confidentiality.However, there is persuasive authority to that effect and, in practice,arbitration proceedings customarily remain confidential. Having saidthat, Court applications related to arbitral proceedings are heard inopen court and not in camera, and the interaction of such a principleof confidentiality with the Irish constitutional imperative that justicebe administered in public has yet to be challenged, so the positionunder Irish law cannot be definitely stated.


A party is not expressly prohibited from seeking to rely uponinformation or evidence disclosed in arbitration proceedings insubsequent proceedings, but it would be contrary to an implied dutyof confidentiality.

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Under Irish law, an arbitrator may determine and award damages asan Irish court would. Although Irish law recognises the availabilityof punitive or exemplary damages, such awards are limited totortious claims in exceptional cases, to mark the Court’sdisapproval of outrageous conduct on the part of a defendant. Muchof that case law relates to the tortious conduct of employees of theState in performing their duties, sometimes also involving allegedbreaches of constitutional rights, which disputes are unlikely to bearbitrated since, given their exceptional nature, are unlikely to fallwithin the arbitration clause. Save for very exceptional cases,therefore, it is unlikely that an arbitrator could legitimately awardsuch damages. However, this issue aside, it is generally assumedthat an arbitrator would have at his disposal the full range ofcommon law remedies (save specific performance relating to acontract for land or an interest in land - Section 26 of the 1954 Act).

13.2 What, if any, interest is available?

In domestic arbitration, the availability of interest is covered bySection 17 of the 1998 Act (which repealed and replaced Section 34of the 1954 Act). For international arbitrations, interest is dealt within Section 10 of the 1998 Act, which has the same provisions.Those provisions set out that the parties may agree upon thearbitrator’s powers as regard interest and, unless otherwise agreed,the arbitrator may award simple or compound interest from thedates, at the rates and with such rests in the interest period he or sheconsiders meets the justice of the case. Moreover, such interest maybe awarded on all or part of the award in respect of any period upto the date of the award or, on any monies claimed in the arbitrationif paid before the award.


For domestic arbitrations, Section 29 of the 1954 Act provides that,unless a contrary intention is expressed, every arbitration agreementshall be deemed to include a provision that the costs of the referenceand award shall be at the discretion of the arbitrator. However,Section 30 precludes the parties from entering into an arbitrationagreement that provides for the parties to bear their own costs of thereference or award by treating such provision as void. In addition,if the award is silent as to the costs of the reference, under Section31, any party may, within a specified time (14 days), apply to thearbitrator for an order directing by and to whom those costs shall bepaid.For international arbitrations, the principles related to therecoverable costs of the arbitration, and the fees and expenses of thetribunal, are dealt with in Section 11 of the 1998 Act. That sectionalso permits the parties to agree on how the costs are to be allocatedand on the costs that are to be recoverable. Where there is noagreement as to the recoverable costs, the tribunal may, with the

parties’ consent, determine by award those costs on the basis itthinks fit. In relation to the recoverable fees and expenses of thetribunal, where there is no agreement, the tribunal may simplydetermine those as it thinks fit, without the need for the parties’consent.Effectively, under both regimes the powers of tribunals relating tocosts are very similar. As a general principle, the costs will usuallyfollow the event and, therefore, the successful party will usually beawarded its reasonable costs as against the unsuccessful party whowill then have to discharge them. However, that is simply the usualpractice and, where an arbitrator deems it appropriate to do so, heor she can deviate from that practice.


It will depend on what any damages provided for in the award relateto. If the damages relate simply to a breach of contract, tax will notbe payable. However, if the damages relate to work carried out orservices rendered then, to that extent, the award is taxable.


14.1 Has Ireland signed and ratified the Washington Conventionon the Settlement of Investment Disputes Between Statesand Nationals of Other States (1965)?

The Washington Convention was adopted in the Arbitration Act,1980 and Part IV of that Act deals with the enforcement ofWashington Convention awards.

14.2 Is Ireland party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Although Ireland signed the Convention establishing ICSID in1966, Ireland’s ratification was deposited and the Convention cameinto force in 1981. However, Ireland is a party to only one bilateralinvestment treaty, that being with the Czech Republic.

14.3 Does Ireland have standard terms or model language thatit uses in its investment treaties and, if so, what is theintended significance of that language?

No, it does not.

14.4 In practice, have disputes involving Ireland been resolvedby means of ICSID arbitration and, if so, what has theapproach of national courts in Ireland been to theenforcement of ICSID awards?

No, they have not.

14.5 What is the approach of the national courts in Irelandtowards the defence of state immunity regardingjurisdiction and execution?

The question has never arisen and been determined by the Irishcourts.



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15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Ireland? Are certain disputescommonly being referred to arbitration?

In Ireland, the most common types of significant disputes referredto arbitration are those arising under construction contracts.However, arbitration is also commonly used for certain other typesof dispute, e.g. holiday disputes, which are necessarily worth farless. The benefits of arbitration common to both, as distinct fromcourt proceedings, are matters such as speed of hearing, reducedcosts and confidentiality. For construction disputes in particular,the relevant expertise of the arbitrator is often a relevant factor.As stated previously, new legislation has been proposed (and wasannounced at the ICCA Conference in Dublin in 2008). It isproposed that this will govern both domestic and international

arbitration and place the principles applicable to all arbitrations tobe conducted in Ireland on a uniform footing, premised upon theUNCITRAL Model Law. This is expected to pass into law during2009.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Ireland?

ADR generally is becoming more commonplace in Ireland andthere is certainly less suspicion than previously was the casetowards different methods of seeking to resolve disputes. It istherefore increasingly being seen as a proactive and cost-effectiveway of early resolution of disputes. In addition, under its rules, theCommercial Court is permitted to adjourn proceedings for a periodup to 28 days to refer the issues in dispute to a process of mediation,conciliation or arbitration.

Bríd Munnelly

Matheson Ormsby Prentice 70 Sir John Rogerson’s QuayDublin 2 Ireland

Tel: +353 1 232 2000Fax: +353 1 232 3333Email: [email protected]: www.mop.ie

Bríd Munnelly has been a Partner in the Commercial Litigation andDispute Resolution Department of Matheson Ormsby Prentice since2002. Bríd represents many international and domesticcorporations and institutions in relation to all aspects of litigation,dispute resolution, litigation risk management and dispute resolutionstrategy. She has been involved in a number of high profileinvestigations and litigation matters, involving significantreputational issues for international clients. She is also a qualifiedmediator (CEDR).

Gearóid Carey

Matheson Ormsby Prentice70 Sir John Rogerson’s QuayDublin 2 Ireland

Tel: +353 1 232 2000Fax: +353 1 232 3333Email: [email protected]: www.mop.ie

Gearóid was admitted as a solicitor in England and Wales in 2001and as a solicitor in Ireland in 2003. Upon qualification in 2001,Gearóid worked in the International Arbitration Group at HerbertSmith, London, and represented commercial clients in bothinstitutional and ad hoc arbitral proceedings. Gearóid joinedMatheson Ormsby Prentice in 2004 and works in the firm’sCommercial Litigation and Dispute Resolution Department,undertaking a wide variety of dispute resolution work forinternational and domestic Irish clients. He has written widely oncontract law and practice and procedure, and particularly onarbitration matters.

Matheson Ormsby Prentice is a leading Irish corporate law firm providing a comprehensive range of legal services toour global client base. Our principal office is in Dublin and we also have additional offices in London, New York andPalo Alto, California. The firm is a partnership consisting of 73 partners, over 350 additional legal and tax professionalsand more than 180 support staff.

We are a full service law firm and our Commercial Litigation and Dispute Resolution Department has a long establishedpractice in arbitration. We have experience of acting for parties to arbitrations under a wide variety of institutional rules.

We pride ourselves on the top quality service provided to our clients, which include some of Ireland’s largest public andprivate companies with many of the current Fortune 500 companies featuring amongst our client base. We have abroad range of clients in the public sector including Government Departments and Offices, State bodies and LocalAuthorities.



Chapter 22

Lombardi Molinari e Associati

Italy


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Italy?

Rules on arbitration are to be found in the text of the Italian Codeof civil procedure (“c.p.c.”), at Section VIII, articles 806 - 840, aswell as in a number of multilateral and bilateral conventions ratifiedby the Government of Italy, such as the 1958 New York Conventionon Recognition and Enforcement of Foreign Awards, the 1961European Convention on International Arbitration, and the 1965Washington (ICSID) Convention.Italian law accepts the classical distinctions between ad hoc andadministered arbitration and, as far as arbitration agreements areconcerned, between an agreement to submit to arbitration futuredisputes (clausola compromissoria) and an agreement to submit toarbitration disputes which have already arisen between the parties(compromesso). Arbitrable disputes can arise from both contractualand non-contractual matters. Besides traditional arbitration(arbitrato rituale), Italian law also admits a peculiar kind ofarbitration (arbitrato irrituale), in which awards have not the natureof a judgment but rather of a contractual settlement. The c.p.c. contemplates only two mandatory requirements for anarbitration agreement (article 807): it must be in writing adsubstantiam and clearly determine the subject matter of the dispute.The arbitration clause in writing can also be appended to rather thaninserted in the contract involved, and has always the legal effect ofexcluding the jurisdiction of the courts.


No, there are no such special requirements or formalities in Italy forcommercial arbitration. However, stricter forms and requirementsexist when a party to the relationship is a consumer.


Article 809 c.p.c. establishes that the arbitration agreement mustcontain the appointment of the arbitrators or establish their numberand the manner in which they are to be appointed.The arbitral tribunal must consist of an odd number of arbitrators;when the arbitration agreement indicates an even number, theadditional arbitrator will be appointed, unless the parties have

agreed otherwise, by the President of the Court where thearbitration has its seat, or, if no seat has been established, of theplace where the agreement has been concluded, or if such place isabroad, by the President of the Rome First Instance Court. Obviously, it is advisable to define, especially in internationalarbitration agreements, the place and the language of arbitration andthe law applicable to the dispute.


Especially since the 1994 arbitration amendments, Italian Courtshave developed a fully positive approach towards arbitration, whichhas been strengthen by the legislative reform of 2006. By virtue of the principle of autonomy of the arbitration agreement(article 808, para. II c.p.c.), and of Kompetenz-Kompetenz (article819-ter, para. III c.p.c.), no State court can interfere while thearbitral proceeding is pending and until a final award (at least onjurisdiction) is issued.


As a general principle, when the parties have agreed to submit adispute to ADR (other than arbitration), they are prevented frominstituting a proceeding on the merit before a national court untiltheir attempt to settle the dispute amicably has failed. Consequently, a court action filed in violation of an ADR agreementwould be declared inadmissible (improcedibile) by the judge.However, a party is always free to apply to the judge for interimmeasures (both conservative and injunctive).As for the enforceability of ADR settlement agreements, the generalprinciple is that they, like contracts, are not immediately enforceable.However, in some areas covered by special legislation (in particular,in corporate disputes), settlement agreements are immediatelyenforceable, and the conduct of the parties may be assessed by thejudge of a subsequent dispute on the merits in his decision on costs.


2.1 What legislation governs the enforcement of arbitrationagreements in Italy?

The enforcement of arbitration agreements is governed by theItalian c.p.c. (articles 806 to 840).

Marco Frigessi di Rattalma

Gabriele Crespi Reghizzi



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Lombardi Molinari e Associati Italy


The 2006 reform has repealed the distinction effective since 1994between domestic and international arbitration. Remnants of thatdistinction can only be found in the provision of article 830,according to which, whenever the dispute arises from a subjectivelyinternational contract, the Court of Appeal requested to annul anarbitral award may directly decide the merits of the case only if sorequired by all the parties. International arbitration must, of course, be distinguished from“foreign” arbitration, more precisely, from arbitral awards renderedabroad. Articles 839 and 840 c.p.c. regulate recognition andenforcement of such awards, along the lines of the 1958 New YorkConvention.


While original arbitration law was extensively autochthonous, since1993 the Italian legislator has been growingly inspired by theUNCITRAL Model Law. However, UNCITRAL bifurcated approachto domestic and international arbitration was abandoned in 2006.

2.4 To what extent are there mandatory rules governingInternational arbitration proceedings sited in Italy?

As explained above under question 2.2, the difference betweendomestic and international arbitration has been repealed. As aconsequence, mandatory rules governing arbitration in generalapply to both domestic and international arbitration proceedingssited in Italy. The most significant of these mandatory requirements is the duty -provided for by article 816-bis c.p.c. - to grant all parties reasonableand equal opportunities to present their case (principle ofcontradictoire). More specific mandatory rules can be found under article 815 c.p.c.,which assigns to State courts the final judgment on challenges andunder article 818 c.p.c., preventing the arbitrators from issuinginterim measures.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Italy? What is thegeneral approach used in determining whether or not adispute is “arbitrable”?

The guide rule (set forth in article 806) bans arbitration of disputesconcerning rights that the parties are not allowed to freely disposeof and limits to some extent arbitration of labour disputes. With thepartial exception of antitrust disputes, in commercial matters non-arbitrability is rare.


Yes, based on the principle of Kompetenz-Kompetenz, arbitratorsare permitted to rule on the validity, extension and effectiveness ofthe arbitration agreement in order to verify their potestas iudicandi.


After an arbitration has been established, national Courts mustrefrain from addressing the issue of the potestas iudicandi of thearbitrators, who have the exclusive competence to verify their ownpowers (article 813 ter c.p.c.). Even in case of lis alibi pendensbefore a national judge, the arbitrators have still the power to statetheir own jurisdiction. Only after their decision is taken, through aninterim or final award, can such award be attacked before a nationalCourt.

3.4 Under what circumstances can a court address the issueof jurisdiction and competence of the national arbitraltribunal?

When a dispute is first submitted to arbitration, according to theprinciple of Kompetenz-Kompetenz only the arbitral tribunal mayrule on the question of its own jurisdiction. However, when litigation precedes arbitration, the court willaddress the issue of competence of the national arbitral tribunal(article 819-ter, para. I c.p.c.)Also appellate courts may address the issue of jurisdiction andcompetence of an arbitral tribunal when they are requested to setaside an award.

3.5 Under what, if any, circumstances does the national law ofItaly allow an arbitral tribunal to assume jurisdiction overindividuals or entities which are not themselves party toan agreement to arbitrate?

The general rule under Italian law is that the arbitration agreementis binding only the parties which have signed the agreement. Thereare a few exceptions to this rule established by statute or case law. The first exception is established by article 35, para 2 of legislativedecree no. 5 of 2003 on the reform of corporate law. This articleallows, with exclusive reference to corporate arbitration, thevoluntary intervention in the arbitration proceedings of interestedthird parties who are not members of the corporation; by so doing,they become parties to the arbitration and are thus bound by anyrelevant award. As an example, one may quote the case of aninsurance company intervening in an arbitration proceeding wherea manager of a corporation, insured with the same company, is suedby a party claiming damages for mala gestio. The same decree (article 34, para 4) states that an arbitral clausecontained in the corporation’s by-laws may provide that arbitrationwill apply to all claims initiated by managers, liquidators and otherorgans of the corporation or promoted against them. The departurefrom the general rule is the circumstance that managers, liquidatorsetc. who are not members of the corporation are bound by thearbitration agreement even though they have not signed it. Moreover, in both the above described situations, arbitrators areempowered to attract ex officio to the arbitration proceeding, anythird party being a member of the corporation. In cases unrelated to company law, third party voluntaryintervention and its attraction to the arbitral proceedings alwaysrequire the agreement of the third party concerned, all thearbitrators and all the parties to the arbitration, unless we deal withsituations of necessary joinder of party.

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3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Italy and what is thetypical length of such periods? Do the national courts ofItaly consider such rules procedural or substantive, i.e.,what choice of law rules govern the application oflimitation periods?

There are no specific rules in Italy providing for limitation periodsfor the commencement of arbitrations. Naturally, the parties mustcomply with the statute of limitations applicable to the substantiveright(s) in dispute, which is considered substantive and notprocedural.



EU Regulation no. 593/2008 (so-called Reg. “Rome I”, on the lawapplicable to contractual obligations) allows the parties to a contractto choose the law applicable to their contractual relationship and amore limited freedom of choice is granted by EU Regulation864/2007 (so-called Reg. “Rome II”, on the law applicable to non-contractual obligations) in case of disputes arising out of a non-contractual relationship.Arbitrators must respect the choice of law made by the parties.Failing such choice, the arbitrators can freely determine the lawapplicable to the substance of the dispute. Arbitrators can decide ex aequo et bono only when authorised to doso by the parties.For disputes falling within the scope of the 1961 Geneva EuropeanConvention on International Commercial Arbitration, thedetermination of the applicable law must be done through the rulesof conflict chosen by the arbitrators (so-called “indirect rule”).


The answer to this question is to be found in articles 3.3, 9.1, and9.3 of EU Reg. 593/2008, respectively devoted to simple mandatorynorms, overriding mandatory provisions of the seat and overridingmandatory provisions of other jurisdictions. The same principlesapply to arbitration.

4.3 What choice of law rules governs the formation, validity,and legality of arbitration agreements?

Under the principle of autonomy, the existence, validity andeffectiveness of the arbitration agreement must be evaluatedindependently from the contract in which the agreement is included. Consequently, the law governing the arbitration agreement maydiffer from the law applicable to the contract. The 1961 Geneva Convention offers three subsequent parameters toevaluate the validity of arbitration agreements: the law chosen bythe parties, if any, the law of the country in which the award is to bemade, and the law applicable under the rules of conflict of thecountry where the court seized of the dispute is located.



Parties are parties free to selecting arbitrators, excluding peoplelacking or limited in the legal capacity. However, in intra-corporatedisputes, and when the arbitration agreement is inserted in the by-laws of the company, the power to appoint arbitrators can onlybelong to a person not connected with the company (otherwise theclause is null and void).


If the parties’ chosen method for selecting arbitrators fails, or whenthe parties do not appoint their arbitrator, or do not succeed inselecting the sole arbitrator or the chairman of the arbitral tribunal,art. 810 c.p.c. transfers the corresponding power to the President ofthe Court.


The judge can intervene in the selection of arbitrators, both in thecases mentioned above, question 4.2, and where the arbitrationagreement has given the judge the choice of the sole arbitrator or ofthe collegium. Moreover (see question 4.1 above, in all corporatearbitration proceedings governed by an arbitration clause containedin the by-laws, the choice of the arbitrators by a third person notconnected with the company has become compulsory. As it is notunusual to select a Court President as a company-independentappointed authority, the numbers of arbitrators chosen by thejudiciary is likely to increase.


The requirements of independence and impartiality of thearbitrators are a matter of principle of public policy, and thereforecannot be departed from, irrespective of the nature of thearbitration. Arbitrators lacking independence can be challengedaccording to the procedure described in article 815 c.p.c.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institution within Italy?

No specific rules of Italian law govern arbitrators’ disclosure.Nevertheless, the “Code of Ethic and Conduct” of the Italian BarAssociation, provides in article 55 the duty of the arbitrator tocommunicate to the parties every relationship, fact and event thatmight affect his independence. Naturally, the Code only boundsarbitrators who are members of the Bar.Moreover, article 815 c.p.c. provides that an arbitrator may bechallenged if:1) he or she or an entity, association or company of which he

or she is a director has an interest in the case; 3) he or she or his or her spouse is a relative up to the fourth

degree or a cohabitant or a habitual table-companion of aparty, one of its legal representatives or counsel;

4) he or she or his or her spouse has a pending suit against or a



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serious enmity to one of the parties, one of its legalrepresentatives or counsel;

5) he or she is linked to one of the parties, to a companycontrolled by that party, to its controlling entity or to acompany subject to common control by a subordinate labourrelationship or by a continuous consulting relationship or bya relationship for the performance of remunerated activity orby other relationships of a patrimonial or associative naturewhich might affect his or her independence; furthermore, ifhe or she is a guardian or a curator of one of the parties; or

6) he or she has given advice, assistance or acted as legalcounsel to one of the parties in a prior phase of the same caseor has testified as a witness.

Furthermore, most arbitration institutions in Italy have publishedguidelines for arbitrators’ disclosure. See, e.g., the ArbitrationRules of the Chamber of Commerce of Milan, which request thearbitrators to submit a statement of independence to the Secretariat.In said statement, the arbitrator must mention: a. any relationshipwith the parties or their counsel which may affect his impartialityand independence; b. any personal or economic interest, eitherdirect or indirect, in the subject matter of the dispute; and c. anyprejudice or reservation as to the subject matter of the dispute aswell as the time and duration of the above.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Italy? If so, do those laws or rules apply toall arbitral proceedings sited in Italy?

Unless otherwise stated, the following answers mainly refer to adhoc arbitration. They must be necessarily complemented with thespecific arbitration rules of each administered arbitration centre.Mandatory rules of procedure, applicable to any kind of arbitrationinclude the equal treatment of the parties, their right to be heard andthe principle of due process in general (the so-calledcontraddittorio). Most remaining procedural rules contained in thec.p.c. are not mandatory. A general principle, (article 816 bis)allows the parties, or, failing them, the arbitral tribunal, to freelyestablish the rules governing the proceedings.

6.2 In arbitration proceedings conducted in Italy, are there anyparticular procedural steps that are required by law?

No particular procedural steps are required by Italian law, besidesgeneral principles applicable to both judicial and arbitralproceedings.It is only worth noting that the arbitral awards must be renderedwithin two hundred and forty days from the date of constitution ofthe arbitral tribunal, although even this time limit can be modifiedby the parties or extended by the President of the Court uponreasoned request of a party or the arbitral tribunal.


The only mandatory rules governing the conduct of a hearing arethe general principles mentioned under question 6.1 above.

6.4 What powers and duties does the national law of Italyimpose upon arbitrators?

The arbitrators must treat the parties equally, and must be and

remain independent and impartial during the entire proceedings.They also must render the award within the time limit provided forby article 820 c.p.c.Arbitrators have to conduct the proceedings in an efficient andexpeditious manner. When an arbitrator fails to perform his or herduties timely, each party may ask for his or her removal (article813-bis).Moreover, other duties may be inferred a contrariis from article813-ter c.p.c. on arbitrators’ liability.Finally, further contractual duties may be imposed upon arbitratorsby the rules of arbitration institutions or by concrete arbitrationagreements.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Italy and, if so, is itclear that such restrictions do not apply to arbitrationproceedings sited in Italy?

Whereas restrictions still exist for lawyers from other foreignjurisdictions to appear before Italian courts, no limitations of thiskind are applicable to arbitration proceedings. Moreover, inprinciple, Italian law does not require a party to be assisted by alawyer in arbitration proceedings (816 bis c.p.c.)

6.6 To what extent are there laws or rules in Italy providing forarbitrator immunity?

There are no rules in Italy providing for immunity in favour of themember of an arbitral tribunal.


Generally speaking there is no interference by the national courts asregards the proceeding and the procedural issues, but see belowsection 7 on Interim Measures and section 8 on EvidentiaryMatters. On the contrary, arbitrators are presently permitted todecide obiter on issues non-arbitrable or not embraced by thearbitration agreement which they consider relevant for the maindecision.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Italy (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

In Italy, multiparty arbitration is typically linked to intra-corporatearbitral proceedings. The joint appointment of arbitrators is a wellknown difficulty in multiparty arbitration proceedings. In order totackle the problem the legislator introduced a special selectionmechanism in 2003, described in question 4.1.The same, or a very similar solution, was extended in 2006 to allmultiparty arbitration disputes, irrespective of their corporate ornon-corporate nature, by article 816 quater c.p.c., which reads:“Should more than two parties be bound by the same arbitrationagreement, each party may request that all or some of them besummoned in the same arbitral proceedings, provided that thearbitration agreement defers to a third party the appointment of thearbitrators, or the arbitrators are appointed by agreement of allparties or the other parties, following the appointment by the first

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party of an arbitrator or more arbitrators, jointly appoint bycommon agreement an equal number of arbitrators or entrust to athird party their appointment.”The same article provides that if the conditions set out above are notmet, separate arbitration proceedings must take place. However, ifsuch conditions are not met and the law provides for the case anecessary joinder of parties, arbitration cannot take place. Theconsolidation of a plurality of arbitral proceedings may occur onlywhen all the parties to the arbitral proceeding so agree. In thisevent, the parties will have to find an agreement as to theappointment of the new arbitral tribunal. As to third party joindersee question 3.4 above.



Notwithstanding a growing debate in Italy, and the contrarysolution reached in most arbitration-friendly legal systems, thetraditional approach reserving to State Courts the power to issueinterim measures has not been changed. Therefore, article 818c.p.c. prevents arbitrators from granting any such measures,whether ante causam or during the proceedings, and irrespective oftheir nature. However, since 2003, arbitrators may order the stay of challengedresolutions of stockholders’ meetings in intra-corporate disputes.


As explained above at question 7.1, the Court is not only entitled tobut has a monopoly on interim measures (with just the oneaforementioned exception). Interim measures must therefore berequested to the national Court who would have jurisdiction on thecase, had the parties not chosen arbitration.The parties’ request to a Court for interim relief has no effect on thejurisdiction of the arbitral tribunal.


Such request would be treated by the Court exactly as a requestsubmitted by parties to a (present or future) judicial dispute.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Italy?

Rules of evidence in arbitration tend to coincide with thoseapplicable in Court proceedings, especially so with regard to typesof evidence and the rules admissibility. The main exception is thata written testimony (witness statement) is permitted, while in courtproceedings testimony is only oral.


The arbitrators have no coercive powers, and can therefore onlyinvite parties or third parties to disclose their documents or to allowan inspection, and there is no sanction in case of non compliance. Only with regard to witness testimony, the situation recentlychanged and the new article 816-ter of the civil procedure codeprovides that, should a witness refuse to appear before thearbitrators, the latter may petition the president of the Court of theseat of the arbitration to order his or her appearance. If this occurs,the time limit for the rendering of the award is suspended from thedate of the order until the date of the hearing fixed for the taking ofthe testimonial evidence. The arbitrators may also request public administration offices toprovide written information related to activities and documentscontrolled by the administration that they deem necessary to theproceedings.


With the exception described in question 7.2 above, there are noforms of cooperation or intervention by national courts in matters ofdisclosure/discovery.


Irrespective of the recent suppression of the distinction betweendomestic and international arbitration (see question 2.2 above), acompromise is frequently reached whenever a party to the dispute,a defense attorney or an arbitrator belongs to a common law system.


A witness in a proceeding before an arbitral tribunal usually doesnot testify under oath. Until recent times the arbitrators lackedcoercive powers if the party’s witness did not appear at the hearing,refused to answer or failed to bring documents with him. However,the law changed pursuant to the new article 816-ter c.p.c. (seequestion 7.2 above). Cross-examination is allowed in arbitration.

8.6 Under what circumstances does the law of Italy treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

As stated at question 11.1 below, despite the absence in Italian lawof specific provisions concerning privilege attached to thedocuments submitted by the parties during arbitral proceedings,confidentiality is generally considered as a basic feature ofarbitration. Therefore, many arbitrators will make arrangementswith the parties in order to guarantee full discretion in the treatmentof the documents.



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9 Making an Award


The requirements of an award are set out in article 823 c.p.c., asamended in 2006: awards must be in writing and deliberated by amajority, unless the rules of the administered arbitration centreselected by the parties provide otherwise. They must contain: 1) thenames of the arbitrators; 2) the place of arbitration; 3) the names ofthe parties; 4) the arbitration agreement and the claims of the partiesas set out in their final pleadings; 5) a brief statement of the reasons;6) the dispositif; and 7) the signature of the arbitrators. Thesignature of a majority of the arbitrators is sufficient, provided thatmention is made that the award was deliberated with theparticipation of all the arbitrators and that the other arbitrators wereeither unwilling or unable to sign; and 8) the date of the signature.Only the requirements ex nn. 5, 6, 7 are under express penalty ofnullity.



While appeal strictu senso (revision of the merits) is not permitted,a party request to set aside (annul) an award can be filed with theCourt of Appeal of the district where arbitration has its place, within90 days from its service, only for one of the reasons set out in article829 c.p.c., i.e.:1 if the arbitration agreement was invalid;2 if the arbitrators have not been appointed according to the

provisions laid down in the c.p.c.;3 if the award has been rendered by a person who could not be

appointed as arbitrator;4 if the award exceeds the limits of the arbitration agreement;5 if the award does not comply with the mandatory

requirements mentioned above (see question 8.1);6 if the award has been rendered after the expiration of the

time-limit;7 if during the proceedings, the formalities prescribed by the

parties under express sanction of nullity have not beenobserved, and the nullity has not been cured;

8 if the award is contrary to a previous award or judgmenthaving the force of res judicata between the parties, providedthat such award or judgment has been submitted in theproceedings;

9 if the principle of due process has not been respected in thearbitration proceedings;

10 if the award terminates the proceedings without deciding themerits of the dispute and the merits of the dispute had to bedecided by the arbitrators;

11 if the award contains contradictory provisions; or12 if the award has not decided some of the claims and

counterclaims submitted by the parties within the scope ofthe arbitration agreement.

Pursuant to article 829, the objection based on the reasons sub. 1, 2,4 and 8 must have already been raised by a party during theproceedings.The party whose conduct was a cause of nullity is prevented fromrequesting avoidance of the award.


Article 829 provides a list of grounds for the setting aside of thearbitral award that may not be waived by the parties (non-waivablegrounds) (see question 9.1).


No, however Italian law explicitly permits the parties to anarbitration to agree that an award can be set aside also when thesubstantive rules of law applicable to the dispute have beenviolated.

10.4 What is the procedure for appealing an arbitral award inItaly?

As mentioned before (question 10.1), an appeal strictu sensu is notadmissible.A party wishing to have an award annulled, must, within 90 daysfrom its service, file a request with the Court of Appeal of thedistrict where arbitration has its place. The Court of Appeal may annul entirely or partially the award. A party filing a request for annulment of an award may also ask forthe stay of its enforcement.


11.1 Has Italy signed and/or ratified the New York Conventionon the Recognition and Enforcement of Foreign ArbitralAwards? Has it entered any reservations? What is therelevant national legislation?

The New York Convention to which Italy is a party was ratified byLaw no. 62 of January 19, 1968. No reservations have been enteredby Italy. The matter is presently regulated by articles 839 and 840c.p.c. which also apply to non-conventional foreign awards.Whoever wants a foreign award to have effect in Italy must file apetition with the President of the Court of Appeal. The President,after ascertaining that the award complies with formalrequirements, the dispute is arbitrable under Italian law and theaward is not contrary to Italian public policy, orders recognition andenforcement. This order becomes final if no objections are raisedwithin 30 days, based on the grounds set out in article 840,coinciding with those provided for by article V of the New YorkConvention. The final decision of the Court of Appeal may bechallenged before the Court of Cassation on limited ground.

11.2 Has Italy signed and/or ratified any regional Conventionsconcerning the recognition and enforcement of arbitralawards?

EU Reg. 44/2001, the most important European Regulation onrecognition and enforcement of foreign (EU) judgments,specifically excludes arbitration.

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11.3 What is the approach of the national courts in Italytowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

Italian courts easily grant recognition and enforcement ofarbitration awards provided that the award complies with formalrequirements and is not contrary to public policy. However, publicpolicy plays indeed a very minor role in commercial arbitration.

11.4 What is the effect of an arbitration award in terms of resjudicata in Italy? Does the fact that certain issues havebeen finally determined by an arbitral tribunal precludethose issues from being re-heard in a national court and, ifso, in what circumstances?

Under Italian law the arbitral award is binding for the parties to thearbitration as of the date of its signature by the arbitrators, in the sameway as it is a judgment of a national court. The new article 824-bisprovides that: “The arbitral award has as of the date of its last signatureby the arbitrators the same effects of a judgment rendered by a nationalcourt”. The issues decided by the award are thus covered by resjudicata and may not be reheard by a national court.

12 Confidentiality

12.1 Are arbitral proceedings sited in Italy confidential? What,if any, law governs confidentiality?

Despite the absence of specific provisions and case law it isgenerally held that confidentiality is a classical feature of arbitralproceedings. Confidentiality covers the proceedings as well as theaward. However, the parties may agree with the consent of thearbitral tribunal to disclose certain aspects of the arbitration to thirdpersons or to the public. Moreover there may be specific situations,such as a request of a government agency or a national court, whereinformation must be disclosed to such public authorities.


A difference in principle can be drawn between information anddocuments created only for the dispute, which are confidential, andinformation and documents which existed before and independentlyfrom the dispute. However, as stated in question 12.1, bothcategories of information and documents can be referred to and/orrelied on in special cases (criminal proceedings, setting asideproceedings etc.).


If the award has to be enforced in Italy or is challenged before anItalian Court it has to be submitted to the competent Court. See alsoquestion 12.2.



The types of remedies that may be awarded in arbitration depend

upon the law applicable to the substance of the dispute, unless theyfall within the realm of mandatory Italian procedural rules. Moreover, remedies (damages) provided for under foreign lawsmay occasionally contradict the Italian ordre public. This is thecase of punitive damages, which are deemed contrary to the basicprinciple of proportionality.


Interest rate depends upon the law applicable to the dispute. Theyearly legal interest rate is presently 2.5%. However, incommercial transaction parties are entitled to higher interest ratesbased on rates of the ECB.


The arbitral award must determine which of the parties shall bearthe costs of the arbitration or in what proportion they shall be borneby the parties. In general terms, the successful party is entitled torecover the fees and the reasonable legal and other costs incurredfrom the other party.


An award is subject to taxation according to Presidential Decree no.634 of 1972, (3% of the awarded sum). Only when an award isdeclared enforceable by the Court is it subject to taxation. Therefore,no tax applies if the award is voluntarily executed without itssubmission to the Court according to article 825 c.p.c.


14.1 Has Italy signed and ratified the Washington Conventionon the Settlement of Investment Disputes Between Statesand Nationals of Other States (1965)?

Italy has ratified the Convention on March 29, 1971, in force sinceApril 28, 1971.

14.2 Is Italy party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Italy is a party to many Bilateral Investment Treaties and to the EnergyCharter Treaty. A list of such treaties can be found athttp://www.worldbank.org/icsid/treaties/italy.htm. Most of thesebilateral treaties contain provisions concerning arbitration. Claimant(the investor) has often a choice between the Courts of the investmentState, ICSID (supplementary rules) and ad hoc arbitration.

14.3 Does Italy have standard terms or model language that ituses in its investment treaties and, if so, what is theintended significance of that language?

The Bilateral investment treaties to which Italy is a party do notsignificantly differ from the first generation of bilateral treatiesentered into by European Countries.



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14.4 In practice, have disputes involving Italy been resolved bymeans of ICSID arbitration and, if so, what has theapproach of national courts in Italy been to theenforcement of ICSID awards?

To date there have been no ICSID cases involving Italy as a party tothe arbitration scheme. However, some Italian investors have appliedto ICSID in order to resolve disputes they have with various States.The association “Task Force Argentina” - www.tfargentina.it - hasfiled a “collective claim” of approximately 230,000 Italian citizenswho did not accept the public offering of the new discounted bondsof February 2005 and who are claiming back the money they lost asa result of the default of Argentina.

14.5 What is the approach of the national courts in Italytowards the defence of state immunity regardingjurisdiction and execution?

It is noteworthy that some BITs, to which Italy is party, provide fora derogation to the Investment State’s right to invoke immunityagainst the enforcement of an arbitral award.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Italy? Are certain disputescommonly being referred to arbitration?

Recourse to arbitration is steadily growing in Italy. This isparticularly true for contractual disputes arising out of sharepurchase agreement, joint-ventures and project finance agreements.Moreover, it should be noted that the 2003 reform has significantlyenlarged the area of “arbitrable” disputes in the field of corporatelaw in general.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Italy?

The benefits of the last arbitration reform have still to be felt andassessed. As everywhere in the world, duration and costs of majorarbitrations are a matter of concern for the entrepreneurialcommunity.

Gabriele Crespi Reghizzi

Lombardi Molinari e AssociatiVia Andegari 4/A20121 MilanoItaly

Tel: +39 0289 6221Fax: +39 0289 6223 33Email: [email protected]: www.lmlaw.it

Professor of Comparative Law and International Commercial Law, LawSchool, University of Pavia; Co-chairman of the Italy-China BusinessMediation Center (“ICBMC”); Italian member of the ICC (InternationalChamber of Commerce) International Court of Arbitration; conciliatorof the Chamber of Commerce of Milan.Accredited arbitrator at numerous national and international centres(LCIA, VIAC, ICA, MKAS, CIETAC, CCIC, BCCI, SAKIG, KIA, GZS,CRB, etc.). Corresponding member of the International Institute for the Unificationof Private Law (UNIDROIT), member of the International Academy ofComparative Law, member of the ICC Commission on Arbitration andcorresponding member of the ICC Institute of World Business Law, lifemember of the India International Center; editorial board member ofscientific journals devoted to Chinese law, Russian law andinternational arbitration. Author of numerous publications, concerning mainly Soviet/Russianlaw, Chinese law, law of the former socialist and planned-economycountries, comparative East/West law (civil and commercial), publiccorporations in different legal settings, law and development, law offoreign trade and investment and transnational arbitration.

Marco Frigessi di Rattalma

Lombardi Molinari e AssociatiVia Andegari 4/A20121 MilanoItaly

Tel: +39 0289 6221Fax: +39 0289 6223 33Email: [email protected]: www.lmlaw.it

Marco Frigessi di Rattalma is full professor of International andPrivate International Law at the Law School of the University ofBrescia. He teaches European Union Law at the School for forensicprofessions created by the same University.He has published numerous articles and the following volumes inEnglish: “The United Nations Compensation Commission. AHandbook” (with prof. T. Treves) (Kluwer Law int.1999); “Theimplementation provisions of the EC choice of law rules for insurancecontracts, a commentary: Belgium, France, Germany, Italy, TheNetherlands, Spain, United Kingdom” (Kluwer Law int., 2003).His practice focuses on corporate, banking, insurance andbankruptcy law.

Lombardi Molinari e Associati is an independent law firm providing legal advice mainly in the areas of corporate andcommercial law. The Firm has established itself as an important player among law firms in Italy, advising on litigationand arbitration as well as on corporate and financial transactions. The Firm, founded by Giuseppe Lombardi who leadsit with the other managing partner, Ugo Molinari, has approximately fifty lawyers. The Firm maintains strong links withthe academic legal community, and members of the Firm serve as law professors at Italian universities both in civilprocedure and arbitration law as well as in comparative, private international and European Union law. Since itsformation, the Firm has been involved in important arbitration cases in corporate, commercial and general civil lawmatters. Most of the Firm’s clients are Italian corporations and financial institutions, including banks, insurancecompanies and private equity funds. The Firm’s clients are assisted in complex and innovative transactions as well asin high-profile disputes both within Italy and, increasingly, at an international level. In this context, the Firm provideslegal assistance also in the English, French, German, Russian and Spanish languages, and has developed far-reachingrelations with prominent international law firms with which the Firm works on a regular basis.



Chapter 23

Advokaturbüro Dr. Dr. Batliner & Dr. Gasser

Liechtenstein


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Liechtenstein?

An arbitration agreement needs to be in written form. If parties -including a Liechtenstein party - agree to the submission to a foreign(non-Liechtenstein) arbitration panel, such agreement needs to beauthenticated by a Liechtenstein court clerk or peace judge in orderto be valid and binding on the Liechtenstein party (Art 53a JN).Furthermore, arbitration agreements can only be entered into withregard to disputes that may be settled informally between theparties. Thus, issues such as annulment of marriages, paternityissues etc. can not be handled by an arbitration panel.Furthermore, of course, parties to an arbitration agreement need tohave legal capacity to enter into such agreements.


There are no specific provisions for the time being.However, Liechtenstein is still in the process of comprehensivelyamending its statutory provisions on arbitration and a new draftarbitration law - for which the Austrian provisions served as amodel - is in discussion and is expected to be passed in parliamentthe next time.The new provisions on arbitral proceedings do indeed provide forspecific formal requirements if a “consumer” in the sense ofconsumer protection (a person acting outside the scope of a trade ofbusiness) enters into arbitration agreements or clauses.Specifically, such agreements need to be contained in a separatedocument and signed by the consumer.


The core provisions of arbitration agreements are the following,though statutory requirements do not exist:

seat of the tribunal;method of appointment of arbitrators; andapplicable procedural law or specific provisions as to theprocedure.


There is no (published) jurisdiction of the Liechtenstein courtsconcerning this issue except for singular statements of the courts,according to which arbitration clauses need to be authenticated if aforeign arbitration tribunal is agreed upon (see also question 1.1).As the Liechtenstein Code of Civil Procedure, which contains theLiechtenstein Rules on Arbitration has been drafted and issuedbased on the provisions of the Austrian Code of Civil Procedure, thecourts regularly consider Austrian prejudices.Furthermore, the new Liechtenstein Law on Arbitration - also basedon appropriate Austrian provisions - provides for the clear rule thatthe court shall only intervene if explicitly provided for - therefore,the competences of the arbitration tribunal shall prevail.


According to Liechtenstein law, mediation by a peace judge isobligatory for most civil law matters and a prerequisite to filingclaims with the Liechtenstein courts.In 2005, the Liechtenstein law on Mediation in Civil Law Mattersentered into force, which law provides for certain specific rules for“private” mediation agreed upon by the parties to a dispute. Thepractical relevance of this new law is not yet apparent.


2.1 What legislation governs the enforcement of arbitrationproceedings in Liechtenstein?

The provisions on arbitration proceedings in Liechtenstein do form aspecific section in the Code of Civil Procedure (Art 594 ZPO et seq.).A new law on Arbitration Proceedings is in the process of beingenacted (Bericht & Antrag der Regierung betreffend dieTotalrevision des Schiedsrichterlichen Verfahrens - Teilrevision derZivilprozessordnung, Vernehmlassungsfrist 11th July 2008) andlikely to come into effect at the beginning of 2010.


In general, there are no separate provisions; however, arbitrationagreements providing for foreign arbitration shall only be binding

Dr. Helene Rebholz

Dr. Johannes Gasser



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Advokaturbüro Dr. Dr. Batliner & Dr. Gasser Liechtenstein

on the Liechtenstein party if agreed upon in an authenticatedmanner.


The governing law on international arbitration is very “basic”;however, a new law is in the pipeline, which is closely draftedaccording to the Austrian provisions on arbitration - which in turnhave been closely drafted along the UNCITRAL Model Law.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Liechtenstein?

According to Art 615 there are only three mandatory rulesgoverning international arbitration proceedings.

Parties are not allowed to waive the right to rule out anarbitrator on the same grounds as they could rule out anordinary judge (§ 603 ZPO). Parties cannot waive their right to receive the office copy ofthe arbitration award personally or via postal service. Theoffice copy and the original have to bear the date of thearbitration award and must be signed by all arbitrators (§ 609ZPO).The provisions concerning the invalidity of the arbitrationaward cannot be waived (§ 612 ZPO).

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Liechtenstein?What is the general approach used in determining whetheror not a dispute is “arbitrable”?

The governing law states that arbitration is allowed and arbitrationagreements shall be binding as far as disputes are concerned, whichmay in general be settled by negotiation by the parties. Thisexcludes specifically issues of legal status (e.g. marriage, paternity).According to the new law expected to be issued at the earliest at theend of 2009 any and all pecuniary issues shall be arbitrable, non-pecuniary issues shall be arbitrable insofar as the parties may settlesuch cases out of court.


There are no provisions ruling on this question in the applicablelaw.However, the new draft law explicitly states that the arbitratorsthemselves shall decide on their competences. Such decision may,however, be objected to by the parties; furthermore, an arbitrationdecision taken by a tribunal in exceeding its competences (e.g.arbitration agreement does not govern disputes decided) may be setaside by the national courts.

3.3 What is the approach of the national courts inLiechtenstein towards a party who commences courtproceedings in apparent breach of an arbitrationagreement?

The courts do not react “ex officio” in such circumstances but the

parties may object to the jurisdiction of the national courts byreferring to arbitration agreements.


If arbitration agreements do exist and one party neverthelessinvolves the national court or if arbitration proceedings are alreadypending and, parallel thereto, national court proceedings areinitiated, the national courts will have to decide whether they arecompetent to deal with the respective issues or not.Furthermore, decisions of an arbitration tribunal may be set aside ifthe arbitrators did exceed their competences (§ 612 ZPO).

3.5 Under what, if any, circumstances does the national law ofLiechtenstein allow an arbitral tribunal to assumejurisdiction over individuals or entities which are notthemselves party to an agreement to arbitrate?

Whilst the legal situation as to this aspect seems to be a bit unclearfor the time being, according to the new provisions on arbitration,expected to enter into force at the earliest at the end of 2009 § 598ZPO (new), it is clearly stated that the provisions on arbitrationshall not only apply as a consequence of written agreementsbetween the parties but also in cases where arbitration tribunals areprovided for e.g. by a last will or by another “legal declaration notbased on an agreement between the parties” to a dispute, the lawexplicitly mentions “Statuten” - company’s articles.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Liechtenstein and whatis the typical length of such periods? Do the nationalcourts of Liechtenstein consider such rules procedural orsubstantive, i.e., what choice of law rules govern theapplication of limitation periods?

The limitation periods are ruled by the ABGB (General Civil Codeof Law) and are in most cases 3 years (for obligations), 5 years (forpossession of movables) and 30 years (for possession ofimmovables). Such rules are considered by the national courts ofLiechtenstein if Liechtenstein Laws are material to the case andthey had not been abrogated by the parties.There are no specific prescriptions on limitation periods for thecommencements of arbitrations. If the parties agreed upon suchrules in the arbitration agreements the national courts will considerthem. There are no specifics concerning the choice of law rules inthis respect.



The law applicable to the substance of a dispute is either agreed onby the parties in the respective agreement or has to be determinedby the provisions of the Liechtenstein International Private Law.


Mandatory laws (of the seat or of another jurisdiction) will prevail

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over the law chosen by the parties if the ordre public ofLiechtenstein (legal principles that are regarded essential within theLiechtenstein legal system) was violated in case provisions of thelaw chosen would be applied. As for the mandatory rules, seequestion 2.4. Especially in connection with the enforcement ofjudgments/awards be they arbitrational or not, the Liechtensteinlegal system does not allow for a choice of law insofar asprocedural law issues are concerned.


Jurisdictional basis for the formation, validity and legality of anarbitration agreement is the accordance of wills of the parties to theagreement. Substantive questions and questions resulting from theaccordance of wills as to the validity, operation and purview of theagreement are to be assessed by the law, the regime, chosen by theparties. This may be limited by the ordre public of the state ofdecision, the state of recognition or the state of enforcement. If theparties did not make a choice of law, the law of the state where theaward has been rendered comes into effect; if this state, in case ofan objection against the award, is not determinable, the conflict oflaws rules of the state of the judge are applied.The parties are free to choose the law of procedure which alsogoverns the validity of the arbitration award. Such power is limitedby coercive procedural provisions of the state of recognition or thestate of enforcement or the state where the legal proceedings arepending in connection with the objection against the arbitration.Further limitations can be deduced from the ordre public of therespective state of the procedure and the law chosen.



Judges of the Princely Liechtenstein Courts must not accept themandate as an arbitrator. Furthermore, an arbitrator may beobjected to by the counterparty for reasons of being biased etc. Apart there from, the parties are generally free to mandatearbitrators - the arbitration award may, however, be set aside in casea party appeals to it with the argumentation that the arbitrationtribunal was not appropriately constituted in such a manner thatbasic procedural principles (e.g. to hear both parties) have not beencomplied with.


In case the arbitration agreement does not provide for a specificmethod of appointment of arbitrators, § 597 ZPO states that eachparty shall appoint an arbitrator, which arbitrators shall then agreeon an umpire.In case the parties cannot agree on an arbitrator to be appointed bythem jointly according to the terms of the arbitration agreement, thePrincely Court has to state that the arbitration agreement is nolonger valid (§ 600 ZPO).


Upon application of (i) the parties to a dispute, or (ii) appointed

arbitrators, the court, if it was competent to deal with such disputelacking an arbitration agreement, appoints (a) an arbitrator, if aparty failed to do so on time, or (b) if the two appointed arbitratorsdo not manage to agree on an umpire.


The parties may object to and demand removal of an arbitrator forthe same reasons a party to a court proceeding may demandremoval of a judge. This is specifically the case if there is reason tobelieve that such person is biased.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Liechtenstein?

See question 5.1. There are no specific rules on the procedure ofdisclosing conflicts of interest of arbitrators. An arbitrator can beruled out due to the same reasons as civil judges (§ 603 inconnection with §§ 10 and 11 GOG = Law on the organisation ofcourts). Thus by indication of one of the following points a rulingout is enforceable:

if an arbitrator holds a personal interest in the case;if an arbitrator is or was married to or is/was a live-incompanion of one of the parties;if an arbitrator is closer related than the fourth degree ofrelationship or connected by marriage to one of the parties(including relationships by adoption, step relationships orfostering);if an arbitrator stands in a relation of representation,authorisation, engagement or belongs to a body of one of theparties;if the arbitrator was member of a subordinate panel orattorney of one of the parties, expert or witness in the case.if an arbitrator stands in close friendship or personal hostilityto one of the parties or if there is a special relationship basedon duty or dependence; orif an arbitrator is involved in a litigation with one of theparties or someone else being involved in the arbitration orany other case that raises doubts concerning his impartiality.

The new law provides detailed provisions on the ruling out ofarbitrators following article 13 UNCITRAL Model Law.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Liechtenstein? If so, do those laws or rulesapply to all arbitral proceedings sited in Liechtenstein?

The parties are free to provide for procedural rules for “their”arbitration tribunal; there are no specific statutory provisions inLiechtenstein governing procedure before an arbitration tribunal. Ifthe parties do not provide for specific provisions, it is in the freediscretion of the arbitrators to decide on procedural issues.Regularly, they will do so by closely applying the LiechtensteinCode of Civil Procedure (Zivilprozessordnung - ZPO).

6.2 In arbitration proceedings conducted in Liechtenstein, arethere any particular procedural steps that are required bylaw?

Apart from a written and signed arbitration agreement,



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Liechtenstein Law clearly requires that the basic principles of civillaw procedure are complied with in arbitration proceedings as well.Specifically, § 604 ZPO requests that the arbitrators must hear both(all) parties to the dispute and investigate in and consider the factsof the case. The arbitration award must be dated and signed by allarbitrators and served to the parties.


No, the parties - alternatively the arbitrators - are free to decide onthe conduct of the proceedings. As a sole but major “rule”, the lawstates that both parties must be heard.

6.4 What powers and duties does the national law ofLiechtenstein impose upon arbitrators?

The powers and duties of the arbitrators primarily depend on thepowers and duties vested in them by arbitration agreement oreventually by reference to a specific procedural code. The lawclearly states that the arbitrators do not have power to applycoercive measures (e.g. force witnesses to appear in court) orinterim measures.The law, however, does explicitly state that the arbitration awarddoes have the effects of a court judgment.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Liechtenstein and, ifso, is it clear that such restrictions do not apply toarbitration proceedings sited in Liechtenstein?

Generally, there are, according to the Rules and Regulations of theLiechtenstein Bar, restrictions for foreign lawyers to appear in legalmatters in Liechtenstein. However, this does not apply forarbitration proceedings. The parties can appear in person or may berepresented or assisted by any person of their choice, which can alsobe a lawyer of an other jurisdiction. A person representing a partyshall produce a power of attorney to the arbitrators.

6.6 To what extent are there laws or rules in Liechtensteinproviding for arbitrator immunity?

There are no specific rules on arbitrator immunity. Still, thearbitrators named by a party have a duty to conduct arbitralproceedings in an appropriate way, a duty to render an award, and aduty to give leave of enforcement on the award; moreover, thearbitrators must be objective. If an arbitrator fails to comply with aduty he or she can be held liable for damage caused by thearbitrator’s wrongful behaviour (§ 601 Abs 2 ZPO). However,these rules do not apply if the arbitration agreement providesotherwise. The parties may, in addition, request the appropriatecourt (normally the district court) to declare the arbitrationagreement has ceased to have effect (§ 600 Abs 2 ZPO).In terms of the arbitrator’s personal liability for legal irregularitiesapparent gross negligence and in connection with defective awardsgross carelessness are required; a comparable measure has to beapplied as in connection with such claims against civil judges.


As the arbitrators do not have the power to apply coercive measuresor interim measures, if they consider it necessary, the arbitrators

may request the national courts to apply such measures in theirstead (§ 606 ZPO).

6.8 Are there any special considerations for conductingmultiparty arbitrations in Liechtenstein (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

There are no specific procedural rules dealing with such issues inarbitration proceedings. As already stated, the parties or,alternatively, the arbitrators are more or less free to decide on suchprocedural issues.

6.9 What is the approach of the national courts inLiechtenstein towards ex parte procedures in the contextof international arbitration?

As the law clearly states that both parties must be heard, ex parteprocedures are not admissible in Liechtenstein arbitrationproceedings. Furthermore, it is a clear rule in the law that thearbitrators do not have the power to decide on interim measures -which regularly are issued in ex parte proceedings.



No, the arbitrator would need to seek the assistance of the court (§606 ZPO).


As the arbitrators do not have such competences the Liechtensteinnational courts are entitled to grant such measures if so requested bythe parties, notwithstanding the fact that arbitration proceedingsmay already be pending. Interim measures require an element of“urgency”; the measure requested (often: freezing of an account)needs to be shown to be necessary to eventually enforce a final andbinding decision, whereas without such interim measureenforcement would no longer be possible (e.g. transfer of assets outof Liechtenstein).The interim measure does not have any effect on the arbitrationproceeding and cannot specifically be considered prejudicial asinterim measures are regularly issued in ex parte proceedings andbased on a lower level of evidence than required in regularproceedings.


The courts do not distinguish between interim injunctions requestedin the context of arbitration proceedings or otherwise.

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Arbitral tribunals are normally free to do so or not - as they/theparties are free to decide on procedural rules - often, a security isdemanded.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Liechtenstein?

There are no statutory rules for evidence in arbitral proceedings. Ifthe parties/arbitrators do not decide otherwise, the rules of the Codeof Civil Procedure will apply.


“Disclosure” is an institution not known to Liechtenstein procedurallaw. To a very limited extent only, a party may demand that certaindocuments to be specified shall be disclosed by the counterparty(e.g. “joint” documents such as contracts).Again, the parties to an arbitration/arbitrators are free to apply theprovisions of the Code of Civil Procedure or to decide on a broaderfield of application of disclosure. However, as arbitrators do nothave the power to apply coercive measures, they can only weighthis fact in case a party refuses to disclose documents.


There is no possibility of intervention of the courts in matters ofdisclosure/discovery. In case a party refuses to comply with anorder to disclose, this fact will be considered by the decidingjudge/arbitrators when issuing the judgment/award.


See above the answer to question 8.2.


Again, this is up to the parties/arbitrators to decide on theseprocedural issues. The provisions on arbitration proceedings clarifythat the arbitrators shall not have the power to swear in witnesses orto apply any coercive measures whatsoever against witnesses orparties.Usually, the arbitrators will apply the procedural rules of the Codeof Civil Procedure. Liechtenstein law does not know “written”testimony of witnesses. Witnesses are regularly obliged to appearin court and to give oral statements. In doing so, they arequestioned by the judge as well as the parties (or their lawyers).

8.6 Under what circumstances does the law of Liechtensteintreat documents in an arbitral proceeding as being subjectto privilege? In what circumstances is privilege deemed tohave been waived?

There is no legal institution in Liechtenstein comparable to thecommon law attorney-client-privilege - at least not with regard todocuments. If a party has documents in its hands it is not restrictedin using them as evidence in arbitration proceedings (orproceedings before the national courts).

9 Making an Award


The arbitral award needs to be dated, signed by all arbitrators andserved to the parties.



An appeal from an arbitral award to a second-tier arbitral body isonly possible if the parties have so agreed in the arbitrationagreement.An application for the setting aside of an award can be madeexclusively to the appropriate court (normally the district court) onany one of the following grounds for which an award is invalidaccording to the ZPO:The award shall be set aside:

if an arbitration agreement does not exist, if the arbitrationagreement has become invalid before the award has beenissued or has ceased to have effect for the particular case;if a party was lacking capacity to conclude the arbitrationagreement;if the party applying to have the award set aside was unableto present its case in the proceedings before the arbitrators;if required by statute, was not appropriately represented byan agent or guardian;if statutory or contractual provisions concerning thecomposition of the arbitral tribunal or the method of reachinga decision have been infringed or if the original of the awardhas not been signed;if a challenge to an arbitrator has been rejected unjustifiablyby the arbitral tribunal;if the award infringes mandatory provisions of law; orif the award condemned a party to an inadmissible act or atortious act.

Furthermore, an award shall be set aside in circumstances where acourt judgment can be set aside and the case reopened, e.g. when anaward was based on false witness statements or false documents.


No, parties cannot waive their right to appeal against an arbitralaward (§ 615 iVm 612 ZPO).



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No, the reasons for setting aside an arbitration award as set forth inthe law and laid out above in the answer to question 9.1 areconsidered to be enumerated conclusively.

10.4 What is the procedure for appealing an arbitral award inLiechtenstein?

According to § 612 ZPO, an arbitral award shall be null and void ifone of the circumstances as set forth above in the answer toquestion 10.1 takes place. Therefore, formally spoken, the partywishing to contest the award does not file a formal “appeal” but aregular claim with the request to the national court to set the arbitralaward aside (to decide that it does not have any effect).


11.1 Has Liechtenstein signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

Liechtenstein plans to ratify - or at least to internally discussratification - of the New York Convention. As a prerequisitethereto, the Liechtenstein provisions on arbitration proceedings arein the process of being modernised, the new provisions are expectedto come into force at the end of 2009 at the earliest.

11.2 Has Liechtenstein signed and/or ratified any regionalConventions concerning the recognition and enforcementof arbitral awards?

Liechtenstein is not subject to European Regulations on mutualacknowledgment of foreign jurisdiction. Furthermore,Liechtenstein is not a party to the Lugano Convention or othermultilateral or international Conventions on the acknowledgmentand enforcement of foreign judgments or arbitral awards.Liechtenstein has concluded bilateral treaties containing provisionson the recognition and enforcement of arbitral awards only withSwitzerland and Austria.As a consequence, judgments of an arbitral tribunal are notenforceable in Liechtenstein. Trying to enforce an arbitral awardregularly leads to a special procedure (“Rechtsöffnungsverfahren”,release/discharge proceedings) in the course of which theLiechtenstein party may, inter alia, claim inconvenience of theforeign forum if, contrary to § 53a JN, the jurisdiction clause hasnot been publicly certified (and notwithstanding a party’scontractual obligation not to claim inconvenience). Theconsequence of a Rechtsöffnungsverfahren regularly is that anentire new procedure on the claim will be initiated in Liechtenstein.The Liechtenstein court will newly opine on the facts, theLiechtenstein judge will take evidence himself whereby the foreignjudgment including any and all results of the foreign procedure willregularly be entirely ignored. According to § 614 LiechtensteinCode on Civil Procedure a party cannot waive her right toeventually appeal against the judgment of an arbitral tribunal forreason of substantial defects in the arbitration as set forth by § 612ZPO (e.g. invalidity of jurisdiction clause, no fair trial).

11.3 What is the approach of the national courts inLiechtenstein towards the recognition and enforcement ofarbitration awards in practice? What steps are partiesrequired to take?

An arbitral award has the force of a final and binding courtjudgment between the parties unless the parties have provided in thearbitration agreement for the possibility of appeal to a second-tierarbitral body. Any party to the arbitration may request thearbitrators to confirm in writing, on a copy of the award, the finalbinding nature and the enforceability of the award. Thisconfirmation is a prerequisite for the enforcement of a domesticaward in Liechtenstein. The award is enforceable underLiechtenstein enforcement law without requiring prior recognition. A settlement reached by the parties during a domestic arbitralprocedure can be recorded in the form of a settlement agreement.The settlement agreement is enforceable once the arbitrators haveconfirmed in writing, on the document itself, its enforceability. Asettlement agreement can therefore be enforced by Liechtensteincourts in the same manner as an arbitral award.

11.4 What is the effect of an arbitration award in terms of resjudicata in Liechtenstein? Does the fact that certainissues have been finally determined by an arbitral tribunalpreclude those issues from being re-heard in a nationalcourt and, if so, in what circumstances?

As, according to § 611 ZPO, an arbitral award has the effect of afinal and binding court judgment, an issue dealt with and decided inan arbitral award would be considered res judicata and thuspreclude court proceedings.

12 Confidentiality

12.1 Are arbitral proceedings sited in Liechtensteinconfidential? What, if any, law governs confidentiality?

Contrary to court proceedings, arbitration proceedings are notaccessible to the public and are regularly treated as confidential.There are no statutory provisions specifying confidentiality inarbitration proceedings, thus, this will need to be mentioned eitherin the arbitration agreement or in the procedural rules set forth bythe parties, subsidiary, this will be considered implied and includedin the mandates/appointments of the arbitrators.


Again, the scope and extent of confidentiality depends on theagreement between the parties. If it is not explicitly excluded in thearbitration agreement, the parties to the procedure do of course haveaccess to the files of the arbitration tribunal and may also useinformation and documentation obtained in the arbitrationproceedings in eventual subsequent court proceedings.The “confidentiality” obligation is regularly understood to haveeffect vis-à-vis third parties (other than the national courts). Evenif a party would make use of information and documentationobtained in the arbitration proceedings in breach of an eventualconfidentiality commitment the national courts would not ignoresuch additional arguments or evidence.

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If the parties agree, they may decide that the proceedings must notbe treated confidentially or shall even be conducted in publichearings. However, this would be rather unusual.



No, an arbitration tribunal does have the same powers as a nationalcourt (insofar as it can be competent - see initial questions in section3 above). Thus, it can render decisions and decide on all types ofremedies that Liechtenstein (or the applicable) material lawprovides for.This is, of course, limited by the general rules which arbitrationtribunals as well as national courts have to comply with. Awards aswell as judgments must e.g. not decide on remedies which areconsidered against the ordre public. Specifically, “punitivedamages” are in general not known to Liechtenstein law and can, tosome extent, be considered against the ordre public.


This depends on the applicable (material) law. According toLiechtenstein law, the statutory interest amounts to 5% p.a.


If the parties have not agreed on rules of reimbursement of cost, thearbitration tribunal can decide on the reimbursement of costs withinits discretion. Normally, the results of the proceedings are takeninto account.Usually, the arbitrators do apply the same principles as are used inregular civil law procedure. This means that the losing party isordered to pay the total amount of the arbitrator’s fees and costs ofthe arbitration including reasonable expenses for the legalrepresentation of the counterparty. Arbitrators may, however,apportion the costs between the parties if they deem it justified.


There is no Liechtenstein tax on amounts ordered by aLiechtenstein court or arbitration tribunal with a seat inLiechtenstein. Whether eventual awards paid are subject to taxes tobe paid by the parties (income tax) depends on the domicile of thereceiving party and the laws applicable there.


14.1 Has Liechtenstein signed and ratified the WashingtonConvention on the Settlement of Investment DisputesBetween States and Nationals of Other States (1965)?

No, it has not.

14.2 Is Liechtenstein party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

No, except for the Agreement on the establishment of the WorldTrade Organisation 1994, which contains some provisions oninvestment protection and rules on the settlement of disputes,Liechtenstein’s involvement in bi- and multilateral treatments inthis field is negligible.

14.3 Does Liechtenstein have standard terms or modellanguage that it uses in its investment treaties and, if so,what is the intended significance of that language?

No, it does not.

14.4 In practice, have disputes involving Liechtenstein beenresolved by means of ICSID arbitration and, if so, whathas the approach of national courts in Liechtenstein beento the enforcement of ICSID awards and how has thegovernment of Liechtenstein responded to any adverseawards?

Liechtenstein is not a contracting state/Member State.

14.5 What is the approach of the national courts inLiechtenstein towards the defence of state immunityregarding jurisdiction and execution?

Please see the answers to the questions in section 11 above.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Liechtenstein? Are certaindisputes commonly being referred to arbitration?

There are no fixed and constant arbitration institutions inLiechtenstein, thus, disputes are referred to ad hoc arbitral tribunalsregularly. The “need” or wish for discretion reaches a rather highlevel in Liechtenstein, thus, disputes involving Liechtensteinfoundations or other types of entities used for asset structuring andestate planning are commonly referred to arbitration instead ofbeing tried in court.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Liechtenstein, such as pending orproposed legislation that may substantially change the lawapplicable to arbitration?

Liechtenstein is in the process of substantially amending itsstatutory provisions on arbitration proceedings. The new lawexpected to enter into force at the end of 2009 will follow theUNCITRAL model law and is seen as a first step of Liechtensteininto the direction of ratifying the New York Convention (1958) onthe acknowledgment and enforcement of foreign arbitral awards.



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Dr. Johannes Gasser

Advokaturbüro Dr. Dr. Batliner & Dr. GasserMarktgass 21FL-9490 VaduzLiechtenstein

Tel: +423 236 0480Fax: +423 236 0481Email: [email protected]: batlinergasser.com

Dr. Johannes Gasser, LLM is a partner of the law offices of Dr. Dr.Batliner & Dr. Gasser, the largest law firm in Liechtensteinexclusively providing forensic services to international client beforecourts of law and authorities. The law office was founded in 1954and comprises of 11 lawyers. His firm’s expertise extends tolitigation in all areas, focusing on dispute resolution involving trustsand foundations, and also representing defendants suspected ofbusiness crimes, fraud victims and defrauded corporations. Thefirm advises banks, offshore services companies and financialinvestors in protecting themselves from money-laundering and otherviolations of the law. The firm has been very successful in thedefence of unfounded legal assistance requests in criminal mattersinvolving banking assets in Liechtenstein.Dr. Gasser is admitted both in Liechtenstein and Austria. Hespecialises in freezing assets in Liechtenstein banks, includingproceeds of crime, and piercing the veil of Liechtensteincorporations. He contributed chapters to the firm’s book onLitigation and Arbitration in Liechtenstein.

Dr. Helene Rebholz

Advokaturbüro Dr Dr Batliner & Dr GasserMarktgass 21FL-9490 VaduzLiechtenstein

Tel: +423 236 0480Fax: +423 236 0481Email: [email protected]: batlinergasser.com

Dr. Helene Reholz, LL.M is member of the law offices of Dr. Dr.Batliner & Dr. Gasser. She is admitted to bar both in Liechtensteinand Austria. Dr. Rebholz specialises in civil law, corporate law, trustsand estate law, banking law, due diligence and European law.

For more than fifty years, Advokaturbüro Dr. Dr. Batliner & Dr. Gasser has been representing domestic and internationalclients and providing sustainable and long-term solutions, which are developed by a team of experienced attorneys.Our law firm has proven and time-tested relations with the most prestigious law firms in all countries of the world.

One of our core competences is the representation of clients in Liechtenstein courts. Most attorneys in Liechtensteinpractice and act exclusively as trustees. They specialise in the formation and management of domiciled companies andholding companies. They usually do not offer forensic services, i.e., consulting and representation of clients beforecourts of law and authorities. We do, however, dedicate ourselves exclusively to playing the “classic” attorney’s role,which has allowed us to preserve our independence. This benefits our clients especially in disputes involving trusttransactions (foundations, institutions, trusts, liability of administrative boards, securing of assets etc.). Nevertheless,our attorneys are still well trained in trust transactions, and they are familiar with the tricks and errors on which thesuccess of a legal proceeding depends. As a law firm offering purely forensic services, we are not only one of the oldestbut also the largest law firms in Liechtenstein.




Chapter 24

Juridicon Law Firm

Lithuania


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Lithuania?

Under the Law on Commercial Arbitration (1996) (hereinafter - theLaw), an arbitration agreement or an arbitration clause (which is anon-excludable part of some broader agreement) shall be concludedbetween the Parties in writing. The conclusion of the writtenagreement may be any of these:

written document, signed by both parties (including thewritten agreement which includes arbitration clause);exchange of documents (notices, telegrams, faxes or otherdocuments) between the parties. These documents shallindicate the subject of arbitrage agreement; orexchange of claim and response to claim between the parties.In these documents one of the parties shall claim thearbitration agreement and the other shall not dispute it.


There are no special requirements prescribed by Lithuanian laws.


Arbitration agreement shall include the settlement of the parties totransfer their disputes (all or part of them) to the arbitration. Thisis the main element of agreement. There are other elementscommon in practice, such as the name of the arbitration institution,seat of arbitration, number of arbitrators, language of procedures,and procedural rules, governing material law, that are highlyrecommended but not compulsory.


According to the Code of Civil Procedure, courts may notcommence proceedings or must terminate the trial, if the partieshave made an arbitration agreement and the defendant relies on it(without delay), except if the validity of the arbitration agreement isdisputed in the statement of claim. The Supreme Court states that if the parties do not agree on thespecific arbitration body, it does not make the arbitration agreementinvalid.


Alternative dispute resolution (ADR) is encouraged in Lithuania. Ifthe parties reach the agreement through the ADR procedures (as thepre-trial procedures, e.g. conciliatory mediation) and conclude theamicable agreement, they may provide it for the national court toapprove (the final resolution of dispute, which is equal tojudgment). According to the Law on Conciliatory Mediation in Civil Disputes(2008), conciliatory mediation shall apply on the basis of a writtenconsent of parties to a dispute. If parties to a dispute agree toresolve the dispute by way of conciliatory mediation, they shallattempt to resolve the dispute by this procedure before they refer tothe court or arbitration. A court hearing a civil case may suggest toparties to a dispute that they attempt resolving the dispute by wayof conciliatory mediation. If the parties to the dispute accept thecourt’s suggestion, the court shall adjourn the case. There are no reported cases regarding ADR agreements.


2.1 What legislation governs the enforcement of arbitrationproceedings in Lithuania?

The Code of Civil Procedure of Lithuania 2002 (hereinafter -CCP), the Civil Code (hereinafter - CC) and the Law onCommercial Arbitration (1996) govern the enforcement ofarbitration proceedings and awards.


The same laws regulate both domestic and international arbitrationproceedings.


UNCITRAL Model Law has influenced the Law. Most differencesare not significant. The Law also states those institutions whichhave powers in these matters (District courts and the LithuanianCourt of Appeal), regarding the issues that are not arbitrable, as wellas recognition and execution of the award. The Law states that in

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Juridicon Law Firm Lithuania

absence of the agreement of the parties on the law to be applicable,the arbitration shall apply the law which is applicable according tothe applicable conflict of laws rules. Meanwhile the Model Lawsays that the arbitration shall apply law determined by the conflictof laws rules which it considers applicable. What is more, the Lawalso: allows the dissent opinions of the arbitrators; provides specificprovisions which may show doubts about the impartiality andneutrality of the arbitrator (see question 5.4); provides someprohibitions to practice arbitration permanently for judges,prosecutors and alike officers; and states limitation of thearbitration to refuse approval of the settlement of the parties(amicable agreement) on the basis that this agreement lacks validityaccording to the applicable law and others laws.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Lithuania?

The common rule of application of mandatory provisions inLithuania state, that neither parties nor the Lithuanian courts mayavoid applying the mandatory rules of Lithuania. If this rule is notfollowed, problems in recognition and enforcement of the awardmay occur.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Lithuania? What isthe general approach used in determining whether or not adispute is “arbitrable”?

Constitutional, labour, family and administrative disputes, alsodisputes arising in competition, patents, trade marks and servicenames, bankruptcy and consumer relationships are not arbitrable.The dispute shall not be transferred to Arbitration if one of theparties is a governmental/municipal body or governmental/municipal enterprise and the prior written consent of itsincorporator was not received. The Government itself mayconclude arbitration agreements in its commercial activities.The general approach is that the more the dispute is related to themandatory rules of the state, the less it is arbitrable.


The arbitrator is entitled to competence competence rule and mayrule on his own jurisdiction, including but not limited to hiscompetence to decide on validity and scope of the arbitrationagreement.

3.3 What is the approach of the national courts in Lithuaniatowards a party who commences court proceedings inapparent breach of an arbitration agreement?

The plaintiff may claim in courts despite the apparent arbitrationagreement and the dispute may be settled by Lithuanian courts,provided that the defendant doesn’t demand to apply the arbitrationagreement. There is a significant change in the approach, sinceunder previous legislation Lithuanian courts refused to start courtproceeding or discontinued the started proceedings irrespective ofdefendant’s position (i.e. a valid arbitration agreement used to be anabsolute obstacle to any court proceedings).


The court may address the issue of the arbitration competence inthese situations:

if one of the parties provides the claim in the court and theother party claims the effective arbitration agreement to beapplicable in this dispute;if the arbitration agreement is pronounced to be null and voidon the common basis of invalidity of contracts;if the party made an appeal to the Court of Appeal to contestthe award of the arbitration; orif the party applied to the Court of Appeal for the recognitionand enforcement of the arbitration award.

3.5 Under what, if any, circumstances does the national law ofLithuania allow an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

Lithuanian laws do not regulate this issue. There are some cases incourt practice that in the event of cession (which is understoodbroadly) transferees are treated as parties to an agreement toarbitrate.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Lithuania and what isthe typical length of such periods? Do the national courtsof Lithuania consider such rules procedural or substantive,i.e., what choice of law rules govern the application oflimitation periods?

Limitation periods are considered to be substantive rules anddepend on the law which is chosen by the parties. If Lithuanian lawis applicable, the usual limitation period is ten years.



The parties of the arbitration agreement may choose the substantivelaw applicable to their dispute. If parties did not choose anyapplicable law, the arbitration shall apply the law determinedaccording to the conflict of law rules.


Mandatory laws prevail over the applicable law chosen by theparties in any case.


The Lithuanian Civil Code state that the Arbitration clause shall beregulated by the same law which regulates the whole agreement theclause is part of. If this agreement is invalid, the law of the statewhere the arbitration agreement was concluded shall apply (lex lociactus). If this state cannot be identified, the law of the arbitrationseat state shall apply.

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The common rules of the Civil Code regulate agreement formissues. The provisions state that the law of the state where theagreement was concluded shall apply to its form. In any case thelaw of the state which recognises the form of the concreteagreement shall apply (lex validatis).



The party may choose the arbitrator (capable natural person) despitethe arbitrator’s citizenship, except if otherwise agreed by theparties. In all cases the arbitrator shall admit to be appointed andthe number of arbitrators shall be uneven. There are no other strictlimits provided by the laws, except some restrictions on thecontinuing arbitration practice and arbitrator fees applicable forjudges, prosecutors etc.


There is a default procedure stated in the Law - if the parties do notagree otherwise:

when the arbitration shall consist of 3 arbitrators, each of theparties shall appoint its arbitrator and these arbitrators shallappoint the third one;when the arbitration consists of 1 arbitrator and the partiescannot agree on its candidature, the arbitrator shall be chosenby the chairman of the arbitration institution upon the requestof any of the parties; andif the arbitration shall consist of 3 arbitrators and any of theparties failed to appoint his arbitrator within 30 days or the 2appointed arbitrators fail to appoint the third arbitrator within30 days since their appointment, the arbitrator shall beappointed by the chairman of the arbitration institution uponthe request of any of the parties.

Any of the parties may apply to the chairman of the arbitrationinstitution (unless otherwise agreed by the parties) with request totake measures to appoint the arbitrator, if the procedure ofappointment of arbitrators was settled between the parties butcannot be exercised because (for any of these reasons):

any of the parties fail to follow this procedure;the parties or the arbitrators appointed by the parties cannotreach the agreement upon the appointment of the arbitrator;orthe third person fails to exercise any of the functions relatedto the appointment of the arbitrator.


There are no provisions of the laws that would state this possibility.


The arbitrators shall be independent, neutral and impartial. Thearbitrator shall announce before the arbitration procedures any of thecircumstances that may cause doubts on his neutrality andimpartiality. The arbitrator may be removed only if thesecircumstances denying his neutrality and impartiality become known:he is dependent on the party either because of his work position or

because of other circumstances; he is a relative of the party; he isdirectly or indirectly concerned about the conclusion of the dispute onbehalf of any of the parties; he participated in the procedures of thepre-arbitral mediation; or there are other circumstances that providedoubts about the arbitrator’s impartiality. These provisions might beconcretised in some regulations of arbitration institutions (VilniusInternational and National Commercial Arbitration, Vilnius Court ofCommercial Arbitration).

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Lithuania?

The Law provides specific circumstances which may show doubtsabout the possible conflicts of interest of the arbitrator (mentionedin question 5.4 above). The arbitrator shall announce before thearbitration procedures any of the circumstances that may causedoubts on his neutrality and impartiality.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Lithuania? If so, do those laws or rulesapply to all arbitral proceedings sited in Lithuania?

If the parties did not agree on the procedural matters of thearbitration, the arbitration institution may choose the order which issuitable to be applied. National permanent arbitration institutions have adopted their ownrules governing arbitration proceedings. The CCP may be appliedadditionally if certain questions are not regulated by theseregulations.

6.2 In arbitration proceedings conducted in Lithuania, arethere any particular procedural steps that are required bylaw?

The Law states that the parties shall be noticed in advance about thearbitration hearings. Also the appointed arbitrator shall pronounceany circumstances that may provide doubts on his impartiality andneutrality. Unless otherwise agreed by the parties, the arbitraltribunal proceedings shall commence on the date on which a requestfor the dispute to be referred to arbitration has been received by therespondent. The procedure issues not agreed by the parties shall bedecided by the arbitrator (also see question 6.4).


The hearings of the arbitration should be held in writing or orally,according to the agreement of the parties. Any documents providedto the arbitration by the parties or by experts shall be provided to theother party or to both parties.

6.4 What powers and duties does the national law ofLithuania impose upon arbitrators?

There are variant rights and duties of the arbitrators, the mostimportant might be stated in the agreement of the parties. Othersare stated in the Law:

the right to object to being the arbitrator for the parties, alsothe right to challenge himself or to resign;



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the right to solve arbitration’s competence questions; the obligation to announce to the parties any circumstancesthat may cause doubts on his impartiality and neutrality;the obligation to avoid any delay in performance of hisobligations;the right to accept documents from the parties that weredelivered to the arbitration overdue (notices that thearbitration does not have competence, the renewed claimsand responses);on the request of the party, to oblige the other party toprovide the concrete sum as the interim measures or to applyfor the District court to apply these measures;the right to apply to the District Court for the assistance intaking evidence;the right to decide on the order of the procedures in theabsence of the agreement between the parties; andthe procedural rights and obligations during the arbitrationprocedures and when they are finished (conduct the hearings,approve or refuse to approve the amicable agreements,terminate the procedures or to continue them when the specialcircumstances stated by the Law exist, to appoint the expert, todemand for additional information from the parties, to correctthe mistakes in the awards or to explain awards etc.).

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Lithuania and, if so,is it clear that such restrictions do not apply to arbitrationproceedings sited in Lithuania?

There are no such restrictions. In any cases, the Law clearlyexpresses that the arbitrator might be any capable natural persondespite his citizenship, who is chosen by the parties.

6.6 To what extent are there laws or rules in Lithuaniaproviding for arbitrator immunity?

There are no provisions on an arbitrators’ immunity.


The national courts have no competence in procedural issues ofarbitration, except if the arbitration itself or the parties, knowinglyby the arbitration, applied for the assistance of the court in interimmeasures or taking of evidence. The arbitration is independentwhile it solves arbitration issues.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Lithuania (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

These questions are not regulated by national laws. The parties arefree to settle these issues in their agreement. The arbitration mayalso solve the questions of arbitration order as far as they are notagreed by the parties.

6.9 What is the approach of the national courts in Lithuaniatowards ex parte procedures in the context of internationalarbitration?

The Law provides that in certain circumstances the arbitration may

conduct ex parte procedures. On the other hand, the arbitral awardmay be provided for the appeal procedures if the party was notproperly informed about the appointment of the arbitrator, hearingsof arbitration or if the party could not provide its explanationsbecause of any other serious reason. This provision in practice isalso taken into consideration by the courts as the one, which is thebasis to revoke the arbitral award.



Unless otherwise agreed by the parties, the arbitral tribunal may, atthe request of any party, make the other party pay a deposit tosecure the claim. This is the only interim relief that the arbitraltribunal has at its disposal, while any other interim measures mayonly be granted by the court.


According to the Law, it is not incompatible with an arbitrationagreement for a party to request, before or during arbitralproceedings, interim relief from a court and for a court to grant suchrelief. The adoption of an interim measure does not prejudice thejurisdiction of the arbitral tribunal. A court may grant interim reliefif there is a real threat that in the absence of such measures theexecution of a future award may become more onerous orimpossible.


In practice national courts grant such measures if the mandatoryrequirements (as set out in question 7.2 above) are fulfilled.


According to the CCP, a court may order the requesting party toguarantee the compensation of loss which the other party may incurdue to the imposition of interim measures. Such a guarantee cannotbe required by arbitral tribunal.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Lithuania?

Unless otherwise agreed by the parties, the arbitral tribunal maydetermine the admissibility, relevance, materiality and weight ofany evidence. The arbitral tribunal may order that any documentaryevidence shall be translated into the language agreed upon by theparties or determined by the arbitral tribunal.

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This issue is not regulated by Lithuanian law.


According to the Law the arbitral tribunal or a party with theapproval of the arbitral tribunal may request from the local districtcourt assistance in taking evidence. The court must execute therequest according to the rules of the CCP.


There is no general practice for disclosure/discovery ininternational arbitration proceedings.


Unless otherwise agreed by the parties, the arbitral tribunal may,following the rules of the Law, determine at its discretion theprocedure for the investigation of the case. According to the Lawthe arbitrator may, unless otherwise agreed by the parties, appointone or more experts to report to it on specific issues to bedetermined by the arbitrator and/or require a party to give the expertany relevant information, to produce or provide access to anyrelevant documents, goods or other property for his inspection.Unless otherwise agreed by the parties and if a party so requests orif the arbitral tribunal considers it necessary, the expert shallparticipate in a hearing and deliver his written or oral report, as wellas answer the questions put to him by the parties.

8.6 Under what circumstances does the law of Lithuania treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

This issue is not governed by Lithuanian law.

9 Making an Award


Unless otherwise agreed by the parties, in arbitral proceedings withthree or more arbitrators, any decision of the arbitral tribunal shallbe made by a majority of votes of the arbitrators. Questions ofprocedure may be decided by a presiding arbitrator, if so authorisedby the parties or all members of the arbitral tribunal.The award must be made in writing and must be signed by thearbitrator(s). In arbitral proceedings with three or more arbitrators,the signatures of the majority of all arbitrators are sufficient,provided that the reason for any omitted signature is declared. Thearbitrator(s) who refused to sign the award have the right to expresstheir individual opinion in writing which must be adjoined to theaward.

The award must state the reasons upon which it is based, unless theparties have agreed that no reasons are to be given or the award ismade on the basis of the conditions of settlement agreement. Theaward must state whether the claim is satisfied or rejected, as wellas the amount of arbitration fees, trial costs and their allocationbetween the parties. The award must state the date and place of itsissuance, the name(s) of arbitrator(s), the parties to the dispute, theirplace of residence or office, representatives of the parties. Each ofthe parties shall be served with the copy signed by the arbitrators inaccordance with the Law



According to Article 37 of the Law an arbitral award may be setaside by the Court of Appeal if: 1) The party making the application provides evidence that:a) a party to the arbitration agreement was under some

incapacity, or the said agreement is not valid underapplicable laws;

b) the party has not been properly informed of the appointmentof an arbitrator or of the arbitral proceedings or was unableto submit its explanations for other valid reasons;

c) the arbitral award deals with a dispute not contemplated byor not falling within the terms of the arbitration agreement,or contains decisions on matters beyond the scope of thearbitration agreement; or

d) the composition of the arbitral tribunal or the arbitralprocedure was not in accordance with the agreement of theparties, unless such agreement was in conflict withprovisions of the Law from which the parties could notderogate, or, failing such agreement, was not in accordancewith the Law.

2) The court finds ex officio that:a) the subject-matter of the dispute is not capable of settlement

by arbitration under the laws of Lithuania; orb) the award is in conflict with public order established by the

laws of Lithuania.


The parties are not allowed to exclude any grounds of appealagainst an arbitral award.


According to the courts practice, an arbitral award can be revisedonly on the grounds provided in the Law.

10.4 What is the procedure for appealing an arbitral award inLithuania?

An application for annulment of an arbitral award may be submittedto the Court of Appeal within 3 months after the arbitration awardand, in case the award is corrected, supplemented or clarified,within 3 months after the relevant award of the arbitral tribunal.During the annulment proceedings, the execution of the award may



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be stayed at the request of one of the parties. The Court of Appealmay, if so requested by a party, suspend the setting asideproceedings for a definite time period in order to enable the arbitraltribunal to resume the arbitral proceedings or take such other actionas in the opinion of the Court would eliminate the grounds forsetting aside the arbitral award. The Court’s decision can be thesubject of a complaint to the Supreme Court. However, Lithuaniancourts are not authorised to change the content of an arbitral award.


11.1 Has Lithuania signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

Lithuania ratified the Convention on 17 January 1995. It hasentered one reservation that awards made in the territories of non-contracting states will be recognised and enforced only on the basisof reciprocity.

11.2 Has Lithuania signed and/or ratified any regionalConventions concerning the recognition and enforcementof arbitral awards?

Lithuania has not signed or ratified any regional Conventionsconcerning the recognition and enforcement of arbitral awards.

11.3 What is the approach of the national courts in Lithuaniatowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

In most cases Lithuanian courts have recognised foreign arbitralawards and declared them enforceable. The party willing tocommence proceedings for the recognition and enforcement of anarbitral award has to submit a written request and the originalarbitration award or its copy, as well as the original arbitrationagreement or its properly certified copy. In case the arbitral awardor/and the arbitration agreement is not made in Lithuanian, acertified Lithuanian translation shall also be submitted. Accordingto the Law, a court may refuse to recognise or enforce the arbitralaward on the same grounds as provided in Article 5 of the New YorkConvention.Awards of the national arbitral tribunal are binding from themoment of their adoption, without recognition by the court. In caseone of the parties refuses to execute the award, the other party hasa right to apply to the local district court and request for a certificateof enforcement. The district court may refuse to issue the certificateof enforcement on the grounds provided in the Law.

11.4 What is the effect of an arbitration award in terms of resjudicata in Lithuania? Does the fact that certain issueshave been finally determined by an arbitral tribunalpreclude those issues from being re-heard in a nationalcourt and, if so, in what circumstances?

According to the Law, national courts shall not initiate proceedingsif an arbitral award which has become effective exists between thesame parties on the same subject matter and on the same ground.

12 Confidentiality

12.1 Are arbitral proceedings sited in Lithuania confidential?What, if any, law governs confidentiality?

Although the issues of confidentiality are not explicitly governed byLithuanian law, they are subject to the parties’ agreement or to therules of the relevant arbitration institution.


There are no specific provisions which would prevent a party fromseeking to rely, in subsequent proceedings, upon informationdisclosed in arbitration.





Arbitral tribunals have the same types of remedies at their disposalas the national courts. As Lithuanian law provides for damageswhich are compensatory in nature (and not punitive), an awardgranting punitive damages under foreign law could be deemed ascontrary to Lithuanian public policy.


If there is no agreement between the parties, statutory interest maybe applied. Under Lithuanian substantive law a party may alwaysclaim interest of 5% p.a. (or 6% p.a., if both parties are businessmenor private entities). Directive 2000/35/EC of the EuropeanParliament and of the Council of 29 June 2000 on combating latepayment in commercial transactions has been transferred into theLithuanian law, and the Law on the Prevention of Late Payment inCommercial Transactions entitles in most cases to claim higherinterest equal to a monthly VILIBOR interest rate (interbankoffered rate, at which banks are willing to lend funds in litas toother banks), increased by 7 percentage points.


Unless otherwise agreed by the parties, an arbitrator decides on theallocation of fees and/or costs of the arbitral proceedings. In practice,the costs of the winning party are usually entirely compensated at theexpense of the other party, unless otherwise agreed by the parties.


An award itself is not subject to tax, but the awarded amounts may

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influence the parties’ tax obligations (e.g. income tax); it dependson the domicile of the receiving party and on the applicable law.


14.1 Has Lithuania signed and ratified the WashingtonConvention on the Settlement of Investment DisputesBetween States and Nationals of Other States (1965)?

Lithuania signed the Convention on 6 July 1992.

14.2 Is Lithuania party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Lithuania is a party to nearly 50 BITs. Most of them provide forrecourse under the ICSID as one of a few possible venues.Lithuania is also a member to the Energy Charter Treaty.

14.3 Does Lithuania have standard terms or model languagethat it uses in its investment treaties and, if so, what isthe intended significance of that language?

Lithuania does not have standard terms or model language that ituses in its investment treaties.

14.4 In practice, have disputes involving Lithuania beenresolved by means of ICSID arbitration and, if so, whathas the approach of national courts in Lithuania been tothe enforcement of ICSID awards and how has thegovernment of Lithuania responded to any adverseawards?

The only case involving Lithuania in the ICSID arbitration wasParkerings-Compagniet AS v. Republic of Lithuania. AsParkerings’ claims were accordingly dismissed in their entirety,there is no practice of national courts on the enforcement of ICSIDawards.

14.5 What is the approach of the national courts in Lithuaniatowards the defence of state immunity regardingjurisdiction and execution?

There are few cases concerning state immunity decided by thenational courts. However, the Supreme Court has stated, on severaloccasions, that Lithuania recognises the doctrine of restrictive stateimmunity, e.g. that commercial acts (acta jure gestionis) are notcovered by the principle of state immunity.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Lithuania? Are certain disputescommonly being referred to arbitration?

Arbitration is still a new notion in Lithuania, because most of thecommercial disputes are commonly adjudicated through the courts.Disputes arising from construction, lease, purchase of immovableproperty and supply and carriage of goods are most commonlyreferred to arbitration. With regard to international disputes, theyare mostly “arbitrable” disputes.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Lithuania, such as pending orproposed legislation that may substantially change the lawapplicable to arbitration?

There are no noteworthy issues at the moment.



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Laimonas Marcinkevicius

Juridicon Law FirmTotoriu St. 5-7 LT01121 Vilnius Lithuania

Tel: +370 5 269 1101Fax: +370 5 269 1010Email: [email protected]: www.juridicon.lt

Laimonas Marcinkevicius is a managing partner at Juridicon LawFirm (full name Law Firm Marcinkevicius, Caikovski & PartnersJURIDICON), advocate (Attorney at Law). Laimonas Marcinkeviciusestablished his own law firm in 1996 and became an attorney atlaw in 2003. He is a member of International Bar Association,associate member of American Bar Association and associatedmember of Risk and Insurance Management Society. Laimonas Marcinkevicius graduated from the Faculty of Law ofVilnius University in 1998, where he obtained professionalqualifications of a qualified lawyer. In 2006 he obtained a PracticeDiploma in International Joint Ventures (College of Law of Englandand Wales). Laimonas Marcinkevicius has been a LLD candidatesince 2005 and is a lecturer at Mykolo Romerio University, Facultyof Law.His main practice areas include: foreign investment; internationaltaxation; mergers and acquisitions; and litigation.Mr Marcinkevicius’ working languages are English, Russian andLithuanian.

Andrzej Czajkowski

Juridicon Law FirmTotoriu St. 5-7 LT01121 Vilnius Lithuania

Tel: +370 5 269 1101Fax: +370 5 269 1010Email: [email protected] URL: www.juridicon.lt

Dr Andrzej Czajkowski is a partner at Law Firm Marcinkevicius,Caikovski & Partners JURIDICON, advocate (Attorney at Law).Andrzej Czajkowski graduated from the Faculty of Law of VilniusUniversity in 2002, where he obtained LLM degree. In 2007 hedefended his doctor’s thesis at the Faculty of Law of VilniusUniversity and since then works there as a lecturer. Dr Andrzej Czajkowski started his legal practice in 2000 andbecame an advocate in 2006. His main practice areas include: contract law and litigation.Dr Czajkowski’s working languages are English, Polish, Russian andLithuanian.

Juridicon Law FirmTotoriu St. 5-7, 01121 Vilnius, Lithuania

Tel: +370 5 269 11 01Fax: +370 5 269 10 10

www.juridicon.lt

JURIDICON Law Firm is a national law firm with international reach, providing a comprehensive range of commercialservices to its Lithuanian and international clients. These include: foreign investment; joint ventures; internationaltaxation; contracts; mergers and acquisitions; corporate governance; company law; competition; labour; real estate; andlitigation.

The firm’s mission is to provide a high quality, creative and result-oriented legal team to individuals and businesses,providing reliable, high quality, especially tax-efficient solutions at a reasonable price and serve as a primary resourceand partner in all aspects of clients’ business growth and development.

JURIDICON has associations with foreign lawyers, accountants, corporate services providers, banks and routinely dealswith instructions from overseas clients.


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Chapter 25

Elvinger, Hoss & Prussen

Luxembourg


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Luxembourg?

Since 1806 the legislation governing arbitration proceedings inLuxembourg has been included in the procedural code, presently inarticles 1224 to 1251 of the Nouveau Code de Procédure Civile(“NCPC”). These provisions apply without distinction between thecommercial or civil, or the domestic or international nature of thecase.The parties may either enter into an arbitration agreement inconnection with a specific dispute, or they may promise to submitany dispute connected with defined matters to arbitration.The arbitration agreement must be made in writing. Therequirement of a written form does, however, not apply to a promiseto enter into arbitration proceedings, or an arbitration clause. Thewritten form is then a mere matter of evidence, and for instance thevoluntary appearance before the arbitrators has been considered asevidence of the existence of a valid arbitration clause.However, in principle an arbitration clause must be subject to thespecific acceptance by a party, if the agreement is a printed formprepared by the one party for mere adherence by the other. Thisrequirement, however, does not apply to international contracts,which are not governed by Luxembourg law. The arbitration agreement sets out the object of the litigation andthe names of the arbitrators. In practice, it is often entered into afterthe commencement of the procedure, if the arbitral tribunal isappointed pursuant to a promise or arbitration clause. It thendefines the scope of the arbitration and the powers of the arbitratorsand is then executed by all parties and the arbitrators.


There are no special requirements save that the person, who is aparty to an arbitration clause or an arbitration agreement, must becapable of settling disputes by arbitration. Specific requirements set out by article 1227 NCPC, which does notapply to the arbitration clause, but only solely to the arbitrationagreement, are the need to specify the object of the litigation and thename(s) of the arbitrator(s).


The parties ought to include the procedural rules to the extent thatthey deviate from the normal rules of court proceedings, define theinstitutional or other rules that may apply to arbitration and nameeventually the arbitral institution, which supervises the arbitration,designate the seat of the arbitration, the language of the arbitrationprocedure and the choice of law (including the right of thearbitrators to act as amiable compositeur).Except for the precise object of the dispute and the names of thearbitrators, it is advisable that the arbitration clause contains thesame provisions, number of arbitrator(s) to be appointed and themethod of appointment of the arbitrator(s).


If parties have agreed to submit to arbitration, the lack ofjurisdiction may be raised before court by any of the parties. Insuch case, Luxembourg courts will deny jurisdiction on the matter. If the lack of jurisdiction is not raised at the beginning of the courtproceedings, the parties will be deemed to have waived the right tosubmit the case to arbitration. If subsequently a party fails to appoint an arbitrator, national courtsmay be involved in the appointment. Luxembourg courts will alsobe involved to enforce the arbitral award within Luxembourg.


It is difficult to describe the approach of national courts to theenforcement of other types of ADR agreements to the extent thatthey are instituted by contract as opposed to conciliation institutedby law, namely in connection with collective labour disputes withcertain disputes with social security administrations and ininternational tax matters. Although conciliation clauses are found in contracts and there is nocase law on the question as to what obligations, if any, arise inrespect of a party to such a clause.

Marc Elvinger

Yves Prussen



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Elvinger, Hoss & Prussen Luxembourg


2.1 What legislation governs the enforcement of arbitrationproceedings in Luxembourg?

Enforcement of arbitral awards is governed by articles ii to v of theNew York Convention of 1958 and articles 1241, 1242, 1250 and1251 of the NCPC. An arbitral award can only be enforced upon anorder of the president of the district court. The New York Convention on the Recognition and Enforcement ofarbitral awards has been applicable in Luxembourg law since a lawof 20 May 1983.


The NCPC does not distinguish between domestic or internationalarbitration proceedings.


There is no specific Luxembourg law, which governs internationalarbitration. The provisions of the NCPC are compatible with therequirements of international arbitration and the NCPC allows forenforcement of arbitration awards rendered by arbitration tribunalsoutside of Luxembourg.As to the procedure, which would be applied in Luxembourg,failing specific agreement of the parties on procedure, it is notmaterially different from that described by the UNCITRAL ModalLaw. There are some differences:

a Luxembourg court cannot refer a matter to arbitration, butwill only deny jurisdiction upon request of a party; anda arbitral tribunal would not directly require the assistance ofthe court.

The recourse should in principle be exercised against the decision ofthe president of the district court which enforces the arbitral award.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Luxembourg?

Apart from fundamental principles such as those following from therequirement of due process of law, there are no mandatory rulesgoverning international arbitration proceedings sited in Luxembourg.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Luxembourg? Whatis the general approach used in determining whether ornot a dispute is “arbitrable”?

Article 1224 NCPC limits the scope of arbitration to subject matters inrespect of which the parties have the right to enter into a settlement.Article 1225 NCPC defines the cases that the parties are not capableof settling by arbitration. This includes mainly any issue relating tomarital status and capacity of individuals, relationship betweenspouses, divorce or ancillary proceedings, representation of minorsof age. Further it is not possible to submit to arbitration disputesrelated to consumer protection laws or labour law, as well as leases.


An arbitral tribunal is required to rule on the question of its ownjurisdiction, if such matters are raised before the arbitrator.However, the tribunal will not make a final decision on these issues.Article 1244 NCPC contemplates the possibility of challenging thearbitration award, which may be declared null and void inter alia ifthere was no valid arbitration agreement, if the tribunal was notproperly constituted, if the matters submitted to arbitration inaccordance with the arbitration agreement could not be settled byarbitration or if the arbitrator has exceeded his or her competenceand powers. Thus, any decision of the arbitrator(s) on thesesubjects may be subject to verification by courts.

3.3 What is the approach of the national courts in Luxembourgtowards a party who commences court proceedings inapparent breach of an arbitration agreement?

The lack of jurisdiction of the Luxembourg court, which resultsfrom an arbitration agreement, is not a matter, which may be raisedex officio by the judge. The issue of the lack of jurisdiction must beraised by a party in limine litis, since otherwise such party isdeemed to have waived the right to settle the dispute by arbitration.If the argument is raised, the court will enforce the arbitrationagreement by declaring that it has no jurisdiction on the matter.


The issue of the jurisdiction and competence of a national arbitraltribunal can only be addressed by a court prior to the initiation of thearbitration proceedings, if the matter is first brought before the court.If one party has designated an arbitrator, the issue might be raised bythe president of the district court if an application is made to him toappoint an arbitrator following the failure by the other party to appointan arbitrator. In such case, the president of the district court couldrefuse to appoint an arbitrator if it is obvious that the arbitrator has nojurisdiction. There is no possibility of appeal against any such order,whether it appoints an arbitrator or refuses to appoint an arbitrator. Once the arbitrators are appointed, the only procedure, whichallows a court to address this issue, is in the context of proceedingsinitiated to seek the annulment of the arbitration award. The awardcould be declared null and void by the court, if the issue to beresolved could not be settled by arbitration or if there was no validarbitration agreement or if the arbitrators have exceeded theirpowers and competence. If the matter is concurrently brought up before the arbitral tribunaland the court, the latter would have to stay the proceedings and towait for the outcome of the arbitration proceedings. If the arbitraltribunal decides that it has jurisdiction on the matter, this decisionwould be final unless the arbitration award is declared null and voidfollowing the specific procedure referred to above.

3.5 Under what, if any, circumstances does the national law ofLuxembourg allow an arbitral tribunal to assumejurisdiction over individuals or entities which are notthemselves party to an agreement to arbitrate?

Since the arbitration agreement or an arbitration clause can only bebinding upon the parties thereto, an arbitral tribunal cannot assumejurisdiction over persons that are not themselves party to such

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agreement. However, a third party may become bound by anagreement in the event it accepts an assignment of the rights underthe agreement or the benefit of a stipulation contained therein,provided that in such event it is deemed to have accepted the benefitof the entire contract, including the arbitration clause.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Luxembourg and what isthe typical length of such periods? Do the national courtsof Luxembourg consider such rules procedural orsubstantive, i.e., what choice of law rules govern theapplication of limitation periods?

There are no Luxembourg law provisions providing for specificlimitation periods for the commencement of arbitrationproceedings. The same limitation periods apply as before theordinary courts and limitation rules would normally be consideredto be substantive rules.



In the vast majority of the cases where the parties have agreed toarbitration, they will also have agreed on the law governing thesubstance of their agreement, in which case the law so chosen willin principle apply. Absent any choice of law, the provisions of theRome Convention of 19 June 1980 and, as from December 2009,the Brussels Regulation n° 593/2008 of 17 June 2008, will applywhere the matter falls within the territorial scope of thoseinternational instruments. But even where those internationalinstruments do not apply, national conflict rules lead to solutionsvery similar to those set out in the Convention/Regulation.However, to which extent arbitrators are bound or lead by nationalconflict of law rules, is a matter of argument.


Where there is an intimate link between the (performance of an)agreement and the territory/interests of a certain country, certainmandatory rules of law of that country can apply even if they wouldnot otherwise be applicable as per the ordinary conflict of law rules.


The choice of law rules governing the formation, validity, andlegality of contracts apply similarly to the formation, validity, andlegality of arbitration agreements.



There are no specific requirements for the choice of an arbitratorexcept for the independence from the parties. Parties are free tochoose their arbitrators regardless of any specific qualification orexperience, and the method of their appointment. Lawyers or notariesmay be appointed, provided they are independent. The participation

of a judge in an arbitral tribunal is not prohibited. Civil servants needto be authorised by the government to be able to accept theappointment as an arbitrator and, in any case, they cannot take part inarbitration involving the administration in which they serve. Theparties are free to designate an even or uneven number of arbitrators.


In case the parties fail to agree on a procedure for the appointmentof arbitrators (including the umpire), article 1227 NCPC providesfor a default procedure. In the latter case, the arbitration will becarried out by a tribunal of three arbitrators whereby each party (ifthere are two parties only) has the right to appoint one arbitrator andthe two arbitrators so appointed select the umpire. If a party fails toappoint an arbitrator or if the arbitrators selected by the parties failto appoint an umpire, the appointment will be carried out by thepresident of the district court. In the first case, the appointment will be made by an ex parte order,against which there is no possibility of appeal. In the second case,the decision is taken by the president of the district court after ahearing where all parties have to be summoned to appear.If there are more than two parties, that have a distinct interest in thecase, all parties need to agree on the names of the three arbitrators,failing which the appointment will be made by the president of thecourt following a hearing, where all parties will be summoned toappear. If an arbitrator namely appointed in the arbitration agreementdeclines its mission, parties should proceed to a new appointment,either by common agreement or, if it is not possible, by followingthe procedure of article 1227 NCPC.


The president of the district court may intervene in the selection ofarbitrators in the event that a party fails to appoint the arbitrator, inthe event that there are more than two parties that are required topoint arbitrators and they fail to agree on the names of thearbitrators, if the arbitrators appointed by the parties cannot agreeon the name of an umpire or, if the arbitration is made by a tribunalcomposed of an uneven number of arbitrators, the arbitrators fail toagree on the award. In such cases, the appointment of an arbitratoror an umpire will be made by the president of the district court.


Although the law contains no express statement with respect to thearbitrators’ independence, neutrality and/or impartiality, thisrequirement is part of fundamental principles of Luxembourg lawwhich are applied by courts. Lack of impartiality and independenceof arbitrators would lead to the annulment of the award asconstituting a violation of the rights of defence.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Luxembourg?

Neither the law nor the rules issued by an arbitration institutionprovide for any express rules on disclosure of potential conflicts ofinterest. But arbitrators are clearly obliged to declare such conflictsof interest.



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6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Luxembourg? If so, do those laws or rulesapply to all arbitral proceedings sited in Luxembourg?

To the extent that they are not set out in articles 1224 to 1251NCPC, the procedural rules applicable to arbitration are, except ifotherwise agreed by the parties, the normal rules applicable to courtproceedings. The parties are free to agree on derogations thereto, which can bedone in the arbitration agreement or in the course of the arbitrationby mutual agreement of the parties and the arbitrators.Luxembourg procedural rules apply to arbitration carried out inLuxembourg under Luxembourg law or deemed to be carried out inLuxembourg, because of the express or implied choice of the seatof arbitration. This would be the case if the agreement has beenestablished under Luxembourg law without a specific designationof a seat of the arbitral tribunal outside of Luxembourg or anyreference to a foreign arbitration procedure. The provisions, which relate to the stay of proceedings and theenforcement of the arbitral award within Luxembourg will applyregardless of the law, which is applicable to the procedure.

6.2 In arbitration proceedings conducted in Luxembourg, arethere any particular procedural steps that are required bylaw?

The fundamental requirement is the obligation to ensure the fairnessof the proceedings and the respect of the rights of the parties: eachparty must have the opportunity to present its case and to reply tothe statements of the other side; each party must also have the rightto submit evidence and to receive access to the evidence anddocuments submitted by the other party.The document and minutes produced by the arbitral tribunal need tobe signed by all arbitrators unless the arbitration agreementauthorises the arbitrators to empower one of them to sign alone. Arbitration proceedings will be stayed if there are concurrentcriminal proceedings, which may influence the outcome of thearbitration proceedings, or if a document is produced in respect ofwhich the other party initiates proceedings, whether civil orcriminal, in order to have it declared as being forged. If the arbitration agreement between the parties does not fix a timelimit to the arbitration, the arbitration will have been carried outduring a three-month period following the execution of theagreement, unless this time limit is extended by the parties.


To the extent that the rules governing the conduct of an arbitrationhearing have not been defined in the arbitration agreement or by themutual consent of the parties and the arbitrators during apreliminary hearing or in writing, the normal rules of courtprocedure are applicable (article 1230 NCPC). These are containedin part in the NCPC, but also in the Decree of 29th June 1990,which contains the internal regulations of the court of appeal, thedistrict court and the justice of peace.

6.4 What powers and duties does the national law ofLuxembourg impose upon arbitrators?

Arbitrators have all the powers conferred to them by the parties’agreement as well as all non coercive powers that judges generallyhave, such as the right to appoint experts. Arbitrators cannot have coercive powers against third parties,namely to order them to appear and witness, or to providedocuments. Further, arbitrators have only a limited power against aparty to the arbitration. If a party has been given notice, but doesnot appear or does not provide documents requested by the arbitraltribunal, the latter can only decide to combine the proceedingdespite the failure to answer his invitation. However, an awardcould order payment of a penalty (astreinte), if the party fails tosubmit documents requested by the tribunal.Verifications and statements as to material facts made in person byarbitrators are deemed to be final evidence unless they arerecognised by a court to constitute a forgery. Arbitrators have to comply with the principle of due process, ofimpartiality and of respect of the rights of the defence. However,the law imposes some additional duties upon them: arbitrators shallaccomplish their mission themselves and shall jointly sign any actof procedure, unless one of parties has authorised the delegation ofpower to sign on behalf of both (article 1232 NCPC).

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Luxembourg and, ifso, is it clear that such restrictions do not apply toarbitration proceedings sited in Luxembourg?

For certain types of matters, there are, before the national courts,rules restricting the appearance of lawyers from foreignjurisdictions. It is clear that no such restrictions apply to arbitrationproceedings sited in Luxembourg.

6.6 To what extent are there laws or rules in Luxembourgproviding for arbitrator immunity?

There are no laws or rules providing for arbitrator immunity inLuxembourg.


National courts have no jurisdiction on issues that are within thescope of the arbitration once the arbitral tribunal has validly beenset up. National courts may intervene during an arbitration proceeding inconnection with the enforcement of preparatory acts (article 1242NCPC) in that the president of the court will issue an enforcementorder. They may upon application of a party assist in the gatheringof evidence.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Luxembourg (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

There are no specific provisions in the NCPC, except for theappointment of arbitrators (article 1227 NCPC). Where there are

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more than two parties to an arbitration agreement and no specificprovision as to the method of appointment of arbitrators, all partiesshall agree on the appointment of three arbitrators. Failing such anagreement, the president of the district court will proceed to theappointment of three arbitrators by an order made upon applicationof one of the parties following a hearing to which all parties mustbe summoned to appear.Parties are free to provide in the arbitration agreement for rulesrelating to multiparty arbitration proceedings and consolidation.This may include the consolidation of arbitration proceedings orconcurrent hearings, provided always that this is possible only if allparties to the various proceedings agree.

6.9 What is the approach of the national courts in Luxembourgtowards ex parte procedures in the context of internationalarbitration?

Under Luxembourg law, each party to a dispute shall be present orat least duly called to appear before the arbitral tribunal. Except forthe appointment of an arbitrator following the failure to do so by aparty, ex parte procedures are not valid, if a party has not beencalled to appear.



Unless the parties have agreed otherwise, the tribunal is authorisedto issue preliminary orders and to make orders for provisionalrelief. Such orders are current practice and are part of the normalprocedure of Luxembourg courts, the rules of which are applicableunless otherwise agreed by the parties. The arbitral tribunal is thusempowered to grant preliminary awards as it may deem necessary.The enforcement thereof against one of the parties may, ifnecessary, require an enforcement order by the president of thedistrict court (article 1242 NCPC).


Despite the existence of concurrent arbitration proceedings,preliminary or interim relief may be granted by the referee judge inthe course of summary proceedings. This may be the case ifpreliminary measures are required to be ordered because of theurgency of the case or, because the opinion of the referee judge, aclaim cannot be seriously challenged. The referee judge also hasthe power to order any measure that is necessary for thepreservation of evidence, which includes the hearing of witnesses.The intervention of the referee judge may therefore result ineffective measures, which an arbitral tribunal would not be able toenforce. It has however been decided that a judge could onlyinterfere in arbitration procedures if the arbitral tribunal is not ableto order the measures or if it has no power to impose the measure.If the measure is directed against the party, the arbitral tribunal willoften be able to deal with it, since the provisional or interim awardwill be made enforceable by an order of the president of the districtcourt.


Courts intervene within the limits as described here above (seequestion 6.2).


Unless otherwise agreed by the parties, the arbitral tribunal canorder security for cost if this is considered necessary.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Luxembourg?

The parties are free to agree upon a procedure with respect togathering evidence, otherwise the matters will be governed by thegeneral provisions on evidence set out in the NCPC, which areapplicable to proceedings before national courts. However,contrary to national courts, the arbitrators could not issue aninjunction, which as such is enforceable, except for orderingpayment of a penalty failing compliance by a party with theinjunction. In such case, the parties may have to apply to thereferee judge to issue such an injunction. Witnesses, who refuse toappear when summoned by a court, may be fined.


Luxembourg procedural law does not know the concept ofdiscovery as it is known in the United Kingdom or the United Statesof America. The parties to the litigation are under no obligation tomake documents available to the court or to disclose documents.However, if the existence of documents is known to the court, thecourt may order that the documents be produced and the refusal bya party to produce such documents will lead to certain conclusions,or courts may make the payment of a penalty (astreinte) at a ratedetermined by them for each day during which a party was notcomplied with the order. Courts also have the power to orderdisclosure by documents held by third parties, but in such eventcannot order payment of a penalty.If the arbitration procedure is carried out in Luxembourg, thearbitrators have the power to order disclosure of documents held bythe parties, but cannot order disclosure of documents held by thirdparties, nor can they force third parties to appear as a witness. Ifsuch steps are required to be taken, the parties may have to initiateproceedings before the referee judge. However, there is no reasonwhy arbitrators could not in an interim award order the payment ofa penalty in case of non-compliance by a party. Such order couldthen be enforced following an enforcement order of the president ofthe district court.


Since there is no procedure of discovery or disclosure other thanthat which has been stated above, courts may only in limitedcircumstances intervene in ordering the disclosure of documents,which may be relevant for the proceedings. It should however be



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emphasised that courts are normally reluctant to order thedisclosure of documents held by third parties that are not party tothe litigation.


There is no general practice for discovery in Luxembourg, but thereform of the procedural code has enlarged the powers of the judgebeyond the procedure previously known as “actio ad exhibendum”.Courts have the power to require documents to be produced if thereis evidence that a party has such a document. Courts may alsorequire submission of documents from third parties. In principle,however, each party submits the documents, which it deemsrelevant and is not compelled to submit documents, which are notfavourable to its case unless required by the judge. The parties submit the evidence, which they deem relevant within thetime limit fixed by the arbitrators or at most 15 days before theexpiration of the time limit set for the arbitration. In practice, thearbitral tribunal is likely to invite the parties to produce additionaldocuments if the arbitrators come to the conclusion that the evidenceavailable is insufficient. It is not abnormal that an interim awarddefines additional points of evidence and invites the parties to producefurther documents for examination by the arbitral tribunal. Shouldthese documents not be produced, then this may lead to certainpresumptions, it may also give a party the opportunity to initiatesummary proceedings before the referee judge in order to obtaindisclosure thereof or the arbitral tribunal may make an interim awardupon application of a party to order payment of a penalty in the eventthat documents are not produced by a party. This may be made if thereis evidence that such documents are in the possession of such partyand do not constitute privileged information.


Unless the parties have specifically agreed about the rules, whichapply to written and/or oral witness testimony, the normal rule ofexamination of witnesses before a court, are applicable. However,arbitrators have no power to require that witnesses be sworn and afalse statement before the arbitral tribunal may not be prosecuted asperjury. If witnesses sign their statements, a false statement may beprosecuted as forgery. The parties will normally file written witnessstatements in the form required by article 402 NCPC, unlessanother form has been agreed by the parties, and propose a hearingof witnesses to the arbitral tribunal. In practice, the hearing ofwitnesses will result in a cross-examination by the parties andquestions may also be raised by the arbitral tribunal. The tribunaldoes not have the power to force the attendance of a witness and ifa witness fails to appear, the parties may have to apply to the refereejudge to obtain an order, which requires the witness to give an oraltestimony under penalty of a fine.Unless it has been otherwise agreed in the arbitration agreement,arbitrators are also permitted to appoint experts or advisers to assiston specific matters.

8.6 Under what circumstances does the law of Luxembourgtreat documents in an arbitral proceeding as being subjectto privilege? In what circumstances is privilege deemed tohave been waived?

Luxembourg law treats certain documents as being subject to

privilege. This will normally be those documents that are kept bypersons that are committed to an obligation of secrecy. Thedocuments held by such persons could only be disclosed inconnection with criminal proceedings by order of an investigatingmagistrate. The production of these documents could not beordered by a civil court. These privileged documents would includethe advice given by lawyers to their client. The privilege could bewaived by the person that benefits from the obligation of secrecy.However in certain circumstances the obligation of secrecy isconsidered to be in the public interest and a waiver could not becontemplated.

9 Making an Award


Arbitral award shall be in writing as it must be signed by eacharbitrator, either approving or disapproving the award (article 1237NCPC). Refusal of a minority of arbitrators to sign should bementioned in the arbitral award. The award shall be motivatedunless parties have exempt by an express agreement the arbitratorsfrom the duty to motivate the award (article 1244 8 NCPC).The tribunal should render its arbitral award within the time limitfixed by the parties or within a 3-month period if the parties havenot agreed otherwise (article 1233 NCPC and 1228 NCPC). Theaward shall be in writing.



Although certain provisions of the NCPC contain a reference to anappeal against an arbitral award, these references are contained inthe law by mistake since the possibility of an appeal has beenabrogated since 1981. The only possibility to challenge an arbitralaward is the procedure to have it declared null and void by way ofopposition to the enforcement order of the president of the districtcourt. This is only possible for Luxembourg awards and not withforeign awards. Article 1244 NCPC draws up an exhaustive list of 12 basis forannulment of proceedings:

causes relating to the substance of the arbitration: the arbitralaward is contrary to the public interest; the dispute cannot besettled by way of arbitration; or there is no valid arbitrationagreement between the parties;causes relating to the arbitral proceedings: the tribunal hasexceeded its power or jurisdiction; omission to decide uponone or more issues, which are indivisibly linked to the settledissues; the tribunal has not been regularly set up; violation ofthe rights of the defence; or lack of motivation, unless therewas a exemption to motivate contradictions in the provisionof the arbitral award; andcauses relating to the grounds of the award: the award hasbeen obtained by fraud; the award has been found on thebasis of evidence which has been declared false by virtue ofan irrevocable court decision or on the basis of evidence thathas been recognised to be false; or it is discovered that theone party has concealed evidence which would have had adecisive influence on the award.

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Articles 1244 and 1246 NCPC are mandatory provisions and partiescannot agree to waive the right to challenge the arbitral award.Parties cannot alter the list by excluding or adding causes to it. Theonly indirect waiver is the possibility for the parties to exempt thetribunal from the obligation to motivate its award (article 1244 8NCPC).


The parties cannot expand the scope of the proceedings forannulment of an award before national courts.

10.4 What is the procedure for appealing an arbitral award inLuxembourg?

In principle, the proceedings for annulment are not directed againstthe arbitral award, but against the enforcement order. However, itis accepted by some authors that a party seeking an appeal may alsoapply for annulment in the absence of an enforcement order, butthere is no case law on that issue up to this date.Proceedings for annulment are possible only if the jurisdiction ofthe final award has been rendered and the arbitral tribunal has nofurther jurisdiction. Such is not the case where the tribunal hasomitted to decide on one or more points which can be dissociatedfrom the issues already decided by the tribunal. In that case a partycan apply to the tribunal to complete the award even though thetime limit of the arbitration has expired (article 1248 NCPC), unlessthe other party disputes that the issues could be dissociated. In thatcase, an action may be brought before the district court which willdecide on the possibility to dissociate the issues and eventuallyrefers the matter to the arbitral tribunal in order to complete theaward.The proceedings shall be initiated within one month from the dateof the notification of the enforcement order or from the day ofdisclosure as to causes of nullity relating to the grounds of theaward (article 1246 NCPC) by way of opposition to theenforcement order before the district court, the president of whichhas rendered the order (article 1246 NCPC). The opposition shallbe notified by writ of summons. Any causes of annulment of the arbitral award shall be pleaded inthe same proceedings except the causes relating to the grounds ofthe award having appeared later. The arbitral award is several. When the provisions of an arbitralaward are subject to annulment but can be dissociated from theother provisions, only the defective provisions will be annulled andthe award will remain valid as to the other provisions (article 1247NCPC). The enforcement of the arbitral award is stayed during theproceedings for annulment unless the arbitral tribunal has orderedthe provisional enforcement of the award (article 1249).In case of a foreign arbitral award, it is possible to challenge theenforcement order before the court of appeal. The effect of theseproceedings is not to annul the foreign arbitral award, but to preventits enforcement in Luxembourg.


11.1 Has Luxembourg signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

Luxembourg has signed the New York Convention of 10th June1958 on the Recognition and Enforcement of Foreign ArbitralAwards (the New York Convention) and has ratified it by a law of20 May 1983 without reservation. The provisions of the New YorkConvention apply by virtue of the law of implementation to anyaward granted by a tribunal whose seat is situated in a country thathas also signed the convention. Otherwise, the NCPC deals with the recognition and theenforcement of arbitral awards in general. Foreign arbitral awardswill be rendered enforceable as domestic ones. Application for anenforcement order shall be filed with the district court of thedomicile of the person against whom the enforcement is sought orof the place where the award should be enforced. The applicationshall be accompanied by the original or a certified copy of thearbitral award (article 1250 NCPC). Subject to the conventional provisions, the recognition andenforcement of a foreign award can be refused only if one of thecauses for annulment as set out by article 1244 NCPC exists or ifthe validity of the arbitral award can still be challenged before thearbitral tribunal and the tribunal has not ordered the provisionalenforcement (article 1251 NCPC).

11.2 Has Luxembourg signed and/or ratified any regionalConventions concerning the recognition and enforcementof arbitral awards?

In addition to the New York Convention, Luxembourg has signedand ratified the European Convention on International CommercialArbitration dated 21st April 1961.

11.3 What is the approach of the national courts in Luxembourgtowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

Luxembourg courts recognise and enforce arbitral awards whetherdomestic or foreign. Annulment of a foreign award in the homejurisdiction is not a ground to refuse enforcement in Luxembourg. A party which intends to enforce a Luxembourg arbitral award shallfile the minutes of the arbitral award with the chancery of thedistrict court, or the chancery of the court of appeal if the award isrendered following an arbitration, which has settled a dispute wherean appeal was lodged against a judgment of a court of first instance(article 1241 NCPC). In the latter case, the enforcement order ismade by the president of the relevant section of the court of appeal.

11.4 What is the effect of an arbitration award in terms of resjudicata in Luxembourg? Does the fact that certain issueshave been finally determined by an arbitral tribunalpreclude those issues from being re-heard in a nationalcourt and, if so, in what circumstances?

Although there are no precedents, which confirm this, it is acceptedby treatises that an arbitral award which qualifies for being renderedenforceable by order of the president of the district court has theauthority of the res judicata and parties are precluded from any



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further arbitration or court proceedings on the arbitrated issues as ifit was a judgment of a national court.

12 Confidentiality

12.1 Are arbitral proceedings sited in Luxembourg confidential?What, if any, law governs confidentiality?

The law does not specifically provide for the confidentiality ofarbitration proceedings. However, it is commonly accepted thatsuch proceedings are deemed confidential by their nature, sinceconfidentiality is often an important criterion for the choice ofarbitration. The parties are free to agree on the confidentiality ofthe proceedings and the award and to determine the modalities ofdisclosure to third parties. Arbitrators are subject to a general dutyof confidentiality.


Information disclosed in arbitral proceedings cannot be referred toand/or relied on subsequent proceedings before national courtunless the information is set out by the arbitrators in the award andthe proceedings are among the same parties. It is a consequence ofthe confidentiality of the proceedings that the information cannot bedisclosed to third parties. In certain circumstances, the informationmay however be used by the same parties in subsequentproceedings in court or before arbitrators, notably if the subsequentproceedings are a consequence of the arbitral proceedings. Further, the parties may have agreed or may be deemed to haveagreed with that information disclosed during the arbitralproceedings could be made available if this is necessary for theprotection of the legitimate interests of the parties.


Confidentiality of the proceedings is not protected if the partieshave agreed otherwise or deemed to have agreed otherwise. Thisincludes any procedure, which is related to the arbitration, such asany application for enforcement or any procedure for annulment. Itis generally accepted that disclosure is also possible if this isreasonably necessary for the protection of the legitimate interest ofan arbitrating party. The confidentiality of arbitral proceedingscould not be protected in the event that the disclosure becomesnecessary in the context of the prosecution of criminal offense.



The arbitrators have full power to grant remedies to the extent thatsuch remedies are compatible with Luxembourg law. To the extentthat Luxembourg law is applicable to the case, the arbitrators couldorder under sanction of penalty that certain steps be undertaken byan arbitrating party or they could order the payment of a sum ofmoney as damages. As to punitive damages, the question isdebatable. Indeed if the arbitral tribunal has to apply foreign law,which provides for special damages or punitive damages, it may beargued that the tribunal is able to award such damages even though

the arbitration is sited in Luxembourg. However, one may come tothe conclusion that the punitive or special damages that are oftenacceptable in other countries such as the United States of America,are not compatible with the Luxembourg ordre public and thereforeare not available in arbitration proceedings that are subject to theLuxembourg ordre public.If the law to be applied by the arbitrators is Luxembourg law,damages, which exceed the amount of the loss, would be excludedanyway and agreed upon damages would have to be reduced by thearbitrators. The provision, which gives power to the judge orarbitrator to reduce these amounts, is part of the internal ordrepublic and it is generally considered that the type of punitivedamages, which is available elsewhere, will be considered to beincompatible with the prevailing legal concepts regarding thismatter. Thus a foreign award, which orders payment of suchdamages, might not be enforceable.


If the arbitral tribunal applies Luxembourg law, it would be normalfor the tribunal to grant an award of interest and to allow, if this wasrequested by parties, this interest to be compounded annually, if thematter deals with interest due for late payment under contractualobligation or even, more often, if the matter deals with interest dueon an amount of damages due as a result of wrongdoing.The date as from which the interest shall be accrued, may varydepending on the specificities of the case. It is normally consideredthat the provisions of Luxembourg law, which limit the award ofinterest are not part of the international ordre public andconsequently, if the arbitrators apply a legislation other thanLuxembourg law, or act as amiable compositeur, they would havethe power to derogate from rules of Luxembourg law relating tointerest and, for instance, allow for the compounding of interest forperiods, which are shorter then one year, in connection withcontractual obligations.


There is no specific provision of the NCPC, which deals with thecost of arbitral proceedings. However the NCPC deals with the costof proceedings, which are normally recoverable by the winningparty from the losing party, except as otherwise specifically decidedby the court. This would normally include the fees and other costsof the arbitrators, but not the fees of the lawyers of the arbitratingparties. However, the recovery of fees (or part of the legal fees) isnot excluded by Luxembourg law and to some extent contemplatedby the NCPC. Thus, the recovery of such fees and costs and a division of costs ispossible, and failing any agreement of the parties with respectthereto, the tribunal may make an award allocating cost between theparties in the light of the outcome of the proceedings, includingrecovery of all or part of legal fees and other costs incurred by aparty.


The award as such is not subject to any tax and the need to payregistration taxes on the amount thereof has been abolished.However, if a party is domiciled in Luxembourg, the award may

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have some tax consequences. Indeed, payments ordered to aLuxembourg party may constitute expenses that are recognised fortax purposes and payments received by a Luxembourg party may,depending on their nature, constitute taxable income. Luxembourgtax law is not applicable to parties to an arbitration that are notresident in Luxembourg.


14.1 Has Luxembourg signed and ratified the WashingtonConvention on the Settlement of Investment DisputesBetween States and Nationals of Other States (1965)?

The Convention of Washington of 18 March 1965 has been signedby the Grand-Duchy of Luxembourg and ratified by a Law of 8April 1970.

14.2 Is Luxembourg party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Luxembourg is party of a wide network of Bilateral InvestmentAgreements which consists of more than 90 BITs, of which 67 arein force. (http://www.unctadxi.org/templates/DocSearch.aspx?id=779). Luxembourg has also signed the Energy Charter Treatywhich was ratified by a law of 24 January 1997.

14.3 Does Luxembourg have standard terms or model languagethat it uses in its investment treaties and, if so, what isthe intended significance of that language?

There are no standard terms but generally the BITs shall ensure theprotection of investors, a treatment equal to nationals, return ofdividends, compensation for expropriation and access toindependent settlement of disputes.

14.4 In practice, have disputes involving Luxembourg beenresolved by means of ICSID arbitration and, if so, whathas the approach of national courts in Luxembourg beento the enforcement of ICSID awards and how has thegovernment of Luxembourg responded to any adverseawards?

Before 2004, BITs have been entered into by the Kingdom ofBelgium on behalf of the economic union of Belgium andLuxembourg. Therefore there are no specific disputes involving aLuxembourg party that are known to have been resolved by meansof ICSID arbitration and there are no published precedents showingthat national courts have been involved in the enforcement ofICSID awards.

14.5 What is the approach of the national courts in Luxembourgtowards the defence of state immunity regardingjurisdiction and execution?

Immunity of jurisdiction and execution of a state is recognised as auniversal principle of international public law. But courtsdistinguish between the acts of a state which are jure imperi and theacts jure gestionis. Immunity of jurisdiction of a state does notapply if a state acts as private person. However, a judgment againsta state cannot be enforced by a Luxembourg court unless the statehas specifically waived immunity of execution.Luxembourg signed and ratified the European Convention on StateImmunity in Basel on the 16 May 1972. According to thisconvention each party waives its immunity of jurisdiction in case itis subject to proceedings involving a series of civil and commercialmatters.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Luxembourg? Are certaindisputes commonly being referred to arbitration?

There is an obvious willingness of Luxembourg public authoritiesto present arbitration as attractive dispute resolution method inLuxembourg. In 1987 the Luxembourg Chamber of Commerce setup an Arbitration Center which rules are inspired by the rules of theICC Court of Arbitration.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Luxembourg, such as pending orproposed legislation that may substantially change the lawapplicable to arbitration?

It is generally recognised by practitioners that the latest reform ofthe provisions of NCPC that deals with arbitration was not adequateand that more specific legislation would be helpful to promotearbitration in Luxembourg. This promotion of arbitration and other alternative disputeresolution might prove to be particularly helpful to support thedevelopment of Luxembourg based investment vehicles used byprivate equity investors and by collective investment schemes.Practice shows that in numerous cases arbitration is the procedure,which best suits these investment activities where Luxembourgincorporated entities are major players.



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Yves Prussen

Elvinger, Hoss & Prussen2 Place Winston ChurchillL-2014 Luxembourg

Tel: +35 2446 6440Fax: +35 2442 255Email: [email protected]: www.ehp.lu

Yves Prussen is “doctor at law” and “diplomé of the Institut d’EtudesPolitiques” (Grenoble), became a member of the Luxembourg Bar in1971. In 1975, he became a partner of the firm Elvinger & Hosswhich later changed its name.He is a member of the “International Bar Association”, of theLuxembourg branch of the “International Fiscal Association”, of the“Luxembourg Association for Arbitration” and a member of the“Comité d’Experts Juristes” with the “Commission de Surveillancedu Secteur Financier” (CSSF).He is the author of various publications in the field of tax law,securities law and company law as well as national reports for the“International Fiscal Association Congress”.Besides his areas of activity in banking, financial and securities law,aircraft financing, intellectual property law and tax law, he is alsoinvolved in litigation including arbitration procedures.

Marc Elvinger

Elvinger, Hoss & Prussen2 Place Winston ChurchillL-2014 Luxembourg

Tel: +35 2446 6440Fax: +35 2442 255Email: [email protected]: www.ehp.lu

Marc Elvinger is a partner with Elvinger, Hoss & Prussen sinceJanuary 2000, when he joined the firm after having conducted anindividual practice during ten years. He is a member of theLuxembourg bar since 1985. Maître en droit, he further holds a post-university degree (DEA) ininternational conflict law (Strasbourg) and one in internationaldevelopment law (Paris).He has extended experience in commercial and civil litigation aswell as in international arbitration. He also has a wide practice inadministrative law and litigation, including matters such as publicprocurement, immigration law, urbanism and environment.Apart from litigation, he practices contract, company and bankinglaw on a regular basis. He has published on a large variety ofmatters relating to, among others, human rights, administrative law,banking law and construction law, etc. He is fluent in Luxembourgish, French, English and German.

Elvinger, Hoss & Prussen is a leading Luxembourg law firm with strong practices in corporate, corporate finance,mergers and acquisitions, banking, general commercial, insurance, investment and pension funds, private equitystructures, European law, securitisation, intellectual property, administrative law and tax law.

The firm provides high level legal services, both in terms of legal advice and litigation as well as arbitration to local andinternational financial and industrial groups and financial institutions, Luxembourg investment funds and their serviceproviders.

Partners of the firm participate at industry and governmental level in the development of the legal and regulatoryenvironment of the financial services sector in Luxembourg

Elvinger, Hoss & Prussen has deliberately chosen to be an independant non-affiliated organisation, carrying its activitiesin and from Luxembourg, in each country who are, in the relevant field of law, considered to be the most competent.




Chapter 26


Netherlands


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of the Netherlands?

The Dutch Arbitration Act (“DAA”) of 1986 does not imposespecial requirements on arbitration agreements beyond the rulesapplicable to the formation of contracts in general. An arbitrationagreement need not be concluded in writing, but it can be provenonly by a written instrument (Section 1021 Dutch Code of CivilProcedure (Wetboek van Burgerlijk Rechtsvordering or “DCCP”).This is a rule of evidence, not validity. A writing that provides forarbitration, or refers to standard conditions that in turn provide forarbitration, will suffice if the other party has expressly or impliedlyaccepted it. A letter, fax, or email is sufficient.


In general, no. In consumer contracts, an arbitration clausecontained in standard terms may be considered to be unfair andtherefore unenforceable.


The DAA includes detailed rules governing arbitration proceedings.A number of these rules are not mandatory, meaning they apply bydefault only in the absence of contrary agreement. It is usuallyprudent for an arbitration agreement to specify the seat ofarbitration, the language(s) of the proceeding, the number ofarbitrators, confidentiality obligations, and the institutional or otherarbitration rules to be applied.


The Netherlands is generally “arbitration-friendly”. Dutch courtsfaced with a valid arbitration agreement will readily declinejurisdiction and refer the parties to arbitration.


ADR has become increasingly popular in the Netherlands. After

several years of pilot projects, the Dutch legislature adoptedmeasures enabling courts to refer parties to mediation in ongoinglitigation cases they deem appropriate. At the same time, the Dutch Supreme Court has held that amediation agreement cannot be enforced since by its naturemediation is voluntary (HR 20 January 2006, NJ 2006, 75). Insome instances, lower courts have declared claims inadmissible ifagreed ADR procedures have not been exhausted prior to litigation,but this is a developing area of law where consistency has not yetbeen achieved.


2.1 What legislation governs the enforcement of arbitrationproceedings in the Netherlands?

The DAA governs the enforcement of arbitration proceedings. Agroup of leading scholars and practitioners, at the behest of theMinistry of Justice, presented a proposed revision of the DAA to theMinistry in December 2006. While it has been widely assumed thatthe revised law will be adopted by Parliament, this has nothappened, and the Dutch Supreme Court recently held that courtsshould not anticipate Parliament by looking to the proposedrevision for interpretive guidance to the current law.


The DAA applies to both domestic and international arbitrationproceedings.


The DAA was influenced by the UNCITRAL Model Law and othertexts, such as the UNCITRAL Arbitration Rules and nationalarbitration acts.Notable differences between the DAA and the Model Law include:

The Model Law requires an arbitration agreement to be inwriting in order to be valid, while the DAA requires only thatthe agreement be proven through written evidence. Under the Model Law, arbitrators can be requested to give aninterpretation of their award. This is not provided for in theDAA.

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The Model Law provides for a remission procedure, meaningthat a court may, pending a setting aside procedure and uponrequest of a party, refer the matter back to the arbitrators.The DAA does not provide for remission.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in theNetherlands?

The DAA contains many mandatory rules that are applicable tointernational arbitrations seated in the Netherlands. The frequentlyused wording “unless the parties have agreed otherwise” indicatesthat a particular provision is not mandatory and that parties candeviate from it. Absent these or similar words, the rules aregenerally - but not always - held to be mandatory.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of the Netherlands?What is the general approach used in determining whetheror not a dispute is “arbitrable”?

In general, any dispute arising out of a defined legal relationship,whether contractual or not, can be submitted to arbitration (Section1020(1) DCCP).However, an arbitration agreement may not determine legalconsequences of which the parties cannot freely dispose (Section1020(3) DCCP). This will typically be the case if the arbitrationaward would have consequences for third parties. Family matters,patent validity, bankruptcy and certain aspects of company law thataffect third parties are not arbitrable.


The arbitral tribunal may rule on its own jurisdiction (Section1052(1) DCCP). A challenge to jurisdiction has to be made at thelatest with the statement of defence on the merits.

3.3 What is the approach of the national courts in theNetherlands towards a party who commences courtproceedings in apparent breach of an arbitrationagreement?

A court must decline jurisdiction over a dispute in respect of whichan arbitration agreement has been concluded if (a) a party invokesthe existence of the arbitration agreement before submitting adefence on the merits and (b) the agreement is not invalid (Section1022 DCCP). If the defendant does not raise the issue, the courtwill not raise it ex officio. The court will, however, declare thearbitration agreement invalid ex officio if the agreement is contraryto public policy, e.g. if the subject matter is not arbitrable.


If an arbitration procedure is already pending when the court isseized of a dispute, the court will generally defer to the decision ofthe arbitral tribunal on the validity of the arbitration agreement(Section 1052 DCCP). If the arbitral tribunal holds it hasjurisdiction, the court will generally decline jurisdiction.

3.5 Under what, if any, circumstances does the national law ofthe Netherlands allow an arbitral tribunal to assumejurisdiction over individuals or entities which are notthemselves party to an agreement to arbitrate?

Only the parties to an arbitration agreement are bound by it. Thirdparties are in principle not bound by the arbitration agreement. The“group of companies” theory for joining non-signatories has not yetbeen tested before Dutch courts, to our knowledge. Exceptionsapply to persons who “stand in the shoes” of a party, such as anassignee, a surety, or a bankruptcy administrator.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in the Netherlands andwhat is the typical length of such periods? Do thenational courts of the Netherlands consider such rulesprocedural or substantive, i.e., what choice of law rulesgovern the application of limitation periods?

Under Dutch law, limitation periods are substantive rules governed bythe substantive law applicable to the obligation in question. Thetypical limitation period for Dutch-law contract and tort claims is fiveyears.



Absent an agreement of the parties on applicable law, the tribunalapplies the rules of law that it considers appropriate (Section1054(2) DCCP). In practice, a tribunal seated in the Netherlandswill generally follow Dutch rules on conflict of laws.


Mandatory laws of the seat of arbitration will generally prevail ifthey constitute public policy. Mandatory laws of anotherjurisdiction may also prevail over the law chosen by the parties.This is particularly relevant if the arbitral award has to be enforcedin that other jurisdiction. A tribunal may also be required to applymandatory principles of EU law.


The arbitration agreement is separate from the main agreement(Section 1053 DCCP). The usual conflict of law rules determinethe law applicable to the formation, validity and legality of thearbitration agreement. The applicable law is that chosen by theparties. Absent such a choice, the arbitration agreement is governedby the law of the country having the closest connection to thearbitration agreement. There are two schools of thought withrespect to “the closest connection”: some commentators say this isthe country whose law applies to the rest of the agreement, whileothers say it is the place of arbitration.

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The parties are free to agree on a method for appointing the tribunal.If no method of appointment is agreed upon, the arbitrator(s) shallbe appointed by consensus between the parties (Section 1027(1)DCCP). The tribunal must consist of an uneven number ofarbitrators (Section 1026(1) DCCP).Any natural person of legal capacity may be appointed. Unless theparties have agreed otherwise, no person shall be precluded fromappointment by reason of his nationality (Section 1023 DCCP).


If the parties cannot agree on the number of arbitrators, the numberof arbitrators shall at the request of either party be determined bythe President of the District Court (Section 1026(2) DCCP).Similarly, if the parties have agreed on the number of arbitrators buthave not appointed the arbitrators within a certain period of time,the arbitrator(s) shall at the request of either party be appointed bythe President of the District Court. (Section 1027(3) DCCP). Theperiod is two months from the notice of arbitration (three months ifone of the parties is not domiciled in the Netherlands) but can beextended or shortened by agreement between the parties.


See the answer to question 5.2. Also, if the arbitration agreementgives one of the parties a privileged position with regard to theappointment of the tribunal, the other party may request the Presidentof the District Court to appoint the arbitrator(s) (Section 1028 DCCP).


An arbitrator must be impartial and independent. This also appliesto party-appointed arbitrators. If there are justifiable doubts as to anarbitrator’s impartiality or independence, a party may challenge thearbitrator (Section 1033(1) DCCP).

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within the Netherlands?

Two sets of rules commonly referred to are the IBA Guidelines onConflicts of Interest in International Arbitration 2004 and the DutchJudicial Impartiality Guidelines (Leidraad Onpartijdigheid van deRechter). The latter is intended for the judiciary but can also beused as reference for arbitrators in (mainly domestic) procedures.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in the Netherlands? If so, do those laws orrules apply to all arbitral proceedings sited in theNetherlands?

The parties may agree how the arbitral proceedings are conducted,

including by referring to the rules of an arbitration institution. If theparties have not agreed, the tribunal determines the procedure(Section 1036 DCCP). The DAA contains a number of mandatoryrules such as the right of the parties to be treated equally and topresent their cases, rules with respect to the hearing of witnesses,the appointment of expert witnesses, the possibility to intervene orjoin in arbitral proceedings and the consolidation of arbitralproceedings.

6.2 In arbitration proceedings conducted in the Netherlands,are there any particular procedural steps that are requiredby law?

The commencement of the arbitration proceedings is important inconnection with statutes of limitation. Unless otherwise agreed bythe parties, arbitration proceedings shall be deemed to havecommenced on the date of receipt of a written notice in which oneparty informs the other that it is commencing arbitration and givesa description of the matters submitted to arbitration (Section1025(1) DCCP).A notable procedural requirement is that arbitral awards must bedeposited with the registry of the District Court. The date of depositis the starting point for deadlines to seek rectification or correctionof the award, the rendering of an additional award, or setting aside.


The parties have a right to an oral hearing under the DAA. TheDAA does not establish rules for the conduct of an arbitrationhearing, except for due process rules that the parties must be treatedequally and given an opportunity to present their case.

6.4 What powers and duties does the national law of theNetherlands impose upon arbitrators?

Arbitrators may: order the parties to produce documents (Section1039(4) DCCP); hear witnesses (Section 1041 DCCP); appointexperts (Section 1042 DCCP); order the parties to appear at ahearing to provide information (Section 1043 DCCP) or explore thepossibility of settlement; request information about foreign laws viathe President of the Hague District Court (Section 1044 DCCP);and render an award by default (Section 1040 DCCP). Main duties include: treating the parties equally; giving each partyan opportunity to present its case; remaining impartial andindependent; and depositing the award with the District Court.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in the Netherlands and,if so, is it clear that such restrictions do not apply toarbitration proceedings sited in the Netherlands?

Foreign lawyers may appear in Dutch courts alongside a Dutchlawyer who formally represents the party. This restriction does notapply to arbitration proceedings seated in the Netherlands.

6.6 To what extent are there laws or rules in the Netherlandsproviding for arbitrator immunity?

There are no laws providing for arbitrator immunity. TheArbitration Rules of the Netherlands Arbitration Institute (NAI)provide that the arbitrator(s) cannot be held liable for any act oromission with regard to an arbitration governed by said Rules



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(Article 66). The NAI is the leading generalist arbitral institution inthe Netherlands. Other arbitral institutions (generally industry-specific) often have similar rules.


See the answers to questions 5.2 and 5.3 regarding the potential roleof courts in the appointment of arbitrators.National courts may also provide assistance in examining anunwilling witness. The arbitrators may attend the examination ofthe witness taking place before the District Court. Challenges to arbitrators will ultimately be resolved by nationalcourts even if the parties have appointed another authority (e.g. anarbitration institute) to resolve such challenges (Section 1035DCCP).National courts also decide on consolidation of arbitrationproceedings (see question 6.8 below).

6.8 Are there any special considerations for conductingmultiparty arbitrations in the Netherlands (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

There are no special considerations for conducting multipartyarbitrations in the Netherlands.If two or more arbitral proceedings are pending in the Netherlands,a party can apply to the President of the District Court ofAmsterdam for a full or partial consolidation of the proceedings,provided the subject matters of the arbitrations are connected(Section 1046 DCCP). All parties and arbitrators will have anopportunity to be heard. If consolidation is ordered and the partiescannot agree on the appointment of the tribunal or the rulesapplicable to the consolidated proceedings, the President of theDistrict Court will rule on these matters. The parties can excludeconsolidation by previous agreement (“opting-out”). Upon the written request of a third party with an interest in theoutcome of arbitral proceedings, the tribunal may allow such aparty to join or intervene in the arbitration proceedings (Section1045(1) DCCP). A party which claims indemnification by a thirdparty may also request the joinder of that third party (Section1045(2) DCCP). The tribunal will permit joinder or interventiononly if the third party enters into a written agreement with the otherparties to accede to the arbitration agreement.

6.9 What is the approach of the national courts in theNetherlands towards ex parte procedures in the context ofinternational arbitration?

Some ex parte procedures available in Dutch litigation also apply tointernational arbitrations. A common example is pre-awardattachment. Although the DCCP does not provide for the other sideto be heard in these procedures, in practice courts may decide tohear the opposing party before ruling on the attachment. Failingthis, the other party will have to commence a new procedure to liftthe attachment after it has been made.



The parties may agree to empower the arbitral tribunal or its chairto render an award in summary proceedings and grant preliminaryrelief. This will be the case if the parties have chosen the NAIArbitration Rules, which provide for summary arbitral proceedingseven prior to constitution of the arbitral tribunal; the NAI willappoint a tribunal to resolve the summary proceedings on shortnotice.Arbitrators may grant a wide range of provisional remedies,including preliminary injunctions and monetary awards, such asadvance payment of damages. Conservatory attachment orders,however, can be made only by a national court.


An arbitration agreement shall not preclude a party from requestinga court to grant interim relief. It is relatively easy to obtain leavefor pre-award attachments in support of arbitrations pending orsoon to be pending in the Netherlands or even in other jurisdictions. A party’s request to a court for interim relief does not have anyeffect on the jurisdiction of the arbitration tribunal.


If the party opposing interim relief invokes a valid arbitrationagreement, the District Court decides whether to assumejurisdiction taking into account all circumstances and consideringboth parties’ interests. Timing is crucial. If interim relief can beobtained from the arbitral process in timely fashion, as is often thecase when the NAI Arbitration Rules (including their provision forsummary arbitral proceedings) have been chosen, the Court willusually decline jurisdiction. If arbitrators have not yet beenappointed and it is expected that obtaining interim relief from themwill take (far) more time than from the Court, the Court is likely toassert jurisdiction. Another factor is the special expertise of thetribunal. If the parties have agreed on arbitration by specialisedarbitrators (for example on technical issues or trade practices), theCourt will be more inclined to decline jurisdiction.


The DCCP does not provide for courts or tribunals to order securityfor costs. However, there is no mandatory rule prohibiting atribunal from granting such relief if the parties have agreed to givesuch power to the tribunal.

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8.1 What rules of evidence (if any) apply to arbitralproceedings in the Netherlands?

The tribunal is free to determine rules regarding evidence, includingadmissibility and weight, unless the parties agree otherwise(Section 1039(5) DCCP). The rules of evidence that apply in courtlitigation do not apply to arbitration.


Arbitrators may order the parties to disclose documents but cannotorder third parties to do so. The tribunal cannot force a party to disclose documents. If a partyordered to disclose documents refuses, the arbitral tribunal maydraw the inferences it deems appropriate.


A tribunal’s discovery order is not enforceable in court. Courts mayorder third parties to produce documents for use in arbitrationpursuant to Section 843a DCCP, which applies in fairly narrowcircumstances and only to specific documents.


Dutch arbitrators generally use their power to order disclosure ofdocuments with restraint, and common law discovery is not known.In international arbitration, there is an increased tendency to applythe IBA Rules on the Taking of Evidence.


The tribunal determines the manner in which witness examinationshall proceed, including whether witnesses will be sworn in.Cross-examination is permitted but generally not used in domesticarbitrations. Parties more often agree to cross-examination ininternational arbitrations, by reference to the IBA Rules on theTaking of Evidence for example. If the parties have not agreed tocross-examination, the arbitral tribunal will take the lead inexamining witnesses. Counsel for the parties may question awitness after the tribunal has finished.

8.6 Under what circumstances does the law of theNetherlands treat documents in an arbitral proceeding asbeing subject to privilege? In what circumstances isprivilege deemed to have been waived?

Documents submitted in an arbitral proceeding are in principle notsubject to privilege.

9 Making an Award


Unless otherwise agreed by the parties, the award shall be made bymajority vote. An arbitral award shall be in writing and signed bythe arbitrators. A refusal by a minority of the arbitrators to sign theaward must be mentioned in the award and this statement must alsobe signed by the majority arbitrators. In addition to the decision, the award must contain the followinginformation: the names and addresses of the arbitrators; the namesand addresses of the parties; the date of the award; the place wherethe award is made; and the reasons for the decision, unless theaward relates solely to the determination of the quality of goods orrecords a settlement agreement.A copy of the award shall be communicated to the parties withoutdelay. The original of the award is deposited with the registry of theDistrict Court at the seat of the arbitration.



An appeal to an arbitral appeals tribunal is possible only if theparties have agreed (Section 1050(1) DCCP). An award cannot beappealed to a Dutch court.Either party may apply to the District Court at the seat of arbitrationto set aside an award. Setting aside is permitted on five exclusivegrounds: (i) there is no valid arbitration agreement; (ii) the tribunalwas constituted in violation of the applicable rules; (iii) the tribunaldid not comply with its mandate; (iv) the award was not signed ordoes not contain the reasons for the decision; and (v) the award orthe manner in which it was made violates public policy or goodmorals. With respect to the fourth ground, the Dutch SupremeCourt has ruled that an award may be set aside, even if it doescontain reasons, if it lacks any convincing explanation for thedecision. In a more recent decision, the Supreme Court emphasisedthat this standard is highly restrictive, and in practice lower courtsseem to apply it very rarely.


The grounds for setting aside arbitral awards are mandatory. Theparties cannot exclude or limit these grounds.


The parties cannot agree to expand the scope of review in settingaside proceedings.

10.4 What is the procedure for appealing an arbitral award inthe Netherlands?

Unless the parties have agreed otherwise, an appeal to a secondarbitral tribunal shall be lodged within three months of the date ofdeposit of the award with the registry of the District Court.



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A court application to set aside an award may be made as soon asthe award has been rendered and must be made within three monthsof the deposit of the award (if the tribunal fails to deposit the award,the prevailing party may formally serve the award, together withleave for enforcement, on the other party, in which case that partymust apply for setting aside within three months of service). Theapplication shall be made to the District Court where the award isto be deposited, i.e. at the seat of the arbitration. All the grounds forsetting aside shall be mentioned in the writ of summons on pain ofbeing barred at a later stage.If the award is set aside, the jurisdiction of the national court overthe underlying dispute shall revive, unless the parties have agreedotherwise (Section 1067 DCCP).


11.1 Has the Netherlands signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

The New York Convention entered into force for the Netherlands on23 July 1964. It entered into force on the same date for theNetherlands Antilles and on 1 January 1986 for Aruba. Uponratification, the Netherlands made the reciprocity reservationpermitted by Article I(3), declaring that it will apply the Conventionto the recognition and enforcement only of awards made in theterritory of another Contracting State.

11.2 Has the Netherlands signed and/or ratified any regionalConventions concerning the recognition and enforcementof arbitral awards?

The Netherlands is a party to the Netherlands-Belgium executiontreaty of 1925, which entered into force on 1 September 1929.

11.3 What is the approach of the national courts in theNetherlands towards the recognition and enforcement ofarbitration awards in practice? What steps are partiesrequired to take?

Enforcement of an award rendered in the Netherlands may berefused only if the award or the manner in which it was made ismanifestly contrary to public policy or good morals (Section 1063DCCP). Awards rendered in New York Convention states areenforceable in accordance with the provisions of the treaty. Forawards rendered in other states, Section 1076 DCCP providesgrounds for refusal of enforcement that are almost identical to thegrounds set out in Article V of the New York Convention.In practice, Dutch courts rarely refuse to enforce foreign awards andtend to interpret the grounds for refusal restrictively.Enforcement of an award rendered in the Netherlands requires leavefrom the President of the District Court, a formality that is generallyaccomplished ex parte. To enforce a foreign award, a party mustsubmit the original or a certified copy of the award as well asdocuments establishing that the award is enforceable in the statewhere it was made. Both parties will be heard before the DistrictCourt grants exequatur.

11.4 What is the effect of an arbitration award in terms of resjudicata in the Netherlands? Does the fact that certainissues have been finally determined by an arbitral tribunalpreclude those issues from being re-heard in a nationalcourt and, if so, in what circumstances?

A partial or final award is binding upon the parties and has resjudicata effect (Section 1059(1) DCCP). A party may invoke resjudicata in subsequent arbitral or court proceedings between thesame parties.

12 Confidentiality

12.1 Are arbitral proceedings sited in the Netherlandsconfidential? What, if any, law governs confidentiality?

Unlike court litigation, the principle of publicity of the proceedingsand decision does not apply to arbitration. This being said, theDAA does not contain a provision on confidentiality. The proposedrevision to the DAA would require confidentiality unless the partiesotherwise agree.The NAI Arbitration Rules provide that the NAI may publish theaward in redacted form so as not to reveal the identity of the parties,unless either party objects to publication. Proceedings before national courts which arise in connection witharbitration proceedings (e.g. enforcement, consolidation, etc.) are inprinciple public.


The DCCP does not forbid the use of information obtained inarbitral proceedings. Information disclosed in arbitral proceedingscan therefore be referred to and/or relied on in Dutch courtproceedings unless the parties have agreed otherwise.


This depends on the agreement between the parties. Sometimes,information about arbitral proceedings will be in the public domainor will have to be made public as a result of reporting obligations(e.g. if a party is publicly traded).



The types of remedies available depend on the applicablesubstantive law. Typical remedies under Dutch law include theperformance or rescission of an agreement and damages, includingfor lost profits, as well as costs. Dutch law does not provide forpunitive damages. If the law applicable to the dispute permitspunitive damages, it is not clear whether Dutch courts wouldenforce an award of such damages or would consider it to violatepublic policy.The arbitral tribunal has the power to impose a penalty for non-compliance with its orders in certain cases (Section 1056 DCCP).

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Under Dutch law, interest is a matter of substantive law. Thestatutory interest rate is periodically adjusted by the government.


The DAA does not deal with the recovery of fees or costs. Theparties may provide for the allocation of costs (including legal fees)in their arbitration agreement. Absent such agreement, thearbitrators will often decide that the losing party should bear thecosts of the arbitration, including (a portion of) the legal fees of theother side. In practice, arbitrators are often inclined to limit thecosts to an amount they consider reasonable.


There are no stamp duties or comparable taxes on the award assuch. The arbitrators’ fees may be subject to VAT, depending ontheir specific position. Administration costs by an arbitrationinstitution and the costs of a secretary to the tribunal are subject toVAT.


14.1 Has the Netherlands signed and ratified the WashingtonConvention on the Settlement of Investment DisputesBetween States and Nationals of Other States (1965)?

The Washington Convention entered into force for the Netherlandson 14 October 1966; for the Netherlands Antilles on 22 May 1970;and for Aruba on 1 January 1986. The Kingdom of the Netherlandsmade no reservations upon ratification.

14.2 Is the Netherlands party to a significant number ofBilateral Investment Treaties (BITs) or MultilateralInvestment treaties (such as the Energy Charter Treaty)that allow for recourse to arbitration under the auspices ofthe International Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

The Energy Charter Treaty entered into force for the entireKingdom of the Netherlands, including the Netherlands Antillesand Aruba, without reservations, on 16 April 1998.According to the Ministry of Economic Affairs, the Netherlands isparty to 90 BITs. The texts of these BITs can be found on thewebsite of the Ministry of Economic Affairs (http://www.ez.nl/).Seven of those 90 BITs have not yet entered into force. Venezuelaterminated its BIT with the Netherlands as of 1 November 2008.Dutch BITs generally apply to the Netherlands Antilles and Aruba.

14.3 Does the Netherlands have standard terms or modellanguage that it uses in its investment treaties and, if so,what is the intended significance of that language?

The Netherlands uses a Model BIT, in English. The text is on theMinistry of Economic Affairs website (http://www.ez.nl/).

14.4 In practice, have disputes involving the Netherlands beenresolved by means of ICSID arbitration and, if so, whathas the approach of national courts in the Netherlandsbeen to the enforcement of ICSID awards and how has thegovernment of the Netherlands responded to any adverseawards?

We are not aware of any ICSID proceedings instigated against theNetherlands and therefore of any attempts to enforce an adverseaward against the Netherlands. Companies established in theNetherlands have brought a large number of publicly known cases,at ICSID and otherwise, under treaties to which the Netherlands isa party, and some have been awarded large sums against a numberof other states. Given the Dutch government’s active BITprogramme, its having initiated the negotiations leading to theEnergy Charter Treaty, and its policy in favour of investmentarbitration, one would expect voluntary payment of any ICSIDaward against the Netherlands.

14.5 What is the approach of the national courts in theNetherlands towards the defence of state immunityregarding jurisdiction and execution?

Dutch courts tend to follow international jurisprudence with respectto the immunity of states as well as their property based oncustomary and conventional rules of public international law.The defence of state immunity is generally not accepted if a stateacted de iure gestionis, which must be established by reference tothe nature and not the purpose of the act. Attachment of stateproperty is not possible if the property has a public purpose. Inrecent years, a number of parties attached foreign embassies in TheHague and related property (such as embassy bank accounts), butthe courts now seem definitively to have rejected such attachments.In 2008, the Supreme Court established that a tax claim of a foreignstate could not be subjected to third-party attachment.The Netherlands is party to the European Convention on StateImmunity as well as to the Vienna Convention on DiplomaticRelations. The Netherlands is not party to the 2004 UN Conventionon Jurisdictional Immunities of States and Their Property.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in the Netherlands? Are certaindisputes commonly being referred to arbitration?

Arbitration is frequently used in the Netherlands. Besides the NAI,which administers domestic as well as international arbitrations,there are many specialised or industry-related arbitration institutesin the Netherlands that have their own arbitration rules (e.g. forconstruction disputes, for automation disputes, for the healthcareindustry, for engineers, for maritime matters).The Netherlands is also home to many international courts andinstitutions, including the Permanent Court of Arbitration.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in the Netherlands, such as pending orproposed legislation that may substantially change the lawapplicable to arbitration?

As indicated above (see question 2.1) a proposed revision to theDAA was presented to the Dutch Ministry of Justice in December2006. It is unclear when this proposal will be considered by the



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Jonathan Gass

Freshfields Bruckhaus Deringer LLP Strawinskylaan 101077 XZ AmsterdamThe Netherlands


Jonathan Gass is a senior associate in the Dispute Resolutionpractice group of the firm’s Amsterdam office. Jonathan specialisesin international arbitration, with a particular focus on investor-statetreaty arbitration. Besides his work as counsel, Jonathan has alsobeen appointed as arbitrator.He is admitted to practice in the State of New York. Jonathan haspublished articles and monographs on arbitration and United Statesconstitutional law.He studied Social Studies (International Relations) at HarvardCollege and both Political Science and Law at the University ofCalifornia. Jonathan speaks English and has a basic knowledge ofDutch, French and Japanese.

Alexandra Schluep

Freshfields Bruckhaus Deringer LLP Strawinskylaan 101077 XZ AmsterdamThe Netherlands


Alexandra Schluep is a senior associate in the Dispute Resolutionpractice group of the firm’s Amsterdam office. Alexandra specialisesin international litigation and arbitration. She also acts as secretaryto arbitral tribunals.She is a member of the Swiss Arbitration Association and of severalyoung practitioners’ groups (ASA Below 40, YIAG, NAI Jong Oranje).Alexandra studied Swiss law at Fribourg University and Dutch lawat the University of Amsterdam. She speaks Dutch, English, Frenchand German.

The firm’s global International Arbitration practice has now been centralised in Paris, London, New York andWashington. For years, Freshfields worldwide has been acknowledged as the leading law firm in the field ofinternational arbitration. Our Amsterdam specialist arbitration lawyers work as members of international matter teamsled from Paris, London, or the US. Our specialist contribution to such teams is mostly related to investment arbitration,applicable law (“continental” civil law, Dutch law, and/or Swiss law) and/or the languages of the arbitration (German,English, Dutch). In addition, our team in Amsterdam specialises in Dutch ad hoc and NAI arbitration, as well asarbitration-related proceedings in domestic courts.


Ministry and Parliament, though the general expectation is that itwill be adopted eventually. The purpose of the revision is tomodernise the DAA and further enhance the arbitration friendlinessof the Netherlands. The most notable proposed changes in that regard are: arbitratorswill be empowered to order provisional measures other than insummary arbitral proceedings; the automatic revival of the nationalcourts’ jurisdiction after an arbitral award has been set aside will be

abolished; awards will no longer have to be deposited with theregistry of the District Court; setting-aside applications will bemade in the first instance to the Court of Appeal, after which furtherappeal to the Supreme Court will be possible only on limitedgrounds; remission to the tribunal after the setting aside of an awardwill be introduced; and arbitral proceedings will explicitly be madeconfidential.



Chapter 27

Coelho Ribeiro & Associados

Portugal


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Portugal?

All matters related to voluntary arbitration are governed by Law no.31/86, of 29th August, as amended by Decree-Law no. 38/2003, of 8thMarch (hereinafter referred to as the “Arbitration Law” or the “AL”).Any dispute, which is not in respect of inalienable rights, may bereferred by the parties to arbitration (article 1(1) of the AL) providedthat it is not exclusively subject, by a special law, to the courts ormandatory arbitration.Arbitration is only permitted on the basis of a written agreement of theparties, which is based on their intentions and is made in good faith.According to article 2(1) of the AL, an arbitration agreement must bein writing. An arbitration agreement is deemed to be in writing if it isin a document signed by both parties, or in an exchange of letters,telexes, telegrams or another form of communication, whether thesedocuments contain the arbitration agreement directly, or whether theycontain a clause, which refers to another document, which contains thearbitration agreement - article 2(2) of the AL. The subject matter of an arbitration agreement can be an existingdispute, even if it is pending before a court (arbitration agreement), orpossible future disputes arising from a specific contractual or extracontractual legal relationship.

1.2 Are there any special requirements or formalities required ifan individual person is a party to a commercial transactionwhich includes an arbitration agreement?

There are no specific provisions in the Arbitration Law regarding thismatter.A question that is sometimes posed is the validity of arbitration clausesin commercial agreements in which one of the parties is seen as theweaker party. This situation is common in commercialagency/distribution agreements or in consumer law, in which thecontractual relationship is governed by standard contractual terms.There is Portuguese case law, which considers that arbitrationagreements, which, in practice, amount to a major imbalance betweenthe parties and which may prevent one of them from having effectiveaccess to a forum, which enables him to safeguard his rights, areunlawful.This has been observed in commercial agency and distributionarrangements, in which the stronger party manages to impose anarbitration clause, which involves a procedure, which is unjustifiablyonerous and inaccessible to the commercial agent/distributor, the

effect of which is to render recourse to arbitration by them practicallyimpossible. In such cases, the courts tend to accept jurisdiction inrespect of the disputes arising therefrom. Similarly contracts between traders and consumers and particularlythose involving standard terms of trade, require particular care so thatthe clauses are drafted and submitted to the consumer in accordancewith all of the applicable legal provisions, particularly in the consumerdefence legislation.


According to article 3 (2) of the AL, the arbitration agreement muststate the subject matter of the dispute precisely (in the case of anexisting dispute). An arbitration clause (with regard to a possiblefuture dispute) must identify the legal relationship to which thedisputes relate.If the parties have recourse to ad hoc arbitration, rather thaninstitutional arbitration, it is advisable to stipulate a number of mattersregarding the establishment of the arbitration tribunal and the conductof the proceedings in order to avoid disputes, i.e. the determination ofthe place where the arbitral proceedings have their seat, the languageof the proceedings, the procedural rules applicable in the proceedingssubsidiarily, the time limit of the arbitral proceedings, the waiver, ornot, of an appeal from the award (failing agreement to the contrarybetween the parties, an appeal lies from awards in domestic arbitralproceedings), the arbitrators’ fees and the general cost of theproceedings, the production of evidence, the fixing of procedural timelimits and the calculation thereof, the deposit, or not, of the arbitrationaward, any waiver of the confidentiality of the proceedings, amongother issues appropriate to the particular case.


The practice of the Portuguese courts with regard to arbitration clauseshas been to respect and accept arbitration clauses whenever theycomply with the legal requirements referred to above and correspondto a serious and conscious interest of the parties.The courts have confirmed their lack of competence to decideconflicts, which breach arbitration agreements.


There is no court practice yet in Portugal with regard to the

Luis Moreira Cortez

Rui Botica Santos



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enforcement of ADR agreements. As ADR agreements concern non-binding dispute resolution mechanisms, in practice, failure to complytherewith is not invoked by the parties for reasons of proceduraleconomy and cost limitation.


2.1 What legislation governs the enforcement of arbitralproceedings in Portugal?

The enforcement of arbitration agreements is governed by theArbitration Law and by the Portuguese Civil Procedure Code. Article494 of the Portuguese Civil Procedure Code clearly provides that thecourts have no competence to decide matters, which are validlysubject to resolution by arbitration.

2.2 Does the same arbitration law govern both domestic andinternational arbitral proceedings? If not, how do the lawsdiffer?

The Arbitration Law applies both to domestic and international arbitralproceedings that take place in Portugal. Chapter VII of the ArbitrationLaw deals with international arbitration. Article 32 of the AL defines international arbitration as arbitrationconcerning international commercial interests. One of the specificfeatures of international arbitration in the AL (article 34) is that thereis no appeal against the award, unless the parties so agree.


There is a similarity between the Portuguese provisions and theUNCITRAL Model Law (“Model Law”). Both laws were introducedon more or less the same date. The Arbitration Law was inspired bythe general principles in the rules to be found in the drafts of the ModelLaw.The Model Law is entirely concerned with international arbitration,while the Arbitration Law focuses essentially on domestic arbitration,although applying the same basic principles.Portuguese legal theory has indicated the following main differences,i.e.:

The Portuguese Law does not include any provision regardingthe powers of arbitration tribunals to grant preliminary orinterim relief either within the arbitral proceedings, orregarding recourse to courts of law for preliminary or interimrelief in relation to disputes subject to voluntary arbitration.The Portuguese Law states that there must be an unevennumber of arbitrators. The Model Law leaves the number ofarbitrators up to the parties.The Portuguese Law does not establish the procedural rules tobe adopted by the arbitration tribunal in the event that the sameare not previously stipulated by the parties, but expressly leavesthe choice of the rules to be observed in the arbitral proceedingsto the arbitrators.The Portuguese Law always requires grounds to be stated in thearbitration award (article 23(3) of the AL), and failure to stategrounds is sufficient grounds to set the award aside. Article31(29) of the Model Law permits the parties to waive thestatement grounds for the award.The Portuguese Law does not permit the arbitration tribunal toconsider and decide with regard to matters that the tribunalshould not have considered. If this prohibition is breached the

award may be set aside.The Arbitration Law established a six-month time limit for thehanding down of the award, which period may be increased totwice its initial duration by agreement between the parties. TheModel Law does not establish any time-limit within which thearbitral tribunal must hand down its decision. The Arbitration Law provides two different ways to challengean arbitration award: appeal to the courts (with two instances ofappeal) in which the award can be reviewed on the merits; andproceedings to set aside arbitration awards in those cases inwhich it is considered that there has been a breach of some ofthe matters described in article 27 of the AL. It should be notedthat only in the case of international arbitrations does the lawstipulate that there is no appeal in the absence of agreement tothe contrary between the parties.

There are naturally other minor differences between the legalframeworks established by the laws but there is a clear parallelbetween the solutions they adopt.

2.4 To what extent are there mandatory rules governinginternational arbitral proceedings sited in Portugal?

Chapter VII of the Arbitration Law refers specifically to internationalarbitration, but contains no mandatory provisions. The provisions ofthis chapter only apply in the absence of an agreement otherwisebetween the parties.According to article 33(1) of the AL, the parties may choose the lawto be applied by the arbitrators, unless they have been authorised todecide according to equity. In the absence of a choice of law, thearbitration tribunal is required to apply the law, which is mostappropriate to the dispute (article 33(2) of the AL).Also according to the specific rules established for internationalarbitral proceedings, and unlike the rules governing domestic arbitralproceedings, no appeal lies from the tribunal’s decision, unless theparties have agreed that there shall be a right of appeal and haveregulated the terms thereof.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Portugal? What is thegeneral approach used in determining whether or not adispute is “arbitrable”?

The following matters may be arbitrated: (i) all matters, which are notsubjected by special law to the exclusive jurisdiction of a court of lawor mandatory arbitration; and (ii) all matters that do not concerninalienable rights.Article 1 of the AL, as drafted, is somewhat unclear and has given riseto a variety of differing interpretations in Portuguese legal theory andcase law.Given the specific jurisdiction of the Administrative Courts, questionsof public law would appear not to be arbitrable according to article 1as drafted.In practice however, an understanding has emerged that there are aseries of Administrative Law situations in which arbitral proceedingshave been permitted (particularly in relation to administrativecontracts or the civil liability of the State).Article 4 of the AL provides that the State and other public law juristicpersons can make arbitration agreements, when authorised to do so byspecial law, or if the subject matter of the agreements are disputesregarding private law relations.

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3.2 Is an arbitrator permitted to rule on the question of his or herown jurisdiction?

According to article 21(1) of the AL, the arbitration tribunal maydecide with regard to its own jurisdiction (kompetenz-kompetenz),even if it has to consider the existence, validity or efficacy of thearbitration agreement, or the contract of which it is part, or theapplicability of the arbitration agreement.The fact that a contract, which contains an arbitration agreement, isnull and void, does not mean that the arbitration agreement is also nulland void, except when it is shown that it would not have been made inthe absence of the said arbitration agreement (article 21(2) of the AL).The lack of competence of the arbitration tribunal may only be raisedprior to the filing of the defence on the merits and together therewith(article 21(3) of the AL).A decision in which an arbitration tribunal declares that it is competentcan only be considered by the court after the decision on the merits hasbeen handed down and by the means specified in articles 27 and 31 ofthe AL (article 21(4) of the AL).

3.3 What is the approach of the national courts in Portugaltowards a party who commences court proceedings inapparent breach of an arbitration agreement?

Breach of an arbitration agreement must be expressly pleaded in thelegal proceedings commenced in breach of the said agreement. Theparty, which considers that it is prejudiced by the breach of thearbitration agreement, must plead the breach of the said agreement,when it files its defence.Breach of an arbitration agreement is a “dilatory exception” asprovided in article 494(j) of the Civil Procedure Code and cannot beconsidered by the court on its own motion.

3.4 Under what circumstances can a court address the issue ofthe jurisdiction and competence of the national arbitraltribunal?

Following the arbitration tribunal’s decision, the courts may challengethe award on the grounds that the arbitration tribunal’s lack ofcompetence to decide the dispute, in the context of appeal proceedings(if the parties have not waived an appeal) or in proceedings to set theaward aside.As is stated in question 3.2 above, a decision whereby an arbitrationtribunal declares that it is competent may only be considered by acourt after the tribunal has handed down its award.

3.5 Under what, if any, circumstances does the national law ofPortugal allow an arbitral tribunal to assume jurisdiction overindividuals or entities, which are not themselves party to anagreement to arbitrate?

The Arbitration Law does not permit a person, who has not voluntarilyagreed to submit to this dispute resolution mechanism, to be a party inarbitral proceedings.We know of no case in Portugal in which arbitration tribunals have,via the theory of disregard for the veil of incorporation, considered anatural person, who represents or controls a juristic person that is aparty to an arbitration agreement, is a proper party in the arbitralproceedings. The extension of an arbitration agreement to a naturalperson, who represents or controls a juristic person, appears to us to bedifficult to sustain given the requirements that the parties must agreeto the arbitration agreement expressly.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Portugal and what is thetypical length of such periods? Do the national courts ofPortugal consider such rules procedural or substantive, i.e.,what choice of law rules govern the application of limitationperiods?

The Arbitration Law and the general law do not provide for differingrules for arbitration and court proceedings.The admissibility of the action is subject to the general rules regardingthe limitation of the cause of action and the commencement ofproceedings.The general rules regarding limitation of actions can be found in thePortuguese Civil Code.Limitation periods vary considerably according to the nature of thedispute. The ordinary limitation period in article 309 of the Civil Codeis 20 years. There are however a series of exceptions to this limitationperiod, e.g. article 310 of the said Code provides a 5-year limitationperiod for various matters, e.g. contractual or legal interest, even ifunliquidated, and company dividends.The Legal Framework governing Public Works, which applies to mostcontracts referred to arbitration, provides a 132 day limitation period(after the practicing of the relevant act) for the commencementproceedings regarding the interpretation, validity or performance ofthe contract.The procedural or substantive nature of limitation has been widelydebated in Portuguese legal theory, but the Portuguese courts, andparticularly our Constitutional Court, have recognised the dual natureof limitation and has considered that is has simultaneously aprocedural and substantive nature.



If the parties have made an express choice of law, the law chosenshould be applicable (article 33(1) of the AL). If there is no expresschoice of law clause, the court should apply the most appropriate lawto the dispute (article 33(2) of the AL). In this case, the tribunal shouldexamine the contract for evidence of an implicit choice of law or seekto ascertain the parties’ intention. At the very least, the choice of theproper law is a matter to be determined by the Portuguese conflict oflaws rules in the Civil Code.The choice of law rules are required to be applied to the followingissues: (i) the law governing the arbitration agreement; and (ii) the lawgoverning the contract (or other matter) from which the dispute hasarisen. In principle the same law is applicable to these two issues;however, the arbitrators may need to take these two aspects of theissue into consideration.

4.2 In what circumstances will mandatory laws (of the seat or ofanother jurisdiction) prevail over the law chosen by theparties?

The provisions of a foreign law are not applicable when theapplication thereof would involve the violation of fundamentalprinciples of international public policy of the Portuguese State (article22 of the Portuguese Civil Code). It is common practice for thearbitration to refuse to apply law, which violates principles of naturallaw.



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4.3 What choice of law rules govern the formation, validity, andlegality of arbitration agreements?

See question 4.1.



According to article 8 of the AL the arbitrators must be individualswith full legal capacity, and must act independently and impartially.The arbitration tribunal may comprise a single arbitrator, or variousarbitrators, who must be uneven in number (article 6(1) of the AL).No one can be compelled to be an arbitrator, but if the position hasbeen accepted excusal will only be proper if based on a superveningevent, which prevents the person appointed from sitting as anarbitrator (article 9 of the AL). The civil procedure provisions regarding impediments and excusal ofjudges applies to arbitrators not appointed by agreement of the parties(article 10 of the AL).Although there are no other legal requirements arbitrators tend, inpractice, to be individuals with a legal training and a recognisedbackground in law, either as lawyers, legal advisers or law professors.

5.2 If the parties’ chosen method for selecting arbitrators fails, isthere a default procedure?

If a party fails to appoint its arbitrator, the other party may request thePresident of the Court of Appeal (Tribunal da Relação) of the placewhere the arbitration has its seat to appoint the missing arbitrator(article 12(1) of the AL), if the arbitration agreement stipulates noother way to appoint the missing arbitrator. Appointment of anarbitrator by the court may be made one month after the notice of theapplication to establish an arbitration tribunal, or within one month ofthe appointment of the last of the arbitrators, who have to select themissing arbitrator (article 12(2) of the AL).If the tribunal is comprised of more than one arbitrator, the arbitratorsshall choose the tribunal chairman from amongst their number, unlessthe parties agree in writing on some other solution, prior to theacceptance of the first arbitrator. If agreement regarding theappointment of the chairman of the panel is not possible, the chairmanis selected by the President of the Court of Appeal in accordance witharticle 14 of the AL.


The selection of the arbitrators depends on what the parties havestipulated in the arbitration agreement.If the arbitration agreement makes no such provision, the provisionsof the Arbitration Law are directly applicable. In those circumstances,each party may appoint one arbitrator and the arbitrators appointed bythe parties appoint a third arbitrator, who will complete the panel.The courts can intervene if (i) one of the parties fails to appoints itsarbitrator within the corresponding time limit, (ii) if the arbitratorsappointed by the parties do not agree on the appointment of the otherarbitrator, or (iii) whenever the arbitration agreement so provides. Seequestions 5.1 and 5.2 above.


The Arbitration Law provides that the civil procedural provisionsregarding impediments or excusal of judges applies to arbitrators, whoare not appointed by agreement of the parties (article 10 of the AL).The arbitrators must be independent of the parties and impartial in theconduct and deciding of the dispute, otherwise there would be animpediment.The following are some of the cases of impediment provided in thecivil procedure rules:

the judge (or members of his family) are parties in their ownright, or on behalf of another person, or have an interest in theproceedings;when the judge has intervened in the proceedings as counsel oran expert, or when it is necessary to decide a question on whichhe has given or stated an opinion;when the judge has deposed, or will be called upon to deposeas a witness; or, inter alia,judges who are spouses, relations or kin in the direct line or inthe second degree in the collateral line may not simultaneouslybe members of a collective court.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators, imposed by law or issuedby arbitration institutions within Portugal?

There are no rules other than the rules regarding impediments andexcusal in the Civil Procedure Code. There is no legal obligation forthe arbitrators appointed to make a written declaration of theirindependence from the parties in dispute, or to inform the parties ofcircumstances, which they may consider to prejudice theindependence required of arbitrators.There is, however, an accepted practice in arbitrations, which is torequest arbitrators not appointed by agreement of the parties to makea formal statement of independence, impartiality and willingness toresolve the dispute.This statement should be made at the beginning of the arbitration andinform the parties of any interests, which are in potential conflict withany of the parties or with the subject matter of the dispute.Arbitrators, who deliberately conceal facts, which may amount to animpediment, or who make false statements with regard thereto, maybe civilly and criminally liable in accordance with the general law.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure of arbitrationin Portugal? If so, do those laws or rules apply to all arbitralproceedings sited in Portugal?

The Arbitration Law governs both domestic and international arbitralproceedings. This law contains general provisions, which apply to allarbitrations in Portugal, i.e. the general principles of law to which theyare subject. It is for the parties, or the arbitral tribunal, in the absenceof agreement between the parties, to choose the procedural rulesapplicable to the arbitral proceedings. It should be noted that most ofthe procedural rules in the Arbitration Law only apply by default in theabsence of agreement otherwise (article 15 of the AL).The procedural rules and the place where the tribunal will sit andoperate should be stipulated in the arbitration agreement orsubsequently in writing, prior to the acceptance of the first arbitrator.The agreement of the parties regarding these matters may lead to the

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adoption of the arbitration regulations of an institutionalisedarbitration centre.The general principles with which arbitral proceedings should comply,which are not left to the parties’ discretion by the Arbitration Law, arethe absolute equal treatment of the parties, that the respondent must beserved and be given notice to defend, guaranteed strict compliancewith the adversarial principle in all phases of the proceedings and thatboth parties must be heard, orally or in writing, before the finaldecision is handed down (article 16 of the AL).

6.2 In arbitration proceedings conducted in Portugal, are thereany particular procedural steps that are required by law?

Other than the existence of a written arbitration agreement betweenthe parties, the only procedural matters required by the ArbitrationLaw is compliance with the general principles in article 16, describedin the reply to question 6.1, although the law does not state how thearbitral tribunal should proceed in order to do so.

6.3 Are there any rules that govern the conduct of an arbitrationhearing?

There are no rules or procedures laid down regarding the conduct ofan arbitration hearing. The arbitral tribunal is restricted only by thegeneral principles referred to above with which the arbitration mustcomply (see questions 6.1 and 6.2 above).

6.4 What powers and duties does the national law of Portugalimpose upon arbitrators?

In addition to the definition of the procedural rules, if the parties havenot done so, the arbitrators have the power and duty to conduct thearbitration in complete accordance with the general principles referredto above.The arbitrators must ensure the working of the arbitral tribunal andcompliance with the time limits defined for the arbitration. In theabsence of provision to the contrary, the tribunal will have a maximumof 6 months in which to render its decision (this period may beextended to twice its initial duration, by agreement between theparties), in accordance with article 19 of the AL.In the conduct of the arbitration, the arbitrators have similar powers tothose of judges in courts of law, with the exception of those powerscomprised in ius imperii.Arbitrators are subject to a duty to decide in accordance with theapplicable law, unless the parties have agreed in the arbitrationagreement, or in a document signed prior to the acceptance of the firstarbitrator, that they shall decide according to equity (article 22 of theAL).The tribunal chairman must, in the absence of other agreement,prepare the proceedings, direct the pleadings and evidential phase ofthe proceedings, conduct the hearing and control the debates (article19(1) of the AL).Finally, arbitrators are required to comply with the relevant formal andmaterial requirements in the drafting of the arbitral award (seequestion 9.1 below).

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Portugal and, if so, is itclear that such restrictions do not apply to arbitralproceedings sited in Portugal?

According to article 17 of the AL, the parties may appoint someone to

represent or assist them in the arbitration tribunal.The restrictions imposed regarding the representation of parties in thecourts, in which the law requires representation by lawyers, who aremembers of the Bar Association, and trainee lawyers, who are alsomembers of the Bar Association, subject to certain restrictions, andindependent legal executives, do not apply to arbitration proceedings.

6.6 To what extent are there laws or rules in Portugal providingfor arbitrator immunity?

Portuguese law does not provide for any arbitrator immunity.


The courts may intervene within the ambit of the production ofevidence and the determination of preliminary and interim measures,at the request of the arbitration tribunal, or with its consent. The challenging of arbitrators for reasons related to impediment andsuspicion are considered and decided by the Court of Appeal for theplace where the Arbitral Tribunal sits, in accordance with theprovisions of the Civil Code.In the event of the replacement of arbitrators by reason of death,excusal or permanent impossibility, or if the appointment becomesineffective, the President of the Court of Appeal may be called uponto appoint a new arbitrator to replace the arbitrator in question (article13 of the AL).

6.8 Are there any special considerations for conductingmultiparty arbitrations in Portugal (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under the sameagreement or different agreements) be consolidated in oneproceeding? Under what circumstances, if any, can thirdparties intervene in or join an arbitration proceeding?

There are no special considerations for conducting multipartyarbitrations under Portuguese Law. These procedures, therefore, mayonly occur with the mutual agreement by all the parties involved.

6.9 What is the approach of the national courts in Portugaltowards ex parte procedures in the context of internationalarbitration?

Although there is no specific rule or case law relating to ex partearbitration procedures, we take the view that these would not beadmissible under Portuguese Law because, as a matter of principle, thearbitral tribunal has to protect the right of the parties to be heard at alltimes. This understanding is based on the fundamental principalsestablished under article 16 of the AL.Portuguese courts may, in certain circumstances, order ex parteinterim or conservatory measures.


7.1 Under the governing law, is an arbitrator permitted to awardpreliminary or interim relief? If so, what types of relief?Must an arbitrator seek the assistance of a court to do so?

This issue is not directly dealt with in the Portuguese Arbitration Law.Nevertheless, most authors tend to accept that arbitrators havejurisdiction to award preliminary or interim relief, but no court



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decisions are known of regarding this matter. However, it is ourunderstanding that the enforcement of such preliminary or interimrelief, if not accepted on a voluntary basis by the party against whomthe order is made, must be done through the courts.

7.2 Is a court entitled to grant preliminary or interim relief inproceedings subject to arbitration? In what circumstances?Can a party’s request to a court for relief have any effect onthe jurisdiction of the arbitration tribunal?

The Portuguese courts have unreservedly accepted jurisdiction toconsider and order provisional and interim measures within the ambitof disputes subject to arbitration.Portuguese legal theory and case law concur that the existence of anarbitration agreement does not prevent the parties from havingrecourse to the courts in order to obtain preliminary and interim relief,and also that this is neither a breach of the arbitration agreement nordoes it affect the arbitral tribunal’s competence to decide on the meritsof the case.


The courts have generally agreed to accept and decide applications forpreliminary and interim relief even with regard to matters, which theparties have referred to arbitration.


Portuguese law has no specific mechanism for the provision ofsecurity for costs in either the courts or arbitration proceedings.However, if the power to decide such matters is expressly granted bythe parties to the arbitrators there is nothing to prevent the arbitrationtribunal from having such a power.It is common practice in international commercial arbitration for thearbitrators to be confronted with applications for an order for securityfor costs. In order to obtain such an order, applicants must detail andestablish a justified fear that the costs incurred and expected to beincurred with regard to the proceedings, will not be recovered, if it issuccessful in the proceedings.The order and the enforcement thereof, depends first of all on thepowers and duties granted by the parties to the arbitration tribunal inthe arbitration agreement. If nothing has been agreed regarding thematter, we consider that a decision with regard thereto would beoutside of the ambit of the subject matter of the dispute and thereforeoutside of the arbitration tribunal’s powers. Even if this matter wascontemplated in the arbitration agreement the effects andenforceability of the order of the arbitration tribunal would always beopen to discussion, in the event that the order was not complied withvoluntarily.


8.1 What rules of evidence (if any) apply to arbitral proceedingsin Portugal?

According to the provisions of article 18(1) of the AL any evidencepermitted in civil procedure law may be adduced before an arbitrationtribunal.The general rule regarding evidence in arbitral proceedings is the

subsidiary application of the principles enshrined in civil procedurelaw.The parties can establish their own rules, which they deem appropriatefor the dispute in the exercise of their autonomy and in accordancewith the fundamental principles in article 16 of the AL.


In court-based litigation, Portuguese law does not have any proceduralphase similar to the “discovery” procedures in the Anglo-Saxon legalsystems. The limitations, to which arbitrators are subject to in ordering theproduction of evidence, are, to a certain extent, the same as thelimitations which apply in the courts, i.e. the restrictions regarding theobtaining of information which is classed as confidential, whether forreasons of professional ethics, internal security, State secrecy orinformation related to commercial or technological secrets. There are a greater limitation of the powers of arbitration tribunalswith regard to orders for the production of evidence, mainly those,which involve third parties, to the extent that arbitration tribunals donot have ius imperii powers, i.e. they do not have the authority to orderany measures in relation to third parties, unlike courts of law. Refusalto comply with a court order amounts to a crime of disobedience,while there is no penalty for refusal by a third party to comply with arequest made by an arbitration tribunal. There is of course nothing toprevent the arbitration tribunal, at the request of one of the parties, orwith the parties’ consent, from applying to the courts for an order forthe production of evidence deemed fundamental to the proceedings. It is common practice for one of the parties to apply to the arbitrationtribunal for an order that the other party to produce documents in itscustody or under its control, and, in order to do so, it must prove theexistence and relevance of the said documents in terms of the decisionof the dispute. Although arbitrators do not have authority to imposethe production of documents, which are in the possession or control ofone of the parties, refusal to comply with such an order would be takeninto consideration in the consideration of the dispute, according to thematerial relevance thereof.


According to article 18(2) of the AL, when evidence to be produceddepends on one of the parties or a third party and they refuse to co-operate, the interested party may, with the arbitration tribunal’sauthorisation, apply to the courts for an order that the evidence beproduced to it.


The same rules apply as for domestic arbitrations (see questions 8.2and 8.3).

8.5 What, if any, laws, regulations or professional rules apply tothe production of written and/or oral witness testimony? Forexample, must witnesses be sworn in before the tribunal? Iscross-examination allowed?

The Arbitration Law makes no provision regarding the production ofevidence and it is for the parties, or arbitration tribunal, in the absence

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of agreement between the parties, to decide how evidence is to beproduced.In arbitrations, the examination of witnesses involves directexamination by the counsel of the party, who offered the witnesses,cross-examination by the counsel for the other party and by arbitrators.At the beginning of the examination of witnesses it is the practice ofarbitrators to ask witnesses to promise to tell the entire truth withregard to the facts known to them. Breach of this promise could beclassified as a crime of false testimony.The practice in domestic arbitration has usually been for witnesses togive their evidence orally by direct examination and cross-examination. Written statements are increasingly common ininternational arbitration.

8.6 Under what circumstances does the law of Portugal treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed to havebeen waived?

It is the general understanding that documents, which are not publicdocuments, must be kept confidential. The parties may agree to waivethe confidentiality of documents. According to the provisions of article 24 of the AL, the original of theaward is lodged in the central office of the court of the place where thearbitration took place, unless the parties have dispensed with this, or ifthe regulations in institutional arbitrations provide for some other formof deposit. The deposit of the award means that third parties canaccess the provisions of the award.

9 Making an Award

9.1 What, if any, are the legal requirements of an arbitral award?

According to article 23 of the AL, an arbitral award must contain thefollowing elements, failing which it will be subject to challenge. Itmust:

be in writing;identify the parties;refer to the arbitration agreement;describe the subject matter of the dispute;identify the arbitrators;state the seat of the arbitration and the date and place where theaward was made;be signed by the arbitrators; andidentify any arbitrators, who were unable or unwilling to signthe award.

The award must state the grounds therefor and must bear a number ofsignatures, which is at least equal to a majority of the arbitrators andmust include the duly identified dissenting opinions.The award must also fix the expenses arising from the proceedingsand allocate the payment thereof between the parties.



According to the Arbitration Law, the parties may challenge anarbitration award in two ways: (i) by an appeal (article 29 of the AL);and (ii) by proceedings to set aside the award (articles 27 and 28 of theAL).

Appeals are permitted in domestic and international arbitrations,although so far as the latter are concerned, the Arbitration Lawprovides that no appeal lies from the award unless the parties haveexpressly agreed that there will be a right of appeal and have madeprovision governing the same. Conversely in domestic arbitration theaward is generally appealable unless the parties have waived this right.When arbitrators are authorised to decide according to equity thisinvolves a waiver of the right to appeal (article 29(2) of the AL).An appeal against an arbitration award may be on the grounds oferroneous assessment of the facts and/or erroneous application of thelaw to the established facts.Proceedings to set aside an arbitral award can be commenced on oneof the following grounds:

The dispute was not such as could be resolved by reference toarbitration.The award was made by a tribunal, which had no jurisdictionor competence, or which was improperly constituted.Breach of the fundamental principles of arbitral proceedings.Failure to comply with the rules regarding the matters, whichmust be contained in the award (see question 9.1).The tribunal considered matters, which it should not haveconsidered, or failed to consider matters, which it should haveconsidered.

10.2 Can parties agree to exclude any basis of appeal or challengeagainst an arbitral award that would otherwise apply as amatter of law?

The right to apply for an award to be set aside cannot be excluded(article 28 of the AL). As is stated above, the right of appeal can bewaived by agreement between the parties. See question 10.1 aboveand question 10.4 below.


No, the parties cannot expand the scope of appeal or proceedings to setthe award aside, beyond the grounds available in national laws.

10.4 What is the procedure for appealing an arbitral award inPortugal?

An ordinary appeal, if it has not been excluded or regulated by theparties, must be commenced in the Court of Appeal (Tribunal daRelação) within ten days of service of the arbitral award. The appealproceeds as if it was an appeal against a decision of a court of firstinstance. Subsequently and if the subject matter of the appeal sopermits, there may be a further appeal from the Court of Appeal to theSupreme Court of Justice and, if the violation of a constitutionalprovision is at issue, to the Constitutional Court.Proceedings to set aside an arbitration award, which are commencedon the grounds referred to in question 10.1, must be commenced in thecourts within thirty days of service of the award.If there is a right of appeal against the arbitral award and an appeal islodged, the issue of whether or not the award is null and void can onlybe considered within the ambit of the appeal (article 27(3) of the AL).Both actions to set aside and to appeal proceed in accordance with theCivil Procedure Code.



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11.1 Has Portugal signed and/or ratified the New York Conventionon the Recognition and Enforcement of Foreign ArbitralAwards? Has it entered any reservations? What is therelevant national legislation?

Portugal ratified the New York Convention in 1994 by Assembly ofthe Republic Resolution no. 37/94, of 10th March 1994, subject to thefollowing proviso: “In accordance with the principle of reciprocity,Portugal will only apply the Convention when the arbitral awards aremade in states, which are bound by the Convention.”Portuguese legislation governs the recognition of foreign judgments(including foreign arbitration awards) in articles 1094 to 1102 of theCivil Procedure Code.

11.2 Has Portugal signed and/or ratified any regional Conventionsconcerning the recognition and enforcement of arbitralawards?

Portugal is a party to various bilateral conventions and agreementsregarding these matters, particularly the Convention on the Settlementof Investment Disputes (ICSID) and the Convention Establishing theMultilateral Investment Guarantee Agency (MIGA).

11.3 What is the approach of the national courts in Portugaltowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required to take?

Arbitral awards are recognised and enforced and have the samebinding effect and enforceability as a court judgment (article 26(2) ofthe AL).According to article 30 of the AL, arbitral awards are enforced in acourt of first instance, in accordance with the Civil Procedure Code.A pending action to set aside an award is not grounds for thesuspension of the enforcement thereof, although the party seeking theenforcement may be required to provide adequate security if theexecution reaches the payment phase before the said proceedings arefinally decided.If the period for the setting aside of an award has expired, the opposingparty may raise the grounds therefor in its opposition to execution ofthe award (article 31 of the Arbitration Award).An arbitral award made abroad must be recognised by the Court ofAppeal under articles 1094 to 1102 of the Civil Procedure Court andthe New York Convention before it can be enforced in Portugal.Having lodged the document, which contains the decision to bereviewed, together with the confirmation application, the other partyis served with the proceedings and given 15 days in which to filedefence. The applicant may reply within 10 days of the service ofnotice of the filing of the defence. Once pleadings have closed and themeasures the judge considers to be indispensible have been taken, theparties and the Attorney-General’s department may make their finalsubmissions within 15 days. The grounds for refusing to recognise or enforce foreign arbitralawards are those provided for in the New York Convention, to whichthe above mentioned provisions of the Civil Procedure Code must beadapted.

11.4 What is the effect of an arbitration award in terms of resjudicata in Portugal? Does the fact that certain issues havebeen finally determined by an arbitral tribunal preclude thoseissues from being re-heard in a national court and, if so, inwhat circumstances?

Article 26 of the AL provides that an arbitral award that has beenserved on the parties and, if necessary, deposited in court, is deemedto be final as soon as it is no longer subject to ordinary appeal i.e. (i)10 days after service of the award on the parties, provided that noappeal has been lodged in court, or (ii) immediately after the awardhas been served, if the parties have agreed that no ordinary appeal liesfrom the arbitral award.This prevents the same issues being reconsidered by the courts, or byarbitration tribunals, in proceedings between the same parties, or theirsuccessors.According to the Portuguese Civil Procedure rules only the dispositivepart of the award, and not its reasoning, has res judicata effect.

12 Confidentiality

12.1 Are arbitral proceedings sited in Portugal confidential?What, if any, law governs confidentiality?

There is no general provision on the confidentiality of arbitralproceedings in Portuguese Law. The rules of arbitration institutions,or other rules agreed by the parties, may contain provisions relating toconfidentiality.It is generally accepted that the deliberation and the voting ofarbitration tribunals are secret. Further, the arbitrators must keep theproceedings confidential.As a matter of course, third parties do not have access to the tribunal’sfiles of and cannot attend the hearings without the agreement of theparties.There is no explicit obligation of the parties to keep the existence, andthe content of, the arbitral proceedings secret. In general, a duty of theparties to keep the proceedings confidential may not be inferred froman arbitration clause. A party may even be obliged to inform thepublic about proceedings, i.e., under rules regarding ad-hocpublications applicable to companies listed on a stock exchange.In any event even when the question of confidentiality has not beendealt with by the parties, it is generally accepted in legal theory thatarbitral proceedings are confidential, without prejudice to theentitlement of the parties to invoke the existence of the arbitrationproceedings or the arbitration award in the proper forums in order toprotect their legitimate interest.It is also generally considered that arbitrators and professionalsinvolved in arbitration proceedings (representatives of the parties,tribunal clerk, experts, etc.) are also subject to a duty of confidentiality.The original of the decision must be deposited at the central office ofthe court for the area of the seat of the arbitration, unless the partieshave waived the deposit, or, in the case of institutionalised arbitration,the regulations provide for some other form of deposit. Deposit of theaward means that third parties have access to the contents thereof.

12.2 Can information disclosed in arbitral proceedings be referredto and/or relied on in subsequent proceedings?

The rule is that proceedings are not, per se, protected by duties ofconfidentiality. Confidentiality agreed between the parties cannot bean obstacle to them being entitled to use the information disclosed inthe arbitration proceedings in subsequent arbitration or court

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proceedings in order to protect their legitimate interests.

12.3 In what circumstances, if any, are proceedings not protectedby confidentiality?

The parties themselves are not subject to a particular duty ofconfidentiality, unless they agree otherwise. See the answers inquestions 12.1 and 12.2 above.


13.1 Are there limits on the types of remedies (including damages)that are available in arbitration (e.g., punitive damages)?

The law applicable to the merits of the dispute determines which typesof remedies, including types of damage, are available. In principle, thePortuguese Arbitration Law does not put a limit on such types ofremedies. However, a particular remedy that is provided for by theapplicable law would be rejected if it is contrary to public policy.An issue discussed and not resolved is the application of punitive(exemplary) or multiple damages. As the courts are not allowed toaward punitive damages, it is our understanding that the samerestriction applies to arbitral tribunals, given the punitive nature ofsuch damages. Whenever the remedies granted require the use of iusimperii prerogatives, the enforcement thereof will be via application tothe courts.Another question is whether an award of punitive damages may be setaside, when the parties have renounced a right of appeal. We considerthat this would be possible given the grounds stated in article 27 of theAL.


No special rules exist in relation to the powers of the arbitral body toaward interest. The same rules as apply in civil litigations also applyto arbitration proceedings.

13.3 Are parties entitled to recover fees and/or costs and, if so, onwhat basis? What is the general practice with regard toshifting fees and costs between the parties?

According to article 23(4) of the AL, the award must include the fixingof the expenses of the proceedings and must allocate these between theparties.According to Portuguese law and legal practice, recovery of expenseand costs by the successful party only means the fees paid to the statein relation to the proceedings. The successful party is not entitled torecovery the fees and disbursements of its lawyers, or of other personsinvolved in the dispute.So far as international arbitrations with their seat in Portugal areconcerned, the rules applicable to such arbitrations, i.e. the rules of theinstitutions under the auspices of which the arbitration takes place,apply.

13.4 Is an award subject to tax? If so, in what circumstances andon what basis?

There is no particular tax on Portuguese arbitral awards.There is the understanding that arbitrators’ fees are VAT exempt.However this question have been debated by legal theorists and there

is as yet no tax ruling on this point. Some consider that this is a caseof the exercise of a judicial function (VAT exempt); while othersconsider that it is a normal supply of services, subject to VAT.


14.1 Has Portugal signed and ratified the Washington Conventionon the Settlement of Investment Disputes Between Statesand Nationals of Other States (1965)?

The Washington Convention was ratified by Portugal in 1984(Government Resolution No. 15/84 of 3 April 1984).

14.2 Is Portugal party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investment treaties(such as the Energy Charter Treaty) that allow for recourse toarbitration under the auspices of the International Centre forthe Settlement of Investment Disputes (‘ICSID’)?

Portugal is signatory of several Bilateral Investment Treaties (BITs),which provide for recourse to arbitration under the ICSID as well asunder international arbitration (ICC or UNCITRAL). Portugal ratifiedthe Energy Charter in 1996.

14.3 Does Portugal have standard terms or model language that ituses in its investment treaties and, if so, what is theintended significance of that language?

Portugal has adopted the language contained in the 1967 Draft OECDConvention on the protection of foreign property. Furthermore, thesestandard terms are modelled around the standard terms and modellanguages used by Portugal in the various BITs it has entered into withcountries in Western Europe.

14.4 In practice, have disputes involving Portugal been resolvedby means of ICSID arbitration and, if so, what has theapproach of national courts in Portugal been to theenforcement of ICSID awards and how has the governmentof Portugal responded to any adverse awards?

Portugal has not been involved in any ICSID arbitration proceedings.

14.5 What is the approach of the national courts in Portugaltowards the defence of state immunity regarding jurisdictionand execution?

There are several court decisions acknowledging the State’s immunityfrom jurisdiction and/or execution, within limits. A foreign State willonly enjoy immunity for acts that are ius imperii, but not for acts iurigestionis, at least to the extent there is a certain connection to Portugal.Only the nature of the act (iure imperii or gestionis) but not its purposecould provide immunity. In the enforcement stage, public assets thatare used iure imperii nature will enjoy immunity from execution.Portugal has ratified the United Nations Convention on JurisdictionalImmunities of States and their Property signed in New York in 2005.



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15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Portugal? Are certain disputescommonly being referred to arbitration?

There has been a significant increase in the number of arbitrations,namely those regarding international commercial contracts. Indomestic arbitrations the greater preference is for ad hoc arbitrationrather than institutional arbitration. The Arbitration Centre of theLisbon Commercial Association is reference in domestic arbitrations,when the parties opt for institutionalised arbitration. Parties in ad hocarbitrations also frequently apply this Centre’s regulations. Reputablelegal theory has been created, and the use of court proceedings tosupport and supervise arbitration proceedings has been standardised.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Portugal, such as pending or proposedlegislation that may substantially change the law applicableto arbitration?

The current arbitration law, which dates from 1996, was amendedslightly in 2003. Although we consider that the current law is a validinstrument, most legal theory considers that there are aspects whichshould not have been omitted, i.e. with regard to the granting ofpreliminary and interim relief and the definition of the professionalconduct and ethical status of arbitrators.The amendment of the law should make arbitration proceedings into asmoother, commoner and more easily accessible way of solvingdisputes, particularly those involving international commercialrelations.

Rui Botica Santos

Coelho Ribeiro & Associados Av. Engº. Duarte Pacheco, Emp. AmoreirasTorre 2 - 13º A1099-042 LisbonPortugal

Tel: +351 21 383 9060Fax: +351 21 385 3202Email: [email protected] URL: www.cralaw.com

Member of Portuguese Bar Association: since July 1994.Qualifications/Education: Lisbon University (Decree in Law 1987-92); Post-Graduation Community Studies, Lisbon University(1994); Mediation Course in Civil and Corporate matters - CanadianProfessor Serge Roy (2001); Mining Law Short Course, by the RockyMountains Mineral Law Foundation (USA/May 2009). Career: Founding Partner of CRA Timor (2006); Partner of CRA -Coelho Ribeiro e Associados since 1998; associate lawyer from1995-98; Official Arbitrator of the Court of Arbitration for Sport(TAS/CAS) in Lausanne since 2003; Arbitrator in several domesticand international arbitrations; Mediator Certified by the Ministry ofJustice; Chairman of the General Meeting of Somincor - SociedadeMineira de Neves Corvo, SA (since 2004).Academic Contributions: Lecturer for the Master in InternationalSport Law (LLM) of ISDE (Madrid), Spain on Dispute ResolutionMatters (since 2007); Lecturer for the Post-Graduation course inNova Forum, at University Nova of Lisbon on Insolvency (2003-07)and Dispute Resolution (2004).Languages: Portuguese; English; Spanish.

Luis Moreira Cortez

Coelho Ribeiro & Associados Av. Engº. Duarte Pacheco, Emp. AmoreirasTorre 2 - 13º A1099-042 LisbonPortugal

Tel: +351 21 383 9060Fax: +351 21 385 3202Email: [email protected] URL: www.cralaw.com

Member of Portuguese Bar Association: since 2002.Qualifications/Education: Degree in Law (1998) and Post-Graduatein Court Practice and Corporate Legal Assistance (2004) with theLisbon Catholic University; Post-Graduate in Professional SportsLaw (2006) with the University of Coimbra.Career Profile: Associate Lawyer with Coelho Ribeiro e Associadossince 2007; previous experience as Associate Lawyer with other lawfirms in Lisbon (1998 - 2007); Intern with Gaedertz Rechstanwälte,Frankfurt and Cologne offices (2000). Main Areas of Practice: Corporate and Commercial Law; M&A;Sports Law; Aviation Law; International Arbitration.Languages Spoken: Portuguese; English; Spanish; French; German.

Coelho Ribeiro & Associados (CRA) was founded in 1986 by José Manuel Coelho Ribeiro, then President of thePortuguese Bar Association, and since then gained an international dimension.

CRA offers a full-service legal advice with an emphasis on the general corporate and business law to the national andinternational corporations and potential investors, specially focussing on providing services to foreign investors inPortugal and in the Portuguese Speaking Countries.

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CRA is recognised to be in the front line in areas like business law, natural resources, aviation, environment, settlementof disputes and IP/IT/DP matters.

Find out more about CRA in www.cralaw.com



Chapter 28

Pachiu & Associates

Romania


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Romania?

Under Romanian law, the arbitration agreement is defined as thewritten agreement of the parties under which they decide to settleby way of arbitration any present or future disputes arising fromtheir legal relationship, except for disputes implying rights uponwhich the law allows no settlement. An arbitration agreement maybe concluded either in the form of an arbitration clause, provided ina master agreement, or in the form of a separate understandingcalled an arbitration agreement. The severability principle,according to which the validity of the arbitration clause does notdepend on the validity of the master agreement, is applicable underRomanian law. The Court of International Commercial Arbitrationof the Chamber of Commerce and Industry of Romania, which isthe most representative court of arbitration in Romania (the Courtof Arbitration), has frequently stated that the arbitral tribunal iscompetent to solve a dispute even in the absence of an arbitrationclause or agreement, if both parties performed procedural acts bywhich they expressly or implicitly recognised the arbitral tribunal’sjurisdiction (e.g. the registration of an arbitral claim by theclaimant, followed by an indisputable acquiescence of therespondent).


Under the Romanian law, no special requirements or formalitiesapply to an individual person as party to a commercial transactionwhich includes an arbitration agreement. An individual person mayenter into a commercial transaction provided that it has the capacityto enter into any form of contract and provided that the legalrequirements regarding an arbitration agreement are met (seequestion 3.1 below).


Distinct rules apply to ad hoc arbitration and institutionalarbitration, such as the Court of Arbitration.Ad hoc arbitral tribunalFor ad hoc arbitration, the following must be incorporated:

a clear statement that the arbitration shall be ad hoc;

a choice of law or an express choice of arbitration in equity;in the absence of such choices, the arbitrators shall determinethe applicable law;the designation of the seat of arbitration; in the absence ofsuch election, the arbitral tribunal shall establish the seat ofarbitration;the designation of the number of arbitrators. In the absenceof such indication, a number of three arbitrators shall beappointed; each party shall appoint one arbitrator, who,together, shall afterwards appoint the chairman. Wheneverthe parties fail to mention the arbitrators’ number or methodof appointment, and no agreement can be reached, theclaimant is entitled to request Romanian courts to appoint thearbitrators or the chairman;a clause in the arbitration agreement providing for the rightof one party to appoint an arbitrator for the other party or tohave more arbitrators than the other party is null and void;andthe Court of Arbitration may provide assistance to the partiesof an ad hoc arbitration, upon their joint request and paymentof the due fees. Such assistance may consist of appointmentof arbitrators, evaluation of the arbitrators’ fees, providingappropriate locations for arbitration, and access to thesecretarial services of the Court of Arbitration (summoningof the parties, notifications etc.).

Institutional arbitration (the Court of Arbitration)The parties must indicate the arbitral institution of their choice andmust appoint the arbitrators or indicate the method for theirappointment. Whenever the parties choose to submit the dispute toa permanent arbitral institution, without specifying what rules ofprocedure shall be applied, the arbitration rules of such institutionshall apply. Although under the Civil Procedure Code an arbitrationclause must contain the arbitrator’s name or method ofappointment, there is case-law under which the simple indication ofa permanent arbitral institution was considered sufficient for thevalidity of the arbitration clause.


With the arbitral award being final and binding, it has the sameeffects as any final decision rendered by a court of law. The partyagainst whom the award was rendered is bound to enforce it on afree will basis, either immediately or by the deadline set therein.Upon the request of the winning party, the arbitral award shall beinvested with a writ of execution and may thereafter be enforced bya court marshal as any final court decision. The writ of executionis granted by the competent court at the seat of the Court of

Alexandru Lefter

Voichita Craciun,

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Pachiu & Associates Romania

Arbitration, in case of institutional arbitration, or the court thatwould have been competent to settle the dispute in the absence ofan arbitral agreement, in case of ad hoc arbitration. In case thearbitral award was challenged with a claim for cancellation, thecourt may order the adjournment of the enforcement subject topayment of a bail bond by the claimant.


The Romanian Law provides for two forms of alternative disputeresolution: (i) the mandatory conciliation procedure pertaining tocommercial disputes; and (ii) the mediation procedure. According to Article 7201 of the Romanian Civil Procedure Code,a direct conciliation procedure must be followed in any disputearising out of commercial relationships. Such conciliation is dueprior to any procedure in front of a court of law, as it is a mandatorycondition precedent to any such procedure. The result of theconciliation must be recorded on a minute and such deed attachedto the potential claim addressed to the competent court of law. Thecompetent court may render no decision without this priorconciliation procedure. The case-law of the Court of Arbitration as well as the legaldoctrine have stated the fact that the mandatory direct conciliationprocedure does not apply to arbitral litigations, except for the casethat the parties have provided for such procedure in the arbitrationagreement. The second form of ADR is provided in Law No. 192/2006regarding mediation and the organisation of the mediator profession(Mediation Law). Under such law, the mediation is an optionalmethod of amiable dispute settlement, under the auspices of a thirdperson which is a specialised mediator. The mediator must ensureneutral, impartial and confidential conditions for such procedure.The role of the mediator is to facilitate the negotiations betweenparties and to attempt for a mutual convenient, efficient and durablesolution. The mediator must be authorised to perform suchactivities by the competent authority, the Mediation Council. Such procedure is available to the parties in the process of the priorconciliation procedure described above. The parties may entervoluntarily in such procedure even if there is a jurisdictionalprocedure pertaining to their dispute. In such cases thejurisdictional procedure shall be stayed, for a maximum of threemonths, within which the parties may mediate the dispute. If theparties to such jurisdictional procedure are settling their disputesubsequent to the mediation procedure, the competent jurisdictionalbody shall render a ruling acknowledging such settlement.


2.1 What legislation governs the enforcement of arbitrationproceedings in Romania?

The procedure for enforcement of an arbitral award rendered inRomania in ad hoc or institutional arbitration shall be governed bythe general provisions of the Civil Procedure Code on enforcementof court decisions and other enforcement titles. Foreign arbitralawards cannot be enforced unless they have obtained recognition byway of an exequatur procedure, in accordance with the provisionsof Law No. 105/1992 on private international law (Law No.105/1992).


Domestic arbitration proceedingsThe legislation governing the arbitration agreements and ad hocarbitral proceedings in Romania is the Civil Procedure Code - BookIV “On Arbitration” (the Civil Procedure Code). Such specificprovisions and rules shall be complemented with the ordinaryprocedural rules of the Romanian Civil Procedure Code insofar asthe same are compatible with arbitration and, as the case may be,with the commercial character of the disputes. In addition to these legal provisions, the proceedings beforeinstitutional arbitral tribunals are governed by “Rules ofArbitration”. The Court of Arbitration was expressly authorised byLaw No. 335/2007 regarding the chambers of Romania to adopt itsown rules of procedure (the Rules of Arbitration).International arbitration proceedings

international ad hoc arbitration is governed by the provisionsof the Romanian Civil Procedure Code, if the seat ofarbitration is in Romania or the parties have chosen theRomanian law as the arbitration law; several specific rulesare provided for international arbitration by the CivilProcedure Code; andinstitutional arbitration: in case of international arbitrationwith the Court of Arbitration, the parties are free to decideeither for the Rules of Arbitration, or the UNCITRALArbitration Rules.

Both the Civil Procedure Code and the Rules of Arbitration providefor the following specific rules to be applicable to internationalarbitral proceedings:

an odd number of arbitrators is required to form an arbitraltribunal, each party having the right to appoint an evennumber of arbitrators; the foreign party is entitled to appointforeign citizens as arbitrators;the parties may agree for the sole arbitrator or the chairmanto be a citizen of a third country;the five-month term for finalisation of domestic arbitralproceedings is double in the case of international arbitration;andthe arbitration language is an international languagedetermined by the arbitral tribunal, unless otherwise agreedby the parties; the parties may attend the hearings with theirown translator or the arbitral tribunal may provide atranslator upon the request and at the expense of that party.


The Rules of Arbitration are partially based on the United NationCommission of International Trade Law (UNCITRAL) Model Lawon International Commercial Arbitration. The Rules of Arbitrationapply both to international and domestic commercial arbitration.The following issues need to be underlined:

under the Rules of Arbitration, the restriction provided by theModel Law regarding the number of arbitrators (either one orthree) is not applicable; in international arbitrationproceedings the parties may choose any number ofarbitrators, provided that such number be odd;under the Rules of Arbitration, whenever the parties fail toreach an agreement for the appointment of arbitrators or, thearbitrators fail to appoint a chairman, within certain timelimits, it shall be the president of the Court of Arbitrationwho is entitled to make such appointments;

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under the Rules of Arbitration, if there is a situation on whicha challenge of the arbitrators may be grounded, the partiesmay agree, in writing, to waive the right to file the challenge;the Rules of Arbitration provide for several circumstances inwhich the arbitrators may be held liable for indemnification;the Rules of Arbitration provide for certain specificconditions and terms for submitting evidence duringarbitration;according to the Rules of Arbitration, the arbitration awardmust indicate its motives;under the Rules of Arbitration, the petition for arbitrationmust have attached the evidence sustaining the claim andmust bear the claimant’s signature; according to the Rules of Arbitration, the award shall mentionthe separate opinion of one of the arbitrators, if any; andunder the Rules of Arbitration, the existence of an arbitrationagreement excludes the competence of the courts.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Romania?

There are no special mandatory provisions applicable to theinternational arbitration proceedings sited in Romania. The arbitrationproceedings will be governed by the procedural and substantive law aschosen by the parties. Basically, for as long the internationalarbitration proceedings do not run counter to the Romanian publicorder provisions, no mandatory rules apply in such respect.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Romania? What isthe general approach used in determining whether or not adispute is “arbitrable”?

Under the Civil Procedure Code a dispute may be brought before anarbitral tribunal provided that:

the dispute is economic in nature; andthe dispute implies rights upon which the law allows theparties to conclude a settlement.

The above-mentioned conditions are applicable to disputes arising inalmost all fields of law. The tendency of the Court of Arbitration’srecent case-law is to qualify disputes as arbitrable even in “sensitive”economic areas of law or areas governed by special laws as long assuch special laws do not expressly provide that disputes should not bedeferred to an arbitral tribunal (e.g. disputes related to competitionlaw, consumer protection law, inventions patents etc.).


Under Romanian Law, the arbitral tribunal, either ad hoc orinstitutional, is compelled to rule on its own jurisdiction prior to anydebate on the merits of the case. The arbitral tribunal must rendera preliminary ruling stating whether it is competent or not to rule onthe specific dispute.

3.3 What is the approach of the national courts in Romaniatowards a party who commences court proceedings inapparent breach of an arbitration agreement?

As a principle, the conclusion of an arbitration agreement excludes

the competence of national courts. Consequently, if a partycommences court proceedings in apparent breach of an arbitrationagreement, the court shall rule on its lack of competence if itacknowledges the existence of an arbitration agreement, unless:

the respondent has submitted its defence on the merits,without filing a defence grounded on the arbitrationagreement;the arbitration agreement is null and void or unenforceable;orthe arbitral tribunal cannot not be established due to therespondent’s misconduct.


The court may not analyse the arbitral tribunal’s competence exofficio but only upon request of either party (please see question 3.3above). The obligation of the court to verify its own competenceonly upon notification by the respondent or by the arbitrationtribunal, excludes application of the procedural exceptions of litispendentis or the connection between the two categories of courts. The court may also address the issue of the jurisdiction of a nationalarbitral tribunal in case it was legally invested to rule upon a claimfor cancellation of the arbitration award, and only if the claimantgrounds such claim on the arbitral tribunal’s lack of jurisdiction.

3.5 Under what, if any, circumstances does the national law ofRomania allow an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

Notwithstanding if an arbitral tribunal is vested by either anarbitration clause provided in a master agreement or a separatearbitration agreement, such can only assume jurisdiction over theparties of the master/separate arbitration agreement. In compliancewith the principle of law res inter alios acta aliis neque nocereneque prodesse potest, it follows that an arbitral award neitherdirectly confers rights nor imposes obligations upon individuals orentities who are not a party to an arbitration agreement.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Romania and what is thetypical length of such periods? Do the national courts ofRomania consider such rules procedural or substantive,i.e., what choice of law rules govern the application oflimitation periods?

The limitation periods are treated by the Romanian courts as asubstantive law issue, and therefore it depends on the law elected bythe parties to govern the agreements which generated the disputeneeding settlement. Under the Romanian Law, the statute oflimitation, i.e. the term within which a party may request from theother party the performance of its obligation, is governed by theprovisions of Decree No. 167/1958 (“Decree No. 167/1958”),which provides that the general limitation period for paymentobligations is 3 (three) years as of the date when the paymentobligation became due for patrimonial claims and of 30 (thirty)years for claims on real property subject to limitation. However, thelaw expressly provides for certain exceptions, such as certainclaims on real property, which are not subject to statutes oflimitation.Under the general rule, the limitation periods are calculatedbeginning with the date when the right to claim arises. The



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limitation periods are established by law and, therefore, suchperiods may not be modified by the parties, under the sanction ofabsolute nullity of such arrangements.



Generally, the law applicable to a contractual relationshipconcluded between two or more Romanian entities is Romanianlaw. Derogation is allowed if there is an extraneous elementpertaining to the said relationship. The law applicable to thesubstance of the dispute is the law designated by the party to governthe contractual relationship which gave rise to the dispute. Suchchoice of law must be expressly made or must undoubtedly resultfrom the contractual content or circumstances.


The law elected by the parties will be applicable to the extent thatits effects do not run counter to the Romanian international publicorder. Romanian law does not provide for a definition of publicorder of private international law. There are limited instances whenlaw considers a circumstance as being contrary to the public orderof private international law (such as, non-observance of theexclusive competence of Romanian courts or breach of fundamentalrights and liberties or principles provide for by the RomanianConstitution). The public order of private international law isconsidered by courts on a case by case basis and according tocircumstances at the time of dispute and not when the law of acontract was chosen as governing law.


Generally, the persons which agree for their disputes to be settledby an arbitral procedure must have full legal capacity. The rules governing the formation, validity and the legality of thearbitration agreements is the procedural law elected by the partiesto govern the arbitration. In case no such rules were previouslyelected, the rules of the indicated arbitration institute will apply.



Only natural persons, who are Romanian citizens and have fullcapacity to exercise their rights, may be appointed as arbitrators. Incase of international arbitration, the foreign party may appointforeign citizens as arbitrators, and both parties may agree for thesole arbitrator or the chairman to be a citizen of a third country. In the case of arbitration before the Court of Arbitration, the partiesmay choose from the arbitrators enlisted with the Court ofArbitration or other persons who are not enlisted and who, due totheir skills and uprightness, enjoy their trust. The only limits to the parties’ autonomy to select arbitrators are thefollowing:

Neither party is allowed to appoint an arbitrator on behalf ofthe other party or to have more arbitrators than the otherparty.If the parties did not determine the number of arbitrators, thedispute shall be settled by three arbitrators, one appointed byeach party and the third arbitrator - the presiding arbitrator -appointed by the other two arbitrators. If there are several claimants or respondents, the partieshaving joint interests shall appoint a sole arbitrator. In case ofdisagreement, the arbitrator shall be appointed by thepresident of the Court of Arbitration.In case of international arbitration, an odd number ofarbitrators is required to form an arbitral tribunal, each partyhaving the right to appoint an even number of arbitrators.


If the parties do not select the arbitrators or do not provide themethod to appoint the arbitrators, the law provides for two distinctdefault procedures, depending on whether the arbitration is ad hocor institutional:Ad hoc arbitration:In case of disagreement between the parties as regards theappointment of the sole arbitrator or if a party fails to appoint anarbitrator or if the two party-appointed arbitrators fail to agree onthe appointment of a presiding arbitrator, the party intending toresort to arbitration may request a court of law to appoint thearbitrator/presiding arbitrator. The ruling shall be rendered withinten days as of filing the request and it is not subject to remedies.Institutional arbitration:

In case the parties did not determine the number ofarbitrators, the dispute shall be settled by three arbitrators,one appointed by each party and the third arbitrator, thepresiding arbitrator, appointed by the other two arbitrators. If there are several claimants or respondents, the partieshaving joint interests appoint a sole arbitrator and, in case ofdisagreement, the arbitrator shall be appointed by thepresident of the Court of Arbitration.Upon a party’s request, the arbitrator shall be appointed bythe president of the Court of Arbitration. Should therespondent fail to appoint its arbitrator, should the partiesdisagree on the appointment of the sole arbitrator, or shouldthe two arbitrators disagree on the person of the presidingarbitrator, the president of the Court of Arbitration shallmake the necessary appointments.


Under the Civil Procedure Code, the court may intervene in theselection of arbitrators in the following situations:

in the absence of any indication by the parties regarding thenumber of arbitrators or their method of appointment, and ifthey cannot reach an agreement regarding the number ofarbitrators or the presiding arbitrator, the claimant is entitledto request the courts to appoint the arbitrators or thepresiding arbitrator;in case of disagreement between the parties as regards theappointment of the sole arbitrator or if a party fails to appointan arbitrator or if the two arbitrators fail to agree on theappointment of a presiding arbitrator, the party intending toresort to arbitration may request the court to appoint thearbitrator/presiding arbitrator; andcourts rule on challenges raised against an arbitrator for

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reasons of doubt over its independence or impartiality or forfailure to meet the qualification criteria or other conditionsinserted by the parties in the arbitration agreement.

In case of institutional arbitration, all powers of the court under theCivil Procedure Code are exercised by the appointed arbitrationinstitution, in compliance with its rules, except if such rules provideotherwise.


Notwithstanding the applicable Romanian laws (either CivilProcedure Code or the Rules of Arbitration), the arbitrators shall beindependent, unbiased in fulfilling their duties and they may not bethe representatives of the parties. As a guarantee of theindependence, neutrality and impartiality of the arbitrators, theRomanian laws provide that:

an arbitrator must have full exercise of his/her rights, shouldbe held in high esteem and must have adequate qualification;the arbitrators shall sign a statement by which they consentto the appointment and undertake the obligation to fulfil theirduties as arbitrators impartially and in strict compliance withthe law; andarbitrators may be challenged as regards their independenceand impartiality, in the same way as judges. Non-compliancewith the qualification requirements or with otherrequirements regarding arbitrators, provided by the arbitralagreement, may also be a reason for challenge.

In addition, in case of institutional arbitration, the arbitrators musthave expertise in the field of commercial law or internationaleconomic relations.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Romania?

According to the Romanian Code of Civil Procedure, an arbitratorcan be denied by a party for reasons throwing doubt upon anarbitrator’s independence and impartiality. The causes for which anarbitrator may be removed by a party are the same as for theRomanian judges, mostly for situations able to give rise to conflictsof interests.Also, a professional qualification not meeting the standardsrequired under the arbitration agreement may serve as ground forthe removal of an arbitrator.A person appointed as an arbitrator having knowledge of a denyingcause in his regard, has the obligation to inform the other arbitratorsand parties accordingly.The request for an arbitrator to be removed from his position mustbe filled within 10 days as of its appointment and is solved,according to the Romanian Code of Civil Procedure, by aRomanian Court. According to the Rules of Arbitration, suchrequest is solved by the other arbitrators and the President of theinstitution or an arbitrator appointed by the latter.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Romania? If so, do those laws or rules applyto all arbitral proceedings sited in Romania?

The ad hoc arbitration procedure is governed by the provisions of

the Civil Procedure Code. Where the Court of Arbitration isentrusted with the organisation of arbitration, the parties agree ipsofacto to the Rules of Arbitration, unless, upon requesting theorganisation of the arbitration, the parties have already agreed, inwriting, to other arbitration rules and the same have been acceptedby the arbitral tribunal.Any set of procedural rules agreed to by the parties or chosen by thearbitrators, as well as institutional rules, shall be applied inarbitration proceedings in Romania only in so far as such complywith public order, good morals and mandatory rules of Romanianprocedural law. As a general rule, the arbitral award shall be nulland void if the arbitration procedural rules do not ensure equaltreatment of the parties, the right to a proper defence and theprinciple of contradictoriality.

6.2 In arbitration proceedings conducted in Romania, arethere any particular procedural steps that are required bylaw?

The petition for arbitration must be addressed to the Court ofArbitration and shall be filed together with the supportingdocuments. The respondent must be notified of the petition andsubpoenaed for the first hearing established by the arbitral tribunal.In addition:

the arbitral tribunal must attempt to reach a settlement,subject to the parties’ agreement at any stage of the dispute;andthe arbitral proceedings must be recorded in minutes of thehearings and any decision of the arbitral tribunal and thegrounds thereof has to be written in the minutes of which theparties are entitled to take knowledge.


The Civil Procedure Code expressly provides for rules regarding:the participation of the parties to the arbitral hearing; theparties may attend hearings either in person or throughrepresentatives and may be assisted by attorneys, advisers,interpreters etc. The party having attended or having beenrepresented at a hearing shall not be summoned for any othersubsequent hearings, being deemed to have knowledge of thenext hearing dates, unless otherwise provided by the Rules ofArbitration;failure of one party, although duly summoned, to attend thehearing; such failure shall not prevent the progress of theproceedings;adjournment of the hearing; only one adjournment may begranted upon either party’s request and for justified reasons,provided the notification of such request is made both to thearbitral tribunal and to the other party at least one day priorto the hearing;the participation of third parties to the arbitral hearing; unlikecourt hearings, arbitral hearings are not public, theparticipation of third parties being possible only with theconsent of both parties and the approval of the arbitraltribunal; andthe obligation of the arbitral tribunal to issue a minute aftereach hearing; the minute must refer to the attendants to thehearing, the claims made by the parties during the hearingand the motives of such claims, any measures decided by thearbitral tribunal and the signatures of the arbitrators and ofthe clerk.

These rules ought to be complemented with the general provisionsof the Civil Procedure Code regarding the conduct of court



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hearings. Such general rules provide for the authority of the judgeto impose fines and resort to the assistance of the police force tomaintain order in court. While the presiding arbitrator of thearbitral tribunal is responsible for maintaining the order during thearbitral hearing, such measures are not available to him/her.

6.4 What powers and duties does the national law of Romaniaimpose upon arbitrators?

As soon as it is established, the arbitral tribunal shall be entitled andshall also have the obligation to rule upon the request forarbitration, and the other claims and requests concerning the arbitralprocedure, in accordance with the powers granted to them by thearbitration agreement, save for the requests which, in accordancewith mandatory provisions of law, are in the exclusive jurisdictionof the national courts. The arbitral tribunal shall render the awardwithin the time limits provided under the arbitration agreement orunder the Rules of Arbitration.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Romania and, if so,is it clear that such restrictions do not apply to arbitrationproceedings sited in Romania?

According to Law No. 51/1995 regarding the lawyer profession andorganisation, a foreign lawyer is not allowed to appear in front ofRomania national courts.However, according to the same law, the above cited restrictiondoes not apply to disputes settled in international arbitrationproceedings sited in Romania.

6.6 To what extent are there laws or rules in Romaniaproviding for arbitrator immunity?

There are no specific rules pertaining to arbitrators’ immunity.According to the Romanian Code of Civil Procedure andArbitration Rules, the arbitrators may be kept liable for the damagesthey cause in the following circumstances:

after accepting the arbitrator position, if they unjustifiablydrop such position;if by not participating in the settlement of the dispute, otherunjustified delays of such settlement are caused or if they donot render the arbitral resolution within the time limitsestablished by the arbitral agreements or the applicablearbitration rules;if they do not observe the confidential nature of thearbitration by publishing or disclosing data, without havingthe parties’ consent;if they materially breach the arbitrators’ duties.

In case one of the above mentioned situations occurs, the arbitratorinvolved may be removed from that dispute or even from thearbitrators’ list kept with the institution.


Under the Civil Procedure Code, before or during the arbitralproceedings, either party may request the competent court toinstitute temporary measures or grant interim relief with regard tothe object of the dispute or to decide on findings of factualcircumstances. The arbitral tribunal is not qualified to exertcoercion or punish witnesses or experts. To have these measuresdecided, the parties must apply to the competent courts.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Romania (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

In compliance with both the Civil Procedure Code and the Rules ofArbitration, there is one special consideration, i.e., the partieshaving joint interests may appoint a sole arbitrator. The competent courts of jurisdiction have no power to order theconsolidation of the proceedings in any circumstances. However,by means of interpretation of the relevant principles of law, aconsolidated arbitration would be possible provided that the partiesagreed to arbitration and the parties agreed on the same defaultprocedure, either ad hoc or institutional arbitration. The arbitraltribunal, either the ad hoc tribunal or the Court of Arbitration, havethe power to render a single final award determining all disputesbetween them, being joined in arbitration with their expressconsent. Considering that the arbitration depends on consent, as a generalrule, it is not possible for a third party to intervene or join otherparties in arbitration without their agreement. According to theCourt of Arbitration’s case law, a third party was allowed by suchto be brought into the same arbitral proceedings, based on anarbitration agreement executed by the third party and a party inarbitration proceedings. In this case the arbitral tribunal did notrequire the consent of the other party to the arbitration.

6.9 What is the approach of the national courts in Romaniatowards ex parte procedures in the context of internationalarbitration?

The international as well as domestic arbitration proceedings aregoverned by the principle of contradictorily debate. Under theRomanian law there are no provisions regarding such ex parteprocedures.However, an arbitral tribunal is entitled to render an award if a partydid not participate at the debates, provided that such party has beenduly summoned as regards the conduct or the arbitral procedure.An award rendered in the absence of proper summoning of a partymay be repealed by the competent court.



The arbitral tribunal may grant interim relief during the arbitralproceedings or may take appropriate temporary measures, unlessotherwise provided by the parties in the arbitration agreement.The types of interim relief available under Romanian law are pre-judgment seizure of goods, pre-judgment garnishment and judiciaryseizure of goods. Pre-judgment seizure and pre-judgmentgarnishment may be granted in case the receivable is certified by awritten deed or the claimant filed an action in court for recovery ofthe receivable and paid a bail bond of half the value of thereceivable. The deposit of a bail bond is mandatory if thereceivable is commercial in nature (Article 908 of the CommercialCode). Judiciary seizure of goods may be granted if the claimant

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proves that there is a pending lawsuit regarding the ownership titleover such goods.In case of international arbitral proceedings, Romanian courts haveconsidered that the appointment of the sole arbitrator andnotification of the respondent is similar, for the purpose of grantinginterim relief, to filing an action in a court of law.Temporary measures may be granted in case a party is imminentlythreatened with the loss of a right or in case such are necessary forthe prevention of other imminent loss. Temporary measures may begranted ex parte in case of extreme urgency.In case the respondent fails to comply with the arbitral tribunal’sorder granting interim relief of imposing temporary measures, theclaimant must resort to the court of law for the enforcement of suchorder.


The court’s competence to grant interim relief or temporarymeasures is alternative to the arbitral tribunal’s competence in thesame respect. In addition, the court may order such measures alsoin the time period prior to the valid formation of the arbitraltribunal.The court may grant interim relief only upon request of either party.The claimant must submit to the court, together with the request forinterim relief, the copy of the arbitration agreement and proof ofinitiation of the arbitration proceedings. The party’s request for thecourt to grant interim relief does not impinge on the jurisdiction ofthe arbitral tribunal.


National courts have been granting interim relief to parties to anarbitration agreement, and have also ordered temporary measures.Interim relief was granted also in case of international arbitration.


The Romanian law does not provide securities for cost institution.The Civil Procedure Code states that the party which loses the trialshall bear all the judiciary fees/arbitral expenses made by it or bythe winning party.However, in case of granting interim relief measures, the court mayrule for the payment of a bail bond (see question 7.1 above).


8.1 What rules of evidence (if any) apply to arbitralproceedings in Romania?

If neither the parties under their arbitration agreement, nor thearbitral tribunal choose a set of rules of evidence (see question 5.1above), the general rules of evidence provided under the CivilProcedure Code shall be applicable, with certain particular features.This is also applicable to arbitration by the Court of Arbitration,

whose rules of evidence do not differ from the Civil ProcedureCode.The Romanian procedural law is based on three main principles:

each party must bring evidence in support of itsclaims/defences (onus probandi incumbit actori);both parties must have equal access to the administration ofevidence and have the right to counter-evidence; andthe judge/arbitral tribunal may decide upon theadministration of any type of evidence permitted by law.

The main difference regarding administration of evidence by anarbitral tribunal as opposed to administration of evidence by a courtof law is that the arbitral tribunal lacks the authority to take coerciveor punitive measures against witnesses, experts or third parties. Thearbitral tribunal must refer to a court of law for inflicting suchmeasures upon any of the above-mentioned participants toarbitration.


Under the Romanian general procedural rules, there is no discoveryphase preliminary to the trial. If, during the administration of theevidence, a party submits sufficient proof that the other party, apublic institution or a third party holds a document which isrelevant to the case, the court may order any such person to producethe document in court. A refusal may be grounded only on thepersonal character of the document, the existence of a legalconfidentiality obligation or the possibility for a criminalprosecution to be commenced based on such document. In case aparty refuses to produce a document, the court is entitled to considerthat such document exists, in the form and substance alleged by theother party.The Civil Procedure Code acknowledges the arbitrator’s authorityto administrate any evidence provided for by law, without limitationto its right to order for a document to be presented to the arbitrationpanel. However, since only a court may take measures againstwitnesses/experts, the arbitrator will not be able to take measuresagainst third parties who refuse to produce evidence in thearbitration proceedings.


The court may intervene upon the arbitral tribunal’s request forinfliction of coercive measures against witnesses, experts or thirdparties who refuse to comply with the arbitral tribunal’s requests.The parties may also request the court, at any time during thearbitration proceedings and even prior to the filing of the arbitrationpetition, to “secure” a piece of evidence which is in danger of beinglost should its administration be postponed. This procedure allowsthe court to hear witnesses, expert opinions, to ascertain a state offact or to obtain the recognition of a document, fact or right. In caseof extreme emergency, the procedure may take place without thenotification of the other party (“ex parte”).


The general rules of evidence provided under Romanian law areequally applicable in national and international arbitrationproceedings.



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Witness testimony is generally allowed under Romanian law.Exceptions are applicable in case of non-commercial transactionsexceeding a certain value and in case witness testimony is intendedto be brought as counter-evidence to written evidence proving theexistence and the terms of a legal transaction. The parties may,however, agree to accept witness testimony in such cases, also.Relatives up to the 3rd degree, the spouse, persons condemned forperjury or incapable of testimony may only be heard with theconsent of both parties. Persons held by a confidentiality obligationand persons who would expose themselves or others to a criminalpenalty by testifying, have the right not to testify.Witnesses and experts are not sworn in before testifying in arbitralproceedings. The other party has the right to cross-examine thewitness, as provided under the principle of contradictorily debatewhich governs any proceedings under Romanian law; breach ofsuch right may lead to the annulment of the proceedings. Questionsmust be addressed through the chairman of the arbitration panel,who may rule out irrelevant or inappropriate questions. The courtclerk takes down the witness testimony by dictation from thechairman.Only the court of law, upon the arbitral tribunal’s request, may takecoercive or punitive measures against witnesses or experts for theirrefusal to testify or for perjury.

8.6 Under what circumstances does the law of Romania treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

In an arbitral proceeding, either ad hoc or institutional, documentscould be regarded as subject to privilege only in case special lawsand/or regulations expressly provide for specific documents not tobe subject to disclosure (e.g. confidential or classified information).A waiver for privilege documents could be acquired if therequirements of the respective special provisions are met.

9 Making an Award


The arbitral award must be rendered in writing and must contain thefollowing information:

the name of the arbitrators, the place and date of renderingthe award;the name, domicile/headquarters of the parties, of therepresentatives of the parties and of any other participant tothe debates;the arbitral agreement;the object of the dispute and the parties’ claims;the motives - de facto and de jure - of the award (also in caseof an award rendered in equity);the holding; andthe signatures of the arbitrators.

The award must be rendered within five months after the formationof the arbitral tribunal, unless otherwise agreed by the parties. Forjustified reasons, the tribunal may prolong such term with an

additional period of not more than two months. However, theexpiration of such period shall result in the dissolution of thearbitral tribunal only if at least one of the parties notified itsintention to request such dissolution, and such notification wasmade no later than the first hearing.The five and respectively two-month time periods shall be doubledin case of international arbitral proceedings.



The only remedy available against an arbitral award is the claim forcancellation, which may be filed only for one of the followingreasons:

the dispute was not arbitrable;the arbitration agreement did not exist, was void orineffective;the arbitral tribunal was not formed in compliance with thearbitral agreement;the party absent from a hearing was not legally subpoenaedfor the hearing;the arbitral award was rendered after the expiration of thearbitration period;the arbitral tribunal did not rule on one of several claims,granted more than the parties requested or what was notrequested (minus petita, ultra petita, extra petita);the arbitral award does not include the reasons, the holding,the place and time of rendering the award, or the signaturesof the arbitrators;the ruling of the arbitral award contains unenforceablemeasures; orthe award runs against public order, good morals or againstmandatory provisions of the Romanian law.

The parties may not waive in advance their right to request thecancellation of the arbitral award.In cases of material errors in the award, or in cases where thearbitral tribunal failed to rule on some of the claims, or in caseswhere the minute of the award contains contradictory provisions oradditional clarifications are required with regard to the content ofsuch minute, the parties may ask the arbitral tribunal to rectify orsupplement the award, provide additional explanations, or toeliminate the contradictory provisions of the minute of the award.


In compliance with the provisions of Article 3641 of the CivilProcedure Code correspondent to the Article 70 of the Rules ofArbitration, the parties cannot agree to exclude any basis of appealagainst an arbitral award until the arbitral award is not yet renderedby the arbitral tribunal.


The grounds available for appealing against an arbitral award arespecifically defined by the Romanian relevant laws, i.e. ninegrounds expressly provided by Article 364 of the Civil Procedure

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Code correspondent to Article 69 of the Rules of Arbitration. Underno circumstances, can the parties expand the scope of appeal of anarbitral award, notwithstanding if such award was rendered byfollowing the ad hoc or institutional proceedings.

10.4 What is the procedure for appealing an arbitral award inRomania?

The jurisdiction for ruling upon claims for cancellation of arbitralawards belongs to the common court immediately superior to thecommon court which, absent the arbitration agreement, would havebeen competent to solve the litigation.The claim for cancellation of the award may be filed within onemonth as of the date of communication of such award.Should the court accept the claim for cancellation, it shall repeal theaward. In case the court reasons that the circumstances of the casehave been clarified, it shall render an award on the merits of thecase, within the limits of the arbitration agreement.The award rendered by the court with regard to the claim forcancellation may be appealed.


11.1 Has Romania signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

Romania adhered to the New York Convention on the Recognitionand Enforcement of Foreign Arbitral Awards by Decree No. 186 ofJuly 24, 1961. Romania made two reservations under Article Iparagraph 3 of the Convention: the commercial reservation and thereciprocity reservation. Accordingly, the Convention is appliedonly with regard to arbitral awards settling commercial disputes andonly if the arbitral award was rendered on the territory of anothercontracting state (unless the condition of reciprocity is met).The general rules for the recognition and enforcement of foreignarbitral awards are provided by Law No. 105/1992 on privateinternational law. Recognition is granted under the same conditionsas for foreign court decisions: the decision must be final, renderedby a competent jurisdictional body, with the exclusion of fraud; thedecision does not conflict with public order; the case was notpreviously settled by a Romanian court of law (res judicata); andthe reciprocity condition is met.

11.2 Has Romania signed and/or ratified any regionalConventions concerning the recognition and enforcementof arbitral awards?

Romania has ratified the Geneva European Convention onInternational Commercial Arbitration as of 1961 and has alsoconcluded several bilateral conventions, which refer to therecognition and enforcement of foreign awards, including arbitralawards.

11.3 What is the approach of the national courts in Romaniatowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

Answer Arbitration awards are enforced in practice under the sameconditions as court decisions. A particular feature is that, pending

the ruling on the claim for cancellation of the award, theenforcement procedure may be suspended only if the party againstwhom enforcement is sought pays the bail bond established by thecourt.Under the provisions of Law No.105/1992, the foreign arbitralawards are recognised in Romania, and therefore regarded as resjudicata, subject to the fulfilment of following conditions:a) the award is final, according to the law of the state where it

was rendered;b) the tribunal which rendered the award was, according to the

above mentioned law, competent to solve the litigation; andc) there is reciprocity between Romania and the state of the

tribunal which rendered the award, as regards the effects offoreign awards.

The court competent to rule upon the request for recognition of theforeign arbitral award is the tribunal of the seat/domicile of theperson which refused the recognition. However, in case therecognition is raised in other litigation, the court competent to solvesuch litigation shall become also competent to rule upon such plea,in accordance with the principle accesorium sequitur principale.The foreign arbitral awards may be enforced in Romania based onthe approval rendered by the county tribunal where the executionmust take place. The award must fulfil the requirements for therecognition of a foreign arbitral award and the following additionaltwo conditions:a) the award is enforceable, under the law of the court which

rendered it; andb) the time bar for the request for enforcement of the award,

under the Romanian law, was complied with.Also be advised that the applicable legislation in the field ofenforcement in civil and commercial matters in case of EU MemberStates is currently represented by Regulation 44/2001.Within the meaning of the aforementioned regulation, arbitralawards are enforceable titles and shall be enforced in another EUMember State provided that, on the application of any interestedparty, it has been declared enforceable there.

11.4 What is the effect of an arbitration award in terms of resjudicata in Romania? Does the fact that certain issueshave been finally determined by an arbitral tribunalpreclude those issues from being re-heard in a nationalcourt and, if so, in what circumstances?

Arbitration awards rendered in compliance with the arbitrationagreement and the applicable laws/rules are regarded as resjudicata. Under the Romanian laws, the national courts have nojurisdiction on the matters referred to arbitral tribunals by a validarbitration agreement. National courts may not adjudicate disputeswhich were finally determined by an arbitral tribunal. Noexemption is provided by the law with regard to certain issueswhich might be addressed to national courts. The matter of res judicata effect of an arbitral award should beconsidered from different perspectives:

Effect on the parties in dispute. In case neither party haschallenged the arbitral award before a competent court, thecourt shall dismiss the petition of a party based on the samecause of action in consideration of the fact that the issue hasbeen disposed of and the arbitral award is final and bindingupon the parties in respect of the issues with which it dealt.One party may bring a court action against the other only incase the arbitral tribunal failed to dispose of all the issuesraised in the new proceedings. In case the parties challenge the arbitral award before thecompetent court and this is set aside by the court of



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competent jurisdiction or, in case the award is invalid, sucharbitral award does not operate as res judicata. Stare decisis has no effect in arbitration, under the Romanianlaws. Whenever same parties are involved in subsequentdisputes, the previous arbitral award has no relevance to thesubsequent disputes between the same parties. Arbitral awards cannot be res judicata in respect of claimsagainst a third party in case the third party is affected by therespective arbitral award and such has a significant indirectimpact on individuals or entities who were not parties to thearbitration.

One important aspect of res judicata is deciding the validity of anarbitration agreement since such could be inoperative due to the factthat the same dispute between the same parties has already beensettled by either arbitral or court proceedings.

12 Confidentiality

12.1 Are arbitral proceedings sited in Romania confidential?What, if any, law governs confidentiality?

The Civil Procedure Code provides that the arbitrators are liable forindemnification in case of breach of the confidentiality related tothe arbitral proceedings. There are no express provisions regardinga confidentiality obligation for the other participants to theproceedings (clerks, experts, other representatives of the partiesetc.).The Rules of Arbitration clearly state that the Court of Arbitration,the arbitral tribunal, and the entire personnel of the Chambers ofCommerce are subject to the obligation to respect theconfidentiality of the arbitration proceedings. Third parties mayhave access to the file only with the written permission of bothparties and the approval of the arbitral tribunal. The publication ofthe arbitral award is subject to the parties’ permission. However, itis allowed for such awards to be briefly commented in specialisedpublications, without the indication of the parties’ names or of anyother information that may harm their interests.


In case the information was disclosed by way of witness testimony,it is not possible for it to be directly used in front of a court of law.As a rule, the judge may only admit direct, oral witness testimony.The witness may change its deposition in front of the court,however this may affect its credibility and it may be charged withperjury based on its testimony before the arbitration tribunal. If thewitness becomes unable to testify in front of the court, otherparticipants to the arbitration proceedings may be called to testifyas to what they directly heard from such witness.In case the disclosed information originates in documents attachedto the arbitration file, the general rules regarding the obligation toproduce documents in court shall apply (see question 7.2).


The Civil Procedure Code provides only for the arbitrators’obligation of confidentiality. As a result, if other participants to thearbitration proceedings are summoned to testify in otherproceedings before a court of law, they may not be able to invokethe confidentiality obligation as grounds for their refusal to testify.

It must be noted that the proceedings in the court of law pending theclaim for cancellation of the arbitral award are not protected byconfidentiality, being governed by the principle of publicity of thehearings. The parties may request the judge to hold the hearing inhis chambers if the publicity of the debates would harm theirinterests or good morals, but even if such request is granted, thejudge is not bound by an obligation of confidentiality.



Under Romanian substantive law, damages are granted if theclaimant proves that the breach of contract/law by the respondent isthe direct cause of the damage incurred. As a rule, the arbitrator canonly grant compensation for damage actually incurred, and not fordamage that may occur at some point in the future. It is possible forthe parties to establish, prior to the dispute, the amount of damagesby means of a “penal clause”. The judge or the arbitrators may notmodify the amount of “liquidated” damages established in suchclause.The institution of punitive damages does not exist under Romanianlaw. Somewhat similar is the institution of “comminatorydamages”, however with essential differences. In case therespondent fails to comply with its obligations and such arepersonal in nature, it may be condemned to pay a certain amount ofcompensation per day until actual performance of its obligationsoccurs. After the obligations are complied with, the amount of“comminatory damages” received by the claimant shall be reducedto the actual value of damage incurred due to the delay inperformance of respondent’s obligations.


The calculation of interest is subject to the substantive lawapplicable to the dispute. Under Romanian commercial law,interest starts to accrue on monies as of the date when paymentbecomes due. Unless the parties agree to a different interest rate,the legal interest rate shall apply. The arbitral tribunal may decidethat interest continues to accrue on the principal amount until actualpayment of such amount by the debtor.In certain cases where the receivable represents the price ofpurchased goods, it was decided that the seller was entitled to becompensated for the difference between the current market value ofdelivered goods and the contract price, instead of calculatinginterest to such unpaid price.


The general rule under Romanian law is that the losing party shallbear all the costs of the winning party (including but not limited toarbitration fees, evidence expenses, travelling expenses for theparties, witnesses, experts and arbitrators, etc.). This rule is alsoapplicable to arbitral procedures, unless the parties agree to adifferent allocation of costs. The assignment of arbitration costs isdifferent for international arbitration. Unless the parties agreeotherwise, each arbitrator’s fee and travelling expenses are borne bythe appointing party; in case of a sole arbitrator, such fee and

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expenses are borne equally by both parties. This particularity in theassignment of costs in international arbitration was not acceptedunder the Rules of Arbitration, under which the general rule oflosing party is paying party continues to apply.


Amounts recovered from the debtors based on arbitral awards arenot subject to special taxation rules. The tax obligations of thewinning party shall be the same as if the amount was paid on thedebtor’s free will.The Romanian fiscal law provides that amounts representingpenalties, damages and any other type of compensation for breachof contract, granted by way of final court decision, are not takeninto consideration for computation of VAT. Such amounts are,however, not excluded from income/profit tax.


14.1 Has Romania signed and ratified the WashingtonConvention on the Settlement of Investment DisputesBetween States and Nationals of Other States (1965)?

Romania adhered to the Washington Convention on the Settlementof Investment Disputes between States and Nationals of OtherStates by Decree No. 62 as of May 30, 1975.

14.2 Is Romania party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Romania is party to over seventy Bilateral Investment Treaties andis also a party to the Energy Charter Treaty which allow for recourseto arbitration under the auspices of ICSID.

14.3 Does Romania have standard terms or model languagethat it uses in its investment treaties and, if so, what isthe intended significance of that language?

The investment treaties concluded so far by Romania do not displaystandard terms or model language. Although these treaties are nothomogenous from a linguistic point of view, there is a developingunitary pattern as the majority of these investment treaties aredefining certain terms, such as “investment”, “investor”, “national”,“income”, “company”, etc., in a similar approach.

14.4 In practice, have disputes involving Romania beenresolved by means of ICSID arbitration and, if so, whathas the approach of national courts in Romania been tothe enforcement of ICSID awards and how has thegovernment of Romania responded to any adverse awards?

On October 12, 2005, the Romanian State has been rendered afavourable ICSID arbitral award (Noble Ventures vs. the RomanianState). Apart from this, there is no national court case on theenforcement of ICSID.

14.5 What is the approach of the national courts in Romaniatowards the defence of state immunity regardingjurisdiction and execution?

In accordance with the provisions of the Rules of Arbitration, theState, the administrative-territorial units and other public law legalentities are only entitled to conclude a valid arbitration agreementin the international commercial arbitration, unless otherwiseprovided by law.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Romania? Are certain disputescommonly being referred to arbitration?

Romania follows the general world-wide trend in favour ofinstitutional arbitration vs. ad hoc arbitration, as well as thetendency of arbitration institution to specialise in solving disputesarising in particular fields. Over the past few years several arbitralbodies were established, many of which are adopting their ownspecialised rules of procedure (i.e. capital markets, intellectualproperty, insurance etc.). Arbitration was organised by includingmatters previously excluded from arbitration (i.e. conflicts ofinterests in labour law).

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Romania, such as pending orproposed legislation that may substantially change the lawapplicable to arbitration?

An important impediment to the development of arbitration inRomania is the lack of familiarity of the parties with suchproceedings. Often, the parties insert arbitration clauses in theiragreements, but when the dispute arises they prefer to settle it incourt.One possible reason is the availability of the “payment notice”procedure which may only be granted by courts of law. This is aspeedy procedure, very often used in practice, available to partieswho ground their claims on written deeds which evidence a payabledebt, the amount of which is clearly established.Other impediments that may negatively affect arbitrationproceedings is the insufficient specialisation of certain arbitratorsenlisted with arbitration institutions.



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Voichita Craciun

Pachiu & Associates 4-10 Muntii Tatra Street, 5th floorBucharest 1, RO-011022Romania

Tel: +40 21 312 1008Fax: +40 21 312 1009Email: [email protected]: www.pachiu.com

Voichita is a graduate of the Law School of Nicolae TitulescuUniversity in 2001, and is a senior member of the Bucharest BarAssociation, as well as the National Romanian Bars Association.She also has extensive experience in domestic and internationalcommercial arbitration and is a member of the Banking and RealEstate Departments of the firm. She assists Austrian and Germanclients in providing legal assistance in matters related to commercialcontracts and corporate law.

Alexandru Lefter

Pachiu & Associates 4-10 Muntii Tatra Street, 5th floorBucharest 1, RO-011022Romania

Tel: +40 21 312 1008Fax: +40 21 312 1009Email: alexandru.lefter@ pachiu.comURL: www.pachiu.com

Alexandru is a partner with Pachiu&Associates. He graduated theLaw School of the Bucharest University in 2004 (J.D. equivalent).He also graduated the Business Law Course of the French-Romanian Institute of Business Law and International CooperationNicolae Titulescu - Henri Capitant (which is a partnership betweenthe Law School of Bucharest and University I - Pantheon Sorbonne).Alexandru is a senior member of the Bucharest Bar Association andmember of the Romanian National Union of Bar Associations. Hisarea of expertise includes commercial, corporate and civil law,mergers and acquisitions and tax. Alexandru is fluent in Romanianand English and conversant in French.

Pachiu & Associates is a Bucharest based business law firm established by Romanian attorneys. The firm currentlyconsists of 22 lawyers plus additional staff comprising paralegals, authorised translators and supportive staff. Thelawyers of the firm are all graduates of leading universities in Romania or abroad. More than half of the lawyers aresenior members of the Bucharest Bar Association. All lawyers are fluent in Romanian and English, and some are fluentin German, French or Spanish. The firm provides for a full range of commercial and corporate legal advice from itsmain office in Bucharest and its secondary office in Cluj-Napoca (west of Romania).

The firm has extensive expertise in matters related to corporate governance, corporate disputes, securities, mergers andacquisitions, insolvency, commercial contracts, offshore and tax structures, labour law, real estate, anti-trust law,intellectual property, banking and project financing, secured transactions, cross-border transactions, public acquisitions,procurement, and strong arbitration and litigation department. Apart from its consistent mergers & acquisitions andcross-border transactions practice, the firm has developed a sound practice in tax, securitisation and real estate,construction, labour and intellectual property. Also the firm has provided assistance to various clients on arbitrationand other ADR proceedings.

The firm maintains a close relationship with some leading multinational law firms and other small and medium-sizedlaw firms from abroad, so as to ensure efficient liaison with important foreign business centres and jurisdictions.

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Chapter 29

Clifford Chance CIS Limited

Russia


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Russia?

The legislation governing international arbitration in Russia is theInternational Commercial Arbitration Act 1993 (hereinafter“ICAA”). The definition of an “arbitration agreement” reads as follows: “Anarbitration agreement is an agreement by the parties to submit toarbitration all or certain disputes which have arisen or which mayarise between them in respect of a defined legal relationship,whether contractual or not. An arbitration agreement may be in theform of an arbitration clause in a contract or in the form of aseparate agreement” (Art. 7 (1) of the ICAA). Thus, the arbitration agreement should:

contain an explicit statement that disputes should besubmitted to arbitration;define the legal relationships and the disputes which shouldbe arbitrated; andspecify the arbitration institution that should resolve thedisputes or refer to ad hoc arbitration.

Under Art. 7 (2) of the ICAA, arbitration agreements must be madein writing. An agreement is deemed to be in writing if it is: (1)made in writing as a document signed by the parties; (2) made byexchange of letters, telex, telegrams or other means oftelecommunication which may be recorded; or (3) made byexchange of statement of claim and defence in arbitral proceedingsin which the existence of an agreement other than in writing isalleged by one party and not denied by the other. Any reference ina contract to a document containing an arbitration clause is deemeda valid arbitration agreement provided that the contract is in writingand the reference is such as to make that clause part of the contract(Art. 7(2)). It is vital that the arbitration institution be named correctly. Russiancourts often refuse to enforce arbitration agreements on the groundsthat arbitration institutions have not been named precisely (e.g.“Arbitration Court of the Chamber of Commerce and Industry ofthe Russian Federation” instead of the “International CommercialArbitration Court at the Chamber of Commerce and Industry of theRussian Federation”, see Decree No. KG-A40/7725-03 of theMoscow Okrug Federal Arbitrazh (i.e. commercial) Court of 06November 2003).


There are no specific requirements or formalities in Russian law inthis regard.


There are no other specific requirements besides those set outabove. It is, however, advisable to specify:

the language of the arbitration;applicable law;number of arbitrators;place of arbitration; andany pre-arbitral procedure.


Russian courts are reluctant to direct parties to arbitration, if anarbitration agreement is invoked. In some instances the validity ofarbitration agreements has been successfully challenged on thebasis of minor errors in the name of the arbitration institution oralleged lack of authority to enter into the arbitration agreement.


Russian law does not have many rules in this regard.Art. 158 (2) of the Arbitrazh Procedure Code provides that arbitrazhcourts may adjourn a hearing at the request of both parties if theyhave referred the dispute to a court or a mediator for amicablesettlement of the dispute. Usually Russian courts limit theirassistance in reaching an amicable settlement to a simple statementin subpoenas that the parties may settle the dispute. Russian courts do not take a uniform approach to the enforcementof ADR agreements. In some cases Russian courts treat ADR as apre-trial procedure (Decree No. F03-A59/06-1/709 of the Far-EastOkrug Federal Arbitrazh Court of 18 April 2006), in which case, ifthe court finds that the claimant has submitted its statement of claimwithout using the ADR mechanism prescribed by the agreement itmay decline to consider the claim, terminating the proceedingswithout prejudice (Art. 148 of the Arbitrazh Procedure Code, Art.222 of the Civil Procedure Code). In other cases, i.e. when courts

Timur Aitkulov

Ivan Marisin



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Clifford Chance CIS Limited Russia

do not consider ADR to be a pre-trial procedure, they disregardADR agreements and proceed with examination of the case.


2.1 What legislation governs the enforcement of arbitrationproceedings in Russia?

The enforcement of arbitration agreements is governed by theICAA and two Russian procedural codes: the Arbitrazh ProcedureCode (‘arbitrazh’ denoting the Russian commercial courts) and theCivil Procedure Code. The Arbitrazh Procedure Code applies to theresolution of commercial disputes and, as a rule, the parties to theproceedings are sole proprietors or legal entities. The CivilProcedure Code primarily deals with cases where at least one of theparties to the proceedings is a natural person.


International arbitration in Russia is governed by the ICAA,whereas the provisions on domestic arbitration are set out in thePrivate Arbitration Tribunals Act 2002. There are a number ofimportant differences in these acts:

Arbitrators. In international commercial arbitration with itsseat in Russia there are no special requirements onarbitrators’ qualifications, whereas in domestic arbitrationthe sole arbitrator or the chairman of the tribunal must be aperson with a degree in law. Arbitration agreement. In domestic arbitration, anarbitration agreement in a contract whose terms are definedby one of the parties in template or other standard form andhave been accepted by the other party by acceding to thecontract on the whole (accession contract) is valid if thearbitration agreement is concluded after the grounds arose onwhich the claim is based. The ICAA does not contain anysuch provisions.Appointment procedure. If the parties to domesticarbitration have agreed that disputes are to be resolved by asole arbitrator without stipulating any default procedure andthen fail to agree on an arbitrator, the dispute is heard by acourt. Domestic disputes will also be heard by the courts ifthe arbitrators appointed by the parties fail to appoint thechairman of the tribunal, unless otherwise agreed by theparties.


The ICAA is based on the UNCITRAL Model Law (in its original1985 version). There are, however, some differences between theICAA and the Model Law, namely:(a) Regarding determination of whether or not an arbitration is

international, the ICAA, unlike the Model Law, does notcontain sub-clauses (b) and (c) of Art. 1, and therefore doesnot take into account the place of arbitration or the placewhere a substantial part of an obligation is to be performed.Nor does the ICAA take into consideration the place withwhich the subject matter of the dispute is most closelyconnected. At the same time the ICAA states that disputesbetween Russian entities where at least one of them is acompany with foreign investment may be resolved by way ofinternational arbitration.

(b) The ICAA prescribes that the functions of appointing andchallenging arbitrators referred to in Art. 11 (3), (4), 13 (3)and 14 are to be performed by the President of the RussianFederation Chamber of Commerce, whereas the Model Lawstipulates they are to be performed by a competent court.

(c) Art. 28 of the ICAA is the same as Art. 28 of the Model Lawsave for one minor difference. In the ICAA, clause 3, on thepossibility of deciding cases ex aequo et bono, is omitted.Consequently Russian-based arbitrations cannot be decidedon such a basis or as amiable comositeur.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Russia?

The ICAA is the primary source of mandatory rules with respect toarbitration proceedings sited in Russia (e.g. Art. 7, prescribing thatan arbitration agreement must be in writing; Art. 16, envisaging theautonomy of an arbitration agreement; and Art. 31, regarding theform and content of awards). However, such mandatory rules arenot numerous. International treaties to which Russia is a party (e.g. the New YorkConvention 1958) also are an important source of such mandatoryrules.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Russia? What is thegeneral approach used in determining whether or not adispute is “arbitrable”?

Generally all commercial and other civil law disputes are arbitrable.As a general rule, public law disputes, e.g. disputes arising out ofpublic misfeasance, may not be referred to arbitration. Accordingto Art. 33 of the Insolvency (Bankruptcy) Act 2002, bankruptcycases, including any monetary claims against a debtor which ariseafter bankruptcy has commenced, are not arbitrable in Russia. Disputes related to subsoil use are generally of a public nature andtherefore cannot be referred to arbitration. However, since January2000, parties may agree on arbitration of property disputes in thissphere. Disputes in matters related to rights to immovable property situatedand/or registered in Russia are also not arbitrable (Decree No. 207/04of the Presidium of the Supreme Arbitrazh Court of 11 May 2005). There is also a view that certain other matters, such as disputes withregard to state property, are not arbitrable.


Under Art. 16 of the ICAA, arbitrators and arbitral tribunals areentitled to rule on their own jurisdiction, including on the issue of theexistence or validity of the arbitration agreement. An arbitral tribunalmay rule on a plea that the tribunal does not have jurisdiction either asa preliminary question or in the award on the merits.

3.3 What is the approach of the national courts in Russiatowards a party who commences court proceedings inapparent breach of an arbitration agreement?

According to Art. II of the New York Convention 1958 and Russianlaw, the courts are to leave such claims without consideration(terminate without prejudice) and are to refer the parties to

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arbitration, unless they find that the arbitration agreement is invalid,inoperative or incapable of being performed. Russian law does not impose any specific sanctions forcommencement of court proceedings in apparent breach of anarbitration agreement.


A court may deal with the issue of jurisdiction under the followingcircumstances: if an arbitral tribunal rules that it has jurisdictionover a dispute as a preliminary question and a party requests, withinthirty days after having received notice of such ruling, thecompetent court to decide on the matter. The jurisdictional issuecan also be invoked in enforcement and setting aside proceedings.Under Russian law, a decision that the arbitral tribunal lacksjurisdiction cannot be challenged in the courts (Art. 16 (3) of theICAA).

3.5 Under what, if any, circumstances does the national law ofRussia allow an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

Russian law provides that an arbitral tribunal may have jurisdictionover individuals or entities which are not signatories to anarbitration agreement only if all the parties explicitly agree on this,including the non signatory itself (Art. 7 of the ICAA).

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Russia and what is thetypical length of such periods? Do the national courts ofRussia consider such rules procedural or substantive, i.e.,what choice of law rules govern the application oflimitation periods?

As a general rule, under the Civil Code of the Russian Federation(“Civil Code”) the limitation period is three years starting from theday when a person becomes aware of or ought to have becomeaware of the infringement of his right. This rule applies to themajority of contractual and tort claims. There exist several exceptions where limitation periods vary anddepend on the type and subject matter of the claim in question. Forexample, (i) claims seeking application of the consequences ofinvalidity of a void transaction are subject to a three-year limitationperiod (starting on the day performance of the transactioncommenced), and (ii) claims for invalidation of a voidabletransaction and application of the consequences of its invalidity aresubject to a one-year limitation period (generally starting on the daywhen the claimant became aware or ought to have become aware ofthe circumstances that were grounds for the claim).Russian courts consider the rules prescribing limitation periods tobe substantive. In accordance with Art. 1208 of the Civil Code, thequestion of limitation periods is governed by the law of the countryapplicable to the relevant material relationship (lex causae).



As a general rule, the law applicable to the substance of a dispute in

international cases is determined by agreement of the parties. If parties fail to choose the applicable law, a Russian court or anarbitral tribunal venued in Russia will follow the conflict of lawrules that it finds applicable (Art. 28 (2) of the ICAA), which as amatter of practice are usually Russian conflict of law rules.The parties’ choice of applicable law may be overruled bymandatory rules of the Russian Federation or another country (seequestion 4.2).


According to Art. 1192 (1) of the Civil Code, certain Russianmandatory laws apply irrespective of the parties’ choice of law orchoice of law made in accordance with the relevant conflict of lawrules. Such mandatory laws may specifically indicate that theyprevail over the applicable law provisions (e.g. Art. 1209 (2) of theCivil Code, regarding the written form of certain transactions).Alternatively, a court or an arbitral tribunal may apply suchmandatory laws owing to their importance inter alia for protectionof the rights and legitimate interests of parties to civil law relations(e.g. Art. 169 of the Civil Code, regarding the invalidity oftransactions that violate public morals). It is worth noting that Art. 1192 (2) of the Civil Code envisages thepossibility for a court or an arbitral tribunal to apply mandatorylaws of a foreign state that has close connection with the particularrelationship, irrespective of the law otherwise applicable. Art. 1210 (5) of the Civil Code provides that if it follows from theaggregate of circumstances in a case which existed as of the time ofselection of the applicable law that a contract was actuallyconnected with only one country, the parties’ selection of the law ofanother country shall not affect the applicability of imperativenorms of the country with which the contract is actually connected.According to Art. 1193 of the Civil Code, applicable foreign lawprovisions should not be applied if so doing would be contrary toRussian public policy. Where necessary, Russian law rules are to beapplied instead. It should be noted that there exists no statutorydefinition of public policy. Case law describes it quite broadly,allowing for court discretion in deciding whether or not publicpolicy may be invoked in a particular case (Decree of the MoscowOkrug Federal Arbitrazh Court dated 14-21 June 2007 No. KG-A40/5368-07 in case No. A40-3513/07-40-34, Decree of the EastSiberia Okrug Federal Arbitrazh Court dated 22 January 2007 incase No. A58-5134/06-F02-7285/06-S2). Recognition and enforcement of an award in Russia may be deniedif a court finds it would violate Russian public policy (Art. 244 ofthe Arbitrazh Procedure Code).


Art. 36 (1) (1) of the ICAA stipulates that the court may denyrecognition and enforcement of an award if the underlyingarbitration agreement “is invalid under the law to which the partieshave subjected their arbitration agreement and, if the parties failedto indicate the law applicable to the arbitration agreement, underthe law of the country where the award was made”. The sameprovision is contained in Article IX(1)(a) of the New YorkConvention 1958. In line with the above provisions, in cases where parties have failedto choose the law applicable to their arbitration agreement, theICAC usually applies Russian law (lex loci arbitri) when resolving

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questions of the validity and legality of the arbitration agreement(e.g. cases of the International Commercial Arbitration Court at theChamber of Commerce and Industry of the Russian Federation(“ICAC”) No. 11/2007 dated 7 February 2008 and No. 2/1995dated 05 November 1997). There is case law where Russian courtsruling on recognition and enforcement of an award have applied thelex loci arbitri principle in assessing the validity of an underlyingarbitration agreement (Decree of the Volgo-Vyatsk Okrug FederalArbitrazh Court No. A43-13260/02-15-28isp dated 24 April 2003).At the same time there is case law where, with an arbitral award stillpending, the courts have applied Russian law, even though this didnot coincide with lex loci arbitri (Decree of North-West OkrugFederal Arbitrazh Court No. A05-7905/01-515/23 dated 21 June2003, Decree of the Urals Okrug Federal Arbitrazh Court No. F09-6663/07-S5 dated 14 August 2007).We are also aware of instances where Russian courts resolving theissue of the validity of an arbitration agreement governed by foreignlaw (on the basis of which an award was already rendered) referredto the imperative rules of Russian law as subsidiary law (Decree ofthe North-West Okrug Federal Arbitrazh Court in case No. A21-2499/03-C1 dated 23 September 2005).



There are few limits to the autonomy of the parties to selectarbitrators in international arbitrations. In domestic cases at least one arbitrator must be a lawyer (seequestion 2.2 above). Russian state court judges cannot serve asarbitrators. Parties, however, are free to agree on the arbitrators’ qualificationsor specify additional requirements thereon (Art. 11 of the ICAA).


The default procedure is set forth in Art. 11 of the ICAA. Theappointing authority is the President of the Russian Chamber ofCommerce and Industry. It should be noted that with regard to disputes pending before thetwo most well-known Russian arbitration courts - the ICAC and theMaritime Arbitration Commission (“MAC”) (both are under theumbrella of the Chamber of Commerce and Industry of the RussianFederation) - the appointment procedure is governed by the rules ofthese arbitration institutions. In the ICAC, with a three-member arbitral tribunal, the claimantand the respondent each select one arbitrator (§17 (3) of the ICACRules). The chairman of the arbitral tribunal by default is appointedby the Presidium of the ICAC (§17 (7) of the ICAC Rules), and notby the co-arbitrators. The Presidium of the ICAC also appoints solearbitrators. It also makes appointments for parties that have failedto appoint an arbitrator or have specifically requested that anarbitrator be appointed by the Presidium. The Presidium of theICAC may, unless the parties have agreed otherwise, also appointan arbitrator on behalf of a party if the powers of the arbitrator whowas previously appointed by that party terminated (§20 (1) of theICAC Rules). In MAC proceedings the functions of the appointing authority areperformed by the President of the MAC.

If the Presidium of the ICAC or the President of the MAC fail tomake an appointment, a party may refer this issue to the Presidentof the Russian Federation Chamber of Commerce and Industry.


Russian courts are in no position to intervene in the selection ofarbitrators. They may, however, in the course of considering anapplication to have an award set aside, assess the appointmentprocedure as a potential basis for annulment of the award. Russiancourts may also deny enforcement of an award if they establish thatan arbitrator was directly or indirectly interested in the outcome ofthe case (item 24 of the Letter of the Supreme Arbitrazh Court No.96 dated 22 December 2005).


There is a general requirement that arbitrators must be impartial andindependent, but there are no legal definitions of these terms in theICAA. Art. 12 (2) of the ICAA permits a party to challenge an arbitrator ongrounds of reasonable doubt as to the arbitrator’s impartiality andindependence. The ICAC Rules also require that arbitrators must be impartial andindependent and cannot be a party’s representative (§3 (1) of theICAC Rules). The ICAC Rules also provide that any personaccepting the post of arbitrator must disclose to the ICAC anycircumstances that may affect his/her independence and/orimpartiality with regard to the dispute in question. Arbitrators arealso required to disclose immediately such circumstances if theyarise in the course of proceedings (§3 (2) of the ICAC Rules).

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Russia?

According to Art. 12 of the ICAA, any circumstances likely tocause justified concerns about any potential arbitrator’s impartialityor independence with regard to any dispute in the examination ofwhich he/she might participate must be disclosed by the potentialarbitrator. Arbitrators are also required to give immediate notice ofany such circumstances if they appear in the course of arbitralproceedings. The ICAC Rules contain more detailed provisions in this respect(§3 (2)). In particular, potential arbitrators are required to make adeclaration regarding the above circumstances in a form approvedby the ICAC Presidium. Arbitrators must also disclose personalinformation about themselves (including educational backgroundand current and former places of work) to the ICAC, andsubsequently such information may be disclosed to the parties upontheir request. As Russian courts have the power to assess the procedure ofappointment of arbitrators who are to consider applications toenforce or cancel awards (see question 5.3 above), certaincircumstances that potential arbitrators must disclose can be foundin the case law. In particular, it was recently ruled that arbitrators should discloseinformation about their participation in conferences sponsored byany of the parties to arbitration (Decree of the Moscow OkrugFederal Arbitrazh Court dated 26 July, 13 August 2007 No. KG-A40/6775-07 and Ruling of the Supreme Arbitrazh Court dated 10

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December 2007 No. 14955/07). Arbitrators should also disclose ifthey have been appointed by a party too frequently (Decree of theMoscow Okrug Federal Arbitrazh Court dated 13 October 2008 No.KG-A40/9254-08).

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Russia? If so, do those laws or rules apply toall arbitral proceedings sited in Russia?

Pursuant to Art. 19 of the ICAA, parties are free to agree on theprocedure to be followed in arbitral proceedings. In the absence ofsuch agreement the arbitral tribunal may, subject to the provisionsof the ICAA, conduct the arbitration in the manner it deemsappropriate. The ICAA does contain a number of provisions thatapply to arbitral proceedings venued in Russia which are generallysimilar to Chapter V of the UNCITRAL Model Law; specifically,these are the rules on equal treatment, determination of procedure,place of arbitration, commencement of arbitral proceedings,language, statement of claim and defence, hearings and writtenproceedings, default of a party, expert evidence and court assistancein taking evidence. These provisions apply only to internationalarbitrations venued in Russia, not to domestic arbitrations. Alsorules of relevant arbitration institutions (e.g. ICAC, MAC) apply toproceedings before these institutions.

6.2 In arbitration proceedings conducted in Russia, are thereany particular procedural steps that are required by law?

Under Art. 23 of the ICAA, within the period of time agreed by theparties or determined by the arbitral tribunal, the claimant muststate the facts supporting its claim, the points at issue and the reliefor remedy sought, and the respondent must state its defence inrespect of these particulars, unless the parties have agreed otherwiseas to the required elements of such statements. The parties maysubmit with their statements all documents they consider relevant ormay refer to documents or other evidence they will submit. If theclaimant, without demonstrating sufficient cause, fails to submit itsstatement of claim in accordance with Art. 23, the arbitral tribunalterminates the proceedings. There are no other specific procedural requirements.


There are not many rules in this respect. Unless otherwise agreed bythe parties, the arbitral tribunal may, subject to the provisions of theICAA, conduct the arbitration hearings in the manner it deemsappropriate (Art. 19 of the ICAA). The tribunal can decide whether to hold oral hearings or to conductproceedings on the basis of documents and other materials.However, unless the parties have specifically agreed that nohearings are to be held, the arbitral tribunal holds such hearings atan appropriate stage of the proceedings if so requested by a party(Art. 24 (1) of the ICAA). If any party, without demonstrating sufficient cause, fails to appearat the hearing or to produce documentary evidence, the arbitraltribunal may continue the proceedings and render an award on theevidence before it, unless otherwise agreed by the parties (Art. 25(c) of the ICAA). Unless otherwise agreed by the parties, if a party so requests or if the

tribunal considers it necessary, an expert shall, after delivery of hiswritten or oral report, participate in a hearing where the parties havethe opportunity to put questions to him and to present expert witnessesin order to testify on the points at issue (Art. 26 (2) of the ICAA).The ICAC Rules and the MAC Rules provide that the tribunal or acourt reporter is to write up a record of proceedings of hearings.

6.4 What powers and duties does the national law of Russiaimpose upon arbitrators?

The ICAA empowers arbitrators (and/or arbitral tribunals), interalia:

To rule on their own jurisdiction (Art. 16 of the ICAA).Unless otherwise agreed by the parties, to order interimmeasures of protection (Art. 17 of the ICAA). To conduct the arbitration in such a manner as the arbitratorsconsider appropriate, subject to the provisions of the ICAAand unless otherwise agreed by the parties (Art. 19 (2) of theICAA). To order that any documentary evidence be accompanied bya translation into the language(s) agreed upon by the partiesor determined by the arbitral tribunal (according to thegeneral rule, documentary evidence is to be provided in thelanguage of the original) (Art. 22 (2) of the ICAA). To allow a party to amend or supplement its claim during thecourse of the arbitral proceedings, unless the arbitral tribunaldeems it inappropriate to allow such amendment due to adelay in making it (Art. 23 (2) of the ICAA). To continue proceedings and make awards on the evidencebefore them if, without demonstrating sufficient cause: (i)the respondent fails to communicate its statement of defence;and/or (ii) any party fails to appear at a hearing or to producedocumentary evidence (Art. 25 of the ICAA). Unless otherwise agreed by the parties, to appoint one or moreexpert witnesses to report to the tribunal, and to require partiesto give expert witnesses any relevant information or to produceor provide access to any relevant documents, goods or otherproperty for inspection by them (Art. 26 of the ICAA). To request from a competent Russian court assistance intaking evidence (Art. 27 of the ICAA). The chairman of the tribunal may decide alone questions ofprocedure if so authorised by the parties or all members ofthe tribunal (Art. 29 of the ICAA).

The duties of arbitrators and/or arbitral tribunals under Russian lawinclude the following:

Arbitrators must be impartial and independent and discloseany circumstances likely to give rise to reasonable doubts asto their impartiality and independence (Art. 12 (1) of theICAA).Arbitrators must treat the parties with equality and give eachparty the full opportunity to present its case (Art. 18 of theICAA). Disputes must be decided in accordance with the rules of thelaw chosen by the parties as applicable to the subject matterof the dispute. Failing any designation by the parties, thearbitrators and/or arbitral tribunals are to apply the lawdetermined by the conflict of law rules they considerapplicable. In all cases, the terms of the contracts and thetrade usages applicable to the transactions in dispute are to betaken into account (Art. 28 of the ICAA).If, during the arbitral proceedings, the parties settle thedispute, the arbitrators or arbitral tribunal must terminate theproceedings and, if requested by the parties and not objectedto by the arbitrators or arbitral tribunal, record the settlementin the form of an arbitral award on agreed terms (Art. 30 (1)of the ICAA).

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Awards are to be made in writing and signed by thearbitrators. Awards are to include the reasons upon whichthey are based, the decision dismissing or awarding theclaims, the amount of the arbitration fee and the proportionin which it is split between the parties (Art. 31 of the ICAA). Arbitral tribunals or arbitrators upon request of a party shallmake corrections or provide clarification of an award if theyconsider such request to be justified. Upon request of aparty, arbitral tribunals or arbitrators may render anadditional award in respect of claims presented in the arbitralproceedings but omitted from the award, if the tribunalconsiders such request to be justified (Art. 33 of the ICAA). If the parties agree, in particular by reference to theapplicable arbitration rules, the arbitrators or arbitraltribunals shall not disclose any circumstances which havebecome known to them in course of the proceedings.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Russia and, if so, isit clear that such restrictions do not apply to arbitrationproceedings sited in Russia?

Russian law provides for special rules with respect to theappearance of foreign barristers or advocates (i.e. members offoreign bars) before Russian courts. According to the Federal LawNo. 63-FZ, On Attorney’s Activities and Advocacy in the RussianFederation, dated 31 May 2002 (the “Law on Advocacy”), foreignadvocates may provide legal assistance in the Russian Federationon matters of the law of the country from which they come.Furthermore, the Law on Advocacy requires that foreign advocatesmust be registered with a special Russian registry before they canconduct cases in Russian courts. Art. 2 (2) of the Law on Advocacy stipulates that advocates mayrepresent their clients in arbitrations. However, it is not entirelyclear whether the requirements of the Law on Advocacy concerningforeign advocates apply to the foreign advocates partaking inarbitrations. That said, there have been no reported cases where aparty’s representative was denied the right to participate in anarbitral hearing because he/she was a foreign advocate and did nothave the requisite registration.

6.6 To what extent are there laws or rules in Russia providingfor arbitrator immunity?

There are no such rules in Russia.


As a rule, courts cannot intervene in procedural matters of anarbitration until after a final award has been issued. The onlypossibility for courts to intervene during proceedings arises if aparty challenges an interim decision on jurisdiction (see question3.4 above).

6.8 Are there any special considerations for conductingmultiparty arbitrations in Russia (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

Multiparty arbitrations are generally allowed in Russia, althoughthere are no special rules in this regard. In multiparty arbitrations,

the parties on each side must concur in appointing an arbitrator, butif they fail to do so the arbitrator will be appointed for that multi-party by the competent authority (see, e.g., §17 (8) of the ICACRules). In order to involve a third party in proceedings, all of the parties tosuch proceedings must agree to this.The ICAA does not have provisions on consolidation of claims orproceedings. The ICAC Rules have only one provision stating that“if a statement of claim contains claims arising out of severalagreements, it is accepted for consideration provided there is anarbitration agreement that encompasses such claims” (§11 (3) of theICAA). The ICAC usually does not accept statements of claim ifthey are based on more than one contract, even if all the contractscontain identical or similar arbitration agreements and the parties tothe contracts are the same.

6.9 What is the approach of the national courts in Russiatowards ex parte procedures in the context of internationalarbitration?

National courts do not question ex parte procedures in the course ofchallenging or recognition of awards provided that both partieshave had equal opportunities to present their positions.



Under Art. 17 of the ICAA, arbitrators and arbitral tribunals arepermitted to award preliminary relief in respect of the subjectmatter of a dispute in such form as they deem necessary. Thismeans that arbitrators and arbitral tribunals may order, inter alia,that a party be prohibited from disposing of its assets or require aparty to provide a bank guarantee. The ICAC can grant interim relief in the form of interim awards(§36 of the ICAC Rules). An arbitrator does not have to seek theassistance of a court to do so. Under the previous ICAC Rules, notonly the arbitral tribunal but also the President of the ICAC couldorder injunctive relief, meaning that measures of protection couldbe ordered before the arbitral tribunal was constituted. This is nolonger the case. The MAC Rules provide that interim relief can be granted by thePresident of the MAC.


Arbitrazh courts, upon the request of a party, may grant injunctiverelief in support of a pending arbitration in situations where thecourt believes failure to do so could render enforcement of theaward impossible or substantially complicate enforcement or causethe applicant in incur substantial damage. Decisions on allapplications for injunctions are made by courts ex parte. Any partyis entitled to file a motion to lift an injunction. Although notentirely clear, a party may also request injunctive relief in supportof an arbitration that has yet to commence (Informational Letter No.78 of the Supreme Arbitrazh Court of the Russian Federation of 7July 2004).

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Russian courts are reluctant to grant injunctions in support ofarbitration. A party must clearly show that the facts requiringinjunctive relief exist, which makes it very difficult to obtaininjunctions.


Under Art. 17 of the ICAA, an arbitral tribunal may, at the requestof a party, order any party to take such interim measure ofprotection as the arbitral tribunal considers necessary in respect ofthe subject matter of the dispute. Therefore, a literal interpretationof this rule provides that the tribunal is not entitled to order securityfor costs, as this does not relate to the subject matter of disputes. As far as national courts are concerned, though it is provided thatcourts may grant interim relief for any damages (including legalcosts), the courts tend to dismiss applications for security of costs(see, for example, Decree No. A12-12532/03-S47 of the VolgaOkrug Federal Arbitrazh Court of 9 December 2004; Decree No.F08-4725/2004 of the North-West Okrug Federal Arbitrazh Courtof 20 October 2004).


8.1 What rules of evidence (if any) apply to arbitralproceedings in Russia?

General rules on evidentiary matters are included in the ICAA andthe relevant arbitration rules. The tribunal is empowered todetermine the admissibility, relevance, materiality and weight ofany evidence, unless otherwise agreed by the parties (Art. 19 (2) ofthe ICAA). As a general rule, each party must prove thecircumstances to which it refers in its claims or defence.


No specific rules on disclosure are applicable in internationalarbitration in Russia. A tribunal may order that a party discloseparticular documents if they are relevant and admissible. As ageneral rule, a tribunal has no power to order production ofdocuments by a third party that has not been brought into arbitralproceedings and should seek court assistance in this case (seequestion 8.3 below). In most cases arbitrators simply inferappropriate conclusions from a party’s refusal to produce adocument.


An arbitral tribunal or a party with an arbitral tribunal’s approvalmay make a request to a competent Russian court in takingevidence; the courts may fulfil such requests within theircompetence and according to their rules on taking evidence (Art. 27of the ICAA).


There are no disclosure requirements in arbitral proceedings. Partiesare free to agree to the scope and method of disclosure. The onlymandatory requirements are as follows: all statements, documentsand other information submitted to the arbitral tribunal by one partyis to be communicated to the other party; and any expert report orevidentiary document on which the arbitral tribunal relies in makingits decision is to be communicated to the parties (Art. 24 (3) of theICAA). Under Art. 23 (1) of the ICAA a party may submit to thearbitral tribunal any documents it considers relevant.


There are no special provisions on witness testimony. Witnesstestimony is relatively uncommon in Russian arbitrations. As ageneral rule, witnesses must attend the hearings and testify inperson, if so requested by either party. Witnesses are heard withoutbeing sworn in before the tribunal. Parties may agree that witnessesbe cross-examined.

8.6 Under what circumstances does the law of Russia treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

Attorney-client communications are subject to privilege underRussian law. This privilege cannot be waived.

9 Making an Award


The requirements as to the form and content of awards are set forthin Art. 31 of the ICAA, in particular: (a) awards are to be made in writing and signed by the arbitrator

or arbitrators. In arbitral proceedings with more than onearbitrator, the signatures of the majority of the members ofthe arbitral tribunal is sufficient, provided that the reason forany omitted signature(s) is stated therein;

(b) awards are to state the grounds upon which they are based,the relief awarded and the arbitration fees to be paid by theparties; and

(c) awards are to state the date of an award and place ofarbitration.



Arbitral awards cannot be appealed. However, applications may befiled seeking annulment of awards made in Russia. According toArt. 34 of the ICAA, upon application of a party, an arbitral awardmay be set aside by the competent Russian court if the party soapplying furnishes proof that:

a party to the arbitration agreement was under someincapacity, or said agreement is not valid under the

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governing law chosen by the parties (or, in the absence ofsuch choice, under Russian Federation law); the party making the application was not duly notified of theappointment of an arbitrator or of the arbitral proceedings orwas otherwise unable to present its case; the award was made in relation to a dispute not contemplatedby or not falling within the terms of the arbitrationagreement, or contains a decision on matters beyond thescope of the arbitration agreement (where only part of anaward is outside the scope of the arbitration agreement, thenonly that part of the award may be set aside); the composition of the arbitral tribunal or the arbitralprocedure was inconsistent with that agreed by the parties,unless such agreement was in conflict with a provision of theICAA from which the parties cannot deviate; or if the court finds ex officio that:

the subject matter of the dispute is not capable of set-tlement by arbitration under Russian law; orthe award is in conflict with Russian public policy.


No, the parties cannot agree to exclude any basis of challengeagainst an international arbitral award.


The rules on the grounds for challenging arbitral awards which areset forth in the ICAA (Art. 34) and the procedural codes aremandatory, therefore parties cannot opt out of them or change themby agreement.

10.4 What is the procedure for appealing an arbitral award inRussia?

As is stated above (in question 10.1), under Russian law arbitralawards cannot be appealed. A party can file an application seekingthat an award be set aside with the competent court where thearbitral tribunal that delivered the award is located within threemonths from the date the award is received.


11.1 Has Russia signed and/or ratified the New York Conventionon the Recognition and Enforcement of Foreign ArbitralAwards? Has it entered any reservations? What is therelevant national legislation?

The USSR ratified the New York Convention on 24 August 1960,and it came into force on 22 November 1960. Russia is a legalsuccessor of the USSR in respect of all international treaties,including the New York Convention. The Russian Federation has entered the following reservations:

that it will apply the convention only to recognition andenforcement of awards made in the territory of anothercontracting State; andthat with regard to awards made in the territory of non-contracting States, it will apply the convention only to theextent to which those States grant reciprocal treatment.

The general provisions on enforcement of arbitral awards arecontained in the ICAA (Art. 35, 36 et seq.). Some provisions arealso contained in the Arbitrazh Procedure Code (Art. 241-246) andCivil Procedure Code (Art. 409-417). In case of contradiction, theNew York Convention prevails over any Russian law provision.

11.2 Has Russia signed and/or ratified any regional Conventionsconcerning the recognition and enforcement of arbitralawards?

The Russian Federation signed and ratified the Moscow Conventionon the Settlement by Arbitration of Civil Law Disputes Arisingfrom Relations of Economic, Scientific and Technical Cooperation,signed on 26 May 1972. This convention was intended forCOMECON countries and was signed by Bulgaria, Hungary, EastGermany, Mongolia, Poland, the USSR, Romania andCzechoslovakia. This convention has not been denounced by theRussian Federation and still applies in some cases (see, forexample, ICAC award No. 67/1998 of 18 April 2000). Theconvention provides for recognition and enforcement of arbitralawards without any special procedure.The Russian Federation is also a party to the European Conventionon International Commercial Arbitration (1961).

11.3 What is the approach of the national courts in Russiatowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

Generally arbitral awards are enforced by Russian courts.However, there have been cases where Russian courts havedemonstrated an ‘anti-arbitration’ approach, refusing to enforcearbitral awards on purely formalistic grounds or by broadinterpretation of public policy. Russian courts usually dismiss applications for enforcement if thereis a Russian judgment declaring the relevant agreement invalid.There have been cases where, for example, a third party not boundby an arbitration agreement (a shareholder of a party to thearbitration) brought a claim in a Russian court seeking that thecontract on which the claims in arbitration were based be declarednull and void ab initio. The Russian court declared the underlyingcontract void, which had the result that enforcement of the arbitralaward based on that contract was denied on the grounds that itwould contravene public policy.In order to have an award recognised and enforced, a party toarbitral proceedings must file an application for recognition andenforcement of the award in the Russian Federation with therelevant Russian court at the place where the debtor is located, or,if this place is unknown, at the location of the debtor’s assets. Theapplicant must submit the following documents, inter alia, to thecourt, with translations into Russian (if necessary): an original orduly certified copy of the award; an original or duly certified copyof the arbitration agreement; a document certifying that the awardhas come into force, unless it is clear from the award itself; and anoriginal or duly certified copy of the document certifying that thedebtor was notified properly and in due time about the proceedings.

11.4 What is the effect of an arbitration award in terms of resjudicata in Russia? Does the fact that certain issues havebeen finally determined by an arbitral tribunal precludethose issues from being re-heard in a national court and, ifso, in what circumstances?

Under Russian law (Art. 150 of the Arbitrazh Procedure Code, Art.

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220 of the Civil Procedure Code), courts are to terminateproceedings with prejudice if there exists an arbitral award in adispute between the same parties, concerning the same subjectmatter and on the same grounds, unless such award has beensuccessfully challenged or its enforcement has been refused.

12 Confidentiality

12.1 Are arbitral proceedings sited in Russia confidential?What, if any, law governs confidentiality?

Though there are no confidentiality requirements under the ICAA,some arbitral institutions (such as the ICAC) have special rules.Under §25 of the ICAC Rules, all arbitrators, reporters and otherofficers of the ICAC are obligated not to disclose confidentialinformation about cases pending before the ICAC which coulddamage the parties. Hearings are not public unless otherwiseagreed by the parties (§32 of the ICAC Rules). The arbitral awardsare published in redacted form (i.e. the names of the parties andother relevant details are deleted) without the permission of theparties.


Yes, such information can be used in subsequent proceedings.


Arbitration proceedings are not confidential unless otherwiseagreed by the parties, e.g. by reference to the relevant arbitrationrules.



While there is no explicit limit on the types of remedies available inarbitration, remedies must meet the requirements on arbitrability,i.e. only civil law remedies can be sought. For instance, a partycannot seek that a normative act be held invalid, because suchdisputes are of a public law nature and as such cannot be the subjectof arbitration. Under Russian law damages suffered should be compensated in fullunless otherwise agreed by the parties or provided for by law.Russian law does not envisage punitive damages, and an awardgranting this type of damages under applicable foreign law willlikely be held to contravene Russian public policy by the competentcourts of the Russian Federation.


Under Russian law (Art. 395 of the Civil Code) arbitrators mayaward interest at the average bank rate at the location/residence ofthe creditor until the amounts awarded are paid by the respondent.


The general principle in this regard is that the costs should followthe event (i.e. the successful party will be entitled to its costs).Costs recoverable include the arbitrator’s fees and expenses, thefees and expenses of the arbitration institution, and the reasonablelegal costs and expenses of the successful party. In practice,arbitrators and arbitration tribunals tend to reduce the amount oflegal costs awarded.


Awarded amounts are not subject to any special tax; however, theymay be subject to VAT or income tax depending on the particularcircumstances.


14.1 Has Russia signed and ratified the Washington Conventionon the Settlement of Investment Disputes Between Statesand Nationals of Other States (1965)?

The Russian Federation signed the Washington Convention on 16June 1992 but has not ratified it.

14.2 Is Russia party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Russia is in the process of ratifying the Energy Charter Treaty. The Russian Federation is also party to over 50 BITs that allowrecourse to arbitration. Usually those treaties provide forarbitration in various institutions at the claimant’s option. The mostcommon is the Arbitration Institute of the Stockholm Chamber ofCommerce (BITs with Spain, Austria, Germany, the UnitedKingdom, South Africa, Turkey, etc.). Some BITs provide for adhoc arbitration under UNCITRAL Rules (BITs with Argentina,Cuba, Canada, Japan, Spain, Italy, Norway, Greece, Mongolia,Egypt, etc.). There are also BITs with some countries stipulating that disputesmay be resolved under the ICSID Additional Facility Rules (inparticular, the Czech Republic, Slovakia, Romania, Japan, Yemen,Syria, Ethiopia, Argentina, Algeria and Armenia).

14.3 Does Russia have standard terms or model language thatit uses in its investment treaties and, if so, what is theintended significance of that language?

Starting from 2001, the standard terms for bilateral investmenttreaties are prescribed by Russian Government Resolution No. 456of 9 June 2001, On the Execution of Bilateral Investment TreatiesBetween the Government of the Russian Federation and theGovernments of Foreign Countries. This resolution approves thestandard BIT terms to be used in negotiations. According to theseterms, disputes that remain unresolved for a period of 6 months maybe referred to ad hoc arbitration under UNCITRAL Rules or ICSIDRules (if the Washington Convention is effective for both parties) or

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the ICSID Additional Facility Rules. However, ultimately suchterms are to be decided in the course of negotiations with therespective country.

14.4 In practice, have disputes involving Russia been resolvedby means of ICSID arbitration and, if so, what has theapproach of national courts in Russia been to theenforcement of ICSID awards and how has thegovernment of Russia responded to any adverse awards?

To date, Russia has not been involved in ICSID arbitrations.

14.5 What is the approach of the national courts in Russiatowards the defence of state immunity regardingjurisdiction and execution?

Russian arbitrazh courts and courts of general jurisdiction treat statejurisdictional immunity differently. Under Art. 251 of the Arbitrazh Procedure Code: A foreign State,which acts jure imperii, enjoys jurisdictional immunity. Though thewording of this article is not entirely clear, commentaries on theArbitrazh Procedure Code in the main suggest that Art. 251introduces the principle of “functional immunity”. Art. 401 of the Civil Procedure Code provides for absoluteimmunity of a foreign State unless otherwise provided for by treatyor federal law. However, to date no relevant federal law has beenpassed. Under both codes execution of foreign judgments and arbitralawards against a State is allowed only with the consent of thecompetent authorities of that State. There was a remarkable precedent in a ruling by the Presidium ofthe Supreme Arbitrazh Court in which it stated that “An arbitrationagreement concluded by parties that do not have the authority towaive jurisdictional immunity and which has been signed in breachof the established procedure cannot be considered legal grounds fora State to waive jurisdictional immunity” (Decree No. 9982/05 ofthe Presidium of the Russian Federation Supreme Arbitrazh Courtof 12 December 2005).

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Russia? Are certain disputescommonly being referred to arbitration?

One of the most important trends is more detailed regulation ofprecisely which disputes are arbitrable.In particular, as mentioned in question 3.1 above, disputes inmatters related to rights to immovable property situated and/orregistered in Russia are not arbitrable. According to recent caselaw, such disputes are not arbitrable if they involve or entail theneed for state registration of a right to the immovable property inquestion. On the other hand, disputes involving pecuniary claimsrelated to immovable property (e.g. recovery of outstanding rent)are arbitrable.Yet another important trend is a closer cooperation between theChamber of Commerce and Industry of the Russian Federation andthe Russian Federation Supreme Arbitrazh Court in the area ofcommercial arbitration. To this end the two bodies established ajoint working group in late 2008.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Russia, such as pending or proposedlegislation that may substantially change the lawapplicable to arbitration?

Following amendments introduced to the UNCITRAL Model Lawin 2006, currently corresponding amendments to the ICAA arebeing considered. In late 2008 a draft law on mediation was submitted to the lowerchamber of Russia’s parliament, the State Duma. The bill isconsidered a further step in the development of ADR in Russia.

AcknowledgmentThe authors would like to thank Julia Popelysheva, associate in theLitigation & Dispute Resolution group at Clifford Chance Moscow,for her assistance in preparing this chapter.

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RussiaClifford Chance CIS Limited

Ivan Marisin

Clifford Chance CIS Limitedul. Gasheka 6125047 MoscowRussian Federation

Tel: +7 495 258 5050Fax: +7 495 258 5051Email: [email protected]: www.cliffordchance.com

Ivan Marisin is Senior Partner and Head of the Litigation andDispute Resolution Practice at Clifford Chance’s Moscow office. Hespecialises in all aspects of litigation and arbitration, domesticallyand internationally. He has acted in some of the most high-profiledisputes involving construction, tax, banking, contractual andcommercial issues, share buyout offers, recovery of debts andassets, restructuring, bankruptcy and repossession. Mr. Marisin is amember of the Moscow Advocates Association and also an arbitratorat the ICAC (International Commercial Arbitration Court at theChamber of Commerce and Industry of the Russian Federation),VIAC (Vienna International Arbitral Center of the Austrian FederalEconomic Chamber) and other institutions. Recommended by Legal500 2009, Chambers Global 2009, and PLC Which Lawyer 2008.Mr. Marisin is a frequent speaker at seminars and conferences andan author of numerous publications. He is also an editor of theRussian journal “Arbitration”.

Timur Aitkulov

Clifford Chance CIS Limitedul. Gasheka 6125047 MoscowRussian Federation

Tel: +7 495 258 5050Fax: +7 495 258 5051Email: [email protected]: www.cliffordchance.com

Partner in the litigation, arbitration and dispute resolution practice ofthe Moscow office of Clifford Chance. Mr. Aitkulov specialises ininternational arbitration, cross-border and domestic litigation,regulatory and white-collar issues. He has acted as counsel inStockholm, London, Moscow and Zurich in a significant number ofinternational arbitrations involving nuclear energy, oil and gas,mining and general commercial matters. He has participated incomplex multi-jurisdictional white-collar cases and cross-borderlitigation. Mr. Aitkulov is a member of the Moscow Bar and aneditor of the Stockholm International Arbitration Review.Recommended by Legal 500 2009 and Chambers Global 2009.

Clifford Chance is a leading international law firm that has been advising domestic and international clients on allaspects of corporate and financial activity in Russia since 1991.

With integrated teams of lawyers qualified under Russian, English, German and U.S. law, the team in Moscow worksclosely with experts across the firm’s global network of offices to provide commercially sound legal advice.

Areas of expertise include Litigation & Dispute Resolution, Banking & Finance, Capital Markets, Corporate / M&A, RealEstate and Tax, as well as sector specialisation in Consumer Goods and Retail, Energy and Natural Resources, HealthCare, Infrastructure and PPP, Manufacturing, Mining and Telecommunications.

Clifford Chance has 30 offices in 21 countries worldwide. The firm has a highly impressive track record and adviseson the most challenging deals.

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Chapter 30


Karanovic & Nikolic

Serbia


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Serbia?

The legal requirements of an arbitration agreement are stipulated bythe Serbian Law on Arbitration and they are the following:

the type of dispute to which an arbitration agreement refersought to be capable of settlement before arbitration. Thedispute is capable of settlement before arbitration if it is apecuniary dispute which concerns the rights that parties canfreely dispose of, except for disputes that are reserved to theexclusive jurisdiction of courts;an arbitration agreement has to be in written form;the parties must have necessary qualities and capacities forconclusion of such an agreement; andan arbitration agreement must not be concluded by a partyacting under duress, fraud or error.

An arbitration agreement shall be null and void if the above saidconditions are not fulfilled.


There are no special requirements or formalities required since theLaw on Arbitration prescribes that each natural or legal person(including the State, its instrumentalities, institutions andcompanies in which a State has a property interest) may agree toarbitration. No requirements are prescribed in case an individualperson is a party to a commercial transaction which includes anarbitration agreement.


Besides conditions specified in question 1.1 there are no otherelements that have to be incorporated in an arbitration agreement.


The court whereto the claim is filed in a matter which is the subjectof an arbitration agreement, shall (upon a motion of a partysubmitted prior to engagement in the discussion of the subjectmatter of the dispute) dismiss the claim for lack of jurisdiction,

unless it finds that the agreement is obviously null and void orunenforceable.


If the parties in the ongoing procedure jointly propose that thedispute can be solved through mediation, the court shall direct theparties to mediation and suspend the proceedings. However, thecourt shall schedule a trial if the parties fail to settle the disputethrough mediation within 30 days.If the parties have previously agreed that they shall resolve alldisputes that might arise through mediation, but one of the partiesfiles the claim before the court anyway, the court will not dismissthe claim for lack of jurisdiction.


2.1 What legislation governs the enforcement of arbitrationproceedings in Serbia?

The Law on Arbitration (Official Gazette of the Republic of SerbiaNo 46/2006) governs the enforcement of arbitration proceedings.


Yes, the Law on Arbitration governs both domestic andinternational arbitration proceedings.


Yes, the Serbian Law on Arbitration is based on the UNCITRALModel Law, and there are no significant differences between thegoverning law and the Model Law.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Serbia?

The Serbian Law on Arbitration (The Official Gazette of theRepublic of Serbia, No. 46/2006) prescribes that the provisions ofthis law are applicable to arbitration and arbitration proceedingswhen the place of arbitration is on the territory of the Republic of

Milan Lazic

Ivana Rackovic

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Karanovic & Nikolic Serbia

Serbia. The Law states that the parties may stipulate otherwisewhen the international arbitration is in question. However, the Lawexplicitly provides that provisions of this law, which the partiescannot exclude, must be abided when the arbitration is seated inSerbia.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Serbia? What is thegeneral approach used in determining whether or not adispute is “arbitrable”?

All property disputes about rights the parties are free to disposewith, except those in which the law explicitly provides thejurisdiction of the national court, can be brought before thearbitration court.The national courts have exclusive jurisdiction over the disputes onownership and possession rights on immovable property; disputesarisen out of lease of immovable property or usage right onimmovable property; all that for the case the immovable property islocated in Serbia.


Yes, an arbitrator is permitted to rule on the question on his or herown jurisdiction.

3.3 What is the approach of the national courts in Serbiatowards a party who commences court proceedings inapparent breach of an arbitration agreement?

For the case the party commences the court proceedings in apparentbreach of an arbitration agreement, i.e. the subject matter of thedispute is agreed to be subject of the arbitration, the national courtshould dismiss the claim and find itself without jurisdiction for thecase. Please note that a court could not dismiss the claim ex officio, butupon the objection of the opponent. The objection should be filedbefore entering the dispute. Additionally, there is an exemption to this rule. In the case the courtfinds (upon objection of one party) that the arbitration agreement isobviously null and void or unenforceable, the court may continuedeciding upon the merits of the case.


In case the party decides to challenge the jurisdiction of the arbitraltribunal, it can initiate the proceedings before the arbitrators, orbefore the court. Once the party receives the decision onjurisdiction from arbitrators, it may file the claim to the competentcourt, within 30 days from the receipt of the claim. Arbitral tribunal may decide either to order the stay of theproceedings while the case is pending before the court, or tocontinue the proceedings and render the arbitral decision while thecase is pending before the court.

3.5 Under what, if any, circumstances does the national law ofSerbia allow an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

Serbian Law on Arbitration does not contain provisions whichspecify circumstances for allowing an arbitral tribunal to assumejurisdiction over individuals or entities which are not themselvesparty to an agreement to arbitrate.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Serbia and what is thetypical length of such periods? Do the national courts ofSerbia consider such rules procedural or substantive, i.e.,what choice of law rules govern the application oflimitation periods?

The Serbian Law on Obligations (Official Gazette of SFRY, No.29/78, 39/85, 45/89, 57/89 and Official Gazette of FRY, No. 31/93,22/99, 23/99, 35/99, 44/99) contains the Statute of limitation rules.These provisions are mandatory and their application cannot beavoided. However, those are not procedural rules, but substantiveones. Therefore, the party may initiate arbitration proceedingsregardless to any limitation period, but if the limitation period for acertain claim expired the arbitration court may reject the claim uponthe objection of the respondent that the claim is time barred. Thegeneral limitation period according to the Law on Obligations is 10years. Special limitation periods are 1 year (for periodical claimssuch as the claim for interest or other special claims such as chargesfor the supply of electricity, gas, water, heating, garbage, postoffice, etc.) and 3 years (for claims between corporate bodies in thesphere of sale of goods and services, damage compensation claims,insurance claims, etc.). As stated above, national courts of Serbiaconsider these rules as substantive.



Under the condition that at least one of the parties is a foreign, theparties are free to choose the law applicable to the substance of thedispute. If the parties did not choose such law, the Serbian Law onInternational Private Law (Official Gazette of SFRY, No. 43/82,72/82, Official Gazette of FRY, br. 46/96 and Offcicial Gazette ofRS, No. 46/2006) contains rules on law applicable to relations withinternational element.


The law chosen by the parties will not apply if the effects of suchlaw would be contrary to the basis of the social system determinedby the Constitution of the Republic of Serbia. In these situations thelaws of Serbia will prevail. Furthermore, for contracts which referto the immovable property, the law of the state whereby thisproperty is located will be exclusively applicable.


The Law on Arbitration of the Republic of Serbia stipulates that the

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parties are free to choose the rules which will govern the formation,validity, and legality of arbitration agreements. Unless the partiesagreed otherwise, the Laws of Serbia will apply. If the agreementis not valid according to the chosen law, or the Serbian law (if theparties did not choose the other law to be applicable), this is areason for nullification of an arbitral award before the court.



An arbitrator must be a person with complete capacity. Anarbitrator cannot be a person convicted to an unconditional prisonsentence.


Yes, there is. If the parties’ chosen method for selecting arbitratorsfails, the appointing body determined by the parties (an individualor the institution) should elect the arbitrator. If there is noappointing body, or the appointing body fails to elect the arbitrator,the court shall appoint the arbitrator upon the request of the party.Against the court’s resolution on appointing an arbitrator, the appealis not allowed.


Yes, as explained under the previous question.


An arbitrator has to be impartial and independent towards theparties and the subject matter of the dispute. A person proposed tobe an arbitrator is obliged to notify parties on all facts that canchallenge his impartiality or independence, before taking the dutyof an arbitrator. An arbitrator is obliged without delay to inform theparties on all facts that can challenge his impartiality orindependence, if such facts arise at a later stage. Impartiality and independence are the basis for challenging thearbitrators. The court decides upon such challenge, unless theparties have agreed otherwise.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Serbia?

According to the Law on Arbitration, the person proposed for anarbitrator is obliged to disclose the facts which could create a doubtin his or her impartiality or independence, before his or heracceptance of a position. Pursuant to the same law, an arbitrator isobliged to immediately disclose the same facts which occurred afterhis or her appointment. Furthermore, the Rules of the Foreign Trade Court of Arbitration atthe Serbian Chamber of Commerce provides that the person to beappointed must disclose any circumstance which could create adoubt in his or her impartiality or independence.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Serbia? If so, do those laws or rules apply toall arbitral proceedings sited in Serbia?

The parties are free to agree on the rules of the procedure ofarbitration, or to consign to certain arbitration rules. For internationalarbitrations, the parties are free to agree on a foreign procedural law tobe applied. If the parties have not agreed on the rules or law governingthe procedure of arbitration, the arbitral tribunal is free to conduct theproceedings in the way the tribunal find is expediently. The Law on Arbitration provides general rules that need to be appliedto all arbitrations sited in Serbia. These rules refer to the following: (i)the arbitral tribunal should allow each party to reply to all evidencesand statements of the opponent (equity of the parties); (ii) the partyneeds to be timely informed on the date of the hearing and allpleadings, evidences, witness reports and information that one partyhas served to the tribunal, need to be served to the opponent; and (iii)the party who fails to object without delay to misapplication ofdiscretionary rules proscribed by the Law on Arbitration, looses theright to object in a later stage of the proceedings.

6.2 In arbitration proceedings conducted in Serbia, are thereany particular procedural steps that are required by law?

Besides the general rules mentioned in question 5.1 which areapplicable in all arbitration proceedings sited in Serbia, there are noparticular procedural steps that are required by law.


The Law on Arbitration leaves the parties to determine all rules onthe hearing. If the parties have not agreed otherwise it is left to thetribunal to decide if the hearing should take place or not. Still, ifone party requests a hearing, arbitral tribunal will conduct ahearing, unless the parties have agreed to exclude the hearing.

6.4 What powers and duties does the national law of Serbiaimpose upon arbitrators?

An arbitrator has to have qualities that parties have agreed upon andneeds to act in good faith and efficiently. An arbitrator is obliged tobe impartial and independent towards the parties and the subject ofthe dispute. The person proposed for an arbitrator is obliged, beforeaccepting the duty of an arbitrator, to inform the parties on allrelevant facts that may cause concerns on his impartiality orindependence. Once being appointed, an arbitrator is obliged toinform parties (without delay) on circumstances that may causesuspicion in his impartiality or independence, for the case thesecircumstances appear after the appointment.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Serbia and, if so, is itclear that such restrictions do not apply to arbitrationproceedings sited in Serbia?

The Serbian Law on Advocacy (Official Gazette of FRY, No. 24/98,26/98, 69/2000, 11/2002, 72/2002) provides that the attorney -foreign citizen who is not inscribed in the attorney registeraccording to the Serbian law, may perform advocacy in a particularcase under the condition of reciprocity.

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It is not clear if the above restriction from the Law on Advocacyapplies to arbitration proceedings in Serbia.

6.6 To what extent are there laws or rules in Serbia providingfor arbitrator immunity?

The Constitution of the Republic of Serbia regulates the immunityof judges. However, neither the Constitution nor any otherregulations regulate the immunity of arbitrators.


There are many procedural issues that are left for the parties toagree upon. If the parties fail to do so, the person or institutiondetermined by parties should decide upon these issues. If there isno such person or institution, or if such person or institution fails todecide upon requested issues, it is left to the court to decide uponthem. The procedural issues, upon which the court should decide,refer to the number of arbitrators and the procedure for appointingor challenging arbitrators. If the parties fail to agree on cancellation of an arbitrator, theunsatisfied party can request from the court to reach a decision ontermination of duties to arbitrator, if the arbitration is ad hoc. In theinstitutional arbitrations, this issue is resolved by the arbitrationinstitution. The unsatisfied party needs to prove that an arbitrator isnot capable of performing its duties, or that an arbitrator is failingto perform its duties within reasonable time.Furthermore, the court has jurisdiction over certain objections if theparties bring this procedural issue before the court. The followingobjections are: (i) objection on the existence and validity of anarbitration agreement; (ii) objection on the jurisdiction of thearbitral tribunal; and (iii) objections on exceeding the scope ofauthorities of arbitral tribunal.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Serbia (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

The Law on Arbitration does not specify any special considerationsfor conducting multiparty arbitrations. The Law does not providespecific provisions on consolidation of different arbitrationproceedings. There are no stipulated circumstances under which athird party can intervene or join arbitration proceedings.

6.9 What is the approach of the national courts in Serbiatowards ex parte procedures in the context of internationalarbitration?

There is no relevant published practice in this regard.



According to the Law on Arbitration, an arbitrator is permitted to

award a so called preliminary measure. The Law on Arbitrationdoes not specifically quote or limit the possible types of preliminarymeasures, hence an arbitrator could render any kind of preliminarymeasures, such as: prohibiting the party from disposing of chattels,as well as seizing such chattels from the party, prohibiting the partyfrom disposing of his immovable property, seizure of cash orsecurities from the party, etc. However, it is the opinion of legal theory that the preliminarymeasure issued by an arbitrator cannot be enforced; therefore suchpreliminary measure is effective only if it is voluntarily obeyed bythe party. This also means that the court will refuse the enforcementof the preliminary measure issued by an arbitrator, i.e. an arbitratorcannot rely on the assistance of the court in this regard.


The Law on Arbitration provides that the party (before or during thearbitration proceedings) is entitled to request the regular court toissue the preliminary measure and that the court is entitled to awardsuch measure. This also goes for arbitration agreements which referto arbitrations seated in foreign countries.The preliminary measure should be requested from the court in casethe party has reason to believe that the measure will not bevoluntarily obeyed by the opposite side. This should not have any effect on the jurisdiction of the arbitrationtribunal.


There is no existing published court practice in this regard.


The Serbian International Private Law/Law on Arbitration allowsthe court/arbitral tribunal to order security for costs. However, theLaw on Arbitration does not prescribe any closer conditions for thesecurity of costs, while the International Private Law prescribescases when the court should refuse to order security for costs. Oneof those reasons is reciprocity.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Serbia?

No rules of evidence apply to arbitral proceedings in Serbia.


The Serbian system is not familiar with the concept of disclosure ofdocuments/discovery.

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The Serbian system is not familiar with the concept ofdisclosure/discovery.


It is our understanding that Anglo-Saxons’ systems are familiar withthe disclosure/discovery concept, while the continental systems donot recognise such practice.


The Law on Arbitration applies to witness testimony. According tothe Law, witnesses are interrogated without taking an oath. TheLaw does not exclude cross-examination.

8.6 Under what circumstances does the law of Serbia treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

All documents presented during the arbitral proceeding should notbe disclosed to any third parties. However, all documents providedby one party as evidence in the proceedings shall be disclosed to theopposite party with no limitations.

9 Making an Award


An arbitral award should be made in writing and should be signedby an arbitrator. Arbitration tribunal renders the award upondeliberation whereby all arbitrators should be present, unlessotherwise stipulated by the arbitration agreement. All decisionsmust be made by majority vote of the panel, unless otherwisestipulated by the arbitration agreement.An arbitral award must consist of introduction, judgment, costs ofarbitration and explanation (unless explanation is excluded by theagreement).



The parties are not entitled to appeal an arbitral award. The partiescan only file the claim to the court for nullification of the arbitralaward. The grounds for nullification of the arbitral award are thefollowing:

if the arbitration agreement is not valid according to the lawagreed between the parties or according to the law ofRepublic of Serbia;if the party against whom the award was rendered was notduly informed on appointment of the arbitrator or arbitral

proceedings or for some other reason was not able toparticipate in the proceedings; if the award refers to the dispute not comprehended by thearbitral agreement or the award has exceeded the scope ofarbitral agreement;if the arbitral tribunal or arbitral proceedings were not inaccordance with the arbitral agreement or the Law onArbitration; andif the award is based on the false testimony of witness orexpert or it is based on the forged document; if the award wasrendered due to the criminal act of the arbitrator or the party,but only if such reasons are proved by the final courtjudgment.


The parties cannot exclude any basis of challenge against an arbitralaward.


The parties cannot expand the scope of the challenge beyond thegrounds available in national laws.

10.4 What is the procedure for appealing an arbitral award inSerbia?

As stated above, the appeal against an arbitral award is notpermitted. On the other hand, the claim for nullification of an arbitral awardcan be filed within 3 months from the day the plaintiff was servedwith the award. The procedure for nullification of the award isregulated by the Civil Procedure Code of the Republic of Serbia.


11.1 Has Serbia signed and/or ratified the New York Conventionon the Recognition and Enforcement of Foreign ArbitralAwards? Has it entered any reservations? What is therelevant national legislation?

The Republic of Serbia has ratified the New York Convention onthe Recognition and Enforcement of Foreign Arbitral Awards.Serbia has entered 3 reservations:(i) Serbia will apply the Convention only to recognition and

enforcement of awards made in the territory of anothercontracting State.

(ii) Serbia will apply the Convention only to differences arisingout of legal relationships, whether contractual or not, that areconsidered commercial under the national law.

(iii) Serbia will apply the Convention only to those arbitralawards which were adopted after the entry into effect of theConvention.

Relevant national legislation is the Law on Ratification of theConvention on Recognition and Enforcement of Foreign ArbitralAwards; International Private Law and Law on Arbitration.

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11.2 Has Serbia signed and/or ratified any regional Conventionsconcerning the recognition and enforcement of arbitralawards?

The Republic of Serbia is a signatory to the European Conventionon Arbitration (1961).

11.3 What is the approach of the national courts in Serbiatowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

There is not much published court practice in this regard. In ourexperience the courts tend to recognise and enforce arbitrationawards when all conditions prescribed by the law are met.However, court proceedings for recognition and enforcement ofarbitral awards are time consuming.

11.4 What is the effect of an arbitration award in terms of resjudicata in Serbia? Does the fact that certain issues havebeen finally determined by an arbitral tribunal precludethose issues from being re-heard in a national court and, ifso, in what circumstances?

According to the Serbian Civil Procedure Code, the court shalldismiss the claim if it was already adjudicated with a final courtdecision. Taking into account that the domestic arbitral award hasthe legal power of the final court decision, it should stop the sameissue from being re-heard before the regular national court. As faras the foreign arbitral awards are concerned, in case the same issueends up before the regular court, the court should stay theproceedings until the procedure for recognition of foreign arbitralaward is ended.

12 Confidentiality

12.1 Are arbitral proceedings sited in Serbia confidential?What, if any, law governs confidentiality?

Arbitral proceedings sited in Serbia are confidential. This is ageneral rule for arbitration proceedings and there are no laws in theRepublic of Serbia that exclusively regulate confidentiality.


Yes, if the subsequent proceedings are led before the court or anyother public body and the court/public body demands informationby official channels. This also goes for the procedure forrecognition and enforcement of arbitral awards, where disclosure ofinformation from arbitral proceedings is necessary.


Proceedings are not protected by confidentiality if disclosure ofproceedings is necessary to protect public interests and demands orfor the purposes of other proceedings before the court/public body.



The types of remedies are limited with public policy, i.e. arbitrationcannot award remedies, which are against the public policy of theRepublic of Serbia, such as punitive damages.


Types of interest depend on the substantive law applicable inarbitration proceedings, provided that interest rates are not againstthe compulsory provisions of the Republic of Serbia or publicpolicy. The Serbian Law distinguishes default interest rate andinterest rates provided by the contract between parties.


The costs of arbitration are apportioned between the parties,proportionally to their success in the dispute.


Generally, an arbitral award is not subject to tax.


14.1 Has Serbia signed and ratified the Washington Conventionon the Settlement of Investment Disputes Between Statesand Nationals of Other States (1965)?

Yes, Serbia has signed and ratified this.

14.2 Is Serbia party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Yes it is.

14.3 Does Serbia have standard terms or model language that ituses in its investment treaties and, if so, what is theintended significance of that language?

Serbia does not have standard terms or model language in itsinvestment treaties.

14.4 In practice, have disputes involving Serbia been resolvedby means of ICSID arbitration and, if so, what has theapproach of national courts in Serbia been to theenforcement of ICSID awards and how has thegovernment of Serbia responded to any adverse awards?

There is no court practice in Serbia in this regard.

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Ivana Rackovic

Karanovic & NikolicLepenicka 7BelgradeSerbia

Tel: +381 113 094 246Fax: +381 113 094 223Email: [email protected]: www.karanovic-nikolic.com

Membership in Professional Societies: Registered as an attorney atthe Belgrade Bar Association; IBA member.Key Qualifications: Ivana joined Karanovic & Nikolic in January2005. She advises clients on all aspects of dispute resolution as aHead of Dispute Resolution Department. Ms. Rackovic has beenengaged in numerous complex commercial disputes in Serbia, inMontenegro and in Bosnia & Herzegovina. Ms. Rackovic also hassignificant experience in international commercial arbitrations.Prior to joining the firm Ms. Rackovic worked for five years in VMunicipal Court Belgrade. In January 2005 she was proposed forJudge by Higher Council of Justice, but she resigned and joined aprivate sector. Her invaluable court experience and private practiceknow how presents valuable assets to Karanovic & Nikolic DisputeResolution Department.Languages: Serbian - mother tongue; English - excellent (reading,speaking and writing).

Milan Lazic

Karanovic & NikolicLepenicka 7BelgradeSerbia

Tel: +381 113 094 263Fax: +381 113 094 223Email: [email protected]: www.karanovic-nikolic.com

Membership in Professional Societies: Registered as an attorney atthe Belgrade Bar Association.Key Qualifications: Mr. Milan Lazic joined Karanovic & Nikolic inJune 2007. He advises clients on all aspects of litigation, disputeresolution and arbitration. Mr. Lazic has been engaged in numerouscomplex commercial cases in Serbia, Montenegro and Bosnia &Herzegovina. Mr. Lazic also has significant experience ininternational commercial arbitrations.Prior to joining the firm Mr. Lazic worked for three years in theCommercial Court in Belgrade as an assistant judge. His invaluablecourt experience and private practice know how presents valuableassets to Karanovic & Nikolic Dispute Resolution Department.Languages: Serbian - mother tongue; English - excellent (reading,speaking, writing).

Karanovic & Nikolic is a full service commercial law firm currently having 60 lawyers practicing in Serbia, Montenegroand Bosnia and Herzegovina. Practice areas include corporate, M&A, privatisation, banking and finance, real property,competition, labour and employment, tax, environment, intellectual property and dispute resolution. Karanovic &Nikolic Dispute Resolution Department believes in achieving high effectiveness by investing adequate time andresources into understanding our clients’ business and thorough analysis of all details relating to each potential orexisting contentious matter. We understand that contentious matter, although undesirable, must be handled in amanner consistent with the client’s interests, business needs and strategy.

The KN Dispute Resolution Department also believes that the synergy of legal specialists in different legal areas iscritical to achieve maximum protection of clients’ interests. Our interdisciplinary approach to commercial disputesenables us to address contracts, labour and employment, construction and project finance, enforcement of foreignjudgments, intellectual property protection, as business concerns, not just elements of trial strategy.

Finally, KN Dispute Resolution Department believes that nothing but the rule of law must decide and prevail. We willalways be at the forefront of the daily battle to build strong institutions, together with others interested in this samegoal. We pay the utmost attention that this principle is never compromised. This is in the interest of the professionand certainly in the interest of our clients.


14.5 What is the approach of the national courts in Serbiatowards the defence of state immunity regardingjurisdiction and execution?

By entering the investment treaty, Serbia is waiving its right to stateimmunity.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Serbia? Are certain disputescommonly being referred to arbitration?

Commercial disputes are most commonly being referred toarbitration. The state agencies apply the arbitration clause also.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Serbia, such as pending or proposedlegislation that may substantially change the lawapplicable to arbitration?

There is a trend of wider contracting arbitration as a way ofresolving disputes. The only institutional arbitration in Serbia hasbeen divided in domestic and foreign arbitration by the SerbianChamber of Commerce. The Foreign Court of Arbitration bySerbian Chamber of Commerce is receiving around 30 cases peryear, and the duration of arbitration is about one year.



Chapter 31

White & Case s.r.o.

Slovakia


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of the Slovak Republic?

Arbitration agreements are regulated under Act No. 244/2002, onArbitration Proceedings (the “Arbitration Act”). In addition to thegeneral conditions for the validity of contracts, such as the free willand capacity of the parties and certainty of the content of theagreement, arbitration agreements must have a written form. Therequirement that an arbitration agreement be in writing is met if thearbitration is agreed by telefax or other telecommunication meansby which the content of the arbitration agreement and the identityof the parties to such agreement can be preserved. Failure tocomply with this requirement may be remedied by a later jointdeclaration of the parties in front of the arbitration tribunal.The arbitration agreement may take the form of a separate agreementor it may be included in the underlying contract as an arbitrationclause. The arbitration clause is separable from the underlyingcontract and does not have to be governed by the same law. The arbitration agreement is independent of the main contract. Asa result, unless agreed otherwise, the arbitration agreement surviveseven if the parties terminate the underlying contract. Similarly, ifthe underlying contract is invalid, the arbitration agreement remainsvalid, unless the grounds of invalidity affect the arbitrationagreement as well.


Slovak law does not provide for any such special requirements.


In addition to the statutory requirements, an arbitration agreementshould determine other aspects of an arbitration such as the scope ofthe arbitration, court of arbitration, number of arbitrators, selectionprocess and criteria for the arbitrators’ appointment, language of thearbitration, applicable arbitration rules and governing law.


The courts respect valid arbitration agreements and refuse to hear

disputes where such an agreement was concluded. Since there arevery few statutory requirements for the validity of arbitrationagreements, the courts very rarely declare arbitration agreementsinvalid.


Besides the arbitration, Slovak law recognises the concept ofmediation as an alternative way of dispute resolution, which isregulated under Act No. 420/2004 Coll., on Mediation. Thesettlement which is agreed among the parties to the mediation isbinding for the participating parties. If the settlement has the formof a notarial deed or is approved before a court, it constitutes a legalground for a warrant of enforcement. Act No. 99/1963 Coll., on Civil Proceedings (the “Civil ProcedureCode”) encourages the parties to a dispute to reach a settlementprior to the commencement of court proceedings. The courts areobliged to encourage the parties to reach a settlement even in thecourse of the court proceedings, in which such settlement would notcontradict the nature of the disputed matter. A settlementsanctioned by the court has the effect of a final and binding courtdecision. The court may recommend that the parties resolve theirdisputes through mediation.


2.1 What legislation governs the enforcement of arbitrationproceedings in the Slovak Republic?

The enforceability of arbitration agreements is governed by (i) theCivil Procedure Code, (ii) the Arbitration Act, (iii) the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards and (iv) Act No. 233/1995 Coll., On CourtExecutors and Execution Activities (the “Act on Execution”).


Yes. Article 1 (a) of the Arbitration Act governs both domestic andinternational arbitration proceedings. There are minor differencesin the manner of enforcement of foreign arbitration awards (seeSection 11 below).

Miriam Galandová

Marek Staronv



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White & Case s.r.o. Slovakia


The Arbitration Act was adopted in 2002, and was, to a large extent,based on the UNCITRAL Model Law.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in the SlovakRepublic?

Mandatory rules govern international arbitration proceedings onlyto a limited extent. These rules include, without limitation, the formof the arbitration agreement, requirements for the arbitrator,grounds for the termination of arbitrator’s position, the written formand content of the arbitration award, the grounds and period forappeal of an arbitration award and the rules for the recognition orenforcement of domestic and foreign arbitration awards.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of the SlovakRepublic? What is the general approach used indetermining whether or not a dispute is “arbitrable”?

The following types of disputes can not be subject to arbitrationproceedings:(i) disputes regarding the creation, amendment, or termination

of an ownership right and other rights in rem to immovableproperty;

(ii) disputes regarding personal status (e.g., restriction of thelegal capacity of a natural person);

(iii) disputes related to enforcement proceedings; (iv) disputes that emerged in the course of bankruptcy and

restructuring proceedings;(v) consumer contracts which restrict other means of dispute

resolution than arbitration; and(vi) matters in which the dispute may not be resolved by

settlement.


The Arbitration Act provides that the arbitration tribunal is empoweredto rule on its own authority. Such authority includes the right toaddress any objections with respect to the existence and validity of thearbitration agreement. However, a party to the arbitration proceedingsmay object to the decision of the arbitration tribunal within thejurisdiction of a civil court (see question 3.4 below).

3.3 What is the approach of the national courts in the SlovakRepublic towards a party who commences courtproceedings in apparent breach of an arbitrationagreement?

If a party to an arbitration agreement files an objection against thecommenced court proceeding as its first act in that court proceedingdue to the existence of an arbitration agreement, the court shallterminate the court proceedings. In all other circumstances thecourt will continue in the court proceeding despite the existence ofan arbitration agreement between the parties.If any party disputes the validity of the arbitration agreement, the

court suspends the civil proceedings until the dispute is resolved bythe relevant arbitration tribunal.


In addition to the possibility mentioned in question 3.3 the courtshall assume its jurisdiction if it finds out that (i) under the law ofthe Slovak Republic the matter may not be subject to an arbitrationagreement, (ii) the arbitration agreement is invalid or non-existent,(iii) the matter is beyond the agreed scope of the arbitrationproceeding or (iv) the arbitration tribunal refuses to hear the matter.If any party disputes the validity of the arbitration agreement, thecourt suspends the civil proceedings until the dispute is resolved bythe relevant arbitration tribunal.

3.5 Under what, if any, circumstances does the national law ofthe Slovak Republic allow an arbitral tribunal to assumejurisdiction over individuals or entities which are notthemselves party to an agreement to arbitrate?

If the original parties to an arbitration agreement have not excludedthe arbitration applicability to their legal successors, an arbitrationtribunal may assume its jurisdiction over the original parties legalsuccessors. A party to arbitration proceedings can raise an objection against thejurisdiction of the arbitration tribunal. If the arbitration tribunalaccepts its jurisdiction, the objecting party can appeal to the court.The appeal must be filed within 30 days from the receipt of thearbitration tribunal’s ruling on its jurisdiction. The civil courts can address the issue of the jurisdiction of thearbitration tribunal in the event that a party to the arbitrationproceedings files a claim against the arbitration award on thegrounds of lack of jurisdiction or competence (see question 10.1).

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in the Slovak Republic andwhat is the typical length of such periods? Do thenational courts of the Slovak Republic consider such rulesprocedural or substantive, i.e., what choice of law rulesgovern the application of limitation periods?

Act No. 40/1964 Coll., Civil Code and Act No. 513/1991 Coll.,Commercial Code, provide limitation periods for matters regulatedunder Slovak substantive law. The majority of arbitration proceedingsunder Slovak law would fall under the Commercial Code where thegeneral limitation period is four years. For disputes under the CivilCode, a general limitation period of three years applies. The limitationperiod will only be taken into account if the obliged party objects tothe lapse of the period before the arbitration tribunal. The limitation periods are considered as substantive rules. Underthe Rome Convention, the law applicable to the contract governsalso the limitation periods.



The Slovak Republic is a contracting state to the Rome Conventionon the Law Applicable to Contractual Obligations (“RomeConvention”).

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Under the Rome Convention, the agreement shall be governed bythe law chosen by the parties. To the extent that the law applicableto the agreement has not been chosen, the agreement shall begoverned by the law of the country to which it is most closelyconnected. Such country is the country in which the party who isto effect the performance which is characteristic of the contract,has, at the time of the conclusion of the contract, its habitualresidence or central administration (or principal place of business inspecific circumstances).In the event that the subject matter of the contract is a right toimmovable property or the right to use the immovable property, itis presumed that such agreement is connected to the country inwhich the immovable property is situated. Specific rules apply for the carriage of goods where the law of thecountry in which the carrier has its place of business and where thecontract was signed, is also the country of loading/discharge orprincipal place of the consignor.The Rome Convention does not apply to the legal status, wills,arbitration agreements, trusts, obligations under bills of exchange,cheques and promissory notes, agent principal relationship andlimitations for insurance contracts. The applicable law for theforegoing issues is determined under Act No. 97/1963 Coll., thePrivate International Act. With respect to the law of obligations, if theparties have not chosen the applicable law, the legal relationship shallbe regulated by the law whose application corresponds to thereasonable regulation of such relationship. The proprietary rights shallbe regulated by the law of the country in which the object is located.


The Rome Convention provides for two types of mandatory ruleswhich may prevail over the law chosen by the parties. The first type includes private law rules. If the parties choose aforeign law in a situation in which all of the relevant elements of thecontract are connected to one country only, under Article 3 (3) ofthe Rome Convention the mandatory provision of law of thatcountry must be applied. The second type includes public law rules. If the contract is to beregulated under foreign law, the public norm rules of a country towhich the situation has a close connection may be applied if suchcountry requires the application of such rules (Article 7(1) of theRome Convention). In considering whether the effect shall begiven to such rules, the courts shall take into account the nature andpurpose of such rules and consider the consequences of theirapplication or non-application.


Arbitration agreements are outside the scope of the RomeConvention. Under the Arbitration Act, the formation, validity andlegality of an arbitration agreement is determined by the law underwhich the arbitration agreement was executed.



The parties may freely select arbitrators, however, according to the

basic conditions imposed by the Arbitration Act, arbitrators (i) mustbe at least 18 years of age, (ii) must have full legal capacity and (iii)may not have committed any wilful criminal acts. In addition, thecandidate must have the necessary expertise for the performance ofarbitrator’s duties and must not be in a position which woulddisqualify him/her from being an arbitrator (e.g., conflict ofinterest).


In an arbitration with three arbitrators, each party shall appoint onearbitrator and the two arbitrators thus appointed shall appoint thethird arbitrator who shall be the chair. If a party fails to appoint anarbitrator within fifteen (15) days from the request to do so by theother party or if the two arbitrators fail to agree on the thirdarbitrator within thirty (30) days of their appointment, upon therequest of one of the parties, the appointment shall be made by aselected party (natural or legal person) or the court. In an arbitration with more than three arbitrators, a proceduresimilar to the three-arbitrator tribunal shall be used.In an arbitration with a sole arbitrator, if the parties are unable toagree on the arbitrator, upon the request of one of the parties, he/sheshall be appointed by a selected individual or the court.


The court may only intervene in the selection of the arbitrators uponthe request of a party following the failure to appoint the arbitratorsby application of the method chosen by the parties or if the partieshave not chosen the method for selection of the arbitrators.


As a general rule, the arbitrators must be independent. The lack ofindependence of an arbitrator constitutes grounds for the annulmentof the arbitration award by the court.Any arbitrator who accepts the nomination for arbitrator is obligedto execute his/her function impartially and with due care. Parties can also object to the partiality of the arbitrators by anapplication to the court, unless they have agreed upon a specificprocedure for raising objections regarding an arbitrator’s partiality.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within the SlovakRepublic?

Under the Arbitration Act, any arbitrator is obliged to inform theparties to the dispute without undue delay of any facts which couldraise questions of his/her impartiality or independence. The statute of the most commonly used arbitration institution, theCourt of Arbitration of the Slovak Chamber of Commerce andIndustry, does not include any rules on the disclosure of potentialconflicts of interest for arbitrators. It only provides an option (nota requirement) for arbitrators to step down if there is a risk of non-independence.



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6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in the Slovak Republic? If so, do those laws orrules apply to all arbitral proceedings sited in the SlovakRepublic?

The Arbitration Act contains provisions governing the procedure ofarbitration. Those provisions apply to all arbitral proceedings withthe place of arbitration in the Slovak Republic. The Civil Procedure Code applies as the subsidiary source of law.

6.2 In arbitration proceedings conducted in the SlovakRepublic, are there any particular procedural steps thatare required by law?

The parties to the arbitration proceedings are free to agree on theprocedural steps. Their autonomy is only limited by the statutoryrequirement of the equal treatment of the parties.


The parties are generally free to agree on procedural rules. Theparties may determine the form of the hearing and the rules whichwill apply; in the absence of such agreement of the parties, thearbitration tribunal decides on the applicable procedural rules.Provisions relevant for the conduct of an arbitration hearing includethe following rules: (i) the parties are obliged to fully cooperatewith the arbitration tribunal; (ii) all notifications regarding the oralhearings must be delivered at least 30 days in advance, in order toprovide the parties sufficient time for preparation; and (iii) alldocuments produced by either party or by experts must be deliveredto all affected parties.

6.4 What powers and duties does the national law of theSlovak Republic impose upon arbitrators?

The arbitrators’ powers include in particular (i) the power to issueinterim relief (see question 7.1), (ii) the power to determinearbitration tribunal jurisdiction (see question 3.2), (iii) the power todetermine the procedural rules (e.g. language, place and experts ofthe arbitration) if not agreed by the parties (see question 6.3) and(iv) the power to execute the evidence (see question 8.1). In particular, the arbitrators are obliged to (i) maintainindependence and impartiality, (ii) act with due care and (iii) keepconfidentiality about all of the circumstances of which they becomeaware during the arbitration proceeding, even after the terminationof their functions.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in the Slovak Republicand, if so, is it clear that such restrictions do not apply toarbitration proceedings sited in the Slovak Republic?

As regards the provision of legal services, Slovak law applies theprinciple of territoriality. In general, on the territory of SlovakRepublic legal services (not in-house) may only be provided byholders of a license from the Slovak Bar. An exception applies tolawyers who are registered as attorneys within the European Unionor European Economic Area. Such attorneys may provide legalservices without a Slovak license on a temporary or irregular basis.

These restrictions also apply to provision of legal services inconnection with arbitration proceedings sited in the SlovakRepublic.

6.6 To what extent are there laws or rules in the SlovakRepublic providing for arbitrator immunity?

There is no express immunity for arbitrators. Under certaincircumstances arbitrators could be held liable. It would requireproving that the arbitrator breached his/her legal obligations andthat this breach was in direct link with the suffered damages.Inconsistent interpretation of law would not qualify as a breach.


The jurisdiction of the national court with respect to arbitrationproceedings is rather limited and the court only acts upon anapplication filed by a party or the arbitrators. The most significantrights of the court include: (i) the right to appoint arbitrators (seequestion 5.2); (ii) the right to remove arbitrators (in the event thatthey cease to fulfil any of the requirements laid down by law, seequestion 5.4); (iii) the right to order interim relief (see question 7.2);(iv) the right to enforce the interim relief (see question 7.1); (v) theright to execute evidence (see question 8.3); and (vi) the right toannul the arbitration award (see question 10.1).

6.8 Are there any special considerations for conductingmultiparty arbitrations in the Slovak Republic (including inthe appointment of arbitrators)? Under whatcircumstances, if any, can multiple arbitrations (eitherarising under the same agreement or different agreements)be consolidated in one proceeding? Under whatcircumstances, if any, can third parties intervene in or joinan arbitration proceeding?

The Arbitration Act does not address issues concerning multipartyarbitration or the consolidation of multiple proceedings into one.The consolidation of multiple proceedings should be possiblesubject to the approval of all involved parties.

6.9 What is the approach of the national courts in the SlovakRepublic towards ex parte procedures in the context ofinternational arbitration?

Awards received in ex parte proceedings are enforceable, subject totheir compliance with the Arbitration Act and the conditions set forthin the New York Convention (applicable to foreign awards only).



Unless the parties have agreed otherwise, the arbitration tribunal mayaward interim relief upon the request of any party, if the arbitrationtribunal deems it necessary. The arbitration tribunal may request thatthe civil court enforce the interim relief. The arbitration tribunal mayrequest that the beneficiary of the interim award deposit an appropriatesecurity in respect of the interim relief awarded. However, interimawards are very rarely granted in the Slovak Republic.

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A party may apply to the court for interim relief before thecommencement of the arbitration proceedings. Granting suchinterim relief by a court does not have any effect on the jurisdictionof the arbitration tribunal. After the commencement of the arbitration proceedings, only thearbitration tribunal may order the interim relief.


If the request for interim relief is delivered before thecommencement of the arbitration proceedings, the courts approachthe issue in the same way as requests for interim relief in courtproceedings, e.g. they must asses whether there is a risk that theexecution of the arbitration award may be endangered.


Slovak law provides for the possibility for the arbitration tribunal torequire a security for the costs of the execution of the evidence orwith respect to the award of interim relief. No additional securitycan be ordered.


8.1 What rules of evidence (if any) apply to arbitralproceedings in the Slovak Republic?

The rules of evidence applicable to court proceedings are alsoapplicable in arbitration. The arbitration tribunal may only executesuch evidence which was proposed by the parties to the arbitrationproceedings and the evidence must be executed in the manner thatbest suits the purpose of the proceedings. The principle of freeassessment of the evidence by the arbitration tribunal applies.


The arbitration tribunal has no authority to issue an order towitnesses and experts to provide documents or other evidence. Although the arbitration tribunal has the right to order the parties tothe arbitration proceedings to submit documents or evidence or tocooperate in another manner, there are no effective measures bywhich the arbitration tribunal can enforce compliance with suchrequest. Should a party be passive and not submit the evidence, thearbitration tribunal issues the arbitration award on the basis of theevidence which was submitted.


The arbitration tribunal may request that the court assist thearbitration and execute evidence which cannot be made by the

arbitration tribunal. However, the scope of possible courtintervention has not been tested in the Slovak Republic.


The same rules that apply to domestic proceedings also apply tointernational arbitration proceedings.


The main requirement for witness testimony is to tell the truth andnot to hide any information from the arbitration tribunal. There isno obligation to be sworn in before the tribunal. The cross-examination of witnesses may be allowed by the arbitrationtribunal. Witnesses who are under the obligation to keep theconfidentiality of particular information may only testify uponbeing relieved of such obligation.

8.6 Under what circumstances does the law of the SlovakRepublic treat documents in an arbitral proceeding asbeing subject to privilege? In what circumstances isprivilege deemed to have been waived?

Documents submitted to the arbitration tribunal are not subject toprivilege unless they are privileged under specific laws (e.g., client-attorney documents).

9 Making an Award


The award must be in writing and signed by the majority ofarbitrators. The award must include the name of the court, thenames and surnames of the arbitrators, the designation of all of theparties to the arbitration proceedings and their representatives, theplace of the arbitration proceedings and the date of issuance of theaward, the text of the award, the reasons for the award, unless theparties agreed that it is not necessary and information on thepossibility of filing a claim for the annulment of the award.



An arbitration award may not be appealed at the arbitration tribunalby the parties. It is only possible to file a claim for annulment ofthe award by the court. Pursuant to the Arbitration Act, the groundsfor the annulment of an award are limited to the following: (i) thearbitration award was issued in a matter which (a) may not besubject to arbitration proceedings, (b) had already been lawfullydecided upon by the court or in different arbitration proceedings;(ii) the arbitration clause is invalid and a party duly raised anobjection; (iii) the arbitration award was adopted in a matter fallingoutside the agreed scope of the arbitration clause, and a party to thearbitration proceedings objected to this in the course of thearbitration proceedings; (iv) the person acting on behalf of a party



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was not properly authorised to act on its behalf; (v) the arbitrationaward was adopted by an arbitrator who was expelled fromdeciding the dispute due to his partiality, or his expulsion could notbe achieved by a party in the course of the arbitration through nofault of such party; (vi) the principle of the equal rights of theparties to the arbitration was violated; (vii) there are reasons whichwould entitle the party to apply for a reopening of the case in civilproceedings; (viii) the arbitration award was affected by a crimecommitted by the arbitrator, by the party to the arbitrationproceeding or by the expert; or (ix) the laws of customer protectionwere violated in the arbitration proceedings (a customer isunderstood as a natural person who enters into a contract outside itsbusiness activities). The reasons for a reopening of the case in civil proceedings referredto in point (vii) above include (i) the occurrence of facts, decisionsor evidence which the party could not present in the formerproceedings through no fault on its part, or (ii) the possibility ofexecuting evidence which could not be executed in the formerproceedings, provided that this could have resulted in the adoptionof a more favourable decision for the requesting party. The reasonsfor the extraordinary reopening of proceedings are examined verystrictly and reopening is allowed only under exceptionalcircumstances. In the case of foreign arbitral awards, the courts may refuse theenforcement of the award on the basis of the grounds set forth in theNew York Convention, including the violation of a party’s right tobe properly informed of the particular steps of the arbitrationproceedings.


The parties may only exclude the grounds for annulment referred toin question 10.1(vii) above.


No additional grounds for annulment can be agreed by the parties.

10.4 What is the procedure for appealing an arbitral award inthe Slovak Republic?

The application for an annulment of the arbitration award must befiled with the competent court within thirty (30) days of the deliveryof the arbitration award to the applicant party. The party applyingfor the annulment of the arbitration award may request that thecourt suspend the enforceability of the arbitration award.


11.1 Has the Slovak Republic signed and/or ratified the NewYork Convention on the Recognition and Enforcement ofForeign Arbitral Awards? Has it entered any reservations?What is the relevant national legislation?

The Slovak Republic ratified, without reservations, the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards, which was implemented by Decree No. 74 of 1959and became effective as of 10 October 1959.

11.2 Has the Slovak Republic signed and/or ratified anyregional Conventions concerning the recognition andenforcement of arbitral awards?

The Slovak Republic signed and ratified the European Conventionon International Commercial Arbitration, adopted in 1961 inGeneva, which was implemented by Decree No. 179 of 1964 andbecame effective as of 11 February 1964.

11.3 What is the approach of the national courts in the SlovakRepublic towards the recognition and enforcement ofarbitration awards in practice? What steps are partiesrequired to take?

A Slovak arbitration award about which the parties to the arbitrationagreement have not agreed on a further review by anotherarbitration tribunal is valid upon its delivery to the parties.If the period for the performance of a valid arbitration award hasexpired, the award may become the subject of enforcement.Enforcement of the arbitration award must be effected through anexecutor (a court certified enforcement officer). Should the obligedparty fail to perform the award, the entitled party may apply to theexecutor for enforcement of the arbitration award. The executor mustaddress the court with a request to approve the award enforcement.The same procedure applies to the enforcement of court decisions.Upon review of the fulfilment of the formal requirements, the courtissues a written certificate authorising the executor to perform thearbitration award enforcement. The obliged party may raise anobjection against the enforcement. The competent Slovak court canprevent the enforcement only if (i) there are grounds for thetermination of the execution proceeding according to the CivilProcedure Code or Act on Execution, (ii) the arbitration award wasadopted in a matter which (a) may not be subject to the arbitrationproceedings, or (b) had already been lawfully decided by the courtor in different arbitration proceedings, or (iii) the award requestsperformance which is impossible, illegal, or which is contra bonamores. To recognise a foreign arbitration award, the party must apply forits recognition and submit the original or notarised copy of theforeign arbitration award with its translation into Slovak. Theforeign arbitration award is recognised implicitly by the approval ofits enforcement. The enforcement is performed in the same manneras in the case of a domestic arbitration award.

11.4 What is the effect of an arbitration award in terms of resjudicata in the Slovak Republic? Does the fact thatcertain issues have been finally determined by an arbitraltribunal preclude those issues from being re-heard in anational court and, if so, in what circumstances?

The arbitration award has the effect of res judicata and, therefore,such award corresponds in its effect on the final and bindingjudgment of a court. As a result, it cannot be re-heard oradjudicated by a court subject to exceptional circumstances statedin question 10.1 above.

12 Confidentiality

12.1 Are arbitral proceedings sited in the Slovak Republicconfidential? What, if any, law governs confidentiality?

If not agreed by the parties otherwise, the arbitral proceedings areconfidential. There are no express rules governing the scope of

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such confidentiality. The arbitrators must keep confidentiality untilrelieved of this obligation by the party for whose interest theconfidentiality is being kept.


There is no formal prohibition in the Arbitration Act on referring toinformation disclosed in previous arbitration in the court proceedings.


The parties may agree on the limitation of confidentiality. Certainpublic law rules impact on the scope of the confidentiality. Inparticular, the provisions of criminal law oblige all persons todisclose certain information to public authorities.



The substantive law regulates the limits and types of remedies.Punitive damages are not authorised by Slovak law.


Interest is a matter of substantive law. In this respect, where Slovaksubstantive law governs the merit of the case, arbitrators generallygrant interest for late payment. The default interest rate incommercial disputes is the official rate of the European CentralBank increased by 8% p.a.


The allocation of the costs of the proceedings (including legal fees) isdetermined in the award. Arbitrators have discretion in the ultimateallocation of the arbitration costs. It is common practice that the losingparty bears all of the costs. The arbitrators sometimes reduce the totalamount of the legal fees compensable to the winning party.


An award is not subject to any special tax in the Slovak Republic.General tax rules apply to any income from the source in the SlovakRepublic.


14.1 Has the Slovak Republic signed and ratified theWashington Convention on the Settlement of InvestmentDisputes Between States and Nationals of Other States(1965)?

The Slovak Republic has ratified the Washington Convention on the

Settlement of Investment Disputes between States and Nationals ofOther States and it entered into force on April 8, 1992.

14.2 Is the Slovak Republic party to a significant number ofBilateral Investment Treaties (BITs) or MultilateralInvestment treaties (such as the Energy Charter Treaty)that allow for recourse to arbitration under the auspices ofthe International Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

The Slovak Republic has entered into a number of BITs withdifferent states and into several MITs, including the Energy CharterTreaty. Most of the BITs allow recourse to ICSID.

14.3 Does the Slovak Republic have standard terms or modellanguage that it uses in its investment treaties and, if so,what is the intended significance of that language?

There are no standard terms or model language in the SlovakRepublic investment treaties.

14.4 In practice, have disputes involving the Slovak Republicbeen resolved by means of ICSID arbitration and, if so,what has the approach of national courts in the SlovakRepublic been to the enforcement of ICSID awards andhow has the government of the Slovak Republic respondedto any adverse awards?

Only one case involving the Slovak Republic was resolved bymeans of ICSID arbitration. The Slovak Republic complied withthe ICSID decision.

14.5 What is the approach of the national courts in the SlovakRepublic towards the defence of state immunity regardingjurisdiction and execution?

Slovak law does not grant the Slovak Republic immunity incommercial disputes (subject to exemptions for specific State-owned assets).

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in the Slovak Republic? Are certaindisputes commonly being referred to arbitration?

As a general rule, more complex commercial contracts andcontracts involving a foreign party tend to include an arbitrationclause (usually referring to foreign arbitration). Disputes arising inconnection with larger financings are referred to arbitration.Many new permanent arbitration courts have recently beenestablished; however, the quality of available arbitrators varieswidely and the awards of local arbitration tribunals are relativelyoften of low quality, which discourages the wider use of localarbitration.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in the Slovak Republic, such as pendingor proposed legislation that may substantially change thelaw applicable to arbitration?

No there are not.



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SlovakiaWhite & Case s.r.o.

Marek Staron

White & Case s.r.o.Hlavné námestie 5 811 01 Bratislava Slovakia


Marek Staron is a partner at the Firm’s Bratislava office. He isconsidered to be one of the leading lawyers in Slovakia in the areaof corporate & commercial law according to the independent rankingpublication, Chambers Global. He joined White & Case in 1996.Prior to his relocation to Bratislava, Mr. Staron worked for the Pragueand New York offices of White & Case, where he gainedconsiderable experience in various international commercialtransactions. He has extensive experience in the area of financing,real estate, securities, mergers and acquisitions and corporatematters.He is a leading member of our Slovak dispute resolution team andhas provided a full range of services to many prominent Slovak andforeign corporations and financial institutions on a variety ofdomestic and international arbitration and litigation cases.

Miriam Galandová

White & Case s.r.o.Hlavné námestie 5 811 01 Bratislava Slovakia


Miriam Galandová is a partner at White & Case’s Bratislava office.Miriam joined White & Case in 2003 after a six-year stint inAndersen’s Bratislava office. Her dual economic and legalqualifications enable her to provide seamless advisory services indeals requiring tax, financial and legal analyses. She has been involved in some of the largest arbitration andlitigation proceedings involving Slovak entities and Slovak lawissues. In many cases she represents clients in the pre-disputeanalysis and negotiation stages. She is a member of the DirectTaxation Methodology Commission at the Slovak Chamber of TaxAdvisors and a member of the Association of Chartered CertifiedAccountants (FCCA).

White & Case LLP is a leading global law firm with lawyers in 34 offices in 23 countries. As one of the first US-basedlaw firms to establish a truly global presence, we provide counsel and representation in virtually every area of law thataffects cross-border business. Earlier this year, White & Case was awarded “Law Firm of the Year - Eastern Europe”by the ACQ Finance Magazine in London.

The Bratislava office of White & Case, established in 1991, is perennially acknowledged by the independentbenchmarking publications as one of the leading international law firms in the Slovak Republic. It offers multi-jurisdictional advice and provides legal services to major domestic and international corporations. Our office with 20lawyers and tax advisors has acted as a legal advisor on some of the largest corporate and commercial, financial, taxand real estate projects, including bankruptcy advice, in the Slovak Republic.

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Chapter 32

Jones Day

Spain


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Spain?

Article 9 of the Arbitration Act 60/2003, of December 23, 2003 (theArbitration Act) regulates the requirements and effects of thearbitration agreement. It allows parties to validly enter into anarbitration agreement using new technologies -provided that theparties keep a verifiable written record of their will- and thearbitration agreement by reference.


There are no special requirements beyond the general requirementto have the capacity (under relevant law) to enter into the contract.


The seat of arbitration and the language of the proceedings should atleast be determined within the wording of the arbitration agreement.


Article 9 of the Arbitration Act contains the principle that upholdsenforcement of the arbitration agreement, whenever possible(favour arbitrii). National courts apply it on a regular basis.


According to domestic case law, ADR agreements are not asenforceable as arbitration agreements.


2.1 What legislation governs the enforcement of arbitrationproceedings in Spain?

The Arbitration Act governs the enforcement of arbitrationproceedings in Spain, along with those applicable rules of

arbitration that the parties may have agreed to in the arbitrationagreement.


The Arbitration Act is monist (Article 1 of the Arbitration Act). ItsArticle 3 delimits the application of the Arbitration Act tocontroversies arising from international trade and submitted tointernational commercial arbitration. It also establishes the criteriathat will determine the seat of arbitration in cases involving litigantswith multiple residences.


The Arbitration Act is essentially based on the Model Law andadapted to the Spanish legal system.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Spain?

Articles 1 and 3 of the Arbitration Act establish the mandatoryapplication of its Articles 3, 4, 6, 8, 9 (except paragraph 2), 11, 23and of its Titles VIII and IX, even when the seat of the arbitrationis outside Spain. It also determines the supplementary nature of thisArbitration Act for arbitration proceedings provided for in otherActs.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Spain? What is thegeneral approach used in determining whether or not adispute is “arbitrable”?

Article 2 of the Arbitration Act does not determine objectivearbitrability of matters. Therefore, as a general rule, those rights ofwhich a person can dispose of are arbitrable.


Article 22 of the Arbitration Act precisely defines the separability

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of the arbitration agreement. The arbitrators may rule on their ownjurisdiction, including any objections raised with respect to theexistence or validity of the arbitration agreement or any otherobjection that would prevent the arbitrators from deciding on thesubstance of the case.

3.3 What is the approach of the national courts in Spaintowards a party who commences court proceedings inapparent breach of an arbitration agreement?

The Act 1/2000 of January 7, 2000 on Civil Procedure (the CPA)implements the principle that the judge must determine whetherproceedings are to be stayed at the earliest possible proceduralstage. Its Articles 39 and 63.1 establish a single procedure for thoseparties who challenge the jurisdiction of the court on the basis thatthe matter properly belongs to arbitrators. The procedure must beapplied in conjunction with its Articles 64.1, 248, 404 and 440.1.These provisions establish precise time-limits within which anyapplication for a stay must be made.


Under Article 22 of the Arbitration Act, the arbitrators may rule ontheir own jurisdiction, including any objections raised with respectto the existence or validity of the arbitration agreement or any otherobjection that would prevent the arbitrators from deciding on thesubstance of the case. Article 11 of the Arbitration Act includes aprecise regulation of the objection to jurisdiction.

3.5 Under what, if any, circumstances does the national law ofSpain allow an arbitral tribunal to assume jurisdiction overindividuals or entities which are not themselves party toan agreement to arbitrate?

Unless conditions established under Articles 9.4 and 9.5 of theArbitration Act are satisfied, Spanish law does not afford anarbitration tribunal the power to assume jurisdiction overindividuals or entities, neither of which are party to the arbitrationagreement.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Spain and what is thetypical length of such periods? Do the national courts ofSpain consider such rules procedural or substantive, i.e.,what choice of law rules govern the application oflimitation periods?

Articles 1961 to 1975 of the Civil Code apply as a general rule.Nevertheless, the limitation periods may vary depending on thenature of the dispute. These rules will be qualified as substantive ascourts must analyse the substance of the case to reach a conclusion.



Articles 34.2 and 34.3 of the Arbitration Act determine that the lawapplicable to the substance of the case will be primarily determinedby the arbitration tribunal in accordance with the law chosen by theparties. Failing any designation by the parties, the arbitrators shall

apply the law they consider appropriate. In any event, thearbitrators shall decide in accordance with the terms of the contractand considering the applicable trade usages.


These circumstances are exceptional. Spanish mandatory ruleswould affect those restrictions determined by law on trade secrets,military secrets and professional privileges.


In international arbitration, the arbitration agreement shall be validif it complies with the formal requirements of the rules chosen bythe parties to govern the form of the arbitration agreement, or thoseapplicable to the merits of the dispute, or Spanish law.



The Arbitration Act respects the will of the parties, enabling themto appoint the candidates they consider most appropriate to settletheir dispute. Nevertheless, a late amendment to the Bill stillrequires that arbitrators in domestic arbitrations at law must belawyers in practice, unless otherwise expressly agreed by theparties.


Article 15 of the Arbitration Act determines the method forselecting arbitrators. If the procedure thereby established orotherwise agreed by the parties fails, any of the parties may applyto the competent court -determined by Article 8 of the ArbitrationAct- for the nomination of the arbitrators or, if appropriate, theadoption of the necessary measures for this purpose.


Article 7 of the Arbitration Act develops the principle of judicial co-operation between judges and arbitrators, including the judicialappointment of arbitrators.


Articles 17 and 18 of the Arbitration Act determine the challengeprocedure and whether arbitrators should be changed.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Spain?

Article 17.2 of the Arbitration Act compiles the grounds forchallenging arbitrators. Those are different from the grounds forchallenging ordinary judges and magistrates. The challenge

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procedure is primarily based on the will of the parties. In itsabsence or unless otherwise agreed, arbitrators will decide on theissue. In 2008, the Spanish Arbitration Club published a set ofrecommendations on the independence and impartiality of thearbitrators.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Spain? If so, do those laws or rules apply toall arbitral proceedings sited in Spain?

The Arbitration Act applies equally to domestic and internationalarbitration proceedings. The rules of arbitration institutions are alsoapplicable.

6.2 In arbitration proceedings conducted in Spain, are thereany particular procedural steps that are required by law?

Article 24 of the Arbitration Act contains these limits: the partiesshall be treated with equality and each party shall be given the fullopportunity of presenting his case.


There are no detailed rules governing the conduct of a hearing. Thisis a matter for the parties and the arbitration tribunal to determineon a case by case basis (Articles 25 and 30 of the Arbitration Act).

6.4 What powers and duties does the national law of Spainimpose upon arbitrators?

The Arbitration Act respects party autonomy and ensures that thearbitral tribunal acts expeditiously. The Arbitration Act also allowsthe Chairman of the arbitration tribunal alone -after consultationwith the other members of some and the Parties, as he may considerappropriate- to adopt any procedural decisions that may be deemednecessary in relation to procedural, scheduling or other non-substantive arbitration issues.Article 25 the Arbitration Act provides that the parties are free toagree on the powers exercisable by the arbitral tribunal in relationto the proceedings. Powers conferred upon arbitrators include thedetermination of the admissibility, relevance and usefulness of anyevidence, the manner of taking evidence -including on thearbitrator’s own motion- and its weight and the ordering of interimmeasures (Article 23 of the Arbitration Act).

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Spain and, if so, is itclear that such restrictions do not apply to arbitrationproceedings sited in Spain?

There are no rules restricting the appearance of lawyers from otherjurisdictions in legal matters in Spain.

6.6 To what extent are there laws or rules in Spain providingfor arbitrator immunity?

Beyond the provisions of the Arbitration Act, there are no additionalrules in Spain to that extent.


Under Article 7 of the Arbitration Act ordinary courts of justicecannot decide on the merits of a case submitted to arbitration. Theirintervention is limited to providing judicial assistance to the arbitraltribunal, based on procedural swiftness and limited to the casesexpressly contemplated in the Arbitration Act [Articles 15.4, 15.7and 22 of the Arbitration Act].

6.8 Are there any special considerations for conductingmultiparty arbitrations in Spain (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

Article 15.2 b), last paragraph, and 15.2.c) of said Act regulatemulti-party arbitrations, incorporating the doctrine of equitabletreatment of the parties in the constitution of the arbitral tribunal.

6.9 What is the approach of the national courts in Spaintowards ex parte procedures in the context of internationalarbitration?

The court is empowered to act in support of arbitral proceedings onthe application of a party or the tribunal (Article 23 of theArbitration Act). Any such application to be made ex parte if thematter is urgent or the effectiveness of application (i.e., interimmeasures) may be challenged (Article 733.2 of the CPA. Order ofthe Court of First Instance number 69 of Madrid dated June 28,1999).



Article 37.1 of the Arbitration Act recognises different types ofawards, other than the final one. An award by agreement of theparties or partial awards rendered during the arbitration are allowed.Courts of justice cannot intervene.


Article 11.3 of the Arbitration Act declares that any of the parties tothe arbitration may apply to ordinary courts for precautionarymeasures in support of pending domestic, international and foreignarbitrations; especially, when these measures are intended to beenforced against third parties (Cfr. Order of the Court of FirstInstance number 69 of Madrid dated June 28, 1999). Ordinarycourts have jurisdiction to adopt such precautionary measures, asthis support does not involve or mean waiver of arbitration by theparties.



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Since the Order of the Court of First Instance number 69 of Madriddated June 28, 1999, the promulgation of the CPA (Articles 721 to747) and the entry into force of the Arbitration Act (Articles 11 and23), national courts attend the request for interim measures,provided that the three procedural prerequisites (Article 728 of theCPA: fumus boni iuris, periculum in mora and security) arecomplied with by the requesting party.


Yes it does: Article 728 of the CPA and Article 23.1 of theArbitration Act.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Spain?

Admissible evidence in arbitration means the evidence the partiesare allowed to submit in support of their respective pleadings(Articles 299 to 386 of the CPA). The Arbitration Act implicitlyaccepts any means of evidence agreed by the parties in accordancewith a combination of evidential techniques of the Civil Law andthe Common Law.


Spanish law does not afford an arbitration tribunal power to assumejurisdiction over individuals or entities that are not a party to thearbitration agreement. Arbitration tribunals may only haveauthority to request disclosure of documents from either of theparties to arbitration.


Court assistance may be necessary if disclosure of documents isrequested from third parties, declining to cooperate with thearbitration tribunal (Articles 7, 8 and 33 of the Arbitration Act).


The Arbitration Act respects the party autonomy. Should the partieshave agreed to proceed with discovery or disclosure of documentsbetween themselves and it is deemed as appropriate, the arbitrationtribunal must respect the agreement of the parties.


Unless otherwise agreed by the parties, written witness testimony indomestic arbitration is not as frequent as it may be in some

international proceedings. Usually, oral witness testimony isrendered. Witnesses are requested to promise or be sworn to tell thetruth before the tribunal. Parties’ interrogations and witnessdepositions are flexible. Cross-examination is allowed and alsoflexible.

8.6 Under what circumstances does the law of Spain treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

Spanish mandatory rules would affect those restrictions determinedby law on trade secrets, military secrets and professional privileges.These privileges may only be waived by an express declaration ofboth the parties and competent authorities.

9 Making an Award


Article 34 of the Arbitration Act expressly provides that arbitrationwill be at law, except otherwise expressly authorised by the parties. Unless otherwise agreed by the parties, the arbitrator will render hisaward within a period of six months from either the reception of therespondent’s answer or from the expiry of the time limit granted forthis submission (Article 29 of the Arbitration Act). The arbitrator,at his discretion, may extend this time-limit by two months. TheArbitration Act regulates the deciding vote of the Chairman of theArbitral Tribunal. The Arbitration Act abolishes the need fornotarisation of the award. The award is considered as anenforceable judgment (Article 517.2.2º of the CPA).



Articles 40 to 43 of the Arbitration Act regulate the application toset aside and review of the award. This application is submittedagainst the final award based on the reasons evaluated in Article 41of the Arbitration Act.


No, they cannot.


No, they cannot.

10.4 What is the procedure for appealing an arbitral award inSpain?

The application to set aside shall be made within two months from thedate the applicant party received notification of the award or ofreceiving the decision on the request for its correction, clarification or

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to supplement this award (Article 39 of the Arbitration Act). Althoughchallenged, the award maintains its enforceability. The applicationwill be submitted before the competent court of the place where theaward was rendered (Article 42 of the Arbitration Act).


11.1 Has Spain signed and/or ratified the New York Conventionon the Recognition and Enforcement of Foreign ArbitralAwards? Has it entered any reservations? What is therelevant national legislation?

Spain ratified the 1958 Convention on the Recognition andEnforcement of Foreign Arbitral Awards (the New York Convention)without reservations (Article 46 of the Arbitration Act).

11.2 Has Spain signed and/or ratified any regional Conventionsconcerning the recognition and enforcement of arbitralawards?

Spain has ratified the 1961 European Convention on InternationalCommercial Arbitration (the Geneva Convention) (Article 46 of theArbitration Act).

11.3 What is the approach of the national courts in Spaintowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

Article 46 of the Arbitration Act refers to the regulation of the NewYork Convention coordinated with the Geneva Convention. Boththe recognition and the enforcement will follow the procedureestablished in the CPA.

11.4 What is the effect of an arbitration award in terms of resjudicata in Spain? Does the fact that certain issues havebeen finally determined by an arbitral tribunal precludethose issues from being re-heard in a national court and, ifso, in what circumstances?

Article 43 of the Arbitration Act provides that final awards have theeffects of res judicata.

12 Confidentiality

12.1 Are arbitral proceedings sited in Spain confidential? What,if any, law governs confidentiality?

Article 24.2 of the Arbitration Act regulates the confidentiality ofarbitration.


Unless otherwise agreed by the parties, it cannot be relied on insubsequent proceedings.


There are two sets of circumstances: (i) the agreement of theparties; and (ii) the remittal of the proceedings to ordinary courts

(i.e., seeking court assistance of the proceedings or court control ofthe award).



Remedies should comply with both mandatory legal requirementsand the respective pleadings of the parties during the course of thearbitration.


In arbitration, the applicable legal rates are taken into account andallocated on a singular basis.


Unless otherwise agreed by the parties, Article 37.6 of theArbitration Act provides that the arbitrators shall decide in theaward on the allocation of costs, including the fees and expenses ofthe arbitrators and of counsel and the costs -if anyof the institution(Article 241 of the CPA).


An arbitral award may be subject to earnings-related tax, but thepayment of tax is a personal matter for the party to whom damagesare paid.


14.1 Has Spain signed and ratified the Washington Conventionon the Settlement of Investment Disputes Between Statesand Nationals of Other States (1965)?

Spain has signed and ratified the Washington Convention on theSettlement of Investment Disputes between States and Nationals ofOther States.

14.2 Is Spain party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Spain has signed, to date, 69 Agreements for the ReciprocalPromotion and Protection of Investments (BIT).

14.3 Does Spain have standard terms or model language that ituses in its investment treaties and, if so, what is theintended significance of that language?

The intended significance of standard terms is to provide uniformityand security in trade and investments.



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14.4 In practice, have disputes involving Spain been resolvedby means of ICSID arbitration and, if so, what has theapproach of national courts in Spain been to theenforcement of ICSID awards and how has thegovernment of Spain responded to any adverse awards?

The Kingdom of Spain may become a party to investmentprotection arbitrations. The recent case in which the Kingdom ofSpain was a party to the proceedings was ICSID Case No.ARB/97/7 Emilio Agustín Maffezini v. Kingdom of Spain. Theparties reported no problem at all.

14.5 What is the approach of the national courts in Spaintowards the defence of state immunity regardingjurisdiction and execution?

Article 2.2 of the Arbitration Act establishes that a State and itsdependent organisations that are parties to an internationalcommercial arbitration are “…treated exactly in the same way asany other individual…”.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Spain? Are certain disputescommonly being referred to arbitration?

Not at all.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Spain, such as pending or proposedlegislation that may substantially change the lawapplicable to arbitration?

No. There are none.

Gonzalo Stampa

Jones DayVelázquez 51, 4th Floor28001 Madrid Spain

Tel: +34 91 520 3918Fax: +34 91 520 3938Email: [email protected]: www.jonesday.com

Gonzalo Stampa has broad experience in handling a wide range ofdomestic and international commercial disputes.He has extensive experience in more than seventy (70) litigationcases, from factually intricate contractual matters to complexcommercial cases. He also has extensive experience of theweightiest commercial cases and the conflict of laws issues thatthey often involve and frequently appears as counsel in courts atevery level of the Spanish judicial instances.Gonzalo Stampa has broad experience as counsel, arbitrator andsecretary to arbitration tribunals in more than eighty (80) domesticand international arbitration cases under the rules of the majorinternational institutions, involving protection of foreign directinvestment, international construction contracts for heavy plants,turn-key construction contracts, joint venture agreements,distribution agreements, technology transfer, sale of companyassets, international sales and banking contracts.Admitted: Madrid. Education: Complutense University of Madrid (LL.B. 1991);University of London, QMW School of International Arbitration(LL.M. in Commercial and Corporate Law 1993).Languages: English, Spanish.

Jones Day is One Firm Worldwide. Created in 1893, Jones Day ranks today among the world’s largest law firms with32 locations around the world and more than 2,400 lawyers. Jones Day acts as principal outside counsel to, orprovides significant legal representation for, more than half of the Fortune Global 500 companies. As a full-service firm,Jones Day provides clients seamless global access to a wide range of legal services. Our commitment to client servicehas repeatedly earned the firm the “Number One for Client Service” ranking awarded by the BTI Consulting Group,notably in 2009 again. Jones Day has a significant European network that includes more than 400 lawyers based inBrussels, Frankfurt, London, Madrid, Milan, Moscow, Munich, and Paris. Our European Antitrust/Competition lawyersare yearly highly recommended in top international guides, such as Chambers Global, Chambers Europe and The Legal500 EMEA. For more information, please visit www.jonesday.com.



Chapter 33

Homburger

Switzerland


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Switzerland?

For international arbitration proceedings (cf. question 2.2 below),Article 178 of the Federal Act on Private International Law, 1987(PILA) provides that the arbitration agreement must be in text formand must comply as to substance with one of three sets ofpotentially applicable laws.First, as to form, the arbitration agreement must be in a form allowingit to be evidenced by a text or texts originating from all parties to bebound by the arbitration agreement, e.g. as part of a written contract,or a telegram, telex, fax or e-mail exchange. The arbitrationagreement needs not to be signed by the parties. Concerning thecontent, the text of the arbitration agreement must, at a minimum,indicate the parties’ intention to submit their dispute to arbitration (inparticular, by mentioning the word “arbitration”) and specify thedispute, or legal relationship, to be decided by arbitration.As to substance, Article 178 para. 2 provides that the arbitrationagreement must comply with either the law chosen by the parties,the law applicable to the subject matter of the dispute, or Swiss law.The validity of the arbitration agreement cannot be challenged onthe grounds that the underlying contract is invalid or that thearbitration agreement applies to a dispute that had not yet arisen atthe time of execution.


No, there are not.


The arbitration agreement should determine the seat of thearbitration (a specific city). It is further advisable to determine thelanguage of the proceedings, the number of arbitrators and themanner of their appointment.


The Swiss courts are legally required to enforce valid arbitrationagreements regarding an arbitrable dispute (Article 7) and

traditionally tend to be arbitration-friendly.


So far, agreements to undertake ADR processes (not includingarbitration) are of little practical relevance in Switzerland, asmediation and other forms of conciliation are a traditional part oflitigation as such and, by extension, also part of the arbitral processif and to the extent that the parties so wish. Consequently, there islittle case law and even less settled law on the enforcement of ADRagreements. There is a tendency to treat ADR agreements ascontractually binding, but not as a procedural precondition ofarbitration/litigation, unless the parties specifically agree otherwise.


2.1 What legislation governs the enforcement of arbitrationproceedings in Switzerland?

The New York Convention (NYC) of June 10, 1958 on theRecognition and Enforcement of Foreign Arbitral Awards governs theenforcement of awards of arbitral tribunals that have their seat outsideof Switzerland. Swiss arbitral awards are enforced in Switzerland inthe same manner that judgments of Swiss courts are enforced.


International arbitration proceedings that have their seat inSwitzerland are governed by the PILA. An arbitration is deemedinternational if at least one of the parties to the proceedings wasneither domiciled in, nor a resident of, Switzerland when thearbitration agreement was made between these parties. In case ofassignment of an agreement, the domicile of the original signatory,not of the assignee, is relevant.All other (domestic) Swiss arbitral proceedings are governed by theIntercantonal Arbitration Convention (Concordat) of August 27,1969, to be replaced in or about 2011 by a new Federal Code ofCivil Procedure (see below question 15.2).The provisions of the PILA and the Concordat differ considerably.In general, the PILA takes a very liberal and modern approach andgives priority to the parties’ wishes on issues of procedure, whereasthe Concordat provides stricter guidelines. The PILA grants thearbitral tribunal the authority to order interim measures, whereas

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the Concordat does not. Moreover, the Concordat’s approach to (i)the necessary form of the arbitration agreement, (ii) whether amatter is arbitrable and (iii) set-off is more restrictive than thePILA’s. Finally, the grounds for appeal of an award, and the courtscompetent to hear the appeal, are different.The Concordat will be replaced by the new Federal Code of CivilProcedure (FCCP), probably as from 2011 (cf. below, question15.2). This will considerably modernise the regime for domesticarbitration proceedings. In particular, the form of the arbitrationclause will then be governed by the same rule that applies tointernational arbitration proceedings. Furthermore, as ininternational proceedings, the arbitrators in domestic proceedingswill then be competent to order interim relief. Under the FCCPrules, the arbitral tribunals will also have jurisdiction to hear a set-off defence irrespective of whether the cross-claim is within thescope of the arbitration clause or subject to another agreement toarbitrate or a forum-selection clause. Finally, a motion to set asidecan be brought against the award to the Federal Supreme Courtpursuant to the new FCCP rules.


Switzerland made a conscious decision not to adopt the Model Law,but rather to devise an even more liberal framework forinternational arbitration adapted to the already existinginternational arbitration practice in Switzerland. The pertinentChapter XII of the PILA contains only 19 articles as compared tothe Model Law’s 36, leaving more leeway for party autonomy.However, there are no fundamental differences between the laws.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Switzerland?

As mentioned above, most PILA rules can be modified by the parties’agreement (or, based on that, by the arbitrators), and only very few areconsidered mandatory. For example, the statutory right to file amotion to the Swiss Federal Supreme Court to set the award aside(Article 190), can be waived ex ante (Article 192). Similarly, thearbitral tribunal is not obliged to check ex officio whether therequirements for the form of the arbitration agreement are fulfilled.Among the mandatory rules are those that ensure due process andequal treatment, i.e. the rule requesting independence of thearbitrators (Article 180 para. 1 c) and the rule allowing thechallenge of arbitrators (Article 180 para. 2 on the possibility ofchallenging an arbitrator based on grounds the party became awareonly after the appointment). The rule in Article 182 para. 3,ensuring equal treatment requirement and the right to be heard in anadversary procedure, is also mandatory. Furthermore, theprovisions on arbitrability (Article 177, see below question 3.1)cannot be modified by the parties, and the same is true for the ruledefining lis pendens (Article 181) and the provision giving the statecourt judge authority to render judicial assistance (Article 185).

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Switzerland? Whatis the general approach used in determining whether ornot a dispute is “arbitrable”?

In international arbitrations with their seat in Switzerland, only

Swiss law governs the issue of arbitrability (Article 177). Anydispute regarding a claim of economic interest can be the subject ofan arbitration. The courts interpret the term “economic interest” ina very broad manner, favouring a finding that a matter is arbitrable.For example, competition and antitrust matters are arbitrable, aswell as expropriation matters, irrespective of what the lawapplicable to the subject matter of the dispute says.


The arbitral tribunal decides on its own jurisdiction, and can do soby way of an interim award or at the time it decides the merit of thedispute (Article 186).

3.3 What is the approach of the national courts in Switzerlandtowards a party who commences court proceedings inapparent breach of an arbitration agreement?

Swiss courts readily decline jurisdiction in favour of arbitrationbased on a prima facie examination of the validity of the arbitrationagreement if the seat of the arbitral tribunal is in Switzerland (theeventual decision by the tribunal on its own competence based onthe concept of competence-competence (Article 186) is then subjectto full review within the framework of an appeal for the setting-aside of an award). Only if the summary examination clearly showsthat the arbitration agreement is null and void, inoperative orincapable of being performed, or if the defendant appeared withoutreservation, do the state courts accept jurisdiction. By contrast, ifthe seat of the tribunal is abroad, the examination of the validity bythe court is thorough.


The arbitral tribunal’s award regarding its own jurisdiction can beappealed to the Swiss Federal Court unless the parties have waivedthe right to an appeal.In addition, state courts address the issue of jurisdiction andcompetence of the arbitral tribunal if a lawsuit is filed with a courtregarding a matter covered by an arbitration agreement providingfor arbitration in Switzerland (cf. question 3.3 above). A foreigntribunal’s jurisdiction and competence may be examined inenforcement proceedings under the NYC.State courts also make a prima facie review of the arbitral tribunal’sjurisdiction and competence if they are asked to assist in thenomination of arbitrators, the enforcement of interim measures orthe administration of evidence.

3.5 Under what, if any, circumstances does the national law ofSwitzerland allow an arbitral tribunal to assumejurisdiction over individuals or entities which are notthemselves party to an agreement to arbitrate?

According to precedent, a written agreement to arbitrate mayexceptionally be extended to non-signatories if one of the laws thatare potentially applicable to the substance of the arbitrationagreement so provides (cf. question 1.1 above), or if justified, as thecase may be, by international trade usage.

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3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Switzerland and what isthe typical length of such periods? Do the national courtsof Switzerland consider such rules procedural orsubstantive, i.e., what choice of law rules govern theapplication of limitation periods?

Limitation periods are considered to be substantive, not procedural,and thus subject to the law applicable to the substance of thedispute. Such law also determines whether limitation periods needto be met by the timely commencement of arbitration (or court)proceedings or any other means of tolling or interrupting thelimitation periods.In Swiss substantive law, different limitation periods exist. Incontract law, the usual limitation period is ten years. However,shorter periods may apply, such as one year in sales and five yearsfor periodic payments and mandate fees. In tort law, the usuallimitation period is one year after the creditor gained knowledge ofthe relevant facts and a maximum of ten years after the tortuous act,always subject to longer periods under criminal law.



The arbitral tribunal decides the merits of the dispute according tothe law chosen by the parties or, in the absence of such choice,according to the law having the closest connection with the dispute(Article 187(1)). It is generally held that such law does not have tobe a state law but may also be rules of law such as the UnidroitPrinciples of International Commercial Contracts or generalprinciples of law. The general conflict of law rules of the PILA arenot applicable in arbitration.The parties may also authorise the tribunal to decide ex aequo etbono (Article 187(II)).


In exceptional cases mandatory laws of a law other than the lawchosen by the parties may be applied. This concerns matters ofpublic policy such as, in particular, the anti-trust laws that may voida contract. Such public policy rules must have a close connectionwith the dispute and must appear to be reasonable and appropriatefrom a transnational perspective. Further, the law having the closest connection with a particular non-contractual aspect of the dispute may apply to such aspect, such asthe standing to sue or be sued of a legal entity or the effect ofbankruptcy on pending arbitration proceedings.


Swiss arbitration law follows the principle of favor validitatis. Thearbitration agreement is held to be valid if it conforms (i) to the lawchosen by the parties for the arbitration agreement, (ii) to the lawapplicable to the substance of the dispute, or (iii) to Swiss law as lexarbitri (Article 178(II)).As a minimum, however, the arbitration agreement has to be inwriting, i.e. any form of communication that allows proof of theagreement by text. There is no need for signatures (Article 178(I)).

Thus, email exchanges suffice, as does an arbitration clause ingeneral conditions of contract that have been sent by one party tothe other as part of the negotiation or execution of the contract.According to the principle of separability, the arbitration clause ofa contract is generally considered to be valid and binding even if themain contract is invalid or inexistent (Article 178(III)).



The law expressly provides that the arbitrators shall be appointed,dismissed or replaced pursuant to the parties’ agreement (Article179), and there are in principle no limits to the parties’ autonomy.In particular, the parties are free to agree on the requestedqualifications of the arbitrator, or on any number of arbitrators.


The state courts at the place where the arbitral tribunal has its seatare competent to appoint (and dismiss or replace) arbitrators. Thestate courts take guidance from the state law on the nomination ofarbitrators. In particular, the state courts follow the rule in theConcordat that provides that there will be three arbitrators, that eachparty will nominate an arbitrator (or, if the party fails to appoint anarbitrator, the state court on behalf of such party) and that the party-appointed arbitrators will nominate the chairperson.


The state courts can assist in the constitution of the arbitral tribunalat the request of one party (in particular if one party fails to appointan arbitrator, even though the parties have agreed on suchprocedure, or if the chairperson cannot be nominated).In addition, to the extent that the parties have not agreed otherwise,the court at the place where the arbitral tribunal has its seat decideson any challenge to an arbitrator. There is no appeal against thecourt’s decision on such a challenge.


In line with modern international standards, an arbitrator can bechallenged if there are justifiable doubts as to his independence.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Switzerland?

The arbitrators have a pre-contractual and contractual duty todisclose potential conflicts of interest. In practice, the IBAGuidelines on Conflict of Interest are generally used as guidelinesto ensure impartiality and independence of arbitrators. The SwissFederal Supreme Court expressly recognised that the Guidelines area valuable working tool and will influence the practice of arbitralinstitutions as well as the courts.



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6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Switzerland? If so, do those laws or rulesapply to all arbitral proceedings sited in Switzerland?

The parties are free to determine the arbitration procedure.Regardless of the chosen procedure, the arbitral tribunal, however,must guarantee that each party is treated equally and granted the rightto be heard in adversarial proceedings (see above, question 2.4).

6.2 In arbitration proceedings conducted in Switzerland, arethere any particular procedural steps that are required bylaw?

Subject to the requirements of due process (equal treatment, right tobe heard), which require that the proceedings be adversarial, and theneed for a request for arbitration, the parties (and the arbitraltribunal) are free to determine the procedural steps.


The law does not provide for any rules on the conduct of hearings(subject to the requirements of due process).

6.4 What powers and duties does the national law ofSwitzerland impose upon arbitrators?

In particular, the arbitrators have the power to determine theprocedure to the extent that the parties have not done so. They canissue procedural orders, including conservatory measures and otherinterim relief. If necessary, they can turn to the courts at the seat ofthe tribunal for enforcement of such orders and other assistance(Articles 183-185). The arbitrators’ duties include the duty ofconfidentiality and the duty to treat the parties equally.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Switzerland and, ifso, is it clear that such restrictions do not apply toarbitration proceedings sited in Switzerland?

The Swiss Attorneys-at-Law Act defines under which conditions aforeign lawyer may be may be licensed to practice law inSwitzerland and appear before the Swiss courts. Generally, foreignlawyers that are admitted to practice in one of the states of theEuropean Union or the European Free Trade Association can appearbefore a Swiss court, possibly with the consent of a lawyerregistered in Switzerland.This act is not applicable to international arbitration proceedingssited in Switzerland. The parties are free to select lawyers fromother jurisdictions as arbitrators or counsels. Hence, there are norestrictions to a party’s right to be represented by a person of itschoice in arbitration proceedings and in proceedings regardingmotions to set aside before the Swiss Federal Tribunal.

6.6 To what extent are there laws or rules in Switzerlandproviding for arbitrator immunity?

There are no Swiss laws or rules granting arbitrators immunity.Instead, an arbitrator may be liable for breach of his or her duties,and the parties may not waive liability for gross negligence or

wilful intent in advance. Because of the specific nature of thearbitrator’s role, it is generally stated that liability should be limitedto gross negligence and wilful intent. This is also the rule of theSwiss Rules of International Arbitration.


Apart from assistance proceedings (cf. question 5.4 above), thecourts may only deal with procedural issues if the award is appealedon the grounds that the principle of equal treatment, or the right tobe heard, were violated during the arbitration proceeding.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Switzerland (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

There is no statutory provision for multi-party arbitrations, forconsolidation/joinder or for third-party intervention in Switzerland,and the proper treatment of such matters is not fully settled by theSwiss Federal Court. There will be a compulsory joinder of multiple parties if the rightsor obligations in dispute are inseparable under the applicablesubstantive law. The Swiss courts will also enforce contractualmulti-party arbitration clauses if they respect the right of each partyto equal treatment. In particular, the Swiss Federal Court enforceda rule pursuant to which two respondents in arbitration had toappoint one joint arbitrator (there seems to be, therefore, no Dutcoissue in Switzerland). The decision of the Federal Court was criticised, however, and theSwiss Rules of International Arbitration of the Swiss Chambers ofCommerce (see below section 14) take these criticisms intoconsideration. They provide for the institution’s right to appoint allthree arbitrators (but not the right to appoint only the failing parties’arbitrator) should a group of claimants or of respondents fail tojointly nominate its arbitrator. In addition, the Swiss Rules allowthe Chambers to order a consolidation/joinder of proceedings, andthe arbitral tribunal to approve third party participation.Absent an agreement of the parties (in the arbitration clause,through a reference to institutional rules such as the ICC or SwissRules, or by way of separate agreement), there will be no formalconsolidation of several arbitration proceedings into one, or ajoinder of a third party, or formal intervention of a third party. InSwiss practice, there are, however, examples of closely coordinatedarbitration proceedings, be it because of identical composition ofthe arbitral tribunals, the stay of one proceeding in view of another,or joint hearings.

6.9 What is the approach of the national courts in Switzerlandtowards ex parte procedures in the context of internationalarbitration?

As a matter of principle, the arbitral tribunal has to protect the rightto be heard at all times. There is no settled case law on the questionwhether the tribunal has, in exceptional circumstances of urgency,the power to grant ex parte interim relief in the absence of partyagreement. However, it is held that a party may request such exparte relief from a competent state court in spite of an ongoingarbitration, unless the parties have agreed otherwise.

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The arbitral tribunal has jurisdiction to order interim measuresunless the parties have agreed otherwise.In general, the arbitral tribunal may order whatever is necessary toprotect the parties’ rights until a final award is issued. In particular,the arbitral tribunal may order any measures available under theprocedural rules applicable to the arbitration proceedings, under thesubstantive law applicable to the dispute, or under the law of thecountry where the order will be enforced. It is the prevailing view,however, that an arbitral tribunal has no jurisdiction to ordermeasures for the securing of money claims if the respective assetsare located in Switzerland.The interim measure ordered by the arbitral tribunal is binding onthe parties to the arbitration proceeding. If the party concerned doesnot voluntarily comply with the interim measure, however, thetribunal must request the assistance of the competent state court inenforcing the measure.


Unless the parties have explicitly agreed otherwise, a state court cangrant interim relief in proceedings that are subject to arbitration.The state court will decide on a motion for the issuance of aninterim order based on its own law. Since there is paralleljurisdiction of the state courts and the arbitral tribunal, thejurisdiction is deemed to lie with the body that first received arequest to issue interim measures.


The state courts normally will not interfere with the arbitraltribunal’s jurisdiction if the tribunal is already constituted and if arequest for the issuance of interim measures is already pending withthe tribunal. Otherwise, the state courts will not treat a request forinterim relief by a party to an arbitration agreement differently fromany other request for interim relief.


Arbitral tribunals sitting in Switzerland request advances on costs tocover the costs of the arbitral proceedings (fees; expenses, etc.). Inaddition, Swiss law allows for an arbitral tribunal sitting inSwitzerland to order a party to provide security for parties’ costs.The order for security for costs is a special type of interim relief.Accordingly, a security for costs can be ordered if one party has aprima facie case that there is a particular risk that it will not be ableto recover its costs from the other party should the arbitral tribunalaward such costs. As a general rule, arbitral tribunals only ordersecurity for costs in exceptional cases. The courts in certain cantons will order a party, normally only the

plaintiff, to provide security for costs of the state court proceedings,but not of arbitral proceedings. In particular foreign plaintiffs willbe ordered to provide a security for costs unless they are freed fromthis obligation by an international convention or treaty, such as theHague Convention regarding Civil Procedure of July 17, 1905.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Switzerland?

To the extent that the parties do not agree on the applicable rules,the arbitral tribunal determines the procedure in its own discretion,but subject to the principles of equal treatment of the parties and theright to be heard.The tribunal administers evidence directly. It may, however,request the assistance of the state court at the seat of the tribunal.This state court can then request the assistance of foreign courts vialetters rogatory.


Within the limits of the procedure agreed to by the parties, thearbitrators have discretion to order disclosure of documents. Thearbitrators cannot directly compel the party concerned to cooperate;they may, however, draw adverse conclusions concerning thecontent of the documents concerned if they are not produced.


The state court at the seat of the tribunal may be asked to assist inthe taking of evidence. In particular, it may order and compel theproduction of documents within the limits of its own procedurallaws, or take the testimony of unwilling witnesses.


Generally, the arbitrators use their discretion with restraint. TheIBA Rules on the Taking of Evidence often serve as guidelines inthe absence of otherwise applicable rules. Parties have to producedocuments in their possession to the extent they are (i) material forthe outcome of the proceedings and (ii) identified as precisely aspossible under the circumstances.


Again, the parties may decide upon the procedure to be followed.Very often, written witness statements are allowed as evidence. Theparties are also free to submit expert reports. Witnesses and expertsare usually cross-examined at a hearing. They may also bequestioned by the arbitrators.Rules concerning professional privilege are observed. Possibleconflicts between the rules of different jurisdictions are decided ona case-by-case basis.



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8.6 Under what circumstances does the law of Switzerlandtreat documents in an arbitral proceeding as being subjectto privilege? In what circumstances is privilege deemed tohave been waived?

In arbitration proceedings, it is unclear which law applies to issuesof privilege. The arbitral tribunal tends to test privilege under morethan one of the possibly applicable laws, and, in particular, to applythe rules of the jurisdiction where the document is situated, and thelaw of the party that is requested to disclose the material.Under Swiss law, professional privilege is the right of an attorneywho is admitted to the bar and who is acting as lawyer (and not asa business person, member of the board, or otherwise) to refuse togive testimony or to produce a document. Privilege does not,however, extend to the party represented by the attorney, so that theparty can generally be required to produce a document made by thelawyer. It is unclear whether arbitrators have a privilege of theirown. In practice, state authorities have in certain cases de factorespected a privilege of the arbitrators, and there is a statutory basisfor the arbitrator’s privilege in certain cantonal laws.Under Swiss law, waiver rarely occurs and the intention of thewaiving party to waive privilege to specific documents must beclearly established.

9 Making an Award


The award has to be made following the procedure, and in the formagreed to, by the parties. Whatever the procedure chosen, the awardmust be rendered in an adversarial procedure, guaranteeing theparties’ equal treatment and right to be heard. If, and to the extent,no such agreement exists, the award has to be passed by a majorityof the members of the arbitral panel. Absent a majority, the awardmay be rendered by the chairperson alone. The award has to bemade in writing and has to be dated and signed by, at a minimum,the chairperson. In addition, the reasoning upon which the awardwas based also must be set forth, unless the parties agreed otherwise(although lack of reasoning does not render the awardchallengeable).



The final award may be set aside based on the following limitedgrounds (Article 190 para. 2):

The appointment of the sole arbitrator was incorrect, or thepanel was incorrectly constituted.The arbitral tribunal has wrongfully assumed, or refused,jurisdiction.The arbitral tribunal has ruled on an issue that was notsubmitted, or, conversely, it has failed to rule on a claimsubmitted.The arbitral tribunal violated the principle of equal treatmentof the parties or their right to be heard.The award violates international public policy - understoodby the Federal Supreme Court to refer primarily to auniversal public policy common to all civilised nationsalthough with a Swiss “touch” (to date, no such violation wasever found by the Court).

A preliminary, or interim, award may be challenged separately, butonly based on grounds (a) or (b), above. The other grounds forappeal can only be raised in a challenge of the final award.Such a challenge can only be heard by the Swiss Federal SupremeCourt as sole instance for challenge proceedings, which adds anarbitration friendly feature to Swiss arbitration law not found inother jurisdictions. The Federal Supreme Court exercises considerable restraint in thesetting aside of arbitral awards, resulting in the dismissal of thegreat majority of appeals. The judgment is usually rendered withina reasonable period of time. An empirical study has shown that theCourt set aside only 7% of all challenges that were brought underthe PILA and decided on the merits and typically takes less thanfive months to decide (Dasser, ASA Bull. 2007, 444, 453, 457).


The parties may waive the right to file an appeal in advance if theydo so explicitly and in writing, and if neither of them has its seat,domicile, residence or place of business in Switzerland (Article192). They may also limit such waiver to specific grounds ofappeal.


The parties are free to provide for an appeal before a secondarbitration tribunal. They may not, however, expand the scope ofreview by Swiss state courts.

10.4 What is the procedure for appealing an arbitral award inSwitzerland?

An award may only be appealed on the limited grounds listed inArticle 190 para. 2 (above, question 9.1), and the appeal must bedirectly made before the highest Swiss court, the Federal SupremeCourt. The appeal must be made in writing within thirty days ofservice of the (full, partial or interim) award onto the parties andmust be answered within thirty days. As a general rule, there is nosecond exchange of briefs and no hearing. Concerning the award,the Court will not take new or re-hear evidence.


11.1 Has Switzerland signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

Switzerland ratified the NYC on March 2, 1965, and the NYCentered into force in Switzerland on August 30, 1965. It is directlyapplicable as Swiss law. The PILA has extended the applicabilityof the NYC to the recognition and enforcement of all foreignawards (Article 194) and, per analogiam, to the enforcement ofSwiss awards if, and to the extent, the parties have agreed to awaiver of the right to file an appeal (Article 192). Switzerland haswithdrawn an earlier reservation, and no such reservations arecurrently in place.

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11.2 Has Switzerland signed and/or ratified any regionalConventions concerning the recognition and enforcementof arbitral awards?

No, but Switzerland is also a party to the Geneva Protocol onArbitration Clauses of 1923 and the Geneva Convention on theExecution of Foreign Arbitral Awards of 1927. In addition, thereare a number of bilateral treaties (in particular with Germany,Sweden, Austria, Belgium, Italy, Liechtenstein, the Czech Republic,and Slovakia) that also cover arbitral awards.

11.3 What is the approach of the national courts in Switzerlandtowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

Arbitral awards are recognised and enforced as a matter of course.This holds true for both domestic and foreign arbitral awards. Caselaw indicates that the courts are very reluctant to second-guess anarbitral tribunal’s determination on the issues. In particular, there isno review on the merits unless the effect of the award manifestlyviolates public policy. Monetary awards are enforced in federal debt enforcementproceedings and may be the basis for an attachment of the debtor’sassets to secure enforcement. If the debtor objects to enforcement,a judge will set aside the objection in summary proceedings andwill normally render a decision within a few weeks. Appeals are,however, possible against this decision, and the appeal proceedingscould last several months. Non-monetary awards are enforcedunder the enforcement rules of each canton, typically in summaryproceedings.

11.4 What is the effect of an arbitration award in terms of resjudicata in Switzerland? Does the fact that certain issueshave been finally determined by an arbitral tribunalpreclude those issues from being re-heard in a nationalcourt and, if so, in what circumstances?

Pursuant to Swiss law, a final award that is enforceable inSwitzerland is also binding on Swiss national courts and arbitraltribunals sitting in Switzerland. Only the operative part of theaward is binding, but not findings of fact or a legal reasoning that isnot part of the operative part of the award. The finality of the awardwill have to be considered under the lex arbitri, the enforceabilityunder Swiss law and, therefore, under the New York Convention incase of a foreign award.

12 Confidentiality

12.1 Are arbitral proceedings sited in Switzerland confidential?What, if any, law governs confidentiality?

There is no general provision on the confidentiality of arbitralproceedings in Swiss law. The rules of arbitral institutions, or otherarbitration rules agreed to by the parties, may contain provisionsrelating to confidentiality.It is generally accepted that the deliberations and the voting of thearbitral tribunal are secret. Further, the arbitrators have to keep theproceedings confidential.As a matter of course, third parties do not have access to the files ofthe tribunal and cannot participate at the hearings withoutagreement by the parties.Conversely, there is no explicit obligation of the parties to keep the

existence, and the content of, the arbitral proceedings secret. Ingeneral, a duty of the parties to keep the proceedings confidentialmay not be inferred from an arbitration clause. A party even maybe obliged to inform the public about proceedings, i.e., under rulesof ad-hoc publications applicable to companies listed on a stockexchange.


Unless the parties have agreed otherwise, each party is free to useinformation disclosed in arbitral proceedings for other purposes,such as in subsequent arbitral or state court proceedings. Inpractice, it is not uncommon to use documents produced, or briefsfiled by, the other party in other proceedings. The rule of Article3(12) of the IBA Rules on the Taking of Evidence, however, isfrequently applied based on agreement of the parties; the same istrue for broader confidentiality orders of the tribunal.


As indicated, the parties themselves are not subject to a particularduty of confidentiality unless they agreed otherwise.



The law applicable to the merits of the dispute determines whichtypes of remedies, including types of damages, are available. Inprinciple, Swiss arbitration law does not put limits on such types ofremedies. A particular remedy that is provided for by the applicablelaw would be, therefore, unavailable only if it were in violation ofpublic policy, but there are no precedents to that regard.An issue discussed and not resolved is, however, the availability ofpunitive (exemplary) or multiple damages. Since punitive damagesare almost (although not entirely) unknown in Swiss law, Swisscourts do not apply punitive damages provided for by the applicableforeign law as a matter of Swiss public policy. It is generallyacknowledged, however, that arbitral tribunals situated inSwitzerland are not bound by the limits of Swiss public policy.Rather, they should, and do, apply truly international notions ofpublic policy. As a consequence, they may apply rules on punitivedamages of the law applicable to the substance of the dispute.Another question is whether an award granting punitive or multipledamages may be set aside on appeal. Since the Swiss FederalSupreme Court refers to a universal public policy, punitivedamages, being a generally acknowledged type of damages in mostcommon law jurisdictions, should not, as such, be set aside.


There is no restriction in Swiss arbitration law with regard tointerest. Whether, and to what extent, interest is due depends uponthe law applicable to the subject matter of the dispute. Swissarbitral tribunals award interest on damages, if claimed, in line withinternational practice. Consequently, there is no rule concerning therate of interest in Swiss arbitration law.



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The PILA is silent on this issue.The criteria for the allocation of fees and/or costs are also generallydetermined by arbitration rules chosen by the parties. In theabsence of such rules, i.e., mainly in ad-hoc arbitration, thearbitrators have discretion. It is generally accepted that thearbitrators may apply the principle of “cost follows event” andaward fees and/or costs in proportion to each party’s success withits claims. However, the arbitral tribunal may use any objectivecriteria. It may, and normally does, take into account specialcircumstances, namely, the time and effort required with regard toparticular claims or evidence offered by one party.With regard to the amount of the parties’ costs, the tribunal, again,has considerable discretion. Generally, the parties are invited tosubmit their costs to the tribunal. A party who prevails in allrespects may expect to be fully compensated for its legal fees unlessit appears that such party has unnecessarily inflated its fees. Veryoften, the costs of an in-house counsel are also compensated ifproperly calculated and presented. It is not usual to compensate aparty for time spent by its employees, as well.As a matter of course, the arbitral tribunal requests that the partiesshare equally in the payment of advances to cover the fees and costsof the arbitral tribunal. In the award, the tribunal usually grants thesuccessful party a right of recourse against the other partyconcerning the advance.


There is no particular tax on Swiss arbitral awards. Specifically, thefees of the arbitrators are exempt from Swiss VAT.


14.1 Has Switzerland signed and ratified the WashingtonConvention on the Settlement of Investment Disputesbetween States and Nationals of Other States (1965)?

Yes, it has.

14.2 Is Switzerland party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Switzerland is a party to more than 25 BITs and various MultilateralInvestment treaties, such as the Energy Charter Treaty and theConvention establishing the Investment Guarantee Agency.

14.3 Does Switzerland have standard terms or model languagethat it uses in its investment treaties and, if so, what isthe intended significance of that language?

The BITs of Switzerland tend to follow the same structure and havesimilar language, but there is no binding model agreement and nonecessarily followed language.

14.4 In practice, have disputes involving Switzerland beenresolved by means of ICSID arbitration and, if so, whathas the approach of national courts in Switzerland been tothe enforcement of ICSID awards and how has thegovernment of Switzerland responded to any adverseawards?

There are no cases concerning Switzerland, and no known decisionsregarding the enforcement of ICSID awards. No problems with theenforcement of such awards are to be expected, though.

14.5 What is the approach of the national courts in Switzerlandtowards the defence of state immunity regardingjurisdiction and execution?

A state that is a party to an arbitration clause cannot contest thejurisdiction of the arbitral tribunal, or the arbitrability of the dispute,by reference to its state law. The general rules apply, in particularthose of the lex arbitri.State courts traditionally follow the concept of a limited stateimmunity regarding jurisdiction and execution. A foreign state willonly enjoy immunity for acts that are jure imperii, but not for actsjure gestionis, at least to the extent that there is a certain connectionto Switzerland. Only the nature of the act (jure imperii or gestionis)but not its purpose could provide immunity. In the enforcementstage, public assets that are used jure imperii nature enjoy immunityregarding execution.In addition, certain conventions and treaties apply, in particular theEuropean Convention on State Immunity of May 16, 1972, and theVienna Conventions on Diplomatic Relations of 1961 and onConsular Relations of 1963. Furthermore, in 2006, Switzerlandsigned the United Nations Convention on Jurisdictional Immunitiesof States and their Property, and ratification can be expected soon.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Switzerland? Are certaindisputes commonly being referred to arbitration?

Arbitration in Switzerland has a long tradition, a very flexible andproven legal framework, a fine-tuned infrastructure and a largenumber of specialist practitioners that are experienced counsel,arbitrators, or both.Switzerland is a preferred venue for proceedings under the auspicesof the International Chamber of Commerce. In addition, severalinstitutions offer arbitration services, such as the Court ofArbitration for Sport|Tribunal Arbitral du Sport, and the well-known Zurich and Geneva Chambers of Commerce. Whereaspreviously various chambers of commerce of the Swiss cantons(including Zurich and Geneva) each had their own set of rules, theunified “Swiss Rules of International Arbitration” (“Swiss Rules”)have governed the institutional arbitration administered by thevarious cantonal Chambers of Commerce since January 1, 2004.The Swiss Rules are based on the UNCITRAL Arbitration Rules,and have established themselves as efficient and user-friendly(www.sccam.ch). In addition, in 2007, the Swiss Chambers addedSwiss Rules of Commercial Mediation. The disputes most commonly referred to arbitration in Switzerlandinvolve construction contracts, commodity trading, long-termenergy supply contracts, license agreements, and commercialdisputes with similar characteristics. In addition, the Court ofArbitration for Sport handles an increasing workload, with 311 new

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Felix Dasser

Homburger AGWeinbergstrasse 56|58, CH-8006 ZürichP.O. Box 194, CH-8042 ZürichSwitzerland

Tel: +41 43 222 1000Fax: +41 43 222 1500Email: [email protected]: www.homburger.ch

Prof. Dr. Felix Dasser (born 1958) was admitted to the Zurich bar in1991 and joined Homburger the same year. He has been a partnersince 2000 and is a member of Homburger’s litigation andarbitration group. He is professor of law at the University of Zurichlaw school mainly teaching international dispute resolution as wellas contract law.His practice focuses on international commercial disputes, litigationand arbitration. He acts as counsel for major companies in Swissand foreign arbitration proceedings under various arbitration rulesand also served as arbitrator in various proceedings (as solearbitrator, wing arbitrator or chairman). He regularly publishes in the fields of international commercial law,litigation|arbitration and contract law, including a thesis oninternational commercial arbitration and lex mercatoria, a thesis onthe typology of contracts, and various commentaries. He is trusteeof CENTRAL, Center for Transnational Law, Cologne.Education: 1985, lic.iur., Zurich (m.c.l.); 1989, Dr. iur., Zurich(s.c.l.); 1990, LL.M., Harvard.

Balz Gross

Homburger AGWeinbergstrasse 56|58, CH-8006 ZürichP.O. Box 194, CH-8042 ZürichSwitzerland

Tel: +41 43 222 1000Fax: +41 43 222 1500Email: [email protected]: www.homburger.ch

Balz Gross (born 1964) has been a partner with Homburger since2002. He is a member of Homburger’s Litigation and ArbitrationPractice Group and Homburger’s Compliance & Criminal Mattersand the Employment Law Groups.His practice focuses on international commercial arbitration andlitigation, in particular as lead counsel in numerous internationalarbitration cases (mainly ICC, Zurich Chamber, UNCITRAL, ad hoc).He also acts as sole- and party-appointed arbitrator.Balz Gross is a Co-Author of a Commentary on the Swiss Code ofObligations (section on performance), a Commentary on the Statuteon Place of Jurisdiction in Civil Matters (section on contract law), aCommentary on the new Federal Code of Civil Procedure (section onparties and third party intervention), and of the Commentary onCartel Law (section on procedure), and of various other publications.From 1989 to 1992, he was a scientific assistant for contract andprivate international law at University of Zurich, in 1993 DistrictCourt Clerk, admitted to the bar in 1994 and joined Homburger in1995.Education: lic.iur./Dr. iur. Zurich, 1989/1996 (summa cum laude);LL.M., Harvard, 1995.

Homburger advises and represents Swiss and international corporate clients and individual entrepreneurs on all keyaspects of business law.

Homburger’s leading Litigation and Arbitration Practice Group focuses primarily on commercial litigation, internationalcommercial arbitration, and Swiss administrative proceedings. We advise clients on dispute resolution strategies indomestic and international settings, and represent them in judicial proceedings, with the emphasis on complex, large-scale litigation or arbitration. We also offer a full range of services in alternative dispute resolution (ADR) and debtcollection.

Our members represent clients as counsel and serve as members and chairpersons of arbitration panels in institutionaland ad-hoc arbitration, including ICC, Uncitral, Swiss Rules of International Arbitration, London Court of InternationalArbitration, WIPO, and others.

Other services include representation of companies in white-collar criminal and asset recovery matters (through theCorporate Compliance and Criminal Matters Group) and in employment related matters (through the Employment LawGroup) as well as expert advice and expert testimony on Swiss law.


arbitration cases filed in 2008 - as compared to e.g. just 75 in 2000.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Switzerland, such as pending orproposed legislation that may substantially change the lawapplicable to arbitration?

In the context of a new Federal Code of Civil Procedure (FCCP) thelaw relating to domestic arbitration proceedings will be completelynew as of (probably) January 1, 2011. The present Concordat willthen be replaced by Title 3 of the FCCP (see above question 2.2).Such regulation will largely mirror the rules on internationalarbitration proceedings, although some differences remain. E.g.,domestic awards may still be challenged on the merits on the groundof arbitrariness, while international awards may only be challengedon the merits if they violate public policy. Conversely, in both cases,challenges will directly go to the Federal Supreme Court (today,domestic challenges are heard in cantonal courts first).

Further, practical problems that may arise today in cases that are notunambiguously domestic or international from the outset will bemanageable. For instance, while international cases can still bemade subject to domestic arbitration rules, domestic cases may,under the FCCP, be made subject to the PILA. Thus, appropriatesolutions may be found for multi-party contracts with more thanone domestic party, where it is unclear at the outset whetherarbitration proceedings will qualify as domestic or international(depending on whether only domestic parties are involved in thearbitration proceedings).

General NoteAll answers in this questionnaire on Switzerland refer tointernational arbitrations, and references to articles are references tothe PILA, unless explicitly indicated otherwise.

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Chapter 34



International Arbitrationin Latin America:Overview and RecentDevelopments

Introduction

Writing an overview of arbitration in Latin America is somewhatakin to writing the introduction to a book on regional cuisine: legalsystems in Latin America can be as different as an Argentine bife dechorizo is from a Peruvian ceviche. Since Latin America is far froma homogenous region comprised of uniform legal systems, it isdifficult to draw regional conclusions without a risk of falling intomeaningless generalities. We therefore prefer to highlight thesituation in specific jurisdictions and respect this diversity. Latin America continues to be a fascinating and challenging regionfor international arbitration practitioners. Latin American states foryears rejected arbitration due to the suspicion that it granted greaterrights to foreign investors in breach of the so-called “Calvodoctrine”, which required that such investors be treated on an equalfooting with locals. Over the last 30 years, great advances havebeen made towards the abandonment of this isolationist policy. Ingeneral terms, Dr. Calvo has been shown the door. Spanish andPortuguese speaking Latin America now boasts a full house of NewYork Convention ratifications. Most Latin American countries alsonow have new arbitration laws based more or less on theUNCITRAL Model Law, with Peru the latest to enact newlegislation in the last year. All but Argentina, Colombia andEcuador have now replaced the ill-adapted provisions of theirantiquated Civil Procedure Codes and arbitration legislation. Thelocal courts in general continue to support arbitration and upholdthe state’s international obligations to enforce foreign awards underarbitration treaties and conventions. However, the ghost of Dr.Calvo still lingers on in the form of pockets of resistance toarbitration both within the judiciary (some of whom continue toconsider arbitration as a competing parallel jurisdiction) and thegovernment. On the political level, there has been a backlash incertain states to high-profile bilateral investment treaty (“BIT”)arbitrations brought against them, principally before theInternational Centre for the Settlement of Investment Disputes(“ICSID”), an organ of the World Bank. This has resulted inArgentina devising a controversial legal strategy to avoid payingICSID (and other BIT) awards, Bolivia withdrawing from ICSIDaltogether, Venezuela terminating one BIT and threatening to exitICSID too, and Ecuador notifying ICSID of exceptions to itsconsent to ICSID’s jurisdiction. Several Latin American countrieshave also announced a plan to launch a competing arbitrationsystem within UNASUR, a new regional institution, which theyclaim will be more neutral to developing countries.The purpose of this Chapter is to highlight these and other recentdevelopments in Latin America in the field of commercial andinvestor-state arbitration, both in individual countries and from aregional perspective, where possible.

I. Commercial Arbitration

A. Multilateral conventions on commercial arbitration

The United Nations Convention on the Recognition andEnforcement of Foreign Arbitral Awards of 1958 (the “New YorkConvention”) has been described as the single most important pillaron which the edifice of international arbitration rests, with its dualpurpose of obliging local courts to: (i) support the arbitral process;and (ii) enforce arbitral awards. At the time of the signature of theNew York Convention, Latin America was still firmly in the Calvoera. However, the Convention’s success could not be ignored forlong: arbitration clauses were appearing increasingly frequently ininternational contracts and investors were making their preferencefor New York Convention contracting states clear in transactions. In the 1970s, the frosty reception to international arbitration inLatin America began to thaw. Resistance to the New YorkConvention was overcome initially by the signature in 1975 of theInter-American Convention on Commercial Arbitration (the“Panama Convention”) by 13 Latin American states. ThisConvention reflected the objectives of the New York Conventionwithin the regional context; as such, its adoption indicated thebeginning of the end of Latin America’s philosophical objection toarbitration. Conscious that the Panama Convention, being a regional solution,was still not enough to attract badly needed foreign investment fromoutside the region, many Latin American states then adhered to theNew York Convention. By 1975, only four states had ratified theNew York Convention: Chile; Cuba; Ecuador; and Mexico. Today,the whole of Spanish and Portuguese speaking Latin America hasadhered, the last states to ratify the Convention being Brazil (2002),the Dominican Republic (2002) and Nicaragua (2003).

B. Commercial arbitration legislation and its application by domestic courts

In 1985, UNCITRAL published its Model Law on InternationalCommercial Arbitration (the “Model Law”). The arrival of theModel Law offered legislators a means of implementing modernarbitration legislation without the need to “reinvent the wheel” andensured that the lack of an arbitral tradition did not prejudice thequality of any new law. Mexico was the first state in the region to adopt the Model Law, in1993. As a result, it gained a competitive advantage over itsneighbours and remains the jurisdiction hosting most internationalarbitrations in Latin America. Other states that have now adopted

Caroline Richard

Sylvia Noury

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Freshfields Bruckhaus Deringer LLP International Arbitration in Latin America

the Model Law with limited modifications include Bolivia, Chile,Guatemala, Paraguay, Venezuela and Nicaragua. Peru replaced itsold Arbitration Act with new legislation by way of LegislativeDecree 1071 adopted in July 2008, which will enter into force on 1September 2009. The new legislation, which like the old Act isbased on the Model Law, was passed in order to comply with theUS-Peru FTA which recently entered into force. The newlegislation provides a unitary arbitration regime for domestic andinternational arbitration, further restricts the intervention of courts,and incorporates the essence of Article 54 of the ICSID Conventionin relation to the execution of ICSID awards. Unfortunately,several Latin American states have shown less foresight in updatingtheir arbitration laws, taking elements of the Model Law butintroducing aspects of their own arbitral procedures or publicpolicy, without fully considering the implications. These statesinclude Brazil, Costa Rica and, most recently (in December 2008)the Dominican Republic. Other states, such as Argentina, Colombiaand Ecuador, are left with antiquated arbitration laws since theirlegislative bodies have failed to adopt a modern arbitration regimebased on the Model Law (in spite of several attempts to pass newlegislation).The proliferation of commercial arbitration in Latin America todaythat has, in part, resulted from this reform and modernisation isevidenced by the statistics of leading arbitration institutions such asthe International Chamber of Commerce (the “ICC”). Whereasonly 2.3% of ICC cases filed in 1990 involved a Latin American orCaribbean party, in 2007, 12.4% of cases filed involved a partyfrom the region. The shift in the balance between North and SouthAmerican parties that was first observed in 2006 continued in 2007,with the proportion of parties from Latin America and theCaribbean rising to 56% of the total number of parties from theAmericas. ICC arbitrations with Latin American seats are also onthe increase, with Brazil and Mexico the most popular in 2007. This growth in Latin American arbitration practice has in turn givenrise to an increasing body of arbitration related case law. Inevitably,there are decisions for and against the arbitral process (as in anyjudicial system). Part of the problem is an inherentmisunderstanding and consequent jealousy of arbitration(particularly in cases involving state-controlled entities) by judgeswho have received little training on the process. We address the most notable developments in arbitration legislationand case law in jurisdictions across Latin America below.

ArgentinaArgentina has still not revised the rules of its Civil Procedure Codecontaining the current outdated arbitration regime, which, amongother things, requires the conclusion of a compromiso (a post-dispute agreement to submit to arbitration) and does not permitarbitrators to order interim measures. A new arbitration law basedon the Model Law has now been submitted to Congress three timesfor approval: first in 2003; again in March 2005; and, most recently,in March 2007. To date, Congress has not considered the latestdraft law. Given the recent political backlash against BITarbitration in Argentina it seems unlikely that there will be thepolitical will in Congress to pass a law promoting arbitration in thenear future. This recent politicisation of arbitration has also given rise tounfavourable jurisprudence in Argentina, such as the notorious2004 Supreme Court decision in José Cartellone ConstruccionesCiviles SA v. Hidronor SA. However, more recent decisions of theSupreme Court have, thankfully, nuanced or rejected an overlyinterventionist approach to commercial arbitration. This newapproach is illustrated in Cacchione Ricardo v. Urbaser ArgentinaSA, rendered by the Supreme Court on 24 June 2006 (published in

June 2007), Pestarino de Alfani v. Urbaser Argentina, rendered bythe Supreme Court on 11 March 2008 and Otto Garde y CompañiaSA v Multiespacios San Isidro SA, rendered by the CommercialCourt of Appeals on 11 November 2008. In all three decisions, theCourts held that by agreeing to arbitration, the parties had waivedtheir right to challenge awards, which are final and binding, otherthan on the limited grounds for review set out in the Civil ProcedureCode (such as the tribunal’s lack of jurisdiction or a graveprocedural irregularity). In Mobil Argentina SA v Gasnor SA(rendered 8 August 2007 and published in 2008), the CommercialCourt of Appeals held that the parties’ arbitration agreement (whichincluded a waiver of the right to appeal) did not entail a waiver ofthe right to challenge the award on public policy grounds.Ultimately, however, the Court rejected the challenge in the casebefore it, establishing a welcome high threshold for the annulmentof awards on public policy grounds.Unfortunately, this non-interventionist approach is not withoutexceptions. In July 2007, the Fourth Chamber of the FederalAdministrative Court of Appeals issued a controversial ex parteorder for the suspension of a BIT arbitration with a Washington DCseat commenced by National Grid plc against Argentina under theUNCITRAL Rules, just days before the final hearing on the meritswas scheduled to take place. The injunction was rendered on thebasis of Argentina’s ex parte challenge in the Argentine courts of adecision of the ICC Court rejecting Argentina’s attempt todisqualify the president of the arbitral tribunal (Causa 2.660/2006Procuración del Tesoro v. International Chamber of Commerce,Deci 15-XII-05, 2 July 2007). The arbitral tribunal ultimatelyrefused to suspend the proceedings on the basis that the Argentinecourts lacked jurisdiction over an arbitration seated in WashingtonDC. One year later, on 17 July 2008, the Court of Appeals issued asecond preliminary injunction, ordering the tribunal to suspendproceedings pending its review of the ICC Court’s decision onpublic policy grounds, subject to fines for non-compliance.Notwithstanding the injunction, the tribunal proceeded to render anaward against Argentina in November 2008. On 19 March 2009,the Court consequently declared that the matter had been renderedmoot.

Brazil Ever since a constitutional challenge to certain provisions ofBrazil’s 1996 Arbitration Act was dismissed by the Supreme Courtin 2001, the Brazilian courts have generally issued decisionssupportive of arbitration. Conflicting decisions still exist regarding the courts’ ability toenforce an arbitration agreement in the absence of a compromisso(i.e. an agreement to submit a dispute to arbitration after it arises).In February 2008, the Court of Appeals of São Paulo affirmed alower court decision enforcing an ICC arbitration clause in acontract, despite the absence of a compromisso, and declinedjurisdiction over civil proceedings commenced by one of the parties(Renault do Brasil SA et al. v. Carlos Alberto de Oliveira Andrade,Appeal No 1117830-0 0/7, 26 February 2008). However, on 30January 2008 the Court of Appeals of Paraná set aside an ICCaward on the ground that the parties had failed to sign acompromisso in breach of the Brazilian Arbitration Act (eventhough the parties’ agreements contained an ICC arbitration clauseand both parties had actively participated in the arbitrationproceedings) (Inepar SA Indústria e Construções v. ItiquiraEnergetica SA).However, the Brazilian courts issued two further decisions in 2008which were notably pro-arbitration. In TMC Terminal Multimodalde Coroa Grande SPE SA v the Minister of State for Science andTechnology (rendered 9 April 2008), the Superior Court of Justice




rejected the Minister’s argument that the state could not validlyagree to arbitrate when the interests of the public administration areat stake. The Court held that disputes involving the State are notarbitrable only where the subject matter of the dispute is primarilyone of public interest. In Litsa Lineas de Transmision del LitoralSA v Inepar SA & SV Engenharia SA (rendered 20 August 2008),the Supreme Court of Justice rejected objections to the recognitionof an ICC award holding that: (i) the existence of parallel courtproceedings in Uruguay did not bar the enforcement of the award inBrazil; (ii) the 1996 Arbitration Act was applicable to the arbitrationagreement even though it was entered into before its enactment; and(iii) the arbitration agreement was binding upon a successor entityfollowing a merger. The trend of court decisions in Brazil thereforeappears to be positive.

ChileIn a landmark step, Chile enacted the Model Law with very fewamendments in September 2004. Since the adoption of theInternational Commercial Arbitration Law, there have been anumber of encouraging decisions of the Chilean courts applying itsprovisions. In two recent decisions, the Supreme Court affirmed the limitedscope of its jurisdiction with respect to applications for therecognition of foreign arbitral awards. Explicitly referring to theInternational Commercial Arbitration Law for the first time since itsenactment in 2004, the Court held that it cannot review factual orlegal issues in the context of exequatur proceedings, nor can itconsider procedural objections that should have been invokedbefore, and decided by, the arbitral tribunal (see Gold NutritionIndustria e Comercio v. Laboratorios Garden House SA, Rol 6615-2007, 15 September 2008). A similar restrictive interpretation ofthe Court’s jurisdiction was upheld in Steelcase Inc. v. HéctorMartinez Ramirez, Rol 5742-05, Supreme Court, 25 March 2008.In addition, in a decision of July 2008, the Supreme Courtreaffirmed that the parties to an international contract are free tosubmit any dispute arising out of the contract to foreign courts orarbitral tribunals (Marlex Limitada v. European IndustrialEngineering, Supreme Court, Rol 1652-2006, 28 July 2008). Thisdecision confirms the abandonment of an earlier interpretation ofArticle 1462 of the Chilean Civil Code according to which clausesremoving disputes from the jurisdiction of Chilean courts were heldinvalid (for other recent decisions of the Supreme Court in the samevein see Mauricio Hoschild S.A.I.C. v. Ferrostaal A.G., Rol 3247-2006, 22 January 2008, and State Street Bank and Trust Company v.Inversiones Errázuriz Ltda, Rol 2349-2005, 14 May 2007).

MexicoSince the enactment of arbitration legislation in 1993 based on theModel Law, the use of arbitration has increased steadily in Mexico,giving the Mexican judiciary plenty of opportunities to show itssupport for arbitration, as illustrated in two recent decisions. In the recent decision Infored SA de CV & Guttiérrez Vivó v GrupoRadio Centro SA de CV (rendered by the Thirteeth Civil CollegiateCourt of the First Circuit on 11 June 2008), the Court quashed thedecision of a first instance judge that had annulled an ICC award onthe basis that the arbitrators were simply lawyers when thearbitration agreement required that the arbitrators be “experts on thesubject matter” (the dispute raised inter alia issues relating tocontract law, intellectual property and accounting standards). TheCourt upheld the award noting that the party challenging the awardhad actively participated in the constitution of the tribunal and hadfailed to challenge the arbitrators in the course of the arbitrationproceedings.In July 2008, a District Court rejected a claim for the setting aside

of an award and for costs and damages against an arbitrator andCANACO (the National Chamber of Commerce of Mexico City)brought by the losing party to an award. The Court held that, inaccordance with the CANACO Arbitration Rules, arbitrators cannotbe held liable for damages in connection with any acts or omissionsin the course of the arbitral proceedings. It also found that as theadministering arbitral institution, CANACO could not be sued insetting aside proceedings as it was not a party to the arbitrationagreement (Dragados Proyectos Industriales de México SA de CV vMacinter SA de CV, Ninth District Judge, Mexico City, 28 July2008).

VenezuelaThe Venezuelan Commercial Arbitration Act adopted in 1998 isalso largely based on the Model Law. Despite this modernlegislative approach, the Venezuelan Supreme Court has tended toadopt an ambiguous approach to international arbitration. In October 2008, however, the Constitutional Chamber of theVenezuelan Supreme Court issued a landmark ruling interpretingVenezuela’s investment law (Ley de Promoción y protección deinversiones). The Court’s decision is positive for commercialarbitration in many respects: it endorses the fundamental right toresort to arbitration under the Constitution, it sanctions arbitrators’authority to issue interim measures and it holds that state entitiescan submit to international arbitration, thereby rejecting the CalvoDoctrine holding arbitration clauses in state contracts as invalid.However, the decision is less favourable to investor-statearbitration. The Court held that Article 22 of the Investment Law(which provides that investors may submit disputes to internationalarbitration before ICSID) does not constitute an open offer ofconsent to ICSID arbitration. The Court held that investors cannotsubmit their disputes to ICSID arbitration in the absence of a clearexpression of consent by the Venezuelan state outside theInvestment Law, for example in an investment treaty or a contract. Ultimately, it will fall to ICSID tribunals to determine theirjurisdiction under the Investment Law, in accordance with theprinciple of kompetenz-kompetenz. The decisions of the ICSIDtribunals constituted to hear the claims brought against Venezuelaby Mobil and ConocoPhillips are greatly anticipated in this respect.

MercosurAlongside the modernisation of domestic arbitration legislation, theregion has seen the signature of the Mercosur Agreement onInternational Commercial Arbitration (“MAICA”) in 1998 by thefour member states of Mercosur (Brazil, Argentina, Paraguay andUruguay). The MAICA is a regional international arbitration law(the only one of its kind) also loosely based on the Model Law.Having been initially ratified only by Argentina (in March 2000,before the political tide turned), the MAICA was subsequentlyratified by Brazil (in October 2003), Uruguay (in September 2004),and most recently Paraguay (in December 2007); it entered intoforce on 25 January 2008. Other South American states have joinedMercosur as “associate” members, including Chile (in 1996),Bolivia (in 1997), Peru (in 2003), Colombia (in 2004), Ecuador (in2004), and Venezuela (in 2004; it then applied for full membershipin 2006 but has yet to become a full member). The associatemembers have not yet adopted the MAICA. The MAICA is intended to ensure that arbitration in the Mercosurregion is conducted in accordance with the same modern regime,irrespective of the arbitral seat. However, the scope of applicationof the MAICA is complicated and unclear, and the parallel systemit imposes confusing. This has led to a rather inconvenient two-track arbitration system in those states where the MAICA is inforce, in which international arbitrations falling under the MAICA

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will benefit from modern arbitration laws based on the Model Law,whereas all others will be governed by each state’s outdated (in thecase of Argentina) or hybrid (in the case of Brazil) arbitrationlegislation.

II. Investment Treaties and Arbitration

A. Introduction

The most high-profile development in the field of arbitration overthe last few years has undoubtedly been the explosion of BITarbitrations in the region. Not only are BIT cases at the cutting edgeof arbitration practice in general (forming the subject matter ofcountless articles, books and conferences all over the world), butBIT cases involving Latin America (particularly Argentina, Bolivia,Ecuador and Venezuela) are the headline news of that cutting edgepractice.

B. Bilateral Investment Treaties

BITs typically provide for the submission by an investor of anydispute arising out of the violation by a state of the substantive BITprovisions (e.g. expropriation) to international arbitration. As such,they are exceptionally useful tools, which can avoid lengthylitigation in local courts whose neutrality may be compromised bythe involvement of the government. Latin American states havesigned over 300 BITs (Argentina alone having signed 59), most ofwhich were signed in the 1990s. The signature of BITs in the regionhas slowed down in recent years and the geographical orientation ofBIT counterparts has shifted East. Recent developments includeVenezuela’s signature of a BIT with Belarus (December 2007), aswell as China’s signature of BITs with Costa Rica (October 2007),Cuba (2007) and Colombia (November 2008) bringing the numberof China’s BITs with Latin American countries to ten. However,signature is one thing: not all Latin American states have quite soreadily ratified such treaty arrangements. For example, Colombiahas signed nine BITs, only two of which have been ratified (of theremaining BITs, three are awaiting the final formalities ofratification, two have been partially rejected by the ConstitutionalCourt, and the ratification of the other two appears to have stalled).As for Brazil, although it has signed some 14 BITs, it has notratified any of them. This may change, however, now that Brazilhas become a significant capital exporter, prompting Braziliancompanies to adopt BIT planning strategies to protect their owninvestments abroad and in particular within Latin America.BITs generally provide for international arbitration under the rulesof ICSID, ICSID’s Additional Facility, the United NationsCommission on International Trade Law (“UNCITRAL”), theStockholm Chamber of Commerce (“SCC”) or the ICC. ICSIDarbitration can only be commenced against states which are partiesto the ICSID Convention (signed in Washington in 1965 and nowratified by 143 states). Notable non-signatories are Brazil, Cubaand Mexico, and now Bolivia, which withdrew from theConvention in 2007.

C. Multilateral Investment Treaties and Trade Agreements

In addition to BITs, aggrieved investors may also avail themselvesof dispute resolution options under multilateral investment treaties(“MITs”) and trade agreements, such as the North America FreeTrade Agreement (“NAFTA”) (Chapter 11) and, eventually,

Mercosur (1994 Colonia protocol (not yet in force) and the 1994Buenos Aires protocol). To date, some 15 claims have been broughtagainst Mexico under the NAFTA. Despite the demise ofnegotiations towards the Free Trade Area of the Americas(“FTAA”), an extension of the NAFTA beyond Canada, Mexico andthe US, other efforts for greater economic integration in theAmericas are bearing fruit. The Dominican Republic and CentralAmerica Free Trade Agreement (“DR-CAFTA”), which has similarprovisions to the NAFTA and was negotiated between the US,Costa Rica, El Salvador, Honduras, Guatemala, Nicaragua and theDominican Republic, recently entered into force in all of thesecountries, including Costa Rica as of 1 January 2009. Four claimshave already been notified by US investors under the DR-CAFTAagainst Guatemala (which faces two claims), the DominicanRepublic and El Salvador respectively. Moreover, Canada and theUS are strengthening their ties with Latin America by negotiatingseveral bilateral free trade agreements which contain investor-statearbitration provisions. In 2004, the US initiated negotiations forfree trade agreements (“FTAs”) with Colombia, Panama, Peru andEcuador. The US signed a Trade Promotion Agreement with Peruin April 2006 (which came into force on 1 February 2009) and withColombia in November 2006 (both agreements were amended inJune 2007). The Canada-Andean Community FTA negotiationswere launched in June 2007. As a result, Canada signed an FTAwith Peru on 29 May 2008, and concluded negotiations for an FTAwith Colombia in early June 2008 (this would be Canada’s fifthFTA with countries of the Americas). Most recently, Australiasigned an FTA containing investor-state dispute settlementprovisions with Chile on 30 July 2008. As demonstrated by its BITpolicy, China is also seeking closer economic ties with Latin-America, having recently signed an FTA with Peru (on 28 April2009) which provides for investor-state arbitration.

D. Latin American BIT and MIT cases

Although UNCITRAL and other institutional statistics are difficultto come by, the flood of investment treaty arbitrations involvingLatin America is clear from the ICSID website(www.worldbank.org/icsid/cases/cases.htm). Whereas less than aquarter of concluded ICSID cases involve Latin American states, ofthe 123 cases currently pending before ICSID tribunals, over half(63) involve Latin American states. Of those, 34 cases are againstArgentina, as foreign investors have flocked to challenge the impactof the January 2002 “Emergency Law” (which “pesified” publicand private contracts previously denominated in dollars) on theirlocal investments. In the last four years, an unprecedented 18 finalawards and 14 awards on jurisdiction have been rendered ininvestment treaty arbitrations involving Argentina, Bolivia, Chile,Ecuador, El Salvador, Mexico, Peru and Venezuela.

ArgentinaBetween May 2005 and March 2009, nine awards for damages inthe total amount of some US$1.1 billion were rendered againstArgentina, seven of which challenged the impact of its “EmergencyLaw” on investments. In each case, Argentina was found to haveviolated the substantive provisions of the relevant BIT. Argentina’sactions were held not to be excused by any defence (such asnecessity) in all but two cases where a defence of “necessity” underArticle XI of the US-Argentina BIT was accepted (LG&E EnergyCorp & others v Argentine Republic, accepting the defence for alimited period of time only and Continental Casualty Company vArgentine Republic). On 5 September 2008, Argentina claimed a victory in an“Emergency Law” case brought by a US company that provided




workers-compensation insurance (Continental Casualty). Thetribunal accepted Argentina’s defence of “necessity” pursuant toArticle XI of the US-Argentina BIT (which provides that measuresnecessary for the maintenance of public order, inter alia, are notprecluded by the BIT). All of Continental’s claims but one wererejected on the basis of the application of this defence. The tribunalconsidered Article XI of the US-Argentina BIT to be a thresholdrequirement and held that this defence limits the scope ofapplication of the BIT: if it applies, the substantive obligations ofthe BIT do not apply. This case can be distinguished from other“Emergency Law” awards which found in favour of the investors(CMS, Enron, Sempra, LG&E BG Group and National Grid) inthat: (i) it did not concern an investment in the regulated publicutility sector but rather in the private commercial (insurance) sector;and (ii) the Argentine government had made no specificcommitments or promises to Continental. As a result, the tribunalawarded Continental only US$2.8 million out of the US$69 millionclaimed.As for the eight BIT awards rendered against it, Argentina hasadopted a policy of challenging all such awards in the relevantforum (before ICSID annulment committees, or the courts of theseat of the arbitration in the two UNCITRAL cases - BG Group andNational Grid). In May 2007, the first of these challengeproceedings involving an “Emergency Law” case culminated in adecision upholding the damages awarded (CMS Gas TransmissionCompany v. Argentine Republic). However, Argentina has yet tocomply with this award, arguing that CMS (and other investors withBIT awards in their favour) must enforce those awards before thelocal courts in Argentina. Argentina’s interpretation of the ICSIDConvention, the New York Convention, the UNCITRAL Rules andthe relevant BITs, exposed in Argentina’s pleadings before theICSID ad hoc annulment committees in the Siemens, Enron,Vivendi and Sempra cases, is that its only international obligation isto ensure that BIT awards can be enforced in its own courts: it is notobligated to make voluntary payment of those awards. Thisposition has been resoundingly rejected by the all of the ad hoccommittees as well as the US government. Recently, three ad hoc committees have taken into accountArgentina’s failure to comply with the CMS award and itsunorthodox interpretation of the ICSID Convention when decidingupon investors’ requests that Argentina be ordered to post securityas a condition of being granted a stay of enforcement pending theconclusion of annulment proceedings. On 7 October 2008, theEnron ad hoc committee asked Argentina to provide an undertakingthat it would not require ICSID award creditors to enforce theirawards through the Argentine courts, failing which it wouldreconsider Enron’s request that the stay of enforcement be madeconditional upon the posting of a bond. On 4 November 2008, theVivendi ad hoc committee ordered Argentina to either (i) provide anundertaking that it would pay the award within 30 days in the eventthat it was not annulled, or (ii) post a bank guarantee as a conditionfor a stay of enforcement. Finally, on 5 March 2009, the Sempra adhoc committee conditioned a stay of enforcement of the (US$128million plus interest) award upon Argentina placing US$75 millionin escrow within 120 days. To date, Argentina has failed to providethe necessary assurances or security. The Enron, Vivendi andSempra decisions evidence the growing frustration of theinternational community with respect to Argentina’s refusal tocomply with its international obligations.

EcuadorEcuador has faced several investor claims in recent years (includingeleven ICSID claims, eight of which are still pending), many ofwhich have arisen as a result of windfall royalties imposed in theenergy sector. In the last year, ICSID has registered four new cases

against Ecuador. Unless these cases settle (which seems morelikely than was the case with Argentina - for example, City OrienteLimited settled its dispute with Ecuador, and discontinued its ICSIDproceedings, in September 2008) the focus of BIT arbitration overthe next few years will be on Ecuador.On 18 August 2008, a final award was rendered in favour of Dukein Duke Energy Electroquil Partners & Electroquil SA v Republicof Ecuador. The dispute arose out of late payments and thewrongful imposition of fines and penalties under power purchaseagreements entered into with a state energy company in the 1990s.The tribunal held that Ecuador had breached the agreements,national law and the protections granted under the umbrella clauseand the fair and equitable treatment provision of the US-EcuadorBIT. Ecuador was ordered to pay US$11 million in damages andinterest. There are also indications that Ecuador will not follow Argentina’sexample with respect to compliance with international arbitralawards. For instance, in December 2008, Ecuador voluntarily paidthe US$11 million Duke award without the need for enforcementproceedings.

Elsewhere in Latin AmericaOver the last year, three final awards were rendered in BIT casesagainst Peru and Chile (one finding against, the others finding infavour of the investor); and three jurisdictional awards (allaccepting the investors’ claims) have been rendered in BIT casesagainst the Dominican Republic, Guatemala and Venezuela. More BIT decisions involving Venezuela and Bolivia are expectedto be issued over the next year or two. Faced with a raft of actualand threatened nationalisations of investments in the naturalresources sector by “Bolivarian” (socialist) governments in thesecountries, as in Ecuador, investors have notified disputes underBITs as part of their “negotiations” with the state. In some cases,BIT rights have simply been used as “bargaining chips” to ensurefairer compensation for expropriation, or better terms for any newcontracts or investment structures, and arbitration has not ultimatelybeen commenced. In other cases, frustrated investors haveproceeded to commence arbitration: in the last year ICSIDregistered three cases against Venezuela. It is to be hoped that thesestates take the approach of Ecuador rather than Argentina in termsof compliance with the eventual awards.

E. The backlash against BIT arbitrations in Latin America

As a reaction to the increasing reliance of foreign investors onICSID arbitration, in May 2007 a group of Latin American statesknown as the “Bolivarian Alternative for the Americas” or “ALBA”- which includes Venezuela, Bolivia, Cuba, Nicaragua, and sinceJanuary and August 2008 respectively, Dominica and Honduras -indicated its intention to withdraw from the ICSID Convention andestablish its own arbitration system. Several of these countries havetaken steps aimed at preventing future BIT arbitrations from beingfiled against them and seeking alternatives to ICSID.

BoliviaIn an unprecedented step, Bolivia denounced the ICSIDConvention, notifying ICSID of its withdrawal on 2 May 2007, andformally withdrawing with effect six months later on 3 November2007 (pursuant to Article 71 of the Convention). No contractingstate has ever denounced the ICSID Convention; as such, the legalconsequences of this withdrawal will constitute a case of firstimpression for the ICSID tribunal which will be required to addressthe issue in the case of E.T.I. Euro Telecom International NV v.

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Republic of Bolivia. In June 2008, the Bolivian governmentannounced the creation of a new Ministry responsible for defendinginternational arbitration claims relating to the government’snationalisation programme, appointing Hector Arce (previouslyVice-Minister of the Presidency) as its head. In January 2009, theBolivian Government reiterated its intention (first communicated in2007) to revise all of its BITs. This task has been assigned toMinister Arce who has yet to take any formal steps to this end.A new Bolivian Constitution was approved in a referendum held on25 January 2009 (and came into force on 7 February 2009). Article366 of this Constitution provides that all foreign companiesoperating in the oil and gas sector are “subject to the sovereignty ofthe State” and that under no circumstances will a foreign tribunal berecognised nor can international arbitration or diplomaticinterventions be resorted to. As a matter of international law, thisprovision is clearly questionable.

EcuadorOn 4 December 2007, Ecuador notified ICSID that it will refuse tosubmit to ICSID arbitration disputes with respect to investments innatural resources (pursuant to Article 25(4) of the Convention). InSeptember 2008, Ecuador adopted a new Constitution whichprevents Ecuador from entering into treaties or internationalagreements ceding jurisdiction to international arbitration tribunals(save for treaties or agreements for the settlement of disputesbetween Latin American states and their nationals through regionalarbitration institutions). In October 2008, Ecuador terminated eightof its 24 BITs, having sent formal termination letters to theGovernments of Cuba, El Salvador, Guatemala, Honduras,Nicaragua, Dominican Republic, Paraguay and Uruguay on thebasis that these BITs had failed to attract sufficient investment.(Several of these BITs contain 10-year survival provisions and theirtermination is therefore not immediately effective.) Ecuador hasannounced that it is reviewing investments made pursuant to itsremaining 16 BITs, and that it is drafting a model BIT (morefavourable to Ecuador) which will be used as a template for new orrevised BITs. The Ecuadorian Government has also threatened toterminate contracts with foreign oil companies who submit theirdisputes to ICSID. Ecuador is insisting that any investmentdisputes be submitted to regional arbitration institutions.

VenezuelaIn a statement issued on 12 February 2008, the Venezuelan NationalAssembly recommended that the Executive withdraw from theICSID Convention. At the time of writing, however, theVenezuelan government has yet to notify ICSID of its withdrawal.More concretely, on 6 May 2008, Venezuela denounced its BIT withthe Netherlands, which had been relied on by investors in severalBIT claims against the state including the high profile case of MobilCorporation and others v. Bolivarian Republic of Venezuela. Inaccordance with its terms, the termination of the BIT took effect on1 November 2008. However, in view of its 15-year survival clause,investments made prior to 1 November 2008 will remain protectedby the BIT until 2023.

NicaraguaNicaragua’s Attorney General reiterated on 14 April 2008 thatNicaragua is considering denouncing the ICSID Convention, citingArgentina’s recent experience with ICSID, and indicating thatNicaragua would not sign investment agreements which provide forICSID as the competent tribunal going forward. A new law wasalso adopted in Nicaragua in April 2007 creating the Inter-Institutional Commission for the Defence of the Nicaraguan Stateagainst Investment Disputes, presided over by the AttorneyGeneral. The purpose of the Commission is to coordinate the

actions of state entities in defending the country against claimsbrought by foreign investors. Despite this hostility towards ICSID, in June 2008, Nicaraguacommenced an ICSID claim against the Spanish Grupo Barcelóclaiming US$30 million in damages or the return of the Montelimartourist resort which was privatised in the 1990s. Nicaragua isclaiming that Grupo Barceló failed to fulfil its obligations under itscontract with the state. In a press release, the Attorney-Generalnoted that the claim had been filed with ICSID despite theinstitution’s bias in favour of investors. ICSID has yet to registerthe claim, which would only be the third claim to be registered bya state against an investor in ICSID’s history.

UNASUR

Amidst this climate of hostility towards investment arbitration inLatin America, certain states have resolved to establish analternative to the ICSID system. On 23 May 2008, the ConstitutiveTreaty of the Union of South American Nations (“UNASUR”) wassigned by Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador,Guyana, Paraguay, Peru, Suriname, Uruguay and Venezuela,furthering the goal of greater economic integration in SouthAmerica. Prior to the signature of the UNASUR treaty, ministersfrom the 12 member states signed a declaration at the First SouthAmerican Energy Summit in Caracas resolving to draft an EnergySecurity Treaty within six months, establishing a regional body forthe resolution of energy disputes in South America. At a furthersummit held in October 2008, Chile, Colombia and Peru proposedthe creation of a regional centre for arbitration and conciliation,although, ultimately no agreement on this proposition was reached.However, it is unclear at this stage what impact such a regionaldispute settlement body could have, if it is eventually established.In order for this body to exercise jurisdiction over investmentdisputes, member states would have to withdraw from the ICSIDConvention and denounce their many BITs; a politically difficultand time-consuming task. Unless this new regional body is able todisplace international law protections and extend the reach ofregional legal principles to foreign investors (which has not beensuccessfully implemented by existing Mercosur and AndeanCommunity dispute settlement bodies), it is unlikely to have thedesired impact.

Conclusion

The rise of international arbitration in Latin America has beenfuelled by the huge increase in foreign investment in the regionsince the early 1990s and, in the case of BIT arbitrations, by thepolitical changes that have caused new governments unilaterally tomodify the rules upon which foreign investments were made. Thedesire clearly exists in Latin America from a commercialperspective to turn its back on isolationism, promote the resolutionof disputes by arbitration and provide the legal tools necessary toensure that process is protected. However, the local judiciary andpoliticians must not let Dr. Calvo in through the back door byputting obstacles in the way of the arbitral process, such asenjoining arbitrations, refusing to make payment of arbitral awardsor reviewing those awards in the local courts on “public policy”grounds. The recent political backlash against internationalarbitrations involving the state in certain jurisdictions is,unfortunately, likely to lead in the short term to an increase in“nationalistic” legislative reforms and judicial decisions. It is to behoped that future administrations steer the course of the region backtowards the modernising approach of the 1990s.



Sylvia Noury

Freshfields Bruckhaus Deringer LLP 65 Fleet StreetLondon EC4Y 1HSUnited Kingdom


Sylvia is Counsel in Freshfields’ international arbitration group. Shehas represented Latin American corporations and foreign investorsin Latin America in arbitrations under the auspices of ICSID, ICC,AAA and UNCITRAL, both in English and Spanish. She has actedin commercial and investor-state disputes relating to Argentina,Bolivia, Chile, Mexico, Peru and Venezuela involving sectors asdiverse as gas, electricity, oil, mineral and water concessions,pipeline construction, alcoholic beverages and tobacco. Sylviarepresents several large energy companies in arbitrations arisingfrom the impact of Argentina’s emergency economic measures in thepublic utility sector, including CMS, Total, BG and National Grid.Sylvia also advises numerous foreign investors in relation to adversemeasures taken by the Government of Bolivia and Venezuela. Sylviais the Special Correspondent for Latin America of Global ArbitrationReview. She was cited as a “recognised name in this field [LatinAmerican arbitration work]” by Latin Lawyer 250, 2007, and as an“up and coming individual” in international arbitration by ChambersLatin America.

Caroline Richard

Freshfields Bruckhaus Deringer LLP 65 Fleet StreetLondon EC4Y 1HSUnited Kingdom


Caroline is an associate in Freshfields’ international arbitrationgroup. She has represented foreign investors in Latin America ininternational arbitrations under the auspices of ICSID andUNCITRAL and has acted in disputes in the gas, electricity andmining sectors. Caroline represents Total and National Grid inarbitrations arising from the impact of Argentina’s emergencyeconomic measures in the public utility sector. She also advisesclients in Venezuela, Ecuador and Bolivia in relation to adversemeasures taken by the Government in relation to their investmentsin the exploration and production of natural resources.

Freshfields Bruckhaus Deringer LLP is a leading international law firm providing a comprehensive worldwide service tonational and multinational corporations, financial institutions and governments. In 2008, the firm was named“Arbitration Law Firm of the Year” by Who’s Who Legal for the fourth consecutive year and by Chambers Global for thethird consecutive year. Freshfields is the only firm ranked in tier one for international arbitration by Chambers LatinAmerica 2009.

The firm’s Latin American arbitration group combines the arbitration expertise and resources of the world’s number onearbitration practice with specialist knowledge and linguistic ability. The group advises on a wide range of disputes forLatin American corporations, foreign investors and Governments in the region, representing clients in commercial andinvestment treaty arbitrations under various procedural rules, in English, Spanish and Portuguese. The group includescommon law and civil law lawyers (including lawyers trained in Argentina, Brazil, Canada, Chile, Colombia, Mexico,Spain, the UK, the US and Venezuela), who match advice on both systems of law with a full understanding of the LatinAmerican context and culture.




Chapter 35

M. & M. Bomchil

Argentina


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Argentina?

The Argentine National Civil and Commercial Procedural Code(hereinafter “NCCPC”) distinguishes between the agreement tosubmit future disputes to arbitration (“cláusula compromisoria”)and the agreement to submit a dispute that already exists(“compromiso arbitral”).The cláusula compromisoria could be inserted into the contract -orin a separate instrument- clearly stating that every related disputeshall be submitted to arbitration.The compromiso arbitral must take the form of a public deed orprivate instrument, or of a minute executed before the court hearingthe case or the one which would have jurisdiction if the case werenot brought to arbitration (NCCPC, article 739).


Individual persons must have legal capacity to settle disputes inorder to be legally qualified to enter into an arbitration agreement(NCCPC, article 738).


Pursuant to article 740 of the NCCPC, the compromiso arbitral shouldinclude: the date, name and address of the parties and of the arbitrators-with the exception of those cases in which an arbitrator is appointedby other arbitrators, the courts or a designated authority-; a statementof the issues submitted to arbitration and the underlyingcircumstances; and the fine that shall be paid by the party who doesnot comply with the acts necessary for the fulfilment of the arbitrationagreement. Further issues -such as procedural rules, place ofarbitration, number of arbitrators, language of the arbitration and,whether arbitration is de iure or amiables compositeurs- may also beincluded. If no provision is established on the type of arbitration, thearbitrators shall act as amiables compositeurs.


In general, courts enforce arbitration agreements provided that the

formal and substantial requirements are met (inter alia, capacity ofthe parties to arbitrate and objective arbitrability).


Courts favour ADR agreements. In particular, federal legislationhas established mandatory mediation procedures applicable toalmost all disputes between private parties (Law No. 24,573) andconciliation procedures in labour law matters (Law No. 24,635) asa step prior to resorting to courts.


2.1 What legislation governs the enforcement of arbitrationproceedings in Argentina?

Argentina is a federal country, with both federal and provinciallevels of organisation. At the federal level and within the city ofBuenos Aires, the NCCPC sets rules concerning arbitration. Eachprovince has its own procedural rules, which include arbitration-related provisions.At the federal level, the NCCPC governs, inter alia, arbitrationagreements, awards and the recognition and enforcement of foreignawards.


The NCCPC rules both kind of arbitration proceedings and does notdistinguish between each other. The NCCPC provides for particularrules concerning recognition and execution of foreign awards(NCCPC, articles 517 to 519 bis). Where treaties to whichArgentina is a party turn out to be applicable -such as the New Yorkand Panamá Conventions, the Montevideo’s Treaties on ProceduralMatters (1889-1940), the Montevideo Convention of 1979, amongothers- they shall prevail over the NCCPC.


No. Argentina has not passed yet a modern international arbitrationlaw based on the UNCITRAL Model Law. A draft bill based on themodel law has been submitted to Congress, but its treatment has

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been delayed. Certain private institutional arbitration proceedingsfollow the model law.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Argentina?

There are no specific mandatory rules applicable to internationalarbitration proceedings, provided that the rules on prorogatio foriare observed (NCCPC, article 1). However, general mandatoryprinciples apply (i.e. observance of due process).

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Argentina? What isthe general approach used in determining whether or not adispute is “arbitrable”?

The NCCPC provides under its article 737 that matters not subjectto settlement cannot be submitted to arbitration. This comprises-among others- certain family law and public order matters.


The NCCPC does not explicitly provide for the kompetenz-kompetenzprinciple. However, Argentine courts have generally considered thatarbitrators are empowered to rule on their own jurisdiction. It isadvisable to refer to this matter specifically in the arbitration clause.

3.3 What is the approach of the national courts in Argentinatowards a party who commences court proceedings inapparent breach of an arbitration agreement?

In those cases, the court serves the complaint to the other party whichmay submit a challenge to the court’s jurisdiction. In general, if suchchallenge is made showing that the parties had entered into a validand enforceable arbitration agreement, the court declares its lack ofjurisdiction and defers the dispute to arbitration. However, if theother party fails to make a jurisdictional challenge at the appropriatestage, the right to do so is deemed to have been waived.


When a court is requested to decide on any matter related to anarbitration proceeding, it will consider whether: (i) there is a validarbitration agreement; (ii) the subject-matter of the dispute isarbitrable; and (iii) the dispute has been sufficiently defined in thecompromiso arbitral. If these requirements are met, the court will notinterfere in the arbitration proceeding. (See, i.e., “Nidera ArgentinaS.A. c/Rodriguez Alvarez de Canale, Elena G.”, Federal SupremeCourt, 11/10/1998; “Otondo, César A. c/Cortina Beruatto S.A.”,National Commercial Court of Appeals, Chamber E, 6/11/2003).

3.5 Under what, if any, circumstances does the national law ofArgentina allow an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

The NCCPC does not contain provisions allowing extension of thearbitration agreement to non-signatories.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Argentina and what isthe typical length of such periods? Do the national courtsof Argentina consider such rules procedural or substantive,i.e., what choice of law rules govern the application oflimitation periods?

Arbitrations should commence within the time period agreed in thecompromiso arbitral (if any limitation period is therein agreed).Otherwise, the general statute of limitations applies counted as ofthe relevant breach giving place to the dispute took place -which bydefault is 10 years and is deemed as a substantive issue ruled by theArgentine Civil Code.



In disputes related to international contracts, parties are free to agreeupon the law applicable to the substance of the dispute. In the absenceof such choice, if the contract was executed in Argentina or should beperformed in Argentina, the Argentine Civil Code establishes that thedispute shall be settled based on the law applicable at the place ofperformance. If the contract was neither executed nor should it beperformed in Argentina, or the place of performance is undetermined,the laws in force at the place of execution apply.


Mandatory laws of the seat prevail over the applicable law chosen bythe parties in those cases in which one effectively contradicts the other.


Arbitration agreements related to international contracts aregoverned by the law agreed upon by the parties. If no law has beenselected, the choice of law rules applicable to internationalcontracts under the Argentine Civil Code apply (see question 4.1above). If an international treaty -such as the 1958 New YorkConvention- becomes applicable, it prevails over the provisions ofthe Argentine Civil Code.



There are no limits to the selection of arbitrators. However,arbitrators have to comply with some general requirements such asbeing over 21 years old and enjoy full exercise of their civil rights,not being a judge or employee of the Judiciary (except in cases inwhich the State is a party), and being a lawyer when the arbitrationis de iure (NCPCC, articles 743 and 765).


In those cases, the court which would have entertained the case had

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the parties not agreed to arbitrate the dispute is competent toappoint the arbitrators (NCPCC, articles 742 and 743).




Arbitrators must be independent, impartial and neutral. They maybe challenged by the parties on the same grounds as judges(NCCPC, articles 17 and 746), when there is a conflict of interests.Among others, these grounds include having a close or businessrelationship with one of the parties or their lawyer, an interest in theoutcome of the dispute, having given an opinion or issuedrecommendations regarding the dispute or received an importantbenefit from one of the parties. In the case of amiables compositeurs, the grounds due to which theymay be challenged after their appointment (NCCPC, article 768)are more limited (for instance, having an interest in the outcome ofthe dispute, among others).

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Argentina?

There are no rules on disclosure of potential conflicts of interestsestablished by law. The NCCPC does not impose to arbitrators thelegal obligation to disclose potential conflicts of interest. Privatearbitration institutions do provide for the obligation to disclose. Forinstance, the Arbitration Rules of the Buenos Aires Chamber ofCommerce (article 11) provides that the arbitrators have theobligation to disclose the existence of any of the situations underwhich they could be challenged pursuant to article 17 of the NCCPC.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Argentina? If so, do those laws or rulesapply to all arbitral proceedings sited in Argentina?

Articles 736-773 of the NCCPC govern the arbitration procedurewhen conducted under federal jurisdiction. In the provinces,provincial procedural codes will apply. There are other arbitration rules established by local arbitrationinstitutions, such as those of the Buenos Aires Stock Exchange(www.bcba.sba.com.ar) and the Argentine Chamber of Commerce(www.cac.com.ar). Provisions of the procedural codes apply onlysubsidiarily with respect to the arbitration rules agreed by the parties.

6.2 In arbitration proceedings conducted in Argentina, arethere any particular procedural steps that are required bylaw?

In de iure arbitration, under article 751 of the NCCPC, the judicialprocedure for ordinary or summary proceedings (depending on theamount on dispute) will be applicable unless the parties have agreedotherwise. In the case of amiables compositeurs, in accordancewith article 769 of the NCCPC, arbitrators must conduct theproceeding without respecting any particular procedural steps.

However, as these provisions are only subsidiary, they are notapplied when parties have agreed on the application of particularrules or the rules of an arbitration institution.


Except for those cases under institutional arbitration rules -to whichthe corresponding rules apply- there are no mandatory rules.

6.4 What powers and duties does the national law ofArgentina impose upon arbitrators?

Arbitrators shall conduct the arbitration fairly and render an awardwithin the time limits agreed upon the parties in the compromisoarbitral (if any). They are empowered to issue provisionalmeasures. However, since arbitrators lack imperium, in order toenforce any such measures they should seek the court’s assistance(NCCPC, article 753).

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Argentina and, if so,is it clear that such restrictions do not apply to arbitrationproceedings sited in Argentina?

Lawyers from other jurisdictions are not allowed in general toprovide legal services in Argentina unless they: (i) are enrolled inthe Bar Association of the jurisdiction where the court or tribunal isseated; (ii) are not affected by any of the incompatibilities orimpediments established in the applicable law; and (iii) haveregistered a domicile within the perimeter of the city in which thetribunal or court is seated. Although there are no specific provisionson the matter, such restrictions are not generally applied concerningthe appearance of lawyers from other jurisdictions in internationalarbitration proceedings sited in Argentina.

6.6 To what extent are there laws or rules in Argentinaproviding for arbitrator immunity?

Argentine Law does not provide specific immunities for arbitrators.However, given that the Argentine Supreme Court recognises ajurisdictional function to arbitrators (Argentine Supreme Court,“Bear Service S.A. v. Cervecería Modelo S.A”, 04/05/2005) andsince judges benefit from immunity in Argentina, legal scholarsconclude that arbitrators are protected by the same immunity. Legal scholars state that arbitrators could be held liable in case ofdamages caused by their own gross negligence.


In principle, no. Courts do not intervene in arbitration proceedings,except in particular situations such as when an arbitration decisionmust be compulsorily enforced, or once the award has been issuedand a party seeks annulment.In some particular cases where the State has been involved, localcourts have evidenced a wider interest in intervening in theproceedings which has generated significant criticism both inArgentina and abroad. In one case, a federal district judge issued a provisional measuresuspending an ICC arbitration proceeding pending an actionbrought by a State party requesting to decide on (i) the content of

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the Terms of Reference, and (ii) the challenge of the arbitral tribunalfor allegedly having incurred in prejudgement (a challengepreviously denied by the ICC) (See, i.e., “Entidad BinacionalYacyretá c/ Eriday y otros s/ proceso de conocimiento”, FederalAdministrative Court Nº 3, 09/27/2004). In another case, an Argentine federal court ordered the suspensionof an arbitration hearing under the UNCITRAL rules sited inWashington until it decided on a challenge to the Chairman filed bythe Argentine State (“Estado Nacional- Procuración del Tesoro c.Cámara de Comercio Internacional”, Federal Administrative Courtof Appeals, Chamber IV, 7/17/08).

6.8 Are there any special considerations for conductingmultiparty arbitrations in Argentina (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

Argentine law does not contain any provision concerningmultiparty arbitrations, consolidations of proceedings and thirdparty interventions. As a general principle, unless both parties tothe arbitration agreement and the third party provide their consent,no third parties may intervene or join an arbitration proceeding.

6.9 What is the approach of the national courts in Argentinatowards ex parte procedures in the context of internationalarbitration?

Courts generally do not object to ex parte procedures -such aspreliminary measures- provided that the affected party is grantedwith sufficient opportunity to be heard after the measure is ordered.



Under the NCCPC, arbitrators are empowered to issue preliminaryand provisional measures. However, due to their lack of imperium,only courts can order their compliance if the party affected refusesto abide by the order. Any type of relief accepted in judicialproceedings may be dictated.The empowerment to award preliminary relief is provided in manyinstitutional arbitral procedures -i.e. Buenos Aires Stock Exchangerules (article 33).


A court may order preliminary or interim relief in proceedings subjectto arbitration if the request meets the basic judicial requirements set bylocal legislation: i) there is an urgency to take the measure requested;ii) there is a prima facie positive view on the right of the requestingparty; and, iii) a bond is posted to cover potential damage. The reliefshould not match the requested outcome of the dispute (it shouldmerely guarantee the prospective enforcement of the award).

The party’s request and the granting of the interim relief have noeffect on the jurisdiction of the arbitration tribunal.


The courts approach these requests as they would in a judicialsetting. However, precedents on the matter are scarce.


There is no provision providing for a specific and complete regimeon security for costs. However, article 772 of the NCCPCempowers arbitrators to require the courts to order the deposit or theattachment of the amounts to cover the arbitrators’ expected fees incase the assets involved in the dispute constitute no sufficientguarantee (NCCPC, article 772).In addition, if the claimant has no real estate property and nodomicile in Argentina, the respondent may request a kind ofsecurity for costs (NCCPC, article 348).


8.1 What rules of evidence (if any) apply to arbitralproceedings in Argentina?

There are no mandatory provisions regarding evidence. If thearbitration agreement or institution rules do not provide forregulations, the de iure arbitral proceedings must follow theNCCPC (article 751). Amiables compositeurs may elect the rulesof their choice (NCCPC, article 769).


As stated above, arbitrators lack imperium to enforce compliancewith the measures they order. They must rely on the courts toobtain compulsory disclosure of documents (NCCPC, article 753).Discovery as understood in the U.S. is not provided for inArgentina.


When confronted with a request from an arbitrator to ordercompulsory disclosure of a document, the courts may orderdisclosure in accordance with Argentine law (NCCPC, article 753).


As stated above, discovery is not provided for under Argentine law.With regard to disclosure of documents, the Tribunal may drawadverse inferences upon a party’s denial to produce a document(NCCPC, article 388). The arbitral tribunal would not frequentlyseek for court’s assistance to compel a party to produce documents.

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As stated above, there are no mandatory arbitral procedural rules inArgentina. However, if no agreement on the arbitral proceedingshas been reached, the rules of the procedural codes are applied.Under the NCCPC, witnesses must take an oath to tell the truth(article 440). Questions to the witness are put forward by thearbitrator after having been written and filed in advance by theparties or added by them during the hearing. Cross examination ismade following this procedure. Written testimonies are allowed inthe case of certain public officers.Expert opinions are admissible if a special or particular knowledgein science, art, industry or technical activity is needed (NCCPC,articles 751 and 457).

8.6 Under what circumstances does the law of Argentina treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

There are no particular provisions on privilege in arbitralproceedings. However, ethical rules issued by Bar Associationsestablish the obligation to keep the attorney-client documentsconfidential. Depending on the circumstances, its disclosure maybe punishable under the Argentine criminal code. In addition, lawson confidential information and data protection (Laws No. 24,766and 25,326) limit the kind of documents and information whichmay be subject to disclosure.

9 Making an Award


Awards must be in writing and the decision reached must beproperly justified in facts and law. It must deal with all the issuessubmitted to arbitration as well as with ancillary matters such ascosts and fees of the proceedings, and be issued within the agreedupon term. An award must be signed by the majority of thearbitrators in those cases where the tribunal is composed by severalarbitrators.



If the right of appeal has not been waived, the award may beappealed for the same reasons and bases as court judgments. Whilethe parties can waive the right to appeal, such waiver does not applyto an annulment request based on the failure to observe theestablished procedure; to the rendering the award out of time orbeyond compromised points. Awards rendered in amiable composition procedures are not subjectto appeal (NCCPC, article 771).


The parties may waive in advance their right to appeal the award.However, the remedy of an annulment and the petition forclarification of an award cannot be waived (NCCPC, article 760).


No. The judicial court’s appeal jurisdiction cannot be expandedbeyond the boundaries established by law. However, the partiesmay agree upon an appeal procedure outside the judicial system,thus not subject to the restrictions related to the rules on courts’jurisdiction.

10.4 What is the procedure for appealing an arbitral award inArgentina?

The aggrieved party may file an appeal within five days since theaward was served to it. The pleading should contain the groundsand reasons for appealing the award and should be filed with thearbitral tribunal. If the arbitral tribunal declares the appealadmissible, the Court of Appeals holding territorial and subjectmatter jurisdiction on the dispute is called to decide. In case thearbitral tribunal finds the appeal inadmissible, the aggrieved partymay file a petition of review (“queja por denegación de apelación”)with the Court of Appeals within five days of being served with thedecision on admissibility.


11.1 Has Argentina signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

On September 28, 1988, the Argentine congress passed Law No.21,619 whereby it approved the 1958 New York Convention. Uponratifying the New York Convention, on March 14, 1989, Argentinamade both reservations authorised under its article I(3). Accordingly,it declared that on the basis of reciprocity, it will apply theConvention only to the recognition and enforcement of foreignarbitral awards made in the territory of another Contracting State andto differences arising out of legal relationships, whether contractualor not, which are considered as commercial under its national law.

11.2 Has Argentina signed and/or ratified any regionalConventions concerning the recognition and enforcementof arbitral awards?

Argentina has signed and ratified several treaties concerningrecognition and enforcement of arbitral awards: the Treaties onProcedural Law executed in Montevideo in 1889 and 1940; theInter-American Convention on International CommercialArbitration, signed in Panama in 1975; the Inter-AmericanConvention on Extraterritorial Validity of Foreign Judgments andArbitral Awards, signed in Montevideo in 1979; and the Protocol onJurisdictional Cooperation and Assistance in Civil, Commercial,Labour and Administrative Matters within the MERCOSUR.

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11.3 What is the approach of the national courts in Argentinatowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

In general, Argentine courts recognise and enforce arbitral awardsprovided they do not violate Argentina’s international public policyand formal requirements established by law or any applicable treatyare met. Under the NCCPC -which governs the matter if no treaty isapplicable- the following requirements must be met by the partyseeking recognition and enforcement: (i) the award must be final at theplace where it was issued and the arbitral tribunal should have hadjurisdiction pursuant to the Argentine rules on internationaljurisdiction; (ii) the proceedings should have abided by the principleof due process; (iii) the award must meet the formal requirements tobe considered as such at the place where it was issued and should beauthenticated according to the Argentine rules on the matter; (iv) theaward must not affect Argentina’s international public orderprinciples; and (v) the award should not be contrary to or inconsistentwith a prior or simultaneous judgment of an Argentine court.

11.4 What is the effect of an arbitration award in terms of resjudicata in Argentina? Does the fact that certain issueshave been finally determined by an arbitral tribunalpreclude those issues from being re-heard in a nationalcourt and, if so, in what circumstances?

An arbitration award recognised in Argentina is deemed resjudicata. Courts are precluded from reviewing the same issues,provided that the triple identity requirement is met (same parties,object and cause of action). However, certain exceptions apply. For instance, a joint and severaldebtor may invoke the res judicata effect of an award issued in aproceeding to which it was not a party involving the creditor and itsco-debtor/s (Argentine Civil Code, article 715).

12 Confidentiality

12.1 Are arbitral proceedings sited in Argentina confidential?What, if any, law governs confidentiality?

There is no specific confidentiality requirement under Argentinelaw. Nevertheless, the parties are free to agree on their own termsin this regard, and frequently do so. In addition, certain institutionalarbitration rules establish the confidentiality of the proceeding(Buenos Aires Stock Exchange rules, article 24; Buenos Aires BarAssociation arbitral rules, article 25; arbitral rules of the ArbitralTribunal of the Economic Science Professional Council, article 1.4,among others).


The general rule is that information is not confidential, thus, it maybe subsequently referred to. However, a confidentiality agreementmay restrict such use.


Arbitration proceedings are not confidential by law, but in practice, theparties usually agree to conduct the arbitration on a confidential basis.



There are no particular limits with regard to damages applicable toarbitration proceedings. The general law on damages will beapplicable, which does not provide for punitive damages.


Argentine law does not provide any particular restriction on interestin arbitration proceedings. Arbitral tribunals will normally applythe same interest rates that judicial courts apply at that time.


Pursuant to article 772 of the NCCPC, arbitrators award fees andcosts following the general rules of Argentine law, as found inarticle 68 of the NCCPC. The general principle is that the winningparty is entitled to recover its fees and costs as regulated in the law,which basically provides for fees as a percentage of the award.


An award is not subject to court tax, unless recourse is made to acourt for its enforcement, in which case a 3% court tax must be paidupon filing the proceedings.


14.1 Has Argentina signed and ratified the WashingtonConvention on the Settlement of Investment DisputesBetween States and Nationals of Other States (1965)?

Argentina signed the ICSID Convention on May 21, 1991,approved it by Law No. 24,353, and ratified it on October 19, 1994.The Convention entered into force for Argentina on November 18,1994.

14.2 Is Argentina party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Argentina is a party to more than 50 bilateral investment treaties.Most of them provides for the possibility to submit investor-statedisputes to ICSID arbitration.Within the MERCOSUR, Argentina has signed the ColoniaProtocol for the Promotion and Protection of Investments, which isnot in force yet.

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14.3 Does Argentina have standard terms or model languagethat it uses in its investment treaties and, if so, what isthe intended significance of that language?

Argentina does not have a model BIT nor follows pre-establishedstandard terms when negotiating BITs. However, most of its BITsprovides for similar drafted clauses establishing the followingprotections in favour of foreign investors: (i) fair and equitabletreatment; (ii) protection against discriminatory and arbitrarymeasures; (iii) protection against unlawful expropriation; (iv)national treatment, (v) most favoured nation treatment; (vi) freetransfer of funds; and (vii) umbrella clauses.

14.4 In practice, have disputes involving Argentina beenresolved by means of ICSID arbitration and, if so, whathas the approach of national courts in Argentina been tothe enforcement of ICSID awards and how has thegovernment of Argentina responded to any adverseawards?

Since ratification of the ICSID Convention, Argentina has been aparty to more than 40 ICSID cases. To date, the Government ofArgentina has not voluntarily complied with any final award issuedagainst Argentina. There is no domestic court decision regardingthe enforcement of an ICSID award.

14.5 What is the approach of the national courts in Argentinatowards the defence of state immunity regardingjurisdiction and execution?

There are no precedents on the matter particularly dealing withinvestment arbitration. Under the ICSID Convention, the partieshave waived their jurisdictional immunity, but preserved its right toinvoke immunity from execution.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Argentina? Are certain disputescommonly being referred to arbitration?

Although no official statistics are kept, there has been a trend duringthe last 20 years favouring the incorporation of arbitration clausesinto international commercial agreements. In particular, insurance,joint venture, turn-key contracts, share purchase agreements, publicworks, oil and gas, and international sales contracts are now likelyto contain an arbitration clause. With regard to domesticarbitration, arbitration clauses are increasingly found inconstruction, purchase of shares, and civil engineering contracts.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Argentina, such as pending orproposed legislation that may substantially change the lawapplicable to arbitration?

Currently, the scope of the annulment remedy and the courts’ powerto intervene in ongoing arbitration proceedings are some of themain issues at stake in Argentina.a) Scope of annulment proceedings. The NCCPC provides that aparty may seek for annulment of the award under the followinggrounds: (i) essential procedural flaw; (ii) failure to render theaward within the time limits; (iii) failure to abide by the issuessubmitted to arbitration ruling ultra petita; and (iv) incompatiblerulings. The Judiciary is, thus, not empowered to review the meritsof the award at the annulment stage.However, in some cases involving State parties, the FederalSupreme Court has opened the door for a broader review of awards.In Cartellone v. Hidronor in 2004, it held that an award could alsobe judicially challenged when it turns out to be unconstitutional,illegal or unreasonable. The broad grounds (including reasonability-a highly imprecise standard-) under which the Court admitted thereview of an award even in those cases in which the parties waivedtheir right to appeal has triggered serious concerns.b) Courts’ involvement in arbitration proceedings. Traditionally,under Argentine law it has been considered that courts shouldrefrain from interfering in arbitration proceedings until an awardhas been rendered. In this path, the NCCPC provides courtremedies against arbitral awards, but it does not establish anyrecourse to be eventually filed during arbitration proceedings.Otherwise, the arbitral authority to conduct the proceedings wouldbe severely impaired.However, some few recent court decisions in cases involving theState have departed from the non-intervention principle and issuedinjunctions staying arbitration proceedings -including an ongoinginvestment arbitration against Argentina- under the view that theJudiciary retains imperium over the arbitral authority and extendingthe broad review standard set out by the Supreme Court inCartellone v. Hidronor to interim arbitration decisions.

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Guido Santiago Tawil

M. & M. BomchilSuipacha 268, piso 12C1008AAF Buenos AiresArgentina

Tel: +54 11 4321 7500Fax: +54 11 4321 7555Email: [email protected]: www.bomchil.com

Guido Santiago Tawil is a Chair Professor at the University of BuenosAires and a Senior Partner at M. & M. Bomchil, in Buenos Aires,where he heads the international arbitration and regulatory practicesof the firm. Dr. Tawil is the Co Chair of the IBA’s Arbitration Committee, an ICCACouncil member, a member of the LCIA Court, the ICC’s LatinAmerican Arbitration Group, the ITA’s Academic Council, the FIAAExecutive Committee, among other institutions. He has published fivebooks and over 120 articles in matters related with his fields ofpractice. His professional activity is focused in administrative law, energy,public utilities and international disputes. He acts as chair, co-arbitrator, counsel or independent expert in arbitrations under therules of the ICC, LCIA and ICSID. He has been awarded with the University of Buenos Aires LawSchool Award for the best doctoral dissertation and by the BuenosAires Bar with the Shaw Award for the best legal contribution. He received his law degree (1983), a master degree (1986) and aPh.D. (1991) with the highest academic qualifications, all of themfrom the University of Buenos Aires.

Ignacio J. Minorini Lima

M. & M. BomchilSuipacha 268, piso 12C1008AAF Buenos AiresArgentina

Tel: +54 11 4321 7577Fax: +54 11 4321 7555Email: [email protected]: www.bomchil.com

Ignacio J. Minorini Lima is a Senior Associate at M. & M. Bomchil,in Buenos Aires, Argentina, where he is a member of theinternational arbitration and regulatory practices of the firm. He hasbeen a foreign associate at Debevoise & Plimpton, LLP (2009). Mr. Minorini Lima received his law degree in 2002 from theUniversity of Buenos Aires, with honors, and a master degree inAdministrative Law in 2007 from Universidad Austral. He is anassistant professor of Administrative Law at the University of BuenosAires Law School. He has published papers on arbitration andadministrative law issues.Mr. Minorini Lima has primarily concentrated his practice ininternational arbitration, counselling multinational and domesticcompanies in proceedings instituted under the ICC, UNCITRAL andICSID rules. He has also been actively involved in domestic litigationbefore the Argentine Federal Supreme Court and lower courts.

M. & M. Bomchil was founded in 1923. It is one of Argentina’s major law firms, providing comprehensive legal servicesto local and foreign clients in the different branches of law, with specialisation in commercial, financial, administrativeand regulatory law, tax, anti-trust, arbitration and domestic litigation.

M. & M. Bomchil is considered a regional leader in arbitration, being its partners regularly involved as counsel,arbitrators or experts in large commercial, regulatory and investment law disputes. The firm represents foreign andnational companies in international and domestic arbitration proceedings under the ICC, UNCITRAL and ICSID rules aswell as under the rules of domestic arbitration institutions, among others.

The firm’s clientele, mainly formed by multinational companies that invest in Argentina and by medium and large localcompanies, is involved in diverse sectors of the economy: commercial and industrial companies, public utilities’ andpublic works’ concessionaires, banks and financial institutions, insurance companies, entertainment enterprises andservice companies, as well as foreign governments and embassies, foundations and non-profit organisations.



Chapter 36

Guevara & Gutierrez S.C. Servicios Legales

Bolivia


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Bolivia?

Pursuant to the Bolivian Arbitration and Mediation Law of March10, 1997, an arbitration agreement must be in writing. It may be aspecial agreement or an arbitral clause within an agreement amongthe parties. In addition the law specifically recognises arbitralagreements that are evidenced through the exchange ofcorrespondence. The law further recognises as evidence of anarbitration agreement any mechanism that leaves documentaryevidence of the parties’ intent to submit to arbitration.


There are no particular additional formalities required for a validarbitration agreement if an individual is party to a commercialtransaction as opposed to a company. We do note, however, thatthere are special authorisations and particular formalities required ifa state entity or a state controlled entity is to agree to an arbitrationagreement.


The parties need only agree to subject the possible controversiesamongst them to arbitration for the agreement to be valid. If noother aspects are included in the arbitral agreement, the BolivianArbitration Law sets forward a statutory procedure destined to helpthe parties constitute the arbitral panel and carry out the processwith help of the courts. However, we advise that the partiesdesignate an arbitral administrative institution as it may be verydifficult to proceed with the arbitration if the defendant is indisagreement and many issues have to be brought before a Bolivianjudge. We also suggest that the parties identify the arbitration as aninternational arbitration, as certain provisions of the BolivianArbitration Law will then apply, allowing the parties to agree on thelaw to be applied by the arbitral panel in resolving the dispute.


Although initially the courts treated arbitration and arbitral awards

with distrust, there is now a marked tendency to enforce arbitralagreements and, as a result, accept motions to dismiss judicialproceedings in light of the arbitration agreements. There are twocases in which this has not been the tendency and those are whenthe Bolivian State or one of its instrumentalities is a party to anarbitral agreement and when the arbitral agreement has beenquestioned as void. When the state is a defendant, the courts have been much morecautious in enforcing arbitral agreements, in some cases lookinginto the relevant authorisations and validity of the arbitrationagreement prior to dismissing a judicial proceeding and remittingthe parties to arbitration. The Bolivian Supreme Court has adopted the position that when anagreement is questioned as void pursuant to Bolivian Law, thecourts and not an arbitral panel must determine if the arbitrationagreement contained in such agreement is void. This opinion,however is contrary to a Constitutional tribunal ruling that declaresthe validity of the Arbitration and Mediation law holding that thearbitrators do have competence to determine questions regardingthe validity of the an arbitration award.


National courts have given little merit to ADR agreements and havenot stayed or suspended proceedings when such agreements havenot called for compulsory arbitration. It seems that this position hasbeen assumed in the view that the ADR agreed upon amongst theparties may continue parallel to the court proceedings and ifsuccessful a settlement arrived by the parties would be ultimatelyrespected by the courts.


2.1 What legislation governs the enforcement of arbitrationproceedings in Bolivia?

The Bolivian Arbitration and Mediation Law of March 10, 1997,governs the enforcement of arbitration proceedings in Bolivia. Inaddition, we note that Bolivia has ratified the 1975 Panama InterAmerican Convention on International Commercial Arbitrationwhich contains certain provisions regarding the enforcement ofarbitration agreements which could be called to apply in the eventof an international arbitration amongst parties of the Organisationof American States member countries.

Ramiro Guevara

Jorge Luis Inchauste



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Guevara & Gutierrez S.C. Servicios Legales Bolivia


The same Bolivian Arbitration and Mediation Law of March 10, 1997,governs international arbitration in a special section. This specialsection to the Bolivian Arbitration Law contains special normsapplicable to arbitrations in which the parties have agreed that thesubject matter of the arbitration deals with more than one state, whenthe business establishment of the parties is in different states and whena substantial part of the obligations of the parties has a closerelationship with an establishment outside of the country. The specialnorms applicable to international arbitration include the faculty of theparties to decide on the applicable law, which for domestic arbitrationmust be Bolivian Law. In addition, the parties’ capacity to enter intoan arbitration agreement will be that of their legal establishment, thevalidity of the arbitration agreement will also be governed by theparties’ choice of law. Finally, we note that the remainder of theBolivian Arbitration Law will be applicable to internationalproceedings to the extent that it is not contradictory to the specialnorms indicated for international arbitration.


Although the Bolivian Arbitration and Mediation Law contains aspecial section for international arbitration, most of the regulationsof that law may still be applicable to international arbitration. Thereare a few important differences between the Bolivian ArbitrationLaw and the UNCITRAL Model Law. One such difference is that,pursuant to Bolivian Law, an arbitral procedure should concludewithin 180 days of the instalment of the arbitral panel unlessexpressly extended for an additional 60-day period.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Bolivia?

Regulations regarding the arbitral procedure and the appointment ofarbitrators may be agreed upon by the parties and are not subject tomandatory rules. However, it may be argued that even in the eventof an international arbitration, other regulations of the Arbitrationand Mediation Law are mandatory to arbitrations sited in Bolivia.Such regulations may include the subject matter that can besubmitted to arbitration.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Bolivia? What isthe general approach used in determining whether or not adispute is “arbitrable”?

Pursuant to article 6 of the Bolivian Arbitration Law, the followingsubject matters may not be referred to arbitration: 1) matters overwhich a final judicial decision has been reached (except for issuesarising from the enforcement of such decisions); 2) matters relatedto the marriage status and capacity of the parties; 3) questionsregarding the assets and rights of minors or other persons judiciallydeclared as incapable of making decisions; 4) matters concerningthe functions of the state as a sovereign; and 5) labour issues, whichare excluded as they are subject to a special administrativeprocedure before the Ministry of Labour and thereafter to thejurisdiction of the labour courts.


Pursuant to article 32 of the Bolivian Arbitration Law, the arbitratoris permitted to rule on the question of his own jurisdiction and onthe question of the existence, validity and effectiveness of thearbitral agreement.Due to some recent Supreme Court rulings there is some questionas to the ability of arbitral panels to determine the validity ofagreements when a party claims that they are null and void and thearbitral clause contained therein is also questioned as void. TheBolivian Constitutional Court on the other hand has reaffirmed theability of arbitral panels to decide questions regarding the validityof the agreements and an arbitral clause.

3.3 What is the approach of the national courts in Boliviatowards a party who commences court proceedings inapparent breach of an arbitration agreement?

Judicial authorities must inhibit themselves from hearing acontroversy that is subject to an arbitration agreement when thedefendant to such proceedings presents a pre-answer motion to thejudicial authority requesting that they inhibit themselves from thecase. The judicial authority may only deny such a request if it findsthat the arbitration agreement is void or of impossible performance.Unfortunately, as described above, there is little uniformity amongstthe national courts regarding the ability of the Arbitral Tribunal todetermine if an agreement and the arbitral agreement is void.


The Bolivian Civil Courts may only address the issue of jurisdictionand competence of an arbitral tribunal (domestic or international) ifone of the parties presents a claim before such courts claiming thatthe arbitration agreement is void or of impossible performance. Aside from that, an argument regarding the competence of anational arbitral tribunal can be addressed upon the filing of nullityclaim against the arbitral award. Among the limited reasons forwhich a claim for the nullity of the award can be presented is thereference in the arbitral award to matters or controversies thatexceed the arbitral agreement.

3.5 Under what, if any, circumstances does the national law ofBolivia allow an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

The law only allows the arbitral tribunal to assume jurisdiction overindividuals or entities that have manifested their agreement to thearbitration agreement in writing. As a result, some form of writtencommunication must evidence the agreement of such persons orentities to be bound to arbitration, otherwise the arbitral tribunalwill not be able to assume jurisdiction over parties that are notthemselves party to an agreement.

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3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Bolivia and what is thetypical length of such periods? Do the national courts ofBolivia consider such rules procedural or substantive, i.e.,what choice of law rules govern the application oflimitation periods?

The Bolivian Arbitration law sets forth a period of 8 days within whichthe parties must designate arbitrators. If they fail to do so then thecourts may appoint the arbitrators not duly appointed. There is nolimitation period however, and the parties may take much longer tofinally conform and commence the arbitration. In addition these rulesare procedural rules which may be superseded by an agreement of theparties or arbitral rules adopted by the parties. We do note however, that the Bolivian Arbitration law sets forth amaximum period of 180 days within which the award may be issuedonce the arbitration has commenced. This period may be extended bythe written agreement of the parties. The failure to issue the award inthis period is a cause for the nullity of the award. Notwithstanding thefact that there is no set jurisprudence in this regard we understand thatthe logical view is that this term may be modified by the parties uponthe adoption of arbitral rules that either set forth different periods or donot have a limitation like this one.



The Bolivian Arbitration Law has a special chapter referring tointernational commercial arbitration. In that section the lawrecognises the ability of the parties to determine the law orprinciples that will be applicable to the substance of the dispute. Inthe event the parties have not determined the law applicable to thesubstance, the Arbitral Tribunal is specifically empowered by theBolivian Arbitration Law to decide based on the particular case todetermine the applicable law they find more convenient.


Pursuant to the Bolivian Commercial Code, agreements that will beperformed in Bolivia must be subject to Bolivian Law and anyagreement amongst the parties to the contrary will not beconsidered. Although the Arbitration Law is more specific toarbitral proceedings, and as a result the agreement of the partiesshould prevail. We note that disputes resulting from agreements tobe performed in Bolivia that are decided based on anothersubstantial law, may be questioned as contrary to Bolivian publicPolicy.


The Bolivian Arbitration Law also determines the ability of theparties to determine the law pursuant to which the arbitralagreement must be interpreted as to formation, validity and legality.We do note again however, the existence of rulings form theBolivian Supreme Court that determine that the arbitral panels maynot decide with regard to a question of nullity of the arbitralagreement.



Public servants are legally impeded from acting as arbitrators. Thisprohibition expressly includes employees of the judicial andlegislative branches, as well as district attorneys.


The Bolivian Arbitration Law sets forth a default procedure for theselection of arbitrators in the event the parties do not agree on anarbitration selection method. In the event the parties do not agreeon the number of arbitrators, such number will be three. In theevent the number of arbitrators is three (by agreement among theparties or by application of the Arbitration Law), then each partymust designate an arbitrator and the third arbitrator must bedesignated by agreement among the party appointed arbitrators.


In the event the parties have agreed that the dispute will be decidedby a single arbitrator, but do not agree on the person of sucharbitrator and have not agreed on a procedure for electing suchsingle arbitrator, any one of the parties may request that a civil courtjudge designate such sole arbitrator. A civil court judge will alsointervene and designate an arbitrator in the event the arbitration willbe conducted by three arbitrators when the parties fail to agree onthe method of designating the arbitrators and one of the parties doesnot designate an arbitrator within eight days of receiving a writtenrequest from the other party to do so or in the event the partyappointed arbitrators fail to designate the third arbitrator withineight days of their appointment.


The Bolivian Arbitration law states that arbitrators must beindependent and impartial. Further arbitrators may be liable for thedisloyal or fraudulent exercise of their duties and as a result of anydamages caused to the parties as a result of their actions.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Bolivia?

In order to guarantee the independence or impartiality of thearbitrators the Bolivian Arbitration Law compels any personappointed as arbitrator to notify the parties of any possible situationsthat may cause create a conflict of interest. The obligation to notifythe parties of any situation that arises, which could compromise theimpartiality or independence of the arbitrators, continues after theappointment and until the arbitrators complete their appointed task.The parties may expressly waive any possible conflict of interestonce they have been informed. If a party does not promptly raise anobjection to the arbitrator once informed of the possible conflict thenthey will be deemed to have implicitly waived its right to object to thearbitrator based on those grounds and may not later question thearbitrator or the award as a result.

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6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Bolivia? If so, do those laws or rules applyto all arbitral proceedings sited in Bolivia?

The Bolivian Arbitration Law governs the procedure of arbitrationin Bolivia. Although many of the rules contained in the ArbitrationLaw will apply to all arbitrations conducted in Bolivia a fair numberof these will be binding only to the extent the parties have notagreed on a different procedure.

6.2 In arbitration proceedings conducted in Bolivia, are thereany particular procedural steps that are required by law?

There are no required procedural steps as such and the parties, thearbitral institution, or the arbitrators have substantial freedom as tothe procedural steps to be conducted. The basic required proceduralstep that may not be avoided is the proper notice to the parties withthe designation of the arbitrator(s) and of the arbitral proceedings.


Again, there are no specific rules that govern the conduct ofhearings and such rules are typically agreed upon by the parties orset forth by the arbitrators. We do note that most arbitral panels inBolivia will not allow a direct cross-examination of witnesses butwill require that all questions be directed to the tribunal.

6.4 What powers and duties does the national law of Boliviaimpose upon arbitrators?

Arbitrators are empowered by the Bolivian Arbitration Law toconduct the arbitration, resolving measures they deem proper tomove the arbitration forward. The arbitrators may dispose at anytime of the proceeding the measures that they deem necessary todetermine the truth of the controversial facts. Arbitrators are furtherempowered to act as mediators among the parties and propose asettlement amongst them.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Bolivia and, if so, isit clear that such restrictions do not apply to arbitrationproceedings sited in Bolivia?

There are regulations restricting the appearance of non-Bolivianlawyers in legal matters in Bolivia. Such regulations could result inpenalties to the offending attorney. The Bolivian Arbitration Lawstates that the parties need not be represented by legal counsel inarbitration proceedings and, as a result, there is no need to registerany legal counsel. However since there is a possibility that there arelimitations to the practice of foreign lawyers in Bolivia, we suggestthat foreign lawyers do not act as legal counsel but rather appear asrepresentatives in arbitral proceedings to be carried out in Bolivia.

6.6 To what extent are there laws or rules in Bolivia providingfor arbitrator immunity?

There are no laws or rules in Bolivia that would provide arbitratorswith immunity against claims that arise out of their action asarbitrators.


Procedural issues raised during the arbitration must be resolved bythe arbitral tribunal. The courts have jurisdiction to deal with onlythe following procedural issues: (1) the imposition of provisionalremedies at the request of the arbitral tribunal or of one of theparties; (2) a motion regarding the lack of jurisdiction of the arbitraltribunal may be appealed to the courts if resolved prior to theissuance of the final arbitral award; and (3) a recourse for theannulment of the arbitral award.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Bolivia (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

Multiparty arbitrations are not contemplated specifically in theBolivian Arbitration Law, and as stated above all parties to thearbitration must have agreed to submit the controversy toarbitration. Multiparty arbitrations can be consolidated into one arbitralproceeding only if all the parties have agreed under the same ordifferent agreements to consolidate all claims. Third parties to an arbitration may only intervene in or join anarbitration if they are a party to the arbitration agreement or if theyhave been invited to take part.

6.9 What is the approach of the national courts in Boliviatowards ex parte procedures in the context of internationalarbitration?

To date there is no binding case law with regard to the matter of exparte procedures in the context of international arbitration. TheBolivian Law is nonetheless quite clear regarding the prohibition ofex parte proceedings for domestic arbitrations.



Pursuant to the Bolivian Arbitration Law the arbitrators arepermitted to award preliminary or interim relief measures that areset forth in the Bolivian Civil Procedure Code. Such interim reliefmeasures include the attachment of assets and certain limited formsof injunction. However, the arbitrators must seek the assistance oflocal courts for the enforcement of such interim relief measuresbefore a third parties (including registries or public offices) oragainst a party that refuses to comply with the arbitrators’ measures.


Pursuant to the Bolivian Arbitration Law, the Bolivian civil courts

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are entitled to award preliminary or interim relief measures inproceedings subject to arbitration at the request of one of the partiesor at the request of the arbitral tribunal. To the extent the party thatrequests such interim relief does not initiate a judicial proceedingrequesting that a court decide upon the merits of the claim then suchrequest for the aid of the court in imposing interim measures shouldnot have any effect on the jurisdiction of the arbitration tribunal. Ifthe one of the parties requests that the court make a judgment on themerits and the other party does not present a motion to dismissbased on the arbitration agreement, then the parties may be deemedto have waived their right to subject the controversy to arbitration.


As stated earlier, some local courts are distrustful of arbitration andmay, at the defendant’s behest, go beyond the mere imposition ofpreliminary measures to the analysis of the validity of the arbitralagreement.


The Bolivian Civil Code requires that the claimant place securityfor the costs prior to the effectiveness of any interim measure. Thisrequirement should also be applied by arbitral tribunals as it is apublic policy norm.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Bolivia?

Pursuant to the Bolivian Arbitration Law, domestic arbitrations maybe conducted in equity or law. If an arbitration is conducted inequity, the arbitrators have much more leeway in the form andweight they attach to the evidence presented. However, if anarbitration is conducted pursuant to law, then the arbitrators mustabide to the strict rules of evidence set forth by the Bolivian CivilProcedure Code.


Discovery, and/or the requirement for disclosure of documents, isnot used in the Bolivian court system. It is therefore seldom usedin Bolivian domestic arbitrations. As a result, arbitrators are notcomfortable with document disclosure requests and will strictlylimit such requests - they typically extend only to such documentsthat the party requesting the disclosure can show exist. TheBolivian Arbitration Law does not set forth limits to the arbitrator’sdiscretion in this regard.


As stated above (see question 8.2), discovery practice is not used inBolivian courts and as a result it is unlikely that the courts will beable or willing to intervene in a discovery request.


In international proceedings that involve Bolivian parties andarbitrators, such parties and/or arbitrators will resist broaddiscovery and try to impose severe limitations to the discoveryprocess.


As stated previously, arbitrations conducted in equity have muchbroader leeway in the production of evidence and will allow mostforms of written and/or oral testimony with limited cross-examination. If the arbitration is conducted under law and thenorms of the Civil Procedure Code are imposed by the arbitraltribunal, most of the questions to the witnesses will come from thearbitral panel and direct cross-examination will not be allowed asparty questions must be addressed to the arbitral tribunal, whichmay rephrase them before putting them to the witness.

8.6 Under what circumstances does the law of Bolivia treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

Documents that have been presented in an arbitration are typicallynot deemed to be subject to any form of privilege. However,communications between the attorney and client will typically notbe compelled to be shown as they will be considered privileged.

9 Making an Award


Arbitral awards must be in writing and must explain the reasoningbehind the resolution (unless the parties expressly agreedotherwise). The arbitral award must be signed by all arbitrators;including dissident arbitrators which must explain the reason fortheir dissention. However, the award will be valid provided at leasta majority of the arbitrators have signed it. The Bolivian Law further states that the arbitral award must alsohave the following formal elements: a) Names, nationality. Domicile and generals of the parties and

the arbitrators.b) Place and date of issuance of the award.c) Controversy subject to arbitration.



The arbitral tribunal’s decision regarding its jurisdiction may beappealed before the Bolivian courts. The final award is not subjectto an appeal on the merits but only to a limited nullity recourse. Thecauses for which a party may request the nullity of the award mustbe announced during the arbitration before the issuance of theaward and are limited to the following: 1) an award contrary topublic policy; 2) an award on a matter that is excluded from

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arbitration; 3) the nullity of the arbitration agreement; 4) the failureto give proper notice of the designation of the arbitrators and of thearbitral proceeding; 5) impossibility of a parties right to defenditself; 6) inclusion in the award of issues or controversies notsubject to arbitration by the parties; 7) irregular composition of thetribunal; 8) development of the arbitral proceeding contrary to theparties agreement, the regulation adopted or the law; and 9)issuance of the award after the legal term for the arbitral proceeding(180 days to be extended for a maximum period of an additional 60days).


Parties may not exclude a basis of a nullity challenge, as suchagreement would not be considered valid against the legaldetermination.


Parties may not extend the scope of the nullity recourse beyondthose set forth in the Law.

10.4 What is the procedure for appealing an arbitral award inBolivia?

The party that wishes to question the validity of the arbitral awardmust present such claim within 10 days of its notification to thearbitral tribunal. The arbitral tribunal must resolve such questionwithin 30 days. If the arbitral tribunal denies the recourse, therecurrent party may present a claim against the award before aBolivian civil judge which will notify the arbitrators and order themto present the arbitral proceeding before the court. There is norecourse to the Bolivian civil courts determination regarding thevalidity or nullity of the arbitral award.


11.1 Has Bolivia signed and/or ratified the New York Conventionon the Recognition and Enforcement of Foreign ArbitralAwards? Has it entered any reservations? What is therelevant national legislation?

Bolivia ratified the New York Convention without any reservationson August 12, 1994 through Law number 1588. The BolivianMinistry of Foreign Affairs delivered the ratification instrument tothe United Nations on April 29, 2009.

11.2 Has Bolivia signed and/or ratified any regional Conventionsconcerning the recognition and enforcement of arbitralawards?

Bolivia has ratified the 1975 Panama Inter American Convention onInternational Commercial Arbitration and the 1979 Inter AmericanConvention of the Extraterritorial effects of Judgements andArbitral Awards approved in Montevideo. In addition it is party tothe Mercosur Agreement on International Commercial Arbitrationamongst MERCOSUR, the Republic of Bolivia and the Republic ofChile.

11.3 What is the approach of the national courts in Boliviatowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

The recognition and enforcement of foreign arbitral awards must bedetermined in Bolivia by the Bolivian Supreme Court pursuant tothe rules set forth by the New York Convention. As a result, partiesmust go through a lengthy process in front of the Bolivian SupremeCourt before a foreign arbitral award may be enforced in Bolivia.This procedure may take over a year to be completed.

11.4 What is the effect of an arbitration award in terms of resjudicata in Bolivia? Does the fact that certain issues havebeen finally determined by an arbitral tribunal precludethose issues from being re-heard in a national court and, ifso, in what circumstances?

The Bolivian Arbitration Law grants arbitral awards the quality ofres judicata. As a result, all controversies finally determined byarbitration may not be re-heard in national courts.

12 Confidentiality

12.1 Are arbitral proceedings sited in Bolivia confidential?What, if any, law governs confidentiality?

Arbitral proceedings will be held confidential if any of the partieshas requested such confidentiality. This is a principle of the arbitralproceeding set forth by the Bolivian Arbitration Law.


Once the arbitral and the award has been made public by theexpress consent of the parties, or as a result of a subsequent judicialtrial as described below, information may be referred to insubsequent proceedings.


In the event that the parties to the arbitration do not object to thedisclosure, the proceedings will not be confidential. In cases whereone of the parties is the Bolivian Government or a Governmentcontrolled entity the arbitral procedure may not be confidential.In addition, if one of the parties challenges the validity of the award,or one of the parties requests the judicial enforcement of the award,then ensuing judicial proceeding will not be confidential anddocuments presented in such procedure will not be confidential.



Remedies and damages are a matter that is regulated by the lawapplicable to the merits of the particular claim. As a result, indomestic arbitration the Bolivian Civil Code will be applied,generally limiting the remedies to the performance of thecommitted obligation or to the termination of the contract and the

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payment of damages. Damages are limited to direct damages;which may include consequential damages that are a directconsequence of the alleged wrongful act. Punitive damages, forinstance, may be deemed contrary to Bolivian Public Policy andcould be a cause for setting aside an arbitral award.


Courts will apply the conventional interest rate agreed upon by theparties; the limit of which will be 3% monthly (except forauthorised financial institutions that have special regulations).Parties may agree on an additional punitive interest rate for thedelay in performance. However, such interest rate may not exceedthe value of the original obligation. In addition, the agreed-uponinterest rate will be considered as the maximum damages payablefor the delay in performance. If the parties have not agreed on aninterest rate, the courts (arbitrators) may apply a legal interest rateof 6% annually. Further please note that pursuant to Bolivian Lawcompound interest is contrary to Bolivian public policy.


The parties are typically entitled to recover costs, as evidencedbefore the tribunal, and reasonable attorney fees unless thedefendant has counterclaimed, in which case no costs and fees willbe recovered. The Bolivian Bar Association usually sets forth atable of accepted attorney fees, and typically those are the feesrecognised. In arbitral practice, generally, if the parties have notagreed to the shifting of fees, the arbitrators will not entitle theprevailing party to the recovery of costs and fees.


An award will be subject to income tax to the extent the claimanthas a net gain as a result of the award. In addition, if the awardinvolves the payment of monies owed for goods and services, suchgoods and services must be invoiced and a value added tax will beimposed.


14.1 Has Bolivia signed and ratified the Washington Conventionon the Settlement of Investment Disputes Between Statesand Nationals of Other States (1965)?

Bolivia signed and ratified the Washington Convention on theSettlement of Investment Disputes during the nineties. However,Bolivia’s current government has adopted a different view towardsforeign private investment and has proceeded to “nationalise”several assets that were privatised a decade earlier. This led severalcompanies to threaten with investor state arbitration. As a result, onMay 1, 2007, the Bolivian Government denounced the WashingtonConvention. Pursuant to the terms of the Washington Convention,Bolivia ceased to be a signatory as of November 3, 2007.

14.2 Is Bolivia party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)? If so, what does the withdrawal fromthe Washington Convention’s International Centre for theSettlement of Investment Disputes (‘ICSID’) signify?

Bolivia is party to approximately 30 BITs, most of which allowinvestors recourse to arbitration under the auspices of aninternational arbitration panel. The BITs reference several disputeresolution procedures, including the ICSID. Thus, the merewithdrawal from the ICSID does not preclude internationalarbitration from resolving disputes between foreign investors andthe Bolivian government. Hence, future international arbitrationinvolving foreign investors and the state may commence underUNICITRAL rules or other rules as governed by the specificwordings of the BITs. To completely avoid internationalarbitration, the Bolivian government must withdraw from or revisethe individual BIT agreements. Currently, it has undergone nospecific action but has expressed a general desire to enact revisions.

14.3 Does Bolivia have standard terms or model language thatit uses in its investment treaties and, if so, what is theintended significance of that language?

Bolivia has not developed standard terms or model language to usein its investment treaties.

14.4 In practice, have disputes involving Bolivia been resolvedby means of ICSID arbitration and, if so, what has theapproach of national courts in Bolivia been to theenforcement of ICSID awards and how has thegovernment of Bolivia responded to any adverse awards?

Bolivia has not developed standard terms or model language to usein its investment treaties.

14.5 Previously, had disputes involving Bolivia been resolved bymeans of ICSID arbitration and, if so, what had theapproach of national courts in Bolivia been to theenforcement of ICSID awards?

Bolivia has been subject to international arbitration for alleged BITviolations in three instances. The first resulted from the failed potable water and sewageconcession granted in favour of Aguas del Tunari S.A. However,that arbitration did not reach a final decision as the government ofBolivia and the foreign investors in Aguas del Tunari S.A.,subsidiaries of the U.S. firm Bechtel Engineering and the SpanishAbengoa S.A., settled the case for no monetary compensation afterthe issuance of an award for jurisdiction against the Republic ofBolivia’s objections to jurisdiction. (Aguas del Tunari S.A. v.Repúblic of Bolivia, Award on Jurisdiction of October 21, 2005,ICSID case No. ARB/02/3.) A second arbitration was presented by Non Metallic Minerals andits Chilean shareholders, Quiborax, against the Republic of Boliviafor the unlawful expropriation of their mining concessions.Although the parties initially requested that the arbitral procedurebe suspended, the procedure has recommenced but no award has yetbeen issued. A third arbitration procedure was brought by ETI EuroTelecomafter the Bolivian Government announced in 1996 the

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nationalisation of ENTEL S.A., the largest Boliviantelecommunications company, privatised in 1997. This caseremains pending before the ICSID.

14.6 What is the approach of the national courts in Boliviatowards the defence of state immunity regardingjurisdiction and execution?

Although the Bolivian courts have not issued any specific judgmentabout the specific issue of state immunity regarding jurisdiction andexecution of the Bolivian Arbitration Law, its section regardinginternational arbitration clearly states that when the Bolivian Stateor a governmental entity has legally celebrated an arbitrationagreement, the arbitrability of the controversy may not bequestioned nor objected to on the basis of internal Bolivianlegislation or the lack of capacity on part of the state to celebratesuch arbitration agreement

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Bolivia? Are certain disputescommonly being referred to arbitration?

Since the promulgation of the Bolivian Arbitration Law in 1997, thenumber of matters referred to arbitration has steadily increased.Most of the arbitrations have been resolved by institutionalarbitrations managed by the chambers of commerce. Currently, the insurance law determines that most disputes must bereferred to arbitration.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Bolivia, such as pending or proposedlegislation that may substantially change the lawapplicable to arbitration?

In a recent ruling, the Bolivian Supreme Court determined that thenullity of an agreement was a matter to be decided by the courts andnot by an arbitral panel. This opinion is contradictory to a series ofrulings that have been issued by the Bolivian Constitutional Courtupholding the arbitrators’ competence to determine the validity ornullity of agreements subject to arbitration. This split opinion iscausing some uncertainty in this matter and will require additionalcase law to be finally resolved.

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Guevara & Gutiérrez S.C. is a full service Bolivian Law Firm that provides a wide range of legal services includingdomestic and cross-border litigation and arbitration as well as other forms of alternate dispute resolution. The preciseand timely administration of conflicts that the firm provides has given fruit in several successes accomplished by thefirm in representing clients before arbitral tribunals, administrative agencies and the Bolivian courts, including theBolivian Supreme Court and Constitutional Tribunal.

Recent experience of Guevara & Gutierrez S.C. in international arbitration includes the representation of Aguas delTunari and its international shareholders, International Waters and Abengoa in their claim investment claim against theBolivian government before an ICSID arbitral tribunal. The Firm is currently advising Non Metalic Minerals and itsforeign investor Quiborax, in their investment claim against the Bolivian government before an ICSID arbitral tribunal.

Senior Partners Ramiro Guevara and Primitivo Gutierrez are accredited authorities in arbitration and litigation beforeprestigious national and international arbitration and litigation institutions. Dr. Guevara is a certified arbitrator of theInternational Chamber of Commerce (ICC) and the Bolivian National Chamber of Commerce. Dr. Gutierrez is cofounderof the Arbitration and Mediation center of the La Paz Bar Association.


Jorge Luis Inchauste

Guevara & Gutierrez S.C. Torre Ketal Piso 4 Oficina 2Calle 15 de CalacotoLa PazBolivia

Tel: +591 2 277 0808Fax: +591 2 279 6462Email: [email protected]: ww.gg-lex.com

Jorge Luis Inchauste was admitted to practice law in Bolivia in1997, thereafter he was admitted to practice law in the State ofNew York in 2004.Studies: Georgetown University Law Center, Washington D.C.Master of Laws - LL.M.; Universidad Andina Simon Bolivar, La Paz,Bolivia, Masters in Economic Law; Universidad Católica Boliviana,La Paz, Bolivia, Lawyer.Work Experience: GUEVARA & GUTIÉRREZ S.C., Partner, La Paz,Bolivia; Law Firm Piper Rudnick LLP, New York, Associate; BolivianNational Chamber of Commerce, La Paz, General Secretary ofArbitration and Mediation.Areas of Practice: International Business Transactions, StructuredFinance, Corporate, Arbitration, Alternate Dispute Resolution,Electricity, Hydrocarbons, Water.Professor: Corporations, Masters in Corporate and Business Law,Universidad Andina Simon Bolivar, La Paz; Mediation, Diplomacy inAlternate Dispute Resolution Methods, School of Business andCommerce, La Paz. Electricity and Public Water Services Law;Universidad Privada Boliviana, La Paz: Corporations, MastersProgram for Development, Universidad Católica Boliviana, La Paz.Languages: Spanish, English.

Ramiro Guevara

Guevara & Gutierrez S.C. Torre Ketal Piso 4 Oficina 2Calle 15 de CalacotoLa PazBolivia

Tel: +591 2 277 0808Fax: +591 2 279 6462Email: [email protected]: www.gg-lex.com

Ramiro Guevara is founder of Guevara & Gutiérrez S.C. ServiciosLegales. He obtained his law degree from the “Universidad Mayorde San Andrés” in La Paz, Bolivia. In addition, he obtained an MBAat the “Université des Sciences Sociales” and completed post-graduate studies in International Commerce at the “Institut d’EtudesInternationales et de Development” in Toulouse, France. He alsoparticipated in the Seminar on Investment Treaties, InvestmentAgreements and Joint Ventures at the Institut International de Droitdu Dévelopment in Rome, Italy.As a result of his achievements, Mr. Guevara features prominently inmany national and international publications as one of the foremostattorneys in Bolivia, including the latest publications in LatinChambers and IFLR. This recognition, coupled with his constantand positive participation in the International Bar Association’sactivities, led to his appointment as Country Representative (Bolivia)by the IBA and the New York State Bar Association. Furthermore,he is a member of the American Bar Association and a registeredarbitrator in the Conciliation and Arbitration Centre of the NationalChamber of Commerce of Bolivia.Mr. Guevara has been appointed as an arbitrator on many occasionsby the National Chamber of Commerce of Bolivia. In addition, hehas acted as counsel in many such local procedures. His experiencein international arbitrations derives from his participation as co-counsel, on behalf of the claimants, in cases brought against thegovernment of Bolivia before ICSID, as well as from his appointmentas arbitrator by the ICC.During his practice he has taught at the “Universidad CatólicaBoliviana”. He also gave various lectures and workshops regardinginvestment bonds, hydrocarbons law and legal security in Bolivia,international arbitration and financial law and is currently involvedin the drafting of new securities law, leasing law and trust law.His experience led to his participation in the drafting commissionscharged with the drafting of the following Bolivian Laws: CentralBank Law, Conciliation and Arbitration Law, Export Law, SecuritiesLaw, Pension Funds Law, and Hydrocarbons Law.

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Chapter 37


Pinheiro Neto Advogados

Brazil


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Brazil?

Pursuant to article 4 of the Federal Law n° 9.307, of September 23,1996 (the “Brazilian Arbitration Law” or “BAL”), the arbitrationclause shall be in writing, and may be inserted in the contract itselfor in a separate document that refers to it.The BAL maintained the distinction between an arbitration clause(cláusula compromissória) and a submission agreement(compromisso arbitral). The arbitration clause is a conventionwhereby the parties to a contract undertake to settle any futuredisputes arising therefrom by arbitration. The submissionagreement is a convention whereby the parties submit a concreteand existing dispute to arbitration.It is important to note, however, that under the BAL, compromissosare only required when the parties’ contract contains no arbitrationclause at all, or when said clause is open, vague or fails to providethe details referring to applicable arbitral rules or the appointmentof arbitrators (so-called ‘empty arbitration clauses’). Therefore, theso-called ‘full arbitration clauses’ do not require a compromisso toset aside the jurisdiction of state courts. That is the case, forexample, when the parties agree on a self-executing procedure forsetting in motion the arbitral process by referring to the rules of anyadministering organisation, or any ad hoc rules, such as theUNCITRAL Rules. The vast majority of both scholars andBrazilian case law understand that the compromisso is not requiredif the parties have previously agreed on the form for instituting thearbitral proceeding in the arbitration clause.


In view of the contractual nature of the arbitration agreement, ingeneral any individual with full legal capacity or any legal entityrepresented by individuals with due powers may enter intoarbitration agreements and will be bound to the arbitrationproceeding.A special formality is required in adhesion contracts. In such case,the arbitration clause will only be enforceable if the adhering partyinitiates arbitration proceedings, or expressly agrees to it, as long asthe clause is written in a separate document or in bold type, dulysigned or initialised by the adhering party.


The BAL sets forth the following requirements for the submissionagreement (compromisso): (i) the name, profession, marital statusand domicile of the parties; (ii) the name, profession and domicileof the arbitrator(s) or, as the case may be, the particulars of theentity to which the parties delegated the appointment of arbitrators;(iii) the matter referred to arbitration; and (iv) the place where thearbitration award will be rendered. The submission agreement mayalso state: (v) the place(s) where arbitration will be conducted; (vi)an authorisation for the arbitrator(s) to decide in equity, if agreed bythe parties; (vii) the deadline for submission of the arbitrationaward; (viii) the indication of Brazilian laws or statutory rulesapplying to arbitration, if agreed by the parties; (ix) the liability forpayment of arbitration fees and charges; and (x) the fixing of thearbitrators’ fees.


Brazilian courts have been constantly enforcing lawful arbitrationagreements, especially after the BAL was declared constitutional bythe Brazilian Supreme Court (December 12, 2001).


The most common amicable dispute resolution methods in Brazilare mediation, conciliation and neutral evaluation. Conciliation iscurrently used in the Brazilian judicial system as an attempt ofresolving disputes without court intervention. The Brazilian civilprocedural law foresees that the judge may attempt to, at any time,conciliate the parties in court proceedings. However, there is veryscarce case law in this regard. The BAL requires arbitral tribunalsto try to help parties reconcile their differences at the beginning ofthe proceedings.


2.1 What legislation governs the enforcement of arbitrationproceedings in Brazil?

The BAL governs the enforcement of arbitration proceedings.

Renato Stephan Grion

Gilberto Giusti

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Yes, the BAL governs both domestic and international arbitrationproceedings and contains no distinction between domestic andinternational arbitration. There is only a distinction betweendomestic and foreign arbitration awards. According to article 34 ofthe BAL, foreign arbitration awards are those rendered outside theBrazilian territory, and domestic awards are those rendered in Brazil.


The BAL was inspired by various texts, including, among others,the UNCITRAL Model Law. However, there are some relevantdifferences between them such as the fact that the BAL makes adistinction between arbitration clause and submission agreement,while UNCITRAL Model Law does not. Also, pursuant to theBAL, an award rendered within the Brazilian territory shall beconsidered domestic, regardless of any other aspect, such as thenationality of the parties.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Brazil?

The BAL restricts to a minimum its mandatory rules. Regardless ofthe parties’ choice of the procedural rules applicable to thearbitration, the Brazilian legal system requires that the arbitrationproceedings comply with the following mandatory principles: fulldefence and proper response; equal treatment of the parties;arbitrators’ impartiality; free convincement; and due process of law.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Brazil? What is thegeneral approach used in determining whether or not adispute is “arbitrable”?

The BAL states that only issues regarding disposable pecuniaryrights may be arbitrated. Thus, the objective limits to arbitrabilityare non-pecuniary rights and non-disposable rights. Non-pecuniaryrights are those not directly linked to economic utility, such as theright to life, liberty, physical integrity, name, honour and intimacy.Disposable rights, in turn, are usually classified as any right thatmay be assigned, conveyed, waived or settled.


Yes. The power granted to the arbitrators under the BAL todetermine their own jurisdiction during the course of arbitration isin line with the international arbitration principle known as“kompetenz-kompetenz”, which is reflected in the main institutionalarbitration rules.

3.3 What is the approach of the national courts in Braziltowards a party who commences court proceedings inapparent breach of an arbitration agreement?

According to article 267, VII, of the Brazilian Code of Civil

Procedure, the judge shall dismiss the case without prejudice,referring the parties to arbitration. This has happened in somerecent disputes involving derivatives agreements containingarbitration clauses in Brazil.


According to some scholars, the only circumstance under which acourt can address the issue of jurisdiction and competence is whenthe arbitration agreement is clearly null and void.

3.5 Under what, if any, circumstances does the national law ofBrazil allow an arbitral tribunal to assume jurisdiction overindividuals or entities which are not themselves party toan agreement to arbitrate?

As a general rule, the arbitration agreement binds only thosesignatories to it. There has been one precedent from the Court ofAppeals of the State of São Paulo that has allowed the extension ofthe arbitration clause to another company of the same corporategroup of one of the parties, which was not an original signatorythereto. The Court held that it was clear from such third party’sconduct that its true intent was to be bound by the arbitration.Nonetheless, this remains a very controversial issue, and Braziliancase law is not yet fully settled thereon. In the specific scenario ofa merger transaction, a decision rendered by the Superior Court ofJustice (“STJ”) enforced the arbitration agreement executed by acompany that was later merged into another company. The STJheld that an arbitration agreement survives a company’s merger asthe surviving company assumes all rights and obligations of thecompany merged into it, which includes the arbitration agreement.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Brazil and what is thetypical length of such periods? Do the national courts ofBrazil consider such rules procedural or substantive, i.e.,what choice of law rules govern the application oflimitation periods?

Limitation periods are generally set forth in the Brazilian CivilCode. The length of the limitation period can vary from one to tenyears, depending essentially on the nature of the claim.Statutes of limitation are material provisions, but a recentamendment in the Brazilian Code of Civil Procedure authorises ajudge to recognise the time barring of a claim regardless of anyrequest made by the party. It is still debatable, however, whether ornot such possibility applies to arbitration.



According to the BAL, the parties are free to agree upon the rulesof law to be applied by the arbitrators to the merits of the dispute,provided that there is no violation of public policy or good morals.The parties can also grant the arbitrators powers of an amiablecompositeur or decide ex aequo et bono.



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Regardless of the parties’ choice of the procedural rules, theBrazilian legal system requires the arbitration process to complywith due process of law. One more example is the requirement thatthe arbitral award be reasoned.


The formation, validity and legality of arbitration agreements aregenerally governed by the Brazilian Civil Code. Considering the contractual nature of the arbitration agreement, it issubject to the requirements for validity of any contract underBrazilian law, to wit: (i) capacity and power; (ii) valid consent; (iii)lawful and possible subject matter; and (iv) compliance with thelegally prescribed form.



Party autonomy is fully endorsed by the BAL with respect to thenumber of arbitrators, their qualification, as well as the method oftheir appointment. Parties may therefore freely choose anyone asarbitrator. The arbitrator may be any person with full legal capacity,impartial, independent and deserving the trust of the parties. Thereis no restriction as to foreign arbitrators.


The interested party will have to go to court to seek the arbitrators’appointment. The judicial procedure will follow the process forspecific performance of arbitration clauses (article 7 of the BAL).


A court may intervene in the selection of arbitrators only in thesituation mentioned in question 5.2 or in case the arbitrationagreement does not provide for any mechanism of replacement ofan arbitrator.


Pursuant to the BAL, the arbitrators shall act in an impartial,independent, competent, diligent and judicious manner. The onlyobjective criteria provided in the BAL for lack of independence orimpartiality are the situations that cause the impediment andsuspicion of judges in judicial proceedings, both of which aregrounds for refusal. Such situation occurs, for instance, when thearbitrator: (i) is a party to the process; (ii) has assisted a party ascounsel, worked as an expert or deposed as a witness in thatprocess; (iii) is married or related to a party or to an attorney of aparty; or (iv) is a manager of a legal entity that is a party.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Brazil?

The BAL provides that, before accepting any appointment,prospective arbitrators are required to disclose any facts likely togive rise to justifiable doubts as to their impartiality andindependence. Most arbitration institutions acknowledge the dutyof full disclosure, and often condition the vesting of the prospectivearbitrator on signing a “statement of independence”.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Brazil? If so, do those laws or rules apply toall arbitral proceedings sited in Brazil?

The BAL provides that the arbitral procedure shall comply with theprocedure agreed upon by the parties in the arbitration agreement,which may refer to the rules of an arbitral institution or specialisedentity. If there is no provision on the arbitration procedure, thearbitrators shall regulate it. During the arbitration proceeding, theprinciples of due process of law, equality of the parties, and thearbitrator’s impartiality and free convincement must always beobserved.

6.2 In arbitration proceedings conducted in Brazil, are thereany particular procedural steps that are required by law?

The BAL does not require any particular procedural steps.


Unless the parties agree otherwise, the arbitrators and the parties arefree to organise the hearings as they deem fit, subject however tocompliance with the mandatory procedural principles, includingfull defence and equal treatment of the parties.

6.4 What powers and duties does the national law of Brazilimpose upon arbitrators?

The arbitrators are subject to the following express duties under theBAL: competence; diligence; discretion; and impartiality/independence, in addition to the duty of disclosing facts that maycast doubt on their impartiality or independence. As a general rule,the BAL grants the arbitrators the power to hear and judge the case,but not the power to enforce their own decisions, which is aprerogative of the judiciary.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Brazil and, if so, is itclear that such restrictions do not apply to arbitrationproceedings sited in Brazil?

In order to practice law before state courts one needs to be enrolledwith the Brazilian Bar Association. It is clear, however, that suchrestriction does not apply to arbitration proceedings.

6.6 To what extent are there laws or rules in Brazil providingfor arbitrator immunity?

There is no specific provision stating the immunity of arbitrators.

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As far as criminal liability is concerned, article 17 of the BALprovides that in the exercise of their functions or as a result thereof,arbitrators are subject to the same criminal law provisionsapplicable to civil servants.

6.7 Do the national courts have jurisdiction to deal withprocedural issues arising during arbitration?

The BAL grants the arbitrators the power to hear and judge the case,but not the power to directly impose coercive measures or to enforcetheir own decisions, which is the prerogative of the judiciary. In thissense, in case a coercive measure is required, or an urgent measureneeds to be enforced, court assistance will be necessary.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Brazil (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

The BAL states nothing about the possibility of consolidatingseparate arbitral proceedings into a single arbitration. Therefore,unless the parties have specifically agreed to this possibility, it israther unclear whether cases can be consolidated. Also, the BALdoes not address the situation in which the claims referred toarbitration arise out of different contracts or agreements, in otherwords multi-contract situations. Finally, there is no reference in theBAL as to the possibility of joining third parties to ongoing arbitralproceedings. It might therefore be assumed that the joinder of thirdparties is not allowed, save when the parties have expressly agreedon joining a third party or have resorted to institutional arbitrationthat recognises such possibility.

6.9 What is the approach of the national courts in Braziltowards ex parte procedures in the context of internationalarbitration?

There is no relevant case law on this issue yet. Ex parte proceduresare common in judicial matters, and there is no reason to believethat state courts would not allow such procedures in the context ofinternational arbitration provided that the requirements of the Laware met. However, there seems to be a general reluctance ofarbitrators to grant ex parte measures.



Yes, an arbitrator may grant injunctive relief or other urgentmeasures sought by any of the parties. Court assistance will onlybe necessary in case of non-compliance with the injunction.


The great majority of Brazilian case law recognises the right of a

party, before the constitution of the arbitration tribunal, to seekinjunctive relief or other urgent measures from state courts,regardless of the existence of an arbitration clause. After thearbitration tribunal is constituted, it is generally recognised thatarbitrators can confirm, modify or revoke the injunction granted bystate courts. As a rule, after the constitution of the arbitrationtribunal, the arbitrators are generally viewed as having exclusivejurisdiction to grant emergency relief. However, in specific andexceptional cases, the parties can have recourse to state courts,without affecting the jurisdiction of the arbitrators.


Courts tend to accept jurisdiction while the arbitration tribunal isnot yet constituted. After the arbitration tribunal is constituted, it isgenerally recognised that arbitrators can confirm, modify or revokethe injunction granted by state courts.


Arbitrators may order the parties to advance the funds for expensesdeemed necessary.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Brazil?

The BAL allows the parties and the arbitrators great flexibility inorganising the arbitration proceedings and how evidence should betaken. The arbitrators may take the parties’ deposition, hearwitnesses, and order the performance of expert investigations orsubmission of other evidence deemed required, either on an exofficio basis or at the parties’ request.


Discovery in Brazil is very limited when compared to the discoveryexisting in some common law jurisdictions and is normally onlyaccepted if it is related to the parties to the arbitration. The partiesare, however, free to adopt, for example, the IBA Rules on theTaking of Evidence.


The arbitrators may ask for the adoption of any coercive measure orinjunctive relief to state courts originally competent to hear thecase. The BAL contains a specific provision authorising thearbitrators to seek the assistance of the courts to compel a third-party witness to appear before them. The state court would notenter into the merits of the arbitration tribunal’s decision, but ratherenforce it through the use of police force or any other enforcementmechanism under the law to compel compliance.



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Brazilian law does not provide for such kind of measure. However,the parties to the arbitration are free to adopt any kind ofdisclosure/discovery they wish. It is not uncommon for the partiesto refer to the IBA Rules on the Taking of Evidence.


The BAL has no specific provision on the production of testimonialevidence. However, the hearing of witnesses is frequentlyrequested by the parties and almost always admitted by arbitrators.Witnesses are formally invited to come to a hearing, where they willanswer to questions made by the parties’ counsels and arbitrators.The witnesses are obligated to give depositions telling the truthunder penalty of crime of false testimony (Brazilian CriminalCode). The procedure for the production of oral witness testimonycan be freely agreed by the parties in the arbitration proceeding. Ifthe parties agree, cross-examination of witnesses will be possible.Cross-examination is now frequently adopted in arbitration inBrazil, even in domestic cases.

8.6 Under what circumstances does the law of Brazil treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

The BAL has no specific provision on this issue.

9 Making an Award


The arbitral award shall be reduced to writing in a proper document.An arbitration award shall be composed of: (i) a report, containingthe parties’ names and a summary of the litigation; (ii) the reasonsfor the decision, addressing the factual and legal aspects involvedand expressly mentioning whether the arbitrators rendered an awardin equity; (iii) the provision on the basis of which the arbitratorswere requested to resolve the dispute and to set out the deadline forcompliance with the ensuing decision, as the case may be; and (iv)the date and place in which the arbitration award was rendered. Thearbitral award shall be signed by the sole arbitrator or by the entirearbitration tribunal. The chairman of the arbitration tribunal shallexpressly indicate that one or some of the arbitrators cannot or donot want to sign the award.



A domestic arbitral award is not subject to appeals or to recognitionby the courts. If it is a foreign arbitral award (i.e., rendered outsideBrazil), the award shall be recognised by the Superior Court ofJustice in Brazil. A domestic award may be set aside only on thegrounds set forth in the BAL (article 32).


Although there is no case law yet on this issue, some scholarsunderstand that the parties cannot agree to exclude any basis ofchallenge against an arbitral award, as this would be contrary tosome mandatory constitutional and legal provisions.


See question 10.1. The parties cannot agree to expand the scope ofchallenge against an arbitral award.

10.4 What is the procedure for appealing an arbitral award inBrazil?

The main remedies against a domestic arbitral award are (i) thefiling of an annulment lawsuit and (ii) a challenge to theenforcement of the award (impugnação à execução). An arbitralaward shall be deemed null and void if: (i) the correspondingarbitration clause is null; (ii) it was rendered by a disqualifiedarbitrator; (iii) the conditions set out in article 26 of the BAL havenot been met; (iv) it was rendered beyond the scope set out in thearbitration agreement; (v) the decision fails to address the entiredispute referred to arbitration; (vi) the award was rendered with thepractice of concussion or corruption; (vii) it was rendered outsidethe time limit; and (viii) it was rendered without respect to theprinciples of procedural public order, due process, adversarialsystem, equal treatment of the parties, impartiality of the arbitratorsand their freedom of convincement.


11.1 Has Brazil signed and/or ratified the New York Conventionon the Recognition and Enforcement of Foreign ArbitralAwards? Has it entered any reservations? What is therelevant national legislation?

Brazil has been a signatory to the New York Convention since 2002,without any reservations. The applicable legislation in Brazil forthe recognition and enforcement of foreign arbitral awards are theNew York Convention, the BAL, and the Superior Court of Justice’sResolution nº 9, of May 4, 2005.

11.2 Has Brazil signed and/or ratified any regional Conventionsconcerning the recognition and enforcement of arbitralawards?

Brazil has ratified the Inter-American Convention on InternationalCommercial Arbitration (Panama Convention); the Inter-AmericanConvention on Extra-territorial Validity of Foreign Judgments(Montevideo Convention); and the Buenos Aires Protocol onInternational Commercial Arbitration in the Mercosul.

11.3 What is the approach of the national courts in Braziltowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

The application for recognition before the Superior Court of Justice

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(“STJ”) is mandatory for the validity of a foreign arbitral award inBrazil. The award does not have to be recognised by the foreignstate’s judicial courts before being submitted to the STJ. Theapplication for recognition should contain the original foreignarbitration award or a certified copy thereof, duly notarised by theBrazilian consulate and translated into Portuguese by a sworntranslator in Brazil, and the original agreement to arbitrate or acertified copy thereof duly translated into Portuguese by a sworntranslator. The standards regarding the enforcement of a foreignarbitration award in Brazil are consistent with article V of the NewYork Convention. The STJ has recognised foreign arbitral awardswhenever they do not violate any of the provisions of Article 38 of theBAL. It is important to note that the STJ has been analysing onlyformal aspects of the award. The merits of the arbitration award havenot been analysed. The STJ’s internal rules authorise the court to issuepreliminary injunctions during the recognition proceedings, such asfreezing assets while an application for recognition is pending, and togrant partial recognition of foreign arbitration awards. Once theforeign arbitration award is recognised by the STJ, the judgmentcreditor is entitled to enforce the award in the same way as a domesticaward, that is, before a competent first instance state court.

11.4 What is the effect of an arbitration award in terms of resjudicata in Brazil? Does the fact that certain issues havebeen finally determined by an arbitral tribunal precludethose issues from being re-heard in a national court and, ifso, in what circumstances?

A domestic arbitral award has the same effects as a judicial decisionthat is res judicata between parties, and may be enforced against thelosing party. In this sense, if a matter that has already been decidedby an arbitral award is brought in a judicial or arbitral proceeding,the judicial or the arbitral tribunal must decline jurisdiction anddismiss the case without prejudice.According to the Brazilian law, (i) the grounds that led to thedecision, (ii) the interpretation of the facts, and (iii) the decision onprejudicial matters are not deemed to be res judicata.

12 Confidentiality

12.1 Are arbitral proceedings sited in Brazil confidential?What, if any, law governs confidentiality?

The BAL contains no specific provision on the issue ofconfidentiality. Some scholars consider that the arbitration and thearbitral award are subject to confidentiality. The BAL only setsforth that arbitrators must be discrete in their actions. Brazilianlegal system contains no express provision imposing confidentialityon the parties themselves.


There is no rule that prevents a party from using the informationobtained in a proceeding in other subsequent proceeding.


The BAL does not provide for the confidentiality of the arbitration,but the parties agree otherwise. Please see comments in question12.1.



There are no limits on the type of remedies, including damages andproved loss of profit, subject to the limits provided by the law. It isconsolidated that Brazilian law does not recognise punitivedamages.


The legal interest provided by the law and monetary adjustment(indexation according to inflation) may be awarded, even if they arenot requested by the parties. Interest rates are determined accordingto the substantial governing law.


The arbitration award must set and apportion the costs and expensesfrom the arbitration. The parties have total flexibility to regulatethis issue. The general practice is that the party who has lost thecase bears the costs.


Amounts received by means of awards can be subject to differenttaxes, such as income tax, tax on services, contribution on profits,among others, depending on the nature of the claim. The generaltax rules apply.


14.1 Has Brazil signed and ratified the Washington Conventionon the Settlement of Investment Disputes Between Statesand Nationals of Other States (1965)?

No, it has not.

14.2 Is Brazil party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

No, it is not.

14.3 Does Brazil have standard terms or model language that ituses in its investment treaties and, if so, what is theintended significance of that language?

No, it does not.



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14.4 In practice, have disputes involving Brazil been resolvedby means of ICSID arbitration and, if so, what has theapproach of national courts in Brazil been to theenforcement of ICSID awards and how has thegovernment of Brazil responded to any adverse awards?

No, they have not.

14.5 What is the approach of the national courts in Braziltowards the defence of state immunity regardingjurisdiction and execution?

The Brazilian Supreme Court and the Superior Court of Justice haveinterpreted the state jurisdiction immunity as being acts practiced byState as sovereignty (ius imperii), excluding those acts practiced bythe State as a private agent (ius gestionis). Regarding the immunity ofexecution, Brazilian courts understand that it does not include State’sproperty used for commercial purposes and finalities.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Brazil? Are certain disputescommonly being referred to arbitration?

Arbitration in Brazil has undergone a dramatic change over the lasttwelve years. A new arbitration-friendly legal framework has beenimplemented, followed by an increasing body of case law which isin line with the way modern arbitration laws have been interpretedand applied in other well-known arbitration centres around theworld. Even though there are some issues that still need to bedecided and settled by the Brazilian courts, the forecast for furtherdevelopment of arbitration in Brazil is highly positive.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Brazil, such as pending or proposedlegislation that may substantially change the lawapplicable to arbitration?

See question 15.1.

Gilberto Giusti

Pinheiro Neto Advogados Rua Hungria, 1100, Jardim Europa01455-000, São Paulo, SPBrazil

Tel: +55 11 3247 8400Fax: +55 11 3247 8600Email: [email protected]: www.pinheironeto.com.br

Gilberto Giusti is a partner of Pinheiro Neto Advogados. He is aMember of the Latin American Group of the International ArbitrationCourt of the ICC; Member of the Court of the London Court ofInternational Arbitration - LCIA; Vice Chairman of the ArbitrationCommittee at IBA; Member of the Board of Ethics and Discipline ofthe Brazilian Bar Association - São Paulo Chapter; Director andCoordinator of the Arbitration Committee of the Studies Center forLaw Firms - CESA. He is the author of several articles published indomestic and foreign periodicals, and chapters in books onarbitration. He has been acting as counsel and arbitrator in bothdomestic and international arbitrators. He is fluent in Portuguese,English and Spanish.

Renato Stephan Grion

Pinheiro Neto Advogados Rua Hungria, 1100, Jardim Europa01455-000, São Paulo, SPBrazil

Tel: +55 11 3247 8965Fax: +55 11 3247 8600Email: [email protected]: www.pinheironeto.com.br

Renato Stephan Grion is a senior associate in the InternationalArbitration Group of Pinheiro Neto Advogados, based in São Paulo.He is a lawyer educated and trained in Brazil, U.S. and France, andhas broad experience in international arbitration. He has worked asAssistant Counsel at the Secretariat of the International Court ofArbitration of the ICC in Paris before joining Pinheiro NetoAdvogados. He specialises in international arbitration and acts ascounsel in a variety of commercial arbitration cases under leadinginstitutional rules in Brazil and abroad. He is a guest lecturer ininternational arbitration at Fundação Getúlio Vargas - GVlaw in SãoPaulo and is the author of many articles on the subject. He is amember of the ICC Latin American Arbitration Group and of the ICCTask Force on the “Revision of the ICC Rules of Arbitration”. Hespeaks Portuguese, English, French and Spanish.

Founded in 1942, Pinheiro Neto Advogados is one of the largest law firms in Latin America and one of the most well-established in Brazil. Its tradition of excellence is evident throughout its nearly 800 member legal and administrativestaff. The firm maintains offices in the cities of São Paulo, Rio de Janeiro and Brasília and also has an extensive networkof correspondents throughout the country.

The firm’s main objective has always been the search for excellence in serving our clients. The most valuable assetsof Pinheiro Neto Advogados are the talents of its lawyers and its long-standing client relationships.

Pinheiro Neto Advogados’ legal practice is divided into four practice areas: Corporate, Litigation; Tax; and Labour. Ourlawyers in each of these areas are, in turn, divided into teams of specialists dedicated to meeting each client’s special needs.

The firm’s conduct has always been guided by an absolute commitment to ethical principles, by quality in humanrelations, and by the duty to contribute to the social development of the community.



Chapter 38

Carey & Allende Abogados

Chile


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Chile?

In Chile, international commercial arbitration is governed by LawN° 19.971 on International Commercial Arbitration (Law 19.971),which is virtually identical to the UNCITRAL Model Law 1985 onInternational Commercial Arbitration. Domestic arbitration isgoverned by the Judicial Code (Código Orgánico de Tribunales orCOT) and the Code of Civil Procedure (Código de ProcedimientoCivil or CPC). As established by Article 7 of Law 19.971, the internationalarbitration agreement has to be in writing. The agreement isconsidered to be in writing if it is contained in a document signedby the parties, or in an exchange of letters, telex, telegrams or othermeans of telecommunication which provide a record of theagreement, or in an exchange of statements of claims and defencesin which the existence of an agreement is alleged by one party andnot denied by the other. As far as domestic arbitration is concerned, Article 234 of the COTdoes not refer to arbitration agreements explicitly but establishesthat the appointment of an arbitrator must be in writing and mustcontain the following information:1. the given names and the family names of the parties to the

dispute;2. the given name and the family name of the appointed

arbitrator;3. the issue submitted to arbitral proceedings; and4. the powers granted to the arbitrator, as well as the place

where, and the time limit in which he/she shall perform hisfunctions.

Failure to indicate any of the information listed under numbers 1, 2and 3 renders the appointment void.


Other than the common requirements for entering into contracts,there are no special requirements for individuals entering intoarbitration agreements. Only in case of domestic arbitration, Article224 of the COT specifies that parties must be of legal age andcapable of disposing of their assets in order to grant arbitratorspowers of amiables compositeurs, and therefore the authority todecide ex aequo et bono.


Apart from the requirements indicated above there are no othermandatory elements. However, if parties to a domestic arbitrationwish to appoint an arbitrator ex aqueo et bono or amiablecompositeur, they must do so explicitly, or otherwise the arbitratorwill be by default de jure and must decide according to the law.(Articles 223 and 235 of the COT.)


Chilean courts are respectful of arbitration agreements. However,it is understood that parties to an arbitration agreement can waivetheir right to bring their case to arbitration. Therefore, except incase of mandatory arbitration, whenever a claimant party to anarbitration agreement decides to bring its claim before the Chileancourt system, it is up to the defendant to object the jurisdiction ofthe Chilean court and request referral to the competent arbitraltribunal.


To our knowledge, there is no information regarding the approachnational courts have had on this point.


2.1 What legislation governs the enforcement of arbitrationproceedings in Chile?

The enforcement of domestic arbitration agreements is governed bythe Code of Civil Procedure and the Judicial Code. Internationalarbitration agreements, on the other hand, are enforced inaccordance with the rules of Law 19.971, the New YorkConvention, the Panamá Convention and the Code of CivilProcedure (Articles 242-251).


International and domestic arbitration are governed by differentstatutes. International arbitration is regulated by Law 19.971 which

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follows the UNCITRAL Model Law on International CommercialArbitration, while domestic arbitration is subject to the norms of theCode of Civil Procedure and the Judicial Code. One of the maindifferences is the scope of both regulations. Whereas Law 19.971only applies to international commercial arbitration, domesticnorms apply to a wide variety of matters such as: the dissolution ofthe property in a joint property marriage; the division of property;issues arising from the rendering of accounts by managers orreceivers of commercial partnership; disputes arising betweenshareholders of corporations; among others.


Law 19.971 is virtually identical to the 1985 UNCITRAL ModelLaw. Only where the Model Law so requires does the ChileanArbitration Law contain country-specific indications.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Chile?

The Law 19.971, following the 1985 UNCITRAL Model Law,enhances the autonomy of the parties’ will within an arbitrationagreement with regard to both the substantive and the procedureapplicable law. Thus, arbitrators should render an award accordingto the rules chosen by the parties as applicable to the dispute(Articles 19 (1) and 28 (1) of Law 19.971). Nonetheless, there are certain mandatory procedural rules that thearbitrator must follow. Article 18 of Law 19.971 demands anequitable treatment of the parties. The arbitrator has to hear bothparties, has to attach to the file the documents submitted by theparties, has to guarantee them an equal access to the evidence andhas to ensure that he/she gets all the required evidence to decide thecase (see Articles 23; 23(2); 24(3); 26(2) of Law 19.971. See alsoArticle 34(2)(a)(ii) of Law 19.971). Consequently, the internationalarbitration proceeding is forced to respect the due process, i.e. islimited by the primacy of the public interest (orden público) and theprocedural public interest.In addition, The Chilean Constitutional Court (ROL Nº 420)analysed Article 5 Law 19.971 which establishes that ordinarycourts shall not intervene in arbitration proceedings unless Law19.971 says so. The Chilean Court found such article adjusted tothe Constitution in the meaning that the attributions given by theConstitution to the Supreme Court are untouchable, as well as thelegal actions provided in there in favour of everyone whose rightsmight be affected.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Chile? What is thegeneral approach used in determining whether or not adispute is “arbitrable”?

Under Chilean Law the following subjects cannot be submitted toarbitration: disputes regarding alimony; the right to request theseparation of property between husband and wife; criminal matters;matters of the local police; disputes between a legal representativeand the represented person; and those in which the dispute must beheard by the relevant Court official (Fiscal Judicial) (see Articles229 and 230 of the COT). The legislative history and text of theconsumer protection law (Law 19.494) also indicates that

arbitration is prohibited with consumers, identified as natural andlegal persons that are the end-user of a good or service. Theseexceptions are of great importance because of Article 34 (b) of Law19.971 which establishes that an arbitral award may be set aside bythe respective Court of Appeals only if: “the court finds that:(i) the subject-matter of the dispute is not capable of settlement

by arbitration under Chilean law; or(ii) the award is in conflict with the public policy of Chile.”


There is no norm in domestic law that confirms the arbitrator’sKompetenz-Kompetenz. Consequently, in order to avoid anyconflicts, parties to arbitration agreements usually include a clausethat explicitly allows the arbitrator to rule on his or her ownjurisdiction. As far as international arbitration is concerned, this isalso determined explicitly in Article 16 of Law 19.971: “(1) thearbitral tribunal may rule on its own jurisdiction, including anyobjections with respect to the existence or validity of the arbitrationagreement. For that purpose, an arbitration clause which forms partof a contract shall be treated as an agreement independent of theother terms of the contract. A decision by the arbitral tribunal thatthe contract is null and void shall not entail ipso jure the invalidityof the arbitration clause.” Nonetheless, as in most jurisdictions,parties may still argue before Chilean courts that such a decision bythe tribunal violates the terms of the arbitral agreement, due processor public order.

3.3 What is the approach of the national courts in Chiletowards a party who commences court proceedings inapparent breach of an arbitration agreement?

National courts understand the submission of a dispute to an arbitralproceeding to be a right that can be waived by the parties. Thus,except in case of mandatory arbitration, courts do not consider exofficio whether they have jurisdiction in spite of the existence of anarbitration agreement. Any objection to the court’s jurisdiction dueto the prevalence of an arbitration agreement must be explicitlyraised by one of the parties. In the same vein, Article 8 of Law19.971 states: “A court before which an action is brought in a matterwhich is the subject of an arbitration agreement shall, if a party sorequests not later than when submitting his first statement on thesubstance of the dispute, refer the parties to arbitration unless itfinds that the agreement is null and void, inoperative or incapableof being performed.”


A party to an arbitration agreement can submit the dispute to anordinary court despite the arbitration agreement. In this case theother party may object to the court’s jurisdiction and request referralto what it believes to be the competent arbitral tribunal. The courtwill only consider the issue upon request by one of the parties. Incase of international arbitration, and as stipulated in Article 8 ofLaw 19.971, the court will refer the parties to arbitration unless theagreement is null and void, inoperative or incapable of beingperformed.On the other hand, where a claimant has submitted the dispute to anarbitral tribunal, the other party may present a request to what it

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considers to be the competent court, to ask the, in its view,incompetent court to cease the procedure and to forward the files(see Article 102 of the CPC). This action is called the “inhibitoria”.

3.5 Under what, if any, circumstances does the national law ofChile allows an arbitral tribunal to assume jurisdiction overindividuals or entities which are not themselves party toan agreement to arbitrate?

An arbitral tribunal does not have jurisdiction over third parties. Infact, Article 635 of the CPC requires the intervention of the ordinaryjudiciary if third parties are to be affected by the enforcement of anaward.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Chile and what is thetypical length of such periods? Do the national courts ofChile consider such rules procedural or substantive, i.e.,what choice of law rules govern the application oflimitation periods?

The Chilean Law 19.971 does not establish limitation periods forthe commencement of arbitrations in Chile. Article 21 of Law19.971 only indicates that unless otherwise agreed by the parties,the arbitral proceedings shall start on the date in which therespondent receives the request of submitting the dispute toarbitration. Law 19.971 does not stipulate an express time limitwithin which the arbitral tribunal shall render its decision.



Article 28 of Law 19.971 states that the arbitrators shall decide thedispute in accordance with the rules of law chosen by the parties.Any appointment of law or legal system of a given State shall beunderstood, unless otherwise expressed, as referring to thesubstantive law of the State and not to its conflict of law rule. In theabsence of any express choice by the parties, the applicable lawshall be determined in accordance with the relevant conflict of lawsrules. In all cases, the arbitrators shall decide in accordance withthe contract’s stipulations, taking into account the mercantile usesapplicable to the case.


Chilean Law 19.971 does not mention any circumstance wheremandatory laws shall prevail over the law chosen by the parties. Astold above, Law 19.971 enhances the autonomy of the parties inchoosing both the substantive and the procedure applicable law.However, there are some limits to that autonomy; mandatory rulesthat prevail over the law chosen by the parties such as thoseproviding an equitable treatment to the parties e.g. an arbitrator hasto hear both parties, etc.


The lex fori chosen by the parties.



There are no limitations to the parties’ autonomy to select arbitratorsunder the Law 19.971. However, for domestic arbitration, Article225 of the COT determines that any person of legal age may beappointed as arbitrator only if capable of disposing of his assets andcapable of reading and writing. Furthermore, only lawyers may beappointed as arbitrators de jure. Before September 2007, non Chileannationals could not practice law in Chile. Although this limitation nolonger exists, it is still the case that in order to practice as a lawyer inChile, it is necessary to have studied law in Chile. Article 11(1) of Law 19.971 expressly states that nationality is nota reason to preclude someone from acting as an arbitrator. Wherethe appointing authority indicated in the Law is called to appointone or more arbitrators, the advisability of appointing an arbitratorof a different nationality than the parties may be taken into account,as well as the qualifications required of the arbitrator by theagreement of the parties and the need to secure the arbitrator’sindependence and impartiality (Article 11(5) of Law 19.971).


Parties to an international arbitration agreement are free to determinethe number of arbitrators. In the absence of any determination thenumber of arbitrators is three (Article 10(2) Law 19.971). Moreover, parties are free to agree on the procedure to appoint thearbitrators. Failing such agreement the procedure is set out inArticle 11(3) of Law 19.971 as follows: in an arbitration with a solearbitrator, if the parties are unable to agree on the arbitrator, he orshe shall be appointed, upon request of a party by the President ofthe Court of Appeals at the place of arbitration. In case of threearbitrators, each party shall appoint one arbitrator, and the twoarbitrators thus appointed shall appoint the third arbitrator. If aparty fails to appoint the arbitrator, or if the two arbitrators fail toagree on the third arbitrator, the appointment shall be made, uponrequest of a party, by the President of the Court of Appeals at theplace of arbitration. Furthermore, if under the appointment procedure agreed upon bythe parties, a party fails to act as required; or the parties, or twoarbitrators, are unable to reach an agreement; or a third party(including institutions) fails to perform functions entrusted to it,then any party may request the President of the Court of Appeals atthe place of arbitration to take the necessary measures to secureappointment. (See Article 11 of Law 19.971.)Parties to a domestic arbitration must unanimously decide on thearbitrators. If the parties cannot reach an agreement, the arbitratorsare appointed by domestic courts. In this case, there can only beone arbiter. (Article 232 of the COT.)




Arbitrators in international arbitration have an obligation to disclose

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any circumstances that might affect their independence orimpartiality. An arbitrator may be challenged only if circumstancesexist that give rise to justifiable doubts as to his impartiality orindependence or if he does not possess qualifications as agreedupon by the parties. (Article 12 of Law 19.971.)Under national rules, arbitrators are also required to be independentand impartial (see Article 226 of the COT).

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Chile?

Article 199 of the COT determines that the judges who considererthemselves within some of the legal causes of implication orchallenge shall, as soon as they noticed it, make it evident in theprocess, declaring themselves disqualified to continue acting, orasking this statement to be done by the court they join (see Articles194-199 of the COT).As far as National and International Arbitration is concern, TheChilean Chamber of Arbitration and Mediation (CAM Santiago)has established special rules for disclosure of potential conflicts ofinterest (see http://www.camsantiago.cl/reglamento.htm#1 andhttp://www.camsantiago.cl/reglamentona.htm#4).

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Chile? If so, do those laws or rules apply toall arbitral proceedings sited in Chile?

The procedural rules for domestic arbitration are laid down in theCPC, which distinguishes between arbitrator de jure, “mixed”arbitrator, and amiable compositeur or arbitrator ex aequo et bono.The “mixed” arbitrator is an arbitrator de jure that has been grantedpowers of an amiable compositeur. (Article 628 CPC.) Thearbitrator de jure has to abide, as regards the administration of theprocedure and the rendering of the final award, by the rules which thelaw establishes for ordinary courts according to the nature of the filedaction. Mixed arbitrators and amiables compositeur can follow amore flexible procedure, as established by the parties in theirarbitration agreement. In the case of the mixed arbitrator, the strictapplication of the law is limited to the making of the final award.In international arbitrations, parties are free to agree on theprocedure to be followed by the arbitral tribunal in conducting theproceedings. Failing such agreement, the arbitral tribunal mayconduct the arbitration in such manner as it considers appropriate(see Article 19 of Law 19.971).

6.2 In arbitration proceedings conducted in Chile, are thereany particular procedural steps that are required by law?

Under Law 19.971 there are no particular procedural steps. Article21 states that the arbitral procedure will start on the date on whicha request to refer a dispute to arbitration is received by therespondent. In domestic arbitrations conducted by amiable compositeurs, andwhere parties have not provided for procedural rules in thearbitration agreement, the arbitrators must hear the parties, receiveand record the documents presented to them, perform the acts thatthey deem necessary to ascertain the facts, and render the awardaccording to what their wisdom and equity tell them (Article 637CPC).


The general rule of procedure is that the parties shall be treated withequality and each party shall be given a full opportunity to presenthis/her case (see Article 18 of Law 19.971). Apart from this rule,there is no other provision in the International CommercialArbitration Act governing the conduct of an arbitration hearing.

6.4 What powers and duties does the national law of Chileimpose upon arbitrators?

As a general rule, the powers of an arbitrator are determined by theparties in the arbitration agreement. Article 18 of Law 19.971establishes that parties shall be treated with equality and be given afull opportunity to present their case. Moreover, Article 12 of Law19.971 establishes a continuous duty for the arbitrators to discloseany circumstances that may give rise to justifiable doubts abouttheir independence and impartiality. Other than that, Law 19.971does not contain specific rules regarding the arbitrators’ powers andduties. However, it is understood that they must carry out theproceedings within a reasonable time and respect the general dutiesof due process.In domestic arbitrations, de jure arbitrators must decide inaccordance with the rules which the law establishes for ordinarycourts according to the nature of the filed action. Arbitrators areobliged to carry out their tasks once they have accepted their office(Article 240 of the COT). They must swear when accepting theiroffice that they will perform the task with due reliability and in theshortest time possible (Article 236 of the COT). Unless the partiesagree otherwise, the arbitrators must lay down their office if noaward has been issued within two years after their acceptance ofoffice (Article 235 of the COT).

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Chile and, if so, is itclear that such restrictions do not apply to arbitrationproceedings sited in Chile?

Article 11(1) of Law 19.971 expressly states that nationality is nota reason to preclude someone from acting as arbitrator. Besides,Law 19.971 does not impose legal requirements for the arbitrators,such as being a lawyer. Article 526 of the COT determines that onlyChilean nationals and non Chilean nationals who studied law inChile could practice as attorneys before national courts, withoutprejudice to the disposals of valid international Treaties. It is not tointerpret, however, that Article 526 of the COT imposes a restrictionto the appearance of lawyers from other jurisdictions. Nonetheless,it is convenient to take this into account when choosing Chile as theseat of an international arbitration. (See also question 5.1 above.)

6.6 To what extent are there laws or rules in Chile providingfor arbitrator immunity?

Article 1(5) of Law 19.971 states that this Law may not undermineother laws excluding arbitration as the settlement method forspecific disputes or providing for specific arbitration rules for suchdisputes. Thus, Law 19.971 does not apply to division of maritalproperty, alimony, criminal matters, foreign investment contracts,oil operation contracts, contracts with the Chilean Commission ofNuclear Energy and contracts on concessions of public property orof government property. There are also types of dispute declarednon-arbitrable because they might be contrary to public order (e.g.individual labour disputes or those related to consumer’s

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protection). On the other hand, there are disputes subjected by lawto mandatory arbitration (Article 227 of the COT).


Any measure involving compulsion must be taken by the ordinaryjudiciary. (Article 633 and 635 of the CPC.) According to theInternational Commercial Arbitration Act, courts may intervene atthe request of an arbitral tribunal in the taking of evidence (Article27 of Law 19.971).

6.8 Are there any special considerations for conductingmultiparty arbitrations in Chile (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

There are no special provisions regarding multiparty arbitration.According to the International Arbitration Act, parties are free toallow the intervention of third parties (Article 2 of Law 19.971).

6.9 What is the approach of the national courts in Chiletowards ex parte procedures in the context of internationalarbitration?

The principle of due process is recognised in the ChileanConstitution and part of domestic law (see Article 19 N° 3 of theConstitution). Since an ex parte procedure is deemed to be contraryto this principle, courts usually reject them. Nevertheless, certaininterim measures can be adopted without prior notification of theother party. However, this is only authorised under seriouscircumstances. If after five days the other party has not beennotified, the measures have no effect (see Article 302 of the CPC).



The International Arbitration Law does permit the adoption ofinterim measures, be them prior to or after the constitution of thearbitral tribunal (see Article 9 of Law 19.971). Furthermore, Article17 of the same Law states: “Unless otherwise agreed by the parties,the arbitral tribunal may, at the request of a party, order any party totake such interim measure of protection as the arbitral tribunal mayconsider necessary in respect of the subject-matter of the dispute.The arbitral tribunal may require any party to provide appropriatesecurity in connection with such measure.”Under the domestic system, Article 290 of the CPC lists some of theavailable measures. These are: 1) conservatory attachment of theobject of the claim; 2) the appointment of one or more controllers;3) retention of determined assets; and 4) prohibition to perform actsor to execute contracts regarding certain assets.If the arbitral order requires compulsion or if they involve thirdparties, the arbitrator must request the assistance of the ordinaryjudiciary (see Article 635 of the CPC).


A court may grant preliminary relief when the arbitral tribunal is notyet constituted. The request for an interim measure should not haveany effect on the arbitral tribunal’s jurisdiction.


If the legal requirements are met, there is no inconvenience for anational court to grant interim relief. Recently, a court in Santiagoprohibited a respondent of an arbitral proceeding to collect bankguarantees as an interim measure. In general, Chilean courts aremore receptive to freeze assets or prohibit the transfer of goods thancourts in the US or UK.


The Chilean legal system does not have costs that need to be paiddirectly to the tribunal. Thus, there is no practice related to securingthe costs. There are, however, different types of costs associated toa trial, such as payment to the court official (receptor) fornotifications, depositions, etc. Also, there are legal fees to be paidto the respective attorneys. The general rule is that the defeatedparty pays for the costs unless the claim had merits.Parties who recur to institutional arbitration should expect to payhalf of the fees of the arbitrators, as well as half of theadministrative costs of the relevant institutions.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Chile?

The International Arbitration Law contains some general rules ofevidence. Article 24 of Law 19.971 determines that everystatement, document or any other information supplied to thearbitral tribunal by one party must be communicated to the otherparty. Also any expert report or evidentiary document on which thearbitral tribunal may rely in making its decision shall becommunicated to the parties.De jure and mixed arbitirators must apply the rules of evidence asdetermined in Articles 341-429 of the CPC. These includedefinition of the means of evidence and of their respective weight.


Article 349 of the CPC establishes mandatory exhibition ofdocuments, including documents in possession third parties. Thesemust have a direct relation to the subject matter of the case, and beneither secret nor confidential. Arbitrators have no powers to takecompulsive measures.There is no similar rule under the International Arbitration Law.

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In Chile there is no general practice of discovery per se. However, it must be noted that under Chilean civil procedure, thereare rules regarding pre-trial evidence that can be considered as alimited disclosure. Thus, claimant may request that the court askthe defendant-to-be to produce, for example, certain documents oraffidavits, and the court will agree to such request when necessaryto commence the trial (see Article 273 of the CPC).


The International Arbitration Law does not have rules regardingdiscovery. Since discovery as an institution does not exist in Chile,there is no general practice to comment on.


There is no special rule in the International Arbitration Lawconcerning witnesses. Article 633 of the CPC (concerningdomestic arbitration) says: “The arbitrator may not compel anywitness to testify before him. He may only take the testimony ofthose who voluntarily agree to do so. If somebody refuses to testify,the arbitrator shall request the appropriate ordinary court to take thetestimony, providing it with the necessary case records.”Under domestic law, witnesses are required to be sworn in andcross-examination is allowed.

8.6 Under what circumstances does the law of Chile treatdocuments in an arbitral proceeding as being subject toprivilege? In what circumstances is privilege deemed tohave been waived?

There is no general rule related to privileged documents. Fewspecific instances of privileged documents do exist. Accountingbooks are confidential and they can only be partially exhibited (seeArticles 42 and 43 of the Chilean Commercial Code (CCC)). Also,the General Bank Act establishes a “banking secret” for bankaccounts (Article 154 General Bank Act). Attorney-clientcommunications are privileged as well, unless waived by the client.

9 Making an Award


Under the International Arbitration Law, the award shall be made inwriting and shall be signed by the arbitrator or arbitrators. Inarbitral proceedings with more than one arbitrator, the majority ofall members of the arbitral tribunal shall suffice, provided that thereason for any omitted signature is stated.The award shall state the reasons upon which it is based, as well asthe date and place of arbitration. (See Article 31 of Law 19.971.)In international arbitration, parties may agree that no reasons are tobe given or that the award is an award on agreed terms (Article31(2) of Law 19.971).



Law 19.971 only contemplates recourse to a court against anarbitral award by an application for setting aside the award (seeArticle 34). The grounds for setting aside are identical to thegrounds established in the New York Convention for the refusal ofenforcement of the award.Regarding domestic arbitration, the COT and the CPC regulatemainly two recourses against arbitral awards: appeal and settingaside (or cassation). Setting aside of decisions by amiablecompositeurs is not possible, whereas their appeal is onlyadmissible if the parties have provided in the appointmentagreement that they retain the right to such recourse before otherarbitrators of the same nature, and have appointed the persons thatshall carry out this task (Article 642 of the CPC and Article 239 ofthe COT). Awards by de jure and mixed arbitrators can bepresented for appeal and cassation before the court that wouldotherwise have tried the case but for the arbitration agreement,unless the parties have waived their rights or have submitted theseprocedures to yet another arbitral tribunal (Article 239 of the COT).Parties to domestic and international arbitration cannot waive theirconstitutional right to invoke the so-called recurso de queja on theground that the judgment has been issued with abuse of law orsuffers from another fundamental flaw. Also, parties can requestthe Constitutional Court to declare a statue inapplicable for beingunconstitutional in the particular case. The recurso de queja hasbeen invoked by parties in domestic arbitration, but courts areextremely reluctant to intervene.


Under Chilean law there is only one general ground for appeal,which is to request the superior tribunal to amend a judgment or anaward in accordance with the law (see Article 186 of the CPC).Therefore, there is no basis of appeal to exclude or expand. Partiescan not agree to exclude or expand this basis to appeal.


See question 10.2.

10.4 What is the procedure for appealing an arbitral award inChile?

The appeal has to be filed before the ad quo tribunal (in this case thearbitral tribunal) within ten days after the communication of thefinal award. The ad quo tribunal admits the appeal and thenforwards the files to the appellate tribunal, which could be theordinary judiciary or, in the case of amiables compositeurs, otherarbitrators of the same nature.

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11.1 Has Chile signed and/or ratified the New York Conventionon the Recognition and Enforcement of Foreign ArbitralAwards? Has it entered any reservations? What is therelevant national legislation?

Chile has been a party to the New York Convention since 1975 (DSN° 664 dated October 2, 1975). Upon ratification, Chile declared itwill only apply the Convention to recognition and enforcement ofawards made in the territory of another contracting State.

11.2 Has Chile signed and/or ratified any regional Conventionsconcerning the recognition and enforcement of arbitralawards?

Chile is a party to the Convención Interamericana sobre ArbitrajeComercial Internacional (Panama Convention) (1975). Also, Chilehas signed but not ratified the Convención Interamericana sobreEficacia Extraterritorial de las Sentencias y Laudos ArbitralesExtranjeros (Montevideo Convention).

11.3 What is the approach of the national courts in Chiletowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

In Chile a foreign arbitral award is subject to leave from theSupreme Court. With a few exceptions, the Supreme Court hascorrectly applied the New York Convention on the Recognition andEnforcement of Foreign Arbitral Awards. Thus, the nationaljudicial system is supportive of international arbitration.The party with a favourable award must obtain an exequatur fromthe Supreme Court in order to enforce its award in Chile. If thereare no treaties on this matter between Chile and the country wherethe award was issued, the principle of reciprocity determines thatthe foreign award shall have the same legal force in Chile asjudgments rendered in Chile enjoy in that other country. If theaward originates from a country where judgments by Chilean courtsare not enforced, it shall have no legal force in Chile. In all othercases, the decisions of foreign courts shall have the same legal forceas if they had been made by Chilean courts, provided they fulfill thefollowing conditions:1. they do not contain anything violating the laws of the

Republic. However, the laws on procedure to which thedecision would have needed to be submitted in Chile shallnot be taken into account;

2. they are not contrary to national jurisdiction;3. the party against whom the decision is being invoked has

been duly notified of the action. Additionally, this party mayprove that it has been prevented from presenting its case dueto other reasons; or

4. they are enforceable without further recourse availableaccording to the laws of the country in which they have beenmade.

(See Articles 242-251 of the CPC.)Domestic arbitral awards can be enforced by the arbitratorsthemselves (only one year after the award is rendered), but thesemust recur to the tribunals for assistance if the use of public force isnecessary.

11.4 What is the effect of an arbitration award in terms of resjudicata in Chile? Does the fact that certain issues havebeen finally determined by an arbitral tribunal precludethose issues from being re-heard in a national court and, ifso, in what circumstances?

In Chile final judgments or awards become res judicata when theyhave been notified to the parties and no recourse is available.Otherwise, they are deemed final when any available recourses areconcluded or can no longer be submitted. The consequences of anaward being res judicata are: 1) parties are precluded from bringingthe same claim (i.e. same parties, same object requested and samecause to request) again before a court or an arbitral tribunal; and 2)parties can initiate an enforcement procedure.

12 Confidentiality

12.1 Are arbitral proceedings sited in Chile confidential? What,if any, law governs confidentiality?

Neither national legislation nor the International Arbitration Lawany provisions regarding confidentiality of arbitration procedures.Nevertheless, parties may agree upon confidential proceedings.Also, the International Arbitration Rules of the Chilean Chamber ofArbitration and Mediation (CAM Santiago) establish that awardsare confidential unless parties agree otherwise or publication of theaward is necessary for further judicial proceedings such as appealand enforcement.It is to be kept in mind though that confidentiality of arbitralproceedings is always subject to the requirements of other Chileanlegislation, such as the need for public companies to disclosematerial facts affecting the company’s operation. Parties seekingcomplete privacy for dispute resolution may also wish to know thatChilean domestic arbitration law has a provision that the arbitrationagreement and matters decided by arbitrators shall be filed in theappropriate judicial archives. However, this requirement has neverbeen enforced in domestic arbitration and is unlikely to be extendedto international arbitrations.


There is no rule or provision that prohibits disclosure. However, ifparties have agreed on a confidentiality clause, or if privilegeddocuments were used in the proceedings (such as accounting booksor any other document subject to banking secret) then theinformation cannot be disclosed nor used.


As indicated above, neither the International CommercialArbitration Law nor the legislation governing domestic arbitrationcontain rules regarding the confidentiality of arbitral awards.Therefore non-confidentiality is the general rule.



Under Chilean law there is no limit on the types of remedies or

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damages that can be claimed. Although punitive damages do notexist under Chilean law, judges will usually award a greater amountof damages in acknowledgment of pain and suffering.


Law 19.971 does not contain rules regarding awards and particularinterest rates. In domestic arbitration simple interests are usuallyawarded.


Law 19.971 contains no special rule regarding costs and fees. Fordomestic arbitration see question 7.4 above.


Under Chilean tax laws, only damages awarded by a court orarbitral tribunal for the concept of lost profits are considered taxableincome. (Article 17 of the Tax Code.) Direct damages are exemptfrom taxes.


14.1 Has Chile signed and ratified the Washington Conventionon the Settlement of Investment Disputes Between Statesand Nationals of Other States (1965)?

Chile ratified the Washington Convention on September 24, 1991.

14.2 Is Chile party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Chile has ratified almost 40 BITs and 10 Free Trade Agreements(FTAs), 6 of them with Investment Chapters. The provisionsregarding the settlement of investment disputes between a State andnationals of other States often allow recourse to ICSID tribunals, aswell as arbitration under the UNCITRAL rules.

14.3 Does Chile have standard terms or model language that ituses in its investment treaties and, if so, what is theintended significance of that language?

Most of the investment agreements follow a prior model such asthose from European countries. Also, most of the FTAs are basedon the US Model BIT.

14.4 In practice, have disputes involving Chile been resolved bymeans of ICSID arbitration and, if so, what has theapproach of national courts in Chile been to theenforcement of ICSID awards and how has thegovernment of Chile responded to any adverse awards?

There have been three ICSID cases so far where Chile has acted asRespondent. The first ICSID case where Chile has been

condemned to pay damages is MTD Equity Sdn. Bhd and MTDChile S.A. v. Republic of Chile. The award has become final afterthe ad hoc Committee rejected Chile’s request for annulment. Chilehas also been condemned to pay damages in the case Victor PeyCasado et.al. v. Republic of Chile, but this award has not yetbecome final. Finally, Chile is currently preparing its defence in theannulment proceedings initiated by Claimant in the case EduardoVieira v. Republic of Chile.Execution of the MTD award has not involved national courts, andChile does not have any special procedures for the execution ofICSID awards.

14.5 What is the approach of the national courts in Chiletowards the defence of state immunity regardingjurisdiction and execution?

In the specific case of ICSID arbitration, immunity of jurisdiction isconsidered waived by the ratification of the ICSID Convention, incombination with the State’s consent to submit a dispute to ICSIDarbitration as expressed in a BIT or other instrument. Regardingimmunity from execution, Chile has not appointed a designatedauthority for purposes of facilitating the enforcement of an ICSIDaward, as contemplated under Article 54 (2) of the ICSIDConvention. Until now, two unfavorable awards have been issued(e.g. MTD Equity Sdn. Bhd and MTD Chile S.A. v. The Republic ofChile, and Víctor Pey Casado and President Allende Foundation v.The Republic of Chile), the first of which has become final andbinding after Chile’s request for annulment was rejected.Therefore, National courts have not been involved in theenforcement of this award.With regard to other matters, such as the labour law, national courtshave ruled that State assets that are not earmarked for publicactivities do not enjoy immunity of execution.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Chile? Are certain disputescommonly being referred to arbitration?

Arbitration is a preferred method of dispute resolution in Chile. Notonly can arbitration clauses be found in complex commercialcontracts, but also in contracts referring to the sale of real estate andcredit arrangements. Arbitration as a dispute resolution method ismost frequently for disputes related to agriculture, real estate, andconstruction activities. There are several reasons for the preferencefor arbitration, one of which is the overwhelming caseload of thecourts which makes even the simplest of procedures a long andcumbersome process.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Chile, such as pending or proposedlegislation that may substantially change the lawapplicable to arbitration?

International arbitration is still an exceptional occurrence in Chile.There have not been many occasions for ordinary courts to applyLaw 19.971 so there is as of yet not much to report on therelationship between domestic courts and international arbitrationtribunals. One of the factors that could be considered as an obstacleto the promotion of international arbitration was that the lawprohibited non Chileans from practicing the law. Thankfully, as itwas explained above, this restriction no longer applies.

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Nicolas Lama L.

Carey & Allende AbogadosMiraflores 178, pisos 21-22SantiagoChile

Tel: +56 2 485 2000Fax: +56 2 633 4043Email: [email protected]: www.careyallende.com

Mr. Lama has experience in the areas of civil, commercial and laborlitigation, bankruptcy, and domestic and international arbitration.He has advised Chilean and foreign clients.Mr. Lama joined the firm in 2009. He was formerly an InternationalLegal Consultant at Crowell & Moring LL.P, Washington DC (2008);a Senior Associate in Alvarez Hinzpeter Jana’s Dispute ResolutionGroup (2003 - 2008); an Associate Attorney in Barros Court &Correa’s Dispute Resolution Group (2001 - 2003); and an AssociateAttorney in Santander Bank’s Dispute Resolution Group (2000 -2001).In 2007 and 2008, Chambers and Partners considered him one ofthe young lawyers with best future in the dispute resolution file(Associate to Watch category).Mr. Lama is co-author of The International Comparative Legal Guideto: International Arbitration 2008, 5th edition, Global Legal GroupLtd, London.Mr. Lama received a J.D. degree from Diego Portales UniversitySchool of Law (1999), cum laude, and received a Master of Lawsdegree (LL.M.) from the University of Wisconsin School of Law(2007-2008). Besides, Mr. Lama received a Diploma onConstitutional Injunctions from de University Diego Portales in2004.In 1996, Mr. Lama was granted with a full scholarship from theUniversity Diego Portales to study a Master of Laws in the Universityof Wisconsin.Mr. Lama taught Civil Procedure as Assistance Professor at theUniversity Diego Portales Law School from 2005 to 2007.Mr. Lama’s native language is Spanish and he is fluent in English.

Luis Vidal

Carey & Allende AbogadosMiraflores 178, pisos 21-22SantiagoChile

Tel: +56 2 485 2000Fax: +56 2 633 4043Email: [email protected]: www.careyallende.com

Mr. Vidal is Legal Counsel to Chilean and foreign companies in thefields of construction, engineering, electric generation, informationtechnology, manufacturing, media, mining and real estate. He hasactively participated in court litigation and domestic andinternational arbitration cases in these fields. He has had an activepart in negotiations and execution of international projects, and infinancial restructuring processes. Mr. Vidal has vast experience incorporate and tax planning matters.Mr. Vidal has occupied positions of attorney and senior lawyer infinancial corporations and has been member of the board of pulpand paper, manufacturing, media and telecommunicationcompanies, in Chile and in affiliates in the U.S. and Latin America. Mr. Vidal received a J.D. degree from Pontificia Universidad Catolicade Chile School of Law in 1981, and is a member of the Chilean BarAssociation. Mr. Vidal has been a Professor in postgraduate andundergraduate programs in Pontificia Universidad Oatolica de Chile.Mr. Vidal’s native language is Spanish, and he is fluent in English.

Carey & Allende is a law firm that, although established under its current structure in 1993, was formed by partnerswith a lengthy legal experience.

The main partners of Carey & Allende participated in the formation and development of other highly regarded law firmsin the country and decided to draw together their previous experience in their respective fields into Carey & Allende.

Since 1993, Carey & Allende has grown steadily and excelled by providing legal advice in all economy sectors andplacing itself as one of the leading law firms in Chile.

Carey & Allende has a group of outstanding associates with solid experience and research -- both in Chile and abroad.

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Costa Rica


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Costa Rica?

It must be in writing reflecting the clear agreement of the parties tosubmit the disputes to arbitration.


None other than what is expressed in answer to question 1.1.


You must indicate if it is a local or international arbitration, if localor foreign law is applicable, if it is an ad hoc arbitration or aninstitutional one and if it is an arbitration of law or equity.


They have accepted the enforcement provided the process hascomplied with basic principles of due process.


Please see answer to question 1.4.


2.1 What legislation governs the enforcement of arbitrationproceedings in Costa Rica?

It is governed by Costa Rican law.


For enforcement, yes.


No. The law does not follow UNCITRAL, it is different. Sadly, wedid not base our law on the UNCITRAL model.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Costa Rica?

The same rules for domestic arbitration proceedings apply tointernational arbitration proceedings. There are no mandatory rulesgoverning only international arbitration proceedings in Costa Rica.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Costa Rica? Whatis the general approach used in determining whether ornot a dispute is “arbitrable”?

All economic disputes can be subject to arbitration.


Yes they are.

3.3 What is the approach of the national courts in Costa Ricatowards a party who commences court proceedings inapparent breach of an arbitration agreement?

An exception is filed arguing that the matter must be resolved byarbitration due to the agreement of the parties (with the exceptionof “clausula compromisoria”). It is an exception that must beresolved by the court before analysing the merits of the case.


Any disputes with respect to jurisdiction or competence must beresolved by the arbitral tribunal itself however whatever is resolvedby them can be appealed to the supreme court of Costa Rica for afinal decision. This could happen in all cases.

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Rolando Laclé Zúñiga

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3.5 Under what, if any, circumstances does the national law ofCosta Rica allow an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

In general terms there are no circumstances in which this canhappen, although in some cases there have been interpretationsconcluding that certain parties that did not agree in writing to theclause are subject to it because it is clear that they understood andaccepted the clause and agreed to become parties to suchagreement. Nevertheless, the principle is clearly that arbitration isa choice that must be expressly agreed by the parties.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Costa Rica and what isthe typical length of such periods? Do the national courtsof Costa Rica consider such rules procedural orsubstantive, i.e., what choice of law rules govern theapplication of limitation periods?

There are no special rules regarding limitation periods for thecommencement of arbitrations in Costa Rica. The law establishesthat any limitation period will be interrupted once the other partyreceives the notice for the beginning of the arbitration.



The arbitration agreement must assign the applicable law for thesubstance of a dispute. If the arbitration agreement does not referto the applicable law, Costa Rican law will apply.


When the applicable law in Costa Rica has been determine to be amandatory law (“de orden público”).


The formation, validity and legality of arbitration agreements willbe governed by the law chosen by the parties in the arbitrationagreement or in the contract itself. If the agreement is signed inCosta Rica and the parties do not choose a different law, CostaRican law will apply.



No, provided the clause is written correctly there are no limits. Inarbitration of law the arbitrators must be Costa Rican attorneys withcertain qualifications, regardless of the fact that the arbitration islocal or international. This has been an issue in internationalarbitrations entertained in certain institutions since the list ofarbitrators might not include Costa Rican attorneys.


Yes. If the clause is not clear in determining if it is an arbitration oflaw or equity it is one of law. Also the law has the procedure toappoint arbitrators when the parties fail to do so.


If the parties have not clearly agreed on the selection of arbitratorsthe secretary of the Supreme Court can be requested to appoint thearbitrator(s).


The same required for judges as indicated in the applicablelegislation, which reflect general principles of independence.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Costa Rica?

The arbitrators may be objected for the same reasons applicable tojudges. The arbitrator must reveal to the parties in writing all thecircumstances that could be considered a potential conflict ofinterest.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Costa Rica? If so, do those laws or rulesapply to all arbitral proceedings sited in Costa Rica?

The arbitration law of Costa Rica includes an arbitration procedurethat shall be followed if no specific procedure has been agreed bythe parties either by creating a case by case procedure of byreferring the matter to a centre with its own rules (local orinternational).

6.2 In arbitration proceedings conducted in Costa Rica, arethere any particular procedural steps that are required bylaw?

The law contains a procedure to follow if no specific reference ismade to a centre with its own rules, local or international. Thatprocedure does have certain steps that must be taken.


Only very general rules, all regarding the need to document thehearings.

6.4 What powers and duties does the national law of CostaRica impose upon arbitrators?

Equal to those of judges in judicial procedures.



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6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Costa Rica and, if so,is it clear that such restrictions do not apply to arbitrationproceedings sited in Costa Rica?

In order to appear in judicial procedures as a lawyer, you must beregistered as a lawyer in the Costa Rican bar association. Inarbitration of law the arbitrators must be Costa Rican attorneys withcertain qualifications, regardless of the fact that the arbitration islocal or international.

6.6 To what extent are there laws or rules in Costa Ricaproviding for arbitrator immunity?

There are none.


Only to resolve competence in an appeal and to assure due process,the Supreme Court could nullify the arbitration award. There arevery specific reasons why an arbitration award can be nullified.The idea is that the award is reviewed by the Supreme Court toassure that certain general principles are respected and that there areno material or clear inconsistencies in the resolution. Theresolution on the merits should not be reviewed by the court, at leastin principle.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Costa Rica (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

There are no specific regulations on this matter.

6.9 What is the approach of the national courts in Costa Ricatowards ex parte procedures in the context of internationalarbitration?

To our knowledge, there are no precedents in national courts.



No. Any party to an arbitration procedure could always requestpreliminary or interim relief to courts. Even the arbitrators canrequest a court to proceed, either upon request of a party to thearbitrator or at its own discretion.


In all cases such request shall be made. Please see question 7.1.


Any request for interim relief in Costa Rica is difficult. Most courtsnormally take the approach that the resolution on the merits couldalways repair the damage caused. There are exceptions to this butthose are rare, although lately the courts have recognised that insome cases damages are not sufficient and therefore they havegranted interim relief.


No it does not.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Costa Rica?

The parties must offer proof together with their initial filling ofclaim or reply, respectively. They must list all documents,witnesses, expert reports, etc. that they require as evidence.Notwithstanding the above, the arbitrators or institution in chargedmay change the rules or the parties can set out certain rules ofevidence in the agreement.


There are no specific limits on this scope. The arbitrator mayrequire the parties to submit documents or other evidence anymoment during the process and the parties have access to suchevidence, however the party is not obligated to provide documentsthat are not under his/her possession.


Only if the parties include this specification in the agreement orupon request of the arbitrators.


Any doubt as to whether or not disclosure is to be made should beresolved in favour of disclosure.There is a code of ethics for the arbitrators and the parties.


Witnesses must be sworn in as per the law and the civil procedurescode where cross examination is also allowed although onlythrough the arbitration panel. In general the parties may agree on the rules and/or law for thearbitration if it meets the basic principles of contradiction, dueprocess, and right of defence.

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8.6 Under what circumstances does the law of Costa Ricatreat documents in an arbitral proceeding as being subjectto privilege? In what circumstances is privilege deemed tohave been waived?

Documents are treated as being subject to privilege when thearbitrator considers them to be or the parties have established it inthe agreement.

9 Making an Award


It shall be in writing, final and binding. It must include: identification of the parties; date and place where itwas issued; a description of the dispute referred to arbitration; a listof facts, referring to what has been demonstrated and non-demonstrated; the analysis; and the decision. Although not requested by the parties, the award must containguidelines or standards necessary and relevant to identify, facilitateand guide the implementation.The arbitrate shall state the reasons on which the award is based,unless the parties have agreed otherwise explicitly. Awardsrendered in arbitrations of law shall always be motivated.



Costa Rican law does not refer to appeal but to nullity and review.The idea is that an award can only be modified by the SupremeCourt if a breach of due process has existed. The principle is thatthe Supreme Court will not enter the analysis on merits.Nevertheless, the possibility to appeal has been discussed in theconstitutional court.


No. The request for review and nullity can not be waived.


No. The only grounds are those established by law which inprinciple indicate that the analysis of the Supreme Court shall notbe on the merits but only on confirming that principles of dueprocess were complied with.

10.4 What is the procedure for appealing an arbitral award inCosta Rica?

For nullity: the petition for annulment must be filed at the firstdivision of the supreme court (in spanish sala primera de la cortesuprema de justicia) within fifteen days of notice of the award thedecision regarding a request to clarify or add the resolution. The document shall not be subject to any formality, but shall

indicate the alleged cause of nullity.The request for a review must be filed before the Supreme Court.The deadline is three months from the date of the award or from themoment when a procedural fraud is found among othercircumstances. Both of them have to be in writing and explain the causality inwhich it is based.


11.1 Has Costa Rica signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

Yes. Our country has ratified the indicated convention withoutreservations. The relevant legislation is the law on alternative dispute resolutionsand of course the constitution that recognises the possibility ofresolving disputes by way of arbitration.

11.2 Has Costa Rica signed and/or ratified any regionalConventions concerning the recognition and enforcementof arbitral awards?

Yes. The most relevant ones are:Convention on recognition and enforcement of foreignarbitral awards. Interamerican convention on commercial arbitration. Convention for the peaceful settlement of internationaldisputes (convención para arreglo pacífico de disputasinternacionales (la haya)).Geneva convention on arbitration (convencion de ginebraacerca de arbitraje).

11.3 What is the approach of the national courts in Costa Ricatowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

National courts recognise the validity of arbitration awardsprovided they comply with principles of due process.In the event that any of the parties files an action before the courtseither party is empowered to institute a plea of res judicata.

11.4 What is the effect of an arbitration award in terms of resjudicata in Costa Rica? Does the fact that certain issueshave been finally determined by an arbitral tribunalpreclude those issues from being re-heard in a nationalcourt and, if so, in what circumstances?

Please see the answer of question 11.3. Res judicata excludes thepossibility of the national court analysing the ground of the case.

12 Confidentiality

12.1 Are arbitral proceedings sited in Costa Rica confidential?What, if any, law governs confidentiality?

Hearings are private unless otherwise agreed by the parties andawards are public unless otherwise agreed by the parties too.



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No, the information in arbitral proceedings can only be used for thesame proceeding. Every arbitration resolution is considered resjudicata for the parties.


Hearings are private except if otherwise agreed by the parties.Awards are public except if otherwise agreed by the parties.



There are no specific limits in this matter.


In economic disputes the parties can request the panel to recogniseinterest over any amount in dispute. Usually the rate used is thatfrom Banco Nacional de Costa Rica.


Yes. The law refers to this. The general rule is that the loser isforced to pay the other party’s costs, however in principle bothparties (and all parties) contribute to cover the cost until a decisionis made when the award can rule otherwise.


The award itself is not subject to taxes. The income generated toone of the parties by way of a favourable resolution shall beanalysed on a case by case basis by tax experts. The principal isthat no taxes shall be paid due to the award.


14.1 Has Costa Rica signed and ratified the WashingtonConvention on the Settlement of Investment DisputesBetween States and Nationals of Other States (1965)?

Yes. It has been signed and ratified.

14.2 Is Costa Rica party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Yes, it is.

14.3 Does Costa Rica have standard terms or model languagethat it uses in its investment treaties and, if so, what isthe intended significance of that language?

Yes it has standard terms; intended significance of language must beanalysed according to each treaty in particular.

14.4 In practice, have disputes involving Costa Rica beenresolved by means of ICSID arbitration and, if so, whathas the approach of national courts in Costa Rica been tothe enforcement of ICSID awards and how has thegovernment of Costa Rica responded to any adverseawards?

The enforcement of foreign arbitration resolutions is possible inCosta Rica, it must comply the following: 1. duly authenticated resolution; 2. the defendant must be dulynoticed of the process, represented, declared as rebel according toforeign laws; 3. that the object of the case shall not be of CostaRican jurisdiction; 4. that there is no file in progress, and orexecuted sentence by any Costa Rican courts that produce a resjudicata resolution; 5. foreign arbitration resolution according toforeign law can be executed in the foreign country that produced theresolution; and 6. cannot be against public order.

14.5 What is the approach of the national courts in Costa Ricatowards the defence of state immunity regardingjurisdiction and execution?

Costa Rican courts have recognised state immunity and has deniedpetitions that violate state immunity.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Costa Rica? Are certain disputescommonly being referred to arbitration?

The use of arbitration and centres is continuing to grow.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Costa Rica, such as pending orproposed legislation that may substantially change the lawapplicable to arbitration?

This is not applicable.

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Rolando Laclé Zúñiga

Consortium Laclé & GutiérrezSan Rafael de Escazú Barrio Trejos Montealegre 6º. Piso Torre Banco General, San José Costa Rica

Tel: +506 2257 3553Fax: +506 2255 1398 Email: [email protected]: www.consortiumlegal.com

Admitted in Costa Rica. Post graduated specialisation inCommercial Law. He was awarded a Fulbright scholarship for aMaster’s Degree in the USA. He studied a Program of BusinessAdministration at Georgetown University, Washington, D.C. and hewas granted a Master’s Degree in Laws (LL.M.) at the sameUniversity. Specialist in Foreign Investment and International Trade,Litigation and Arbitration, Real Estate, Regulated Sector andCorporate Law.He has participated in local and international transactions assecuritisations, acquisitions of local companies, getting bankinglicenses, bidding processes in telecommunications, real estatetransactions and other projects. He has provided advisory services on disputes, civil and commercialarbitration processes. He was nominated as one of the Top FortyLawyers Under 40 in Central America by The Latin LawyerMagazine, February, 2005 issue; and by the Global Chamberspublication (The World’s Leading Lawyers) as one of the leadinglawyers in Costa Rica, 2004-2005 issue.

Fabián Fernández Faith

Consortium Laclé & GutiérrezSan Rafael de EscazúBarrio Trejos Montealegre6º. Piso Torre Banco General, San José Costa Rica

Tel: +506 2257 3553Fax: +506 2255 1398 Email: [email protected]: www.consortiumlegal.com

Join Excecutive Program: Legal Issues of International Matters.INCAE and Georgetown University Alajuela, Costa Rica. (2006-2007). Master of International Legal Practice. Instituto deEmpresa. Madrid, España (2003- 2004). Law Degree, Cum LaudeProbatus. Universidad Escuela Libre de Derecho. San José, CostaRica (1997- 2002).He was associate Lawyer for Bufete Fernández Sagot & Asociados(1998-2006). He has experience in commercial, corporate and realestate law. He is member of the Costa Rican Bar Association.

Consortium Centro América Abogados is committed to the highest quality in personalised, efficient and ethical legalservices in the Central American Region, through 10 offices located in Guatemala, El Salvador, Honduras, Nicaraguaand Costa Rica.

With more than 150 highly qualified attorneys, it has become the largest provider of full legal services in the region.Consortium maintains close relationships with leading law firms in the USA, Europe, Asia and the rest of the World.Its members participate in international legal organisations such as the International Bar Association, American BarAssociation, International Trademark Association, Latin American Intellectual Property Organization, Latin AmericanFederation of Banks, among others.

Consortium’s clients include leading international corporations, financial institutions, trade associations, industries,start-up businesses, partnerships and individuals.


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Consortium Centro América Abogados -El Salvador

El Salvador


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of El Salvador?

The statute governing international arbitration in the Republic of ElSalvador is the Ley de Mediación, Conciliación y Arbitraje, enactedin 2002 (hereinafter LMCA). However, the internationalconventions ratified by El Salvador take precedence over thenational statute. In all cases, the arbitration agreement must be inwriting. The agreement is legally in writing when it is contained ina contract or a separate document, or in an exchange of letters orany means of communication or correspondence that unequivocallyevinces the will of the parties to submit to arbitration. Apresumptive agreement in writing is deemed to exist when oneparty submits a controversy to an arbitrator or arbitral tribunal andthe other party, under notice of this initiative by the arbitrator orarbitrators, consents to such submission by appearing in theproceedings without objecting. In consumer contracts, the arbitration agreement must be negotiatedat arms-length. It is not legally permitted for suppliers of goods orservices to impose arbitration, or any other conflict resolutionmethod, as a term in their standard contracts.


There are no special requirements for a legally capable individual tobe party to an arbitration agreement.In consumer law, the consumer has no legal capacity to waive inadvance any rights afforded by law.


In El Salvador there are no institutions with experience ininternational arbitration. It is advisable to include tried and trueinternational arbitration rules from renowned internationalarbitration institutions. This is particularly important as regardsmethod of appointing arbitrators and rules of evidence.


There is a strong judicial policy in favour of enforcement of

arbitration agreements. The right to arbitrate civil and commercialmatters is specifically protected by the Constitution at Art. 23.


ADR agreements are generally enforced.


2.1 What legislation governs the enforcement of arbitrationproceedings in El Salvador?

Primarily, the international instruments ratified by El Salvadorgovern the execution of foreign arbitral awards. For awards fromnon-signatories of such instruments, the LMCA, at Art. 82, sets thecauses for denial of enforcement, which strictly follow theUNCITRAL Model Law.


Although the same law (LMCA) governs both domestic andinternational arbitration, there is a separate Section(SecciónTercera) on the latter. The provisions in that Sectionpertain to the primacy of treaties and international law over theLMCA. Parties in international arbitrations are permitted to agreefreely on the applicable substantive and procedural law, as well asto the place of the arbitration. The State is mandated to submit allits international arbitrations to renowned centres.


Yes, the LMCA follows the UNCITRAL Model Law. Importantdifferences include the definition of international arbitration,defined not by the place of establishments but by domicile, and theexclusion of the parties’ agreement on the international nature of thedispute. Unlike the Model Law, the LMCA sets Spanish as amandatory language, alongside any other agreed on by the parties.As regards arbitrators, there is no express allowance for foreignersto serve as arbitrators, contrary to Art. 11 of the Model Law. In thematter of challenges, the LMCA departs form the Model Law andrequires legal causes under the provisions of the Code of CivilProcedure of 1882, a numerus clausus, which are not only

José Roberto Tercero

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impossibly quaint but most difficult to prove. As of 2010 a new Code of Civil and Commercial Procedure willcome into force with a broader basis for challenges.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in El Salvador?

In the case of international arbitration involving a state entity oragency, it is mandatory that the same be conducted before arenowned international centre.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of El Salvador? Whatis the general approach used in determining whether ornot a dispute is “arbitrable”?

The LMCA expressly excludes arbitrability of the following subjectmatters:a) Matters contrary to public order.b) Matters directly pertaining to the authority and powers of the

State and State agencies.c) Criminal liability.d) Future alimony and child support.e) Controversies over rights of persons not legally capable,

unless preceded by judicial authority.f) Family relations, except insofar as patrimonial rights.g) Matters under res judicata. h) Labour matters.


Under Art. 51 LMCA an arbitrator is expressly permitted to rule onthe question of competence, a power which extends to deciding onthe existence and validity of the arbitration agreement as a sourceof their jurisdiction.

3.3 What is the approach of the national courts in El Salvadortowards a party who commences court proceedings inapparent breach of an arbitration agreement?

Most courts overzealously react by dismissing the complaint (andeven applications for interim measures or discovery) on the basis ofthe existence of an arbitration clause in any filed document.However, the LMCA does not mandate such dismissal in limine; itestablishes an arbitration exception, which must be argued by theopposing party. Under the procedure for exception, the court mustactually serve the complaint on the defendant, who will react asconvenient, either arguing the arbitration exception or else replyingto the complaint, thereby tacitly renouncing arbitration. Theexception must necessarily be argued within the term allowed toreply to the complaint, which is three days in mercantile trials andthree to six days in civil trials.


For a court to be able to address the issue of jurisdiction andcompetence, the parties must necessarily have raised it before the

tribunal itself at the inception of the arbitral process. Upon issuanceof the final award, the law allows for a recourse before a court ofappeals, for the annulment of the award on the basis of the partialor total nullity of the arbitration agreement or illegality in theconstitution of the arbitral tribunal, Art. 68, 1) 2) LMCA.

3.5 Under what, if any, circumstances does the national law ofEl Salvador allow an arbitral tribunal to assumejurisdiction over individuals or entities which are notthemselves party to an agreement to arbitrate?

There is no express provision allowing the extension of arbitraljurisdiction over third parties.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in El Salvador and what isthe typical length of such periods? Do the national courtsof El Salvador consider such rules procedural orsubstantive, i.e., what choice of law rules govern theapplication of limitation periods?

Prescripción or statute of limitations rules apply to all actionsderived from a contract or other obligations, which must be broughtto arbitration within a certain period, which ranges from one to fiveyears in commercial matters, three years in tort matters.



The parties may freely agree as to the substantive law governing theirdispute. Otherwise, the arbitral tribunal may determine the matter.


Legal rules will control circumstances that affect capacity of aparty, issues of public interest, arbitrability, etc.


The general rule is locus regit actum. Agreements executed abroadare subject to Salvadoran law as to performance is sought in ElSalvador.



There are two special capacity requirements for arbitrators thatmerit consideration by the parties when the place of arbitration is tobe in Salvadoran territory. The application of these requirements tointernational arbitration is not yet settled.Where the arbitrators are to decide the matter “in accordance to law”,the LMCA requires that they be “authorised attorneys-at-law”.Although this requirement for special legal capacity to serve asarbitrator in El Salvador is contained in Article 35, Sección



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Segunda, Arbitraje Nacional, of the LMCA regulating domesticarbitration, its strict and extensive construction can become an issuein international arbitrations sited in El Salvador. However,reasonably, if the applicable substantive law, as selected by theparties or determined by conflict of laws rules, is not Salvadoranlaw, there is no sense in such strict construction of this requirementand it cannot have been the legislative intent for it to apply ininternational arbitration sited in El Salvador under those conditions.Another special capacity requirement under Art. 35 LMCA is thatarbitrators in El Salvador must be “in full exercise of citizenshiprights”. Only Salvadoran nationals can have citizenship rights underthe Salvadoran Constitution. This would then seem to exclude allnon-nationals from serving as arbitrators. Again, the general contextof this requirement is of national arbitration. The section ofinternational arbitration of the LMCA refers to the primacy ofinternational law. Therefore, a construction of such a restrictiverequirement to apply to international arbitration would be generallyincompatible with the customary law of international commercialarbitration, and specifically incompatible with the InteramericanConvention on International Commercial Arbitration, Art. 2,paragraph 2. It must be noted, as evidence that these issues are latent,that the only authorised arbitration centre in the country, that at theSalvadoran chamber of commerce, has actually followed a broadconstruction of these requirements and to date has included noforeigners in its roster of arbitrators. The experience is still too limitedfor the issues to have been settled by arbitral tribunals or by the courts.


If the parties fail to select their arbitrators by their chosen method,the LMCA default procedure provides for such appointment to bemade by an arbitration centre authorised in El Salvador. This alsoapplies for the party appointed arbitrators failing to agree on a third.At present, there is only one such centre, that of the SalvadoranChamber of Commerce.


The parties may agree on a court to act as appointing authority or todecide challenges.


Art. 33 of the LMCA mandates strict impartiality of the arbitratorsand keeps them independent of any order or authority that mayprejudice their powers. Further, they are protected by privilege inthe information relative to the process. Arbitrators do not and maynot represent the interest of the party that appoints them. Also, theLMCA declares null any agreement that places one party in aprivileged situation in the appointment of arbitrators. Art. 38.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within El Salvador?

Party-appointed arbitrators are legally obliged to disclose anycircumstance affecting their impartiality, but only to the partyappointing them. This is a most curious rule of Salvadoran law.The opposing party may challenge an arbitrator if and when suchcircumstance is discovered independently.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in El Salvador? If so, do those laws or rulesapply to all arbitral proceedings sited in El Salvador?

The law allows full freedom for the parties to submit to the rules ofprocedure of any specific institution, to agree on their own rules todelegate on the arbitrators to determine same. (Art. 45, par. 2LMCA.) If there is no agreement on this matter, the law provides aset of ad hoc rules of procedure which would apply to any arbitralproceeding sited in El Salvador.The ad hoc procedure is established in article 47 of the LMCA. Fromadmission of the complaint, through the stages of reply, a conciliatoryeffort, evidence, final arguments, and award, the basic structure isdesigned to allow equal opportunities for both parties to be heard.There is an abbreviated ad hoc procedure for cases dealing onlywith legal issues, where the award comes immediately after theconciliation stage.

6.2 In arbitration proceedings conducted in El Salvador, arethere any particular procedural steps that are required bylaw?

All those procedural steps that are essential to due process must beobserved. The effective notice of the complaint, a reasonable termfor reply and defence, possibility to present evidence, and theeffective notice of the award to the parties, are such indispensableprocedures in any arbitration.


There are no rules specifically applicable to arbitration hearings.

6.4 What powers and duties does the national law of ElSalvador impose upon arbitrators?

The rule is that arbitrators have the same duties, powers andresponsibilities as judges. Among these are the duty to conduct theprocess with celerity, to prevent procedural fraud and malice, not toallow indecorous behaviour or expressions by the parties, and thesafekeeping of the case file and evidence. However, they do nothave the power to request the use of public force to execute theirdecisions, and must look to the courts for assistance when this isrequired. Arts. 35, par. 4, 28 b) LMCA.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in El Salvador and, ifso, is it clear that such restrictions do not apply toarbitration proceedings sited in El Salvador?

Only lawyers licensed in El Salvador may represent parties injudicial or arbitral processes sited in El Salvador.

6.6 To what extent are there laws or rules in El Salvadorproviding for arbitrator immunity?

In my opinion, arbitrators are not immune under Salvadoran law forthe negligent or tortuous discharge of their duties.

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LMCA Art. 28 a) excludes the courts from all matters arising fromthe arbitration during the arbitral proceedings. They can onlyintervene in assistance requested by the arbitral tribunal.

6.8 Are there any special considerations for conductingmultiparty arbitrations in El Salvador (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

There are no special provisions for joinder and consolidation in theLMCA. The Salvadoran Code of Civil Procedure would probablyapply in cases where conducting separate arbitrations could result incontradictory judgments on the same issues, affecting the sameparties. Under the common rules, a third party could be forced toarbitrate if called upon on the basis of a duty to defend another partyhaled to arbitration, as in hold-harmless clauses or product liabilitycases. Intervention by third parties could be allowed when indefence of property interests.

6.9 What is the approach of the national courts in El Salvadortowards ex parte procedures in the context of internationalarbitration?

The rule is to exclude all ex parte procedures during the arbitration.The only exceptions are interim cautionary measures, such asattachments of assets.



An arbitrator could award interim relief such as forced exhibit ofdocuments or objects, protective or conservatory measures onproperty, preventative attachment of assets. However, theexecution of such measures must be done through a court.


Once the tribunal is in place, courts will generally refuse to acceptpetitions for interim relief but by the tribunal. However, the LMCA(Art. 32) appears to allow the parties to petition a court for interimrelief measures even during the arbitration proceedings.


Courts are generally mindful of their legal obligation to fullycooperate with arbitral tribunals.


Security for costs as a general a rule has been expunged fromSalvadoran court procedure for decades. The arbitrators maylegally decide the mode of payment of costs and fees, and can orderthat security be provided. In the case of a preventative attachmentof assets or a temporary order to desist from unfair competitionactivities, the court may order the petitioner to provide security.


8.1 What rules of evidence (if any) apply to arbitralproceedings in El Salvador?

Art. 55 of the LMCA sets forth the special rules applicable: arbitrators may order ex officio the production of anyevidence, require clarifications from the parties and experts; all evidence, except documentary, must be presented athearings; arbitrators may commission third parties to receiveor obtain evidence, in the country or abroad; andin weighing the evidence, the LMCA directs arbitrators toapply a system termed Sana Crítica, which consists of anoverall evaluation of all evidence in accordance with therules of logic, science and experience; the reasons forassigning or denying evidentiary value to evidence must beexpressed. All evidence must be received in the presence ofall the arbitrators.


The arbitrator’s authority extends as far as the judge’s authority inrespect of the ordering of disclosure of evidence. The law gives anyperson the right to petition a court to order a third party thedisclosure of documents necessary to prepare a claim or a defence.The court is then authorised to order the production of suchdocuments.


A court may intervene at the request of a party or of the arbitraltribunal.


The tribunal, ex officio or at the request of a party, may order thedisclosure/discovery of evidence. If the party holding the evidencerefuses to comply, the law provides for payment of damages.


There are no formal rules for reception of testimony. Perjurypenalties are, however, applicable to witnesses in arbitrationproceedings.



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8.6 Under what circumstances does the law of El Salvadortreat documents in an arbitral proceeding as being subjectto privilege? In what circumstances is privilege deemed tohave been waived?

Documents in arbitral proceedings are under the privilege grantedto arbitrators by the LMCA. The parties may release the arbitratorsfrom the restrictions of privilege.

9 Making an Award


The award must be in writing, dated, fully identify the parties andcontroversy, fully, clearly and precisely decide all matters submittedto arbitration, and signed by all arbitrators.An institutional arbitration award must be certified by thearbitration centre. An non-institutional award must be entered in anotarial register.



Under Art. 68 MCA, the only causes for recourse against the award are:Nullity of the arbitration clause.Illegal constitution of the tribunal.Lack of proper and effective notice of procedural acts.Illegal denial of evidence.Extemporaneous issuance of award.Judgment in equity in a procedure subject to substantive law.Contradictions and arithmetic errors in the award.Ultra petita.Infra petita.


Parties cannot waive or compromise their fundamental right toappeal; they can only freely decide not to exercise it once theopportunity for appeal arises.


No. Appellate jurisdiction is a matter of public law and thisincludes the nullity recourse before the appellate courts. However,the parties may agree on an appeal or review procedure beforeanother arbitral panel on a basis not established in the law in whatis known as a multi-tiered arbitration.

10.4 What is the procedure for appealing an arbitral award inEl Salvador?

There is no true appeal from an arbitral award. None of thesubstantive issues of law or of fact may be reviewed de novo. Theremedy available is only against the validity of the award itself, for

a numerus clauses of legal causes. The parties must file for nullityof the award before an appellate court within 5 able days of havingnotice of the award.The case must be argued 5 calendar days after notice of admissionof the recourse, and the court decides within 60 days of admission.There is no further recourse.


11.1 Has El Salvador signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

El Salvador ratified without reservations the New York Conventionon the Recognition and Enforcement of Foreign Arbitral Awards.(D.L. 114, 22nd October, 1997, pub.D.O. Nº 218, T. 337, 21stNovember 1997.)

11.2 Has El Salvador signed and/or ratified any regionalConventions concerning the recognition and enforcementof arbitral awards?

El Salvador has ratified without reservations the InteramericanConvention on International Commercial Arbitration (D. Ley Nº236, 19th May, 1980, pub. D.O. Nº 98, T. 267, 27th May, 1980).

11.3 What is the approach of the national courts in El Salvadortowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

Courts will enforce awards in the same manner as any judgment.Foreign arbitral awards not under the New York Convention mustundergo a usually very lengthy pareatis or exequatur procedure forrecognition prior to enforcement.

11.4 What is the effect of an arbitration award in terms of resjudicata in El Salvador? Does the fact that certain issueshave been finally determined by an arbitral tribunalpreclude those issues from being re-heard in a nationalcourt and, if so, in what circumstances?

An arbitration award has the full effects of res judicata as betweenthe same parties, on the issues of fact as decided. Courts are barredfrom hearing any matter finally decided by a valid award.

12 Confidentiality

12.1 Are arbitral proceedings sited in El Salvador confidential?What, if any, law governs confidentiality?

Fundamentally, arbitration proceedings, as a matter of contract law,come under the constitutional right to privacy. No party without alegally established legitimate interest can have access to theproceedings.


Each arbitral tribunal is obliged to receive and weigh the evidencefor the case before it. Information disclosed in a previous

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arbitration is not necessarily binding in a subsequent process.


Tax authorities and criminal courts may order the disclosure ofinformation contained in arbitration proceedings.



The parties may agree on the types of remedies recoverable througharbitration, absent such agreement, substantive Salvadoran law ofobligations becomes applicable. Generally, only effective damagesare recoverable in the forms of lucrum cessans and damnumemergens. Recent Supreme Court decisions have broken thistraditional limitation, allowing moral damages as recoverable bydirect application of the constitution, despite absence of legalregulation. (Casación Ref. 134-C-2005, Sala de lo Civil, 8:50hrs22 November, 2005: decided existence of moral damages in theform of emotional suffering due to violation of subjective Rights.Apelación Ref. 1686 S. S; Sala de lo Civil 9:00hrs 23 Sept. 2004:dismissed argument that lack of legal regulation prevents award ofmoral damages, as rights to such derive form the constitution whichmust be directly applied.)


In commercial matters, the legal interest is fixed by the Ministry ofEconomy. At present, it stands at 12% per annum.


There is no specific rule for awarding costs and fees. This mattermust be specifically included in each party’s claims. The generalpractice is for the losing party to pay the costs and fees of the victor,except where both parties have succumbed in part of their claims.


An award is not subject to any tax.


14.1 Has El Salvador signed and ratified the WashingtonConvention on the Settlement of Investment DisputesBetween States and Nationals of Other States (1965)?

El Salvador signed Washington Convention on June 9th, 1982, andratified it on 7th December, 1982 (D.L. 111 7th December, 1982,pub. D.O. Nº 230 T.Nº 277 14th December, 1982).

14.2 Is El Salvador party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

El Salvador is a party to 12 BITs that allow recourse to ICSIDarbitration (Benelux, Costa Rica, Finland, Germany, Israel,Netherlands, Paraguay, Peru, South Korea, UK, USA, Uruguay).

14.3 Does El Salvador have standard terms or model languagethat it uses in its investment treaties and, if so, what isthe intended significance of that language?

El Salvador will usually require express “according to law”language to afford investment protection. This has been construedto exclude all investment tainted by fraud or corruption (see InceysaVallisoletana referred to at question 14.4 below).

14.4 In practice, have disputes involving El Salvador beenresolved by means of ICSID arbitration and, if so, whathas the approach of national courts in El Salvador been tothe enforcement of ICSID awards and how has thegovernment of El Salvadorresponded to any adverseawards?

No disputes involving El Salvador have been resolved by ICSIDarbitration. In the only case brought to ICSID (InceysaVallisoletana vs. Republic of El Salvador) ARB03/26), the tribunaldecided against jurisdiction.

14.5 What is the approach of the national courts in El Salvadortowards the defence of state immunity regardingjurisdiction and execution?

The Salvadoran Constitution expressly allows the State to submit tothe jurisdiction of international arbitral tribunals in commercial andcontractual matters. This curtails the sovereign immunity defence.Courts have not refused execution of arbitral awards on the basis ofsovereign immunity.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in El Salvador? Are certain disputescommonly being referred to arbitration?

International contracts with Salvadoran parties now generally includearbitration clauses, as well as an increasing number of local contracts.However, the use of local institutional arbitration has never taken off,and parties usually submit to ICC or AAA arbitration.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in El Salvador, such as pending orproposed legislation that may substantially change the lawapplicable to arbitration?

At present, there is only one authorised arbitration centre in thecountry. The lack of more centres offering qualified rosters is a majorhindrance to the application of the LMCA and to a more generaliseduse of arbitration. Universities and professional associations are onlystarting to take an interest in establishing other centres.



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El SalvadorConsortium Centro América Abogados

José Roberto Tercero

Consortium Centro América Abogados67 Avenida Sur Pasaje 2 Nº 26 San SalvadorEl Salvador

Tel: +503 2209 1600Fax: +503 2298 3939Email: [email protected]: www.consortiumlegal.com

Chambers and Partners sources place the “extremely solid andknowledgeable lawyer” in the top spot as “the number-one lawyer”for dispute resolution in El Salvador. 2009: Top negotiator Jose Roberto Tercero is building on an alreadypowerful track record in dispute resolution.Authorised in El Salvador. LL.M. Tulane University, U.S.A., 1998;Certificate of Advanced Studies in Commercial Arbitration, TulaneDispute Resolution Group, 1997. Specialist in InternationalLitigation; ADR; International Business Transactions; ForeignInvestment; International Banking; Economic Crimes; Antitrust;Constitutional; Administrative Law.Former professor of Public and Procedural Law. Member, Board ofCommissioners, Training and Education Committee, Foundation forInternational Commercial Arbitration, The Hague; Member,Chartered Institute of Arbitrators, London, UK; Head of the SpecialLitigation and Arbitration Group for Consortium El Salvador since2005.

Consortium Centro America Abogados is committed to the highest quality in personalised, efficient and ethical legalservices in the Central American Region, through 10 offices located in Guatemala, El Salvador, Honduras, Nicaraguaand Costa Rica.





Chapter 41

Consortium Centro América Abogados Guatemala - Rodriguez, Archila, Castellanos, Solares & Aguilar

Guatemala


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Guatemala?

The main legal requirement is that the agreement should be inwriting. The Arbitration Act of Guatemala (Decree 67-95) (“theAA”) includes in its article 10 (1) the same text as article 7 (2) ofthe Uncitral Model Law on International Commercial Arbitration(“the Model Law”). Arbitration agreements can be included as partof a main agreement or can be separately agreed.


No there are not.


If included in an “agreement of adhesion” or a standard form ofcontract prepared by one party, that form or agreement mustindicate in special characters that it includes an arbitrationagreement.


If the arbitration agreement is invoked in a timely manner or isevident from the documents used by the plaintiff, generally,national courts remand the case to arbitration and declinejurisdiction.


In general, the same answer as for question 1.4 applies. Thedifference could only be if mediation or conciliation was not agreedupon as a MANDATORY step before going to litigation (assumingthe parties did not agree for arbitration), then national courts wouldgenerally admit jurisdiction without the need to conclude themediation phase.


2.1 What legislation governs the enforcement of arbitrationagreements in Guatemala?

The AA (Decree 67-95 of the Guatemalan Congress) governs theenforcement of arbitration agreements.


Yes. Guatemala is a Model Law country. The Law was adoptedusing its version of applicability to both domestic and internationalarbitration.


Yes. Generally, it follows it very closely. Differences can be foundin two or three areas, such as the legal recourse against the arbitralaward (the competent court is allowed to modify the award, as wellas to confirm or annul it). It must be kept in mind that Guatemalaused the Model Law to govern both domestic and internationalarbitrations. Therefore, Guatemalan AA shall be compared, as tothe Model Law, in its version as the applicable law for bothdomestic and international arbitrations.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Guatemala?

In essence, all the rules relating to the procedure on how to enforcean arbitration award are mandatory. That is, all the specificrequirements or steps that are needed in order to obtainenforcement, as “lex fori” are mandatory.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Guatemala? Whatis the general approach used in determining whether ornot a dispute is “arbitrable”?

The general principle is that parties may submit to arbitration anysubject matter where such parties have the liberty to dispose

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partially or totally of their rights. In other words, any matter whereparties have the freedom to contract is arbitrable. Notwithstandingthere are some limitations expressly stated in article 3 of theGuatemalan AA. For example, matters that are inseparable ofothers where parties cannot freely dispose of their rights or dutiesare not arbitrable. An addition to the local version of the ModelLaw was section 3, subsection “c” of said article 3, because itprohibits the submission to arbitration of any matter that isexpressly forbidden in a law or any matter where there is a specificprocedure legally determined to be used for its resolution.


Yes. Article 21 of the AA clearly provides for the “kompetenz-kompetenz” principle.

3.3 What is the approach of the national courts in Guatemalatowards a party who commences court proceedings inapparent breach of an arbitration agreement?

The approach of national courts in this aspect has been to remandthe parties to arbitration. In general, there has been a respect forarbitration agreements and their binding nature between the partiesto them.


When an arbitral tribunal decides the issue of jurisdiction andcompetence as a prima facie or preliminary issue, then any partycan present to a national competent court an objection to the arbitraltribunal’s decision within 15 days after such determination has beenserved to the parties. The decision of the national court shall befinal and binding and not subject any other remedy or recourse.

3.5 Under what, if any, circumstances does the national law ofGuatemala allow an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

Jurisdiction can be assumed only when such party has been suedthrough arbitration proceedings and he, she or it does not oppose toarbitration in its first response to the original claim or request forarbitration (tacit arbitral agreement, as provided for in article 10,section 1 of the Guatemalan AA).

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Guatemala and what isthe typical length of such periods? Do the national courtsof Guatemala consider such rules procedural orsubstantive, i.e., what choice of law rules govern theapplication of limitation periods?

Generally, statute of limitation periods are contained in the CivilCode. The general statute of limitation period is of 5 years(maximum period), but there are certain commercial obligations,such as payment of invoices, which period of limitations is twoyears. National courts consider statute of limitation periods assubstantive issues. Therefore, in international cases, limitationperiods should be governed by the law applicable to the substanceof the matter.



If parties have not selected the applicable law, then there are“conflict of law rules” or “International Private Law” rulescontained in the Law of the Judicial Branch. Traditional principles,such as “lex loci celebrations”, “lex loci executionis”, “locus regitactum”, will be used to determine applicable law the substance ofthe dispute.


The Law of the Judicial Branch is clear in establishing that partiesto an agreement can select the applicable law to their contract,provided that it does not contradict a mandatory legal rule or a rulecontaining an express prohibition. Therefore, it can be said that thelaws of another country other than Guatemala cannot be used tocircumvent the application of a legal rule that sooner or later aGuatemalan court will be obliged to apply to the dispute (or thatcould give place to the annulment or a non-enforcement of an awardfor that cause).


The applicable legal rules of the place where the arbitrationagreement is entered into by its parties governs its formation,validity and legality.



The only limit expressly provided for in the AA (article 14, section3) is in regard to any judges, officers or employees working in theJudicial Branch of Government.


Yes. Article 15, section 1 follows almost literally the provision ofarticle 11 of the Model Law (except for the terms provided for insuch article 11 that in the Guatemalan AA are reduced, from 30 to15 days).


Yes, if one party fails to appoint an arbitrator within a period of 15days or if both arbitrators, already appointed, fail to appoint thethird arbitrator within the same period of time, then, after theexpiration of such terms, a national court provided for in article 9 ofthe AA shall become the sole and definite appointing authority. Thesame applies for arbitrations with a sole arbitrator.

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There are no specific requirements defined in the AA. There aregeneral provisions such as: article 14, section 3 (Capacities to be anArbitrator); article 15, section 5 (Appointment of Arbitrators); andarticle 16, section 2 (Grounds for Challenge). Article 14 creates aparallelism with the causes for challenging a judge. In other words,individuals who have some relationship with the parties or thecontroversy which may create a possibility of abstention, excuse orchallenge of a judge, may not be appointed as an arbitrator. Morespecifically, article 15 states that the arbitrators do not represent theinterests of any of the parties and shall perform their duties withabsolute impartiality and independence. Finally, article 16 followsstrictly the Model Law when it states that “an arbitrator may onlybe challenged if there are circumstances that give rise to justifieddoubts regarding the impartiality or independence, or if it does notposses the qualifications agreed by the parties”.

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Guatemala?

No, there are not, but practitioners in the field are aware of the IBAGuidelines on this matter which are and can be used if the parties tothe arbitration do not object them.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Guatemala? If so, do those laws or rulesapply to all arbitral proceedings sited in Guatemala?

Yes, the Guatemalan AA is the law governing any arbitralproceeding in the absence of any particular procedural rulesprovided for by the parties or in the absence of the submission ofany arbitral institutional regulation. If the place of arbitration isGuatemala, the Guatemalan AA is fully applicable and controls thearbitral proceedings, again, only if parties did not tailor their ownarbitral proceedings either through ad-hoc arbitration orinstitutional arbitration.

6.2 In arbitration proceedings conducted in Guatemala arethere any particular procedural steps that are required bylaw?

The Guatemalan AA, following the criteria of the Model Lawallows for wide disposition of the parties to provide for theproceedings. This authority is delegated to the same arbitraltribunal or sole arbitrator, if not limited by the parties. Thisauthority in favour of the arbitral tribunal includes thedetermination as to admissibility, pertinence and the weighing ofthe evidence. The only aspects that cannot be modified by the willof the parties is the general principle of fair and equal treatmentunder article 23 of the Guatemalan AA (article 18 of the ModelLaw).


No. Article 29 of the Guatemalan AA, under the title of “Hearingsand written proceedings” determines that unless otherwise agreedby the parties, the arbitral tribunal will decide if hearings must take

place for the rendering of evidence and oral pleas or if theproceedings will be substantiated based upon the documents andother evidences.

6.4 What powers and duties does the national law ofGuatemala impose upon arbitrators?

Please, see the response to questions 6.3 and 6.7.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Guatemala and, if so,is it clear that such restrictions do not apply to arbitrationproceedings sited in Guatemala?

In general, for an attorney licensed to practice in anotherjurisdiction, in order to be able to provide legal services in front ofa local court, they need to be also licensed in Guatemala, and theprocess for incorporation is troublesome and very lengthy. But inArbitration, the applicable law does not contemplate any restrictionfor foreign attorneys to provide their services in arbitrations with itsplace of arbitration in Guatemala, or having the need to sustain ahearing in Guatemala even though the place of arbitration iselsewhere.

6.6 To what extent are there laws or rules in Guatemalaproviding for arbitrator immunity?

Guatemalan laws are completely silent on this matter.


Yes. Article 24 (Determination of Proceedings) states that theparties have the liberty to determine the proceedings that the arbitraltribunal must follow, but in absence of such determination, is thearbitral tribunal fully empowered to conduct the arbitration in themanner it considers appropriate.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Guatemala (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

Regarding multi-party arbitrations, the Guatemalan AA isabsolutely silent. In regard to third parties intervening in or joiningan arbitration proceeding, article 21 section 4, of the AA contains aprovision forbidding third parties to join an arbitration proceeding.This prohibition was not part of the original draft law presented tothe Guatemalan Congress, but was added during the finaldiscussion and approval of the initiative, based on an old rulecontained in the Code of Civil and Commercial Procedures.

6.9 What is the approach of the national courts in Guatemalatowards ex parte procedures in the context of internationalarbitration?

No information is available in this respect. The reporter was notable to find any cases in this matter.

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Yes. The Guatemalan AA follows strictly the Model Law in thisaspect. Article 22 provides that, unless otherwise agreed by theparties, the arbitral tribunal may, by petition of any of the parties,order to a party to the arbitral proceedings interim measures that thearbitral tribunal considers necessary in connection with the purposeof the dispute. The arbitral tribunal may request to the party thathave requested the interim measure, a guarantee sufficient toprevent its responsibility in regard to said measure. Likewise,unless otherwise agreed by the parties, the arbitrators or the partiesmay request to a competent national court that it issues or drawsinterim measures that must be fulfilled by third parties, or that, oneof the parties shall coactively forced to fulfil an interim measureawarded or granted previously by the arbitral tribunal in front ofone of the parties to the arbitral proceedings.


Please see response to question 6.1. In addition, the GuatemalanAA provides that the fact that a party requests to a national court foran interim measure or relief, it does not affect the jurisdiction of thearbitral tribunal. (Article 12.)


The national courts, in several cases, have demonstrated lack ofadequate support to grant any interim relief sought by the parties toarbitration agreements. Article 35 of the Guatemalan AA providesfor the specific procedure the national courts must follow in thosecases where judicial assistance can be required, but in several casesthe national courts have not responded adequately, but followingtraditional judicial procedures (“incidente judicial”).


Yes, it does.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Guatemala?

As mentioned above, there are no specific rules of evidence. Thearbitral tribunal has the liberty of determining not only proceduralissues, but also issues related to the admissibility, pertinence andweighing of the evidence (article 24).


No, there are no limits under the Arbitration Act. However, thenotion of discovery is foreign to Guatemalan national courts.Regarding the disclosure of documents of third parties, the arbitraltribunal needs to seek judicial assistance, as third parties are notregarded as subject to the jurisdiction of the arbitral tribunal. It mayrequest third parties to disclose documents or information relevantto the dispute, but if such third parties are not willing to cooperate,then the arbitral tribunal must follow the procedure for judicialassistance provided for in article 35.


As derived from the previous answer, when a party to the arbitrationproceeding is not cooperating, or a third party, not subject to thejurisdiction of the arbitral tribunal, is not willing to provide theevidence, the arbitral tribunal or the interested party can seek thejudicial assistance.


There is not sufficient information in this regard, as very fewinternational arbitration proceedings have taken place inGuatemala. It really depends on the cooperation of the parties andthe willingness of the arbitral tribunal to accept proceedings relatedto disclosure/discovery (but again, discovery proceedings are notpart of the legal tradition in Guatemala). The IBA rules regardingthe taking of evidence are becoming a possible standard forinternational cases (the few that the reporter can acknowledge).


The Guatemalan AA does not provide for specific rules in thismatter. When the arbitration proceeding is governed byinstitutional rules, this is certainly common. Not only is the rightfor cross-examination allowed but also the need for the witness tobe sworn before the arbitral tribunal. In ad-hoc arbitrations, this iscommon practice too.

8.6 Under what circumstances does the law of Guatemalatreat documents in an arbitral proceeding as being subjectto privilege? In what circumstances is privilege deemed tohave been waived?

Confidentiality is an essential characteristic of any arbitralproceeding. Privilege must be expressly waived, unless theinformation is public in nature or any competent authority requiresthe disclosure of said information.

9 Making an Award


Article 40 provides for the legal requirements of an arbitral award.

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In essence, it must be in writing and signed by at least the majorityof the arbitral tribunal (describing why there is the lack of signatureof the other arbitrator or arbitrators). In case of the sole arbitrator,his or her signature is mandatory. The award must be duly reasonedor motivated, and the date and place of issuance must be clearlyindicated. Finally, unless agreed differently by the parties, thearbitral tribunal must address the issue of allocation of costs of theproceedings. Dissenting opinions are expressly allowed.



The Guatemalan AA follows strictly the bases for appeal asprovided for in the Uncitral Model Law. The causes or bases areexactly the same. Those that can be argued by the parties, and thosethat can be used or argued by the appellate court “ex-officio” can beappealed.


In principle, the answer is no but taking into account the wording ofthe text of article 43, section 2, of the AA (that contain those bases)and some international cases in other forums, there could be roomfor interpretation in this regard.


No. Article 43 provides for the “only” grounds or bases forappealing. (In Guatemala the appeal is denominated “Recurso deRevisión”.)

10.4 What is the procedure for appealing an arbitral award inGuatemala?

Partial text of article 43 and full text of article 44 of the AA follows:3) The request of review may not be made after a month haspassed starting from the date of the reception of the award or,if the request has been made pursuant to article 42, from thedate in which the request has been resolved by the ArbitralTribunal. 4) The recurrent party that, during the procedureof arbitration, omits to establish a proposal or an opportuneobjection regarding the causes established in number 2) ofthis article, may not invoke subsequently the same cause asthe motion to review.

ARTICLE 44 - Proceedings for the review. 1) Promote the review against an award, hearing will be granted

to other interested parties, for a common term of two days. 2) If the review refers to matters de facto and it was necessary

to open to receive evidences, the parties must offer theindividualised evidences to promote said remedy andevacuate such hearing. In said case, the motion for reviewwill open to the offering of evidences for a period of tendays.

3) The Appeals Court will resolve the review established,without any other act, within the three days for the term ofthe hearing and if it has been opened to evidence, theresolution will be pronounced within an equal period, afterthe evidence period has concluded.

4) Against the resolutions of procedure or substance, that theAppeals Court issues in the substantiation of the motion toreview, there is no remedy whatsoever against it.

5) The Appeals Court, when the review of an award isrequested, may suspend the proceedings of review, when itcorresponds and when one of the parties request it so, for aterm determined with the purpose of granting the ArbitralTribunal the opportunity to renew the arbitral proceedings orof adopting any other measure that to the judgment of theArbitral Tribunal eliminates the caused for the petition ofreview. In this case, in what is compatible, the provisionscontained in article 42 will be applied.

6) After the pass of forty (40) days since the date of thepresentation of the motion to review, if the Appeal Court hasnot pronounced upon the opposed award, it will be legallyconfirmed, and therefore, it will have the quality of a finaljudgment for the effects of its execution.


11.1 Has Guatemala signed and/or ratified the New YorkConvention on the Recognition and Enforcement of ForeignArbitral Awards? Has it entered any reservations? What isthe relevant national legislation?

Yes. Guatemala has signed and ratified the New York Convention.It ratified it under the reservations of reciprocity and applicabilityonly to commercial disputes. The Guatemalan AA includesprovisions for recognition and enforcement that are equal to thoseof the New York Convention, following the Model Law. Therefore,in essence, there is a “uniform” system for the recognition andenforcement of international or foreign awards, notwithstanding ifthey were issued in another “New York Convention country” or not,and without regard if the subject-matter is commercial in nature ornot.

11.2 Has Guatemala signed and/or ratified any regionalConventions concerning the recognition and enforcementof arbitral awards?

Yes. Guatemala has signed the Interamerican Convention onInternational Commercial Arbitration (“the Panama Convention”).

11.3 What is the approach of the national courts in Guatemalatowards the recognition and enforcement of arbitrationawards in practice? What steps are parties required totake?

ARTICLE 48 - Procedure for the recognition and enforcement ofthe award.The procedure of acknowledgment or execution of the awards willbe subject to the following rules:1) Passed the term of one month, indicated in article 43 (3),

without the award being complied, its forced executionmight be obtained before a competent court, pursuant toarticle 46(1), through the request of execution, to which thedocuments indicated in article 46(2) will be accompanied.

2) Likewise, a certified copy of the judicial resolution uponwhich the revision remedy was resolved.

3) Of the execution filed, the court will give a three-day hearingto the executed, which will only be able to oppose to theestablished execution, based upon any motion of reviewpending, as long as it is documentary credited with theopposition brief. In this case, the court will pronouncewithout any other procedure the suspension of the execution

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until the resolution regarding the motion for review is issued,and if said remedy prospers, the court, when presented witha certified copy of said resolution, will pronounce a judicialdecree denying the execution.

4) Besides the foreseen in the abovementioned number, and ifany of the causes established in article 47 do not coincide, thecourt will pronounce a judicial decree ordering its execution,ordering the requirement of the obliged party and theembargo of property, if applicable.

5) Any resolution of procedure or of substance that falls in theprocedure of acknowledgment and execution of an award isnot susceptible to any other procedural remedy whatsoever.

6) In all that is not foreseen in the chapter herein, foracknowledgment and execution of awards, the legalprovisions applicable to the execution of national judgmentswill be applicable supplementary, as long as said provision iscompatible with the celerity and efficiency with which anarbitration award must be executed with.

11.4 What is the effect of an arbitration award in terms of resjudicata in Guatemala? Does the fact that certain issueshave been finally determined by an arbitral tribunalpreclude those issues from being re-heard in a nationalcourt and, if so, in what circumstances?

An arbitral award has the same effects and consequences as ajudgment. Therefore, once all possible attacks to an award havebeen used, the arbitral award produces the effects of res judicata.Therefore, no reopening of issues can be requested in front ofnational courts.

12 Confidentiality

12.1 Are arbitral proceedings sited in Guatemala confidential?What, if any, law governs confidentiality?

As arbitral proceedings derive from arbitral agreements, both areregarded as confidential in nature, based on Constitutionalprovisions (article 24 of the Constitution) as interpreted by ourConstitutional Court. But in all rules of the locally availablearbitration institutions, said rules expressly provide that the arbitralproceedings are confidential.


No, if the party that can claim confidentiality does not expresslyallow for its disclosure.


When the information used in those proceedings is not private orconfidential in nature (article 24 of the Guatemalan Constitution) orwhen a local authority with legal power to require such information,does so (e.g.: local courts; the Attorney General’s office). In thesecases, the information can be disclosed but under reservation ofconfidentiality in front of third parties not related to the proceedingsthat originates such request.



No. There are no legal restrictions or limits, but “punitivedamages” are foreign to the Guatemalan legal system.


Interest is normally regarded as the form to cover damages. TheCivil Code contemplates such remedy and in its calculation it refersto the average interest rate used by commercial banks in their activeoperations (lending) at the moment the interest must be calculated.


Yes, parties can be entitled to recover fees and/or costs from theother party, specifically when the arbitral tribunal considers that theparty that has to pay for such costs and fees litigated in bad faith.When no “bad faith” determination is found, normally fees andcosts are distributed equally among the parties.


In principle, no. The potential tax could be a “stamp tax” applicableon the document containing the award. There is a little room ofinterpretation that the exemption on “judicial documents” exemptedexpressly under the Stamp Tax Law may not extend to arbitraldocuments, but so far the local tax authority has not issued anyresolution regarding this matter.


14.1 Has Guatemala signed and ratified the WashingtonConvention on the Settlement of Investment DisputesBetween States and Nationals of Other States (1965)?

Yes, it has.

14.2 Is Guatemala party to a significant number of BilateralInvestment Treaties (BITs) or Multilateral Investmenttreaties (such as the Energy Charter Treaty) that allow forrecourse to arbitration under the auspices of theInternational Centre for the Settlement of InvestmentDisputes (‘ICSID’)?

Guatemala has signed and ratified several BITs, for example, thosewith China, Honduras, Israel, Switzerland, Spain, Finland, Sweden,Netherlands, Chile, South Korea, Cuba, Argentina, BelgiumLuxembourg, Czech Republic, Italy, France and Germany.Guatemala is not party to Multilateral Investment Treaties exceptfor a regional or Central American Investment Treaty and inaddition it has signed and ratified Free Trade Agreements withMéxico, the United States of America, Chile and Panama, wheretheir investment chapters contains similar provisions for ICSIDarbitrations as in the BITs.

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14.3 Does Guatemala have standard terms or model languagethat it uses in its investment treaties and, if so, what isthe intended significance of that language?

No. Guatemala does not impose or suggests any particular modellanguage in investment treaties.

14.4 In practice, have disputes involving Guatemala beenresolved by means of ICSID arbitration and, if so, whathas the approach of national courts in Guatemala been tothe enforcement of ICSID awards?

No practical experience has been accumulated so far in this regard.Guatemala was sued under an ICSID procedure in the year 2007 forthe first time. So far, the proceedings have not yet commenced andthe Government is pursuing an amicable resolution.

14.5 What is the approach of the national courts in Guatemalatowards the defence of state immunity regardingjurisdiction and execution?

Again, there is no information available regarding this matter. Butin general, there have been no cases in at least the last few decadeswhere it has been publicly known that Guatemala could have usedthe defence of state immunity regarding jurisdiction and execution.

15 General

15.1 Are there noteworthy trends in the use of arbitration orarbitration institutions in Guatemala? Are certain disputescommonly being referred to arbitration?

Recently, parties are submitting more to ad-hoc arbitrationproceedings than to institutional arbitration proceedings. The threeavailable local arbitration institutions are subject to some level ofcriticism. A few cases where the arbitration proceedings were exaequo et bono arbitrations, the parties felt that the arbitrators mayhave abused of such power. Certain disputes are normally referredto arbitration under Guatemalan parties, such as in thetelecommunication, energy and stock market sectors. The specificlaws for those economic sectors specifically allow for arbitration.

15.2 Are there any other noteworthy current issues affecting theuse of arbitration in Guatemala?

The abuse of the constitutional remedy known as Amparo has beenan increasing concern. Not only has this remedy been used undermalicious litigation during arbitral proceedings, but mostly in somenotable cases where recognition and enforcement of foreign arbitralawards have been pursued in Guatemala (at least one case isbecoming noteworthy).

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Alvaro Castellanos Howell

Consortium Centro América AbogadosGuatemala - Rodriguez, Archila, Castellanos,Solares & AguilarDiagonal 6 10-01 zona 10Torre 2, Oficina 1101 Guatemala CityGuatemala

Tel: +502 2279 3939Fax: +502 2279 3938Email: [email protected]: www.consortiumlegal.com

Chambers and Partners portrays Alvaro as “the brain, heart andengine of the firm”. Leading the team and the market is AlvaroCastellanos, who counts prestigious names such as Citibank amonghis clients.Authorised in Guatemala, LL.M. in International and ComparativeLaw, Columbia University. Specialist in Intellectual Property,Commercial Arbitration, International Contracts, Banking &Financial Law, Corporate Law, Regulated Sector and ForeignInvestment.Dean of School of Juridical and Social Sciences, Universidad RafaelLandívar, 2002-2006. Professor of International Private Law,Constitutional Law, Intellectual Property Law, Economic-MercantileLaw, and Banking Law, at Universidad Rafael Landívar, UniversidadSan Carlos and Universidad Francisco Marroquin. Founder andpresident of the Arbitration and Conciliation Center of theGuatemalan Chamber of Commerce. Drafter of the GuatemalanArbitration Law for the Ministry of Economy (1994). Designated National arbitrator for the following Free TradeAgreements: Dominican Republic, Central America and the USA(General); Dominican Republic, Central America and the USA(Investment); Mexico and El Salvador, Guatemala and Honduras;Guatemala and China; General Treaty of Central American EconomicIntegration. Representative member of Guatemala in theInternational Court of Arbitration of the ICC of Paris.

Consortium Centro América Abogados is committed to the highest quality in personalised, efficient and ethical legalservices in the Central American Region, through 10 offices located in Guatemala, El Salvador, Honduras, Nicaraguaand Costa Rica.



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Chapter 42


Consortium Centro América Abogados-Honduras

Honduras


1.1 What, if any, are the legal requirements of an arbitrationagreement under the laws of Honduras?

Arbitration in Honduras in general, is ruled by the Conciliation andArbitration Law, herein after “the Law”. The Law was enacted inthe year 2000, applying to arbitration agreements by which theparties decide to submit their actual or future controversies toarbitration (Article 37). Article 38 of the Law provides that: (i)arbitration agreements must be evidenced in writing; (ii) they couldadopt the form of a clause within a contract or might be anindependent agreement; (iii) any kind of written or any other meansof communication among the parties, stating their unequivocal willto submit to arbitration proceedings is recognised as a valid andbinding arbitration agreement; and (iv) the request of arbitration,accepted by one or more arbitrators, consented later by the otherparty, will have the effect of a written agreement, in such case, theconsent will be presumed if the party, duly notified of the arbitratorsintervention, submits itself to trial without objection.


Asides from the formalities stated herein in the previous response,Honduran Law does not provide any special requirements orformalities if an individual person is a party to a commercialtransaction which includes an arbitration agreement. In fact, article110 of the Honduran Constitution provides that all natural persons,who are free to administrate their possessions, cannot be deprivedof the right to terminate their civil matters by transaction orarbitration.


Written evidence of the agreement is the only legal requirementcontemplated by Honduran Law for an arbitration agreement to bevalid and binding. Nevertheless, even if in writing, a clear intentionto submit the controversy to arbitration will be required by theHonduran Courts to be expressed within the agreement. The Lawprovides all necessary elements which have not been expresslycontained in the agreement, in order to be able to enforce thearbitration.


In general, Honduran courts are willing to enforce arbitrationagreements. The Law contemplates a mechanism known as“Excepcion de Arbitraje” (Article 40), which consists of a defenceby which a party that has submitted itself to arbitration can opposean action by the other party when trying to submit the matter ofcontroversy to common justice. The Exception provides that: (i)arbitration agreements imply that the parties have renounced to thejudicial procedure on the matters or controversies submitted toarbitration; and (ii) if the case is subject to arbitration, courts mustrestrain themselves from judging the matter when the defendantfiles the arbitration exception.


ADR agreements, as well as arbitration agreements in particular,have been upheld by common courts in general. As in the case ofan arbitration agreement, Honduran courts enforce ADRagreements, and, in general, respect ADR procedures andresolutions. Notwithstanding, the only permitted defence is thearbitration exception.


2.1 What legislation governs the enforcement of arbitrationagreements in Honduras?

The legislation governing the enforcement of arbitrationagreements is the Conciliation and Arbitration Law (the Law),enacted through Decree 161-2000 and any treaty, convention oragreement, either multilateral or bilateral to which Honduras is aparty too.


The Law (Article 27) provides that its provisions apply to bothinternational and domestic arbitration, along with any treaties,conventions or other international law instruments to whichHonduras is a party too.

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Gustavo León-Gómez

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Consortium Centro América Abogados Honduras


The Law, in general terms, is based on the UNCITRAL Model Law;the most significant difference is the scope of the Law whichincludes conciliation proceedings and is not limited to internationalcommercial arbitration.

2.4 To what extent are there mandatory rules governinginternational arbitration proceedings sited in Honduras?

The Law provides in its Article 27 that both national andinternational arbitration proceedings are governed by such law,notwithstanding any treaties, agreements, conventions or otherinstruments of international law ratified by Honduras. This lawincludes both public and private order provisions, the latter ofwhich can be modified at the parties’ discretion according to theirpersonal interests and shall relate to the integration of theArbitration Tribunal and its procedure. The public order provisionsby law, are intended to protect basic rights that govern any process,such as due process, equal parts rights, etc., being these provisionsbinding on all parties who submit their dispute to arbitrationjurisdiction and hence cannot be altered or waived.

3 Jurisdiction

3.1 Are there any subject matters that may not be referred toarbitration under the governing law of Honduras? What isthe general approach used in determining whether or not adispute is “arbitrable”?

The Law (Article 29) provides that any matter over which the partieshave free disposition can be subject to arbitration. It specificallyprovides that the following matters cannot be subject to arbitration:

criminal matters except when referring to civil responsibilityderived from a crime;future alimonies;conflicts related to the civil status of people except for thoserelated to the estate related thereto;matters over which a final ruling has been issued;matters in which the Attorney General’s Office has tointervene in representation and defence of those who cannotrepresent themselves due to the lack of capacity or legalrepresentation; andin general, all matters which are not susceptible of atransaction.


Asides from the legal disposition expressly providing for those matterswhich cannot be subject to arbitration, Article 60 of the Law providesthat arbitration tribunals may rule with regards to their ownjurisdiction within legal and contractual boundaries set forth by theparties (principle of Kompetenz-Kompetenz), including any objectionswith respect to the existence or validity of the arbitration agreement.

3.3 What is the approach of the national courts in Hondurastowards a party who commences court proceedings inapparent breach of an arbitration agreement?

Honduran courts shall inhibit themselves from the knowledge of

any controversy subject to arbitration if the defendant pleas for thearbitration exception. Nevertheless, before declaring their lack ofjurisdiction, courts are compelled to admit the action in order toprovide the defendant with an opportunity to accept or reject suchjurisdiction and afterwards, if the exception is filed by thedefendant, the court will rule rejecting the admission of the actionwithout further proceedings.


Considering that the arbitral tribunal may rule on its ownjurisdiction, Honduran courts will not address under anycircumstances the jurisdiction and competence of an arbitraltribunal.On the other hand, Courts of Appeal when resolving an extraordinaryremedy contemplated in the Law towards declaring the award invalidand void (Recurso de Nulidad), will rule, among others, based onwhether the award has been issued: i) over matters which are notsubject to the arbitrators tribunal jurisdiction; and ii) not having ruledover matters which where submitted to their jurisdiction and based onsuch merits, declare the invalidity of the award.

3.5 Under what, if any, circumstances does the national law ofHonduras allows an arbitral tribunal to assume jurisdictionover individuals or entities which are not themselves partyto an agreement to arbitrate?

Under no circumstance can an arbitration tribunal extend itsjurisdiction over individuals or entities which are not themselvesparty to an arbitration agreement. Submission to arbitrationjurisdiction in Honduras is voluntary and cannot be imposed.

3.6 What laws or rules prescribe limitation periods for thecommencement of arbitrations in Honduras and what isthe typical length of such periods? Do the national courtsof Honduras consider such rules procedural or substantive,i.e., what choice of law rules govern the application oflimitation periods?

In Honduras, statutes of limitation are regulated by special orsubstantive laws subject to arbitration, therefore, any limitation forthe initiation of arbitration in Honduras will depend on the lawwhich prescribes the rights it seeks to claim.



The applicable law to the substance of a dispute and in particular ininternational arbitration may be determined by common agreementof the parties in conflict. In general, the Law provides that anyarbitration proceeding to which the parties have not agreed to betechnical or in equity “ex aequo et bono” should be decided by law;arbitrators will then decide specific applicable substantive laws.


The Law sets as mandatory rules those that contain principles

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established in the Constitution, which basically ensure that anyarbitration process takes place within a legal framework thatrespects due process and equal parties’ rights.


In general, Article 110 of the Honduran Constitution and inparticular the provisions established in Articles 37 to 41 of the Lawgovern the formation, validity, and legality of arbitrationagreements.



Under the Law (Article 45), the parties to an arbitration are free toagree on the procedures relative to the appointment of an arbitratoror arbitrators (always odd numbers), however, certain limits areestablished such as:

Lawyers will be required as arbitrators if the arbitration isunder law (Article 43).In a technical arbitration, arbitrators shall be experts on theart, profession or occupation, related to the arbitration(Article 43).Arbitrators would be subject to challenge (conflict ofinterest) according to the applicable regulations ascontemplated in general civil proceeding rules (Article 44).


If the parties’ chosen method fails or they do not agree in anymethod to select the arbitrators, the selection will be made by thearbitration institution selected by them in the arbitration agreement(institutional arbitration) or by any certified arbitration institution oftheir domicile, when the arbitration is not institutional, at therequest of any party to the arbitration agreement.


Honduran courts cannot intervene in the selection of arbitrators.The Law does not provide for a court intervention method, insteadits rules indicate the intervention of arbitration institutions.


Honduran legislation does not provide for specific requirements orcharacteristics with regards to an arbitrator but, instead, it providesfor the causes or circumstances under which an arbitrator can berejected by a party, which are basically those same circumstancesapplicable to an ordinary Judge as provided in the applicable laws,asides from those agreed upon by the parties themselves.Independence, neutrality and impartiality are central to thearbitration proceeding when a person is approached in connectionwith his possible appointment as an arbitrator; he shall disclose anycircumstances likely to give rise to justifiable doubts as to hisimpartiality or independence (Article 49, Conciliation andArbitration Law).

5.5 Are there rules or guidelines for disclosure of potentialconflicts of interest for arbitrators imposed by law orissued by arbitration institutions within Honduras?

Yes. The Law provides general parameters to which the appointedarbitrator must comply, setting out the conflicts of interest that mayarise in their designation or in the performance of their duties andthe right that the law provides to the parties in order to challenge thearbitrators who they consider are not meeting such requirements.Additionally, the parties may agree to establish more restrictivecommon requirements than those established by the Law andregulations for arbitration institutions, in order to meet their needs.

6 Procedural Rules

6.1 Are there laws or rules governing the procedure ofarbitration in Honduras? If so, do those laws or rulesapply to all arbitral proceedings sited in Honduras?

Parties are free to agree on the procedure to be followed by thearbitral tribunal when conducting the proceedings if they have notsubmitted themselves to the rules of an arbitration institution(Article 52, Conciliation and Arbitration Law).In the absence of the parties’ agreement or submission to the rules ofan arbitration institution, the arbitral tribunal will be subject to thesupplementary proceedings as contemplated by the Law (Article 54).

6.2 In arbitration proceedings conducted in Honduras, arethere any particular procedural steps that are required bylaw?

There are no particular procedural steps contemplated in the lawand only in the absence of an agreement thereto will asupplementary legal procedure apply; nevertheless, if thearbitration is submitted to an institutional arbitration, its regulationscan provide for specific procedural steps in the absence of anagreement thereto.


The Law does not provide for any rules that govern the conduct ofan arbitration hearing. Despite the freedom granted to the parties toagree on the procedure to be followed by the arbitral tribunal, atleast all matters related to the provision of proof or evidence mustbe held in oral hearings (Article 62).

6.4 What powers and duties does the national law ofHonduras impose upon arbitrators?

Upon acceptance of its appointment, the Law requires arbitrators tofulfil its duties with diligence and dedication and shall be heldresponsible in connection with any damages which arise from itsnegligence and which affect the parties to the arbitration or anyother person.

6.5 Are there rules restricting the appearance of lawyers fromother jurisdictions in legal matters in Honduras and, if so,is it clear that such restrictions do not apply to arbitrationproceedings sited in Honduras?

In Honduras, the Honduran Bar Association Law provides that thefaculty to represent or exercise law within our country is limited to

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those professionals who are registered at the Bar, therefore, there is aclear limitation on the exercise of foreign professionals in Honduras.

6.6 To what extent are there laws or rules in Hondurasproviding for arbitrator immunity?

Currently, applicable law does not provide for any immunity withregards to arbitrators in Honduras; to the contrary, Article 47 of theLaw states that once the arbitrators have accepted their appointmentthey will be responsible for repairing the damages caused to theparties or third parties due to their negligence.


Courts have jurisdiction over certain matters in connection withwhich the tribunal requires its support; arbitrators for example canissue subpoenas in order to compel the production of evidencewhich cannot only be limited to the evidence provided by theparties but also any other evidence the arbitration tribunal deemsappropriate. Arbitrators can request judicial support when theycannot execute evidence by themselves.Common courts can also assist arbitration tribunals whenrequesting preliminary measures in order to secure the results of thearbitration proceedings.

6.8 Are there any special considerations for conductingmultiparty arbitrations in Honduras (including in theappointment of arbitrators)? Under what circumstances, ifany, can multiple arbitrations (either arising under thesame agreement or different agreements) be consolidatedin one proceeding? Under what circumstances, if any, canthird parties intervene in or join an arbitration proceeding?

No, there are no special considerations for conducting multipartyarbitrations; the Law does not provide for this specific matter butunder the principle of autonomy (freedom of contract) which prevailsas a constitutional principle, this could be agreed by the parties.

6.9 What is the approach of the national courts in Hondurastowards ex parte procedures in the context of internationalarbitration?

To the best of our knowledge, there haven’t been any precedentswith regards to ex parte procedures in connection with internationalarbitrations. Nevertheless, considering the possibility contemplatedin the Law with regards to preliminary measures which can berequested in order to secure the results of the proceedings, thesesame criteria should be applicable with regards to similar requestsin the context of an international arbitration.



Interim relief is not contemplated with regards to arbitrationproceedings. The law does provide for preliminary measures whichcan be executed with the assistance of a court, in which case the lawalso provides that such measures shall not be understood as awaiver to arbitration.


See previous response.


N/A - see above.


No it does not.


8.1 What rules of evidence (if any) apply to arbitralproceedings in Honduras?

The arbitration tribunal has the faculty to determine theadmissibility, relevance and weight of the evidence.In any stage of the trial, arbitrators can request from the partiesadditional clarification or information, and can also order theproduction of additional evidence as deemed necessary.With regards to technical evidence, arbitrators can request furtherexplanations or additions to the opinions given by technicians.The arbitration tribunal can disregard the evidence that has not yetbeen executed upon a motivated decision, if they considerthemselves appropriately informed.The giving of evidence, except for documentary proof, has to besubmitted in oral hearings, which day, place and hour have to beannounced to the parties prior to the hearing being held.The submission of evidence has to be performed before the tribunal;any proof to be given outside the tribunal’s domicile, can be eitherheard by the tribunal itself or it can be delegated to a judicialauthority to be heard. In order for the tribunal to hear proof abroad,it should fulfil the same requirements as an ordinary judgeaccording to civil procedure regulations.


Disclosure of documents can be ordered within the legal marginsset forth in our prior response.


See prior response to question 7.1.


See prior response to question 7.1.

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