Journal of alternative dispute resolution in kosovo v2

AMERICAN CHAMBER OF COMMERCE IN KOSOVO

JOURNAL OF ALTERNATIVE DISPUTE RESOLUTION IN KOSOVO

ARBITRATION CENTER

UDC 341.6(05) 347.97/.99(496.51)(05)

Journal of Alternative Dispute Resolution in Kosovo Volume 2

June 2016

Journal of Altrenative Dispute Resolution in Kosovo

EDITORIAL BOARD Robert Muharremi, Ph.D Lecturer at American University in Kosovo Associate with Chartered Institute of Arbitrators in London Arbitrator with the Arbitration Center at American Chamber of Commerce in Kosovo

Kujtesa Nezaj Shehu, LL.M. Patent and Trademark Agent Arbitrator with the Arbitration Center at American Chamber of Commerce in Kosovo

AnjezĂŤGojani, LL.M. Secretary General of the Arbitration Center at American Chamber of Commerce in Kosovo

* With the support of the Mediation and Arbitration Club at the American University in Kosovo

Published by the Arbitration Center at American Chamber of Commerce in Kosovo, 2016

This material may be reproduced or used for non�commercial purposes if the publication is quoted and identified exactly as the source of information. The views expressed in this newsletter do not necessarily reflect the official position of the American Chamber of Commerce in Kosovo.

June 2016

Volume 2

TABLE OF CONTENTS:

FOREWORD ......................................................................................................................................................................... 4 Alternative Dispute Resolution and the “Kanun”(Robert Muharremi & Alketa Buçaj) ....................... 5 Confidentiality in Arbitration: An Essential Changing Attribute? (Fisnik Salihu) ............................... 22 Case Commentary: National Iranian Oil Company v Crescent Petroleum Company International Limited and Crescent Gas Corporation Ltd (Klentiana Mahmutaj) .......................................................... 35 Intellectual Property Cases in Arbitration (Arberesha Zogjani and Florije Manaj Zogaj)............... 43 Recognition and Enforcement of Kosovo made Arbitral Awards in New York Convention countries: A Comparative Study (Anjezë Gojani) ............................................................................................. 68

Journal of Altrenative Dispute Resolution in Kosovo

FOREWORD

The first volume of the Journal of Alternative Dispute Resolution in Kosovo was published in August 2015. Since then, the Arbitration Center of the American Chamber of Commerce is consistently working in improving the format, the structure, and the editorial selection of the manuscripts. Back when the first volume was underway, the Center operated under one main objective: to gather useful information on domestic and international commercial arbitration and to provide the latest developments of the field to the legal community in Kosovo.

The target audience consisted of legal practitioners, academics, and students. With this objective still very much alive, through the second volume, the Center hopes to further build this platform whereby a balance between an academic and practical discussion will be presented.

The Center is focused in developing arbitration in Kosovo and also consistently improving the quality of the services that it provides. In addition, the Arbitration Center believes that the young generation of lawyers will boost this process. Thus, we also wish to dedicate this platform to this audience and contribute towards fostering their development.

The current volume includes a variety of topics, which provide an overview of certain issues within the domestic arbitration state‐of‐affairs, as well as developments in international commercial arbitration. From a practical standpoint, a fraction within the papers published in this volume are comprehensive reads for non‐lawyers too.

The readers will notice that the journal has a Universal Decimal Classification Code, due to the fact that ISBN and ISSN codes are not yet available in the country.

We hope that the work of the authors featured in this volume will be a good addition to your law library and be reminded that the Arbitration Center is accepting papers on a rolling basis.

Anjezë Gojani, Secretary General Arbitration Center American Chamber of Commerce in Kosovo

4

Volume 2

UDC 340.141 (=18)

Alternative Dispute Resolution and the “Kanun”

Robert Muharremi* and Alketa Buҫaj**

Abstract Albanian society has a rich tradition in alternative dispute resolution as reflected in the “Kanun”.

Latest developments in alternative dispute resolution legislation seem to neglect this aspect and do not connect legislation with this rich tradition. The purpose of the paper is to explore the historical, sociological and legal aspects of dispute settlement mechanisms in Albanian tradition. This paper will explore the development of Albanian tradition as manifested in the “Kanun” drawing from insights developed in legal theory and sociological jurisprudence. Dispute settlement mechanisms as developed in pre‐state societies will also be taken into consideration to assess the dispute settlement mechanisms endorsed by the “Kanun”. The paper will then identify and analyze specific dispute settlement procedures and mechanisms and compare them with modern alternative dispute resolution methods.

The paper will explore the approaches that were used to solve disputes, and how those approaches resulted from the Albanian “Kanun”. Considering that historically the “Kanun” has functioned in conjunction with state legal frameworks, its application may supplement state legislation on alternative dispute resolution. The purpose of the paper is also to identify general principles of dispute settlement which could explain the individual rules of the “Kanun” in a more systematic manner. It will further explore how customary dispute settlement mechanisms could be used to improve alternative dispute resolution legislation and practice based on experiences in Albanian society. Although modern day arbitration and mediation is conducted mainly in civil and commercial disputes, for the purpose of this paper several aspects pertaining to criminal disputes within the Kanun are also discussed.

5

Journal of Altrenative Dispute Resolution in Kosovo

I.

Introduction

We are used to the fact that state courts have primacy in matters related to dispute resolution and that they have mandatory jurisdiction to adjudicate such disputes. This is the result of state‐ centric approach to dispute resolution in society. However, the view that state courts have primacy when it comes to dispute resolution does not mean that state courts have a monopoly in this respect. Alternative Dispute Resolution (ADR) is a recognized set of methods and arrangements of dispute resolution outside of state courts and typically includes negotiations, mediation, conciliation, fact‐finding, and arbitration.1 ADR is based on the idea that conflicts are an integral part of human interaction, and human society must therefore learn to manage them and to deal with them in a way that will prevent escalation and destruction, and to come up with innovative and creative ideas to resolve them.2 Dealing with conflicts, or “conflict resolution”, is therefore as old as humanity itself.3 ADR has gained momentum in the last three decades of the twentieth century.4 It started in the United States in the 1970s in response to the need to find more efficient and effective alternatives to court litigation and to integrate ADR into the legal system.5 More recently, ADR, and particularly mediation, has become institutionalized as part of many court systems and the justice system as a whole throughout the world.6 Kosovo has followed this development by adopting a Law on Arbitration and a Law on Mediation. Arbitration is a procedure outside regular courts in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute.7 Mediation is also an out‐of‐court procedure where a third party assists the parties in dispute to reach an amicable settlement. In 2008, it adopted a Law on Arbitration8 which follows largely the UNCITRAL Model Law on International Commercial Arbitration of 19859 and which applies to commercial disputes only.

In the same year, Kosovo adopted a Law on Mediation which was drafted and implemented with * Robert Muharremi, Ph.D, is a lecturer at American University in Kosovo. He is an Associate with the Chartered Institute of Arbitrators in London, and an arbitration with the roster of the Arbitration Center at American Chamber of Commerce in Kosovo. ** Alketa Buçaj, Bachelor of Science in Applied Arts and Sciences at American University in Kosovo.

1 Shamir, Yona. (2003). “Alternative Dispute Resolution Approaches and their Application”, UNESCO. Page 2.

2 Ibid. Page 2.

3 Ibid. Page 2.

4 Ibid. Page 2.

5 Ibid. Page 2.

6 Ibid. Page 9.

7 World Intellectual Property Organization, “What is Arbitration?”, available at: http://www.wipo.int/amc/en/arbitration/what-is-arb.html.

8 Law No. 02/L-75 on Arbitration, Official Gazette of the Republic of Kosovo No 37, 2008.

9 United Nations, “UNCITRAL Model Law on International Commercial Arbitration”, (1994). The amendments to the UNCITRAL Model Law on International Commercial Arbitration of 2006 have not been incorporated into the law.

6

Volume 2

the assistance of various international donor organizations. Mediation procedure is also included in the Code on Criminal Procedure for criminal matters.

The possible role and influence of the Kanun is less visible and relevant in arbitration than it is perhaps in regards to mediation. Arbitration is strongly influenced by positive law, most notably commercial and private law. However, even within the framework of positive law, custom may play a role. There are multiple provisions in the Law on Obligations which refer to custom and customary practices which may be entry points for Albanian custom. Due to the limited relevance of the Kanun for arbitration, the paper will primarily focus on traditional mediation.

While Kosovo strives to adopt legislation in accordance with international standards, it must not be neglected that dispute resolution is based on norms set by society and as such is determined by a society’s culture. In order to have a clear understanding of the relationship between culture and dispute resolution, a few sociological concepts need clarification. Culture may be defined as the beliefs and practices which a society shares.10 Culture is a function of society, which may be defined as a group of people who share a community and culture.11 Community is related to the territory inhabited by a group of people who share a common culture and may include any form of definable territory, ranging from urban neighborhoods to states.12 Thus, a common territory and a common culture turns a group of people into a society.

Culture itself is composed of material culture and non‐material culture.13 Material culture refers to the objects and artefacts of a society.14 Non‐material culture includes the ideas, values and beliefs of a society.15 Material and non‐material culture are usually interrelated since a society’s material culture represents a society’s ideas, values, beliefs and norms. The key elements of culture derive from a society’s non‐material culture and are a society’s values and beliefs.

Values are a society’s standards about what is good and bad, what is important and what is less important, while beliefs reflect a society’s ideas about what is true and how the world works.16 A society materializes its values and beliefs through norms. Norms prescribe and guide behavior which is in line with society’s values and beliefs, and set sanctions through which they reward or punish members of society for their behavior.17 There is a difference between formal and informal norms. Formal norms are defined as written rules, and include laws and other

10

Little,William. (2013). “Introduction to Sociology”. 1st Canadian Edition. Rice University. Page, 80.

Ibid. Page, 79.

12 Ibid. Page, 115.

13 Ibid. Page,81.

14 Ibid. Page,81.

15 Ibid. Page,81.

16 Ibid. Page, 87.

17 Ibid. Page,87.

11

7

Journal of Altrenative Dispute Resolution in Kosovo

formal regulations.18 Informal norms are standards and expectations of behavior which are not formalized and which are learned through socialization or observation.19 A further distinction is made between mores and folkways. While mores reflect the moral views of a society and may also be enforced by formal norms, such as laws, folkways prescribe standards of behavior without a moral content.20 Since dispute resolution in society is based on norms, it is not only these norms but also the dispute resolution mechanisms and processes which reflect a society’s culture, i.e. its values and beliefs.

However, there may sometimes be a difference between the ideal culture and the real culture in a given society. The ideal culture includes aspired values of a society, whereas the real culture reflects the actual values of a society according to which the society really lives up to.21 The values expressed in the Constitution of Kosovo, i.e. the principles of freedom, peace, democracy, equality, respect for human rights and freedoms and the rule of law, non‐discrimination, the right to property, the protection of environment, social justice, pluralism, separation of state powers, and a market economy may be considered ideal values which the Kosovar society aspires to.22 The real culture may be different. In Albanian culture, honor is the principal value which prevails over life and liberty.23 Honor is the basis for besa (word of honor) and mikepritja (hospitality), which together form the traditional worldview of Albanians.24 As Tarifa states, honor represented the supreme moral value, besa was their true religion, and hospitality their most sublime virtue.25 The cultural aspects are especially important when it comes to alternative dispute resolution, and in particular when it comes to mediation. Mediation is a process whereby a third party assists two or more parties, with their consent, to prevent, manage or resolve a conflict by helping them to develop mutually acceptable agreements.26 The premise of mediation is that in the right environment, conflict parties can improve their relationships and move towards cooperation.27 Mediation differs from society to society. As stated by Celik and Shkreli, every social system, whether a society or an organization has a culture with rules about how conflicts should be managed.28 The mediation process in large and bureaucratized societies is different 18

Ibid. Page, 62.

Ibid. Page,88.

20 Ibid. Page, 200.

21 Ibid. Page, 86.

22 Constitution of the Republic of Kosovo, Article 7.1.

23 Tarifa, Fatos (2008). “Of Time, Honor, and Memory: Oral Law in Albania”. Volume 23. Page, 8.

24 Ibid. Page, 8.

25 Ibid. Page, 8.

26 United Nations. (2012). “Guidance for Effective Mediation.” Page, 4.

27 Ibid. Page, 4.

28 Celik, Ayse Betul and Shkreli,Alma. (2010). “An analysis of Reconciliatory Mediation in Northern Albania: the Role of Customary Mediators”. Europe-Asia Studies. Volume 62, Issue 6. Page, 888.

19

8

Volume 2

from that in small and traditional societies.29 Mediation in bureaucratized societies is conducted by impartial and trained professionals who assist in communication and facilitate the construction of agreeable solutions for the parties.30 In traditional societies, mediation is conducted by individuals who are not necessarily professionals but who are accepted by the parties due to their social status and reputation.31 The purpose of the mediation is not only to settle the dispute between the parties but also to ensure that cooperative relations within the community are sustained and that there is reconciliation not only between the parties directly involved but also between the communities to which the parties belong.32 The laws adopted by Kosovo certainly reflect international standards, i.e. the ideal culture that Kosovo aspires to have. But do they also reflect the real culture of the people, the real values, beliefs and norms which guide Kosovo society in the way how disputes are settled?

II.

Traditional Dispute Resolution and the Kanun

The Kanun of Leke Dukagjini, often also called “Kanuni i Malesise” (Code of the Highlands) or “Kanuni i Maleve” (Code of the Mountains)33 is a collection of orally transmitted principles, norms and rules which have governed the life of Albanians for centuries. The word “Kanun” originates from Greek and means “statute” or “law”.34 It is attributed to Leke Dukagjini, an Albanian medieval ruler in Northern Albania, though it is doubtful if this historic person has indeed any direct connection with the Kanun.35 In addition to the Kanun of Leke Dukagjini, there are other similar collections of customary law, such as the Kanun of Skenderbeg and the Kanun of Laberi in Southern Albania.36 The Kanun was put in writing for the first time between 1897 and 1899 and a final edition of the whole Kanun was published only in 1933.37 The Kanun is divided into 1263 paragraphs and twelve books. It is astonishing in its attention to detail; it encompasses all facets of life including the church, honor, marriage, pledge, loans etc. Edith Durham while studying the Kanun stated that “Whenever in the mountains [of Albania] I asked why anything was done…I was told, ‘Because Leke said so.”38 Throughout Ottoman rule in Albania, the Kanun was the law of the Albanian highlanders stretching from Northern Albania into Montenegro and Kosovo, who were organized under the 29

Ibid. Page, 889.

Ibid. Page, 889.

31 Ibid. Page, 889.

32 Ibid. Page, 889.

33 Tarifa, Fatos (2008). “Of Time, Honor, and Memory: Oral Law in Albania”. Volume 23. Page, 3.

34 Elsie, Robert. (2012). “Northern Albanian Culture and the Kanun.” University of Leiden. Page, 1.

35 Ibid. Page, 1.

36 Tarifa, Fatos (2008). “Of Time, Honor, and Memory: Oral Law in Albania”. Volume 23. Page, 3.

37 Elsie, Robert. (2012). “Northern Albanian Culture and the Kanun.” University of Leiden. Page, 2.

38 Malcolm, Noel. (1999). “Kosovo: A Short History”. Page, 17-18.

30

9

Journal of Altrenative Dispute Resolution in Kosovo

rule of local lords (bajraktare). This regime continued even after the formation of the Albanian state in 1912, although King Zog of Albania managed to reduce the power and influence of the local lords.39 It was only in the 1960s, under communism, that the government managed to suppress the Kanun and its influence on the population.40 With the fall of communism in Albania in 1992, and in view of the ensuing collapse of the state, the Kanun resurrected and regained influence as a set of principles and rules that governs the lives of Albanians.41 In Kosovo, the Kanun maintained its influence, though in diminished form, even during communism.

The Kanun can be well‐defined as a set of customs and rules deriving from sacred Albanian notions such as honor, faithfulness, “besa”, respect, hospitability.42 The Albanian culture has historically put emphasis on “honor” as one of the most significant symbols that one has to protect. The Kanun carefully explain what honor is, what actions result into dishonor, and what one has to do when he is dishonored.43 Paragraph 597 of the Kanun states that honor has no price and if one is dishonored, one shall never forgive that act. The Kanun, which has governed all aspects of life in Albanian populated areas for centuries, is still present in some parts of Albania and Kosovo. The more you move towards the northern part of the country, the more you move into the realm of the Kanun.

The Kanun is very often associated with blood feud, i.e. gjakmarrja, which is permitted self‐ justice by killing a person in order to avenge a crime or violation of one’s honor and that of the family.44 Although the Kanun contains relatively detailed rules on how gjakmarrja should be practiced, its social and economic implications for Albanian society are devastating as they result in cycles of violence, as well as emigration and isolation of individuals and entire families.

According to a Human Development Report published in 1998, around 73% of all murders in Albania during 1997 resulted from blood vengeance.45 However, gjakmarrja is not the only form of dispute resolution according to the Kanun. The Kanun also recognizes dispute resolution mechanisms which resemble those of mediation and adjudication in modern dispute resolution systems.

39

Celik, Ayse Betul and Shkreli,Alma. (2010). “An analysis of Reconciliatory Mediation in Northern Albania: the Role of Customary Mediators”. Europe-Asia Studies. Volume 62, Issue 6. Page, 892.

40 Ibid. Page,, 893.

41 Ibid. Page, 893.

42 Mile, Klementin. (2007). “Blood Feud: between Kanun and State.” Instituti Shqiptar i Studimeve Ndërkombëtare.

43 Kanun of Leke Dukagjini, Paragraph 691.

44 Mustafa, Mentor and Young, Antonia. (2008). “Feud narratives: contemporary deployments of kanun in Shala Valley, northern Albania.” Slovene Anthropological Society. Page, 95; Celik, Ayse Betul and Shkreli, Alma.

(2010). “An analysis of Reconciliatory Mediation in Northern Albania: the Role of Customary Mediators”.

Europe-Asia Studies. Volume 62, Issue 6. Page, 885.

45 Human development report. (1998). Tirana: United Nations Development Programme.

10

Volume 2

Mediation as a method of settling blood feuds, which in today’s modern society is penalized under the Criminal Code, is a long established practice in the Albanian society and is an important part of Kanun. The Kanun explicitly states that the only way to gain the lost honor is through blood vengeance or dispute settlement through mediation.46 Thus, Kanun provided the structure through which disputes could be regulated; mainly through the council of the elders, but also through independent mediators and other alternate means. A specific section in the Kanun is dedicated to mediation and dispute resolution.

The Kanun states that a mediator “may be a man or a woman, a boy or a girl, or even a priest,”47 however this role has principally been taken by respected male elders through the Council of Elders. After both parties have carefully chosen an equal number of elders, the feud is then discussed in the Council of Elders, with the intent of resolving the dispute. Mediation through the Council of Elders is a more formal form of mediation consisting of experienced mediators.

This form of mediation was usually paid, and thus it incentivized elders to suggest families in dispute to resolve their issue through their assistance.48 In the deep mountainous areas and rural areas, dispute resolution usually happened through the mediation of family friends or religious leaders. Other times, instruments for reaching a settlement consisted of paying “blood money”, exchanging food valuable tools, clothes, or women. In the Kanun it is stated that one can resolve issues through mediation but also through “blood money”, this amount of money is usually paid to the family that has suffered most loss; however this way of settling disputes is not seen as a noble way of settlement.

Mediation practices are not only used in blood feud conflict reconciliation, they are also used to resolve other disputes such as property issues, family issues, marriage issues, etc. These issues spread more in post‐communist times, as a result of property redistribution and population movement.49 The government and the legal system at the time were weak and it took years for land ownership certificates to be distributed. In the interim, people started regulating these issues themselves which, in accordance with the Kanun.

A prominent example is the application of the Kanun to property rights disputes and land reform following the end of communism in Albania. The rules of the Kanun were used to

46

Kanun of Leke Dukagjini, Paragraph 597. "Ndera e mârrun giobë nuk kà". -Ndera e mârrun s'falet kurr.

Paragraph 598. "Ndera e mârrun nuk shperblehet me gjâ, por a me të derdhun të gjakut, a me të falun fisnikisht (permbas ndermjetsis së dashamirve të mirë).

47 Kanun of Leke Dukagjini, Paragraph, 669.

48 Ulqini, Kahreman. (1991). Bajraku në organizimin e vjetër shoqëror. Tiranë: Akademia e Shkencave. Page, 128.

49 Standish, Alex. 20 November (2007); University College London (UCL). (2004). "Blood Feuds."

11

Journal of Altrenative Dispute Resolution in Kosovo

decollectivize property and to distribute land to the hereditary owners.50 As De Waal explains, as long as the state law lacked force and failed to cover all the legal post‐cooperative contingencies, the Kanun provided a workable, indeed indispensable, framework for village authority, filling a dangerous vacuum.51 The implementation of those parts of the Kanun that dealt with dispute settlement, property division and rights of way was an important practical means of dealing with the existing legal hiatus.52 Disputes arising from law or formal law stood a chance of being resolved in a face‐to‐face context by applying the Kanun to current situations.53 According to De Waal, thanks to the Kanun’s exhaustive guidelines on boundary recognition and marking, all the cooperative farm land in Mirdita (Albania) had been restored to the hereditary owners by 1992.54 Celik and Shkreli describe the mediation practice according to the Kanun as follows. One of the parties, usually the perpetrator or his family, requests the mediators to intervene in order to avoid further violence.55 The purpose of the intervention by the mediators is to achieve forgiveness, reconciliation between the families and to stop the continuation of violence.56 Mediators, who are required to be impartial, are selected based on their social prestige, background, family origin, experience and reputation in the community.57 A key feature of Albanian traditional mediation is that it is group mediation.58 More mediators with high reputation are a social incentive for the groups involved to accept a mediated solution, as the family feels more respected and honoured when many important people come and ask them to forgive an offence.59 A group of mediators is also an insurance against cheating and reneging on commitments by the parties, to which an individual mediator may have a higher risk of exposure.60 As an exception, individual mediators are the rule when private, sensitive issues are involved, such as the honour of a woman.61 Forgiveness is only a partial result of traditional mediation, as the ultimate goal is to reconcile the parties and their families in order to restore the social relationship and establish peace.62 In order to achieve this, mediators usually shy away from making a proper inquiry into the facts 50

De Waal, Clarissa. (2004). “Post-Socialist Property Rights and Wrongs in Albania: An Ethnography of Agrarian Change”. Conservation & Society 2. Page 24.

51 Ibid. Page 27.

52 Ibid. Page 27.

53 Ibid. Page 27.

54 Ibid. Page 27.

55 Celik, Ayse Betul and Shkreli,Alma. (2010). “An analysis of Reconciliatory Mediation in Northern Albania: the Role of Customary Mediators”. Europe-Asia Studies. Volume 62, Issue 6. Page, 896.

56 Ibid. Page, 896.

57 Ibid. Page, 897.

58 Ibid. Page, 897.

59 Ibid. Page, 897.

60 Ibid. Page, 897.

61 Ibid. Page, 898.

62 Ibid. Page, 905.

12

Volume 2

and to determine who is guilty and who not, which are considered to be counterproductive for restoring social relationships.63 Modern mediation practices in Albania still follow these rules. Blood feud reconciliation is done through neutral intermediaries. When intermediaries conclude their conciliation, they usually do so by agreeing with the offending party to pay “blood money”, i.e. an amount of money in consideration for forgiveness paid to the family which is the victim. This payment, which is regulated in the Kanun, includes livestock or money. Reconciliation may also be successfully concluded by arranging for marriage between the two parties. A successful mediation is still celebrated with a traditional ritual stated in the Kanun, named “buka e pajtimit” (meal of peace), which is served by the offending family and includes the perpetrator’s family and the mediators.64 Only after all these rituals and payments are made, the cross sign, as required by the Kanun, is put on the door as a sign of a successful reconciliation.65 The Kanun also recognizes authoritative dispute resolution in the form of adjudication. Dispute settlement through the issuance of a binding decision is conducted by a tribunal consisting of elders. 66 The elders are typically the leaders of brotherhoods or tribes, which were organizational units of the Albanian society, but also men who had a good reputation and experience with dispute resolution practices.67 The elders do not only adjudicate disputes, they also have the authority to make new laws, and thus they combine legislative and judicial functions.

A case may be brought before the elders provided that the parties submit to the elders a pledge, which may traditionally include a weapon, a bullet, a watch or a tobacco box.68 Leaving these items as a pledge indicates that the parties accept the jurisdiction of the elders and that they accept their decision as binding.69 A decision issued by elders without such a pledge is not binding on the community and under the Kanun.70 When the dispute involves people from different villages or communities, the tribunal of the elders must include elders from both communities.71 As the Kanun requires elders to be impartial72 they are subject to an oath promising that they will adjudicate impartially and 63

Ibid. Page, 905.

Gjeçov, Shtjefën and Fox, Leonard. (1989). Kanuni i Lekë Dukagjinit / The code of Lekë Dukagjini. New York. Gjonlekaj Publishing Company; Kanun of Leke Dukagjini, paragraph 982) 65 Kanun of Leke Dukagjini, paragraph, 983.

66 Ibid, paragraph ,993.

67 Ibid, paragraphs: 992 and 994.

68 Ibid, paragraph, 1022.

69 Ibid, paragraph, 1019.

70 Ibid, paragraph, 1020.

71 Ibid, paragraph, 1004.

72 Ibid, paragraph, 1015.

64

13

Journal of Altrenative Dispute Resolution in Kosovo

strictly in accordance with the rules of the Kanun.73 The sanction for a breach of impartiality is loss of reputation and refusal to include this person in the group of elders. In a society where honour is the highest value, this sanction can be very harsh.

Decisions of elders are usually not subject to appeal.74 It is only if the parties consider that the elders were not impartial that they may request the replacement of the elders.75 Such replacement of elders may occur three times.76 If the parties are still dissatisfied, then their last resort is the House of Gjonmarkaj77, which due to its traditional authority and power in Northern Albania was considered to be the guarantor of the Kanun. Once a decision is made by the elders, all tribal and family leaders are required to respect the decision and assist in its enforcement when so requested by the elders.78 After the Elders come to a decision they leave it up to the local lords (bajraktars) to enforce their decision. If the decision of the Elders is not accepted by the parties, then the lords are responsible to make sure that the decision is enforced, which may include punitive measures, such as destroying the offender’s property, or excluding the offender and his family from the community.

Although the Kanun is available in a published version, many of its rules are outdated and not directly applicable to present realities, such as the role of the House of Gjonmarkaj which today is in fact minimal. The rules of the Kanun are also difficult to understand and therefore open to interpretation. As Celik and Shkreli observe, different interpretations of the Kanun abound for several reasons.79 Despite the fact that the Kanun is valued highly, detailed knowledge of the rules of the Kanun is rare, even among those who apply it as mediators or arbitrators.80 As its rules need to be adapted to new developments and circumstances, and there is no centralized authority to provide guidance, those who apply the Kanun have extensive discretion in how they do this. Interpretation may also be influenced by group interests, which may result in different interpretations depending on the interests involved.81 So despite the existence of a published version, the actual rules of the Kanun may differ not only in time but also from place to place. This makes the knowledge of local interpretations of the Kanun important and it is therefore difficult to speak of only one “Kanun”. After the fall of communism, many Albanians living under the Kanun moved southwards and brought with them their interpretation of the Kanun which they passed on to the new local communities. However, these communities 73

Ibid, paragraph, 1031.

Ibid, paragraphs: 1001, 1002, 1034, 1036.

75 Ibid, paragraph, 1038, 1039.

76 Ibid, paragraph, 1041.

77 Ibid, paragraph, 1041.

78 Ibid, paragraph, 996.

79 Celik, Ayse Betul and Shkreli,Alma. (2010). “An analysis of Reconciliatory Mediation in Northern Albania: the Role of Customary Mediators”. Europe-Asia Studies. Volume 62, Issue 6. Page, 894.

80 Ibid. Page, 895.

81 Ibid. Page, 895.

74

14

Volume 2

interpreted the norms of the Kanun in their own way which resulted in different practices and interpretations of the Kanun. For example, the traditional rule states that vengeance is not permitted against people younger than the age of 16 years old and females, is no longer respected.82 Fischer has also noted that the Kanun is being misinterpreted and in some cases more than one live is taken for revenge.83

III.

Kanun: Law or Custom?

In literature the Kanun is frequently referred to as customary law without making a proper distinction between law and custom.84 Even courts and international organizations refer to the Kanun as a collection of Albanian customary law.85 Celik and Shkreli observed that although there is a Mediation Law in Albania, mediators have engaged in conflicts between families on the basis of customary law, i.e. the Kanun.86 This implies that the principles and rules collected in the Kanun have the force of law and are applied in parallel to formal law enacted by state authorities. The question to be answered is if the principles and rules codified in the Kanun constitute legally binding customary law or if they merely reflect social custom which is subject to social enforcement but not necessarily enforcement by state agencies.

While both law and custom are part of a society’s norms, legal formalism suggests that it is only formal laws which are enforceable by state courts and other institutions. Formal laws are those legal acts which are passed by the constitutionally determined legislator in accordance with the constitutionally prescribed procedure. In addition to formal laws, legal theory also recognizes customary law, which has under certain conditions the force of formal law. However, there is a difference between customary law and custom, as the latter is a social norm which may be enforced by social sanctions but without possibility for recourse to state enforced sanctions.

Customary law is usually defined as practice accompanied by opinion juris, i.e. the belief that the practice is legally obligatory.87 Its relevance is more important in international law than in

82

“Albania: Blood Feuds”. (2008).Research Directorate: Immigration and Refugee Board of Canada.Ottawa.

Ibid.

84 Elsie, Robert. (2012). “Northern Albanian Culture and the Kanun.” University of Leiden. Page, 1; Tarifa, Fatos (2008). “Of Time, Honor, and Memory: Oral Law in Albania”. Volume 23. Page,3; Mustafa, Mentor and Young, Antonia. (2008). “Feud narratives: contemporary deployments of kanun in Shala Valley, northern Albania.” Slovene Anthropological Society. Page, 96 85 District Court in Mitrovica, Decision No. Pnr. 43/2010 of 25 May 2012, at 10; OSCE, Manual per Punonjesin e Sherbimit te proves, 2009. Page, 11.

86 Celik, Ayse Betul and Shkreli, Alma. (2010). “An analysis of Reconciliatory Mediation in Northern Albania: the Role of Customary Mediators”. Europe-Asia Studies. Volume 62, Issue 6. Page, 886.

87 Ruthers, Bernd/ Fischer, Christian/ Birk, Axel (2016). “Rechtstheorie”. Page 158.

83

15

Journal of Altrenative Dispute Resolution in Kosovo

national legal systems, since in national legal systems customary law acquires for the force of formal law only when accepted and applied by the courts.88 While it may sound common sense to recognize law only as formal law in the sense described above, jurisprudence theories differ substantially as to what counts as law, and legal formalism is only one of the many approaches to understanding what the law is in society. Legal formalism is part of a major school of thought in jurisprudence, i.e. legal positivism, which provides that law is a ‘social fact’, which may be found in the actual practices or the institutions of society.89 Legal positivists distinguish law ‘in the legal sense’ from law in the non‐legal sense, such as custom, etiquette, and moral norm.90 They treat as law only those norms which derive from a law making authority that exists as a political or social fact.91 The most important advocate of legal positivism is John Austin who purports that law is the command of a political sovereign.92 Custom would thus become law only when so commanded by the political sovereign.

Part of legal positivism, though with a different approach and understanding of law, is H.L.A. Hart’s analytical jurisprudence, which Hart himself called soft positivism.93 Hart considers the customary rules which are observed by primitive societies that have no legislatures or courts or other authority as laws.94 Hart’s point of departure is the idea that norms create obligations.95 These obligations are enforced by society and members of society have a sense of obligation to respect the norms.96 A modern legal system emerges when a society displays primary and secondary rules of obligation. Primary rules of obligation are commonly accepted norms of conduct which are considered by members of society to be binding and which are enforced by social sanctions. For Hart, these primary rules of obligation are law. However, in a modern legal system secondary rules of obligation complement primary rules of obligation. Secondary rules of obligation provide rules on (i) recognizing which laws are valid (rule of recognition), (ii) rules how norms should be changes (rule of change), and (iii) rules on adjudication based on primary rules of obligation (rule of adjudication). It is only the union of primary and secondary rules of obligation which create a legal system. As Hart pointed out, primitive societies have a set of laws (only primary rules of obligation), while modern societies have a system of laws (union of primary and secondary rules of obligation).

88

Ibid. Page, 159.

Ratnapala, Suri. (2009). “Jurisprudence.” Cambridge University Press. Page, 21.

90 Ibid. Page, 25.

91 Ibid. Page, 25 92 Ibid. Page, 46.

93 Ibid. Page, 48.

94 Ibid. Page, 69.

95 Ibid. Page, 49.

96 Ibid. Page, 50.

89

16

Volume 2

For Hans Kelsen, another representative of legal positivism, law is a coercive order which attempts to bring about a certain behaviour by attaching to the opposite behaviour socially organized coercive act. Laws derive their validity from a basic norm, which in effect refers to the constitution of a country. For Kelsen, law can also consist of custom and does not necessarily require formal laws passed by legislators or other state authorities. Even the basic norm, from which all other laws derive their validity, may be custom, provided that the basic norm is effective. A basic norm is effective when the norms created in conformity with it are by and large applied and obeyed.

Another jurisprudential school is legal realism. Like legal positivists, legal realists try to explain law as it is, and not how it should be. The difference between the two is that legal realists look at the law as it really is, and they come to the conclusion that the law in real life is different from the law as it is written in law books. Law is not what the lawmakers determine to be law; law is what the judges interpret in practice to be the law. For legal realists, best represented by Oliver Wendell Holmes Jr., law embodies the story of a nation’s development and is therefore the result of an evolutionary process. Law emerges as the result of human actions even without the direction of formal lawmakers. Law may therefore exist independent of and even in opposition to the will of the political sovereign. From this perspective, according to Holmes, custom may have the power of law even if statutory law provides the contrary. While law is grounded in the social development of a society, it is the courts which determine what the law actually is. For Holmes, law consists only in the predictions of what the courts will do in particular cases. Karl Llewellyn developed this idea further by suggesting that a lawyer who wants to find out what the courts actually do must engage in the systematic study of judgments of courts. It would not be enough to look only at the law as it is written in a statute; the interpretation of the law and its application in practice by the courts would be more important, as this would truly discover what the law actually is.

A fundamentally different approach is taken by the natural law jurisprudence. According to this school, natural law is a higher form of law which is independent of human will, it is universal and timeless and it is based on reason and morality. Laws made by political sovereigns have to be measured against such natural law. Law that is not in accordance with natural law would be unjust law and would therefore not be law. The concept of natural law thus refers to rules and principles deducible from nature, reason, or the idea of justice.97 Among the Roman jurists, natural law was viewed as the law derived from the nature of human beings, and as law

97

Orakhelashvili, Alexander. (2008) “The Interpretation of Acts and Rules in Public International Law.� The Oxford University Press. Page, 61.

17

Journal of Altrenative Dispute Resolution in Kosovo

expressive of the basic ideas of justice.98 In the middle ages, the divine concept of God‐given natural law acquired increasing relevance.99 Sociological jurisprudence has a different approach to understanding the idea of law.

Sociological jurisprudence is a method of studying law that combines the lawyer’s view of the law, technical knowledge of the law, and insights produced by the sociology of law.100 Lawyers limit the term ‘law’ to the formal law of the state, comprising statutes, official commands, judicial precedents, and such like. Sociologists have a much broader view of the law. Law in this wider sense encompasses all forms of social controls, including customs, moral codes and internal rules of groups and associations such as tribes, clubs, churches and corporations.101 Formal law is only a highly specialized form of social control involving specialized agencies like legislatures and courts but social order is maintained not only by the formal law, but also by many social rules, standards and practices not found in law books and statutes.102 The laws of an association, according to lawyers, exist because of the validity that state law confers upon them.103 Customary laws are law because a state organ such as a court or parliament has recognized them as law.104 Moral rules and rules of social etiquette are not laws in the lawyer’s sense.105 The sociologist of law, in contrast, treats all these rules as part of the ‘social reality’ that is law.106 Emile Durkheim, an early proponent of sociological jurisprudence, explained that a society exists because of interdependence and bonding among a group of individuals, which he called social solidarity.107 Law would be the visible evidence of social solidarity which is found in the society.108 He acknowledged that the law will not provide full evidence of social solidarity.

There are customs that people observe but which are not recognized by authorities as law, or in fact are contrary to law. Normally, custom is not the opposite of law but is the basis of law. A custom arises in opposition to law only in exceptional circumstances. This is when the law no longer corresponds to the state of the existing society.109 These various views on what is law provide different answers to the question if the Kanun is law or just social custom. Following Hart’s analytical jurisprudence, the Kanun would reflect primary rules of obligations and thus qualify as law. The same conclusion would follow from 98

Ibid. Page, 61.

Ibid. Page, 61.

100 Ratnapala, Suri. (2009). “Jurisprudence.” Cambridge University Press. Page, 188 101 Ibid. Page, 188 102 Ibid. Page, 188.

103 Ibid. Page, 188.

104 Ibid. Page, 188.

105 Ibid. Page, 188.

106 Ibid. Page, 188.

107 Ibid. Page, 198.

108 Ibid. Page, 199.

109 Ibid. Page, 199.

99

18

Volume 2

Kelsen’s understanding of law, provided that Kanun as custom is largely applied and obeyed.

From a natural law perspective, it could be argued that the Kanun is law as it reflects the society’s views of morality and justice. Sociological jurisprudence would also view the Kanun as a social reality and a form of social control which has therefore the quality of law.

From the perspective of legal formalism and legal realism, the Kanun would only be considered law if so determined by the state legislature or by state courts. In this respect, different parts of the Kanun may receive different legal treatment. On the one hand, it is evident that gjakmarrja (vendetta) is not accepted by formal law which actually prescribes more severe sanctions for murder committed for the purpose of revenge.110 On the other hand, as Mustafa and Young observe, the rules of the Kanun on mediation and reconciliation are compatible with state law111 and there is evidence that court practice takes them into consideration and refers to them.112

IV.

Kanun in Kosovo’s ADR Practice

As already stated, Kosovo adopted a Law on Mediation in 2008 which was drafted with assistance from international donor organizations. While there is no doubt that compliance with modern mediation practices is important, this does not prevent the inclusion of traditional aspects in order to make mediation more effective and acceptable in practice. Four issues may be highlighted in this regard which could serve as a starting point for further discussion.

First of all, traditional mediation continues to be practiced in parallel to law‐mandated mediation but there is little to no connection between the two forms of mediation. While law‐ mandated mediation is more or less strictly regulated, traditional regulation is left outside.

However, both forms of mediation have the same social function, i.e. to settle disputes out of courts through reconciliation. The question therefore is why there is no comprehensive and integrated legal framework covering both types of mediation.

The second issue relates to the type of mediation regulated by law. The typical situation regulated in the Law on Mediation is mediation by one mediator. While the law allows for more than one mediator when the parties so agree, the rules are designed to suit one‐mediator processes. Given that mediation is traditionally conducted in groups of mediators with varying degrees of participation, it may be worth considering including rules on group mediation.

The third issue deals with the qualifications needed to become a mediator. Mediation in accordance with codified rules is typical for large and bureaucratic societies and does not really 110

Criminal Code of the Republic of Kosovo, Article 179, paragraph 1.8.

Mustafa, Mentor and Young, Antonia. (2008). “Feud narratives: contemporary deployments of kanun in Shala Valley, northern Albania.” Slovene Anthropological Society. Page, 102.

112 Judgment of the Supreme Court Kosovo, Pml. Nr. 220/2014 dated 19 November 2014.

111

19

Journal of Altrenative Dispute Resolution in Kosovo

suit traditional societies. While professionalism is a key feature of mediation in bureaucratic societies, personal reputation and credibility are more important in traditional societies. Kosovo Law on Mediation requires a mediator to (a) have a university diploma, b) to have successfully passed the training course for mediation, c) to have mediated under supervision of a mediator at least in six (6) sessions, d) to not have been convicted for a knowingly criminal act which is punishable with over six (6) months imprisonment, and e) to possess high moral qualities.113 A person who fulfills these criteria will be certified by the Mediation Committee and then the Ministry of Justice issues a license to such person in order to practice as a mediator. These criteria and this process eliminate all those people who have good reputation and credibility in their community, and who are trusted, as these people do not necessarily have a university degree or they are not necessarily willing to undergo the licensing process. However, the above appears to be a necessity for “institutionalized� mediation, which also includes disputes that require a certain academic and professional background to solve complex civil or commercial disputes. But will the law really prevent them from engaging in traditional mediation? Certainly not, but it will direct them into mediation that is socially desired and accepted but which is legally in a grey area.

The fourth issue is related to the mediator licensing process. The licensing process might be a problem because those who are licensed may not necessarily enjoy the trust of the parties. Since trust in the mediators is essential for successful mediation, a license alone without the necessary trust is useless. The perverse consequence may be that parties who would otherwise be willing to engage in mediation will refuse to do so because they have no recourse to a mediator they trust. The unintended consequence could be that disputes which could be resolved by mediation would either not be resolved with a fair chance of escalation or they would end in litigation and further burden the already overloaded judiciary. Commercial disputes are especially sensitive to trust in mediators given that confidential business information and relations will be at stake. It is unlikely that businesses would open up to mediators who they do not trust even if such mediator is professionally qualified and licensed.

The law should therefore allow for the possibility to permit a person to be a mediator if the parties to the dispute agree to select such a person as their mediator, even if that person is not licensed. In the end, the result of mediation is that the parties agree to an amicable settlement of their dispute which reflects the principle of party autonomy. So why should this principle not also apply to the selection of the mediator if both parties have trust in such person.

113

Law 03/L-057 on Mediation, Article 22.

20

Volume 2

V.

Conclusion

The traditional Albanian rules and dispute resolution mechanisms codified in the Kanun provide a rich source or normative material which, if applied wisely, could complement modern alternative dispute resolution methods and make them more effective and socially acceptable. It is a matter�of�fact that daily life in Albania and Kosovo is still influenced by the rules of the Kanun, which may, depending on the different jurisprudential lenses, even amount to customary law and not only social custom. The Kanun is a social reality whether one likes it or not. It is therefore not useful to demonize it as archaic. It should rather be used constructively to design and implement alternative dispute settlement policies which are socially acceptable and in line with tradition and custom. Trying to avoid the Kanun by ignoring, or even demonizing it, will just achieve what past regimes have achieved, namely that it will continue its social life in parallel to the formal legal system and that it will resurrect with full force when the formal legal system shows signs of weaknesses. However, complementing the formal legal system with traditional peaceful dispute resolution methods may not only achieve better social acceptance of the formal dispute settlement mechanisms. It may also have a civilizing effect on the Kanun itself as its interpretation and application would be better controlled and ensured that it is in line with the modern values that Kosovo aspires to.

21

Journal of Altrenative Dispute Resolution in Kosovo

UDC 34 (084.47)

Confidentiality in Arbitration: An Essential Changing Attribute?

Fisnik Salihu*

Abstract

This paper will discuss the issue of confidentiality in arbitration, and current trends that were influenced by latest developments in the field. This topic has been a heated debate for many years. Considered as a self�evident or an implied term in arbitration, the latest development in arbitration has contributed to a more relative view on this principle. Namely, the decision of the High Court of Australia in Esso v. Plowman case is considered to be of great influence in the forthcoming developments.

The confidentiality principle has been regarded differently depending on the jurisdiction and the institutional arbitration rules of that particular jurisdiction. Some jurisdictions and institutional rules recognize confidentiality in arbitration. On the other hand, some other jurisdictions are reluctant and, therefore, have imposed exceptions to the application of this principle.

In this paper, I will refer to and discuss a number of cases, applying the comparative method.

The paper will first give a general overview and a definition of the principle of confidentiality. I will specifically discuss the main Institutional Arbitration Rules endorsing the duty of confidentiality to arbitral institutions. I will then focus on some national laws aligned with the most important court decisions on the issue of confidentiality.

22

Volume 2

I.

Introduction

Arbitration is an important technique used nowadays by parties to resolve their disputes. As an alternative dispute resolution mechanism, arbitration is one of the most common method used worldwide not only by commercial partners but also by states. Compared to court litigation, arbitration is considered to have several advantages. The main advantages of arbitration as an out‐of‐court method for resolving disputes are flexibility of the arbitral proceedings, one instance process and the confidentiality of proceedings. In general, the latter advantage is one of the main reasons why parties opt for arbitration as opposed to court litigation in which case the proceedings would be open to the public.

The aim of this paper is to discuss and address the main issues of the confidentiality principle in international commercial arbitration. The principle is one of the most debatable topics among the scholars and law practitioners and the same has been considered in perpetuity by many arbitral tribunals and state courts. While the classical approach perceived confidentiality as a self‐evident principle in arbitration proceedings, current arbitral awards and state court decisions have put this topic in a controversial level and thus leading to different approaches. The question that arises here is whether the principle of confidentiality is of absolute nature? To what extent does the rule apply? What are the exceptions, if any, which prevail in this case? The decision of the Australian court in Esso v. Plowman case of 1995, which rejected the principle of confidentiality in arbitral proceedings, has influenced this change in perception.

Some legal instruments such as the United Nations Commission on Trade Law rules (UNCITRAL)1 are silent on this issue. On the contrary, some other sources specifically provide for the obligation of confidentiality, these being London Court of International Arbitration (LCIA)2 and the World Intellectual Property Organization Arbitration Rules

* Fisnik Salihu is an Attorney at law with several years of experience in the banking sector. He is an arbitrator with American Chamber of Commerce in Kosovo and European Handball Federation Court of Arbitration in Vienna, Austria. Fisnik finished his basic legal studies at University of Prishtina in Kosovo, and he has a master’s degree from the University of Groningen in the Netherlands in International Economic and Business Law. 1 UNCITRAL Arbitration Rules (as revised in 2010). See UNCITRAL Arbitration Rules (as revised in 2010) at:http://www.uncitral.org/pdf/english/texts/arbitration/arb-rules-revised/arb-rules-revised-2010-e.pdf (last accessed 23 April 2016).

2 Article 30 of LCIA Arbitration Rules (2014). See LCIA Arbitration Rules at: http://www.lcia.org/Dispute_Resolution_Services/lcia-arbitration-rules-2014.aspx# (last accessed 05 May 2016).

23

Journal of Altrenative Dispute Resolution in Kosovo

(WIPO).3 The same distinction is evident in the national laws of different states that generally use arbitration. For instance, the laws in Australia and in the United States are silent on this issue. The national laws of England and France, however, recognize the duty of confidentiality. The paper will also touch upon the importance of the confidentiality agreements between the parties.

II. The notion of confidentiality There is no uniform definition of the confidentiality principle in arbitration proceedings. A number of authors, however, have tried to define the principle. For instance, the distinguished author L.A Mistelis in defining the confidentiality principle has concluded that “Confidentiality in its purest form means that the existence of the arbitration, the subject matter, the evidence, the documents are prepared for and exchange in the arbitration and the arbitrator’s award and other decisions cannot be divulged to any third parties”.4 Yet, up until now, no definition on confidentiality has been provided by any statutory provisions or case laws, not to mention that there is an ongoing debate on this issue, which makes it even harder to give an exact definition.

In order to have a better understanding of the topic, it would be useful to discuss the link between privacy and confidentiality. Different international arbitration rules provide for the hearings in arbitration to be private. For instance, Article 21(3) of the ICC rules provides that “The Arbitral Tribunal shall be in full charge of the hearings, at which all the parties shall be entitled to be present. Save with the approval of the Arbitral Tribunal and the parties, persons not involved in the proceedings shall not be admitted”. The same approach is endorsed by the UNCITRAL rules, respectively Article 26(3) which states that “Hearings shall be held in camera unless the parties agree otherwise. The arbitral tribunal may require the retirement of any witness or witnesses, including expert witnesses, during the testimony of such other witnesses, except that a witness, including an expert witness, who is a party to the arbitration shall not, in principle, be asked to retire”. Similar provisions could be found on WIPO5 and LCIA6 rules as well.

Authors have also discussed the privacy of arbitral proceedings. Redfern and Hunter, for instance, wrote that “International commercial arbitration is not a public proceeding. It is 3

Article 75-75 of World International Arbitration Rules (Effective from June 1, 2014). World International Arbitration Rules (effective from June 1, 2014) at http://www.wipo.int/amc/en/arbitration/rules/ (last accessed 5 May 2016).

4 See L.A Mistelis, “Confidentiality and Third Party Participation” UPS V. Canada and Methanex Corporation v. United States’ (2005) 21.

5 Article 56 of World International Arbitration Rules (effective from June 1, 2014).

6 Article 20 of LCIA rules (2014).

24

Volume 2

essentially a private process and this is seen as a considerable advantage by those who do not want discussion in an open court, with the possibility of further publication elsewhere, of the kind of allegations which can and do arise in commercial disputes – allegations of bad faith, of misrepresentation, of technical or managerial incompetence, of lack of adequate financial resources, or whatever the case may be”.7

“Privacy” in an arbitration hearing is therefore uncontroversial. If the hearing is to be held in private, it would seem to follow that the documents disclosed and the evidence presented at the hearing should also be treated as private. It would be illogical to exclude non‐participants from an arbitration hearing if they would later on, become familiar with the case and its outcome through printed articles or authorized websites. However, a broader duty of confidentiality in international arbitration is now far from clear.8

III. Privacy and confidentiality Although closely related, privacy and confidentiality in arbitration are two different concepts.

As Dr. Julian D.M Lew says “privacy is concerned with the rights of persons other than arbitrators, parties and witnesses to attend meetings and hearings and to know about the arbitration. Confidentiality is the obligation of the arbitrators and the parties not to divulge or give out information relating to the contents of the proceedings, documents or the award”.9 Arbitration is a private and confidential procedure between two or more parties, which means that only the involved parties in the arbitration proceedings or their representatives may attend the arbitration proceedings at any time. In this way the public is excluded. Privacy is now simply taken for granted as one of the ordinary and necessary incidents of arbitration, arising from the fact that (save in cases of statutory references) an arbitration proceeding is the outcome of a private agreement between parties to withdraw their dispute from the courts, and submit it to the decision of a private tribunal. If the principle of privacy is breached, the arbitration may be compromised.10 Although the privacy of proceedings is taken for granted, parties can expect that the confidentiality of the arbitration proceedings is respected only if it includes all parties involved in the process and all parties shall respect the duty of confidentiality. Therefore, 7

Redfern, A and Hunter, M, “Law and Practice of International Commercial Arbitration”, 3rd Edn, 1999, Sweet &Maxwell.

8 Redfern & Hunter, “On International Arbitration”, 5 e druk, 2009, page 137.

9 See Expert Report of Dr. Julian DM Lew in Esso/bhp v. Plowman (1995), International Arbitration l, No.8, page. 285.

10 See Baker v Cotterill (1849) 18 LJQB 345; Giacomo Costa Andrea v British Italian Trading Co Ltd [1961] 2 Lloyd’s Rep 394 at p 402.

25

Journal of Altrenative Dispute Resolution in Kosovo

confidentiality in arbitration proceedings consists of two phases: confidentiality prior to award and confidentiality after the award. Whether parties are under the duty to not divulge any information from the arbitration proceedings during any of these stages, is a matter of statutory provisions or national laws.

Confidentiality may be a result of privacy, but the two notions are not synonymous. However, certain is the fact that confidentiality cannot exist in the absence of privacy. The two concepts are interrelated; confidentiality can be defined only through privacy. One derives from the other, although it is hard to tell where one ends and where one starts.11 That being said, we can assume that there is a wide compromise on the issue of privacy in arbitration proceedings. However, the principle of confidentiality is not entirely affirmed yet.

IV. New trends of confidentiality A. Institutional rules The principle of confidentiality is set out in different rules such as institutional rules, law of the place of arbitration, law governing the contract or the arbitration agreement itself. As far as the duty of confidentiality is concerned, there are three groups of institutional rules.12 The first group of rules is silent on the duty of confidentiality, e.g. UNCITRAL rules. UNCITRAL rules provide only for the duty of confidentiality of the award, which may be made public only with the consent of the parties. The International Centre for the Settlement of Investment Disputes (ICSID) Convention13 is also silent on the topic of confidentiality.

However, the Convention provides for the protection of privacy since an arbitrator must sign a trust declaration which reads ‘I shall keep confidential all information coming to my knowledge as a result of my participation in this proceeding, as well as the contents of any award made by the Tribunal’.14 The second group of rules consists of institutional rules that include limited provisions on confidentiality such as the American Arbitration Association rules.15

11

See Katalin Ligeti “Confidentiality of Awards in International Commercial Arbitration”, Central European University, 29 March 2010.

12 See Pryles Michael, “The Leading Arbitrators Guide to Arbitration, Confidentiality”, Juris Publishing, page 416.

13 Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, International Centre for Settlement of Investment Disputes, Washington 1965. This convention entered into force on October 14,1966.

14 Article 6 of ICSID Arbitration rules.

15 American Arbitration Association Rules Amended and Effective October 1, 2013.

26

Volume 2

The third group of rules, such as the LCIA16 rules and WIPO Arbitration Rules, include specific provisions on confidentiality. The WIPO rules provide a broad summary of provisions on duty of confidentiality. The duty of confidentiality in arbitration proceedings exists from the mere existence of the arbitration and should be maintained after the award as well.17 There are, however, a few exceptions to this duty, respectively; when parties consent to the publicity of the proceedings, when the issue falls within the public domain, or when there is a need to comply with a legal requirement.18

B. Case law If institutional rules that are applicable to a certain arbitration proceedings are silent to confidentiality then respective national laws may serve as a source of reference. Many national courts worldwide, which have considered the duty of confidentiality, have in principle followed two different approaches. As mentioned earlier, national laws on this issue differ since some states recognize the duty of confidentiality, while some other do not. New Zealand, the United Kingdom and France belong to the first group of states.

New Zealand is one of the few countries that have codified the duty of confidentiality. The 1996 Arbitration Act of New Zealand19 has expressly stipulated the duty of confidentiality during the arbitral proceedings and after the award.20 On the other hand, a number of English courts have recognized an implied obligation of confidentiality, but deal with particular claims of confidentiality on a case‐by‐case basis. For instance, in Dolling‐Baker v. Merrett case,21 the English Court of Appeal found that an implied obligation of confidentiality existed in the arbitration process including documents prepared in contemplation of arbitration or used in the process, transcripts, notes of evidence, testimonial evidence, and the award.22 The court ruled similarly in Hassaneh Insurance co of Israel & Ors v. Stuart J.Mew case whereby one of the parties discovered and used the documents of the arbitration. The court held that confidentiality is implied in all arbitration agreements and must be based upon customary or business efficacy.23

16

Article 30 of LCIA Arbitration Rules (2014).

Articles 75-78 of WIPO Arbitration rules.

18 Article 75 of WIPO Arbitration rules.

19 Arbitration Act of New Zealand of 1996. Date of assent 2 September 1996.

20 See provisions 14I to 14G of Article 14 of the Arbitration act of New Zealand.

21 See Dolling-Baker v Merrett [1991] 2 All ER 890(Eng. C.A. 1991).

22 Ibid, 2 All ER 890.

23 See Hassneh Insurance Co. of Israel v. Mew, 2 Lloyd’s Rep. 243 (Q.B. 1993).

17

27

Journal of Altrenative Dispute Resolution in Kosovo

Courts in France have recognized a similar implied duty.24 In Aita v. Ojjeh case the party which requested annulment of the award by the court was found to have breached the duty of confidentiality and was ordered to pay a fine.25 Among the countries that do not recognize the duty of confidentiality are Australia, Sweden and the United States. With regards to Australia, the court judgment in Esso Australia Resources Ltd v. The Honourable Sidney James Plowman case26 has created uncertainty as to what constitutes the essential attribute of arbitration. The High Court of Australia concluded that whilst the privacy of the hearing should be respected, confidentiality was not an essential attribute of a private arbitration.27 Specifically, the court found that a requirement to conduct the proceedings in camera did not translate into an obligation prohibiting disclosure of documents and information provided in and for the purpose of arbitration. The court then concluded that although a certain degree of confidentiality might arise in certain situations, it was not absolute. In a particular case, the “public’s legitimate interest in obtaining information about the affairs of public authorities prevailed”.28 This case was considered as a “u‐turn” of the classical approach on confidentiality in arbitration and showed that confidentiality in arbitration may not be assured.

A similar approach was confirmed by the Swedish Court of Appeals in the case of A.I. Trade Finance Inc. v. Bulgarian Foreign Trade Bank Ltd. (Bulbank).29 The Swedish Court of Appeals held that there is no duty of confidentiality in arbitration implied in law. Rather, the court substituted a duty of loyalty and good faith, which would restrict disclosure of certain information pertaining to the arbitration, depending on the circumstances of the case.30 The U.S. Federal Arbitration Act31 does not include any provision that imposes duty of confidentiality. This attitude was confirmed by judicial decisions in due time. In the famous case of United States v. Pandable Eastern Corporation,32 the U.S. Court of Appeals for the Third Circuit ruled explicitly that the confidentiality of the arbitration proceedings will not be necessarily allowed if there is not any agreement between the parties or any procedural rules 24

See “Confidentiality in Arbitration: A Valid Assumption? A Proposed Solution!” by Claude R. Thomson and Annie M. K. Finn, Dispute Resolution Journal vol. 62, no.2 (May July 2007).

25 Aita v. Ojjeh Cour d'appel de Paris, Aita v. Ojjeh (18 February 1986), 1986 Revue de l'Arbitrage 4. See Also Claude R. Thomson and Annie M. K. Finn, Dispute Resolution Journal vol. 62, no.2 (May July 2007).

26 See Esso Australia Resources Ltd. & Others v. Plowman, 183 C.L.R. 10, 128 A.L.R. 391 (1995).

27 Ibid, 183 CLR 10.

28 Redfern & Hunter, page 138.

29 A.I. Trade Finance Inc. v. Bulgarian Foreign Trade Bank Ltd. (Bulbank), 14 Mealey‟s Int‟‟l Arbitration.

Rep. 4. A1(1999) 23 CA Paris.

30 Ibid, Claude R. Thomson and Annie M. K. Finn.

31 United States Federal Arbitration Act, 9 USC 1-16 (2000).

32 See United States of America v. Pandahle Eastern Corp. 868 F.2d 1363 (3d Cir. 1989).

28

Volume 2

arbitration. In addition, in Lawrence E. Jaffe Pension Plan v. Household International Inc. case33 United States District Court for the Northern District of Illinois also compelled the production of documents from a former arbitration, notwithstanding an explicit confidentiality agreement between the parties covering all documents disclosed in connection with the arbitration. The above referenced cases clearly show that the principle of confidentiality has moved from the classical approach to a new trend, which confirms that there is uncertainty on its application.

V. Confidentiality of the award As mentioned in the beginning of this paper, confidentiality of the award or the outcome is the second phase of the duty of confidentiality. Institutional rules such as ICSID34 and UNCITRAL35 provide that there should be a prior consent between the parties in order to make the award public. In the case of Giovanna a Beccara and others v Argentina36 the tribunal held inter alia that unless the parties agreed otherwise, there was no general duty of confidentiality in ICSID arbitration rules.37 However, the tribunal is entitled to decide the applicability of the principle of confidentiality on a case‐by‐case basis.38 It has always been recognized, however, that there are circumstances whereby an award may need to be made public. One example would be the publication of the award for the purpose of enforcement by a national court.39 The LCIA rules40 include similar provisions on this topic.

Namely, according to these provisions prior consent between the parties for any possible disclosure of the award is required. In addition, WIPO rules41 clearly state that disclosure of the award is available only when the parties consent, or when it falls within the public domain as a result of an action before the court or when protecting third party’s legal rights.

With regards to case law, judicial decisions in France and England have shown that the confidentiality of the award is respected. The only distinction between these two

33

See Lawrence E. Jaffe Pension Plan, et al. v. Household International, Inc., et al. 02-CV-5893-Final Judgment And Order Of Dismissal With Prejudice As To Arthur Andersen LLP 1 / 9.

34 Article 48 of ICSID Arbitration Rules.

35 Article 34, para.5 of UNCITRAL Arbitration Rules (2013).

36 ICSID Case No ARB/07/05.

37 Ibid, para. 75.

38 Ibid, para. 91.

39 Redfern & Hunter, page 140 40 Article 30, para. 30.1.

41 Article 77 of WIPO Arbitration Rules.

29

Journal of Altrenative Dispute Resolution in Kosovo

jurisdictions is that while the confidential duty is unqualified in the former, there are exceptional circumstances in which disclosure may be ordered in the latter.42 Potter LJ in Ali shipping Corporation v. Shipyard Trogir case43 mentioned four exceptions to the duty of confidentiality; first, when a party consent to the disclosure; second, if the court makes an order or grants leave of the disclosure of such documents; third, if is reasonably necessary to protect the legitimate interest of the party to the arbitration; fourth, where the interest of justice requires disclosure.44 Similarly, in the Hassneh Insurance Co. of Israel and others v Mew case,45 the judge held that the award was ‘potentially a public document for the purposes of supervision by the courts or enforcement in them’46 and therefore decided that the award may be disclosed in circumstances where the disclosure was reasonably and necessary to establish or protect a party’s legal rights vis‐à‐vis a third party.47 Another case in support of this view is noted in the ICSID rules applied in Amco v. The Republic of Indonesia case48 where the court held inter alia that: as to the ‘spirit of confidentiality’ of the arbitral procedure, it is right to say that the Convention and the rules do not prevent the parties from revealing the case.49 It is understandable that at least the unsatisfied party will not consent easily to the publication of such an award which may be critical for that party. The Swedish Supreme Court award in the case of Bulgarian Foreign Trade Bank (Bulbank) v. A.I Trade Finance Inc. (AIT) may serve as an illustration.

Representatives of AIT provided the decision to the journal Maeley’s International Arbitration Report for publication. After noticing the publication, Bulbank revoked the arbitration agreement claiming fundamental breach of the contract and requested that the arbitration panel should declare the arbitration agreement invalid. Since the panel was hesitant to declare the arbitration agreement invalid, Bulbank contested the final award. The Swedish Appellate Court ruled against the proposal that the publication of the award

42

See Emem Uduak Udobong, “Confidentiality in Arbitration: How valid is this Assumption?”, University of Dundee, Scotland.

43 See Ali Shipping Corp v Shipyard Trogir [1998] 2 All ER 136, [1999] 1 WLR 314, [1998] 1 Lloyd’s Rep 711.

44 Ibid, para. 36.

45 See Hassneh Insurance Co of Israel & Ors v Steuart J Mew [1993] 2 Lloyd’s Rep 243.

46 Ibid, pages 245-248.

47 Redfern, A and Hunter, M, Law and Practice of International Commercial Arbitration, 3rd Edn, 1999, Sweet &Maxwell.

48 Amco Asia Corporation and others v. Republic of Indonesia (ICSID Case No. ARB/81/1), Decision on Annulment , May 16, 1986, ICSID Reports, Vol. 1, 1193, pp. 515-16.

49 Redfern & Hunter, page 142.

30

Volume 2

constituted a fundamental breach and did not support the implied concept of confidentiality.50 In the European context it is important to mention Article 6(1) of European Convention of Human Rights51 which provides that “Judgments shall be pronounced publicly by the press and public may be excluded from all or part of the trial in the interest of morals, public order or national security in a democratic society, where the interests of juveniles or the protection of the private life of the parties so require, or the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice”.

Although the said provision provides for an open and transparent outcome of the trials, the same provision was affirmed as not applicable in arbitration. In Suovaniemi v. Finland case52 the ECHR held that when parties submit their disputes to arbitration it is considered that they have waived this provision from being applied and agree not to rely on this provision.53 It is evident that parties cannot always expect that the award or the outcome of the arbitration will be confidential, as they would prefer. For example, parties in arbitration have an outmost interest to keep their trade secrets protected as much as possible due to the fact that disclosure would cause a significant harm to their business. The above referenced judicial decisions have already made it clear that there may be a few exemptions which will prevail to the duty of confidentiality in case of publishing the award. According to Thomson and Kinn, “a concurrent and sometimes overriding public interest has to be recognized. It is appropriate to lift the cloak of confidentiality in a number of circumstances”. They mention nine situations in which the public interest overrides disclosure.54 First, the subject matter or the existence of the dispute and/or its outcome must be publicly reported because it may be a material to the financial condition of a public company. Second, disclosure of the dispute and the surrounding circumstances or outcome may be required by shareholders, partners, creditors or others who have a legitimate business interest in the affairs of one of the parties to the dispute. Third, one of the parties may conclude that its commercial interest and the interests of shareholders and potential shareholders would be enhanced by publicly disclosing information about the dispute and any resulting award and that, accordingly, it has a duty to make such a disclosure. Fourth, one or both parties may be 50

See Katalin Ligeti ‘Confidentiality of Awards in International Commercial Arbitration’, Central European University, 29 March 2010.

51 European Convention of Human Rights as amended by Protocols Nos. 11 and 14 supplemented by Protocols Nos. 1, 4, 6, 7, 12 and 13. The European Convention on Human Rights (ECHR) was drafted in 1950 and entered into force on 3 September 1953.

52 Suovaniemi v. Finland Case no. 31737/96, February 23, 1999 European Court of Human Rights.

53 See more at: http://hudoc.echr.coe.int/eng?i=001-4942.

54 Ibid, Claude R. Thomson and Annie M. K. Finn.

31

Journal of Altrenative Dispute Resolution in Kosovo

subject to obligations (e.g., as a fiduciary) to disclose information in spite of any express or implied term to the contrary in the arbitration agreement. Fifth, it may not be possible or proper to shield the company’s auditors and outside visitors from the fact and nature of the dispute, the surrounding circumstances, and the ultimate award, whether confidential or not.

Sixth, the parties may be in duty to disclose information to insurers. Seventh, the parties must be free to present the award and relevant surrounding circumstances in a public court to either enforce or appeal the award. Eighth, the parties may be obliged to disclose evidence from the arbitration in another proceeding. Ninth, evidence of illegal criminal conduct that should be reported to public authorities may be uncovered during the course of the proceedings. In addition to disclosure of awards when required by law, another type of disclosure takes place when an arbitral institution, such as the ICC publishes ‘edited and redacted’ copies of arbitral awards, as a guide for the benefit of lawyers and arbitrators.55 Considering the above exceptions, one may legitimately question confidentiality when the public interest is in conflict with the duty of confidentiality. Before the case is submitted to arbitration, parties expect that confidentiality will be the starting point of the arbitration.

However, this is not entirely correct since practice shows that sometimes public interest will prevail and, therefore, the duty of confidentiality will not be absolute but limited, judged on a case‐by‐case basis.

In arbitration related literature, there are pro and contra arguments with regards to the confidentiality principle. Arguments in favour of confidentiality usually mention the fact that the duty of confidentiality is what distinguishes this dispute resolution mechanism as unique.

On the other side arguments against the duty of confidentiality comprise of the fact that application of confidentiality in arbitration may encounter and produce inconsistent decisions. Therefore, non‐disclosure of information and closed proceedings will not help in the development of arbitration practice and training of arbitrators. More transparency is needed and this may be possible only through open processes which will benefit public interest.

VI. Conclusion Confidentiality in arbitration remains one of the advantages of this alternative dispute resolution mechanism and the main reason why parties choose to arbitrate. The debate over confidentiality developed during the last decades and there is no consensus in the 55

Redfern & Hunter, page 140.

32

Volume 2

international arbitration community. This tendency was challenged and influenced by judicial decisions which did not consider confidentiality as an essential attribute of arbitration. Even though, the privacy is widely accepted as an attribute of arbitration, confidentiality is still part of a controversial debate. The Esso Australia Resources Ltd. et. al. v.

Plowman case caused a serious oscillation in international arbitration community by not endorsing the principle of confidentiality or, endorsing it, only under certain circumstances.

Institutional arbitration rules are different with regards to this topic. Some institutional arbitration rules provide specific provisions on confidentiality (e.g. LSIA, WIPO), other institutional arbitration rules provide limited provisions on confidentiality (AAA), and the third group of institutional arbitration rules is silent on this issue (e.g. UNCITRAL, ICC). At a national level, there are national law provisions that recognize confidentiality explicitly (e.g.

New Zealand), or through court decisions (e.g. United Kingdom). On the other side, there are national laws that do not recognize this principle (e.g. Australia, the United States). Hence, there are legal inconsistencies across jurisdictions, where the principle of confidentiality is treated differently.

Consequently, parties in arbitration should be aware of the fact that existence of the arbitration agreement itself does not automatically provide for the information and the award to be kept confidential. In this respect parties should draft confidential clauses that would explicitly specify the confidentiality terms in their agreement or agree for institutional arbitration rules that support confidentiality.

Confidentiality and public interest may also conflict with each other. In this case, which principle would prevail will depend on the law governing the contract or national court’s rulings. The tendency of confidentiality shows that in the recent decades there have been a number of decisions that were justified in favour of the public interest. In Esso Australia Resources Ltd. et. al. v. Plowman case the court reasoned the public’s legitimate interest in obtaining information about the affairs of public authorities should prevail over the principle of confidentiality.

Considering the above, the contractual parties are advised to draft explicit provisions on confidentiality before entering into legal obligations. If parties want to be assured that arbitration proceedings and the award shall be confidential, then they have to include confidentiality clauses in their contract. These clauses will apply if the respective national law does not provide any confidentiality provisions. This is particularly important after the decision in Esso v. Plowmanm, where in absence of an explicit provision on confidentiality,

33

Journal of Altrenative Dispute Resolution in Kosovo

there is always a possibility that a given court will reject confidentiality as an essential concept in arbitration proceedings.

Lawyers will not be certain that the arbitration proceedings and the outcome of the arbitration will be kept confidential as they may expect. However, the duty of confidentiality can be imposed by drafting a confidential clause as part of the agreement or by relying on institutional provisions rules which expressly stipulate the applicability of confidentiality.

As a final point, confidentiality in arbitration remains an open issue and nothing should be taken for granted. Balancing between the private and public interest seem to be a task for the arbitration community in the future, which is not an easy task. However, the approval of this standard does not necessarily mean that all unresolved issues regarding the confidentiality in arbitration will have the appropriate solution.

34

Volume 2

UDC 343.3

Case Commentary: National Iranian Oil Company v Crescent Petroleum Company International Limited and Crescent Gas Corporation Ltd [2016] EWHC 510 (Comm)

Klentiana Mahmutaj*

Key words: Bribery and Corruption, International Arbitration, Public Policy, Enforcement of Arbitral Award, National Law.

Introduction This case was considered by the High Court of Justice of England and Wales, which following a three‐day hearing, gave judgment on 3 March 2016.

The Claimant (National Iranian Oil Company, NIOC) and the First Defendant (“Crescent Petroleum”) entered into a long‐term gas supply and purchase contract (the “GSPC”) on 25 April 2001. In 2003 Crescent Petroleum wished to assign the GSPC to the Second Defendant, its subsidiary (“Crescent Gas”).

In July 2009 the First and Second Defendants commenced arbitration based on an arbitration clause included in the Contract claiming that NIOC was in breach of the GSPC because it had failed to deliver any gas. NIOC challenged the jurisdiction of the Tribunal (Dr Gavan Griffiths QC (presiding), Dr Kamal Hossain and Dr Assadollah Noori) over the claims by both Defendants on (amongst others) the ground that the GSPC was procured by corruption.1 The Tribunal issued an award on jurisdiction (the “Award”) which dismissed NIOC's jurisdictional challenge and declared that the GSPC was valid and binding on the parties.

NIOC brought applications under ss. 67 and 68 of the United Kingdom Arbitration Act 1996 in the English High Court to appeal and/or set aside the award on various grounds, including that

* Klentiana Mahmutaj is a Barrister practicing in London, UK. Klentiana lectures and publishes regularly on Public International Law, on legal matters pertaining to state immunity, extraterritorial application of the European Convention of Human Rights and corruption in international arbitration.

1 The Claimant also challenged the jurisdiction of the arbitrators on the basis that Crescent Gas was not a proper party (see National Iranian Oil Company v Crescent Petroleum Company International Limited and Crescent Gas Corporation Ltd [2016] EWHC 510 (Comm) (‘Crescent’) at [3]) to the arbitration on the basis that the assignment was not valid. However, this aspect of the case together with an argument on separability of the arbitration clause and the applicable law at [7] are not dealt with by this article.

35

Journal of Altrenative Dispute Resolution in Kosovo

the GSPC had been secured through corruption. The Court rejected this and the other grounds, and refused to set aside the tribunal’s award. This article examines the Court’s reasons for doing so on grounds of public policy and corruption allegations.

The judgment NIOC challenged the award pursuant to s. 68 of the Arbitration Act 1996 on the basis that the award or the way in which it was procured, was contrary to public policy. The Defendants applied to strike out that claim on the basis that it had no reasonable prospect of success.

English law and enforcement of an award Section 68 of the Arbitration Act 1996 states: (1)A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award. …

(2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant— … (g)the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy;

The Arbitral Tribunal and the evidential findings on corruption The issue of whether the GSPC was procured by corruption was considered by the Tribunal in a 30‐day hearing. They examined documents which apparently showed an agreement for corrupt payments between a Mr Yazdi and a Mr Hashemi. The payments were apparently aimed at influencing the outcome of the proposed contract negotiations between NIOC and Crescent Petroleum. The Award set out the explanation advanced by the Defendants including the assertion that ‘nobody at Crescent’ treated ‘the proposed agreement’ (by which they appear to have meant an agreement for payments between Mr Yazdi and Mr Hashemi) seriously.

According to the evidence, Mr Yazdi had also been given a short presentation by Clifford Chance on corruption as a way to let him down politely without causing offence.2 However, the Tribunal found on the evidence that Crescent had given shifting explanations and that it had been ‘less than frank in its explanation that the Draft Agreements were merely a “ploy” 2

Crescent at [34].

36

Volume 2

to “test” Mr Yazdi’3 However, the Tribunal concluded that they were not satisfied on the balance of probabilities that the GSPC was obtained through corruption. The Tribunal was unable to find that Mr Hashemi had aided Crescent in obtaining the NIOC Board’s approval for the GSPC.4 In its assessment of the facts, the Tribunal found that ‘no alleged corrupt contractual arrangements between Crescent and Mr Hashemi were ultimately executed’ and that there was no evidence ‘to surmise the effect that the agreement to pay confidential third‐party fees may have had on the GSPC’5.

The Tribunal, however, recognised that corruption was difficult to prove and that often direct evidence would not be available. Instead inferences could be drawn from circumstantial evidence.6 In this context, they found that there was no indication that ‘the members of NIOC Board were either corrupt or influenced by any corrupt arrangements’ and no causal link had been established between any corrupt arrangements and the final terms of the GSPC which were approved by the NIOC Board7. Whilst there had been discussions about corrupt payments, they had not been acted upon and the Tribunal was satisfied that the corrupt plan had not any effect on the outcome. Therefore the Tribunal concluded that the GSPC was a lawful contract which had not been procured by corruption. It went on to find that the Claimant was in breach of the GSPC by failing to deliver gas.

Revival of the corruption argument before the English court NIOC did not adduce any new evidence to demonstrate that the GSPC had been procured through corruption. Instead, they asserted that the contract was “tainted” by the previous dealings between Mr Yazdi and Mr Hashemi and this was of sufficient concern that the Court should set aside the award. Whilst this was a novel argument of some interest, it did not find favour as it lacked support in English law.

In its analysis the Court considered first whether GSPC was itself an illegal contract and, second, if not, whether it was procured through bribery. In this context, the court clarified the

3

Crescent at [35].

Ibid.

5 Crescent at [36].

6 Circumstantial evidence is a fact that can be used to infer another fact.

7 Crescent at [36].

4

37

Journal of Altrenative Dispute Resolution in Kosovo

relationship between public policy, corruption and the enforceability of arbitral awards in English Law8.

i) Illegal contracts First the Court dealt with illegal contracts and it stated that such contracts, for example a contract to pay a bribe, would not be enforceable in the English courts, irrespective of whether they would be illegal or not under the relevant foreign law.

The Court reviewed the relevant case law and found that a contract to pay a bribe would be unenforceable9 and that an action to recover an amount paid which was itself a bribe would be barred because the court will not assist a wrongdoer who relies on his own illegal conduct in order to recover (ex turpi causa non oritur actio).10 In the English High Court case of Nayyar v Denton Wilde Sapte11 the bribe had not occurred but was attempted. The Court held that an attempted bribe was an ‘act which is more than preparatory which is done with the intent to bribe’, but the Court noted that this was still in the context of a finding that ‘proof of a payment which is intended to be a civil law bribe is sufficient to engage the ex turpi causa principle. It is not necessary to establish the illegal purpose as being effectively carried out.’ The decisive factor in that case was that the action was for recovery of the corrupt payment, so the ex turpi causa principle applied. This was materially different from the potentially corrupt activities in the instant case. The Defendants were not seeking to recover a bribe they had paid and the Tribunal found that the potentially corrupt activities had, in any event, come to nothing. The action here was to enforce a contract ‘which was unaffected by any such acts, even if they were preparatory acts’ (emphasis added).12 The Court therefore held that the GSPC was not (and was not suggested by NIOC to be) an illegal contract and therefore was not automatically unenforceable in the English courts.13

8

Under English law the question of whether to enforce an award on public policy grounds engages public policy considerations about the enforceability of the underlying contract.

9 Lemenda Trading Co. Ltd v. African Middle East Petroleum Ltd [1986] QB 448.

10 Nayyar v. Denton Wilde Sapte [2010] Lloyd's Law Rep (Prof Neg) 139. For an interesting and more general discussion of the illegality principle in English law see Bilta (UK) Ltd (In Liquidation) v Nazir[2015] UKSC 23; [2016] A.C. 1.

11 Ibid.

12 Crescent at [42].

13 Crescent at [49(1)].

38

Volume 2

ii) Legal contracts procured by bribes The Court then considered whether an award regarding a legal contract procured by bribery was automatically unenforceable and, if not, in what circumstances a court should refuse to enforce it.

It explained that a distinction exists between a contract which is itself illegal (e.g. a contract to pay a bribe) and therefore unenforceable on public policy grounds and a contract which was legal but was procured by bribery. The latter was not unenforceable as long as the innocent party had had a right to avoid the contract.

In support for this proposition, the Court reiterated14 the approach in Honeywell International Middle East Ltd v. Meydan Group LLC.15 In that case, Ramsey J had accepted submissions by the party seeking to enforce the award to the effect that:16 ‘even if Meydan's allegations of bribery were established, they would not, as a matter of English law, result in enforcement being contrary to public policy. It submits there is no principle of English law to the effect that it is contrary to English public policy to enforce a contract which has been procured by bribery. It submits that the distinction must be drawn between the enforcement of contracts to commit fraud or bribery and contracts which are procured by bribery. It says that whilst contracts to commit bribery are contrary to public policy and will not be enforced, contracts which have been procured by bribery would be rendered voidable by English law, provided that counter‐restitution can be made. … thus, as a matter of English law public policy, the courts will enforce a contract procured by bribery subject to the innocent party having, in the appropriate circumstances, a right to avoid the contract.… [Whilst bribery is clearly contrary to English public policy and contracts to bribe are unenforceable, as a matter of English public policy, contracts which had been procured by bribes are not unenforceable’(emphasis added).

The Court stated that the lack of fresh evidence beyond that heard during the arbitral proceedings was a significant factor behind Ramsey J’s decision. Similarly, NIOC had not adduced any fresh evidence in support of the allegations of bribery and corruption. The Court accepted the Tribunal’s findings of fact that the GSPC had not been procured by corruption.

Furthermore, given that there was no fresh evidence to suggest otherwise or any other exceptional circumstances, the Court would not interfere with the arbitral award.17 The Court concluded:18

14

Crescent at [43].

Honeywell International Middle East Ltd v. Meydan Group LLC [2014] 2 Lloyd's Law Rep 133.

16 Ibid. at [178].

17 Crescent at [49].

18 Crescent at [49(2)].

15

39

Journal of Altrenative Dispute Resolution in Kosovo

‘There is no English public policy requiring a court to refuse to enforce a contract procured by bribery.

A court might decide to enforce the contract at the instance of one of the parties. It is not that the contract is unenforceable by reason of public policy, but that the public policy impact would not relate to the contract but to the conduct of one party or the other.’

iii) Contracts “tainted” by corruption

NIOC presented an interesting argument, which did not fall squarely in either of the two categories above. It invited the court to refuse to enforce an award on the basis that the GSPC was ‘tainted’ by corruption, in the sense that it had been preceded by, even though unaffected by, a failed attempt to bribe. In those circumstances, NIOC argued that the contract or one of more of the parties to it had been tainted by the preceding corruptive behaviour and in the light of recent international Conventions to outlaw bribery, and the increase of legislation to criminalise it, the Court should refuse to enforce it.

The Court found this argument ‘attractive’ but ultimately unarguable. It concluded that the introduction of the concept of tainting of an otherwise legal contract would create uncertainty, and in any event wholly undermined party autonomy.19 The Court commented: ‘There is certainly no English public policy to refuse to enforce a contract which has been preceded, and is unaffected, by a failed attempt to bribe, on the basis that such contract, or one or more of the parties to it, have allegedly been tainted by the precedent conduct. … There may be many contracts which have been preceded by undesirable conduct on one side or other or both – lies, fraud, threats and worse – but the Court would not interfere with a contract entered into by such parties, even if one or more of those parties had committed criminal acts for which they could be prosecuted, unless the contract itself was illegal and unenforceable, or one or more of the acts of such parties induced the contract, in which case it might be voidable at the instance of an innocent party so induced’.20

Discussion This case offers a valuable contribution to the jurisprudence on the role of corruption in the enforcement of awards and contracts in international arbitration. Whilst there has been a recent trend in international arbitration for losing parties to invoke their opponents’ corruption as a basis for resisting enforcement of the award, it has proved difficult to succeed. As far as the English courts are concerned, this case is a useful illustration of that failing trend and also

19 20

Crescent at [49(3)].

Crescent at [49(3)].

40

Volume 2

provides a clear explanation of why it is difficult to invoke corruption as a valid basis to set aside an award.

Whilst English courts readily refuse to enforce awards based on contracts which are illegal per se, including those providing for bribery and corruption, their approach to enforcement of awards where otherwise lawful contracts were obtained by corruption is more nuanced. In this scenario, the courts are less likely to interfere with the enforcement process if the contract was voidable and the relevant parties have had the opportunity to avoid it.21 However, it seems that if the parties have not had the opportunity to avoid the contract, there would still be public policy grounds to refuse to enforce an otherwise legal contract.

In this case, the English Commercial Court had little difficulty in dismissing NIOC’s argument that contracts should be unenforceable even though they were neither illegal nor procured through corruption but where they were preceded by corrupt behaviour which has ‘tainted’ the contract or any of the parties to it. The Court’s analysis is technically correct to the extent that such corrupt behaviour is irrelevant because it does not affect the content of the contract or the means by which the contract was secured. It also reflects the current approach of the English courts to keep interference with arbitral awards to a minimum, and whilst upholding the rule of law, they aim to protect party autonomy as one of the underpinning principles of arbitration.

However, it could be argued that this approach is also at odds with the increasing fight against corruption, which is illustrated by both domestic and international legal instruments,22 and related political initiatives.23 After all, public policy should be a dynamic concept which reflects changes in society and its core values rather than a stagnant one that is artificially detached from those changes.24 Therefore it is arguable that what constitutes an act which is contrary to public policy should be revisited in order to reflect societal changes towards a more proactive fight of corruption. But whilst there is scope for legislative or judicial change, there is one obvious problem with extending the categories of unenforceable contracts surrounded by 21

For a discussion on voidability of contracts in English law see the expert opinion of Lord Mustill submitted by Kenya in World Duty Free Co. Ltd. v Republic of Kenya ICSID CASE NO. ARB/00/7) at para. 164. In that case, corruption was raised during the arbitral proceedings by the respondent who argued that a claim based on illegality must be dismissed.

22 See for example the UK Bribery Act 2010, the UN Convention Against Corruption (2005), the OECD AntiBribery Convention (1999) andthe EU Convention Against Corruption Involving Officials (2005).

23 See for example recent anti-corruption summit held in the UK: http://www.telegraph.co.uk/news/2016/05/12/explained-david-camerons-global-anti-corruption-summit/.

24 See for example, the Singapore Court of Appeal’s decision in AJU v AJT[2011] SGCA 41 in which it reiterated that public policy was a ground on which to set aside and refuse enforcement as per Article 34(2)(b)(ii) the UNCITRAL Model Law on International Commercial Arbitration as set out in the First Schedule to Singapore’s International Arbitration Act but that public policy meant international public policy and it must involve either exceptional circumstances or a violation of the “most basic notions of morality and justice”.See also Hwang and Lim, ‘Corruption in Arbitration: Law and Reality’(2012) 8 Asian International Arbitration Journal, Issue 1, pp. 1–119, para. 133.

41

Journal of Altrenative Dispute Resolution in Kosovo

corruption: there would be substantial difficulties in determining when a contract is sufficiently ‘tainted’ by corruption and that itself is unlikely to be conducive to legal certainty.

42

Volume 2

UDC 347.7

Intellectual Property Cases in Arbitration

Arberesha Zogjani* and Florije Manaj Zogaj**

Abstract Creating an intellectual property product takes time, efforts and commitment. Why such effort trying to protect it from being infringed when knocking on the right door gives you a quicker resolution?! Intellectual property and arbitration are both new concepts in Kosovo in terms of their implementation. Nevertheless, the situation is not the same as far as enactment of the legislation is concerned. Combination of IP and arbitration offers a total new approach for the public, namely, for the authors of different works. Being an author in an environment where authors’ rights are considered luxury, one cannot afford to hire a private lawyer to protect its rights all the time; neither do they have time to spend in court. Therefore, the Arbitral Tribunal may easily become the “good part” of the dispute. Achieving this result constitutes the purpose of our paper.

Through an analytical model, we aim to offer an “e‐one stop shop” for authors, providing them the needed information about arbitration and its advantages compared to court litigation, since we are strongly convinced that if arbitration becomes a familiar word for IP owners, it will eventually become a practice that they will employ in the future. Tying up arbitration and IP allows us to gain a win‐win result, as not only the awareness on arbitration, but also the importance of enforcing authors’ rights, will be raised.

In this paper, authors enclose information on intellectual property, alternative dispute resolutions, more specifically arbitration, the comparison between arbitration and litigation, legal and institutional infrastructure as well as analyze cases.

43

Journal of Altrenative Dispute Resolution in Kosovo

What is intellectual property?

The notion of Intellectual Property Rights (IP rights or IPR) entails the legal rights resulting from an intellectual activity in the industrial, scientific, literary or artistic fields. The main purpose of IP is to protect the authors and other producers of intellectual materials and services, thereby providing them the rights to control the use of works, namely, their products within a specified time period.1

IP protects a wide range of creations of the mind that have an identifiable economic value. In general, IP rights are divided into two main categories: 1) Copyright (which protects original creations embodied in whatever form of expression such as literary works, musical works, artistic works, photographic works, motion picture works and the like)2, and 2) Industrial Property (which is subsequently divided into patents, trademarks, trade secrets and industrial designs).3

This paper will cover only the first category of IP rights, respectively copyright and how the owners of copyrighted works can get use of arbitration in resolving their disputes. According to the Kosovo Law on Copyright and Related Rights4, copyright belongs to the author for her/his original work in the field of literature, science and art. That is, only the original works of authorship are protected by copyright. Whilst, the following works, although original, are expressly excluded from protection: ideas, guidelines, official laws, bylaws, regulations, official materials and publications of parliamentary bodies, official translations of official materials, and

* Arberesha Zogjani holds an LL.M Degree in Contracts and Commercial Law from the University of Pristina – the USAID long distance program. Her short version of the master thesis, titled “Protection of the musical work as copyright: Kosovo Case” is currently published at the European Union Foreign Affairs Journal, while a more comprehensive paper of the same topic remains published at Social Scientific Research Network. Her other related papers were published and presented in various other occasions, including the 3rd International Scientific Conference “European Integration process of Western Balkan countries”. ** Florije Manaj Zogaj holds a LL.M Degree on International and European Law from Riga Graduate School of Law in Latvia. Florije is a licensed Trade Marks Agent in Kosovo. Her other research work is to court management, as she is co-drafter of the Manual on Court Management and Standard Operation Procedure, as part of the USAID project and research project “Finding our Voices”, regarding the involvement of youth and female in the Kosovo Justice System.

1 World Intellectual Property Organization, Intellectual Property, Publication No. 895 (E), pages 9-10.

2

Article 1, Law No. 04/L-065 on Copyright and Related Rights World Intellectual Property Organization, What is Intellectual Property, Publication No.450 (E), 2010, page 2.

4 Law No. 04/L-065 on Copyright and Related Rights 3

44

Volume 2

administrative and judicial acts, official materials published for public information, folklore performances and daily news5.

Copyright The Law on Copyright and other Related Rights provides what type of work is protected by copyright. Namely, it specifies that copyrighted works are original expressions represented in any form, in particular: 

Verbal works (speeches, lectures, narratives and similar);



Literary works (textbooks, brochures, daily newspaper and other texts of the literary domain, scientific and professional literature as well as computer programs);



Musical works with or without text, and regardless if they are presented through musical notes or in any other form;



Theatrical works, theatrical musical and puppet theatre works including the radio‐ drama;



Choreographic and pantomime works;



Filmic and other audiovisual works;



Photographic works and other works made through a similar process of the photography such as artistic photography, photo montage, posters, photos of the reports;



Art works in the area of painting, sculpture, graphics and drawings;



Architectural works such as charts, plans, templates and the buildings built based on architectural and engineering works, urbanism, panorama and interior design;



Stenography works;



Applicative art works as well as industrial and graphic design;



Cartographic works in the area of geography and topography;



Scientific, educational or technical presentations such as: technical drawings, graphics, charts, expertise and three‐dimensional presentations.6

Derivative works as well as collections of works are also considered as work of authorship.7

However, who is considered the author of the work? The answer to this question is not always as simple as it may look in the first place. In many contentious cases, courts are asked to decide precisely on this question, respectively the question of ownership. However, the law sets out 5

Article 12, Law No. 04/L-065 on Copyright and Related Rights.

Article 8, Law No. 04/L-065 on Copyright and Related Rights, Republic of Kosovo.

7 Articles 10 and 11, Law No. 04/L-065 on Copyright and Related Rights, Republic of Kosovo.

6

45

Journal of Altrenative Dispute Resolution in Kosovo

certain rules as to who is considered the author of the work. First of all, the ownership vests in the person whose name or firm, pseudonym or mark appears in the copy of the work. If the work does not have any of these elements of authorship, however, than the rights remain with the publisher. If the publisher is anonymous too, then the rights shall be enjoyed by the person disclosing the work itself.8

As the author of an original work, you are entitled to the following rights provided by the law: The so‐called moral rights,9 which are applicable to all types of works of authorship and include: 

The right to first publication;



The right to recognition of authorship;



The right of the integrity of work;



The right to remorse;

Another group of rights are the so‐called economic rights10 or the right of the author to enjoy the monetary profits from the exploitation or use of their copyrighted work. The most important economic rights of the author are: 

The right to reproduce the copyrighted work;



The right to distribute the copyrighted work;



The right of rental of the copyrighted work;



The right to publicly perform, communicate and broadcast the copyrighted work;



The right of public display;



The right to disclose the copyrighted work;



Adaptation rights.

Other rights11 provided by the law such as: 

The right to access and exposure;



The right for resale;



The public lending right;



The right for special remuneration.

Another group of rights which are protected by the copyright law but as a separate set of rights are related rights. These works do not meet the original criterion required by copyright law.

8

Article 14,Law No. 04/L-065 on Copyright and Related Rights.

Sub Chapter D, Law No. 04/L-065 on Copyright and Related Rights, Republic of Kosovo.

10 Sub Chapter E, Law No. 04/L-065 on Copyright and Related Rights, Republic of Kosovo.

11 Chapter III, Law No. 04/L-065 on Copyright and Related Rights, Republic of Kosovo.

9

46

Volume 2

These works are, however, protected since they contribute to making the works available to the public. These related rights include:12 

Rights of performers;



Rights of producers of phonograms;



Rights of film producers ;



Rights of broadcasters;



Rights of producers of databases;



Rights of publishers.

All these rights are, however, subject to time limitations. In principle, the copyright runs during the whole lifetime of the author and seventy (70) years after his death. In case of co‐authorship works, the copyright lasts seventy (70) years from the death of the last surviving co‐author.

When dealing with anonymous and pseudonymous works and collective works, on the other hand, the copyright shall run for seventy (70) years after the lawful disclosure of the work.13 The copyrighted works can be administered in two ways; individually, which is exercised by the holder personally or through the representative, and collectively through collective societies authorized by the Office of Authors Rights and Related Rights.14 Any original work of authorship enjoys protection as provided by the Law from the moment of its creation. If these works are infringed, the author can file a claim and ask for compensation.

The confusion occurs exactly at this point: which procedure to follow‐ Litigation vs Alternative Dispute Resolution!

It is important to mention that in order for authors/parties to enter into an arbitration procedure, they should agree among themselves to solve their dispute and have an arbitration clause in their agreement.

12

Chapter IX, Law No. 04/L-065 on Copyright and Related Rights, Republic of Kosovo.

Article 61, Law No. 04/L-065 on Copyright and Related Rights, Republic of Kosovo.

14 Chapter X, Law No. 04/L-065 on Copyright and Related Rights, Republic of Kosovo.

13

47

Journal of Altrenative Dispute Resolution in Kosovo

Alternative Dispute Resolution Understanding of ADR and its history in Kosovo Alternative Dispute Resolution (ADR) means various processes of settling disputes outside the court room, and helping parties resolve disputes without a trial. This is achieved through mediation, arbitration or negotiation. A few other procedures of ADR are acknowledged worldwide, these being neutral evaluation and collaborative law. However, these two procedures are yet not applicable in Kosovo.

ADR has numerous advantages, some listed below: 

Faster solutions;



Less expensive;



Parties play a crucial role;



Long lasting outcomes;



Greater satisfaction;



Improve relationships.

Mediation is an ADR form in which a neutral third person called mediator helps the parties reach a voluntary resolution of a dispute. As such, mediation is more informal, more flexible, less expensive and faster than litigation. It can help people resolve civil, family, juvenile and other matters.

Arbitration is also an ADR whereby a neutral person called arbitrator, selected by parties hears the arguments from both sides and analyzes the evidences submitted and then decides the outcome of the dispute, as such it is a widely accepted mechanism.

Looking back at history, arbitration was one of the most preferred dispute resolution methods in the Middle Ages, while the first formal rules were adopted in England and the U.S. in the 15th and 16th centuries. Western European countries started promoting arbitration in the 20th century, whereas in the former Yugoslavia, ADR was introduced during the 1960s and early 1970s15.

Since arbitration expands the physical borders, it was necessary to set rules for international arbitration, and this was done by the United Nations Mission on International Trade (INCITRAL) which in 1976 adopted rules applicable to international arbitration, including a model 15

USAID System for Enforcing Agreements and Decisions Program in Kosovo, Report and Recommendations for developing and implementing and appropriate and effective alternative dispute resolution system, April 2010, Kosovo, page 11.

48

Volume 2

arbitration clause, rules for appointment of arbitrators and conduct of arbitral proceedings, rules for the form, effect and interpretation of the award16.

After the Yugoslavia dis‐solvation, Kosovo Chamber of Commerce adopted the regulation on Permanent Arbitrage Court in 1999. Five years later, respectively in 2004, the Kosovo Assembly adopted a new Law on the Kosovo Chamber of Commerce which, among others, provided for the establishment of the ADR mechanism known as the Court of Arbitration.

The UNCITRAL Model Arbitration Law, the European Community Directive 93/13.EEC as well as the expertise of different missions, such as the USAID, were closely consulted when drafting the Kosovo Law on Arbitration No.02/L‐75 which was passed by the Assembly in 2007. Other than the Law on Arbitration, the applicable legislation in Kosovo for this field is to be considered the Law on Enforcement Procedure No. 03/L‐008, Rules of Arbitration in Kosovo 2011 as well as the Decision on the Expenses of the Procedure.

As the Law on Arbitration is the main legal source, it is worth mentioning its key elements17: 

Arbitration occurs only if both parties agreed to solve their dispute through arbitration;



A party may be a natural and a legal person;



It is applicable to disputes in all civil and economic matters;



It is required that a court rejects an action if the respondent raised the issue of the existence of an arbitration agreement in his statement of defense;



The arbitral tribunal may consist of one or a panel of arbitrators (odd number composition);



Each party has the burden of providing its claim;



In international arbitration cases, the tribunal applies the law designated by the parties, in the absence of which, the tribunal applies the law consistent with the private international law principles;



The unsuccessful party shall bear all the costs, unless otherwise agreed;



The arbitral award has the effect of a final and binding court decision.

16

USAID System for Enforcing Agreements and Decisions Program in Kosovo, Report and Recommendations for developing and implementing and appropriate and effective alternative dispute resolution system, April 2010, Kosovo, page 12.

17 Law on Arbitration, No.02/L-75, Republic of Kosovo.

49

Journal of Altrenative Dispute Resolution in Kosovo

Arbitration Center of the American Chamber of Commerce in Kosovo Another functional ADR Centre in Kosovo is the Arbitration Center which functions under the umbrella of the American Chamber of Commerce in Kosovo (herein after referred as AmCham Arbitration Center). American Chamber of Commerce in Kosovo (herein after referred as AmCham) is a leading business association in Kosovo officially accredited by the United States Chamber of Commerce in Washington D.C. AmCham is also a member of the European Council of American Chambers of Commerce (ECACC). Though established in 2004, it has been fully operative since 2006. In furtherance of its efforts to strengthen the country’s business climate and economic growth, AmCham Kosovo has established its Arbitration Center, mandated to facilitate the alternative resolution of disputes through arbitration and mediation.18 The AmCham Arbitration Center provides its services to its members and to the business community throughout Kosovo. Resolving disputes through the Center offers several advantages: faster resolution; less costly proceedings; closed hearings and confidentiality; less adversarial process; professional arbitrators and mediators; easier international enforcement of awards and final and binding decisions.19 Arbitration Center is regulated by the Charter of the American Chamber of Commerce in Kosovo20. AmCham Arbitration Center offers to its client’s valuable information regarding the filing procedure, and it offers step by step guidelines. It also offers an Arbitration Clause, Model Arbitration Agreement; Application for Initiation of Arbitration; Fee Schedule; Compilation of Arbitration Rules and workshops and other forums to discuss ADR issues.

The AmCham Arbitration Center consists of the following bodies: Steering Council; Secretary General; and Arbitration Panels;21 and has a roster of 41 arbitrators, excellent international and local experts, involving lawyers, professors and other legal professionals. The roster consists of 11 international and 30 local experts, 9 of which are woman.

Kosovo Permanent Tribunal of Arbitration Kosovo Permanent Tribunal of Arbitration functions under the Kosovo Chamber of Commerce umbrella, though as such, it is fully independent. The Tribunal submits annual working reports

18

http://www.amchamksv.org/adr-center.html See above.

20 Charter of the Alternative Dispute Resolution Center, approved in 2014 http://adr-ks.org/introduction/charterof-the-amcham-adr-center/ 21 Article 4, See above.

19

50

Volume 2

as well as financial annual reports to the Kosovo Chamber of Commerce, which at the same time remains the signing authority of all Memorandums of Understandings on arbitration22.

Its composition consists of Leadership (composed of five members: Chair, Deputy Chair, General Secretary and two other members appointed for four years), President and Secretary23.

Currently, the Kosovo Permanent Tribunal of Arbitration lists 27 arbitrators in its list, out of which 8 international arbitrators and 19 local arbitrators.

The arbitration procedure is governed by the Law Non Arbitration and Kosovo Rules of Arbitration 2011. All disputes related to civil‐judicial and economic‐judicial requests may be the subject of an arbitration agreement, unless prohibited by law.24 The Law on Arbitration states that no court in Kosovo that may intervene in arbitration proceedings, and if an action is brought before it concerning a matter that is a subject of arbitration, should be rejected by court as inadmissible, unless the court finds that the arbitration agreement is null and void or that the disputed subject matter is not covered by the arbitration agreement.

If for instance, you as an author have a dispute, you can only start an arbitration procedure if you and the other party reach a consensus to solve your dispute through arbitration, and as such you may choose to be represented or assisted by another person, whose contact details should be communicated to all parties and the arbitration tribunal.25 The arbitral tribunal can be composed of one or three members – depending on the circumstances of the case and the parties’ preferences, though usually it does consist of one arbitrator. Differently from litigation and court procedure, in arbitration, a party can appoint the arbitrator him/herself, and that not only from the list of arbitrators that the Tribunal owns but also another person outside the list, for whom the party should present a statement of his professional experience.26 In order to protect the parties, the Law on Arbitration and the Rules of Arbitration foresee that any arbitrator may be challenged by either party if circumstances show that there are justifiable doubts for the arbitrators’ impartiality or independence, or if the arbitrator does not have the qualifications agreed to by the parties.

Similarly to litigation, parties to arbitral proceedings should present the claim and counter claims. Though contrary to litigation, in arbitration, the tribunal shall decide whether to hold an 22

The Kosovo Permanent Tribunal of Arbitration Establishment Act, 27.06.2011, Kosovo.

The Kosovo Permanent Tribunal of Arbitration Establishment Act, 27.06.2011, Kosovo.

24 Article 5, Law No.02/L-75 o Arbitration.

25 Kosovo Rules of Arbitration 2011.

26 Article 6, Kosovo Rules of Arbitration 2011.

23

51

Journal of Altrenative Dispute Resolution in Kosovo

oral hearing or to proceed with the procedure based on the documents and written materials presented, or the tribunal may also decide to hold a combination of both, oral hearing and written proceedings. Whereas in either case, each party have the burden of proving the facts relied to the claim or defense.

Article 24 of the Law on Arbitration foresee that parties can present witnesses to the hearings, and to do so, they should inform the arbitral tribunal and the other party about the name, the addresses, the subject as well as the language that the testimony of the witnesses will be given, at least fifteen days before the hearing. Experts can also be a part of the arbitral procedure if not otherwise agreed by parties.

If more than one arbitrator has been appointed in the arbitral proceedings, the award shall be made by a majority of all members, while in case of questions of procedure, the chairman may decide on his/her own.

The award shall be made in writing. The award is final and binding for the parties, with completely the same effect as the final court decision.27 The award cannot be appealed before any court. However, court can set aside an arbitral award under certain circumstances such as: A) The applicant proves that: 

A party to the arbitration agreement did not have the capacity to act;



The arbitration agreement is not valid under the law determined as applicable by the parties or the arbitral tribunal, or in absence of such determination, under the law applicable in Kosovo;



The applicant was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case;



The award deals with an issue not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced;



The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the provisions of this Law or a valid arbitration agreement, under the condition that such defect had an impact on the arbitral award.

B) The court finds that:

27



Arbitration is prohibited by law;



The enforcement of the award leads to a result which is in conflict with public policy28.

Article 31 – Form and Effect of the Award, Law No. 02/L-75 on Arbitration.

52

Volume 2

Recognition and Enforcement of the arbitration tribunal awards Arbitral award is final and has the same value as the court judgment. One very important element is that courts cannot abrogate awards issued by an arbitration tribunal. Courts can analyze and annul the arbitral award under very few circumstances as foreseen by the Law on Arbitration29 and as presented above. One of the reasons why arbitration is extensively used worldwide is the easy recognition and enforcement of the arbitration award, especially compared to enforcement procedure of courts judgments. If regular courts do not recognize or enforce arbitration awards, then there is no value to that award. The main reason why arbitral awards are enforceable in a similar manner in different countries is exactly because of the New York Convention on the Enforcement of Arbitral Awards of 1957 and which entered into force in June 1959. The said convention is applicable with regards to recognition and enforcement of arbitral awards issued in a country different from the place where the award is sought to be enforced.

Kosovo has not signed, nor ratified the New York Convention. However, the Law on Arbitration30 provides for the recognition and enforcement of arbitral awards, both domestic and foreign awards. Article 38 of the Law on Arbitration states that: “An arbitral award made by an Arbitral Tribunal in Kosovo shall be enforced when declared enforceable by the court”.

Whereas in cases when the arbitration procedures were held outside Kosovo, but the award shall be enforced in Kosovo, courts in Kosovo are obliged to enforce such award. Article 39 of the Law on Arbitration states that: “Kosovo courts shall recognize arbitral awards made outside of Kosovo as effective and enforce them if such awards are recognized and are published as enforced according to paragraph 2 till 5 of this Article”.

Request for the recognition and enforcement of the award should be addressed to the Basic Court in Pristina, Commercial Department. The request for recognition should also include as enclosures the original decision or a notarized copy of the award, a copy of the arbitration agreement, and translation thereof if those documents are not drafted in one of the Kosovo’s official languages.31 If such request is approved, enforcement is the same as in other court cases.

28

Article 36, Law No.02/L-75 on Arbitration.

Law on Arbitration No.02/L-75, see above.

30 Law on Arbitration No. 02/L-75, Article 38 – 40.

31 Law on Arbitration, see above.

29

53

Journal of Altrenative Dispute Resolution in Kosovo

Kosovo has a solid legal framework on arbitration and recognition and enforcement of arbitral awards, being domestic or international. Existence of a solid legal framework means security for the potential users of arbitration in Kosovo (artists, creators, writers, etc.). The question is to what extend is the public and professional community aware of these alternative dispute resolution mechanisms and to what extend they are using these methods32. Apart from the backlog of cases in all court instances, another issue is the public perception about the judiciary system in general. Courts, however, remain the most popular institution to address disputes.

This is so despite the fact that based on many public polls33judiciary is the least trusted institution, and judges are the ones who are less trusted in the justice system. Other reports and researches34 show courts as one institution that is not doing their job in addressing corruption and more serious crime cases35.

Considering all the above, arbitration is certainly the best alternative for dispute resolution, which needs, however, to get more attention and to be used more from parties facing a dispute.

Kosovo institutions need to highlight the importance of arbitration more and encourage private persons and legal entities to use arbitration more often when they face with an IP or other commercial related disputes. General public and professionals need to be educated that such a possibility exists and it is certainly more effective and quicker, particularly when it comes to the recognition and enforcement of the arbitral award. To elaborate the recognition and enforcement of arbitral awards, a case study is elaborated.

Case study The Supreme Court in Kosovo recently ruled on a case regarding recognition of an arbitration award36. Claimant in this was a European Union based company, whereas the respondent a Kosovo state owned entity. The arbitral award was issued in 2013 by the International Chamber of Commerce/International Court of Arbitration. According to the request for recognition and enforcement of the arbitration award, the Basic Court in Pristina, Commercial Department, approved in its entirety the claimant’s request. Respondent appealed the decision before the Kosovo Court of Appeals.37 Court of Appeals refused the appeal of the respondent since, according to their reasoning, there were no ground for the appeal, and, therefore, reinforced the decision of the first instance court. The respondent used the so�called revision procedure to 32

See below responses from questionnaire. http://justice.public-communication.net/polling-reports-on-kosovo-criminal-justice-system/ 34 http://www.kdi-kosova.org/index.php?fq=6 35 http://kli-ks.org/korrupsioni-ne-kosove-luftimi-apo-promovimi-i-korrupsionit-2/ 36 Supreme Court of Kosovo, case No.E.Rev.Nr.28/2015. Since we did not get permission from parties in this case, we cannot mention the names of the Company.

37 Case No. Ae.no.129/2014.

33

54

Volume 2

bring the case before the Supreme Court. The revision request was based on the alleged breach of the procedural and substantive law and, accordingly, respondent asked the court to cancel the decisions of both instances and remand the case for reconsideration. The Claimant certainly objected this revision request as completely ungrounded.

The Supreme Court decided that the revision request should not be allowed. The decision was based on the Law on Arbitration, articles 38 and 39, concluding that the said law does not allow for appeals against decisions for the recognition and enforcement of arbitral awards, and that general articles of the contested procedure are not applicable to this specific procedure.

The decisions of all instance courts are absolutely correct and in line with the highest standards in the field. The Supreme Court decision is a very good example to be followed in the future.

This decision can be used in the future as a judicial practice and can be used by lawyers, as a lesson learned for them, but also to educate their clients in the importance of the recognition and enforcement of foreign arbitration awards. This case can also be used as a good example to show investors that Kosovo Courts are reliable and willing to work on recognition and enforcement of arbitration awards.

55

Journal of Altrenative Dispute Resolution in Kosovo

Court Structure in Kosovo Commercial Department of the Basic Court of Pristina38 has the competence to hear and decide on intellectual property related cases. This is a new competence introduced to Kosovo’s legal system. This department is facing different challenges as far as the handling of IP related cases is concerned. Based on the information collected by an interview with a commercial department judge, Mr. Murat Paqarada39, the following are the main challenges that court is facing when handling intellectual property cases: lack of expertise among judges as well as lack of knowledge among the parties themselves.

Intellectual Property Cases in Arbitration – Benefits As previously mentioned, compared to litigation, arbitration has numerous benefits. One of the first reasons why most of us do not turn to courts is the delay in having our case decided. This is mostly because of the backlog that Kosovo Courts have been facing and “backlog” means over 400,000 cases not being treated for two years.

When measuring court efficiency, we take into consideration the timeframes and the quality offered, as a result of which we get the number of cases solved per year versus the cases received during that same period of time. Handling cases with an unprecedented delay certainly damage not only the parties to the dispute, but also the judiciary performance as a whole. As a party, being a plaintiff or a defendant you are derived from the principle of solving a case within a reasonable time, not to mention that it is very likely that your evidences are lost or damaged by the time of decision. On the other hand, the judicial system will always be categorized as non‐ efficient. Most importantly, citizens will have no faith in judiciary.

The table below shows the statistics on the backlog of cases in the entire country, through 1999‐ 2015 – although the 2015 cases are not to be considered as backlog. These statistics have been collected by the Statistical Department of the Kosovo Judicial Council.

38 39

Article 13, par. 1.5, Law on Court, see above.

Interview conducted by authors of this paper as a part of the research, dated: 19th of May 2016.

56

Volume 2

Serious Crimes

Criminal

Juvenile

Civil

Economic

YEAR

1999 3 0 0 5 2000 16 8 2 9 2001 27 11 0 30 2002 41 14 0 52 2003 71 19 0 89 2004 88 34 0 538 2005 221 141 0 535 2006 257 648 5 771 2007 312 480 21 1060 2008 199 280 4 1316 2009 115 307 3 1167 2010 128 553 3 1587 2011 178 1412 11 2524 2012 287 3617 32 4715 2013 1282 6841 65 6254 2014 886 8731 193 8929 2015 1439 15405 367 11354 TOTAL 5550 38501 706 40935 Kosovo Judicial Council, Report on Backlog cases up until 31.12.2015

0 0 0 0 0 0 0 0 0 0 0 0 0 10 147 440 562 1159

Administrati ve

0 0 0 0 0 0 0 0 0 0 1 7 33 173 699 2214 2253 5380

As seen from the above statistical table, there are commercial related cases, IP cases belonging to this group of cases that are four years old.

When measuring the court efficiency, we took into consideration not only the timeframe to have a case decision, but also the quality of the decision. What do we intend when we mention “qualitative justice”?

Several indicators can be positioned as a puzzle in order to create the big “qualitative justice” picture. These indicators are, for instance: -

A specialized lawyer;

-

A specialized judge;

-

Fewer expenses.

It is really unfortunate, but intellectual property is still being considered as a new topic in Kosovo, immediately giving the answer to the question on the level of specialization of a judge or lawyer in IP. Historically seen, however, during the time of Yugoslavia, Kosovo was positioned quite well in this area. Not only laws were in place, but also the collective association such as Sokoj (Serbian Organization for Musician Authors) was very effective in administering the authors’ rights. After the war of 1999 this regime stopped covering the territory of Kosovo and for several years afterwards, Kosovo did not have the legislative infrastructure in place.

57

Journal of Altrenative Dispute Resolution in Kosovo

The government of Kosovo for years had other priorities. IP protection and enforcement was barely seen in the government to do lists before it was raised as an issue in the EU Progress Reports. In 2010, the Kosovo government approved the National Strategy in Intellectual Property, which provided a list of activities with the purpose of increasing human and technical capacities as well as strengthen the cooperation among the enforcement institutions 40.

Following the adoption of the Strategy, the Kosovo government reached an agreement with the court representatives, whereby courts would offer priority to IP related cases and place them in a course of three months from the date of receiving the case.

With the purpose of analyzing the handling of copyright related cases by courts, we performed an interview with a judge from the Prishtina Basic Court, Department of Commercial Matters, Mr. Murat Paqarada41. From the interview, we found out that there is only one copyright related case pending decision before the court.

In the referenced case,42 the plaintiff filed a damage claim in the value of 100,000.00 EUR because of the copyrights infringement against the defendant, which is a publishing/printing house. To get more information, we have been in contact with the owner of the printing house, in this case the defendant43 who provided us with the facts of this case.

The authorized representative of the family of a deceased author approached the publishing/printing house in 2005 and authorized the compilation and publication of the work of the deceased. So, the parties agreed that the printing house publishes the work of the deceased author. The publishing house claims to have properly paid the family of the deceased author for the transfer of publishing rights to them.

On July 11, 2013, the family of the deceased author filed a copyright infringement lawsuit claiming that their copyrights as successors have not been respected, and as such they asked the court to grant damages in the amount of 100,000.00 EUR. In the first instance court issued the decision on January 30, 2015 refusing the copyright infringement claim on the basis of Article 1, paragraph 2 and Article 2 of the Law on Inheritance.

Because the decision was found to have breached some procedural rules, the Appeal Court remanded the case back to the first instance court, and the case is pending a second decision for three years now.

To understand how the parties feel about the handling of the case by the court, we contacted the printing house, which was the defendant in this case. When asked about the approach of judges 40

National Strategy in Intellectual Property 2010-2014, Republic of Kosovo.

Interview conducted by authors of this paper as a part of the research, dated: 19th of May 2016.

42 C.Nr.295/2013 43 Because this case is still not closed, we are referring to parties as anonymous.

41

58

Volume 2

towards this case and IP in general, the representative of the printing house said that it was not of the most satisfactory level; however he admitted that judges are trying. In his opinion, it would be advisable to have a specialized IP unit within the Commercial department.

Without any prejudice with regards to the handling and decision in the above referenced case, it would be unrealistic to expect miracles from judges when faced with an IP related infringement case. Namely, according to a USAID report44, there is no criterion when assigning a case to a judge. The case is usually assigned to a judge who is more comfortable to handle the case and based on their previous experience with similar cases. However, being aware that there are not many copyright infringement cases or IP infringement cases in general, one cannot expect that the deciding judge be at a satisfactory level with regards to the knowledge of the law. One additional factor that may contribute to the lack of expertise among the relevant enforcement institutions is exactly the university curricula. IP class was put in the university curricula only recently.

The situation is not that different among the lawyers. To become a lawyer, one should pass the Bar Exam, which consists of the written and oral part. However, IP law is not asked in any of these parts, expect as an area of law belonging to commercial law in general. That is, no particular specialization is required in order to practice law and register as an attorney at law with the Kosovo Chamber of Attorneys.

Having said that, it can easily be concluded that the courtroom is not the wisest choice to make.

Therefore, authors should think of following another, more suitable, alternative dispute resolution mechanism. From a quick review of the professional background of the 27 Arbitrators listed in the Kosovo Tribunal of Arbitration, 14 of them have Commercial Law and/or Intellectual Property listed as their fields of specialty45. Based on the Rules of Arbitration in Kosovo, parties can themselves propose another person as Arbitrator – outside the list of arbitrators published in the Tribunal, giving authors even more space to have a specialized person deciding their case.

Another factor that authors should consider when choosing the resolution method, is the estimated costs to be incurred. In a number of situations, arbitration is less expensive than court litigation. The table below shows the fees to be incurred in the course of both procedures. At first, both fees are approximately of the same amount. However, the representation fees in arbitration are approximately 600 EUR for disputes worth above 10,000€. On the other hand, the representation costs in court litigation remain 270,40 € per session, which depending on the number of parties and the lawyer’s recognition, can be increased up to 811.20€.

44 45

USAID’s Justice System Strengthening Program, Stocktaking Report. http://www.kosovo-arbitration.com/lista-e-arbitrave 59

Journal of Altrenative Dispute Resolution in Kosovo

The costs in the arbitration procedure are governed by the Decision on Costs of Proceedings46 based on which the registration fee for arbitration proceedings is: a) 250 EUR if the amount of the dispute is less than 100.000 EUR, and b) 500 EUR if the amount of the dispute is more than 100.000 EUR. If the case were to be decided by a single arbitration, the arbitrator’s fees shall be calculated in accordance with the following: Equivalent value of the subject of the dispute in EUR From A To B 5,000 20,000 50,000 100,000 500,000 2,000,000 5,000,000 10,000,000 Over 20,000,000

Amount of fees: base C and percentage D for the amount in excess over A – in EUR Base C % D 600 600 7 1,650 5 3,150 3 4,650 1,5 10,60 1 25,650 0,5 40,650 0,4 55,650 0,1 65,650 0,05

5,000 20,000 50,000 100,000 500,000 2,000,000 5,000,00 10,000,000 20,000,000

For comparative purposes, below are the fees of an attorney at law as per the tariffs on civil procedures47: Type of submission

Matter value

Dispute – low value Claim‐ Request Dispute – big value Representation in low value disputes (per session) Representation in disputes in which the value of the dispute exceeds the small context up to 10.000€ Representation in disputes in which the value of the dispute exceeds the value of 10,000€

Basis

Clause for over 50%

Lump sum 30%

Total:

60 €

18 €

78 €

80 €

24 €

104 €

60 €

118 €

23,40 €

101,40 €

80 €

34 €

31,20 €

135,20 €

160 €

48 €

62,40 €

270,40 €

It is worth mentioning that the above fees are the minimum fees. Hence the parties can agree with their representatives that these fees to be increased, depending on the quality of the work and the volume of the engagement. The Tariff Act also specifies that for the representation of 46 47

Kosovo Permanent Tribunal of Arbitration, Decision on Costs of the Proceedings Extract from the Kosovo Lawyers Tariff 60

Volume 2

the second party, the remuneration raises up to 50% for each party – reaching the value of 405.60€ and can also reach the amount of 300% specifically 811.20€48.

Research Findings Thus, in order to get the opinion of the authors themselves and that of other interested parties, we have conducted a research, the findings of which are presented in this section.

The respondents were mostly of artistic (writers, musicians, producer, photographer, graphic designers), legal and IT professional background. Despite the fact that the majority are holders of authors’ rights, they have only basic knowledge on their rights as authors, mostly gained through media and the Copyright law in Kosovo. This outcome is also evident from the mere fact that a number of the respondents were of the opinion that ideas are protected by the law on copyright.

Interesting answers were given to our question: “Is there any case where your right as an author has been infringed, specifically, is there any case where your work has been used without your permission? If yes, what was your reaction?” Some of these answers are presented below: 

“My author’s rights have been infringed several times, and most of the times I have not taken any actions, as there is no benefit out of it. There have been cases where I have raised my concerns to the infringers themselves, and received not even an apology. The most bizarre of all is the fact that when my book with a topic in Public Relations has been used without my permission, I have consulted several lawyers and none of them were specialized or had basic knowledge on copyrights, therefore, I gave up from my rights.”



“Yes, my author’s rights have been and are being misused, and this is done mostly by the media themselves, which should be the ones knowing these rights the best. Since after the war, my writings and publications (literary works: poetry, poems, analysis etc.) are being constantly published and re‐published through most of our media with no permission from my side. I have never reacted, as I am aware of the fact that there is no legal mechanism to support me, hence I did not have time to waste.”



“My photographs have been used several times by our web portals, never asking for permission. If there is a copyright infringement for a photography used in an international web‐portal, it means that automatically that photography will be out of use

48

Extract from the Kosovo Lawyers Tariff 61

Journal of Altrenative Dispute Resolution in Kosovo

from that portal, whereas here in Kosovo, such infringements are happening continuously despite authors’ concerns and notifications on the infringement.” 

“My photograph has been used by an author as a front page of his book, and when asked to at least provide me with a copy of a book as a present, he refused to do so.” o

“My designs have not been used by others so far, at least as far as Iam concerned.

But to the contrary, I have used other’s work and that being fully conscious, but for several reasons. Starting from the basics, I use design programs without paying for a license though I know that this constitutes an infringement, but there is no other way for me to function. The main reason why I use a program without a license is that our local standards do not allow us such exclusivity.

Buying a licensed program may cost me as much as I pay one or two employees per year, and if I do so, I would have never been able to cover my company’s expenses at the end of the year.

o

Another important element is the way that the working environment treats us, compared to my international colleagues of the same profession, in which case using a program without a license or using another work without a permission or prior agreement is a very shameful act, just as in our environment going to a shop and stealing something, the equivalence is the same. I consider that also the way in which programs and other authors’ works have been presented to us, has impacted the way we use them now. In Kosovo we are used to downloading programs and other works and keep using them without even thinking on how to get the license for it, while in most of other countries, it goes without saying that before using a program you pay for the license.

o

Another situation where we use somebody else’s work without permission are pictures and fonts, and this happens because we believe that Kosovo is a small country, our clients are also small – geographically seen, and we believe that the original (foreign) authors will never get to see our work. Though I had once a case when I downloaded a program, and the company that produced it approached me, emphasizing the need to compensate the damage done to them by downloading the program and using it without a license. We exchanged a lot of emails and at the end because I only used the program twice (and that more for studies), we reached an agreement based on which I would delete the program and not use it anymore without a license.”



“Bardhi Guda: I am a publisher of several dictionaries: In cooperation with famous authors we published the English‐Albanian dictionaries, which were sold at the price of 2500 Lek, around 18 EUR, as well as German‐Albanian dictionaries through two

62

Volume 2

publishing houses. These dictionaries are a result of a long and extensive work, and we as a group were well aware of intellectual property rights as well as obligations based on the law of Albania as there is our hometown since 1994‐1995. But, soon thereafter we started operating in Kosovo and Macedonia also, and that is where we were also interested in IP Laws of these countries. Back on that time, Kosovo was still applying the Yugoslavian law on Copyright. As a publishing house, we were selling our dictionaries to Kosovo clients also, and at some point their request to buy books dropped down. This was the moment that we started thinking that there should be something wrong and came in Kosovo for a visit. When we came here, we realized that our books were being re‐produced without our permission, though they looked the same in the first look, but the quality was lower as well as the price was cheaper. As the burden of proof was on us, we spent much time to collect all the facts and finally achieved to file the claim before the court. We also engaged a lawyer to help us, but because of the complexity of the Yugoslavian law still applicable at that time, he resigned. After this, we also presented our facts to UNMIK, but never heard back.”

It’s interesting to mention the fact that only one of the respondents consulted the Copyright Office for a case of copyright infringement and the same person is in the process of registering his/her work with the Collective Rights Association, so that the management and the enforcement of his rights is done by the association.

The findings of the research show that there are several grounded reasons why authors, who are well aware of their rights, have not taken any actions in case of infringement, and those reasons can be grouped as follows: 

Financial Reasons: No financial capacities, as a lot of money are needed to win a contest.



Social Mentality Reasons: Reacting against copyright infringement can cause enemies; hence no actions have been taken. o

“I wrote poetry for an Albanian soldier, who fought and lost his life in Kumanovo.

I found out that this poetry was being used by one of our famous actors and singers, as a lyric for his song, without my permission. I have never reacted, believing that I would be misunderstood from the public, especially in that time when Kumanovo49 case was still a hot topic”.

49

Beg Riza was one of 40 armed Albanians from Kosovo and Macedonia group who clashed with Macedonian police in 2015 in Kumanovo. The Kumanovo case for Albanian opposition parties in Macedonia was considered to be "a simulation of Macedonian Security Forces to produce a justification to terrorize Albanian population in

63

Journal of Altrenative Dispute Resolution in Kosovo



Legal Infrastructure Reasons: No legal mechanisms or judicial will to fight the ongoing infringements. o

“Being aware of the big amount of cases when books have been photocopied and sold without authors’ consent and prior agreement, and most importantly knowing that such cases took a lot of place in our media, and never an action has been undertaken by the authorities, I considered that reacting against my author rights, would just be a waste of time”.

One of the respondents, who at the same time claims to have been damaged by a newspaper which had his photographs of 1999 used and sold to another newspaper without any consultation, filed a claim with the Basic Court in 2013. However, no decision has been rendered yet.

Respondents’ opinions on addressing courts when it comes to an IP related dispute generally is the same. Most of them would not turn to courts, not that they are not aware that courts are the appropriate authority to bring justice in disputes, but because courts are not efficient and endless time would be needed to solve a dispute.

The rest of the findings show that a court room would be an option only when: 

There is no agreement among the parties to solve the dispute through arbitration;



There is no possibility to solve the dispute through a mutual agreement among parties, through mediation;



Legal consultants advise that a court is the only place to turn to.

Another question raised for the respondents was: “What is your opinion on arbitration procedure, and would you choose arbitration in case of an eventual dispute?” In comparison to the previous section, most of our respondents would not hesitate to go to arbitration to resolve Macedonia trying to identify them with terrorists", while Macedonian opposition parties considered this case "as Government's act to buy time for themselves and to avoid early requested elections".

The same time Macedonian Government authorities considered this case "a terrorist attack of Albanians from Kosovo and Macedonia against security forces of Macedonia aiming to destabilize the state itself". Whereas internationals never qualified it as a terrorist attack not being sure whether this was a game of Macedonian secret service related to so called "bomb cases" when Macedonian opposition party published secret tape recordings of their government high state officials in preparing many similar simulated cases. However there is not a small number of Kosovo Albanians who believed "That those 40 armed people were invited by Kumanova Albanians to protect them from prepared Macedonian Secret Service to massacre those Macedonian Albanians there". Having this in mind many Albanians wrote and devoted to them even artistic stories considering them as heroes. In such an atmosphere for any author fighting for his copyright could be considered "low level" and the average society could consider them kind of a people who want to benefit from the National tragedy"...

64

Volume 2

their IP related disputes. Most of them categorized arbitration as the most efficient and flexible method. It has been considered that even if parties would file an IP infringement claim before the court, and a judge would render a decision, the unsatisfied party would do everything possible to find excuses and not obey with the court decision. The mostly used justifications would be: 

“The court has not analyzed well enough the facts, hence the decision is not adequate”;



“The decision has been taken and the measures have been taken just to comply with international standards and not because they should have really been applicable”.

Some of the respondents would choose arbitration not because of the fact that they know much about it but just to avoid courts. Having said that, it is worth mentioning that the awareness about arbitration and its rules should be in the focus of the Arbitration Tribunal, Kosovo Authorities and National and International donor projects.

In this regard, it is interesting to see the point of view of one of the respondents, who is the only web designer interviewed. When asked whether he would address arbitration or court, he said: “Arbitration, just because it is not named Court.”

“Court would be an option only and only if I would have close connections with the lawyers and judges who would make sure that my time would not be wasted, otherwise, no. Wasting much time in following a case is not a wise choice for me, neither for my company, as whatever the compensation would be, it would be impossible to cover the losses caused by all the time spent running in the court.”

Having in mind the answers given to our questionnaire, there is a need for awareness raising campaigns and the campaign should focus in the following: 

Which cases can be a subject of the arbitration procedure?



How does an arbitration procedure start?



How legitimate and binding is an Arbitration Tribunal award?

There was only one single opinion different from all above described regarding arbitration and that would be cited as follows: “I consider that in Kosovo, Arbitration is not functional. I would choose arbitration only and only in extreme despair.”

The Kosovo Intellectual Property Office as well as the Kosovo Ministry of Culture seems to be considered as the face of this field from our respondents. Only few respondents listed also other public institutions as the ones in charge to protect copyright, such as: Kosovo Police, Customs, Prosecution and Courts.

65

Journal of Altrenative Dispute Resolution in Kosovo

Kosovo has lately signed the Stabilization Association Agreement (SAA)50, which has a special chapter for Intellectual Property, and its Annex VII lists 22 international agreements applicable in this field. When asked whether SAA is considered to be a good instrument in “installing” the obligation to respect the author’s rights, similar responses were given. Moreover, it can be easily said that SAA is also being seen as the last hope to make the war against IP infringement functional, as there is legal adopted and applicable infrastructure, there is also institutional infrastructure and there are authors.

In order to summarize what was elaborated so far, we bring the focus on the core elements of it: Litigation Only 4 judges are engaged in Intellectual Property cases/ Commercial Department of Pristina Basic Court, serving for the whole Kosovo region.

Arbitration AmCham ADR Center has a roster of 41 arbitrator.

27 arbitrators from the list of Kosovo Permanent Arbitration Tribunal can be engaged in Intellectual Property Cases.

New arbitrators can be proposed by parties.

Parties can select the arbitrator to deal with their case in an arbitration procedure themselves.

No backlog at all.

A judge is only assigned by the court to decide on a case, parties cannot select him/her.

The statistics shows that there is a backlog of 1159 cases in the Commercial Department.

Representation for a dispute of 10,000€ can reach the amount of 811.20€ A final court decision is binding for parties.

A court decision has the same power as an arbitration award.

Kosovo citizens have no faith in judiciary.

Representation for a dispute of 10,000€ can reach the amount of 600€ An arbitration award is binding for parties.

The award has the same power as a court decision.

New mechanism, no bad reputation.

50

Stabilization Association Agreement is an international agreement between Kosovo and European Union with a purpose of establishing formal and contractual relations between these two parties which will serve for Kosovo’s membership in EU. 66

Volume 2

Conclusion While preparing this paper, authors have conducted not only desk research but also fieldwork hence allowing them to realize the state of play better and understand the problems from a closer perspective.

It is concluded that for arbitration, there is still a need to put efforts on awareness raising campaigns, though not in the same level with the campaign needed for intellectual property rights.

Based on the interviews conducted, authors strongly believe that Kosovo’s society is easily accepting and acknowledging arbitration, and not only for the advantages of it, but also as a merit of the bad reputation of the judicial system in general.

Â

67

Volume 2

UDC 347.7(083.47)

Recognition and Enforcement of Kosovo made Arbitral Awards in New York Convention countries: A Comparative Study

AnjezĂŤ Gojani*

Abstract Caught in the midst of consistent efforts towards the development of international commercial arbitration in Kosovo, it is inevitable to talk about the elephant in the room. Due to its special status as a country, the Republic of Kosovo is not yet eligible to become a contracting state to the Convention on Recognition and Enforcement of Foreign Arbitral Awards (hereinafter: the New York Convention or Convention).1 This status quo is puzzling, and as such it may introduce legal obstacles to the recognition and enforcement abroad of the arbitration awards rendered in Kosovo.

The objective of this paper is to provide an answer to the following questions: to what extent are Kosovo made arbitral awards enforceable in New York Convention countries; and, from a practical viewpoint does the absence of Kosovo to the New York Convention signatory list present a tangible problem for choosing Kosovo as a seat of arbitration.

The paper will not discuss the legal status of the Republic of Kosovo towards signing international treaties, this being the public international law aspect of the topic. Nor will the paper analyze the issue on the assumption of a handful of countries which might assess that Kosovo has succeeded the convention from the former Yugoslavia. In addition, in absence of legal practice, the paper is confined to a theoretical analysis only.

*AnjezĂŤ Gojani, LL.M., is the Secretary General of the Arbitration Center at American Chamber of Commerce in Kosovo.

1 The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958), available at http://www.newyorkconvention.org/english

68

Volume 2

I.

Introduction

The development of commercial arbitration in Kosovo, and the efforts in promoting the country as <<arbitration friendly>> are not rarely perceived as ambiguous with regards to the last loop of the cycle, namely the recognition and enforcement of arbitral awards rendered in Kosovo as a seat of arbitration and which seek enforcement abroad. It is apparent that the potential users of arbitration in Kosovo have the perception that the awards originating from the country would not be recognized and enforced in other jurisdictions. This is due to a set of obstacles: firstly, the current non‐ability of Kosovo to become a contracting state to the New York Convention, and secondly, due to the non‐recognition of Kosovo statehood. And perhaps rightly so. The legal certainty in enforcing arbitral awards is distinguished as the one crucial element to be assessed by the parties when selecting international arbitration as a dispute resolution mechanism.

This paper will first provide a brief overview of the national legislation related to the recognition and enforcement of arbitral awards in Kosovo, namely the treatment provided by the applicable arbitration legislation to foreign arbitral awards that seek enforcement in Kosovo.

The focus of the paper will be the individual approach of several New York Convention signatories towards enforcement of arbitral awards rendered in non‐Convention states.

Although a mere review of respective national legal provisions will not allow for a comprehensive assessment, it will certainly provide an estimate of the level of risk (if such risk exists at all) in choosing Kosovo as a seat of arbitration, should the award be bound to enforcement abroad.

II. Arbitration in Kosovo Kosovo has a Law on Arbitration 2 that governs arbitration proceedings, including the recognition and enforcement of arbitration awards. The legislator has chosen to explicitly mention European and international arbitration standards within the preamble.3 It can be safely assumed that the adoption of these standards is obvious for two of the most celebrated legal texts of the field, the UNCITRAL Model Law on International Commercial Arbitration4and the New York Convention.

The law is a separate piece of legislation as opposed to many countries which have chosen to regulate this area within their civil procedure codes, and it addresses both, international 2

Kosovo Law on Arbitration No. 02/L-75.

Ibid., the preamble to the Law on Arbitration states the following: “…For the purpose of establishing a set of modern rules, that govern arbitration and the recognition and enforcement of arbitration awards made inside and outside of Kosovo, and that are in line with recognized European and international arbitration standards.”

4 UNCITRAL Model Law on International Commercial Arbitration (1985), with amendments as adopted in 2006, available at http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.html 3

69

Journal of Altrenative Dispute Resolution in Kosovo

commercial arbitration and domestic arbitration. During the drafting process the legislator has relied heavily on the provisions contained in arbitration laws of countries with well‐developed commercial arbitration systems, including the German5 and Austrian6 arbitration acts. Also, with several modifications, the law mainly embraces the provisions of the first version of Model Law of 1985, as a set of rules committed to the entire arbitral process. Lastly, the law has copied almost entirely the provisions of the New York Convention, the grounds for refusal of recognition and enforcement of arbitral awards, and the form requirements therein.

i) Recognition and enforcement of domestic arbitral awards in Kosovo The last step in the procedure after the arbitral tribunal has rendered a final award is enforcement. This being said, the recognition and enforcement procedure becomes of particular importance when a party does not voluntarily comply with the final arbitral award. The respective provisions of the law on recognition and enforcement make a distinction between domestic awards and foreign awards.

The procedure for recognition and enforcement of domestic awards is straightforward. The law does not make reference to the recognition itself, thereby implying that the recognition is immediate and informal, undergoing a non‐contested procedure.7 As for the enforceability of the award the procedure is simple – there should be no grounds for setting aside the award and the arbitral award or a certified copy of it shall accompany the request. To date, the national courts have not faced many situations of enforcing domestic arbitral awards, mainly due to the mechanism being a novelty within the legal system of the country.

It is also unfortunate that, for the purposes of legal research, the access to court documents for a number of domestic arbitrations already conducted is a rocky road to follow. The access to such decisions is crucial in order to create an idea of the level of understanding of judges and their legal awareness in reaching decisions on recognition and enforcement. The approach of judges towards domestic arbitral awards may, by reference, present a good indicator of their approach towards foreign arbitral awards. ii) Recognition and enforcement of foreign arbitral awards in Kosovo Aside from domestic awards, the law also addresses the recognition and enforcement of foreign arbitral awards. Although it does not define a foreign arbitral award, the title of Article 39 5

Code of Civil Procedure (Bundesgesetzblatt (BGBl., Federal Law Gazette), as promulgated on Dec. 5, 2005.

Austrian Code of Civil Procedure, RGBl. Nr. 113/1895 as amended by the 2013 Amendment to the Austrian Arbitration Act -“SchiedsRÄG 2013”, BGBl. I Nr. 118/2013 in force as of 1 January 2014.

7 Ibid., Art. 38(1).

6

70

Volume 2

implies that any award made outside Kosovo is considered as foreign. Hence, the legislator distinguishes the seat of arbitration as the determining factor for the nationality of the award.

Article 39 stays entirely within the framework of the New York Convention. The following paragraph is one of the peculiarities of the law:

â&#x20AC;&#x153;Kosovo courts shall recognize arbitral awards made outside of Kosovo as effective and enforce them if such awards are recognized and are published as enforced according to paragraph 2 till 5 of this Article.â&#x20AC;?8

It is evident that by enacting the said provision, Kosovo has ensured that all foreign arbitral awards are recognized. In fact, the content of this article can easily be considered as a de facto reciprocity clause. While in determining the nationality of the arbitral award the place of rendering the award is conclusive, Kosovo does not impose any restrictions whatsoever. To this end, any foreign award will be recognized and enforced provided the grounds for dismissal are not satisfied.

In further glace of the same article, it is evident that the Article IV of the Convention regarding provisions on the request for recognition and enforcement, Article V (1) on grounds for refusal of recognition and enforcement which may be invoked by the parties, as well as Article V (2) on ex officio grounds for refusal of recognition and enforcement have been adopted within Article 39 of the law.

Although the law does not expressly refer to the New York Convention, as for instance the German Code of Civil Procedure, it basically follows the same grounds and form requirements.

With this approach the legislator has made a de facto unilateral accession to the convention.

According to Article 39(4), the grounds for dismissal of recognition and enforcement are:

a) a party to the arbitration agreement, under the law applicable to this agreement, did not have the capacity to act; or the arbitration agreement was not valid under the law determined as applicable by the parties or, in the absence of such determination, under the applicable law in the territory where the award was made; b) the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present its case; c) the award deals with an issue not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that if the decisions on matters submitted to arbitration can be separated from those not 8

Ibid., Art. 39(1).

71

Journal of Altrenative Dispute Resolution in Kosovo

so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; d) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the law applicable to it; and e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the territory in which, or under the law of which, the award was made.

Based on the above, the only minor distinction with the language of the convention is to be found in subparagraph (d), a distinction which is of no material significance. The convention uses the following language when defining subparagraph (d):

â&#x20AC;Ś the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place.9

Apart from the above grounds for dismissal which can only be invoked by the party against whom the recognition and enforcement is sought, Kosovo local courts may ex officio refuse recognition and enforcement under two situations: first, if the dispute is not capable of settlement by arbitration under the law applicable in Kosovo, and second, if such recognition and enforcement would be contrary to the public policy of Kosovo.10 Again, the local law has adopted entirely Article V(2) of the Convention.

Furthermore to the above, the law combines the provisions of the Model Law and the provisions of the Convention when setting the form requirements and the procedure for recognition and enforcement. The following documents should be submitted when the request for recognition and enforcement of an arbitral award is filed:

a) the authenticated original award or a duly certified copy thereof; b) the original arbitration agreement or a duly certified copy thereof; and c) a duly certified translation of the arbitration agreement and the arbitral award into an official language of Kosovo if the award or agreement is not made in an official language of Kosovo.11

In a strict reading of the above one can apprise that the requirement of the original award or the certified copy of it corresponds to both the Model Law and the New York Convention while the requirement of providing the original arbitration agreement corresponds to the New York Convention. Also, the certified translation requirement is adopted from the Model Law. The idea 9

New York Convention, Art. V(1)(d).

Kosovo Arbitration Law, Art. 39(5).

11 Ibid., Art. 39(3) 10

72

Volume 2

behind this distinction is to demonstrate that the law does not impose more onerous conditions than most domestic laws of other countries, the Model Law, or the New York Convention, for parties seeking recognition and enforcement of a foreign award in Kosovo.

III. The New York Convention Years ago, it was rightfully said that the enforcement of an arbitral award is the “weakest link in the entire chain of international dispute resolution”.12 Currently, in a span of fifty‐seven years, there are 156 parties13 to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. The last country to accede was Andorra in 2015.14 With this number covering the vast majority of independent countries, this weak link is slowly closing down, therefore continuously contributing to further developing international arbitration into the preferred dispute resolution method. Nonetheless, there are still a handful of countries which subject to a range of reasons remain non‐signatories to the Convention, Kosovo is included.

The idea behind the New York Convention, back in its drafting days was to facilitate the recognition and enforcement of arbitral awards, mainly because this process included the involvement of national courts, thus making room for potential barriers in enforcement. This legal uncertainty was gradually altered by the number of countries which adhered to the Convention, thereafter contributing to further development of international commercial arbitration.

For the purpose of this discussion, the most relevant part of the Convention is the provision, which provides for the scope of the Convention, and the nationality of awards that fall within the scope of this Convention. According to Article I (1), the Convention applies to all foreign awards, namely the arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such award is sought.

In terms of its scope, for countries that wished to limit the application of this Convention, it provides two reservations, namely: “When signing, ratifying or acceding to this Convention, or notifying extension under article Ⅹ hereof, any State may on the basis of reciprocity declare that it will apply the Convention to the recognition and enforcement of awards made only in the territory of another Contracting State. It

12

Marc Blessing, “The New York Convention: the major problem areas”, New York Convention of 1958, ASA Special Series No. 9, 1996, at p. 20.

13 At the time that this article is being written, the official web page of UNCITRAL available at http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention_status.html provides that there are 156 signatory countries.

14 The Convention has entered into force for Andorra on September 17, 2015.

73

Journal of Altrenative Dispute Resolution in Kosovo

may also declare that it will apply the Convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the national law of the State making such declaration.”15

The latter reservation is the so‐called the “commercial reservation”, which is not of relevance to the arguments of this paper. The countries that have opted in to this reservation will refuse recognition and enforcement of a foreign arbitral award if the dispute is not commercial under the national law of the country where enforcement is sought.16 Thus, it all amounts to the nature of the dispute, making this reservation of a rather substantive kind. i) Reciprocity reservation The reciprocity reservation17 limits the Convention’s scope of application to foreign arbitral awards made in the territory of one of the contracting states of the Convention, thereby ruling out its application to foreign awards which are rendered in non‐signatory states. Redfern et. al. have maintained that this limitation is becoming a relic, therefore the restrictions posed by it should not be exaggerated. The rationale of this statement lies on the fact that the number of countries that are adopting the convention is growing year by year, therefore linking the major trading nations and diminishing the significance of this reservation.18

Forasmuch as the latter displays the reality it is not the reality which applies to awards rendered in Kosovo. The country is not in a position to adhere to the Convention, yet more than half of the signatories to the New York Convention still apply the reciprocity reservation.

The question that arises here is whether under these circumstances Kosovo made awards will risk finding the proper enforcement forum abroad? A general answer could point out the fact that the non‐application of the New York Convention does not imply a per se refusal of recognition and enforcement of an award of this origin. Rather, the enforcing state will enforce the award based on a different legal instrument, including the national law which sometimes contains more favorable provisions or other treaties and conventions.

ii) More favorable national law provisions

15

New York Convention, Article I(3).

New York Convention, Art. I(3).

17 Ibid.

18 Alan Redfern; Martin Hunter; Nigel Blackaby; Constantine Partasides “Law and Practice of International Commercial Arbitration” (2004), Ed. 4, at p. 442.

16

74

Volume 2

In line with the previous paragraph, parties looking for the enforcement of an arbitral award are allowed to shop amongst the New York Convention, the national law, or other treaties and conventions. With the influence of the New York Conventions, this might be rarely relevant.

Nevertheless, the freedom of choice becomes particularly relevant for awards that cannot be enforced under the convention.

According to Van den Berg, the rationale of the drafters of the New York Convention went beyond the establishment of a uniform regime of recognition and enforcement of arbitral awards, heading towards facilitating recognition and enforcement of foreign arbitral awards through allowing the application of national law or other treaties which might make this process easier.19 This is embodied within Article VII (1) of the Convention, also known as the more favorable right provision: … The provisions of the present Convention shall not affect the validity of multilateral or bilateral agreements concerning the recognition and enforcement of arbitral awards entered into by the Contracting States nor deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law or the treaties of the country where such award is sought to be relied upon.

The choices offered by the provision range between the national law of the enforcing country or other treaties in force, both bilateral and multilateral treaties. It will be assumed here that for the most part, Kosovo made arbitral awards will have to choose the domestic law of the country of enforcement, considering the absence of bilateral treaties of this kind, but also the controversial applicability of other multilateral treaties.

IV. Enforcement of Kosovo‐made arbitral awards in New York Convention jurisdictions In consideration of the fact that there are no clear precedents, mainly due to a low number of arbitration awards made in Kosovo and seeking enforcement, a degree of uncertainty to the idea of arbitrating in Kosovo is certainly present. For this reason, it is of interest to analyze the approach taken by the legislation regarding the matter at stake of a range of countries which currently are and could be potential trade partners with Kosovo, namely the European Union member states and Turkey.

19

Albert Jan van den Berg, “The New York Convention of 1958: An Overview”, p. 21, available at http://www.arbitration-icca.org/media/0/12125884227980/new_york_convention_of_1958_overview.pdf

75

Journal of Altrenative Dispute Resolution in Kosovo

At the time of this paper, out of twenty‐eight EU member states which are contracting states to the Convention, eighteen of them still have a reciprocity clause in force. The following paragraphs will present an overview of the relevant legislation of twelve EU member states and Turkey. From a practical viewpoint, for nine out of thirteen countries presented below which have adhered to the reciprocity clause, an interested party will have to assess whether arbitrating in Kosovo presents a risky legal move. Save for Greece, all other countries which are presented below have recognized Kosovo statehood.

Austria The Austrian Code of Civil procedure explicitly refers to the New York Convention whereas it also cross refers to the relevant provisions on the recognition and enforcement of foreign arbitral awards, within Exekutionsordnung, the Austrian Enforcement Act.20 The legislator here was originally a pro reciprocity party. Nonetheless, in 1988 it withdrew from this reservation.

Hence, if hypothetically the reciprocity reservation would still be in force, one has to search for other instruments which provide sufficient legal basis for recognition and enforcement of non‐ convention arbitral awards. In this line, the country is a party to a number of international treaties and conventions that could eventually provide enough scope for enforceability of a foreign so called non‐convention award. Such instruments include the Geneva Convention on the Execution of Foreign Arbitral Awards, 21 the European Convention on International Commercial Arbitration,22 as well as the Convention on the Settlement of Investment Disputes between States and Nationals of other states (“the ICSID Convention”).23 Thus, in absence of applying the New York Convention, a common ground for Austria and Kosovo could be the ICSID Convention. The Republic of Kosovo is a party to this convention, which has entered into force in 2009. Unsuitably, an arbitral award may not always fall within the scope of this convention, as not every dispute can qualify as an investment dispute ‐ bound to be arbitrated in accordance with ICSID arbitration mechanism.

20

Austrian Code of Civil Procedure, RGBl. Nr. 113/1895 as amended by the 2013 Amendment to the Austrian Arbitration Act -“SchiedsRÄG 2013”, BGBl. I Nr. 118/2013 in force as of 1 January 2014.

21 The entry into force of the New York Convention was intended to replace this convention. Thus, the New York Convention states which are also signatories to this treaty can no longer apply the Geneva Convention; see New York Convention, Art. VII(2) 22 European Convention on International Commercial Arbitration (1961), United Nations Treaty Series, Vol. 484, p. 349.

23 Convention on the Settlement of Investment Disputes between States and Nationals of other states (Washington), in force as of October 14, 1966.

76

Volume 2

Further to the above, an important treaty to be recognized here is the bilateral agreement with Austria on Promotion and Protection of Investments.24 This agreement is commonplace between countries and does indeed favor arbitration as an alternative dispute resolution method in the event of a dispute between the two. Nonetheless, the content of the agreement, once more, confirms the importance of the New York Convention in international arbitration.

Article 16 of the agreement, which can be perceived as safeguard recognition and enforcement clause, maintains that: â&#x20AC;&#x153;Any arbitration under this Part shall, at the request of any party to the dispute, be held in a state that is party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards signed in New York on 10 June 1958. Claims submitted to arbitration under this Part shall be considered to arise out of a commercial relationship or transaction for purposes of Article 1 of the New York Convention.â&#x20AC;?

Based on the above, one can safely conclude that the risk of refusal of recognition of awards in investment disputes between the two countries can be avoided.

Despite the existence of ICSID and the aforementioned BIT, the question of enforcing Kosovo made arbitral awards in Austria (excluding investment disputes) becomes easier with the lack of the reciprocity reservation. This context implies that Kosovo awards will be enforced in Austria within the scope of the New York Convention, and will be treated as equal to arbitral awards from signatory countries to the Convention.

Belgium Belgium has adopted one of the two reservations provided within Article I (3) of the Convention.

This country, which has ratified the Convention in 1975, has declared that it will apply the Convention to the arbitral awards which has been made only in the territory of another contracting state. Thus, at the outset, the reservation might be perceived as a harsh limitation to enforcement of awards of a different origin.

Nonetheless, should it not be possible to apply the convention, the recognition of the awards of this decent shall be based on the relevant rules of the Belgian Judicial Code.25 The rules of the code26 on the application of foreign awards have a similar content to the provisions on the 24

Agreement between the Government of the Republic of Kosovo and the Government of the Republic of Austria on Promotion and Protection of Investments, ratified on February 16, 2010, available at http://www.mfa-ks.net/repository/docs/Marrveshja_Ks-Aus_(anglisht).pdf 25 Belgian Judicial Code (Code Judiciaire), September 1, 2013.

26 Ibid., Art. 1719 through 1723.

77

Journal of Altrenative Dispute Resolution in Kosovo

recognition and enforcement of domestic awards. Thus, in consideration of the fact that these rules do not provide more onerous conditions, the parties are in the position to choose the more favorable provisions for enforcement â&#x20AC;? the Convention or the national law.

Apart from being a signatory of the New York Convention as the most famous instrument of this kind,27 Belgium and Kosovo have signed a bilateral investment treaty in 2010.28 Similar to the bilateral treaty between Kosovo and Austria, the provisions of this treaty request that any arbitration arising out of it should be held in a New York Convention country.29 Thus, the current treaties which might seem relevant to this paper are classic BITs by nature hereby not remotely similar to a bilateral treaty on recognition and enforcement of arbitral awards.

Based on the above, and in consideration of a lack of a bilateral treaty for the purpose of the recognition and enforcement proceedings, all requests for recognition and enforcement of Kosovo made arbitral awards in Belgium can be based on the legal provisions of the Belgian Judicial Code.

Bulgaria When Bulgaria became a party to the New York Convention in 1962, the country adopted the Article I (3) reciprocity reservation. Facing this circumstance, a request for recognition and enforcement of a nonâ&#x20AC;?convention award shall be based on a different legal instrument. Hence, a party in possession of an arbitral award from a nonâ&#x20AC;?convention country to be enforced in Bulgaria should request the latter based on the respective provisions of the Private International Law Code.30

These provisions are somewhat similar to the content of the New York Convention, and refusal of recognition and enforcement may be granted only if one of the conditions within Article 118 through 120 has been satisfied.31

Bulgaria is also a party to the European Convention on International Commercial Arbitration and the ICSID Convention. The former does not apply to Kosovo, whereas the latter may only apply to recognition and enforcement of ICSID awards pertaining to investment disputes.

27

Belgium is also a party to the European Treaty on International Commercial Arbitration (1961).

Agreement between the Government of the Republic of Kosovo and the Belgium-Luxembourg Economic Union on the Reciprocal Promotion and Protection of Investments, available here http://www.mfaks.net/repository/docs/Marrveshja_Ks-Belgjike018_(anglisht).pdf 29 Ibid., Art. 12(3).

30 Bulgarian Private International Law Code, in force as of May 17, 2005.

31 Ibid.

28

78

Volume 2

Croatia As opposed to the countries discussed above, Croatia is one of the few signatories to the New York Convention which has adhered to both, the reciprocity reservation and the commercial reservation. This approach may be perceived as hostile to Kosovo made arbitral awards.

However, because the Convention will not apply to the latter awards, the Croatian Law on Arbitration provides fallback provisions on the enforcement of non‐convention awards.

According to Article 40(1) of the Croatian Arbitration Law, there are three grounds for refusal of recognition and enforcement of foreign awards, namely 1) the opposing party is able to prove reasons prescribed in the Croatian Arbitration Act for setting aside the award, 2) the award is still not binding on the parties; or 3) the court at the seat of the arbitration has set aside the award or suspended the effectiveness of the award.32

Czech Republic Czech Republic to day continues to apply the reciprocity reservation of Article I (3), thereafter strictly applying the Convention only to the arbitration awards made in a signatory country. As the circumstances dictate, if a Kosovo made arbitral awards is seeking enforcement in Czech Republic, the party should turn to the Private International Law Act.33

In this regard, in comparison to the national legislation of the countries discussed above, this act is peculiar in one aspect of it. Article 120 reads as follows: “The arbitral awards issued in a foreign country will be recognized in the Czech Republic as the Czech and enforced arbitral awards, if reciprocity is guaranteed. Reciprocity is considered to be guaranteed also in the case that one state declares generally foreign arbitral awards enforceable under the condition of reciprocity.”34

It is evident that, Czech legislation is rather restrictive, as it uses “double‐reciprocity”. Based on this, an award which does not fall within the scope of the Convention might also not be eligible for recognition if the country of origin does not declaratively guarantee enforcement of all foreign awards. In this sense, Article 39 of the Kosovo Law on Arbitration can be invoked as the reciprocity clause of the country of origin of the arbitral award. Absent precedent, one can only assume that Czech courts will recognize the latter as a declaration of reciprocity.

32

Arbitration in Croatia, by Hrvoje Bardek (CMS), p. 258, available at https://eguides.cmslegal.com/pdf/arbitration_volume_I/CMS%20GtA_Vol%20I_CROATIA.pdf 33 Czech Private International Law Act, in force as of January 1, 2014.

34 Ibid.

79

Journal of Altrenative Dispute Resolution in Kosovo

France France is one of the countries that have adhered to the reciprocity reservation. Despite this, through its national legislation, France has decided to offer more favorable provisions on recognition and enforcement of foreign awards. This legal regimen is the ultimate alternative to recognition and enforcement of arbitral awards rendered in Kosovo.

According to Article 1520 of the Code of Civil Procedure,35 an arbitral award can be refused recognition and enforcement when: (1) the arbitral tribunal wrongly upheld or declined jurisdiction; or (2) the arbitral tribunal was not properly constituted; or (3) the arbitral tribunal ruled without complying with the mandate conferred upon it; or (4) due process was violated; or (5) recognition or enforcement of the award is contrary to international public policy. These grounds are less burdensome if compared to the content of Article V of the New York Convention.

Because of the above, the significance of the reciprocity reservation in France has vastly diminished, to the extent of being of no practical significance. This stance of the French legislation and its application of the national courts ensure that an arbitral award rendered in Kosovo will not be denied recognition and enforcement because of its origin.

Germany Germany withdrew the reciprocity reservation in 1998, thereby committing itself to recognizing and enforcing all foreign arbitral awards regardless of their place of origin. As opposed to approach of the previous discussed EU member states, the German legislation is straightforward in the sense that the Code of Civil Procedure solely refers to the New York Convention,36 and does not offer other provisions for the parties to be able to choose. It seems that because of the lack of the reciprocity reservation, the German legislator did not see the need in drafting other provisions for nonâ&#x20AC;?convention awards.

The civil procedure code also de facto refers to Article VII of the Convention, by way of acknowledging that other recognition and enforcement instruments which may be more favorable will not be affected by the Convention provisions. Based on the above, the parties seeking recognition and enforcement of Kosovo made arbitral awards in Germany will not be limited in doing so.

35 36

French Code of Civil Procedure, Book IV â&#x20AC;&#x201C; Arbitration, in force as of May 14, 1981.

German Code of Civil Procedure, Art. 1061.

80

Volume 2

Greece Greece, as one of the countries to the New York Convention has made the reciprocity reservation. The application of the Convention has been allowed through a legislative decree, as an implementing legislation.37 However, in consideration of the reservation, the decree is of no relevance to the arbitral awards originating in Kosovo.

In such scenario, the parties should turn to the Greek Code of Civil Procedure,38 which applies to all foreign awards that are issued by the nonâ&#x20AC;?convention states. In addition, the existence of a precedent of this kind would be of much importance for the purposes of this discussion, mainly because of the stance of Greece towards the statehood of Kosovo and its recognition.

Italy Italy has not adhered to any of the reservations offered by the New York Convention. The implementing legislation of the latter is the Code of Civil Procedure,39 with its relevant section in arbitration. Facing a lack of the reciprocity reservation, the grounds for refusal of recognition and enforcement are the same for all foreign arbitral awards, including Kosovo made awards.

The Netherlands The Netherlands is one of the countries which have declared that it will apply the Convention to the recognition and enforcement of awards made only in the territory of another contracting state, thereby embracing the reciprocity reservation. This circumstance guarantees the nonâ&#x20AC;? application of the Convention to the awards originating in Kosovo.

For the above reason, one should turn to Article 1076 of the Dutch Code of Civil Procedure. This provision intends to regulate recognition and enforcement of awards in cases where no other treaty is applicable. The grounds for refusing such arbitral awards are the following: no valid arbitration agreement under the law applicable thereto exists; the arbitral tribunal was composed in violation of the applicable rules; the arbitral tribunal did not comply with its mandate; the arbitral award is open to appeal to arbitrators or the courts in the country in which the award was made; the arbitral award was set aside by a competent authority of the 37

Legislative Decree 4220/1961, Art. 36, Statute 2735/1999.

See generally Enforcement Of Foreign Judgments And Foreign Arbitral Awards In Greece, by Meidanis Pagoulatos & Associates Law Office, available at http://www.greeklawdigest.gr/topics/judicial-system/item/19enforcement-of-foreign-judgments-and-foreign-arbitral-awards-in-greece 39 Italian Code of Civil Procedure - Book IV, Legislative Decree of February 2, 2006.

38

81

Journal of Altrenative Dispute Resolution in Kosovo

country in which that award was made. The court can also refuse recognition and enforcement if it is contrary to public policy.

Poland Poland is one of the New York Convention signatory countries which have made both of the reservations of the Convention. Thus, similar to the Netherlands and the countries presented above, in absence of application of the Convention, one falls back to the provisions of national law regarding recognition and enforcement of foreign arbitral awards.

In the case of Poland, such provisions are to be found within the Code of Civil Procedure.

According to Article 1214 and 1215 of the code,40 the grounds for refusal of recognition and enforcement are: 1) there was no arbitration agreement, the agreement is not valid, ineffective, or has lost its effectiveness; 2) the party was not given proper notice of the appointment of an arbitrator, or of the arbitral proceedings, or it was otherwise unable to present its case before the arbitral tribunal; 3) the arbitral award deals with a dispute not covered by or beyond the scope of the arbitration agreement; 4) the composition of the arbitral tribunal or the arbitral procedure were violated; or 5) the arbitral award has not yet become binding for the parties or has been set aside or the enforceability thereof has been suspended by the court in which, or under the law of which, the award was made.

Slovenia Slovenia had initially made a reservation with regards to the reciprocal application of the Convention. However, in 2008 the country withdrew the reciprocity clause reservation. The Slovenian Arbitration Act makes direct reference to the New York Convention for the purposes of recognition and enforcement of arbitral awards.41

Because of the fact that Slovenia opted out of reciprocity, the provisions on recognition and enforcement apply equally to all foreign arbitral awards, regardless of their origin.42

40

Polish Code of Civil Procedure, Part VII â&#x20AC;&#x201C; Arbitration, as amended on October 17, 2005.

Slovenian Arbitration Act (2008), Art. 42(2).

42 See generally Recognition and Enforcement of Domestic and Foreign Arbitral Awards in Slovenia, by AleĹĄ GaliÄ?, available at http://www.pf.uni-lj.si/media/04.galic.sum.eng_2013.pdf 41

82

Volume 2

Turkey Turkey is also part of the group of countries that has exercised the reciprocity reservation.

Nonetheless, the Turkish legislator has made sure to remove any stringent restrictions towards foreign arbitral awards that are not from a New York Convention country. The Act on Private International and Procedural Law43 stipulates that all final and enforceable or binding foreign arbitral awards upon the parties may be subject to enforcement, provided that none of the grounds for dismissal, which are to a large extent similar to Article V of the Convention, exist. 44 Thus, according to the national law, all foreign arbitral awards are subject to enforcement, if all preset conditions are satisfied.

V. Conclusion The New York Convention is the drive behind the success of international commercial arbitration. In a business world with thousands of cross‐border economic transactions, the sustainability of commercial arbitration and its further development is crucial.

In searching for answers to the thesis of this paper, unfortunately, a uniform response is not easy to be found. Different countries address the question differently, but always within the already allowed contours of international commercial arbitration. The New York Convention signatories, who apply the reciprocity reservation, offer a parallel legal regimen for recognition and enforcement of non‐convention awards within their respective national legislation. For countries applying an opt‐out of such reciprocity thereof, the convention is applicable to the Kosovo made awards equally to other foreign arbitral awards.

In consideration of the above options, the idea of arbitrating in Kosovo should not be perceived wrongly, therefore, as uncertain with regards to enforcement of arbitral awards abroad. This being accurate for the main Kosovo trading partners, at the very least.

Thus, in assessing the risk of the parties in remaining without a forum for recognition and enforcement of an award rendered in Kosovo as a seat of arbitration, we can safely assume that such risk is insignificant (or absent – hereby avoiding to run into the danger of exaggerating this statement).

43 44

Turkish Act on Private International and Procedural Law No. 5718, in force as of September 12, 2007.

Ibid., Art. 60 – 62.

83

Journal of Altrenative Dispute Resolution in Kosovo

www.amchamksv.org www.adr-ks.org +381 (0) 38 609 012 +381 (0) 38 609 013

84