Arbitration Law in Bosnia and Herzegovina
Arbitration Law in Bosnia and Herzegovina
Bosnia and Herzegovina (BiH) has a legal framework for arbitration that is primarily governed by both domestic legislation and international conventions. Arbitration in BiH is an important method for resolving commercial disputes, and the legal environment has been developed to align with international standards. The country’s arbitration laws are influenced by the UNCITRAL Model Law and other international norms to ensure the recognition and enforcement of arbitral awards.
1. Legal Framework for Arbitration
Arbitration Law of Bosnia and Herzegovina (2005)
- The main legal act regulating arbitration in Bosnia and Herzegovina is the Law on Arbitration (Zakon o arbitraži), which was enacted in 2005. This law governs both domestic and international arbitration in the country.
- The Arbitration Law is generally in line with the UNCITRAL Model Law on International Commercial Arbitration, which has been adopted by many countries globally to harmonize the rules for international arbitration.
- The law establishes a clear legal framework for arbitration agreements, the formation of arbitration tribunals, the arbitration procedure, and the enforcement of arbitral awards.
Entity-Level Legislation
- Bosnia and Herzegovina consists of two entities: the Federation of Bosnia and Herzegovina and the Republika Srpska. Both entities have their own legislation on arbitration that is largely harmonized with the state-level law but with some regional variations.
- The Federation of Bosnia and Herzegovina and the Republika Srpska each have their own arbitration rules under their respective civil procedure codes, though the state-level law applies to international arbitration.
Civil Procedure Code of Republika Srpska (2013)
- In the Republika Srpska, the Civil Procedure Code (2013) includes provisions for arbitration, particularly concerning the enforcement of arbitral awards and the arbitration process. It applies to disputes within the entity and has similarities with the state-level Arbitration Law.
The New York Convention (1958)
- Bosnia and Herzegovina is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). This international treaty facilitates the recognition and enforcement of arbitral awards made in other New York Convention member countries.
- As a result, Bosnia and Herzegovina adheres to a system that allows for cross-border arbitration and the enforcement of foreign arbitral awards within its jurisdiction.
2. Key Features of Arbitration in Bosnia and Herzegovina
Arbitration Agreement
- For arbitration to be valid in Bosnia and Herzegovina, the parties must have a clear and written arbitration agreement. The agreement should express the parties’ intent to submit their dispute to arbitration instead of litigation.
- The agreement may be part of a broader contract or a standalone document and should contain key elements such as the arbitration procedure, the seat of arbitration, and the rules that will govern the arbitration process.
Arbitral Tribunal
- In Bosnia and Herzegovina, arbitrators are typically chosen by the parties. If the parties cannot agree on the appointment of an arbitrator, they may request assistance from the courts or an arbitration institution.
- The tribunal may consist of one or more arbitrators (usually three), and arbitrators are required to be impartial and independent. The parties are free to agree on the method for selecting arbitrators, including whether they will use an institutional framework or opt for ad hoc arbitration.
Arbitration Procedure
- The arbitration procedure in Bosnia and Herzegovina is flexible, in line with international practices. While the Arbitration Law provides a framework, parties have the freedom to agree on the rules that will govern the arbitration.
- Commonly chosen rules include UNCITRAL or institutional rules such as those of the International Chamber of Commerce (ICC), LCIA, or Arbitration Institute of the Stockholm Chamber of Commerce (SCC).
- The arbitration procedure must be fair, ensuring that both parties have an equal opportunity to present their case.
Judicial Intervention
- Bosnia and Herzegovina maintains a minimal judicial intervention principle in arbitration. The courts may intervene only in specific circumstances, such as:
- Enforcing or setting aside an arbitral award.
- Assisting in the appointment of arbitrators if the parties cannot agree.
- Enforcing arbitration agreements if one party refuses to arbitrate.
3. Enforcement of Arbitral Awards
Domestic Arbitral Awards
- Domestic arbitral awards are generally enforceable in Bosnia and Herzegovina under the Arbitration Law. The party seeking to enforce an award can approach the court for recognition and enforcement.
- The grounds for refusing enforcement of a domestic arbitral award are limited and typically include situations where the award violates public policy (ordre public) or procedural fairness.
Foreign Arbitral Awards
- Bosnia and Herzegovina, as a signatory to the New York Convention, enforces foreign arbitral awards from other New York Convention member countries. This provides a framework for the recognition and enforcement of international awards.
- However, the enforcement of foreign awards may be refused on certain limited grounds, such as:
- Non-compliance with due process (e.g., one party was not given a fair hearing).
- Conflict with public policy in Bosnia and Herzegovina.
- Non-arbitrability of the subject matter under local laws.
4. Arbitration Institutions in Bosnia and Herzegovina
Sarajevo Arbitration Center (SAC)
- The Sarajevo Arbitration Center (SAC) is the primary arbitration institution in Bosnia and Herzegovina. SAC provides institutional arbitration services for both domestic and international disputes.
- SAC’s rules are modeled after international standards and are based on the UNCITRAL Arbitration Rules. It offers a platform for resolving commercial disputes across a range of sectors.
International Arbitration Institutions
- In addition to the SAC, parties in Bosnia and Herzegovina can choose to use other international arbitration institutions, such as the ICC, LCIA, or SCC. These institutions offer well-established and widely recognized frameworks for international arbitration.
Ad Hoc Arbitration
- Ad hoc arbitration is also possible in Bosnia and Herzegovina. In this case, the parties can agree on the rules and procedures to follow, typically adopting frameworks such as the UNCITRAL Arbitration Rules or other international rules.
5. Challenges and Considerations
Public Policy
- Like many jurisdictions, public policy is an important consideration in Bosnia and Herzegovina. Arbitrators may not issue awards that contradict local public policy, and enforcement of awards may be denied if it is determined that the award violates fundamental principles of the country’s legal system.
Development of Arbitration Culture
- Bosnia and Herzegovina’s arbitration culture is still developing. While arbitration is recognized as an effective form of dispute resolution, the practice is less established than in some other European countries. This may result in a smaller pool of local arbitrators and practitioners.
Language and Jurisdictional Challenges
- As Bosnia and Herzegovina has a diverse legal system, language differences and jurisdictional complexities can arise. It is important to ensure that the language of arbitration and seat of arbitration are clearly agreed upon by the parties in advance to avoid any confusion.
6. Arbitration for International Disputes in Bosnia and Herzegovina
- International Arbitration Venue
- Bosnia and Herzegovina, as part of the Balkans and Southeast Europe, can serve as an important venue for international arbitration, especially for disputes involving regional trade and commerce.
- Cross-Border Arbitration
- Bosnia and Herzegovina’s adherence to the New York Convention and the UNCITRAL Model Law makes it an attractive venue for cross-border arbitration. International commercial disputes involving parties from Europe, Asia, and the Middle East can be resolved efficiently through arbitration in Bosnia and Herzegovina.
Conclusion
Bosnia and Herzegovina has a modern legal framework for arbitration, which is in line with international standards such as the UNCITRAL Model Law. The Arbitration Law (2005) provides a comprehensive framework for domestic and international arbitration, while arbitration institutions like the Sarajevo Arbitration Center (SAC) contribute to the growing arbitration culture in the country. The recognition of foreign arbitral awards is ensured through the New York Convention, making the country an important venue for cross-border arbitration.
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