Journal of alternative dispute resolution in kosovo v1

The journal of Alternative Dispute Resolution in Kosovo is made possible by the support of the American People through the United States Agency for International Development (USAID). The contents of this Journal are the sole responsibility of the Alternative Dispute Resolution Center at American Chamber of Commerce and do not necessarily reflect the views of USAID or the United States Government.

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.

Alternative Dispute Resolution Center American Chamber of Commerce in Kosovo August 2015

TABLE OF CONTENTS:

FOREWORD ....................................................................................................................................................................... 5 INTERIM MEASURES UNDER KOSOVO ARBITRATION LAW AND UNCITRAL MODEL LAW.... 6 THE NOTION OF “ORDRE PUBLIC”: ARBITRABILITY OF PATENT LAW DISPUTES .................. 12 THE RELATIONSHIP BETWEEN REGULAR COURTS AND ARBITRATION: LEGAL STANDARDS AND BEST PRACTICES .................................................................................................................. 25 THE IMPORTANCE OF ALTERNATIVE DISPUTE RESOLUTION THROUGH ARBITRATION IN KOSOVO ............................................................................................................................................................................ 30 REDEFINING INVESTMENT ARBITRATION LAW: THE CASE OF KOSOVO ..................................... 38 MEDIATION AS AN ALTERNATIVE DISPUTE RESOLUTION MECHANISM IN KOSOVO ............ 45 A UNITED NATIONS’ LIAISON HUB AND OMBUDSOFFICE FOR INTERNATIONAL ECONOMIC RELATIONS: A PROPOSAL ....................................................................................................................................... 49

FOREWORD This is the first volume of the Journal of Alternative Dispute Resolution in Kosovo of the Alternative Dispute Resolution Center at American Chamber of Commerce in Kosovo.

Commercial arbitration and mediation in Kosovo are in their inception phase. As such, the increasing demand for these services calls for a fully informed audience regarding the peculiarities of the system, and its advantages.

Currently, there is an immense need for professional resources and materials dedicated to this area of law in Kosovo. Generally, scarcity of these resources can be grouped in three categories, namely: lack of academic and scholarly materials for researchers, academics, professionals and students; lack of information about utilizing advantages of arbitration and mediation for the business community; and lack of resources for businesses to track best practices and new developments in the international area, from which practices they can benefit. It is exactly these gaps that the Journal on Alternative Dispute Resolution seeks to address.

This journal will serve as a platform for academics, legal practitioners, and businesses, as an integral part of the ADR system, providing access to professional resources about developments in this area of law.

The present volume is a compilation of seven articles, addressing topics in both national and international arbitration and mediation. The journal has been designed to combine two perspectives, academic and legal perspective on one hand, and business perspectives in the other hand, and the content of this volume reflects exactly this framework.

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UPC 341.6(496.51) INTERIM MEASURES UNDER KOSOVO ARBITRATION LAW AND UNCITRAL MODEL LAW

by Dr. Robert Muharremi1 and Anjezë Gojani2

I. Introduction An interim measure is a legal instrument known in almost all legal areas. The function of an interim measure is to provide in certain cases temporary protection of the interest of the parties in the proceedings until the dispute is finally resolved. The interest of the party for an interim measure may include preservation of evidence or assets from loss or their removal, or simply to keep in force a status ‐ quo, preventing change of the factual situation, until the dispute is resolved.3 Interim measures are also implemented in arbitration proceedings; these measures present a very important instrument for international arbitration considering the specific risks that this procedure may encompass. In many cases the effectiveness of arbitration proceedings depends on interim measures, through which the parties may be barred from the destruction or disposal of assets or evidence.

The purpose of this paper is to discuss the provisions of the Law No. 02/L‐75 on Arbitration in Kosovo, comparing these with the provisions of UNCITRAL Model Law on International Commercial Arbitration of 1985, as amended in 2006. The UNCITRAL Model Law has been prepared by the United Nations Commission on International Trade Law (hereinafter UNICTRAL) and it intends to harmonize and standardize international arbitration rules, the needs of drafting a national law on arbitration, as well as for development of arbitration proceedings.4 The paper will primarily focus on discussing the UNCITRAL Model Law, thereby comparing it with Kosovo Law on Arbitration, considering that the UNCITRAL Model Law represents the international standard for domestic legislation. This paper will not address court‐ ordered interim measures which may be issued by a court in relation to arbitration proceedings and which are regulated by the relevant procedural law, but it will only address interim measures which may be ordered by an arbitral tribunal.

II. Interim measures under the Law on Arbitration The interim measure as an instrument is foreseen by Article 15 of the Law No. 02/L‐75 on Arbitration.

The arbitral tribunal, at the request of a party, may grant an interim measure, provided the party gives credible evidence that it may suffer immediate or irreparable damage or loss, if such a measure is not taken.5 Granting of an interim measure is at the disposal of the parties, because they may also agree that the arbitral tribunal does not have the power to grant interim measures.6 The interim measure ordered by the arbitral tribunal becomes enforceable if the court, on the request of a party, orders its enforcement.7 The court does not order the enforcement of the interim measure ordered by the arbitral tribunal, if the party has also addressed the court with a request for an interim measure.8 The courts and the arbitral tribunal have competitive jurisdiction regarding the grant of interim measures, because regardless of the arbitration agreement or the commencement of arbitration proceedings, the court has jurisdiction to order a provisional measure at the request of a party in arbitral proceedings, if the party proves that it may suffer immediate or irreparable damage or loss, if such a measure is not taken.9

1

Dr. Robert Muharremi, ACIArb is a lecturer at the American University in Kosovo.

Anjezë Gojani, LL.M., is the Secretary General of the Centre for Alternative Dispute Resolution at the American Chamber of Commerce in Kosovo.

3 N. Blackaby/C. Partasides, „Redfern and Hunter on International Arbitration“, Oxford University Press: 2009, pp. 444-445.

4 See generally the preamble to the UNCITRAL Model Law, available at http://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/0786998_Ebook.pdf 5 Law No. 02/L-75 on Arbitration, Article 15, paragrapf 1 6 Ibid 7 Ibid, Article 15, paragraph 2 8 Ibid 9 Ibid, Article 8 2

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The Arbitration Law regulates also some other issues related to interim measures. These include the provision of appropriate security related to the interim measure, for which the arbitral tribunal may order any of the parties.10 In addition, the party in whose favour the interim measure is issued, is obliged to compensate the damages incurred by the other party as a result of its enforcement, if the issued interim measure is established to be unjustified.11 The provisions on interim measures of the Law on Arbitration are a combination of the provisions of the old UNCITRAL Model Law on International Commercial Arbitration, and the German Code of Civil Procedure. The UNCITRAL Model Law on International Commercial Arbitration (hereinafter ‘the Model Law’), in its version of 1985 provides that: “unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order any party to take such interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject–matter of the dispute. The arbitral tribunal may require any party to provide appropriate security in connection with such measure.”12 Article 15 of the Law on Arbitration does not require such a connection, whereby it allows the issuing of interim measures which are not related to the case in dispute.

The main part, which has not been included, is the need of the request for an interim measure to be related to the subject matter of the dispute. According to the relevant provision of the 1985 Model Law, an interim measure shall not be ordered, if it is not related to the subject matter of the dispute. Article 15 of the Law on Arbitration does not require such a connection and this allows for interim measures, which are not related to the case in dispute. In addition, the Law on Arbitration requires from the party which proposes interim measures to present credible evidence that it may cause damage or loss of immediate or irreparable damage if not taken such a measure. Article 17 of the 1985 Model Law, does not impose this requirement on the party which proposes the interim measure, but rather it leaves it to the full discretion of the arbitral tribunal to decide on such measure.

A shortcoming of the old Model Law of 1985, is that it does not provide a definition of interim measures, and what they include. Another shortcoming of the Model Law is that it does not regulate the enforcement of interim measures and therefore gives national legislators enough space to determine this issue.13 Courts have interpreted the Model Law provision on interim measures so that the arbitral tribunal does not have jurisdiction to execute an order for interim measures.14 It is also highly debatable, whether an interim measure may be enforced by reference to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards of 1958 (hereinafter ‘New York Convention’). The New York Convention covers only arbitral decisions, which could be interpreted as including final arbitral awards only and not the procedural orders, including orders for interim measures.15 However, whether the orders for interim measures are incorporated or not, depends entirely on the interpretation of the relevant provisions of the New York Convention by countries which have ratified this Convention, or countries which, similar to Kosovo, have incorporated it into their domestic law without ratifying it.16 The Law on Arbitration has also incorporated provisions of the German Code of Civil Procedure, particularly in connection with the enforcement of an interim measure. The German Code of Civil Procedure provides that the court, at the request of a party, may allow the enforcement of an interim measure, unless the party has not sought an interim measure before the court.17 This provision is textually identical to Article 15, paragraph 2, of the Law on Arbitration in Kosovo. However, there are some shortcomings within this provision as well, considering that it does not determine the criteria according to which the court must assess the admissibility and the merits of an interim measure, but gives broad discretion to the arbitral tribunal. The only clear criterion for allowing an interim measure is for the party not to have requested an interim measure from the court.

No other criteria are required and the court decides on a case‐by‐case basis on its own discretion.

10

Ibid, Article 15, paragraph 1 Ibid, Article 15, paragraph 3 12 United Nations, “UNCITRAL Model Law on International Commercial Arbitration”, 1994, Article 17.

13 Ibid., pg. 20 14 UNCITRAL, “2010 Digest of Case Law on the Model Law on International Commercial Arbitration”, pg. 86.

15 A. Tweeddale/K. Tweeddale, “Arbitration of Commercial Disputes – International and English Law and Practice”, Oxford University Press: 2007, pg. 309.

16 Ibid.

17 Zivilprozessordnung (ZPO), Article 1041, paragraph 2.

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III. Interim measures under the UNCITRAL Model Law 2006 The provisions of the Model Law on interim measures in arbitration proceedings were amended in 2006 (respectively in 2010, the UNCITRAL Rules on Arbitration). In 2006, UNCITRAL has radically reformed the rules on interim measures of the Model Law. The same task was conducted in 2010 with the UNCITRAL Arbitration Rules.

The Model Law of 2006 was amended mainly with a view to expanding its scope to include disputes relating to investment and to arrange interim measures in more detail and more efficiently.18 Changes have been effected to eliminate the shortcomings of the discussions above, which are found in the implementation of the provisions on interim measures. It was also taken into consideration that interim measures have become an important instrument in international arbitration proceedings.19 Under the old rules of the Model Law it was not clear under what circumstances, under what conditions and according to which procedures an arbitral tribunal could order interim measures.20 It was also debatable whether interim measures under the Model Law are an autonomous legal instrument or whether they should be interpreted and implemented in accordance with national law.21 One of the changes is that the new rules of the Model Law provide a definition regarding what is meant by interim measures. According to the law in question, an interim measure is any measure of limited duration, which may take the form of a decision or otherwise, and which is ordered by the arbitral tribunal before issuing a final decision.22 Through an interim measure the party is ordered to (i) Maintain or restore the status quo pending determination of the dispute, (ii) to refrain from taking actions that could harm the arbitration procedure, (iii) provide a means of preserving assets out of which a subsequent award may be satisfied, or (iv) preserve evidence that may be relevant and material to the resolution of the dispute.23 A specific feature of this definition is that it no longer requires for interim measures to be linked to the subject matter in dispute, which expands the scope of the interim measure.24 Also the dilemma regarding the form of the interim measure has been solved; it can be issued both in the form of a decision and therefore be enforceable under the New York Convention, or it can be issued in any other form, including interim measures in a form of a procedural order.

New Model Law rules determine the conditions which the party must meet in order to be granted an interim measure. The party must provide to the arbitral tribunal that (i) harm not adequately reparable by an award of damages is likely to result if the measure is not ordered, and such harm substantially outweighs the harm that is likely to result to the party against whom the measure is directed if the measure is granted; and (ii) there is a reasonable possibility that the requesting party will succeed on the merits of the claim.25 A novelty within the 2006 Model Law are the preliminary orders. Preliminary orders are orders that are issued at the request of one party without notifying the other party (ex parte).26 Such orders are known in some countries in judicial proceedings and serve for emergencies, particularly when there is a risk that one party will dispose of its assets.27 The implementation of this instrument in arbitration proceedings has been highly controversial and most national laws and arbitration rules have not included this instrument.28 On the one hand it is argued that such an order would help the proceedings and would make them more effective, while it is also argued that if the arbitral tribunal cannot effectively operate in an emergency, then the party will be denied justice.29 On the other hand the implementation of a preliminary order in arbitration proceedings for the issuance of an order without notifying the other party has been rejected on the grounds that it violates the principle of equal treatment of parties.30 It has also been argued that such an instrument could be misused and cannot be involved in arbitration

18

M. Rieder/ A. Ernst, “UNCITRAL Arbitration Rules – Institutional Reform”, in: International Arbitration Law Review (2013), pg. 179.

United Nations, “UNCITRAL Model Law on International Commercial Arbitration”, Vienna: 2008, pg. 24.

20 M. Rieder/ A. Ernst, pg. 183.

21 Ibid.

22 UNCITRAL Model Law, Article 17, paragraph 2.

23 Ibid.

24 UNCITRAL, “2012 Digest of Case Law on the Model Law on International Commercial Arbitration”, pg. 86.

25 UNCITRAL Model Law, Article 17 A. 26 A. Tweeddale/K. Tweeddale, pg. 304.

27 Ibid.

28 Ibid.

29 Ibid.

30 Ibid.

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proceedings without the necessary security measures.31 With the new changes to the Model Law preliminary orders as a type of interim measures have also been included, which can be issued without notifying the other party if the other parties’ notice would frustrate the purpose of the interim measure and the need for interim protection is extremely urgent or when the element of surprise is necessary.32 However, a preliminary order has a duration of no more than twenty days and it is not enforceable through court proceedings, although it is compulsory between the parties.33 Consequently, the effect of a preliminary order is quite limited.

As previously noted, the Law on Arbitration is based on the old version of the Model Law, and therefore does not provide the possibility of issuing preliminary orders (the main difference between interim measures and preliminary orders being the fact that the latter can be obtained ex partes) within the meaning used in the 2006 version of the Model Law. However, it is important to note that in the designation of these measures there is a discrepancy between the English version of the law and the Albanian version. Article 8 and 15 of the Law in the English version bare the exact same title ‘preliminary orders’ which in Albanian translates into ‘urdhërat preliminar’. Despite these two provisions not having the same content, for users of the law, the nomenclature gives room for confusion. This is particularly true since its potential users may be natural or legal persons, and in a first reading it can create the idea that Kosovo, as a place of arbitration, is a forum which provides the advantage of applying for ex parte measures. In reality, this is not the case.

It is unclear why the legislator has used this term, instead of interim measures, since the original version of the Model Law which is the basis of the Arbitration Law does not refer to any type of preliminary orders, and the core of the two provisions of the latter does not contain any ex parte element whatsoever.

The problem should be attributed to poor language translation.

Interim measures are named differently from state to state. For example, the International Arbitration Law of Switzerland refers to interim measures as provisional or conservatory measures34, and the German Code of Civil Procedure as interim measures of protection.35 Moreover, the Rules of Arbitration of the International Chamber of Commerce in Paris refer to them as conservatory and interim measures.36 Nevertheless, in international arbitration the term preliminary order, particularly following the adoption of the 2006 version of the UNCITRAL Law, is not used to refer to interim measures.

Although in a case of conflict between the two versions of the law, the Albanian language is official and thus takes priority,37 due to the specific nature of commercial arbitration as international and 'borderless', the legislator should address this discrepancy in the future amenendment of the law.

Furthermore, perhaps the most important provision within the amendments to the Model Law is the one that governs the enforcement of an interim measure.38 Under the new rule, an interim measure ordered by an arbitral tribunal is mandatory, unless otherwise determined by the tribunal itself, and it is enforced by the competent court at the request of the party, regardless of the state where an interim measure is ordered.39 The recognition and enforcement of an interim measure may be refused by the court only on the conditions under which the court may refuse the recognition and enforcement of an arbitral award.40 With this, the conditions for the recognition and enforcement of an interim measure of UNCITRAL Law were harmonized with the provisions of the New York Convention concerning the recognition and and enforcement of arbitral awards.

31

Ibid.

UNCITRAL Model Law, Article 17B; L. Tucker, “Interim Measures under Revised UNCITRAL Arbitration Rules: Comparison to Model Law Reflects Both Greater Flexibility and Remaining Uncertainty”, in: International Commercial Arbitration Brief 1, Nr. 2 (2011), pg. 19 33 United Nations, “UNCITRAL Model Law on International Commercial Arbitration”, Vienna: 2008, pg. 31.

34 Bundesgesetz über das Internationale Privartrecht [Law on Private International Law], December 18, 1987, as amended by January 1, 2007, (Switzerland), Article 183.

35 Ibid. at 17.

36 Arbitration Rules of the International Chamber of Commerce in Paris in force since January 1, 2012, Article 28, available at file:///C:/Users/Ideapad/Downloads/ICC%20865-0%20ENG_Rules_Arbitration_Mediation.pdf 37 In case of disagreement between different versions of documents published in the Official Gazette of the Republic of Kosovo, the official language versions of the government, in accordance with the Constitution of the Republic of Kosovo, are equally authentic.

38 UNCITRAL Model Law, Article 17H. 39 Ibid. Paragraph 1.

40 Ibid., Article 17I. 32

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IV. Comparative insights In relation to interim measures it is important to review the perspective of certain states which are considered as states of a Model Law regime. Currently, they can be classified in three groups: States which have not changed their respective acts after the Model Law 2006; those that have reviewed it in terms of the latter; as well as states which even after the revision have not transposed some of the provisions of the Model Law 2006 (i.e. preliminary orders). For comparative purposes we will present an example from each of these groups. i. France France is among the states that although it has recently revised its corresponding act of arbitration, the latter does not reflect the provisions of the Model Law 2006. In France, the provisions relating to arbitration are contained in the French Code of Civil Procedure.41 Based on Article 1468 (1) of the Code, the arbitral tribunal may order interim measures as it deems necessary, to set conditions for such measures, and if it deems necessary to attach a penalty to such an order. This provision came into force in 2011, given that the previous decree did not include any provision regarding the jurisdiction of the arbitral tribunal to order interim measures. In comparison with the current provision regarding interim measures in Kosovo Arbitration Law, which obliges the parties to submit credible evidence that it may cause damage or loss of immediate or irreparable, if such measure is not taken, pursuant to Article 1468 (1) of the Code the only test for the party which has submitted a request for interim measures is to prove the suitability of the action sought in light of the circumstances of the case.42 Consequently, this provision, gives the arbitration tribunals in France extensive powers regarding interim measures.43 French Code of Civil Procedure contains no provisions regarding the application of interim measures in cases where a party to proceedings refuses to voluntarily implement it, but allows the other party to seek court enforcement of such measures.44 ii. New Zealand New Zealand is among the countries which has almost fully transposed the Modal Law 2006 provisions on interim measures. In fact, this is the first country which has transposed these, by changing the law, which entered into force in 2007.45 The most important part of these changes is that the legislator has allowed the possibility for the arbitral tribunal to issue preliminary orders, as one of the most contentious provisions of the Model Law 2006. However, as is often considered arbitrary, because of its ex parte nature and without notice, the possibility of the arbitral tribunal to issue preliminary orders may be excluded through an agreement between the parties.46 iii. Belgium In Belgium, the provisions related to arbitration are contained in the Belgian Code of Civil Procedure, in force as of September 1, 2013. This state is among the states that even after the review of arbitration act, in terms of the Model Law of 2006, did not include some of its provisions, appearing as a little less detailed, in particular by not including the definition of temporary measures, the conditions under which interim measures may be ordered and by not transposing the provisions relating to preliminary orders.

According to the legislator, the first two are done in order to avoid violation of flexibility, and obstruction of the work of arbitrators. While, in relation to preliminary orders, the preparatory works say that their implementation would pose a problem, since "if the arbitrator has such jurisdiction, it may be incompatible with the consensual nature of arbitration, and jeopardize the independence of the arbitrator and the right protection�.47 Regarding the implementation of interim measures, the provisions of the Belgian Code provide that interim measures are binding and enforceable on the parties.

41 French Decree of 13 January 2011 on amendment of the Arbitration provisions in the Code of Civil Procedure, available at http://www.iaiparis.com/lois_en.asp 42 Baker & McKenzie International Arbitration Yearbook: 2012-2013, Baker & McKenzie, pp. 161-162.

43 See generally Arbitration in France: the 2011 reform, Jones Day Commentary, June 2011, available at http://www.jonesday.com/files/Publication/b9ce7786-7e7e-47b9-a628-bc2a9361e704/Presentation/PublicationAttachment/d609618d-63cc43e9-a0e7-bc6ae3b7663e/Arbitration%20in%20France.pdf 44 Ibid.

45 Law on Arbitration 2007 No. 94, 17 October 2007, available at file:///C:/Users/Ideapad/Downloads/Arbitration%20Amendment%20Act%202007.pdf 46 See generally T.K. Gran in: Promised Land or fire swamp? Interim measures - the New Zealand revolution, available at http://www.kennedygrant.com/docs/Fire%20Swamp.pdf 47 J. Billiet and T. Proshkina, Association for International Arbitration, in: Part 3: State Chapter – Belgium, available at http://globalarbitrationreview.com/reviews/67/sections/233/chapters/2686/belgium/

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V. Conclusion The Arbitration Law, which aims to regulate the subject of arbitration and enforcement of arbitral awards made inside and outside of Kosovo in accordance with modern European and international standards,48 has not updated its provisions concerning temporary measures commensurate the latest amendments to the Model Law. In some particular positions, the Law on Arbitration has already been more advanced than the rules of the Model Law of 1985 itself, as e.g. regarding the elimination of the necessity for the interim measures to be connected to the case in dispute and at least the partial regulation of the enforcement of interim measures. However, with the amendment of the Model Law, these advantages have faded and the Arbitration Law needs to be revised in order to harmonize it with the new version of the Model Law. It should initially (i) to harmonize the definition of "interim measure", (ii) specify the conditions under which the arbitral tribunal shall make a decision to order an interim measure, and (iii) supplement the provisions on recognition and enforcement of a temporary measure by reference to the terms of the New York Convention on the recognition and enforcement of arbitral awards. It should also be discussed to what extent the legislator will adopt provisions for the preliminary orders, which represents an innovation in the field of interim measures in arbitration proceedings.

It should be emphasized that the rules of arbitration issued by the arbitration institutions in Kosovo49, such as Kosovo Arbitration Rules 201150, are largely harmonized with the new version of the Model Law and in this respect are more advanced than the Law on Arbitration. This should be a call for the legislator to make the necessary amendments to the Law on Arbitration to harmonize it with Model Law.

48

Law No. 02/L-75 on Arbitration, preamble.

Alternative Dispute Resolution Center at American Chamber of Commerce in Kosovo www.adr-ks.org/ ; Permanent Tribunal of Arbitration attached to Kosovo Chamber of Commerce 50 Available at http://www.adr-ks.org/adr-rules/rules-of-procedure/ 49

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UPC 347.77./.78(4/9) 341.6(4/9) THE NOTION OF “ORDRE PUBLIC”: ARBITRABILITY OF PATENT LAW DISPUTES

by Luljeta Plakolli‐Kasumi1

Introduction One unique thing about the Alternative Dispute Resolution (ADR), is that it offers the parties an opportunity to settle their disputes through non‐judicial mechanisms that have proven to be more convenient in many aspects than litigating in courts. There, are nonetheless, some requirements, both procedural and substantive that must be satisfied before parties can refer their case to an arbitration tribunal, and these requirements draw a line between disputes that can be arbitrated from disputes that are considered to be non‐arbitrable.

One of the core procedural requirements is that the parties must agree in writing that they will resolve their disputes through arbitration. The arbitration agreement, or the arbitration clause contained in the main contract between the parties2 serves as the basis for an arbitration tribunal to affirm its jurisdiction with respect to the dispute arising from such a contractual relationship between the parties. Another important requirement is that the dispute which is referred to an arbitration tribunal must result from a contractual relationship which is commercial in nature, and capable of being decided by arbitration.

There is one substantive requirement, or referred to as the subject‐matter arbitrability, based on which state courts, in particular, are required to draw a line between arbitrable and non‐arbitrable disputes on the basis of two different policy objectives: ensuring that sensitive matters of public interest are debated and resolved before national courts, and promoting arbitration as a vibrant system of dispute resolution for parties who freely chose to arbitrate rather than litigate their differences3.

Whilst the first two procedural requirements must be satisfied at the beginning of an arbitral proceeding, the issue of the subject‐matter arbitrability can arise when it comes to the recognition and enforcement of a foreign arbitral award. A state court can refuse a recognition and enforcement of a foreign arbitral award on public policy grounds (ordre public).

Public policy arguments often attack the advisability of the arbitration of IP disputes and call for the creation or maintenance of a legal obstacle to it. A reason behind a public policy argument, which is used by some states, is that they desire to seclude public law from the private mechanism of arbitration. This would create a situation where countries would allow infringement but not validity issues within the scope of arbitration4.

The present paper examines the notions of “arbitrability” and “ordre public”; the first one being used as a criteria for determining whether an arbitration tribunal has jurisdiction over a subject matter, and the second one as an exception to recognition and enforcement of arbitral awards under different legislations, 1 LL.M. in International and Comparative Law/ Intellectual Property Law, University of Pittsburgh, School of Law (2006); Professor Assistant, Law Faculty of the University of Pristina; Arbitrator, Permanent Arbitration Tribunal/Chamber of Commerce; Arbitrator, JSM/Permanent Court of Arbitration, Slovakia 2 ) According to UNCITRAL Model law, the requirement that an arbitration agreement be in writing is met by an electronic communication if the information contained therein is accessible so as to be useable for subsequent reference; “electronic communication” means any communication that the parties make by means of data messages; “data message” means information generated, sent, received or stored by electronic, magnetic, optical or similar means, including, but not limited to, electronic data interchange (EDI), electronic mail, telegram, telex or telecopy.

3 “Aribtrability of disputes”: in Gerald Aksen, Karl Heinz Bockstiegel, Paolo Michele Patocchi and Anne Marie Whitesell (eds.), Global Reflections of International Law, Commerce and Dispute Resolution: Liber Amicorum in Honor of Robert Briner (ICC Publishing, S.A. 2005) 4 Smith, M.A. et al, ”Arbitration of Patent Infringement and Validity Issues Worldwide”, Harvard Journal of Law & Technology, Vol. 19, Nr. 2, 2006, p. 305

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and it focuses primarily on the arbitrability of patent law disputes. The main focus of the present paper is to determine in which jurisdictions, and to what extent, are the public policy arguments used to exclude patent law disputes from arbitration. It should be noted from the outset that the paper does not attempt to examine the notion of public policy in its procedural content, but only substantive aspects of it. In doing so, the paper will mainly focus on the examples of the Western Balkan countries5 by also doing a comparative analysis with practices from EU countries.

1. Arbitration as an Alterantive Dispute Resolution mechanism in IP disputes Intellectual Propery (IP), as an essential element of the modern business world, is the main subject‐ matter of contracts involving use, purchase and sale of IP, research and development, joint‐ventures, licensing, and asset purchase or stock acquisition agreements. Nowadays, it has become a trend that such agreements contain a dispute resolution clause calling for final and binding international commercial arbitration6. There are numerous reasons why parties to such agreements opt for international commercial arbitration rather than submitting their dispute before a national court. International commercial arbitration is built upon several principles such as neutrality in terms of both situs and the applicable law, confidentiality, enforceability of the arbitraiton award accross the globe, impartiality, and favorable timelines. These principles, althogether, allow the parties to freely choose where to arbitrate and under which substantive law, decide whether they want to have the final award made known to the public or not, have impartial and professional arbitrators decide on the merits of the case, and have their case resolved in a timely manner. In addition to this, the arbitration in IP disputes has proven to be more cost‐effective than litigating before a national court.7 Preliminary remedies that can be imposed by an arbitral tribunal are another incentive for the parties to agree on arbitration.

Just like a two‐sided coin, the issue of arbitraiton of intellectual property disputes has its pros and cons.

The factors like combative party, judicial review, discovery and the need for precedent or publicity may cut against using arbitration in lieu of litigation8. Another reason, why parties might not choose arbitration over litigation in a dispute concerning IP is the “territorial” nature of rights deriving from IP. This implies that every country has its own specific rules on granting IP rights to inviduals and usually disputes over IP rights that are granted by a public authority, the validity and the extent of such rights cannot be decided by an arbitral tribunal9. Even if the arbitral tribunal decides on such a dispute, the award of the arbitral tribunal may not be enforced under the claim that the subject‐matter was not capable of arbitration. The issue of arbitrability is considered in the light of relevant public policy (ordre public) considerations10 2. Arbitrability of IP disputes : rationae personae and rationae materiae The term “arbitrability” is used to refer to disputes that are capable of being resolved in arbiration, and is divided into subjective arbitrability (rationae personae), and objective arbitrability (rationae materiae).

Subjective arbitrability determines whether a State or other public body may be a party to an arbitration agreement and thus whether a dispute to which such an entity is a party may be submitted to arbitration.

Objective arbitrability, which is the topic of the present paper, determines whether the particular subject‐ matter of a dispute is capable of being resolved by arbitration11.

The issue of subject‐matter arbitrability is one of the conditions for the enforcement of foreign arbitral awards under 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitration Awards [hereinafter referred to as the New York Convention]. Article II of the New York Convention obliges contracting states to recognize arbitration agreements over subject‐matters that are capable of arbitration. Article V.1.(a) further provides that if under the applicable law the arbitration agreement is considered to be invalid, recongition and enforcement of the award may be refused12.

5

Albania, Bosnia and Herzegovina, Croatia, Kosovo, Macedonia, Montenegro and Serbia See Allen B. Green “Intellectual Property Dispute Resolution”, McKenna Long & Aldridge LLP, 2007 7 Alan W. Kowalchyk, “Intellectual Property ADR vs. Litigation: Resolving IP Disputes Outside of Court: Using ADR to Take Control of your Case,” American Arbitration Association, citing the American Intellectual Property Law Association Report of the Economic survey 2005, at I-109.

8 Kyle-Beth Hilfer, “A practical guide to arbitrating IP disputes”, Law Journal Newsletters, May 2004 9 See the Final Report on Intellectual Property Disputes and Arbitration adopted by the ICC Commission on International Arbitration on 28 Oct. 1997, 9:1 THE ICC INTERNATIONAL COURT OF ARBITRATION BULLETIN 37. Also see Jacques Werner, Intellectual Property Disputes and Arbitration - A Comment on a Recent ICC Report, 1:5 J. WORLD INTELLECTUAL PROPERTY 841 (Sep. 1998).

10 See Aksen et al, supra note 3, pg.270 11 Ibid.

12 New York Convention on the recognition and enforcement of foreign arbitral awards (1958) [http://www.uncitral.org/pdf/english/texts/arbitration/NY-conv/XXII_1_e.pdf] 6

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Not all legal systems address the issue of objective arbitrability in the same manner and in every legal system there are disputes that fall under the exclusive authority of national courts and thus cannot be referred to arbitration. Some intellectual property disputes are in many countries deemed to be inarbitrable and some other types can. Intellectual property disputes may refer to patent, copyright, trademark and design infringements, disputes relating to database rights, domain names, misuse of confidential information and trade secrets; breach of different types of contracts, including licensing, distribution, supply, and IP development agreements and settlement agreements13. IP disputes as such can be divided in two types: IP disputes that derive from a contractual relationship and IP disputes that derive out of a non‐contractual relationship. The first group includes claims that in most cases are considered arbitrable i.e. private contractual arrangements between the parties such as the breach of contract or infringement14. The second group of disputes contains claims regarding validity and ownership whereby one party alleges that the other party has not a valid patent for instance. This claim can be raised either as the main issue or more often, as a defense in an infringement action. Arbitrability issues are more frequently raised in relation to these claims because the government grants patents and a challenge of the patent’s validity in a private setting, i.e., arbitration, directly implicates the public registration.15 The present paper focuses on the latter claims.

3. Arbitrability of patent law disputes The issue of arbitrability goes hand in hand with the freedom of contract doctrine16. In some jurisdictions the contractual freedom of parties prevails and therefore patent related disputes are allowed to be referred to arbitration. There are other jurisdictions where arbitration of claims involving validity of patents is not permitted and awards on such claims have no effect and cannot be enforced. In the United States, Patent Act allows the arbitration of patent infringement and validity claims and such awards can be enforced, whereas in France and many other jurisdictions, awards issued by arbitral tribunal involving decisions on validity of patents cannot be enforced in a French Court. The arbitrability of patent issues varies from country to country17. There are generally four approaches to the issue of patent arbitrability that countries have opted for ranging from the most restrictive to the more liberal ones.

The first approach suggests that claims related to patents (infringement and validity) cannot be arbitrated. Even if parties submit their case involving a patent claim to arbitration, the award will not be enforceable by the national court. South Africa, Singapore and Romania are some countries that have adopted this approach and is uncommon for many other countries nowadays18. The second approach allows issues of infringement of patents to be arbitrated, but if the issue of validity of patent is raised as defence in an arbitration proceeding concerning infringement of patent, it will be dealt as a preliminary matter by the competent court19.

The two other groups of countries allow both infringement and validity issues to be arbitrated, but they are split when it comes to the final award. The first group of countries, out of these two, tolerates a final award on the issue of infringement and validity of patent, but such an award has an inter partes effect, while the second group is more liberal and allows both infringement and validity claims to be arbitrated and have an award on the merits of the case with an erga omnes effect. The inter partes award will have legal effect only between the parties in an arbitration proceeding involving a patent dispute, and will not invalidate the patent, whereas the erga omnes award will be binding against the third parties as well. A country that has adopted this approach is thus giving the award full judicial effect.20

13

Karen Fong, “ Arbitration of IP disputes: Eyes wide shut”, found at http://www.inhouselawyer.co.uk/index.php/intellectualproperty/7673-arbitration-of-ip-disputes-eyes-wide-shut 14 Anna P. Mantakou, “Arbitrability and Intellectual Property disputes”, Arbitrability: International and Comparative perspectives, 2009, page 270 15 Therese Jansson “ Arbitrability regarding patent law-an international study”, Faculty of Law, University of Lund, Spring 2010; See also, William Grantham “The arbitrability of International Intellectual Property Disputes”, Berkeley Journal of International Law, Vol. 14:173, 1996, p. 182 16 Ibid.p.14 17 Ibid.p.24 18 Bernard Hantiaou “What law governs the issue of arbitrability?”, Arbitration International, Vol. 12, No.4, 1996. See also Marc Blessing “Arbitrability of Intellectual Property Disputes”, Arbitration International, Vol.12, No.2, 1996; See also M. Scott Donahey, “Arbitration of Patent Disputes Internationally and in the United States”, May 2008 found at [http://files.aliaba.org/thumbs/datastorage/lacidoirep/articles/PLIT0805-Donahey_thumb.pdf] 19 M.A. Smith et al, “Arbitration of Patent Infringement and Validity Issues Worldwide”, Harvard Journal of Law & Technology, Vol.19, No.2, 2006 p. 305 20 Jansson, supra note 13, p.26

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Objective arbitrability restrictions can be explained through two types of arguments: legal and policy arguments. Legal arguments present some obstacle to the objective arbitrability of patent disputes without attempting to decide whether the presence of the obstacle is desirable. The policy arguments, as mentioned at the begining of the paper, attack the advisability of the arbitration of patent disputes and call for the creation or maintenance of a legal obstacle to it21.

3.1 Legal Arguments for excluding patent disputes from the scope of arbitration There are three legal arguments in favor of objective arbitrability restrictions in the field of patents.

According to the first argument, patents are granted by a certain court or adminstrative authority and as such the issue of infringement and validity of patents is exclusive competence of the state body. This does not mean in any way that the parties cannot refer their dispute to an arbitral tribunal, but whatever the outcome of the proceedings would be, such an award would not be enforced by the state court.22 The second argument is related to the sovereign nature of the patent grant. A patent represents a set of rights that are granted to an inventor by a sovereign authority, and only the same authority can extinguish those rights.23 Arbitral tribunals do not have authority to extinguish those rights until given so by the state, and until the state cooperated in enforcing the awards.24 The third argument focuses on arbitrators’ powers. The competence of an arbitral tribunal is limited to the parties who submitted their dispute to arbitation, and to the substantive matters designated by the parties.25 Once granted, a patent right can be licensed or assigned, and when a dispute arises out from such a licensing agreement, the arbitral tribunal can decide who among the parties to the dispute has rights with respect to that patent, and eventually even declare the patent invalid, but such an award will have a legal effect only between the parties (inter partes) and not in relation to everyone (erga omnes)26.

3.2 Public policy arguments for excluding patent disputes from the scope of arbitration According to some scholars, the decision that certain subjects are or are not arbitrable is purely a matter of policy.27 A patent is not an one‐sided deal that only benefits an inventor or a company that owns that patent. To the contrary, there is a major aspect of it that is in the public interest.28 Therefore, in every patent related dispute, whether it is conducted before a state court or an arbitral tribunal, there will be always two sets of interests represented; one, the patent right holder who has been granted with the limited monopoly as an incentive to “invent, invest and disclose’, and two, the party that represents the public interest.29 The patent regimes in all jurisdictions are construed in a way as to serve both interests.

Which one outweights the other, and in what circumstances is decided uniquely by every jurisdiction.

As pointed out by Grantham, in some political systems, restrictions on the objective arbitrability of patent disputes are based on a desire to separate public law from the inherently private mechanism of arbitration.30 However, clearly articulated justifications of such choices from a policy standpoint have, unfortunately, been lacking. Debate is often limited to vague references to the public nature of the patent grant without clearly defining what these public qualities might be or why their presence should require restrictions on objective arbitrability.31 Accordingly, the confusion in the underlying policy question regarding arbitrability of patent validity results from the attempt to answer three questions: first, what are the relevant interests of the public in a validity of patent?; second, can such interests be adequately represented in an arbitration? And, third, assuming the public interests are not adequately represented, is a restriction on the objective arbitrability of patent validity the best means of protecting that interest?32

21

M.A. Smith, supra note 4, p.305-306 Ibid.

23 See Ibid.p.306 24 Jansson, supra note 13, p.20 25 Ibid.

26 See William Grantham, “ Arbitrability of International Intellectual Property Disputes”, 14 Berkeley J. Int’l L. 173, p. 186-187 27 Ibid, p.179 28 John Hammond and Robert Gunderman, “Out patent system- Balancing wealth creation with benefits to society.”, The Limited Monopoly™, 2009 29 See M.A. Smith, supra note 4, p.310 30 Grantham, supra note 24, p.183 31 M.A. Smith, supra note 4, p.308; See also Beckman Instruments Inc. v. Technical Dev. Corp. 433 F.2d 55, 63 (7th Cir. 1970).

32 Ibid, p.309 22

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The argument that the outcome of an award that refuses to recognize the validity of a patent affects only the parties involved and is not binding on third parties, answers to some extent the first question above33.

Proponents of this argument suggest that because the outcome is not binding on third parties, the arbitration has nothing to do with the public policy.34 If the state remains intact through this type of inter partes resolution, there is little to suggest that patent validity must be excluded from arbitration35.

Opponents of this approch argue that arbitrability cannot keep the balance between the social costs of a patent and the social benefits of that patent.

Balance is central to the patent policy, but again, there do not appear to be any cost‐benefit assessements of the impact of patent systems, nor any data that can be used to directly assess the economic impact of patent systems. Discussions of patent policy therefore tend to be theoretical, and any evidence used is anecdotal rather than scientifically based.36 How come than that patent policy is used as a pretext to preclude arbitrability?

Depending from the jurisdiction, patents are granted by courts or administrative authorities i.e. patent offices. Given their territorial nature, every country has its own rules, conditions and procedures for granting a patent. In Kosovo, a patent is granted by the Industrial Property Office (IPO) that functions as an independent agency within the Ministry of Trade and Industry.37 IPO maintains a Patent Register in which patent applications and granted patents are recorded.38 According to the law, a granted patent is regarded as a property right39 that is registered in public registries, and can therefore be transferred partially or completely by means of a license40. Any changes in patent rights must be reflected in the patent registry. In other countries in the region i.e. Albania, Bosnia and Herzegovina, Croatia, Macedonia, Montenegro and Serbia patent rights are also granted by administrative authorities similar to IPO in Kosovo41. In all these jurisdictions there are statutory application procedures for getting a patent for an invention, and all of them have statutory requirements that must be met for a patent to be granted. These requirements are usually examined by respective administrative authorities in charge. All these characteristics, which will be adequately addressed in the forthcoming paragraphs, predominantly speak of a regional system that favors exclusive jurisdiction of courts in matters concerning patent infringement and validity.

Consequently, one might rightfully argue that in all these jurisdictions only courts or any equivalent state body could make any limitations to an already granted monopoly by the patent, whereas countries that do not perform such an examination, would treat validity issues as arbitrable.42 France and Greece are examples of countries where granting act is based on a formal examination43.This would be a justifiable public policy argument, nevertheless the literature suggests that in practice a challenge based upon the inarbitrability of certain IP disputes should neither be rebutted nor resolved in the light of pure public policy grounds as each state freely determines content and countours of its own notion of public policy and as such it can vary from country to country.44 4. Definition of public policy (ordre public) Terms “public policy” and “ordre public” in the present paper will be used interchangeably as it is a French expression that is translated into English as either ‘public policy’ or ‘public order’45 . The public policy is often referred as the judicially‐created monster capable of totally destroying the freedom of 33

See Interim Award in Case.6097 of 1989, 4 Int’l Comm.Arb. 76 Wu Wei-Hua, “International Arbitration of Patent Disputes”, 10 J. Marshall Rev. Intell.Prop.L.284 (2011), p.394 35 Ibid.

36 Hazel V J Moir, “What are the costs and benefits of patent systems?”, Centre for Governance and Knowledge and Development, Working Paper, October 2008 available at http://cgkd.anu.edu.au/menus/PDFs/moir_RegNet%20WP%20Final%20Costs%20and%20Benefits.pdf 37 Industrial Property Office (IPO) http://www.mti-ks.org/?cid=2,381 38 Kosovo Law on Patents [Law No.2004/49], Article 14.1 39 Ibid, Article 41.1 40 Ibid, Article 45 41 In Albania [Directorate of Patents and Trademarks]; in Bosnia [Institute for Intellectual Property of B&H], in Croatia [State Intellectual Property Office]; in Macedonia [State Office of Industrial Property], in Montenegro [Intellectual Property Office], in Serbia [Intellectual Property Office]; See WIPO Directory available at http://www.wipo.int/directory/en/urls.jsp 42 See generally, Jansson, supra note 13, p.21 43 Mantakou, supra note 12, ibid.

44 Trevor Cook & Alejandro I. Garcia, ‘’ International Intellectual Property Arbitration”, Kluwer Law International BV, The Netherlands, 2010, p.; See also F. Gurry, “Objective arbitrability- Antitrust Disputes-Intellectual Property Disputes”, Swiss Arbitration Association Special series 6 (1994): 110-120- the author dismisses the argument that only the body that grants IP rights can decide on challenges to the validity of IPR. According to this division, no other branches, including state courts, can hear disputes as to the validity of IPR. 45 See generally Chaterine Kessedjian, “Public Order in European Law”, Erasmus Law Review [Vol.I, Issue 01], p.26 34

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contract in differents settings.46 It is a well‐settled exception to foreign enforcement47, of both judgments and arbitral awards. As discussed above, the New York Convention in articles IV to VI provides grounds that may be invoked by competent authority of the country where the recongition and the enforcement are sought. Public policy is one of these grounds.48 With regard to the public policy ground for refusal, the question arises whether the notion of public policy is to be interpreted in the same way in both domestic and international cases49. Cases from different jurisdictions suggest that the international public policy is basically national as it “can be sanctioned only by national judges”.50 4.1 Definition of ordre public under international law It is impossible to give a precise definition of the concept of international ordre public51. There is one view found in Allsop Automatic Inc. v. Techoski, where the Corte di Appello (Court of Appeal) of Milan defined the notion of international public policy as follows: “ We must say where the consistency [with public policy], is to be examained reference must be made to the so called international public policy, being a ‘body of universal principles shared by nationals of similar civilizations, aiming at the protection of fundamental human rights, often embodied in international declarations or conventions’.”52 Contrary to this, courts in the United States and Switzerland construed this ground for refusal very narrowly. In CBS and others v. WAK Orient Power & Light Ltd the court found that the “public policy exception is very narrow…”53In Switzerland, the Supreme Court rejected the request invoking public policy exception saying that this exception should be narrowly construed so as to be understood as opposing “the enforcement of foreign arbitral awards which hurt the Swiss legal feeling in an intolerable manner and violate the fundamental principles of the Swiss legal system.54 . However, there is nothing to prevent each country from adopting, as part of its conception of international public policy, principles having some claim to universality, whether voluntarily or in order to honor its international commitments55.

4.2 Definition of ordre public under the European law According to the Treaty instituting the European Community, member states are allowed to prevent the application of the European Community law by arguing that the rule at stake contradicts their public policy or public order. However, the European Court of Justice case law and the secondary legislation, shows that the member states are closelly controlled in the use they make of their public policy. This has been often seen as a criticism towards ECJ for depriving states of the most important effect of their public policy exceptions.56 In Yvonne van Duyn v. Home Office, the ECJ confirmed that it is the responsibility of the member states to define their public policy.57 However, later in Regina v. Pierre Bouchereau58 the Court changed its view and started to intefere with the very content of the member states’ public policy in order to control the impact of that policy on the application of the European rules59.

According to the so‐called supranational legal order, the term ordre public encompasses the protection of public security and the physical integrity of individuals as part of the society60. According to this definition, for any rule to be characterized as public policy it must firstly address a real and severe enough 46

See Jurgen O. Skoppek, “Employment-at-Will in Michigan: A Case for Retaining the Doctrine”, April 1, 1991 Jonathan A. Franklin and Roberta J. Morri, 77 Chi.-Kent L. Rev. 1213, 1239 48 See, paragraph 2(b) of Article V, New York Convention, ““Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or(b) The recognition or enforcement of the award would be contrary to the public policy of that country.”

49 United Nations Conference on Trade and Development: Dispute Settlement; International Commercial Arbitration: 5.7 Recognition and Enforcement of Arbitral Awards: The New York Convention, p.38 50 Ibid.

51 M-L.Niboyet et Geouffre de la Pradelle, “Droit International Prive”, L.G.D.J. (2007) no. 307 52 Ibid., p.39 53 See CBS CORP. v. WAK ORIENT POWER & LIGHT LTD. 168 F.Supp.2d 403 (2001) United States District Court, E.D. Pennsylvania.

April 12, 2001. The court held that the public policy exception is only applicable when “enforcement would violate the forum state’s most basic notions of morality and justice”.

54 Supra note 38, p.39; see also YCA, Vol. 22 (1997), p. 997.

55 E.Gaillard and J. Savage eds., Fouchard, Gaillard, Goldman on International Commercial Arbitration (Kluwer 1999) at pp. 994-995 56 Kessedjian, supra note 43, p. 25&35 57 Case 41/74, Yvonne van Duyn v. Home Office [1974] ECR, 01337 at 01351.

58 Case 30/77, Regina v. Pierre Bouchereau [1977] ECR, 1999.

59 Kessedjian, supra note 43, p.28 & 29; the paper refers to numerous cases of ECJ i.e. case 5/77, Denkavit,1555 ; the opinion of the Advocate General in the case 34/79, Henn & Darby [1979] ECR, 03795 at 03821; Case C-323/93, Centre d’insémination de la Crespelle [1994] ECR, I- 05077 point 31; Case C-5/94, Hedley Lomasm [1996] ECR, I- 02553, point 18; Case C-1/96, Compassion in World Farming Ltd. [1998] I-01251, where it decided that member states have the freedom to to use their public policy concepts during the negotiation of a directive, but that once the negotiations were closed and a Community text was adopted, member states lost their capacity to use their public policy concepts to curtail the application of the directive or to try to avoid concrete effects of the directive (page 33) 60 Found at http://www.iprsonline.org/unctadictsd/docs/RB2.5_Patents_2.5.3_update.pdf ; 47

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danger, and not just any violation of a rule; and secondly, the goal of the public policy rule must be to protect a fundamental interest of the society concerned61.

Ordre public is a legal expression with a long tradition in the area of international private law, where it serves as last resort when the application of foreign law leads to a result, which would be wholly unacceptable for the national legal order.62 Definitions of ordre public are also given in the context of patentability of inventions. Under the European Patent Convention (1973) it is stipulated that that European patents shall not be granted in respect of: (a) inventions the publication or exploitation of which would be contrary to "ordre public" or morality, provided that the exploitation shall not be deemed to be so contrary merely because it is prohibited by law or regulation in some or all of the Contracting States…”63 Similarly, the TRIPS Agreement uses the term “ordre public” and it assumes “concerns about matters threatening the social structures which tie a society together, i.e. matters that threaten the structure of civil society as such64.

As it can be seen there are two possible exceptions to patentability: ordre public and morality. The European Patent Office (EPO) has distinguished between ordre public and morality. In case T356/93, the Board of Appeal of the European Patent Office observed that “it is generally accepted that the concept of “ordre public” covers the protection of public security and the physical integrity of individuals as part of society. This concept encompasses also the protection of the environment65 Morality, on the other hand, includes the totality of the accepted norms which are deeply rooted in a particular culture66.

As noted, the concept of ordre public is defined in a very general manner, and although the European law may be an important source for the interpretation of that concept, there is no generally accepted notion of “ordre public”, and no reason for other WTO Members to follow the European approach. Members have considerable flexibility to define which situations are covered, depending upon their own conception of the protection of public values.67 4.3 Definition of ordre public under national laws Different countries apply different approach regarding the arbitrability of patent law disputes. Those who are against arbitrating claims regarding the validity of a patent rely on public policy grounds, and others are liberal enough to allow such claims. Countries like United States, Canada and Switzerland are quite permissible whereas the other countries share different views. Below is an illustration of which countries do and which do not permit arbitration of patent law disputes.

4.3.1 France Within the context of the French international public policy, it has traditionally been possible to observe a distinction between rules which ensure protection of principles of universal justice and foundations of political and social organization of the French society, and those whose role is to safeguard policy for specific legislation concerned.68 Article 6 of the French Civil Code prohibits private agreements that may derogate from the laws of public order69. The Patent Act of 13 July 1978 provides that rules on exclusive jurisdiction “are not an obstacle to resorting to arbitration within the conditions…” prescribed by the Civil Code, 70 but the case law confirmed that the arbitration is prohibited in the fields of law which interest public policy.71The disputes of purely contractual nature with respect to an IP are arbitrable and there is no any doubt about that, but the problem gets trickier when it comes to the issue of validity of patent. The arbitrators cannot issue an award nullifying a patent erga omnes, and there is no such a precedent that

61

Kessedjian, supra note 43, p.29 Rainer Moufang, The Concept of “Ordre Public” and Morality in Patent Law, in Geertrui Van Overwalle (Ed.), Patent Law, Ethics and Biotechnology, Katholieke Universiteit Brussel, Bruxelles 1998, No.13, p.71 63 Article 53 (a) of the European Patent Convention 64 Supra note 43 65 See Case T356/93 66 Supra note 43 67 Ibid.

68 Romuald di Noto, “ L’ordre public international en droit internationaux prives Francais et Allemand” found at [http://www.villagejustice.com/articles/ordre-public-international-droit,5354.html] 69 Response du ministere: Justice publiee dans le JO Senat du 14/10/1999, p.3409 70 Pierre Veron, ‘ Is there an alternative to litigation: the role of ADR in patent disputes- A continental perspective”, Conference on International Patent System, World Intellectual Property Organization, March 2002, Geneva p.6 71 Cour d’Appel of Paris, March 24, 1994, Revue de l’arbitrage 1994, No.3, p. 515 62

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suggests that the arbitration tribunal can nullify a patent inter‐partes only,72 but if such a case appears, the courts would use the following reasoning: “…the validity or invalidity are not to be considered ratione personae since these concepts concern a title and not a person and hence necessarily bear effect erga omnes …”73 To sum up, in France the arbitration is possible in cases concerning the validity of a patent as well as patent counterfeiting or patent licenses, but an arbitrator may not declare a French patent invalid, since French public policy is directly concerned with the meaning of Article 2060 of the Civil Code74 which provides that “one may not enter into arbitration agreements in matters...on controversies concerning public bodies and institutions and more generally in all matters in which public policy is concerned”.75 4.3.2 Sweden In terms of patents, the Swedish Patent Act designates the Swedish civil court of first instance in Stockholm as a forum for both infringement and validity issues, but the Act prescribes where to go without clarifying whether the parties can refer their dispute to an arbitral tribunal.76 On the other hand, Article 1 of the Swedish Arbitration Act that governs the issue of arbitrability states that “disputes concerning matters in respect of which the parties may reach a settlement may, by agreement, be referred to one or several arbitrators for resolution...’’77. According to the literature a dispute that conflicts with a significant public policy or third party interest may not be arbitrable.78 According to the Swedish principle of ordre public, foreign judgments/awards that clearly contravene the basic principles of the Swedish law may not be recognized or enforced. Some of the statutes giving recognition and enforceability to foreign judgments/awards expressly refer to the ordre public limitations.

However, the absence of such provisions does not restrict the applicability of this general principle under the Swedish law79. There is no exact definition of “ordre public” principle under the Swedish law, and it is argued that the boundaries between the non‐arbitrability and violation of public policy are not clear.80 Based on the international literature and the case law, Professor Heuman states that this rule should be restrictively interpreted and that enforcement may be refused if international public policy has been infringed, but not if the award is in variance with national public policy only.81 4.3.3 Germany The German law does not prohibit arbitration of cases regarding intellectual property rights82. The German arbitration rules are contained in the tenth book of the German Civil Procedure Code (sections 1025‐1066 of the Ziviprozessordnung (ZPO)83. As a general rule, only disputes concerning non‐ proprietary claims may lack arbitrability and only if they cannot, by law, be subjected to a settlement proceedings as well as certain matters of non‐contentious litigation.84 However, it is questionable whether an arbitral tribunal can render an award on a case concerning the grant,the limitation or the nullity of the patent, as these are exclusive jurisdictions of the Patent Office, of the Federal Patent Court and of the Federal Court of Justice.85 According to the majority of the authors, the nullification of a patent by an arbitral tribunal would consitute a violation of the public order with regard to patent law.86 With respect to the definition of “public order” Article 6 of the Introductory Act of the German Civil Code 72

Veron, supra note 70, p.7 & 8 Ibid. ; See also Charles Jarrosson under Cour d’Appel of Parism March 24 1994, Revue de l’arbitrage 1993, no, 3, p.515-Georges Bones and Charles Jarrosson, “L’arbitrabilite de litiges de propriete industrielle” in “Aribitrage et propriete intellectuelle”, I.R.P.I. Litec, p.64 74 Robert Briner, “The Arbitrability Of Intellectual Property Disputes With Particular Emphasis On The Situation In Switzerland”, Worldwide Forum on the Arbitration of Intellectual Property Disputes, March 1994, Geneva/Switzerland; See also Decision of the Cour d’Appel de Paris of February 3, 1992, published in: "Propriété Intellectuelle Bull. Documentaire de l’IRPI" 1992, III, 359 75 French Civil Code, Article 2060 as translated by Georges ROUHETTE, Professor of Law, with the assistance of Dr Anne ROUHETTEBERTON, Assistant Professor of English.

76 Jansson, supra note 13, p. 30 77 The Swedish Arbitration Act of 1999 (SFS 1999:116) 78 Finn Madsen, “Commercial Arbitration in Sweden, 2nd edition, 2006, p.45 79 Sigvard Jarvin, “The Impact of Uniform Law on National Law: Limits and Possibilities”, Answers to the questionnaire addressed to the national reporters, Sweden, April 2008 found at [http://biblio.juridicas.unam.mx/libros/6/2843/26.pdf] 80 Ibid, p.12; See also Lars Heuman, “Arbitration law of Sweden: Practice and Procedure’’, JurisPublishing, New York 2003, p.740 81 Ibid.

82 Veron, supra note 70, p.9 83 Siegfried H Elsing, “ Germany”, Global Arbitration Review, Orrick Holters & Elsing found at [http://www.globalarbitrationreview.com/reference/topics/61/jurisdictions/11/germany/] 84 Ibid., Section 1030 paragraph 1 ZPO 85 Veron, supra note 70, p.9 86 Ibid.

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provides that “a provision of the law of another country shall not be applied where its application would lead to a result which is manifestly incompatible with the fundamental principles of German law. In particular, inapplicability ensues, if its application would be incompatible with civil rights”.87 There are however other voices echoing pro the arbitrability of patent disputes with the restriction that the award would have effect only inter partes.88 The issue of arbitrability of patent disputes thus remains unclear.

4.3.4 Switzerland In Switzerland the issue of arbitrability of patent disputes is straightforward. The Federal Office of Intellectual Property published a decision according to which arbitral awards rendered in connection with the validity of intellectual property rights are recognized as a basis for the entries in the register89.

International and domestic arbitration are governed by two different rules90 and both of them provide for the arbitrability of patent law disputes.The Federal Supreme Court in 1945 decided that state courts did not have exclusive jurisdiction over civil suits but it was only in 1975 when the Federal Office of Intellectual Property held that arbitral tribunals are empowered in connection with the validity of patents, trademarks and designs.91 4.3.5 United States In the United States, the Patent Act has been amended in 1982 and 1984 so that it allows arbitrability of disputes relating to patents. Before the amendments took place, the court had jurisdiction on the matters of infringement and validity of patents. The Act authorizes voluntary arbitration to settle a patent‐related dispute, subject to the reservation by the Director of the Patent and Trademark Office (PTO) for determination of patentability.92 According to this approach, the award by an arbitrator is final and binding only between the parties and has no force or effect on any other person. In the event the subject‐ matter of an award is subsequently determined to be invalid or unenforceable, by any court of competent jurisdiction upon application by any party to the arbitration then the award shall be modified by the court of competent jurisdiction upon application by any party to the arbitration. Such modifications will govern the rights and obligations between the parties from the date of such modifications.93 Laws of Belgium and Netherlands also permit arbitration of patent ownership, validity, infringement and licensing to be biding only inter‐partes94.

4.4 Arbitrability of patent law disputes in selected countries of the Balkans Both intellectual property and arbitration are two new concepts for countries of Western Balkans, and all the countries have recently reformed their legislative framework and institutional set‐up in order to meet the modern requirements deriving from international conventions and EU Directives in both fields. While there are differences regarding the extent to which these two concepts have been developed among the Western Balkan countries, the bottom line is that the case law in the field of intellectual property and arbitration still remains undeveloped in all of them. Up to date, there have been many papers written on the topic of the arbitrability of patent law disputes in the Western European countries and worldwide, and for the first time this paper addresses this complex question by trying to agitate some debate in this part of Europe with respect to the arbitrability of patent law disputes.

87 In the version promulgated on 21 September 1994, Federal Law Gazette [Bundesgesetzblatt] I p. 2494, last amended by law of 12 April 2011, Federal Law Gazette I p. 615 88 Veron, supra note 70, p.10 89 Briner, supra note 74, 90 Swiss Intercantonal Arbitration Convention of March 27, 1968 for domestic arbitration and Chapter 12 of the Swiss Private International Law Act of December 18, 1987 for international arbitration.

91 Briner, supra note 74 92 OKUMA Kazutake, “Arbitration and Party Autonomy”, available at http://www.seinan-gu.ac.jp/jura/home04/pdf/3801/3801okuma.pdf ; For more information regarding the amendment of the U.S. Patent Act see also Karl P.Kilb, “Arbitration of Patent Disputes: An important option in the age of Information Technology”, Frodham Intellectual Property, Media & Entertainment Law Journal, Vol.4, Issue 2 1993, Article 4, Vol.IV, Book 2 93 Roohi Kohli Handoo and Yoginder Handoo, “ Scope”, for Paper presentation at Parallel Session 4: Patent law and litigation at The 5th Annual Conference of the European Policy of Intellectual Property Association, Sept. 20-21, 2010 94 Kenneth R. Adamo, “Overview of International Arbitration in the Intellectual Property Context”, The Global Business Law Review, Vol.2:7, 2011 available at http://www.globalbusinesslawreview.org/wp-content/uploads/2011/12/gAdamo.pdf ; See also Handoo&Handoo, supra note 20, p.8

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4.4.1 Albania Albania does not have an Arbitration law but the provisions relevant to arbitration are found in Law No. 8116 of 29 March 1996 on the Code of Civil Procedure of Albania (part II, title IV art.400‐439), and Title III, Chapter IX regulates recognition and enforcement of foreign arbitral awards in Albania95. Article 402 of the Civil Procedure Code provides that proprietary claims or claims resulting from proprietary relationships are arbitrable. From this wording it is straightforward that claims with respect to contracts relating to intellectual property can be arbitrated.Article 53 of the Law No. 9947 of 7.7.2008 on Industrial Property provides that Tirana Court of First Instance has jurisdiction for deciding on claims regarding infringement of patent rights but this doesn’t mean that parties cannot refer their disputes to an arbitration tribunal if the claim is deemed “proprietary” within the meaning of Article 402 of the Code of the Civil Procedure. The issues of validity and/or nullity of the patent may not be arbitrable since Article 33.5 of the Albanian Law on Industrial Property, provides that the challenge for a granted patent can be filed at the Appeal Board of the Albanian Patent Office, and the appeal against the decision of the Appeal Board can be filed in the Tirana Court of First Instance. There is no case law available which would shed some light to the question whether Albanian courts would enforce a foreign arbitral award on patent validity claim with inter‐partes effect only or they would refuse such a recognition on public policy grounds. According to the Law No.10428 of 02 June 2011 on International Private Law, foreign law will not be applied when the effects of its application are clearly contrary to the public order. The concept of “ordre public” in Albania is used in different pieces of legislation, but it is difficult to find an adequate definition of it and thus in absence of case law, it is difficult to predict what would be the outcome of a foreign arbitral award on patent validity claim.

4.4.2 Bosnia and Herzegovina Since according to the Dayton Agreement of 1995, Bosnia and Herzegovina is composed of two entities and one administrative unit, namely the Federation of Bosnia and Herzegovina, Republic of Srpska and the Brcko District, a self‐governing administrative unit under the sovereignity of the Bosnia and Herzegovina96, there are three separate laws governing the arbitration, which consist of exactly the same provisions.97 For the purposes of this paper, only provisions contained in the CPA of the Federation of Bosnia and Herzegovina will be examined. According to Article 435 CPA an arbitration agreement may be concluded with regard to any present or future dispute that may arise out of a legal relationship established between the parties98. When ratifying the New York Convention, Bosnia declared, inter alia, that the local courts will only recognize and enforce awards relating to disputes that qualify as “commercial” under local law.99 The procedure for recongition and enforcement of foreign arbitral awards in Bosnia is regulated by the Conflict of Laws Act (CLA) and according to Article 99 a foreign arbitral award will not be enforced if enforcement of such an award would be contrary to the BiH Constitution, the FBiH Constitution or RS Constitution and/or public order100. The concept of public policy in Bosnia is also vague and there is no any case law in place that would explain whether patent validity claims are arbitrable under the Bosnian legislation and whether a foreign award on the patent validity would be refused recognition on the public policy grounds. With respect to the arbitrability of such claims, it is generally perceived that claims that cannot be brought before the courts but are decided by state agencies are not arbitrable.101 The competent authority for granting patent rights is the Institute for Intellectual Property Rights of Bosnia and Herzegovina. An appeal against the decision of the Institute may be filed with the Appellate Commission within the Institute against the first instance decision made by the Institute, while an appeal against the second‐instance decision of the Institute is not allowed, but the administrative action may be brought before the Court of BiH102. Consequently, one might argue that dispute regarding the validity of a patent cannot be referred to arbitration at all.

95

Enyal Shuke, “Albania - Arbitration Law and Practice in Central and Eastern Europe”, Juris Publishing Inc., June 2006 Nedeljko Velisavljevic, CMS Reich-Rohrwig Hainz - Sarajevo.

97 Ibid. Note: The three laws are the Civil Procedure Act of the Federation of Bosnia and Herzegovina (CPA), Civil Procedure Act of the Republic of Srpska and the Civil Procedure Act of the Brcko District altogether referred to as Civil Procedure Acts of the Entities.

98 Article 435 of the Civil Procedure Act of the Federation of the Bosnia and Herzegovina 99 Velisavljevic, supra note 96, ibid.

100 Article 99 of the Conflict of Laws Act 101 See generally, contributions given by Sead Miljkovic, Dina Durakovic Morankic, and Vildana Mandalovic on Arbitration in Bosnia and Herzegovina for The Wolf Theiss Guide to: Dispute Resolution in Central, Eastern & Southeastern Europe, p.31 102 http://www.ipr.gov.ba/en/catalogs/view_/postupci-pred-institutom 96

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4.4.2 Croatia The Croatian case law on Arbitration Act has defined the notion of public order so that it connotates that the “fundamental principles of law and ethics valid in Croatia are subsumed103, and “may not be equated with mandatory rules (...) since public policy is not constituted bu the totality of madatory law norms, but encompasses only those which guarantee fundamental legal values (social, moral, economic) of the public policy of a country, or which jeopardize its public policy.104 Nevertheless, there is no case law that would confirm whether the arbitrability of disputes regarding the validity of patent rights would jeopardize its public policy. The Croatian Patent Act provides that the State Intellectual Property Office has exclusive authority to solve patent validity disputes105, whereas Articles 95c‐g of provide for usual civil law protection of patent rights, which leads to conclusion that those rights are arbitrable.106 Since the concept of public policy is not clearly formulated either in Croatia or in comparative law, and since there is no relevant court practice which would determine the standards of the concept, the implementation of this rule will continue to remain within the conscience and professionalism of each judge who is in the position of deciding on recongition of arbitral awards.107 4.4.3 Macedonia In Macedonia, there is no legal defintion of the term public policy, either. However, according to the Macedonian legal theory, the public policy is referring to the most important legal norms in the Macedonian legal system.108 According to Article 107 of the Law on Private International Law, courts will refuse the proposal for recognition and enforcement of foreign awards if the effect of the recognition and enforcement cause violation of the public policy109.According to the Macedonian Law on International Commercial Arbitration, the following claims can be arbitrated: a) disputes that concern rights which the parties may freely dispose (Art.1, para.2) and b) if the exclusive jurisdiction of a court of Macedonia is not foreseen for this particular type of dispute (Art.1, para.6).110 Under Macedonian Law on Intellectual Property, the competent authority for deciding on the validity of patents is the Patent Office,111 therefore from this wording it might be argued that issues of the validity of patent cannot be arbitrated and that courts would refuse recognition of an arbitral award.

4.4.4 Montenegro The term ordre public is mentioned in the Montenegrin Law on Civil Code in several articles,112 but there is no definition of the scope and meaning of the term.113 Arbitration in Montenegro is governed by Part IV of the Law of Civil Procedure114, and under Chapter 33, Article 473 the parties may agree on arbitration for the settlement of disputes regarding rights of which they may freely dispose, unless it is provided by law that certain disputes shall be exclusively settled by other courts.115 With respect to claims related to patent rights, the Montenegrin Patent Act in Article 14 provides that the legal protection of the patent will be realized in the administrative procedure before the Industrial Property Office, competent for the administrative and other issues. Against the final administrative acts, as defined in paragraph 2 of this Article, claim may be brought before the administrative court.116 With respect to the infringement of any other rights that have derived from patent rights i.e. damages, the jurisdiction for resolving disputes is, 103

High Commercial Court of the RoC, Pz-5712/03-3 of 8 November 2006 Supreme Court of the RoC, Gz.19/09-2 of 23 September 2009 Articles 80-82 of the Croatian Patent Act 106 Sajko, K : Private International Law, Narodne Novine, Zagreb, 2009, p.351 107 11 Croatian Arbitration Yearbook: 51, 52 108 Contributions for Montenegro for this paper were given by Vangel Dokovski, Assistant Professor of the Law Faculty of the University of Skopje.

109 Article 107 of the Law on Private International Law 110 Arsen Janevski & Toni Deskoski, “Arbitration- Regional and International Legal Aspect: The new Law on International Commercial Arbitration of the Republic of Macedonia, 14 Croat.Arbit.Yearb.89, 95-96 111 Article 9 (1) of the Law on IP, Official Gazette, 21/2009 112 Article 173 (2) : A court shall deny legal assistance to a foreign court if the performance of the action requested is contrary to the public order.

Article 174 (2): The action, which is the subject of the petition of a foreign court, may also be exercised in the manner requested by the foreign court if such actions are not contrary to the public order.

Article 495 (2): The arbitration board shall upon the request of the party’s record the settlement in the form of an arbitration award, unless it finds that its content violates the public order of the Republic of Montenegro.

Article 506 (2): 2) The court finds even if a party has not raised these grounds, that the award is in conflict with the public policy of the Republic of Montenegro 113 Contributions for Montenegro for this paper were given by Aneta Spaic PhD, Assistant Professor at the Faculty of Law of the University of Montenegro.

114 Part IV Arbitration Proceedings, Law of Civil Procedure of Montenegro 115 Ibid, Chapter 33, Article 473 116 Article 14 of the Montenegrin Law on Patents 104 105

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under Section XI, Article 76 of the Patent Law assumed to the regular courts.117 The latter ones are arbitrable in nature and under Section III, Article 12 paragraph 5 of the Rules of Foreign Trade Court of Arbitration it is provided that the Foreign Trade Court of Arbitration will decide upon...international commercial disputes of the intellectual property nature.118 As for the arbitratibility of patent validity claims, in the absence of case law and explicit provisions defining this matter, in accordance with the precisely defined jurisdiction of the Intellectual Property Office in Montenegro, validity of patents will be under its exclusive jurisdiction.

4.4.5 Serbia In Serbia, all property disputes about rights the parties are free to dispose with, except those in which the law explicitly provides the jurisdiction of the national court, can be brought before the arbitration court.

The national courts have exclusive jurisdiction over the disputes on ownership and possession rights on immovable property; disputes that arise out of lease of immovable property or usage right on immovable property etc.119 Given that intellectual property rights do not belong to the category of immovable property, it can be argued that disputes resulting from contractual relationships in the field of patents i.e. infringement of a patent, can be submitted to arbitration. With respect to the patent validity claims, the competent authority for granting patents under the Serbian patent law is the Industrial Property Office, and according to the new changes introduced in the Patent Law, which entered into force on January 4, 2012, in case of an infringement action arising from the published application, the court will stay the civil proceedings until the IPO’s issuance of the final decision. If the patent revocation proceeding is requested before IPO, the court shall stay the proceedings on an infringement action initiated by the right holder or the holder of an exclusive license.120 The conclusion which can be drawn from this new wording of the new Patent Law, it can be argued that the issue of the validity of patents is exclusive competence of the Industrial Property Office and, in analogy with court proceedings, if such claim is raised during arbitral proceedings, the arbitral tribunal shall stay its proceedings on an infringement action until IPO’s issuance of the decision on the issue of the patent validity.

4.4.6 Kosovo The Kosovo Arbitration Law does not specify any limitations regarding types of disputes that are arbitrable, but it says that all disputes related to civil‐judicial and economic‐judicial requests may be the subject of an arbitration agreement121. Given that patent rights are property rights in nature122, parties are also free to submitt to arbitration any dispute arising from a contractual relationship, however, with regard to the claims related to validity of patents it is still questionable. Under Kosovo legislation, the Industrial Property Office [IPO] which operates under the Ministry of Trade and Industry is the competent authority for granting patents123. With respect to the validity of the patent, Article 105 provides that the procedure regarding the announcement of no validity of a patent is initiated from a written request by the Office124, and that the procedure for declaring the patent invalid can be conducted by the Office through the offices with which the Office has signed cooperation agreements in this matter.125 From this wording, one could argue that if there is a cooperation agreement signed between the Permanent Tribunal of Arbitration and the Industrial Property Office, claims related to validity of patents could also be arbitrated and the arbitral tribunal could even render an award with erga omnes effect, but this is only a guess as the case law has not confirmed this yet.

With respect to the ordre public, the Law on Contentious Procedure provides that courts will not approve any agreement between the parties if its content is in contradiction with the, inter alia, rules of public policy (ordre public)126. Kosovo Arbitration Law also provides that courts can ex officio set aside or refuse the recognition of a foreign arbitral award on public policy grounds. In the absence of a sound definition of the notion of ordre public, according to law professors, courts in Kosovo rely on the modern jurisprudence according to which the ordre public is interpreted narrowly and it is deemed that an 117

Ibid., Article 76 Section III, Article 12, paragraph 5 of the Rules of the Foreign Trade Court of Arbitration 119 See generally contribution for Serbia given by Milan Lazic for the International Comparative Legal Guide to: International Arbitration 2010: A practical cross-border insight into international arbitration.

120 IP News Eastern Europe, Petosevic [http://www.petosevic.com/resources/news/2012/01/000856] 121 Article 5, Kosovo Arbitration Law [Law No.02/L-75] 122 See Ibid. Articles 30-34: the law provides that patents as an object of property can be transferred, licensed, be subject of lien, levied in execution and form part of the bankruptcy estate 123 Article 4 of the Kosovo Patent Law [Law No. 04/L-029] 124 Ibid. Article 105 125 Ibid. Article 103.2 126 Article 3.3. of the Law on Contentious Procedure 118

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agreement between the parties does not violate the public order.127 Based on its legislation, Kosovo has all predispositions to follow the model of Switzerland, United States and Canada, but given that the legislation in the field of intellectual property in Kosovo is new and mainly copied from other jurisdictions and still not tested properly in practice, it is still early to conclude anything.

CONCLUSION Those who would challenge the arbitrability of disputes related to property rights, could argue that the resolution of these disputes through arbitration would deprive the parties of the opportunity of a review by a higher instance court, since decisions in arbitration are final. Nevertheless, the arbitration agreement is a mutual one where parties voluntarily give up the right to a review by a higher instance court or any other instance; therefore, this would not be a deprivation since with the arbitration agreement the parties’ will is realized.

In modern trends of international commercial arbitration almost all commercial disputes can be subject to arbitration and such a decision would not be contrary to the norms of public order. In the field of property rights, from a higher analysis, we see that those countries which permit arbitration for property right cases have reached two possible solutions. The first solution is to allow arbitration for property right cases while the arbitral decision has a legal effect only between the parties (inter partes). The second solution is for competent administrative authorities to allow abitral tribunals to decide on issues related to the validity of patents or based on cooperation agreements, or through a declaration of these administrative authorities, as is the case of Switzerland, where arbitral tribunals have the right to decide about the validity of patents. This would be more advantageous than the first solution because every arbitral decision on the validity of patents would be registered in the competent offices for intellectual property and the arbitral decision would have an erga omnes legal effect. In this way public interest would remain unaffected, since such a decision would be given with the approval of the competent administrative authority, and the efficiency of arbitration which is known as a mechanism for the quick and professional resolution of complex disputes for which courts often do not have sufficient capacities or the specialized knowledge to resolve them would remain unaffected.

There is a third possibility, which is analogous to court procedures, when in case the issue of patent validity is raised in an arbitral proceeding, the latter would suspend the procedure until the competent administrative authority decides on the validity of the patent; however, this solution could delay the arbitral proceedings thereby losing the effect for which this mechanism for the alternative resolution of disputes is renowned.

As a conclusion, it can be stated that in Kosovo, as well as in other countries of the Western Balkans, property rights is an underdeveloped field, and courts which have a large backlog of unresolved cases, do not have the adequate expertise in the property rights field. This lack of expertise makes the courts inefficient in resolving complex disputes of intellectual property. Of all forms of intellectual property, patent law is underdeveloped although the use of patented technology is quite present among the citizens of these countries. Allowing the arbitrability of disputes related to patent law would ease the backlog of cases pending before the court and would offer parties a forum where their cases could be heard and decided upon in a more economical way, faster, and above all from experienced arbitrators. Therefore, it is important to consider the modalities about how to approach the problem of the arbitrability of disputes related to the validity of patents.

127

This was the view shared with the author by professors of the Law Faculty of the University of Pristina (Prof.Dr.Iur. Iset Morina, LL.M., Professor of the Law on Civil Procedure)

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UPC 347.97/.99:341.6 THE RELATIONSHIP BETWEEN REGULAR COURTS AND ARBITRATION: LEGAL STANDARDS AND BEST PRACTICES1

by Visar Ramaj

Abstract: This paper aims to clarify the relationship between regular Courts and Arbitration by identifying standards from applicable case and applying it to concretely identified situations. This will be achieved by analyzing the Kosovo Law on Arbitration and best practices from Model Arbitration Law of the United Nations Commission on International Trade Law (UNCITRAL), Kosovo Law on Arbitration is based on UNCITRAL Model Law, and analysis of judicial practice of developed countries in these questions. A specific focus of this paper are two situations, in one hand is the role of courts in determining the jurisdiction of the arbitral tribunal, and the obligation of the courts to refer cases to arbitration, and on the other hand is recognition and enforcement of arbitral awards by the courts.

During the conclusion of new business agreements or exploitation of opportunities for growing businesses, very little is thought about the courts, arbitration and other methods to resolve possible future disputes. That is because businesses spend long time negotiating substantive terms of the contract, and erroneously believe that discussion of arbitration and courts adversely affects the contract and undermines the confidence by the other business partner2. However, business frequently face contractual problems, including deadlines for completing performance, payment terms, and such problems are inevitable part of the business activity. Therefore, a party which foresees arbitration or other dispute mechanisms in advance gains an advantage in case problems arises and increases its legal security.

After the problems occur, if there is no amicable settlement, parties have two main options to secure a final and binding decision for them, through courts or arbitration. While the right to have access to a fair trial at a court established by law is fully guaranteed for all, the right to use arbitration is limited only to the cases where the parties have a written agreement to go to arbitration3. Choosing between court or arbitration is an exclusive choice, meaning that selecting one has the effect of excluding the other.

Therefore, businesses and individuals who wish to use arbitration and utilize all the advantages that it offers, should include the arbitration clause in writing in the contract or in a separate document.

An agreement to arbitrate represents the consent of the parties to exclude the jurisdiction of the courts to decide or intervene regarding their disputes4. This stems from the will of the parties, party autonomy, and consensual nature of arbitration, through which it differs from court proceedings5.

Therefore, an agreement to resolve disputes through arbitration means that no court or other forum has jurisdiction to intervene in the dispute, except for the arbitration forum which has been chosen by the parties. As illustrative example is if you've provided Arbitration in the Centre for Alternative Dispute Resolution of the American Chamber in Kosovo, than no any other court or other arbitral Tribunal may have the right to resolve the dispute except American Chamber.

However, there are exception to this general principle as it is common that arbitration laws of the country reserve prerogative measures for the courts through which they can intervene in a limited way in arbitration and in some cases also assist the arbitration procedures. This in order to maintain the

1

Paper is focused in international and domestic commercial arbitration.

Andrew and Keren Tweeddale, Arbitration of Commercial Disputes, ( Oxford University Press, 2006), 15 3 Kosovo Law on Arbitration, Law Nr. 02/L-75, article 6, 4 United Nations Commission on International Trade Law(UNCITRAL): Model Law on International Commercial Arbitration (Model Law) – (1985,amended 2006), (Secretariat notes), page 27 5 Andrew and Keren Tweeddale, Arbitration of Commercial Disputes, ( Oxford University Press, 2006), 35 2

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integrity of the country's justice system by placing a control system on arbitration, but also to assist arbitration as the main method of resolving disputes in business.

However, the role of the judiciary system in relation to arbitration in the first place should be seen as an assistant role, giving arbitration the power of the state in the issues of enforcement in case of disregard or non‐compliance with the orders and decisions from the arbitral institution.6 Therefore, the supervisory role comes only as secondary.

Kosovo Law on Arbitration7 provides that the courts have the right to interfere only in situations foreseen specifically by the law8, a summary of these situations include: a) the appointment, replacement and dismissal of arbitrators, b) the tribunal's jurisdiction, c) recognition, enforcement and annulment of arbitral decisions and d) interim measures. In practice, interventions in these situations are very sensitive and should be carefully constructed.

Above mentioned situations are the only situations in which courts may interfere in arbitration cases.

However, it is important to understand the content and standards of this interventions which should be carefully construed and ensuring the integrity and independence of the arbitral procedures.

In exercising these powers, the role of the Kosovo Courts should be based on principles and standards that reflect the interests of the justice system, the judiciary and business community, which chooses solving their disputes through arbitration. For the purposes of this paper the role of court intervention in arbitration shall be treated in the dimension of respecting the jurisdiction of the arbitral tribunal9.

Supreme Court of United States of America, in the famous case of Hall Street v. Mattel, has clearly stated the limits of intervention of the courts in arbitration and the role of the courts in defense of Arbitration.

SUPREME COURT OF UNITED STATES Hall Street Associates, L. L. C. V. Mattel, Inc. (No. 06–989. Heard: 7th on November, 2007—Decision dated 25th March 2008 In United States of America there exists a national policy which favors arbitration, and has only very limited measures for review, as provided in Articles 9‐10 of the Federal Arbitration Act, necessary to maintain the essential virtue of Arbitration as a method for resolving disputes in a fair way. Any other reading or intervention of courts outside these standards opens the door for legal claims and procedures that can transform arbitration to a prelude, for a judicial review process that consumes time and is much more serious. Courts must maintain and protect the essential features of arbitration and the numerous advantages that it has in the business world.

A) The jurisdiction of the Arbitral Tribunal and the formulation of the arbitration agreement If the court faces a case which includes and arbitration agreement is under the duty to dismiss the claim if the defendant in his statement of defense invokes the arbitration agreement, unless the court finds that the arbitration agreement is invalid or that the disputed subject matter is not covered by the arbitration agreement. This means that for those disputes in which there is an arbitration clause, the court will refuse to take the case and will refer it to the competent arbitral institution. An illustrative case comes from Canada:

6

Gary Born, International Arbitration, cases and materials, Kluwer Law, 2011 Aiming uniformity and legal security, UNCITRAL has prepared the Model Law. Model Law has been adopted by around 70 states, including Kosovo with some minor changes.

8 Kosovo Law on Arbitration, article 3 9 Starting from the propositions that: a) dispute is arbitrable, b) arbitration clause is in writing, and c) arbitration agreement is not null, invalid, or inoperative.

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FEDERAL COURT OF CANADA Coopers and Lybrant Limited for BC Navigation SA v. Canpotex Shipping Services Limited 10 (Federal Trial Reporter, 79) "In cases where there is a valid agreement to arbitrate, and if one party requests the transfer of the case to the arbitral tribunal, the applicable law requires the Court to refer the case to arbitration.

The executed Agreement by the parties contained an arbitration agreement. After Coopers and Lybrand Limited have commenced a lawsuit in court, Cantopex has rejected the jurisdiction of the Court to decide in this case and has requested an injunction to stop the proceedings until there is time to prepare its opposition, based on Article 50 ( 1) (b) of the Federal Court of Canada Act. Court approves the whole request of Cantopex. Based on Article 8 of the Model Law for Arbitration of the UNCITRAL which has been adopted by the Canadian Federal Law, the court is obliged to refer the case to arbitration. There existed a valid agreement to arbitrate, and the party has submitted its application in time. " However, courts in certain cases may not refer the case to arbitration 11 and also has the power to refuse recognition and enforcement of the awards issued by the competent arbitral tribunal12, and such cases involve where the dispute is not covered by the arbitration agreement or for other circumstances as provided for by law. These claims for lack of jurisdiction of the arbitral tribunal are frequent in front of the courts, especially by parties that have violated the obligations of the contract and expect to loose the case and need lengthier procedures.

Arbitration is a creature of contract; Arbitration Tribunal's jurisdiction is determined by the arbitration agreement and referral to arbitration13. As been decided in the case of United Service Parcel of America v.

Government of Canada14 the essential principle in arbitration is that the Tribunal has jurisdiction over the case as much as it is given to it by the agreement to arbitrate. Therefore, in order to determine the jurisdiction of the arbitral tribunal it should be analyzed the text of the arbitration agreement and the intention of the parties that the dispute should be resolved through arbitration.

In the cases where the court questions the tribunal jurisdiction to decide a particular case, the courts should have a standard for the handling such challenges. Court’s practice around the world shows two main systems. The first system (mainly common law countries) suggests that we should analyze the wording of the arbitration agreement in a very precise and detailed manner to decide what is included in the agreement to arbitrate15. The second system proposes that the wording of the agreement to be of the secondary importance (mostly countries with civil law), while the court should base its decision on the intention of the parties, whether they aimed that arbitration agreement covers the disputes that arose 16.

This does not exclude the possibility that Kosovo's courts also decide a standard that is the combination of these two The Applicability of the first system should be based on the language used in the agreement to arbitrate.

The language used in arbitration should be specific and depending on the purpose of the parties normally uses certain expressions. This is reflected in the model to arbitration clauses provided by the institutions dealing with arbitration which usually provide three sets of statements with varying degree of authority conferred to the tribunal. For exapmple: a) For disputes arising "from" the contract ‐ the interpretation should include everything that has originated in the contract17 b) For disputes arising "under" the contract ‐ narrow interpretation includes only the interpretation for the fulfillment of the contract18 and c) For disputes arising "related to" the contract ‐ the broadest interpretation possible is to include everything related to the contract19.

American Chamber of Commerce in Kosovo, as a model arbitration clause has this clause: 10

Available at UNCITRAT http://daccess-dds-ny.un.org/doc/UNDOC/GEN/V93/855/96/IMG/V9385596.pdf?OpenElement Kosovo Law on Arbitration, article 7 12 Ibid. article 36.2(a)(iv) 13 P. Fouchard, E. Gaillard, B. Goldman, International Commercial Arbitration, (Kluwer Law, 1999), 46 14 http://www.state.gov/s/l/c37/49.htm 15 Food Corp of India v. Achilles Halcoussis [1988] 2 Lloyd’s Rep 56, 61.

16 Tweddale, supra note 3, page 166 17 Sweet Dreams Unlimited v. Dial-a-Mattress Intern 1 F 3d 639 (7th Circuit 1993) 18 Producer (Finland) v. Supplier (USA), (2000) XXV Ybk Comm Arbn 311-23 19 Ashville Investments v Elmer contractors (1987) 37 BLR 55 11

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"Any dispute, disagreement, or claim arising out or in connection with this contract, including breach, termination or invalidity of the contract will be resolved through arbitration under the American Chamber of Commerce in Kosovo, based on the Rules of Arbitration of the Chamber itself".

Such a formulation is considered very broad and includes any dispute which has origin or is related in one way or another with the contract.

The purpose of the parties, according to the second system, should be interpreted on the basis of intention and business practices between the parties. Moreover, based on the principle of good faith, the party is bound by statements and actions by which has indicated his intention to include or not an issue in the arbitration agreement20.

According to two other principles that are applicable to our arbitration law, the principle kompetenz ‐ kompentez and the principle of separability further clarify handling of arbitration agreements. Based on the principle of competenz‐competenz it is the authority of the arbitration tribunal to rule on its own jurisdiction if there are challenges from any of the parties. The principle of seperability provides that the arbitration agreement is considered as a separate and independent terms from the underlying contract.

Finally, setting the standards for courts intervention in arbitration is of primary importance to the Kosovo justice system and should reflect a broad discussion of interested parties and institutions. This would increase legal certainty for the parties, confidence in the arbitration as the alternative method of resolving disputes and keeping the credibility of the courts.

B) Recognition and Enforcement of arbitral awards by regular courts Although there is no statistical data, in most arbitration cases decisions are fulfilled voluntarily by the parties21. This is because arbitration decisions are enforceable easily, no appeal is allowed, the legal basis for the refusal of enforcement is limited, and the fact that losing party is charged with additional costs.

However, there are cases when a party fails to fulfill its obligations based on the decision, then the other party asks from the court for the enforcement of the decision in the country where the assets of the losing party are22.

Courts may refuse enforcement of arbitral awards in cases where criteria for refusal are met in specific circumstances, cases which may include lack of jurisdiction, procedures for appointment of the arbitrators, parties and other23. While these standards are fairly specifically foreseen, there are two additional grounds foreseen in the local legislation (Kosovo), that if applicable, may result in non‐ enforceability of the decision from the respective court. These two grounds for refusing recognition and enforcement include: A) the case is not arbitrabile in accordance with the local law, B) recognition and enforcement violates public order24. Such solution is identical with the Model Law25 and New York Convention26 and represent internationally recognized standards in arbitration. Case law shows that applicability of this standard did result in uniformity, while providing guidance in most aspects, however leaving a degree of discretion to local courts. Therefore, for the Kosovo Courts in it important to start shaping the lex fori legal standards for enforcement and recognition of arbitral awards, and increase legal security and predictability for the parties.

As a preliminary issue in the recognition and enforcement of the arbitral awards is the statute of limitation with respect to submission of the arbitral award for enforcement, this especially with respect to international commercial arbitration. In such cases, the court may face situations where the statute of limitations is different based on the applicable law, which may be law applicable based on the agreement of the parties, laws of the seat of arbitration, local laws where the enforcement is sought and others. As an example, statute of limitations in China is 6 months, while in Italy is 10 years. Based on this issue, it is generally accepted that regardless of other laws, the applicable law for the statute of limitation is the lex

20

Tweddale, supra note 3, page 165 Andrew and Keren Tweeddale, Arbitration of Commercial Disputes, Oxford, Oxford University Press, 2006, page 408 22 At this point in time, after the award has been issued, the tribunal is functus officio.

23 Kosovo Law on Arbitration, article 36 24 Ibid. article, 36 (2)(b) and 39.5 25 United Nations Commission on International Trade Law(UNCITRAL): Model Law on International Commercial Arbitration (Model Law) – (1985, amended 2006), article 36(1)(v) 26 The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), article V(2) 21

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fori of the country where enforcement is sought27. On the other hand, the burden of proof remains with the party who claims that the statute of limitations applies.28 a) Arbitrability With respect to the question that which cases can be submitted in arbitration, the concept of arbitrability, according to the applicable law in Kosovo, all civil and commercial cases can be submitted to arbitration.29 This definition is not very helpful in practice, where the boundaries between arbitrable and non� arbitrable cases is blurred. There are several fields in the civil commercial matters, including patents, intellectual property, where the issue of arbitrability remains open. It was specifically this problem with defining the issue of arbitrability the reason why UNCITRAL did not address it in the UNCITRAL Model Law. In addition to setting predictable standards about the issue of arbitrability and the question of what can be substandard on whether on this issue they would be treating differently domestic arbitration from international arbitration. There is an ongoing debate on this issue, and a very influential decision was issued by the Supreme Court of the United States in the case of Mitsubishi Motors Corp v. Soler Chrysler�

Plymouth30 which specified that international arbitration would be treated more favorably and the issue of arbitrability would be interpreted more broadly to encompass areas which in domestic arbitration would normally not be arbitrable. Therefore, it is suggested that even Kosovo courts interpret the issue of arbitrability more broadly in the context of international arbitration. b) Public Order Violation of Public Order of a country is a concept that, if applicable, gives the authority to courts to refuse recognition and enforcement despite the fact that all conditions for it are fulfilled. Public order in arbitration is interpreted narrowly and includes cases where there is violation of basic values of justice and moral of a country31, even though the interpretation of the courts changes depending in the state interests and internal concepts of state sovereignty, justice and morals. Some of these cases, which remain highly controversial, include limiting the parties’ rights to fully represent its case, impartiality of the arbitrators, conflict of interest, and others.

Standards of the court in different country vary when it comes to the issue of arbitrators having served in panels with the same party in several cases, where the arbitrator limits the opportunity of the parties to present its evidences, where the arbitrator has worked with one of the legal counsels of one of the parties, where the arbitrator has previously published very one sided comments with respect to legal issues which are into question, and others. In addition, such cases are frequent in arbitration, given the limited number of arbitrators who work in the field. Therefore, it would be very beneficial and helpful is such issues are discussed at the judiciary level here in Kosovo.

In conclusion, enforcement of arbitral awards by the regular courts represents one of the processes which determines how successful will arbitration be in a country and how safe is the environment for doing business. Given the lack of experience of the Kosovo courts in this area is very important for the court to address these issues in advance in order to create uniformity.

27

Government of Kuwait v. Sir Frederic Snow & Partners, [1983] 1 WLR 818, CA Islamic Republic of Iran v. Gould Inc, F 2d 764, 770 (9th circuit, 1992) 29 Kosovo Law on Arbitration, article 5 30 Mitsubishi Motors Corp v. Soler Chrysler-Plymouth, 473 US 614, 105 S Ct Reports (1985) 3346, (1986), XI Ybk Comm Arbn 555-65.

31 Parsons and whittemore v. RAKTA, United States Court of Appeal, 508 F 2d 969 (2nd Circuit 1974) 28

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UPC 341.613(496.51) THE IMPORTANCE OF ALTERNATIVE DISPUTE RESOLUTION THROUGH ARBITRATION IN KOSOVO

by Valbon Mulaj1

Abstract This article aims to highlight the importance of the Alternative Resolution of Disputes through arbitration in Kosovo. In order to better understand the importance of the functioning of arbitration, the Alternative Dispute Resolution Centre in the American Chamber of Commerce and the Permanent Arbitration Tribunal of the Kosovo Chamber of Commerce have been established. The legal framework has been completed, beginning with the Law on Arbitration, the Act on the Establishment of Arbitration, Rules of Arbitration, the Decision on administrative procedure expenses for Arbitration, list of arbitrators. Organizing roundtables with businesses, attorneys, and arbitrators of the Chambers of Commerce in the country. Raising businesses’ awareness for the functioning of arbitration in Kosovo, and its benefits relative to other dispute resolution mechanisms. What is the importance of the parties’ willingness in arbitration, the place of arbitration, number of arbitrators, language of arbitration, the informing of businesses for the role and significance of arbitration so that they direct their disputes for resolution through arbitration. The commitment of the two Chambers of Commerce in the country to achieve credibility in arbitration, so that businesses entrust their disputes to arbitration.

Key words: Arbitration, significance, resolution, alternative, disputes, legal, civil, commercial, procedure, businesses, Chambers, Centre, tribunal, professionalism, confidentiality, informing, mechanisms, court, arbitrator, credibility, arbitration clause, contract.

1. The Importance of Alternative Dispute Resolution through Arbitration The alternative resolution of disputes through arbitration in Kosovo has a great importance for local businesses as well as for foreign investors. Arbitration is one of the alternative and more efficient instruments of dispute resolution, at a time when businesses are interested in a quicker and less bureaucratic resolution of a dispute.2 In arbitration, besides the advantage of speedy resolution of disputes, there are also other advantages such as professionalism, procedure and arbitral decision confidentiality, credibility, efficiency, the consideration for the parties’ consent etc. The awareness and demand for arbitration services from the lawyer and business communities3, economists, and all those who are involved in issues of civil dispute resolution and commercial legal disputes are important to the success of arbitration.

Arbitration is no longer an innovation in Kosovo, because owing to the commitment of the Alternative Dispute Resolution Centre of the American Chamber of Commerce in Kosovo4 and the Tribunal of Arbitration of the Kosovo Chamber of Commerce, 5 businesses have had the opportunity to be informed in detail with regard to the role and importance of arbitration in the country. The importance of arbitration in general is understood by businesses when disputes arise between them. After the dispute arises, the importance and benefits of arbitration come to the fore relative to courts and other mechanisms for dispute resolution.

Arbitration, as one of the mechanisms for dispute resolution, resolves all disputes which deal with civil and commercial issues.6 Disputes, which do not fall under these two categories, civil and commercial, 1

Valbon Mulaj PhD candidate, arbitrator at Alternative Dispute Resolution Center at American Chamber of Commerce in Kosovo.

Kosovo Chamber of Commerce. See webpage: http://www.oek-kcc.org/2013/en/services/arbitration 3 The Systems for Enforcing Agreements and Decisions Program (SEAD). Report and recommendations for the development as well as sucessful and effective implementation of the system for Alternative Dispute Resolution. This report was prepared with the support of the American pople, through the United States Agency for International Development (USAID). April 30, 2010, p.1.

4 American Chamber of Commerce in Kosovo. See webpage: http://www.adr-ks.org 5 See webpage: http://www.oek-kcc.org/2013/en/services/arbitration 6 Article 5 paragraph 2 of the Law on Arbitration in the Republic of Kosovo of 2008. See the official webpage of the Republic of Kosovo: http://gzk.rks-gov.net/ActDetail.aspx?ActID=2579 2

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cannot be subject to resolution through arbitration. It is well known that most disputes businesses have with one another are civil and commercial in nature; as such, arbitration has been created in order to assist businesses by providing them with efficient and prompt services of arbitration. Arbitration, as one of the mechanisms for the resolution of disputes, is not a rival of courts, but rather a facilitator, which unloads their workload. In its Annual Report for 2013, the Kosovo Judicial Council, besides the achievements of 2013, considers this as a year of many challenges that accompany the courts, amongst them the backlog of cases in courts.7 During 2013, courts in Kosovo have received 885,677 cases, amongst which 466,255 remain unresolved.8 As a result, the Alternative Dispute Resolution Centres, which function within the Kosovo Chamber of Commerce and the American Chamber of Commerce in Kosovo, are considered as auxiliary to the courts. This is because, since the establishment of arbitration, all disputes, i.e. disputes which used to be resolved through courts, are now resolved through arbitration.

Arbitration in Kosovo, even if it used to be considered as an innovation, because it did not function well in practice, since 2011 is no longer considered as something new. That is because in the last few years its role and importance has been well presented to the businesses organized by the Alternative Dispute Resolution Centre of the American Chamber of Commerce in Kosovo9 and the Permanent Tribunal of Arbitration of the Kosovo Chamber of Commerce.10 After the Law on Arbitration in Kosovo came into force,11 all the legal framework for the functioning of arbitration was completed in 2011.12 Since 2011, both Centres of Arbitration in Kosovo have been engaged and worked so that arbitration is credible and professional for the businesses. The Alternative Dispute Resolution Centre of AmCham,13 has organized trainings, roundtables with arbitrators, in order for them to be professional in arbitration. AmCham has also organized many roundtables with businesses on the role and importance of arbitration,14 and on the means of dispute resolution through arbitration.15 The businesses that are members of these Chambers,16 have had the opportunity to receive information on the role and importance of arbitration, as well as for the advantages of arbitration in their disputes.

Businesses which are members of the American Chamber of Commerce in Kosovo17 and the Kosovo Chamber of Commerce,18 can resolve their disputes through arbitration if they have included the arbitration clause in their contracts. Businesses which are not members of these two Chambers, but have included the arbitration clause in their contracts, may resolve their dispute through arbitration similar to the businesses which are members of these two Chambers of Commerce.

7

Annual Report of the Kosovo Judicial Council 2013, p, 7. See official webpage of the Kosovo Judicial Council: http://www.kgjkks.org/repository/docs/ALB_Raporti_Vjetor_2013_931339.pdf 8 Annual Report of the Kosovo Judicial Council 2013, p, 39. See official webpage of the Kosovo Judicial Council: http://www.kgjkks.org/repository/docs/ALB_Raporti_Vjetor_2013_931339.pdf 9 American Chamber of Commerce in Kosovo. See webpage: http://www.adr-ks.org 10 Kosovo Chamber of Commerce. See webpage: http://www.oek-kcc.org/2013/en/services/arbitration 11 Law on Arbitration of the Republi of Kosovo, 2008. See official webpage of the Republic of Kosovo: http://gzk.rksgov.net/ActDetail.aspx?ActID=2579 12 Such as: Rules of Arbitration in Kosovo, which entered into force on June 24, 2011. Arbitration Rules in the American Chamber of Commerce in Kosovo. Based on the decision of the Board of Governors of the American Chamber of Commerce for the establishment of the Alternative Dispute Resolution Centre and the appointment of the Board of Directors of the ADR Centre. On its meeting of April 19, 2011, the Board of the ADR Centre approved the Rules of Arbitration 2011. See the official webpage of the American Chamber of Commerce in Kosovo: http://www.adr-ks.org/documents/. Charter of the Permanent Tribunal of Arbitration in the Kosovo Chamber of Commerce.

Entered into force on June 24, 2011. See the internet address: Charter of the American Chamber of Commerce in Kosovo Alternative Dispute Resolution Center, Year 2011. Decision on the Costs of the Arbitration Procedure in the Kosovo Chamber of Commerce, This decision entered into force on 2011.Decision on the Costs of the Arbitration Procedure in the American Chamber of Commerce in Kosovo, 2011.

13 See webpage: http://www.adr-ks.org 14 Raising the awareness of young enterpreneurs on the importance of arbitration, organized by the ADR Centre of the American Chamber of Commerce in Kosovo. See webpage: http://www.amchamksv.org/news-1416574725.html 15 Businesses discuss methodologies for preparing arbitration cases organized by the ADR Centre of the American Chamber of Commerce in Kosovo. See webpage: http://www.adr-ks.org/news/businesses-discuss-methodologies-for-preparing-arbitration-cases 16 American Chamber of Commerce in Kosovo. See webpage: http://www.amchamksv.org/content/members 17 Ibid.

18 Kosovo Chamber of Commerce. See the list of member businesses of the Chamber in its official webpage.

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2. The roster of arbitrators in the Alternative Dispute Resolution Centres The Alternative Dispute Resolution Centres of the two Chambers, KCC19 and AmCham,20 have a roster of professional arbitrators,21 where parties have the chance to appoint arbitrators from that roster and assign them as professional arbitrators in their dispute.

The Alternative Dispute Resolution Centre of the American Chamber of Commerce in Kosovo made a call for application for arbitrators in the end of 2014, 22 to complete the roster of arbitrations with new names and to give as many options to the parties to name professional arbitrators in their disputes. The Arbitration Centres are always adding to the roster of arbitrators with specialized arbitrators in specific fields, thereby offering them specialized trainings. Specialization is considered as one of the main advantages of arbitration because parties have the option to appoint an arbitrator who is specialized in the field in which parties require a resolution. Parties may appoint arbitrators that are in the list of the arbitration institution.23 Parties may also appoint as arbitrators, individuals who are not in the roster of arbitrators, under the condition that that person provides a brief declaration about his/her past and current professional experience. This declaration must be provided if the arbitrator is appointed by an appointing authority that is different from the appointing authority designated by the institution of arbitration.24 In this case, parties wishing to appoint an arbitrator in their dispute may appoint the arbitrator from the roster of arbitrators of that institution in which they have chosen to resolve their dispute or from the roster of another institution of arbitration. For example, that occurs if the dispute has been referred to the Permanent Tribunal of Arbitration in the Kosovo Chamber of Commerce, pursuant to the clause in the signed contract. After the dispute arises, parties may appoint the arbitrator from the roster of arbitrators of the Alternative Dispute Resolution Centre of the American Chamber of Commerce in Kosovo,25 in the event that the biography and the specialization of that arbitrator is more to the liking of the parties.

3. The importance of the parties consent in arbitration and the inclusion of the Arbitration Clause in contracts Parties determine, with their consent (through the arbitration agreement), a series of aspects that relate to the private nature of this process. These include the type, forum, and the place of arbitration, the arbitrator or group of competent arbitrators for the resolution of the dispute, the applicable procedural and substantive law, the cost of arbitration etc.26 Parties in arbitration have a big advantage in that their consent is taken into account. The consent of the parties is expressed through the agreement made between them as mutual consent. Pursuant to Article 5, paragraph 1 of the Law on Arbitration in Kosovo (LAK), “A dispute can be resolved through arbitration only if an agreement between the parties exists, through which they agree that the dispute will be resolved through arbitration”. 27 If the parties agree at the signing of the contract to include the arbitration clause, it is recommended that they agree on the form of arbitration. If the parties agree on the institutional form of arbitration within the Alternative Dispute Resolution Centre of the American Chamber of Commerce in Kosovo, it is undisputed that in the event of a dispute between them, they should refer the dispute directly to the Alternative Dispute Resolution Centre of AmCham.28 This is because if the dispute is sent to the courts,

19

Kosovo Chamber of Commerce. See webpage: http://www.oek-kcc.org/2013/en/services/arbitration Ibid.

21 ADR Centre of the American Chamber of Commerce offers parties the roster of arbitrators. See webpage: http://www.adrks.org/arbitrators/. Permanent Tribunal of Arbitration (Kosovo Permanent Tribunal of Arbitration) offers parties the roster of arbitrators. See webpage: http://www.kosovo-arbitration.com/en/list-of-arbitrators.

22 American Chamber of Commerce. See webpage: http://www.adr-ks.org/news/the/ 23 Article 6 paragraph 1 of the Rules of Arbitration 2011, of the American Chamber of Commerce in Kosovo.

24 Article 6 paragraph2 of the Rules of Arbitration 2011, of AmCham.

25 American Chamber of Commerce in Kosovo. See webpage: http://www.adr-ks.org/arbitrators/ 26 Mëneri, Suela: “E drejta e arbitrazhit dhe e ndërmjetësimit ndërkombëtar tregtar”, Tirana, 2012, p. 42.

27 Article 5 paragraph 1 of the Law on Arbitration of the Republic of Kosovo 2011. See the official webpage of the Republic of Kosovo: http://gzk.rks-gov.net/ActDetail.aspx?ActID=2579 28 American Chamber of Commerce in Kosovo. See webpage: http://www.adr-ks.org/introduction/ 20

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the courts will refer the case back to arbitration, since parties have agreed on the resolution of the dispute through arbitration.

In order to refer the dispute directly to arbitration, parties must include the arbitration clause in their contract. The following is a model arbitration clause: “Any dispute, controversy or claim arising out of or in relation to this contract, including the validity, invalidity, breach or termination thereof, shall be resolved by arbitration administered by the American Chamber of Commerce in Kosovo in accordance with the Rules of Arbitration of the American Chamber of Commerce in Kosovo..29 Parties should also consider adding the following provisions: (a) The appointing authority shall be... (name of the institution or individual); (b) The number of arbitrators shall be...(one or three); (c) The place of the arbitration shall be...(city and country); (d) The arbitral/mediation proceedings shall be conducted in‐‐‐‐language...; (e) The law governing the contract is...;30 On this basis, in case of a dispute the parties shall refer the case for resolution to the Alternative Dispute Resolution Centre of the American Chamber of Commerce in Kosovo because at the time of the signing of the contract the parties have agreed on this model of the arbitration clause.

The Kosovo Chamber of Commerce uses the following model of the arbitration clause: “Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof, shall be settled by arbitration under the auspices of Kosovo Chamber of Commerce in accordance with the Arbitration Rules of Permanent Tribunal of Arbitration”.31 Note: Parties should consider adding: (a) The appointing authority shall be the Permanent Tribunal of Arbitration; (b) The number of arbitrators shall be odd [one or three]; (c) The place of arbitration shall be Prishtina, Kosovo; (d) The language to be used in the arbitral proceedings shall be Albanian, Serbian or English; (e) The applicable substantive law is Kosovo legislation.32 Based on this clause, the parties shall refer the case for resolution to the Permanent Tribunal of Arbitration of the Kosovo Chamber of Commerce, because at the time of the signing of the contract the parties have agreed on this model of the arbitration clause.

Law and Rules of Arbitration: Why is it important for parties to agree on the law and rules of arbitration? It is important for the parties to agree on the law and rules of arbitration at the time of the signing of the contract, through the arbitration clause as part of the contract, because then the sole arbitrator or body of arbitrators shall base the decision on the law and rules of arbitration the parties have agreed upon. In case the sole arbitrator or body of arbitrators basis the decision on another law and other rules of arbitration for which the parties have not agreed upon, the arbitral decision may be considered null and void and the parties may request not to enforce the decision because its contrary to the law and consent of the parties.

29 This model of the arbitration clause was presented to the representatives of businesses, in the Roundtable: “the Strategies for Dispute Resolution and Utilization of Advantages of Arbitration”, organized by the Alternative Dispute Resolution Centre of the American Chamber of Commerce in Kosovo on December 20, 2013, in the offices of the ADR Centre at AmCham. The panel members of this roundtable were: Dastid Pallaska – arbitrator and chairman of the Board of Directors of the American Chamber of Commerce in Kosovo, Merita Emini Project Management Specialist (Rule of Law) of USAID in Kosovo, Zana Bejta – head of Legal and Regulatory Affairs at IPKO, Robert Muharremi, arbitrator – Manager at Deloitte Kosovo, Visar Ramaj – Secretary General of the Alternative Dispute Resolution Centre of the American Chamber of Commerce in Kosovo. Moreover, besides the businesses, the arbitrators elected for the ADR Centre were also present in this roundtable.

30 The same Roundtable organized by the Alternative Dispute Resolution Centre of the American Chamber of Commerce in Kosovo, on December 20, 2013.

31 Model of the arbitration clauses in contracts, in the Annex to the Rules of Arbitration of KOSOVO 2011. The Assembly of the Kosovo Chamber of Commerce, on June 24, 2011, adopt such rules with protocol number 226. dated 27.06.2011, in Article 35, paragraph 5, of these rules, p. 20.

32 Ibid, the Annex of Kosovo Arbitration Rules, 2011, p. 20.

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Place of arbitration: The parties have the right to select the place where the arbitral proceedings are to be held. In case the parties do not wish to select the place or cannot agree on the venue of arbitration, the Arbitral Tribunal may make the selection. Pursuant to Article 1, paragraph 1 of the Law on Arbitration “Unless the parties have agreed on the place where the arbitration is to be held, such place shall be determined by the arbitral tribunal taking into consideration the circumstances of the case and the convenience of the parties and the tribunal .” 33 Number of Arbitrators: The arbitral tribunal shall be composed of either a single arbitrator or a panel of arbitrators, provided that the panel is composed of an odd number of arbitrators.34 Parties with their mutual consent agree on the number of arbitrators, so that one or more arbitrators resolve their dispute.

Parties have full discretion in deciding whom to appoint for the resolution of their dispute. Parties choose to resolve their dispute by arbitrators who are independent and impartial.35 In Kosovo, the Law on Arbitration does not have a provision for the qualification of the arbitrator besides their independence and impartiality.36 For this reason, parties shall be careful to appoint in their dispute an arbitrator or a body of arbitrators who are specialized in the field in which parties require a resolution. Pursuant to Article 9, paragraph 2 of the Law on Arbitration “The parties may agree on a procedure for appointing the arbitrator or arbitrators.” If the parties have not agreed on the number of arbitrators, the appointing authority will decide if the dispute will be referred to a sole arbitrator or to a body of arbitrators consisting of three members, by considering all relevant circumstances.37 If a party fails to appoint the arbitrator within thirty (30) days of the receipt of a request to do so, or if the two arbitrators fail to agree on the third arbitrator within thirty days of their appointment, the relevant appointment shall be made by the Court upon the request of a party.38 When appointing an arbitrator the Court shall have due regard to the qualifications an arbitrator is required to have pursuant to the arbitration agreement.39 Language of arbitration: Parties agree on the language of arbitration through their consent. Usually the language of arbitration selected is the one known by both parties so that additional expenses for language translation during the arbitral proceedings are not incurred. As a rule, the choice of language in the arbitral proceedings relies on the autonomy of the parties.40 In the event that the language of arbitration has not been decided by the parties in the arbitration clause at the signing of the contract, parties shall agree on the language to be used in the arbitral procedure.

“Unless the parties have agreed otherwise, the arbitral tribunal shall, promptly after its appointment, determine the language or languages to be used in the procedure.”41 “The agreement of the parties or, respectively, the determination of the arbitral tribunal shall apply to any written statement and request submitted by a party, any hearing and any award, decision or other communication by the arbitral tribunal.”42 “The arbitral tribunal may order that any documents submitted in the course of the procedure delivered in their original language shall be accompanied by a translation into the language or languages agreed upon by the parties or determined by the arbitral tribunal.”43 33 Article 17 paragraph 1 of the Law on Arbitration in the Republic of Kosovo. See the official webpage of the Republic of Kosovo: http://gzk.rks-gov.net/ActDetail.aspx?ActID=2579 34 Article 9 paragraph 1 of the Law on Arbitration in the Republic of Kosovo. See the official webpage of the Republic of Kosovo: http://gzk.rks-gov.net/ActDetail.aspx?ActID=2579 35 Hetemi, Mehdi, “E drejta ndërkombëtare tregtare – afariste”. Prishtinë, 2007, p, 419.

36 The Systems for Enforcing Agreements and Decisions Program (SEAD). Report and recommendations for the development as well as sucessful and effective implementation of the system for Alternative Dispute Resolution. This report was prepared with the support of the American pople, through the United States Agency for International Development (USAID) April 30, 2010, p, 8.

37 Article 5 paragraph 1 of the Rules of Arbitration 2011. Based on the decision of the Board of Governors of the American Chamber of Commerce for the establishment of the Alternative Dispute Resolution Centre and the appointment of the Board of Directors of the ADR Centre. On its meeting of April 19, 2011, the Board of the ADR Centre adopto these rules of arbitration.

38 Article 9 paragraph 4 of the Law on Arbitration in the Republic of Kosovo. See the official webpage of the Republic of Kosovo: http://gzk.rks-gov.net/ActDetail.aspx?ActID=2579 39 The Systems for Enforcing Agreements and Decisions Program (SEAD). Report and recommendations for the development as well as sucessful and effective implementation of the system for Alternative Dispute Resolution. This report was prepared with the support of the American pople, through the United States Agency for International Development (USAID) April 30, 2010,, p, 8.

40 Mëneri, Suela: “E drejta e arbitrazhit dhe e ndërmjetësimit ndërkombëtar tregtar”, Tiranë, 2012, p. 51.

41 Article 19 paragraph 1 of the Law on Arbitration in the Republic of Kosovo 2008. See the official webpage of the Republic of Kosovo: http://gzk.rks-gov.net/ActDetail.aspx?ActID=2579 42 Article 22 paragraph 1 of the UNCITRAL Model Law on International Commercial Arbitration (Text adopted by the United Nations Commission on International Trade Law, on June 21, 1985, and amended by the same Commission on July 7, 2006).

43 Article 19 paragraph 2 of the Law on Arbitration in the Republic of Kosovo 2008. See the official webpage of the Republic of Kosovo: http://gzk.rks-gov.net/ActDetail.aspx?ActID=2579

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“The arbitral tribunal shall only accept translation produced by a translator who is certified or otherwise approved by a court.” 44 4. Why shall businesses consider arbitration as one the best mechanisms for the resolution of their disputes?

The reason for this is that Arbitration, has precisely been established for the businesses and is favorable for the resolution of their disputes. Arbitration offers professionalism and resolves disputes quickly which businesses consider as a considerable advantage. The pre‐arbitral procedure is obviously less formal, quicker and offers many options to find a compromised resolution from the parties.45 Moreover, the whole arbitral procedure is confidential.46 Parties in an arbitration procedure have an advantage because their consent is taken into account. The arbitral decisions are voluminous and professional because parties appoint the sole arbitrator or the body of arbitrators because of their specialization in the field in which parties appoint them to find a resolution.

“The award of arbitral tribunal shall be made in writing and shall be final and binding on the parties.”47 5. Informing of businesses on arbitration by the Arbitration Centers Arbitration Centers in Kosovo48 shall inform businesses on the importance of arbitration in the country and abroad, on the legal framework of arbitration,49 and on the advantages of arbitration relative to the courts. Moreover, they shall offer a good model of the arbitration clause50 so that businesses at the signing of the contract include that model of the arbitration clause and a roster of professional and specialized arbitrators. In addition, these centers should create a close collaboration between the businesses and the arbitration center. Joint meetings shall be held with the arbitration centers, attorneys, notaries, and private bailiffs, on the role and importance of arbitration so that the suspicions on the application of arbitration are eliminated and a chain support is created. Arbitration Centers shall hold joint meetings with businesses’ attorneys so that they, during the drafting of the contract include the arbitration clause in the contract, not solely to increase the credibility of arbitration, but also because arbitration is favorable for businesses due to the quick resolution of the dispute and the professionalism of the arbitrators as mentioned above. However, what is most important for businesses is confidentiality, where parties and arbitrators of the procedure and the arbitral decision are confidential. Unless the parties expressly agree otherwise, the parties undertake as a general agreement to keep the content of the arbitration procedure, the decisions, and orders undisclosed. Moreover, parties agree not to disclose any materials submitted by another party in the framework of the procedure that are not otherwise in the public domain. In addition they agree to preserve and to the extent that a statement may be requested by a party with a legal obligation, to protect or pursue a legal right or to enforce or challenge a decision in legal proceedings before a judicial authority.51 This undertaking is also valid for the arbitrators, experts, witnesses, persons who act on behalf of another person included in the arbitration procedure, the secretary of the arbitral tribunal and every person of the arbitration institution who is involved in the administration of the arbitration procedure.52 This is highly advantageous for the business that has lost the case and violated the contract because its name will not become available publicly. If the name became publicly available, it would have a negative impact on the business because other companies will 44

Article 19 paragraph 2 of the Law on Arbitration in the Republic of Kosovo 2008.

Bilalli, Asllan, “ Zgjidhja e kontesteve afariste nëpërmjet arbitrazheve tregtare ndërkombëtare”. Revistë për Çështje Juridike dhe Shoqërore. E DREJTA, Nr. 3-4/2012., p, 7.

46 Article 41 paragraph 1 of the Rules of Arbitration 2011.

47 Article 31 paragraph 1 of the Law on Arbitration in the Republic of Kosovo 2008. . See the official webpage of the Republic of Kosovo: http://gzk.rks-gov.net/ActDetail.aspx?ActID=2579 48 Alternative Dispute Resolution Centre of the American Chamber of Commerce. See webpage: http://www.adr-ks.org/introduction/ and the Permanent Tribunal of Arbitration in the Kosovo Chamber of Commerce. See webpage: http://www.oekkcc.org/2013/en/services/arbitration 49 Such as: Law on Arbitration in Kosovo 2008, Charter of Arbitration 2011, Rules of Arbitration 2011, Decision on the cost of the arbitral procedure 2011.

50 A model of the arbitration clause presented to the businesses, prepared by Mr. Visar Ramaj, Secretary General of the Alternative Dispute Resolution Centre of the American Chamber of Commerce in Kosovo, in 2014. This is the model of the clause: “Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof, shall be settled by arbitration under the auspices of Kosovo Chamber of Commerce in accordance with the Arbitration Rules of Permanent Tribunal of Arbitration”.

51 Article 41 paragraph 1 of the Rules of Arbitration 2011. Based on the decision of the Board of Governors of the American Chamber of Commerce for the establishment of the Alternative Dispute Resolution Centre and the appointment of the Board of Directors of the ADR Centre. On its meeting of April 19, 2011, the Board of the ADR Centre approved the Rules of Arbitration 2011.

52 Article 41 paragraph 1 of the Rules of Arbitration 2011, p, 18.

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be hesitant to enter into contractual obligations with a business that has previously violated a contract. As such, confidentiality in the arbitration procedure is immensely important and is considered as one of the advantages of arbitration.

6. The credibility of arbitration to the parties If a type of institutional arbitration is created in an established arbitration center, that centre should have a duty to achieve credibility from the parties. Credibility is required in arbitration; if that cannot be achieved, arbitration will not have a genuine development, in spite of all the advantages mentioned above such as the speed of the resolution of disputes, the parties’ consent etc. If credibility is not achieved all others become worthless. How can credibility in arbitration be achieved? This can be achieved first, by completing the legal framework, appointing a professional management team in the institution of arbitration, such as the chairperson, deputy chairperson, the secretary of the arbitration centre, appointing professional arbitrators with unique specializations and excellent practical experience.

Moreover, this can be accomplished by facilitating the procedure of sending an application for a dispute resolution in the arbitration centre, cooperating with the parties from the beginning, maintaining the confidentiality during the procedure, and reaching a decision from professional arbitrators in the theoretical and practical aspect. The arbitration centre in the initial phase should convince and assure the parties that in no case will their position be abused, and to ensure that no other dispute resolution mechanism will have the professionalism, speed, correctness, efficiency, and determination of arbitration.

CONCLUSION AND RECOMMENDATIONS Even though in Kosovo the legal framework of arbitration has been completed and harmonized with the best functioning models of arbitration, the management of the Arbitration Centre has been appointed, the roster of arbitrators has been completed, it is still important to give a number of recommendations for an even better development of arbitration: -

-

It is recommended that the Arbitration Centres in Kosovo organize more frequent meetings with businesses, providing them more knowledge on the role and importance of arbitration in the country and abroad.

Arbitration Centres should organize joint roundtables on the role and importance of arbitration together with arbitrators, judges of courts, university professors who are specialized in arbitration, attorneys, notaries, private bailiffs, businesses etc.

Update the roster of arbitrators with new arbitrators specialized in unique fields of arbitration for which there are no specialized arbitrators. This update of the roster of arbitrators shall be done with people who have distinct qualifications.

Create opportunities for arbitrators to travel abroad and see the best practices of the functioning of arbitration in other states so that parties do not criticize arbitral decisions on the ground of the lack of professionalism.

Arbitration Centers should provide arbitrators with the most recent literature so that they are informed on every new practice in arbitration in the country and abroad. Moreover, these centers shall continuously inform businesses on the importance of arbitration, by providing them with brochures, books, scientific journals etc.

Arbitration Centers shall present the advantages of arbitration relative to other mechanisms of dispute resolution. These centers shall provide convincing arguments on the advantages of arbitration relative to other mechanisms of dispute resolution.

Arbitration Centers can consider that they have reached their goals if they accomplish to inform and convince businesses that arbitration is favorable to them, based on the professionalism of arbitrators, the speed of dispute resolution, the credibility of arbitration, and because their consent is taken into account during the whole arbitration procedure.

BIBLIOGRAPHY - Bilalli, Asllan & Kuçi, Hajredin: “E drejta ndërkombëtare private”, Libri I, Prishtinë, 2009.

- Hetemi, Mehdi, “Disa tema aktuale të Ekonomisë së Tregut”. Prishtinë, 2005.

- Hetemi, Mehdi, “E drejta Ndërkombëtare Tregtare – Afariste”. Prishtinë, 2007.

- Brestovci, Faik, “E Drejta Procedurale Civile II”. Prishtinë, 2006.

- Mëneri, Suela: “E drejta e arbitrazhit dhe e ndërmjetësimit ndërkombëtar tregtar”, Tiranë, 2012.

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Bilalli, Asllan, “Zgjidhja e kontesteve afariste nëpërmjet arbitrazheve tregtare ndërkombëtare”.

Revistë për Çështje Juridike dhe Shoqërore. E DREJTA, Nr. 3‐4/2012.

MANUALS AND PERIODICALS - Systems for Enforcing Agreements and Decisions (SEAD) Program, Report and recommendations for the development and successful, efficient application of the system for the alternative dispute resolution. April 30, 2010. This report has been prepared with the support of the American People, through the U.S. Agency for International Development (USAID).

LEGISLATION - LAW NO. 02/L‐75. Law On Arbitration in the Republic of Kosovo of 2008. See the official webpage of the Republic of Kosovo: http://gzk.rks‐gov.net/ActDetail.aspx?ActID=2579

- The UNCITRAL Model Law on International Commercial Arbitration (Text adopted by the United Nations Commission on International Trade Law, on June 21, 1985, and amended by the same Commission on July 7, 2006).

- Charter of the American Chamber of Commerce in Kosovo Alternative Dispute Resolution Center, Year 2011, and Charter of the Permanent Tribunal of Arbitration in the Kosovo Chamber of Commerce. Entered into force on June 24, 2011.

- Arbitration Rules in the American Chamber of Commerce in Kosovo. Based on the decision of the Board of Governors of the American Chamber of Commerce for the establishment of the Alternative Dispute Resolution Centre and the appointment of the Board of Directors of the ADR Centre. On its meeting of April 19, 2011, the Board of the ADR Centre approved the Rules of Arbitration 2011. See the official webpage of the American Chamber of Commerce in Kosovo: http://www.adr‐ks.org/documents/, and the Rules of Arbitration of the Kosovo Chamber of Commerce, which entered into force on June 24, 2011.

- Decision on the Costs of the Arbitration Procedure in the American Chamber of Commerce in Kosovo, 2011. Decision on the Amendment of the Decision on the Costs of the Arbitration Procedure of the Permanent Tribunal of Arbitration (PTA) in the Kosovo Chamber of Commerce, No. 227 on June 27, 2011.

INTERNET SOURCES - American Chamber of Commerce in Kosovo. See webpage: http://www.adr‐ks.org - Kosovo Chamber of Commerce. See the official webpage: http://www.oek‐kcc.org/2013/en; and: http://www.kosovo‐arbitration.com/ - ADR Centre of the American Chamber of Commerce offers parties the roster of arbitrators. See webpage: http://www.adr‐ks.org/arbitrators/.

- Permanent Tribunal of Arbitration (Kosovo Permanent Tribunal of Arbitration) offers parties the roster of arbitrators. See webpage: http://www.kosovo‐arbitration.com/en/list‐of‐arbitrators.

- Raising the awareness of young enterpreneurs on the importance of arbitration, organized by the ADR Centre of the American Chamber of Commerce in Kosovo. See webpage: http://www.amchamksv.org/news‐1416574725.html - Businesses discuss methodologies for preparing arbitration cases organized by the ADR Centre of the American Chamber of Commerce in Kosovo. See webpage: http://www.adr‐ ks.org/news/businesses‐discuss‐methodologies‐for‐preparing‐arbitration‐cases - American Chamber of Commerce in Kosovo. See official webpage: http://www.adr‐ ks.org/news/the/ - American Chamber of Commerce in Kosovo. See official webpage: http://www.adr‐ ks.org/introduction/ - Kosovo Chamber of Commerce. See official webpage: http://www.oek‐ kcc.org/2013/en/services/arbitration

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UPC 330.332(496.51) REDEFINING INVESTMENT ARBITRATION LAW: THE CASE OF KOSOVO

by Dr. Ardeshir Atai

Introduction Investment protection standards contained in international investment treaties are enforceable though private right of action against host states in an independent and neutral forum. The investor‐state dispute settlement (ISDS) system provides investors access to international arbitration when the host state expropriates or imposes arbitrary regulation to tax economic profits of investments. Investor protection rules benefits foreign investor by reducing the investment risk premium and the costs of importing capital for the host government. This article outlines the rationale for international claims adjudication procedures involving private investors and sovereign states. The author will highlight the; 1) weakness of customary international law of diplomatic protection and inter‐state arbitration, 2) role of bilateral investment treaties (BITs) in promoting and attracting global capital, 3) benefits of ICSID arbitration, and 4) foreign investment law and arbitration in Kosovo. Last section is conclusion.

1) Diplomatic protection and inter‐state arbitration Historically, the judicial settlement of investment disputes on the international level was considered to be the exclusive function of states.1 Under classical international law, investors did not have direct access to international remedies to pursue claims against foreign states concerning violation of their rights.2 This was due to the fact that, a dispute between a state and a foreign national was not considered as involving an international dispute that could be resolved through international process.3 There were a number of reasons that prevented foreign investors from prosecuting a claim against the host state in an international dispute settlement forum. First, the host state compliance with its contractual obligations did not constitute an international obligation therefore violation by the state did not give rise to internationally wrongful act.4 Second, aggrieved foreign investors were unable to rely on contractual breaches as their local contracting party avoided responsibility for the breach by invoking force majeure.

Thirdly, the injury was caused by a third party; often a governmental authority.5 A private person (natural or legal) lacks the legal personality at international law to pursue a claim in their own right, and as a consequence, corporations are not regarded as subjects of international law.6 Therefore, in the absence of a special international forum designed for the settlement of investment disputes, the only remedy available to the investor on an international level is the diplomatic protection extended by its own state.7 The customary international law principle of diplomatic protection is a method of dispute resolution in which the home state of the investors takes up the investor claim (“espousal of claim”) on its behalf with the host state through diplomatic negotiation or international arbitration.8 In a diplomatic protection claim, the parties to the dispute settlement proceedings are two states, the home state as the claimant and the host state as the respondent, without the involvement of the injured private investor. The International Court of Justice (ICJ) is a prominent option for settlement of investment disputes between states. An advantage of diplomatic protection is that it is an easily available method of resolving dispute 1 M Sornarajah, The Settlement of Foreign Investment Disputes (Kluwer Law International, The Hague 2000) 151-163; I Brownlie, Principles of Public International Law (7th edn, OUP 2008) 701-708 2 R Dolzer and C Schreuer, Principles of International Investment Law (OUP, Oxford 2008) 200 3 M Sornarajah, The Settlement of Foreign Investment Disputes (Kluwer Law International, The Hague 2000) 153 4 P Weil, ‘The State, the Foreign Investor, and International Law: the No Longer Stormy Relationship of a Ménage A Trois (2000) 15 ICSID Rev: FILJ 401, 403 (‘the investor enjoyed protection as a foreigner, not as a contracting party. The State did not incur international responsibility for having violated the contractual rights of the investor, but for having committed an internationally wrongful act vis-a-vis the investor’s home State.’)

5 J Paulsson, ‘Arbitration Without Privity’ (1995) 10 ICSID Rev: FILJ, 232, 253 6 P Muchlinski, ‘The Diplomatic Protection of Foreign Investors: A Tale of Judicial Caution’ (International Investment Law for the 21st Century 2009) 342 (‘There is some authority in international arbitral jurisprudence for the view that an investment agreement between a State and a foreign corporation is an international contract subject to international law.’)

7 M Hirsch, The Arbitration Mechanism of the International Centre for the Settlement of Investment Disputes (Martinus Nijhoff Publishers, London 1993) 8 8 See P Muchlinski, ‘The Diplomatic Protection of Foreign Investors: A Tale of Judicial Caution’ (International Investment Law for the 21st Century 2009); B Juratowitch, ‘The Relationship between Diplomatic Protection and Investment Treaties’ (2008) 23 ICSID Rev: FILJ 10; A Reinisch and L Malintoppi, ‘Methods of Dispute Settlement’ (The Oxford Handbook of International Investment Law 2008) 691

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involving states parties, as there is no requirement for any advance agreement between disputing parties.9 However, the customary international law imposes a number of procedural conditions. The investor must have continued nationality of the state that is seeking its assistance at all material times, and secondly, the exhaustion of local remedied by the investor.10 In general, diplomatic protection was not deemed as an effective remedy by private investors for resolving investment disputes with the host state. First, there is no international obligation on the state of nationality of the injured person to exercise diplomatic protection.11 Second, the home state may decline request by the investor to espouse its claim, or at any time it may discontinue diplomatic protection, or even waive the claim of the national or agree to a reduced settlement.12 Third, where the home state concludes lump‐sum agreement with the expropriating state to accept a portion of the outstanding claims as a settlement payment, injured parties have no entitlement under international law to receive the proceeds of such agreement from their home States.13 Fourth, developing countries resent pressure from capital‐exporting countries, whether it is exercised bilaterally or in multilateral arena such as international lending institution.14 However, the role of diplomatic protection as a means of vindicating the rights of foreigners against host states has greatly diminished, as new trends are evolving in creation of an independent, neutral mechanism for resolution of investment disputes. With the emergence of the international law of foreign investment, the law of state contract is now considered as a component of investment law; no distinction is made between investments under a contract and investment based on a unilateral act of the host State.15 The gradual shift in public international law that previously only recognised states as the holder of right to prosecute international claim, means that private individuals and corporations can have access to neutral, third party forum for resolution of investment disputes. Protection of foreign investment entails three different potential methods; customary international law (diplomatic protection of home state of investor), private law (contractual agreement between host state and investor) and international treaty law (investor has direct recourse against host state) mechanisms.16 2) BIT law Article 38(1) of the Statute of the International Court of Justice (ICJ), that is widely recognised as the most authoritative and complete statement as to the sources of international law provides that;17 a) International conventions, whether general or particular, establishing rules expressly recognised by the contesting States; b) International customs, as evidence of a general practice accepted as law; c) The generals principles of law recognised by civilised nations; and, d) Judicial decisions and the teachings of the most highly qualified publicists of various nations, as a subsidiary means for determination of rules of law.

Foreign investors are primarily protected by bilateral investment treaties (BITs) rather than customary international law alone that was the case in the early 1970s. Therefore, BITs for all practical reasons has become the fundamental source of international law in the area of foreign investment.18 During the past two decades one of the phenomena in international law has been the extraordinary increase in the number of agreements relating to the protection or liberalisation of foreign investment with more than 2,800 such agreements in existence now.19 Bilateral investment treaties (BITs) are designed to facilitate foreign direct investment (FDI) from economies with abundant capital and skilled labour; the Organisation for Economic Co‐operation and Development (OECD) countries to the less developed 9

A Reinisch and L Malintoppi, ‘Methods of Dispute Settlement’ (The Oxford Handbook of International Investment Law 2008) 691, 712 P Muchlinski, ‘The Diplomatic Protection of Foreign Investors: A Tale of Judicial Caution’ (International Investment Law for the 21st Century 2009) 343-359 11 B Juratowitch, ‘The Relationship between Diplomatic Protection and Investment Treaties’ (2008) 23 ICSID Rev: FILJ 10, 13 (‘the law of diplomatic protection entitled such a State to do so, but whether action is taken is, as a matter of international law, entirely a discretionary matter for the State to determine’) 12 R Dolzer and C Schreuer, Principles of International Investment Law (OUP, Oxford 2008) 212 13 A Reinisch and L Malintoppi, ‘Methods of Dispute Settlement’ (The Oxford Handbook of International Investment Law 2008) 713 14 R Dolzer and C Schreuer, Principles of International Investment Law (OUP, Oxford 2008) 212 15 P Weil, ‘The State, the Foreign Investor, and International Law: the No Longer Stormy Relationship of a Ménage A Trois (2000) 15 ICSID Rev: FILJ 401, 412 (‘not only must disputes arising out of foreign private investment be settled by international arbitration; they must also be resolved on the basis of international law.’)

16 B Juratowitch, ‘The Relationship between Diplomatic Protection and Investment Treaties’ (2008) 23 ICSID Rev: FILJ 10, 11 17 MN Shaw, International Law (6th edn, CUP, Cambridge 2008) 70, see also I Brownlie, Principles of Public International Law (7th edn, OUP, Oxford 2008) 5 18 JW Salacuse and NP Sullivan, ‘Do BITs Really Work?: An Evaluation of Bilateral Investment Treaties and Their Grand Bargain’ (The Effects of Treaties on Foreign Direct Investment, 2009) 109, 110-112 19 K J Vandevelde, ‘A Brief History of International Investment Agreements’ in KP Sauvant, LE Sachs (eds), The Effects of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties and Investment Flows (OUP, Oxford 2009) 3, 3 10

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economies.20 BITs have adopted the principles established by customary international law including minimum standard of treatment, protection of alien property, compensation for expropriation and principles of natural justice and due process of law. Developing countries negotiate bilateral investment treaties (BITs) as a strategy to attract foreign direct investment.21 The first BIT was signed in 1959 between Germany and Pakistan and came into force in 1962. The purpose of the BIT as stated ‘in the preambles of the thousands of existing BITs is to promote the flow of FDI and, undoubtedly, BITs are so popular because policy makers in developing countries believe that signing them will increase FDI.’22 BITs serve as commitment device in that countries with weak domestic property rights by explicitly committing themselves to honouring the property rights of foreign investors increase their attractiveness as potential hosts.23 BIT threaten punishment for violation of the commitments undertaken in that the arbitration provisions of BIT have been successfully used by investors to seek compensation against the host for allegedly damaging policies far broader than classical expropriation. 24 Corruption, administrative/regulatory measures, and allegedly biased law enforcement are examples of actions or policies that have been the subject of arbitration proceedings under international investment treaty law.

Investment treaties protect investors against contractual breach by the host state, therefore, if there is a BIT in force between the host and home country, an agreement made between the home country investor and the host government is binding for both, a breach of which by the later is a violation of the BIT and therefore a violation of international law.25 BITs perform four main functions relating to investments; protection (guarantees compensation for expropriation); liberalisation (grant investor a right to establish companies); promotion (provides investment insurance), regulation (prohibition of corrupt payments by investors).26 Although there are some variations in the national and regional practice, the major provisions of BITs are similar and use the following pattern. Preamble lays down the general object and purpose of such treaties, albeit they are not legally binding and may be relevant to interpretation of the agreement. The scope of application of the treaty covers the subject matter, definition of investors and investment (natural and legal persons), territorial application and temporal effect. BITs contain substantive investment protection standards applicable to investors and investments of BIT partner. The applicable standards are classified into general standards and specific standards. General standards are recognised by general international law such as fair and equitable treatment (FET), full security and protection, expropriation and compensation standard and standards which have evolved in the commercial treaty practice such as most favoured nation (MFN) and national treatment standards (non‐ discrimination). Specific standards are applicable to particular incident of investment activity such as transfer of funds, compensation for losses due to expropriation, armed conflict or internal disorder.

Dispute settlement provision in investment treaties is divided into those dealing with disputes between contracting countries as to observance and interpretation of treaty and those dealing with disputes between the investor and the host country.27 The function of BITs are to some extent like foundational or constitutional documents that create a long‐term framework within which the host country must apply its international investment law and policy because they create obligations that cannot be altered merely by modifying domestic legislation.28 For the host governments, the primary economic function of BITs is to act as a commitment device through the investor‐state dispute settlement (ISDS) system. Therefore, investors may bring a claim to an international arbitral tribunal outside the host state if they feel the host government has violated their rights under the BIT.29 BITs, ex ante establish transparency about risk, therefore reduce risk of investing in a country, ex post they ensure the company have certain rights such as property rights and preserve them from expropriation.30 20 P Egger and M Pfaffermayr, ‘The Impact of Bilateral Investment Treaties on Foreign Direct Investment’ (The Effects of Treaties on Foreign Direct Investment, 2009) 253, 253 21 KP Gallagher and MBL Birch, ‘Do Investment Agreements Attract Investment? Evidence from Latin America’ (The Effects of Treaties on Foreign Direct Investment, 2009) 295, 295 22 E Neumayer and L Spess, ‘Do Bilateral Investment Treaties Increase Foreign Direct Investment to Developing Countries’ (The Effects of Treaties on Foreign Direct Investment, 2009) 225, 225 23 M Hallward-Driemeier, ‘Do Bilateral Investment Treaties Attract FDI? Only a BIT and They Could BITE’ (The Effects of Treaties on Foreign Direct Investment, 2009) 349, 350 24 T Buthe and HV Milner, ‘Bilateral Investment Treaties and Foreign Direct Investment: A Political Analysis’ (The Effects of Treaties on Foreign Direct Investment, 2009) 171, 210 25 AT Guzman, ‘Explaining the Popularity of Bilateral Investment Treaties’ (2009) 73, 74 26 KJ Vandevelde, Bilateral Investment Treaties: History, Policy and Interpretation (OUP, Oxford 2010) 5 27 P Muchlinski, ‘The Framework of Investment Protection: the Content of BITs’ (The Effects of Treaties on Foreign Direct Investment, 2009) 37-71 28 KJ Vandevelde, Bilateral Investment Treaties: History, Policy and Interpretation (OUP, Oxford 2010) 3 29 E Aisbett, ‘Bilateral Investment Treaties and Foreign Direct Investment: Correlation Versus Causation’ (The Effects of Treaties on Foreign Direct Investment, 2009) 395, 398 30 P Egger and M Pfaffermayr, ‘The Impact of Bilateral Investment Treaties on Foreign Direct Investment’ (The Effects of Treaties on Foreign Direct Investment, 2009) 253, 253

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3) ICSID arbitration The investor‐state arbitration system provides investors with an effective remedy for protection and enforcement of their rights under the international law. The proliferation of investment protection treaties, ‘have opened up a clear path for the direct access of the individual to international mechanism for the assertion of claims ... in this new context, many times it is the right of the individual affected and no longer that of the State of nationality which is asserted.’31 The regime established by investment treaties, ‘grants innumerable present and future investors the right to arbitrate a wide range of grievances arising from the actions of a large number of public authorities, whether or not any specific agreement has been concluded with the particular complainant.’32 However, the right of the investor to have access to international arbitration proceedings without an independent and neutral forum for adjudication of investment disputes involving a sovereign state would defeat the objective of promotion and protection of investment through the system of bilateral treaties whose beneficiary is mainly the private investor. Dispute settlement provision lays down the rules of procedure on institution of arbitration, appointment of arbitrators, constitution of arbitral tribunal and recognition and enforcement.

BITs provide different options for the settlement of investment disputes, as follows: a) b) c) d)

Competent court of the host state, Ad hoc arbitral tribunal in accordance with UNCITRAL arbitration rules ICC rules of arbitration, ICSID arbitration rules under the ICSID Convention, if or as soon as both contracting parties acceded to it, and e) Any other settlement procedure agreed upon by the parties to the dispute.

The host state by granting foreign investor access to international arbitration make a commitment to honour its obligations that should further enhances investor confidence.33 BITs increase attractiveness of the host country by laying down uniform set of rules and procedure for regulation of foreign investments.

In addition, existence of a BIT may also facilitate obtaining finance and political risk insurance by the foreign investor for capital‐intensive and large infrastructure projects. Investment treaties potentially promote FDI flows by reducing the political risk and protecting foreign investment against illegal expropriation, non‐transferability of foreign currency and discrimination by the host state authorities.34 The World Bank, wary of the need for the establishment of an international institution for the settlement of investment disputes, took the initiative the drafting a convention on the settlement of investment disputes that would be acceptable to world governments and send it to the member states for ratification, acceptance and approval.35 The Convention on the Settlement of Investment Disputes between States and Nationals of Other States (Washington Convention) establishing the International Centre for Settlement of Investment Disputes (ICSID or the Centre) was adopted on 14 October 1966. The creation of ICSID was an innovative step for protection of foreign investments due to the combination of five pertinent features of ICSID as follows: a) b) c) d) e)

Foreign companies and individuals have direct recourse against the host state; State immunity is severely restricted; International law can be applied to the relationship between the host state and the investor; The local remedies rule is excluded in principle; and, ICSID awards are directly enforceable within the territories of all states parties to ICSID.36

A primary function of the ICSID Convention is provision of the institutional support for conducting arbitration proceedings between contracting states and nationals of other contracting states. The ICSID Convention only provides the procedure for arbitration of investment disputes and does not contain any substantive rules. An important feature of ICSID Convention is application of uniform set of rules through codification of customary international law rules on international adjudication. The ICSID is endowed 31

FO Vicuna, ‘Changing Approaches to the Nationality of Claims in the Context of Diplomatic Protection and International Dispute Settlement’ (2000) 15 ICSID Rev: FILJ 340, 343 32 J Paulsson, ‘Arbitration Without Privity’ (1995) 10 ICSID Rev: FILJ, 232, 233 33 UNCTAD, ‘The Role of International Investment Agreements in Attracting Foreign Direct Investment to Developing Countries’ (2009) UNCTAD Series on International Investment Policies for Development (United Nations, Geneva) 15 34 KJ Vandevelde, ‘The Economics of Bilateral Investment Treaties’ (2000) 41 Harvard Intl LJ 469, 488 35 M Hirsch, The Arbitration Mechanism of the International Centre for the Settlement of Investment Disputes (Martinus Nijhoff Publishers, London 1993) 17-18 36 R Dolzer and C Schreuer, Principles of International Investment Law (OUP, Oxford 2008) 20

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with separate international legal personality that is capable of providing the benefits of a fixed set of rules and the support of an experienced arbitral institution although it is not the Centre itself that engages in arbitration.37 As stated in the ICSID’s Preamble its primary purpose is promotion of foreign direct investment and provision of a process for independent resolution of investment disputes. The ICSID is not a private centre or state institution that operates under the laws of a particular state. The World Bank investment court (ICSID) was established by an international treaty, administered by an international organization, and conducts arbitration proceedings in accordance with the norms of public international law.38 BITs offer ICSID arbitration as one of the mechanisms for settlement of investor‐states disputes to be elected by the investor, provided that both the home state of investor and the host state in which the investment is made, have ratified the ICSID Convention and consented to arbitration of disputes under the rules of ICSID. Where the investor has elected to pursue its claim through ICSID arbitration it must satisfy the jurisdictional requirements under both the applicable investment protection treaty and provisions of ICSID Convention. The ICSID Convention provides that, ‘the jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre.’39 The ICSID Convention does not define the term “investment” so the tribunal must refer to the provisions of the contract, bilateral or multilateral treaty and the host state national laws to determine whether the transaction qualifies as an investment pursuant to the instrument defining the term. The ICSID Convention defines an investor as, ‘any natural person who had the nationality of a Contracting State other than the State Party to the dispute’ and defines corporate entities as ‘any juridical person which had the nationality of a Contracting State other than the State Party to the dispute.’40 The ICSID Convention contains provisions concerning applicable law by stating that, ‘the Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties. In the absence of such agreement, the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable.’41According to commentators, ‘proceedings under the ICSID Convention are self‐contained. This means that they are independent of the intervention of any outside bodies. In particular, domestic courts have no power to stay, to compel, or to otherwise influence ICSID proceedings. Nor do domestic courts have the power to set aside or otherwise review ICSID awards.’42 4) Foreign investment law and arbitration in Kosovo Kosovo joined the ICSID Convention 29 June 2009. Kosovo has signed BITs with Belgium and Luxembourg, Austria and Switzerland.43 The ratification of BITs will promote and encourage FDI flows and facilitate arbitration of investment disputes at the ICSID. Kosovo enacted foreign investment law in 2014 entitled the Law No. 02/L‐33 on Foreign Investment (foreign investment law). The said law incorporates international standards of investment protection including fair and equitable treatment, full and constant protection and security, transfer rights.44 The dispute resolution provision in the Foreign Investment Law offers investors the option to refer its disputes against Kosovo to arbitration pursuant to ICSID, ICSID Additional Facility, ICC and UNCITRAL arbitration rules. 45 Kosovo adopted Law No. 02/L‐76 on Arbitration (Arbitration Law) based on the UNCITRAL Model Law on International Commercial Arbitration. The main features of the Arbitration Law will be discussed in the following paragraphs. Any articles stated are provisions of the Arbitration Law unless stated otherwise.

Arbitration agreement The arbitration agreement can be either signed as a separate agreement attached to the main contract or parties may include an arbitration clause in the contract. In either case the agreement of the parties to arbitrate disputes must be in writing and clearly state the parties’ intention to settle contractual disputes through arbitration (arts 6 & 5 Kosovo Arbitration Law).

Party autonomy 37

A Reinisch and L Malintoppi, ‘Methods of Dispute Settlement’ (The Oxford Handbook of International Investment Law 2008) 691, 698 M Hirsch, The Arbitration Mechanism of the International Centre for the Settlement of Investment Disputes (Martinus Nijhoff Publishers, London 1993) 19 39 ICSID Convention art 25(1) 40 ibid art 25 (2)(a) and (b) 41 ibid art 42(1) 42 R Dolzer and C Schreuer, Principles of International Investment Law (OUP, Oxford 2008) 223 43 Minsitry of Foreign Affairs of Republic of Kosovo available at http://www.mfa-ks.net/?page=2,72 44 Official Gazette of the Republic of Kosovo available at http://gzk.rks-gov.net/ActDetail.aspx?ActID=8982 45 Foreign Investment Law art 15.2 38

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An advantage of arbitration is that the parties can freely choose the rules of procedure governing the arbitration proceedings, language and place of arbitration as well as selecting the applicable law of the contract (arts 16.3, 17, 19, 29). Parties are also free to choose the arbitrators who may be familiar with their case or possess expertise in specific industries.

Ad hoc or institutional arbitration There are two main types of arbitration: ad hoc and institutional. In ad hoc arbitration the parties agree on the procedures to govern their dispute and can adapt the rules to meet their requirements.46 Arbitration Rules of UNCITRAL contain flexible rules of procedure for adoption by the parties in ad hoc arbitration proceedings. However, in absence of any rules, the arbitration law of the place of arbitration acts as default rules and procedures for arbitration (i.e.: English Arbitration Act 1996 in case the place of arbitration is London).47 In institutional arbitration, the parties choose the arbitration rules of a specialised institution such as ICSID, International Chambers of Commerce (ICC) in Paris, Alternative Dispute Resolution (ADR) Center of AmCham in Kosovo or the London Court of International Arbitration (LCIA). In institutional arbitration the parties can benefit from the support of the arbitration institution in administration and supervision of the proceedings (e.g.: setting the time schedule for hearings, appointment of arbitrators etc.)

Sole arbitrator or panel of arbitrators The parties can either choose sole arbitrator to decide the dispute or each party appoint one arbitrator and the two arbitrators will then choose the third arbitrator to act as the presiding arbitrator (chairman).48 Initiation of arbitration proceedings Once dispute arises between parties to the contract, the party wishing to initiate arbitration may send a notice of dispute or request for arbitration to the other party containing the details of dispute (particulars of claim) and name of arbitrator and deadline for other party to respond to the claim and appoint its arbitrator.

Powers of the arbitral tribunal The arbitral tribunal has power to decline or accept jurisdiction over the dispute on the basis of the consent of the parties contained in their contact to resolve their contractual disputes through arbitration.

Therefore, arbitration process is consensual and once the tribunal is established it can determine whether it has jurisdiction over the case and on the validity of arbitration agreement.49 The courts will recognise parties’ agreement to arbitrate and cannot intervene in the arbitration proceedings (art 3).50 The courts merely assist the parties and tribunal by issuing orders for collecting evidence or other judicial acts not within competence of the arbitral tribunal (art 28). However the tribunal can only decides the questions referred to it by the parties and should not exceed its authority over the dispute and parties and/or to omit any issues from its deliberations and award. Furthermore the tribunal must justify and give reason for its award (art 31.2). Otherwise there is risk of setting aside or annulment of the award by the courts of law.

Final and binding award The tribunal’s decision is final and binding on the parties and upon application by winning party the court recognises and enforces the award (art 31.1). The arbitral award cannot be appealed or revised on the merits and the losing party may only challenge and resist recognition of the awards on grounds of procedural irregularities in the arbitration proceedings (i.e. constitution of arbitral tribunal, breach of due process and respondent was not given a chance to present its defence). In case the losing party apply for setting aside and annulment the court can only review the case on the points of facts to determine whether or not there was fundamental flaws in the proceedings. The court can also annul an award if the dispute was non not capable of settlement through arbitration and/if its against public policy.

Challenging arbitrators 46

Arbitration Law art 16.3 states that, 'subject to the mandatory provisions of this law, the parties may agree upon an arbitration provision'.

Kosovo Arbitration Law art 16.4 states that, 'in absence of an agreement by the parties on the procedure and in absence of relevant provisions in this law, the arbitral tribunal shall determine by itself the arbitration rules applying dispute procedures or applying arbitrary rules of an institution of the permanent arbitration'.

48 Arbitration Law art 9.1 stipulates that, 'the arbitral tribunal shall be composed of either a single arbitrator or a panel of arbitrators...` 49 Arbitration Law art 14.1 50 Arbitration Law art 3 states that: 'No court in Kosovo may intervene in arbitration proceedings, unless otherwise provided for in this Law.' 47

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In arbitration proceedings the parties can agree on the procedures for appointment of arbitrators (art 10.1). This can be done either at the time of sending the notice of dispute or request for arbitration to other party or at the time of signing the arbitration agreement. In most cases the arbitrators are chosen after the dispute arises. In case there is evidence that the arbitrator is biased or there are doubts as to the impartiality and neutrality of arbitrator, the parties may challenge his/her appointment (art 10.2). In case of objection by one of the parties the arbitrator can be substituted.

Recognition and enforcement of arbitral award In case the arbitral tribunals issues a favourable award the investor may apply to the court for recognition and enforcement of award. The United Nations Convention on Recognition and Enforcement of the Foreign Awards 1957 (New York Convention) applies to arbitration awards that are rendered in a country other than the country where recognition and enforcement is sought (art 1(1) NYC). Under the NYC the courts of the country in which enforcement is sought must recognise and enforce the award the same way as a local judgment. Kosovo has not joined the New York Convention. However, the Foreign Investment Law stipulates that, arbitral award issued by foreign tribunals or international arbitration bodies shall be enforceable in accordance with the New York Convention.51 For enforcement of the award, the applicant must submit the arbitral award or certified copy and the arbitration agreement together with the translated copies of the documents to the respective court in foreign jurisdiction(s). The NYC requires the arbitration agreements to be in writing and signed by the parties to the agreement.

Conclusion The emergence of international investment law as an autonomous body has redefined international dispute resolution procedure. The inter�relationship and application of international law and domestic law enables the arbitral tribunal to recognise regulatory space for sovereign states to enforce health and safety standards, labour law and human rights and environmental protection. As regards promotion and attraction of international investments in Kosovo, the enactment of foreign investment law is the first step for creating an investment friendly regime. The ratification of international treaties containing investor protection rules will complement the international adjudication procedures and increase investor confidence in enforcement of rule of law and good governance in Kosovo. The arbitration law offers modern and flexible rules for arbitration of investment and commercial disputes. Adoption of international standards promotes the status of Kosovo as an arbitration friendly jurisdiction.

International aid agencies and financial institutions and investors may structure their investment to enjoy benefits of BIT protection including access to international arbitration.

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44

UPC 341.21(496.51) MEDIATION AS AN ALTERNATIVE DISPUTE RESOLUTION MECHANISM IN KOSOVO

by Mahir Tutuli

Abstract This article discusses the legal basis of the dispute settlement procedure through Mediation as an alternative mechanism of dispute resolution, as well as the issuing of the enforcement of agreements reached in mediation by the courts in Kosovo. After the introductory remarks on Mediation, the first part of this article will discuss the agreement to resolve the dispute through mediation, including voluntary and mandatory norms. The second part of this article will deal with two situations related to the fulfillment of the mediation agreement and distinguish between (a) the agreement reached based on the parties’ consent outside the judicial procedure and (b) the case when the procedure was initiated in court and the agreement for mediation is reached under the instruction/order of the court, which is then approved in court.

I. General discussion on Mediation Kosovo, in its attempts to create a modern judicial system, has created the judicial base which facilitates the alternative resolution of disputes, including arbitration and mediation. In that regard, the Assembly of Kosovo has approved the Law on Mediation in 2008.1 Mediation is an alternative mechanism of dispute resolution, in which through negotiations, with the assistance of a third party, the parties attempt to reach an agreement on resolving their dispute.2 In principle, the mediation procedure is separate from the court proceedings; nevertheless it is still related with court proceedings. This relation is manifested in different forms since in certain cases courts instruct or order parties to resolve their dispute through mediation. Moreover, the enforcement of agreements reached through mediation can be achieved through court proceedings.

In addition, in practice there are disputes of an international character which showcase the need to analyze the compatibility of domestic legislation with international regulations, in order to ensure that during the implementation of provisions, their interpretation is in accordance with international practices. As such, the issues raised require an answer based on the legal doctrine and case law, which will be further elaborated in the following text.

1. Mediation Agreement The mediation agreement is different from the settlement agreement reached between the parties in a dispute. While the first one creates an obligation for mediation, the second is an agreement to resolve the dispute amongst them.

The Law on Mediation foresees that: “Mediation procedure begins at the moment when parties agree to begin with it�.3 This means that parties are free to decide based on their consent if they want to resolve their dispute through a mediation procedure, the time when the procedure of mediation begins, and to choose the mediator.

Besides voluntary mediation, in legal practice there are also obligatory forms of mediation. In principle, there are three means through which an obligation is created on the parties to resolve the dispute through mediation (a) through the contract, (b) through court order, (c) by law. This obligation does not necessarily mean that a settlement agreement must be reached and that the dispute must be resolved through mediation; however the party which assumes this responsibility is obliged to participate in the mediation procedure.

1

Law on Mediation No.03/L-057, decreed on October 3, 2008 (Kosovo).

Id., Article 2 3 Id., Article 9(1) 2

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The applicable laws in Kosovo do not provide for mandatory mediation based on the law; therefore, there are two mandatory forms of mediation in Kosovo, contractual mediation and that ordered by the court and prosecution.

Contractual obligation for mediation in case of a dispute is created through the agreement of the parties which can be contracted before or after the dispute arises. The mediation contract before the dispute arises can be a separate contract between the parties through which parties agree to resolve their dispute in a mediation procedure, or can be a distinct clause in the main contract, through which parties decide on mediation as the mechanism of dispute resolution, in the event a dispute arises.

The mediation contract after the dispute arises, is defined as the contract which parties sign after the dispute emerges amongst them, through which they agree to resolve their dispute through mediation.

The contractual obligation for mediation can be a requirement to engage in other forms of dispute resolution, be it through alternative forms such as arbitration, or through court proceedings; this requirement inhibits the beginning of other procedures without going through mediation.

Mediation agreements are subject to the general rules that govern contracts as defined in the Law on Obligation Relationships.4 If the mediation agreement is formally or materially valid, it is enforced by the courts and creates an obligation on all parties of the mediation agreement, to engage in mediation as an out‐of‐court proceeding for the resolution of the dispute.

The contractual obligation for mediation does not include the obligation to resolve the dispute through mediation but only the obligation to enter into a mediation procedure; in case an agreement is not reached through mediation, this is not considered as a non‐fulfillment of the mediation agreement.

Violation of contracting obligation to participate in mediation appears in two forms, (i) refusal of a party to participate in mediation; and (ii) the neglect of a contract obligation for mediation by the party and the direct initiation of arbitration or court proceedings. In the first instance, the other party may request the enforcement of the agreement for mediation in court proceedings, whereas in the second instance, the other party may challenge the initiation of the procedure in court and consider it as premature and present the mediation agreement as a procedural obstacle for court proceedings.

Court‐ordered mediation is created based on the court’s order through which it obliges the parties to undergo through the mediation procedure related to their dispute. The applicable laws in Kosovo foresee two situations related to the delegation of the dispute in a mediation procedure. The first instance includes cases where the law foresees that courts can only instruct parties for mediation but not oblige them to. Such an instance is foreseen in Article 9.6 of the Kosovo Law on Mediation, which provides that: “At any stage of the court procedure until its completion, the court may suggest the parties to follow the mediation procedure”. In this case the parties can ignore the court's suggestion and continue with litigation. The second instance deals with cases where the law provides for the possibility of issuing an order to send the issue in a mediation proceeding and in that case an obligation is created on the parties to participate in a mediation proceeding. Such a case is foreseen in Article 232 of the Criminal Procedure Code of Kosovo,5 according to which the prosecutor can send the dispute for resolution through mediation and in that case an obligation for the mediator arises to conduct the mediation proceeding whereas the accused is included in the procedure in spite of his/her consent.

2. Reaching an Agreement in mediation and its enforcement A settlement agreement is defined as an agreement reached between the parties in the mediation proceeding in which they resolve their dispute. The Law on Mediation provides that reaching a settlement agreement depends exclusively on the will of the parties, thus recognizing their full autonomy to reach this agreement.6 The Law provides for two situations related to enforcing the settlement agreement and distinguishes between (a) the agreement reached based on the consent of the parties on out‐of‐court proceedings and (b) in the case where the procedure has been initiated in the court and the settlement agreement is 4

Law on Obligation Relationships No. 04/L-077, decreed on May 30, 2012, (Kosovo) Criminal Procedure Code No. 04/L-123, decreed on December 21, 2012, (Kosovo) 6 Law on Mediation, Article 12.

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reached in mediation conducted based on the instruction/order of the court; this agreement is then approved in court.

In the first instance, where the agreement is reached in an out‐of‐court proceeding, Article 12, paragraph 4 of the Law on Mediation provides that the agreement “…shall have the force of a final and enforceable document” if the settlement agreement has been prepared in accordance with paragraph 4 of the same Article, i.e. if it is made in writing and if signed by the parties and the mediator. In the second instance, where the proceeding is being conducted in court, Article 12.5 of the Law provides that: “If the case‐file is with the court, the written settlement agreement should be submitted to the court, which after the approval, shall have the power of an executive document”.

From the abovementioned, we can conclude that under the law, depending on how the agreement was reached in mediation, the enforcement of the agreement is treated in different ways. The agreement reached in out‐of‐court proceedings, in principle constitutes an agreement which creates contractual obligations between parties based on rules of the law of the contract, i.e. Law on Obligation Relationships and the agreement as such constitutes a contract among the parties and therefore each party may request the fulfillment of obligations in litigation.

Dilemmas arise regarding the procedure to be followed by the court to enforce the mediation agreement.

Should the agreement as such be treated as a contractual obligation or an enforcement document? Under the laws in force, nowhere is it provided that the settlement agreement constitutes an “enforcement document” as specified by Article 22 of the Law on Enforcement Procedure.7 Article 12 (4) of the Law on Mediation in Kosovo also determines that the mediation agreement is obligatory, but does not qualify it as an enforcement document.

The previous Law on the enforcement procedure (Law No. 03/L‐008 for Enforcement Procedure) did not provide that the settlement agreement is an “executive title” and that the settlement agreement could not be executed directly in an execution procedure, unless the mediation was conducted based on the instruction/order of the court.

Even though this issue has been brought forward by the new Law on the Enforcement Procedure in Kosovo (Law No. 04/L‐139), the law does not clearly determine whether the agreement reached in arbitration constitutes an execution document which can be executed directly in an execution procedure.

Article 22 of the Law in paragraph 1.4 provides that “enforcement documents are agreements reached in the mediation procedure in accordance with the law on mediation after approval of the Court”.

Meanwhile, pursuant to Article 23, paragraph 1 of the Law, the settlement agreement is considered as a “settlement” but even in this instance it is not specified whether this refers to the agreement reached in the mediation proceedings when the issue is referred to mediation by the court or the settlement agreement based on the parties’ consent, in an out‐of‐court proceedings.

The same uncertainty is faced in Article 25 of the Law on the Enforcement Procedure as well, which under paragraph 1 provides that: “Court settlement or settlement reached in administrative procedure, arbitration enforcement award, agreement reached in mediation procedure or agreement reached in another procedure shall be enforceable if the credit which should be fulfilled has become reachable”.

Based on the abovementioned provisions, it is not clear whether the mediation agreement reached in out‐ of‐court proceedings constitutes an enforcement document or it should undergo another judicial procedure to be considered an enforcement document. Article 22 of the Law under paragraph 1.4 requests the court’s approval for the settlement agreement to be considered an enforcement document; however, the law does not foresee the procedure through which a court could approve a mediation agreement, in an out‐of‐court proceedings. In this respect there is a legal vacuum which should be addressed in the future, either by amending the law or possibly through a legal position of the competent bodies, which would explain the above mentioned interpretation of the provisions.

In the current legal situation, starting with the fact that the provisions of Article 23 (1) and 25(1) of the Law on the Enforcement Procedure do not distinguish between the settlement agreement referred to by the court and that without a reference by the court, the enforcement of the mediation agreement should 7

Law on Enforcement Procedure No. 04/L-139, decreed on 3 January, 2013 (Kosovo)

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be permitted as provided by Article 25(2) of the Law on the Enforcement Procedure, if the loan which must be fulfilled is made accessible.

Law and case law should treat the mediation agreement reached either referred by the court or otherwise in a similar manner, or the procedure on how the settlement agreement in out‐of‐court proceedings can be made an enforcement document should be determined clearly. The European Directive on Mediation,8 speaks in favor of that and provides that member states must ensure the enforcement of agreements reached through mediation in the cases where the agreement as such is not contrary to the law of that state and if such an enforcement is not contrary to domestic law.9 This practice has been followed by other regional countries as well, which in their laws have recognized the enforcement of the settlement agreement in out‐of‐court proceeding.

The Law for Mediation in Dispute Resolution in the Republic of Albania10 in Article 22.1 provides that “When the parties agree to resolve the dispute between them, along with the mediator/s, sign the relevant agreement, pursuant to terms and conditions, cases and procedures provided in this law. This agreement is binding and enforceable on the same scale with arbitral decisions”. Meanwhile, Article 23 which regulates the enforcement of agreements reached through mediation, under paragraph 3 provides that “If the act agreement complies with the conditions laid down in Article 22 of this Law, it constitutes an executive title and, in this case, the bailiff service is charged with its execution”. Similarly the Law on the Mediation Procedure in Bosnia & Herzegovina11 provides under Article 25 that the settlement agreement constitutes an enforcement document.

The agreement reached in judicial proceedings – The settlement agreement with reference by the court, after approval from the court, the prosecution or another competent authority, has the function of a court agreement and is considered an executive title which can be enforced directly in an enforcement procedure. This is specified under Article 12.5 of the Law on Mediation which provides that “if the case‐ file is with the court, the written settlement agreement should be submitted to the court, which after the approval, shall have the power of an executive document”.

This agreement may be contested by the parties only under the conditions set out in Article 14.5 of the Law on Mediation, which provides that: “The Court or the prosecution may annul the agreement attained through mediation when it concludes that it has been bound against the law in force, when the will of the parties in conflict is not reflected, or when their rights and interests are impinged or when the compensation is in clear disproportion with the caused damage”.

CONCLUSION In general, the applicable law in Kosovo provides a good legal basis for the resolution of legal disputes through mediation, be it those arising from contractual disputes or those which are referred by the courts to reach a settlement between the parties, for example in criminal procedure.

In the final phase, i.e. of the execution of the settlement agreement, based on the applicable law for the enforcement of decisions in Kosovo, it is still unclear whether the settlement agreement reached in out‐ of‐court proceedings is considered as an enforcement document.

In this regard, it appears that the settlement agreement reached in out‐of‐court proceedings (similar to the one reached in court proceedings) is not directly enforceable and can attain the power of an enforcement document only after the approval of the court. With respect to this issue, it appears that the legislature has utilized a similar approach to the enforcement of arbitral decisions. Nevertheless, this criterion, approval of the settlement agreement by the court, in practice is seen as a simple procedural action and not an obstacle for the parties or an obstacle for further actions.

8 Directive 2008/52/EC of the European Parliament and Council of May 21, 2008 on some aspects of mediation in civil and commercial disputes, available at http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32008L0052&from=EN 9 Id., Article 6(1) 10 Law No.10 385, Februrary 24, 2011, Official Gazette of the Repulic of Albania. Promulgated by Decree no. 6922, on March 8, 2011 of the President of the Republic of Albania 11 Zakon o Postupku Medijacije - Službeni glasnik BiH, br. 37/04

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A UNITED NATIONS’ LIAISON HUB AND OMBUDSOFFICE FOR INTERNATIONAL ECONOMIC RELATIONS: A PROPOSAL1

by Chitra Radhakishun2

A good five years after this article was first published, the relevance of the issues related to dispute settlement it raised, has further increased. The creation of prominent dispute settlement bodies, such as the World Bank group's International Centre for Settlement of Investment Disputes (ICSID) and more recently of the World Trade Organization (WTO), the World Intellectual Property Organization (WIPO) and under Free Trade and Regional Trade Agreements, are fairly recent. At the same time, developing countries are increasingly involved in cases brought to the dispute settlement bodies of the World Bank’s International Centre for Settlement of Investment Disputes ICSID, WIPO and the WTO. The cost of dispute settlement has often been disproportionately high for developing countries, while the rulings of these bodies have had a marked impact on their development process.

Noteworthy is also the establishment of regional centres for international commercial arbitration in regions in, Africa, Asia, the Gulf Area and Latin America, and the growth of offers for international and commercial services for arbitration, mediation and other forms of Alternative Dispute Resolution.

It should therefore not be surprising that at the highest political levels the validity of the systems for settling disputes in which developing states are defendants, is now being questioned. Thus International Disputes, involving States, are currently being discussed by Heads of State, academics, experts, NGOs, on blogs and in publications, and in the press. Several political leaders from the EU (including the Netherlands and Germany) have floated the idea for a Trade and Investment Court. Civil society, at the global level, continues to question the social and economic impact of awards issued against States and their impact on attaining lasting socio‐economic peace. NGOs dealing with traditional Peace‐making in armed conflict look at peace making in the economic area. At the international level, UNCTAD's TDR 2014 drew attention to international dispute settlement. UNCTAD's forthcoming World Investment Report will present a further analysis. At the 28th Session of the Human Rights Council, the importance of effective international dispute settlement systems has been mentioned (March 2015). The list can go on and on, all providing evidence of the fact that dispute settlement has become a central feature of the multilateral system.

The paper here reproduced presents proposals aimed at attaining socio‐economic peace, a much needed ingredient in the development process. It is hoped that the re‐publishing of these proposals in the Alternative Dispute Resolution Journal will contribute to the current debate on international dispute settlement, as well as to discussions on a post‐2015 sustainable development agenda, which strives for a world that is just, equitable and inclusive, and where inequality within and among countries is reduced.

1

A United Nations' Liaison Hub and Ombudsoffice in International Economic Relations: A Proposal", was first published in : "A Liber Amicorum: Thomas Wälde - Law Beyond Conventional Thought", Edited by Jacques Werner & Arif Hyder Ali (978-1-907174-01-8, CMP Publishing Ltd. Nov. 2009). Also available at: http://www.transnational-dispute-management.com/liber-amicorum.asp 2 About the author: Ms. Chitra Radhakishun is Manager of the Project on Dispute Settlement in International Trade, Investment and Intellectual Property of the United Nations Conference on Trade and Development (UNCTAD). The views expressed are those of the author and do not necessarily reflect those of the United Nations, the organization she is affiliated with.Contact: chrsur@hotmail.com

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I. Introduction Thomas Wälde was an outspoken person, happy to provoke, not afraid of being politically incorrect when he was convinced of being right. He loved launching ideas and stirring debates. It may therefore be befitting to put forward such a proposal in this Liber Amicorum. The informed reader will, I think, find that the proposal connects dots between initiatives that are slowly taking form in one way or another.

This contribution is made under my personal responsibility, with none of what is written attributable to any organization or institution I am, or was, affiliated with.

II. A Not So Unorthodox Proposal?

International economic relations are increasingly governed by national0 regional and international rules, laid down in a multitude of instruments, creating an international economic ‐ legal regulatory entangled system. In this entangled system, stakeholders from the public and the private sector operate, secure commitments, try to enforce obligations and entitlements and preserve rights. Alongside these actors, United Nations bodies and other national and international institutions engage in these activities related to furthering understanding and implementation of these rules. Within the United Nations, identifying the responsible bodies and their connections to related activities undertaken elsewhere in the system, and at a more basic level, which services could be provided by that body, is a difficult task for member States and other stakeholders alike. To illustrate with an example, officials from national or local government and communities, state lawyers or attorneys‐general, NGOs, business associations or chambers of commerce and industry, have a hard time finding out if any body or bodies within the United Nations system, and if so, which ones, provide training and capacity building in a specific area of trade and investment, or assistance in negotiating international agreements, or counselling and advice in handling disputes.1 Within the international economic maze of rules and regulations, and under the various obligations to which penalties for non‐observation of commitments may be attached, some stakeholders are more challenged than others to optimize benefits and minimize losses in international commercial activities.

That stakeholders from developing countries are typically the weaker ones, needs no further explanation.

The multi‐faceted challenges developing countries face, appear in the earliest stages of the process and can continue to the enforcement stages. Some of the frequently observed challenges are highlighted below.2 A. Legal – Technical Obstacles These obstacles may appear when legal notions and drafting techniques applied where drawn from different legal traditions. Typically, contracts and procedures grounded in common law principles and conventions where the host state observes the civil law traditions, may more easily lead to problems of interpretation. Examples presented at a recently held Arbitration Forum may be illustrative.3 Russian arbitration practitioners raised the indivisible package of ‘U.S.A investment combined with American legal rules’ as a major obstacle and a fertile breeding ground for disputes. German practitioners felt that 1

For example, technical assistance on regional integration, investment and trade related issues is being provided by various United Nations bodies, and the differences in approach or in comparative advantages are not always clear. In the area of trade and development, the United Nations Conference on Trade and Development (UNCTAD) leads an Inter-Agency Cluster on Trade and Productive Capacity in which the United Nations Industrial Development Organization (UNIDO), the United Nations Development Programme (UNDP), the International Trade Center (ITC), the Food and Agriculture Organization of the United Nations (FAO), the World Trade Organization (WTO), the Five United Nations Regional Commissions, the United Nations Environment Programme (UNEP), and the United Nations Office for Project Services (UNOPS) participate. The objective is the coordination of trade and development operations at the national and regional levels within the United Nations system. Beyond trade, the One United Nations – approach, which is aiming at delivering United Nations products as one, is attempting the same within the so-called United Nations Development Group (UNDG). In the UNDG, 32 United Nations funds, programmes, agencies, departments, and offices that play a role in development, are united within the objective of delivering more coherent, effective and efficient support to countries seeking to attain internationally agreed development goals, including the Millennium Development Goals.

2 These observations are confirmed by UNCTAD research. See for example: UNCTAD (2009), the Economic Development in Africa Report 2009: ‘Strengthening Regional Economic Integration for Africa’s Development’, UNCTAD/ALDC/AFRICA/2009, New York and Geneva: United Nations; UNCTAD (2008), The World Investment Report 2008: ‘Transnational Corporations, and the Infrastructure Challenge’, UNCTAD/WIR/2008, New York and Geneva: United Nations; UNCTAD (2007), ‘Globalization for Development: The International Trade Perspective’, UNCTAD/DITC/2007/1, New York and Geneva: United Nations; UNCTAD (2007), Investor-State Dispute Settlement and Impact on Investment Rulemaking UNCTAD/ITE/IIA/2007/3, New York and Geneva: United Nations; UNCTAD (2004), ‘Multilateralism and Regionalism: The new Interface’, UNCTAD/DITC/TNCD/2004/7, New York and Geneva: United Nations; and reports of UNCTAD intergovernmental meetings on regional integration (www.unctad.org).

The author herself has observed these in her work as Manager of the UNCTAD Project on Dispute Settlement in International Trade, Investment and Intellectual Property. Arbitration practice confirms a number of these findings. For example, at the 14th Geneva Global Arbitration Forum in May 2009, Mr. Pierre Lalive, Swiss lawyer and arbitrator, mentioned a number of these obstacles in his presentation.

3 First International Arbitration Forum, organized by the Chambre Européenne d’Arbitrage, 21 May 2009 Kiev, Ukraine.

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the use of Common Law procedures in arbitral proceedings were among the principal causes for increasing cost and duration of international arbitrations in Germany and, consequently, to a turning away from arbitration.

In this context, linguistic obstacles need to be considered. Although not frequently mentioned in international discussions, linguistic obstacles pose a challenge. There is an inherent inequality between parties when arrangements and contracts are negotiated and drafted in what it a foreign language for one party, especially when they involve technical legal notions. Subsequently, at the implementation stage, the linguistic capacity of officials, business partners from the private sector and even local management, will pose obstacles of varying degrees to effective communication with the foreign investor. While English may be widely used in international dealings, the use of this language is by no means universal. A further level of complexity may arise when the language used is a ‘third’ language for both parties. Further study on this obstacle may be indicated.

B. Obstacles Related to the Import and Consequences of Arrangements For Stakeholders When arrangements enter into force, there may still be a lack of understanding of the import and consequences of commitments these arrangements carry, especially outside the circles of officials involved in the negotiating process. An examples if the obligation the World Trade Organization (WTO) membership carries for acceding states.

Understanding the import and consequences of arrangements and commitments, for example regarding the possible imposition of penalties, often poses obstacles in the implementation stages of the agreement for stakeholders from the private sector, especially when their involvement was limited during the negotiating stages. Many developing countries have weak public‐private sector communication structures. As a consequence, there is inadequate dissemination of information, including on the import and impact of concluded agreements on the business community.

Equally, national exporters are often not aware of possibilities for action that could be taken in their favor under international arrangements their governments became party to. For example, exporters may not be aware that the government can take up claims on their behalf when punitive tariffs are imposed on their products. A good example of change is the Indian Government’s information campaign of 2009 to guide the private sector to governmental channels they can approach for exploring safeguard actions under WTO rules against dumping.

C. Obstacles Related to Monitoring and Management of Obligations Lack of and/or weak administrative capacity at the governmental level is an important cause of weak and ineffective monitoring and management of obligations and commitments under the various arrangements states are party to. The ever increasing volume of commitments is further weakening the already weak capacity. The challenges are even more important, when, as it is not uncommon, different departments and/or levels of government are involved. The problems are compounded when the various arrangements the states is signatory to, embody different and even contradictory and conflicting rights and duties for the parties.

D. Dispute Management Obstacles What when disputes arise? The obstacles mentioned above, compounded by other factors, come to head at a point of crisis. Some of the more frequently observed challenges at the dispute management stage are highlighted.

Lack of capacity to manage a threatening dispute effectively, or to assume the obligations of the defendant, poses and obstacle on various fronts. The lack of capacity can become manifest in for example adhering to procedural rules. lax observation of such rules, for example on time frames, could lead to missing deadlines, and thereby forfeiting rights, at times including even the right to initiate or continues arbitration or litigation on the specific issues. The lack of capacity to decide on the most effective dispute strategy, including choosing the most appropriate forum under the concrete circumstances, opting for litigation or alternative dispute resolution – arbitration, mediation, conciliation – but also to evaluate the associated cost‐benefit‐success ratios, may further compound the complexity of the matter at hand. The choice of forum is becoming more and more important, as the growing number of forums that can be

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accessed within the web of international and regional arrangements, provides as many challenges as opportunities.

Where different forums can be opted to settle disputes in the economic field, particularly on trade and investment related issues, factors such as the estimated chance of success under the relevant rules, cost aspects, or keeping open options to approach another forum, need to be given careful consideration.

Government may also weigh political concerns in their considerations, especially national and regional concerns.

E. Obstacles in Administrative Coordination Ineffective administrative coordination poses a challenge to effectively pursue a strategy to resolve disputes. Clarity on which administrative, departmental, or governmental instance is to be in charge, poses hurdles. Local authorities may for example take a different stance from the central government on how to deal with the business partner. Disagreement on the strategy to pursue is likely to have a negative impact on resolution of the dispute.

Insufficient knowledge of the applicable relevant and procedural rules, clarity on which instance is in charge and agreement on the line of action to pursue, from a toxic cocktail which puts especially developing countries at a disadvantage in the settlement of international economic disputes.

F. Obstacles Faced by the Business Community There is often a lack of effective structures to assist the business community when disputes arise under regional or international arrangements. Developing countries in general do not have easily accessible channels to allow traders and/or investors to make use of entitlements under international schemes and to take claims to dedicated international forums. Many bodies, especially in international trade, are accessible to member states, with no direct access to the system for the business community. This holds for example, with respect to getting the government to take up claims, in the jargon, espouse claims, for submission to WTO’s dispute settlement bodies on behalf of exporters. The situation is different for foreign investors, who have direct access to arbitration mechanism of the International Centre for Settlement of Investment Disputes (ICSID), if their governments are parties to the ICSID Convention (which is a multilateral treaty). To date, the majority of developing countries are host countries for foreign investment, and consequently find themselves generally in the position of respondent rather than that of claimant in investment arbitration.

G. Obstacles in Securing Effective Legal Counsel Many developing countries have limited information on commercially and non‐commercially available legal counsel, the schedule of fees and terms of engagement, but also on their margin of negotiating the terms of engagement with the counsel. Many developing country officials find shopping for a lawyer to represent the state in an international dispute a challenging endeavor. This issue has been discussed on Thomas Wälde’s electronic discussion and intelligence forum (on international dispute resolution and on commercial disputes in the energy and resources field, Oil‐Gas‐Energy‐Mining‐Infrastructure Dispute Management (OGEMID)).

Choosing legal counsel demands the capacity to assess the quality of the various legal services on offer.

Criteria weighed in the comparison should typically include the experience, success rate and reputation of the lawyer or law firm as well as the cost of the service and the overall competitiveness of the package offered.

As a minimum, counsel should be able to give a prima facie assessment of chances to make a claim successfully, and the government official(s) in charge should have the capacity to evaluate this advice.

Ideally, the counsel should put in the basket of options she or he presents, also amicable resolution, such as conciliation or mediation, or, in trade disputes, mutually agreed solutions. As regards the latter, it may be illustrative that out of 392 disputes brought to the WTO system for resolution between 1 January 1995 – April 2009, about 25% were settled by mutually agreed solution through consultations (or the dispute was resolved otherwise without recourse to adjudication).4 The legal counsellor is well‐placed and has substantial authority to forward conciliation or mediation as options in other commercial and investment disputes. Even though data on arbitration are not publicly available, evidence from practice suggests that not many lawyers are inclined to go that route, not least because conciliation and mediation are less 4 See ‘UNCTAD Course on Dispute Settlement in International Trade, Investment and Intellectual Property’, Module 3, Overview, World Trade Organization, www.unctad.org/dispute.

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lucrative as fee‐generators for the lawyers in comparison to arbitration or litigation in international forums.

H. Obstacles in securing aid at the dispute settlement stage There are various organizations and institutions, both public and private, that provide legal aid in international disputes, under varying conditions, including within the United Nations system. However, developing countries have limited access to information on available international legal aid and on accessible support funds. The limited access of information is related to both the effectiveness of international organizations’ information outreach as to the absence of tools and networks to obtain reliable and pertinent information at the user’s end.

One example of the better known legal aid institution for international trade disputes, is the Geneva‐ based intergovernmental organization Advisory Center on WTO Law (ACWL). Established in 2001 with the stated objective of providing legal advice on WTO law and support in WTO dispute settlement proceedings, it has become a cost efficient and qualitatively competitive alternative to commercially available legal counsel for developing countries and least developed member states.

III. Key elements for a United Nations response The many challenges faced in the international economic regulatory arena, not least by the weaker stakeholders, notably the developing countries, call for an effective response. In my view, the United Nations is the only international institution that can adequately provide a response to meeting the challenges described above.

A three‐pronged response is proposed: 1.

Negotiating the Maze: The creation of a one‐stop support, liaison and guidance facility, as a first step to facilitate navigation through the currently existing maze of international economic laws, regulations and arrangements; 2.

Legal Aid: The established of e one‐stop guidance facility to direct stakeholders to available legal aid, and extension of legal aid resources for weaker international players – primarily, but not exclusively, states – in international economic disputes; 3.

A United Nations Ombuds‐office: The creation of a United Nations ombuds‐office for facilitated mediation in international economic disputes.

Support, Liaison, Guidance and Legal Aid A. The proposed support, liaison, and guidance facility would have as its objective helping member states navigate the complex international economic legal‐regulatory maze.5 It may be modelled upon the Rule of Law facilities launched since 2004 by the United Nations Secretariat.6 Work on the Rule of Law was proposed because it was felt that the organization needed to deepen and rationalize its rule of law work, and coordinate more effectively with outside actors. To date, this work is limited to four pillars of the modern international legal system, namely international human rights law, international humanitarian law, international criminal law and international refugee law.

As seen above, similar needs exist in the area of international economic law. Hence, the proposed United Nations support, liaison, and guidance facility could have a similar structure in the area of international economic law, focusing on trade and investment. The facility would act as a navigation tool to reach the international body of bodies that could most adequately provide the service, assistance or information sought.

Similar to activities coordinated by the United Nations’ Rule of Law secretariat, the facility could gather data and disseminate information, maintain a central website and/or provide links to bonafide websites, as well as a calendar of activities including of training and capacity building activities relevant to international economic law. It could provide guidance to governments, the business community and to non‐state actors on where to find assistance in international negotiations, or on how to choose a lawyer or arbitrator, and on where to source international financial or non‐financial aid for the settlement of 5

Some of the functions proposed are currently being undertaken by UNCTAD. Rule of Law Coordination and Resource Group, Joint Strategic Plan 2009-2011, United Nations, February 2009; Strengthening and coordinating United Nations Rule of Law Activities, Report of the Secretary-General, United Nations, 6 August 2008, A/63/226.

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international disputes. The latter task would feed into the second facility proposed, namely the legal aid facility.

The proposed facility should also provide a forum where actors and stakeholders from national and international bodies and from governments, such as government and private sector legal officers, attorneys‐general, representatives of bar associations and associations and associations of arbitrators, providers of national and international legal aid, and of training and capacity building, could meet to exchange information and experience.

B. Legal aid Proposals for providing international legal aid keep resurfacing in one form or another. A one‐stop United Nations facility for legal aid would have as its first task taking stock of existing activities and initiatives.

On the basis of the existing structures, proposals could be made for creating an integrated and easily accessible international legal aid structure.

C. The United Nations Ombuds‐office This proposal calls for the creation of a United Nations ombuds‐office for international economic disputes.

The ombuds‐office is proposed as an alternative and affordable solution to the increasing difficulties weaker players in general and developing countries in particular encounter in international arbitration.

This ombuds‐office would combine the moral authority of the United Nations with the more affordable forms of dispute settlement and alternative dispute resolution (ADR) increasingly being discussed in arbitration circles, namely conciliation and meditation.

The ideal shape of the United Nations ombudsoffice needs to be carefully considered. One possibility would be to establish a twin‐headed ombuds‐office. In this structure, the two ombudspersons could represent developing and industrialized countries respectively, and also the two main legal traditions, namely common law and civil law. Such a structure would provide essential options to the member states seeking its services from the very outset.

The principal role of the United Nations ombudsoffice would be to to act as a mediator in differences, disagreements, and disputes. The aim would be to achieve an amicable solution and to avoid, where possible, increasingly costly and often lengthy international litigation, or institutionalized or ad hoc arbitration. The ombudsoffice would promote discussion between the parties and mediate between the parties to reach a mutually agreed solution. Ideally, the ombudsoffice would achieve fair and equitable outcomes in international economic disputes.

The symptoms witnessed in international economic relations, from international legal frictions and disputes, especially in investment, trade and commercial transactions, to the explosion of the feverish legal activities provided by a variety of commercial and non‐commercial service providers and associations, indicate a need for action. In international matters, where the international community holds responsibility, the only multilateral organization that can provide legitimate leadership, create a viable structure for helping member states navigate the complexities of the present tangled system and achieve fair and equitable outcomes in international economic disputes, is the United Nations.

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The journal of Alternative Dispute Resolution in Kosovo is made possible by the support of the American People through the United States Agency for International Development (USAID). The contents of this Journal are the sole responsibility of the Alternative Dispute Resolution Center at American Chamber of Commerce and do not necessarily reflect the views of USAID or the United States Government.

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