Journal of Alternative Dispute Resolution - adr-ks.org · Journal of Alternative Dispute Resolution ... dispute resolution methods. The paper will explore the approaches that were

Journalof Alternative DisputeResolutionin Kosovo

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Volume 2

June 2016

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

AMERICAN CHAMBER OF COMMERCE IN KOSOVO

ARBITRATION CENTER

Journal of Altrenative Dispute Resolution in Kosovo

EDITORIALBOARD

RobertMuharremi,Ph.D

LectureratAmericanUniversityinKosovo

AssociatewithCharteredInstituteofArbitratorsinLondon

ArbitratorwiththeArbitrationCenteratAmericanChamberofCommerceinKosovo

KujtesaNezajShehu,LL.M.

PatentandTrademarkAgent

ArbitratorwiththeArbitrationCenteratAmericanChamberofCommerceinKosovo

AnjezëGojani,LL.M.

SecretaryGeneraloftheArbitrationCenteratAmericanChamberofCommerceinKosovo

*WiththesupportoftheMediationandArbitrationClubattheAmericanUniversityinKosovo

PublishedbytheArbitrationCenteratAmericanChamberofCommerceinKosovo,2016

Thismaterialmaybereproducedorusedfornon‐commercialpurposesifthepublicationisquotedandidentifiedexactlyasthesourceofinformation.TheviewsexpressedinthisnewsletterdonotnecessarilyreflecttheofficialpositionoftheAmericanChamberofCommerceinKosovo.

June2016

Volume 2

TABLEOFCONTENTS:FOREWORD.........................................................................................................................................................................4

AlternativeDisputeResolutionandthe“Kanun”(RobertMuharremi&AlketaBuçaj).......................5

ConfidentialityinArbitration:AnEssential ChangingAttribute?(FisnikSalihu)...............................22

CaseCommentary:NationalIranianOilCompanyvCrescentPetroleumCompanyInternationalLimitedandCrescentGasCorporationLtd(KlentianaMahmutaj)..........................................................35

IntellectualPropertyCasesinArbitration(ArbereshaZogjaniandFlorijeManajZogaj)...............43

RecognitionandEnforcementofKosovomadeArbitralAwardsinNewYorkConventioncountries:AComparativeStudy(AnjezëGojani).............................................................................................68


FOREWORD

The first volumeof the JournalofAlternativeDisputeResolution inKosovowaspublished in

August 2015. Since then, the Arbitration Center of the American Chamber of Commerce is

consistentlyworking in improving the format, thestructure,and theeditorial selectionof the

manuscripts.Backwhenthe firstvolumewasunderway, theCenteroperatedunderonemain

objective: to gather useful information on domestic and international commercial arbitration

andtoprovidethelatestdevelopmentsofthefieldtothelegalcommunityinKosovo.

The target audience consisted of legal practitioners, academics, and students. With this

objectivestillverymuchalive,throughthesecondvolume,theCenterhopestofurtherbuildthis

platformwherebyabalancebetweenanacademicandpracticaldiscussionwillbepresented.

TheCenterisfocusedindevelopingarbitrationinKosovoandalsoconsistentlyimprovingthe

quality of the services that it provides. In addition, the Arbitration Center believes that the

younggenerationoflawyerswillboostthisprocess.Thus,wealsowishtodedicatethisplatform

tothisaudienceandcontributetowardsfosteringtheirdevelopment.

The current volume includes a varietyof topics,whichprovide an overviewof certain issues

within the domestic arbitration state‐of‐affairs, as well as developments in international

commercialarbitration.Fromapracticalstandpoint,a fractionwithinthepaperspublishedin

thisvolumearecomprehensivereadsfornon‐lawyerstoo.

ThereaderswillnoticethatthejournalhasaUniversalDecimalClassificationCode,duetothe

factthatISBNandISSNcodesarenotyetavailableinthecountry.

Wehopethattheworkoftheauthorsfeaturedinthisvolumewillbeagoodadditiontoyourlaw

libraryandberemindedthattheArbitrationCenterisacceptingpapersonarollingbasis.

AnjezëGojani,SecretaryGeneral

ArbitrationCenter

AmericanChamberofCommerceinKosovo

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UDC340.141(=18)

AlternativeDisputeResolutionandthe“Kanun”

RobertMuharremi*andAlketaBuҫaj**

Abstract

Albaniansocietyhasarichtraditioninalternativedisputeresolutionasreflectedinthe“Kanun”.

Latestdevelopmentsinalternativedisputeresolutionlegislationseemtoneglectthisaspectanddo

notconnectlegislationwiththisrichtradition.Thepurposeofthepaperistoexplorethehistorical,

sociologicalandlegalaspectsofdisputesettlementmechanismsinAlbaniantradition.Thispaper

will explore thedevelopmentofAlbanian traditionasmanifested in the “Kanun”drawing from

insightsdevelopedinlegaltheoryandsociologicaljurisprudence.Disputesettlementmechanisms

as developed in pre‐state societies will also be taken into consideration to assess the dispute

settlementmechanismsendorsedbythe“Kanun”.Thepaperwillthenidentifyandanalyzespecific

dispute settlement procedures and mechanisms and compare them with modern alternative

disputeresolutionmethods.

Thepaperwillexploretheapproachesthatwereusedtosolvedisputes,andhowthoseapproaches

resulted from theAlbanian “Kanun”.Considering thathistorically the “Kanun”has functioned in

conjunction with state legal frameworks, its application may supplement state legislation on

alternativedispute resolution.Thepurposeof thepaper isalso to identifygeneralprinciplesof

dispute settlementwhichcouldexplain the individualrulesof the “Kanun” inamore systematic

manner. Itwill furtherexplorehow customarydispute settlementmechanisms couldbeused to

improvealternativedisputeresolution legislationandpracticebasedonexperiences inAlbanian

society. Although modern day arbitration and mediation is conducted mainly in civil and

commercialdisputes,forthepurposeofthispaperseveralaspectspertainingtocriminaldisputes

withintheKanunarealsodiscussed.

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I. Introduction

Weareusedtothefactthatstatecourtshaveprimacyinmattersrelatedtodisputeresolution

andthattheyhavemandatoryjurisdictiontoadjudicatesuchdisputes.Thisistheresultofstate‐

centric approach to dispute resolution in society. However, the view that state courts have

primacywhenitcomestodisputeresolutiondoesnotmeanthatstatecourtshaveamonopoly

in this respect. Alternative Dispute Resolution (ADR) is a recognized set of methods and

arrangementsofdisputeresolutionoutsideofstatecourtsandtypically includesnegotiations,

mediation,conciliation,fact‐finding,andarbitration.1ADRisbasedontheideathatconflictsare

anintegralpartofhumaninteraction,andhumansocietymustthereforelearntomanagethem

andtodealwiththeminawaythatwillpreventescalationanddestruction,andtocomeupwith

innovativeandcreativeideastoresolvethem.2Dealingwithconflicts,or“conflictresolution”,is

thereforeasoldashumanityitself.3

ADRhasgainedmomentuminthelastthreedecadesofthetwentiethcentury.4Itstartedinthe

United States in the 1970s in response to the need to find more efficient and effective

alternativestocourtlitigationandtointegrateADRintothelegalsystem.5Morerecently,ADR,

andparticularlymediation,hasbecomeinstitutionalizedaspartofmanycourtsystemsandthe

justice system as a whole throughout the world.6Kosovo has followed this development by

adopting a Law on Arbitration and a Law on Mediation. Arbitration is a procedure outside

regular courts inwhich a dispute is submitted, by agreement of the parties, to one ormore

arbitrators who make a binding decision on the dispute.7Mediation is also an out‐of‐court

procedurewhereathirdpartyassiststhepartiesindisputetoreachanamicablesettlement.In

2008, it adopted a Law on Arbitration8which follows largely the UNCITRAL Model Law on

InternationalCommercialArbitrationof19859andwhichappliestocommercialdisputesonly.

Inthesameyear,KosovoadoptedaLawonMediationwhichwasdraftedandimplementedwith

* Robert Muharremi, Ph.D, is a lecturer at American University in Kosovo. He is an Associate with the Chartered Institute of Arbitrators in London, and an arbitration with the roster of the Arbitration Center at American Chamber of Commerce in Kosovo. ** Alketa Buçaj, Bachelor of Science in Applied Arts and Sciences at American University in Kosovo. 1 Shamir, Yona. (2003). “Alternative Dispute Resolution Approaches and their Application”, UNESCO. Page 2. 2 Ibid. Page 2. 3 Ibid. Page 2. 4 Ibid. Page 2. 5 Ibid. Page 2. 6 Ibid. Page 9. 7World Intellectual Property Organization, “What is Arbitration?”, available at: http://www.wipo.int/amc/en/arbitration/what-is-arb.html. 8 Law No. 02/L-75 on Arbitration, Official Gazette of the Republic of Kosovo No 37, 2008. 9 United Nations, “UNCITRAL Model Law on International Commercial Arbitration”, (1994). The amendments to the UNCITRAL Model Law on International Commercial Arbitration of 2006 have not been incorporated into the law.

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the assistance of various international donor organizations. Mediation procedure is also

includedintheCodeonCriminalProcedureforcriminalmatters.

ThepossibleroleandinfluenceoftheKanunislessvisibleandrelevantinarbitrationthanitis

perhapsinregardstomediation.Arbitrationisstronglyinfluencedbypositivelaw,mostnotably

commercialandprivatelaw.However,evenwithintheframeworkofpositivelaw,custommay

playarole.TherearemultipleprovisionsintheLawonObligationswhichrefertocustomand

customary practices which may be entry points for Albanian custom. Due to the limited

relevanceoftheKanunforarbitration,thepaperwillprimarilyfocusontraditionalmediation.

WhileKosovo strives to adopt legislation in accordancewith international standards, itmust

not be neglected that dispute resolution is based on norms set by society and as such is

determined by a society’s culture. In order to have a clear understanding of the relationship

betweencultureanddisputeresolution,a fewsociologicalconceptsneedclarification.Culture

may be defined as the beliefs and practiceswhich a society shares.10Culture is a function of

society, which may be defined as a group of people who share a community and culture.11

Community is related to the territory inhabited by a group of people who share a common

cultureandmayincludeanyformofdefinableterritory,rangingfromurbanneighborhoodsto

states.12Thus,acommonterritoryandacommoncultureturnsagroupofpeopleintoasociety.

Cultureitselfiscomposedofmaterialcultureandnon‐materialculture.13Materialculturerefers

to theobjects andartefactsof a society.14Non‐material culture includes the ideas, values and

beliefsofasociety.15Materialandnon‐materialcultureareusuallyinterrelatedsinceasociety’s

material culture represents a society’s ideas, values, beliefs and norms. The key elements of

culture derive from a society’s non‐material culture and are a society’s values and beliefs.

Valuesareasociety’sstandardsaboutwhatisgoodandbad,whatisimportantandwhatisless

important,whilebeliefsreflectasociety’sideasaboutwhatistrueandhowtheworldworks.16

A society materializes its values and beliefs through norms. Norms prescribe and guide

behaviorwhichisinlinewithsociety’svaluesandbeliefs,andsetsanctionsthroughwhichthey

rewardorpunishmembersofsocietyfortheirbehavior.17Thereisadifferencebetweenformal

and informal norms. Formal norms are defined aswritten rules, and include laws and other

10 Little,William. (2013). “Introduction to Sociology”. 1st Canadian Edition. Rice University. Page, 80. 11 Ibid. Page, 79. 12 Ibid. Page, 115. 13 Ibid. Page,81. 14 Ibid. Page,81. 15 Ibid. Page,81. 16 Ibid. Page, 87. 17 Ibid. Page,87.

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formalregulations.18Informalnormsarestandardsandexpectationsofbehaviorwhicharenot

formalizedandwhicharelearnedthroughsocializationorobservation.19Afurtherdistinctionis

madebetweenmoresandfolkways.Whilemoresreflectthemoralviewsofasocietyandmay

also be enforced by formal norms, such as laws, folkways prescribe standards of behavior

withoutamoralcontent.20Sincedisputeresolution insocietyisbasedonnorms, it isnotonly

thesenormsbutalsothedisputeresolutionmechanismsandprocesseswhichreflectasociety’s

culture,i.e.itsvaluesandbeliefs.

However,theremaysometimesbeadifferencebetweentheidealcultureandtherealculturein

agivensociety.Theidealcultureincludesaspiredvaluesofasociety,whereastherealculture

reflects the actual values of a society according towhich the society really lives up to.21The

valuesexpressedintheConstitutionofKosovo,i.e.theprinciplesoffreedom,peace,democracy,

equality, respect for human rights and freedoms and the rule of law, non‐discrimination, the

right to property, the protection of environment, social justice, pluralism, separation of state

powers, and a market economy may be considered ideal values which the Kosovar society

aspiresto.22Therealculturemaybedifferent.InAlbanianculture,honoristheprincipalvalue

whichprevailsoverlifeandliberty.23Honoristhebasisforbesa(wordofhonor)andmikepritja

(hospitality), which together form the traditional worldview of Albanians.24As Tarifa states,

honorrepresentedthesuprememoralvalue,besawastheirtruereligion,andhospitality their

mostsublimevirtue.25

Theculturalaspectsareespecially importantwhen it comes toalternativedisputeresolution,

and in particularwhen it comes tomediation.Mediation is a processwhereby a third party

assists two or more parties, with their consent, to prevent, manage or resolve a conflict by

helpingthemtodevelopmutuallyacceptableagreements.26Thepremiseofmediationisthatin

the right environment, conflict parties can improve their relationships and move towards

cooperation.27Mediation differs from society to society. As stated by Celik and Shkreli, every

socialsystem,whetherasocietyoranorganizationhasaculturewithrulesabouthowconflicts

shouldbemanaged.28Themediationprocess in largeandbureaucratizedsocieties isdifferent

18 Ibid. Page, 62. 19 Ibid. Page,88. 20 Ibid. Page, 200. 21 Ibid. Page, 86. 22 Constitution of the Republic of Kosovo, Article 7.1. 23Tarifa, Fatos (2008). “Of Time, Honor, and Memory: Oral Law in Albania”. Volume 23. Page, 8. 24 Ibid. Page, 8. 25 Ibid. Page, 8. 26 United Nations. (2012). “Guidance for Effective Mediation.” Page, 4. 27 Ibid. Page, 4. 28 Celik, Ayse Betul and Shkreli,Alma. (2010). “An analysis of Reconciliatory Mediation in Northern Albania: the Role of Customary Mediators”. Europe-Asia Studies. Volume 62, Issue 6. Page, 888.

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fromthatinsmallandtraditionalsocieties.29Mediationinbureaucratizedsocietiesisconducted

by impartial and trained professionals who assist in communication and facilitate the

construction of agreeable solutions for the parties.30In traditional societies, mediation is

conducted by individualswho are not necessarily professionals butwho are accepted by the

partiesduetotheirsocialstatusandreputation.31Thepurposeofthemediationisnotonlyto

settlethedisputebetweenthepartiesbutalsotoensurethatcooperativerelationswithinthe

communityaresustainedandthatthereisreconciliationnotonlybetweenthepartiesdirectly

involvedbutalsobetweenthecommunitiestowhichthepartiesbelong.32Thelawsadoptedby

Kosovo certainly reflect international standards, i.e. the ideal culture that Kosovo aspires to

have.Butdotheyalsoreflecttherealcultureofthepeople, therealvalues,beliefsandnorms

whichguideKosovosocietyinthewayhowdisputesaresettled?

II. TraditionalDisputeResolutionandtheKanun

TheKanunofLekeDukagjini,oftenalsocalled“Kanuni iMalesise”(Codeof theHighlands)or

“Kanuni i Maleve” (Code of the Mountains)33is a collection of orally transmitted principles,

norms and ruleswhich have governed the life of Albanians for centuries. Theword “Kanun”

originates from Greek and means “statute” or “law”.34It is attributed to Leke Dukagjini, an

Albanianmedieval ruler inNorthernAlbania, though it is doubtful if this historic personhas

indeedanydirectconnectionwiththeKanun.35InadditiontotheKanunofLekeDukagjini,there

areothersimilarcollectionsofcustomarylaw,suchastheKanunofSkenderbegandtheKanun

ofLaberiinSouthernAlbania.36TheKanunwasputinwritingforthefirsttimebetween1897

and1899anda final editionof thewholeKanunwaspublishedonly in1933.37TheKanun is

divided into 1263 paragraphs and twelve books. It is astonishing in its attention to detail; it

encompasses all facets of life including the church, honor, marriage, pledge, loans etc. Edith

DurhamwhilestudyingtheKanunstatedthat“Wheneverinthemountains[ofAlbania]Iasked

whyanythingwasdone…Iwastold,‘BecauseLekesaidso.”38

Throughout Ottoman rule in Albania, the Kanun was the law of the Albanian highlanders

stretchingfromNorthernAlbaniaintoMontenegroandKosovo,whowereorganizedunderthe

29 Ibid. Page, 889. 30 Ibid. Page, 889. 31 Ibid. Page, 889. 32 Ibid. Page, 889. 33 Tarifa, Fatos (2008). “Of Time, Honor, and Memory: Oral Law in Albania”. Volume 23. Page, 3. 34 Elsie, Robert. (2012). “Northern Albanian Culture and the Kanun.” University of Leiden. Page, 1. 35 Ibid. Page, 1. 36 Tarifa, Fatos (2008). “Of Time, Honor, and Memory: Oral Law in Albania”. Volume 23. Page, 3. 37 Elsie, Robert. (2012). “Northern Albanian Culture and the Kanun.” University of Leiden. Page, 2. 38 Malcolm, Noel. (1999). “Kosovo: A Short History”. Page, 17-18.

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ruleoflocallords(bajraktare).ThisregimecontinuedevenaftertheformationoftheAlbanian

statein1912,althoughKingZogofAlbaniamanagedtoreducethepowerandinfluenceofthe

local lords.39It was only in the 1960s, under communism, that the government managed to

suppresstheKanunanditsinfluenceonthepopulation.40WiththefallofcommunisminAlbania

in1992,and inviewof theensuingcollapseof thestate, theKanunresurrectedandregained

influence as a set of principles and rules that governs the lives ofAlbanians.41InKosovo, the

Kanunmaintaineditsinfluence,thoughindiminishedform,evenduringcommunism.

The Kanun can bewell‐defined as a set of customs and rules deriving from sacred Albanian

notions such as honor, faithfulness, “besa”, respect, hospitability.42The Albanian culture has

historically put emphasis on “honor” as one of themost significant symbols that one has to

protect.TheKanuncarefullyexplainwhathonoris,whatactionsresultintodishonor,andwhat

onehas todowhenhe isdishonored.43Paragraph597of theKanun states thathonor hasno

priceandifoneisdishonored,oneshallneverforgivethatact.TheKanun,whichhasgoverned

all aspects of life in Albanian populated areas for centuries, is still present in some parts of

AlbaniaandKosovo.Themoreyoumove towards thenorthernpartof thecountry, themore

youmoveintotherealmoftheKanun.

The Kanun is very often associatedwith blood feud, i.e.gjakmarrja, which is permitted self‐

justicebykillingapersoninordertoavengeacrimeorviolationofone’shonorandthatofthe

family.44Although the Kanun contains relatively detailed rules on how gjakmarrja should be

practiced, its social and economic implications for Albanian society are devastating as they

resultincyclesofviolence,aswellasemigrationandisolationofindividualsandentirefamilies.

According toaHumanDevelopmentReportpublished in1998,around73%ofallmurders in

Albaniaduring1997resultedfrombloodvengeance.45However,gjakmarrjaisnottheonlyform

of dispute resolution according to the Kanun. The Kanun also recognizes dispute resolution

mechanismswhichresemblethoseofmediationandadjudicationinmoderndisputeresolution

systems.

39 Celik, Ayse Betul and Shkreli,Alma. (2010). “An analysis of Reconciliatory Mediation in Northern Albania: the Role of Customary Mediators”. Europe-Asia Studies. Volume 62, Issue 6. Page, 892. 40 Ibid. Page,, 893. 41 Ibid. Page, 893. 42 Mile, Klementin. (2007). “Blood Feud: between Kanun and State.” Instituti Shqiptar i Studimeve Ndërkombëtare. 43 Kanun of Leke Dukagjini, Paragraph 691. 44 Mustafa, Mentor and Young, Antonia. (2008). “Feud narratives: contemporary deployments of kanun in Shala Valley, northern Albania.” Slovene Anthropological Society. Page, 95; Celik, Ayse Betul and Shkreli, Alma. (2010). “An analysis of Reconciliatory Mediation in Northern Albania: the Role of Customary Mediators”. Europe-Asia Studies. Volume 62, Issue 6. Page, 885. 45 Human development report. (1998). Tirana: United Nations Development Programme.

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Mediation as amethod of settling blood feuds,which in today’smodern society is penalized

under the Criminal Code, is a long established practice in the Albanian society and is an

importantpartofKanun.TheKanunexplicitlystatesthattheonlywaytogainthelosthonoris

throughbloodvengeanceordisputesettlementthroughmediation.46Thus,Kanunprovidedthe

structurethroughwhichdisputescouldberegulated;mainlythroughthecounciloftheelders,

but also through independentmediators and other alternatemeans. A specific section in the

Kanunisdedicatedtomediationanddisputeresolution.

TheKanunstatesthatamediator“maybeamanorawoman,aboyoragirl,orevenapriest,”47

however thisrolehasprincipallybeen takenbyrespectedmaleelders through theCouncilof

Elders. After both parties have carefully chosen an equal number of elders, the feud is then

discussed intheCouncilofElders,withthe intentofresolvingthedispute.Mediationthrough

theCouncilofElders isamoreformalformofmediationconsistingofexperiencedmediators.

This formofmediationwasusuallypaid,andthus it incentivizedelders tosuggest families in

disputetoresolvetheirissuethroughtheirassistance.48

In thedeepmountainousareas and rural areas,dispute resolutionusuallyhappened through

themediation of family friends or religious leaders. Other times, instruments for reaching a

settlement consisted of paying “blood money”, exchanging food valuable tools, clothes, or

women.IntheKanunitisstatedthatonecanresolveissuesthroughmediationbutalsothrough

“bloodmoney”,thisamountofmoneyisusuallypaidtothefamilythathassufferedmostloss;

howeverthiswayofsettlingdisputesisnotseenasanoblewayofsettlement.

Mediationpracticesarenotonlyusedinbloodfeudconflictreconciliation,theyarealsousedto

resolveotherdisputessuchaspropertyissues,familyissues,marriageissues,etc.Theseissues

spreadmore in post‐communist times, as a result of property redistribution and population

movement.49Thegovernmentandthelegalsystematthetimewereweakandittookyearsfor

land ownership certificates to be distributed. In the interim, people started regulating these

issuesthemselveswhich,inaccordancewiththeKanun.

A prominent example is the application of the Kanun to property rights disputes and land

reform following the end of communism in Albania. The rules of the Kanun were used to

46 Kanun of Leke Dukagjini, Paragraph 597. "Ndera e mârrun giobë nuk kà". -Ndera e mârrun s'falet kurr. Paragraph 598. "Ndera e mârrun nuk shperblehet me gjâ, por a me të derdhun të gjakut, a me të falun fisnikisht (permbas ndermjetsis së dashamirve të mirë). 47 Kanun of Leke Dukagjini, Paragraph, 669. 48 Ulqini, Kahreman. (1991). Bajraku në organizimin e vjetër shoqëror. Tiranë: Akademia e Shkencave. Page, 128. 49 Standish, Alex. 20 November (2007); University College London (UCL). (2004). "Blood Feuds."

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decollectivizepropertyandtodistributelandtothehereditaryowners.50AsDeWaalexplains,

as long as the state law lacked force and failed to cover all the legal post‐cooperative

contingencies, the Kanun provided a workable, indeed indispensable, framework for village

authority, filling adangerousvacuum.51The implementationof thosepartsof theKanun that

dealtwithdisputesettlement,propertydivisionandrightsofwaywasan importantpractical

meansofdealingwiththeexistinglegalhiatus.52Disputesarisingfromlaworformallawstood

a chance of being resolved in a face‐to‐face context by applying the Kanun to current

situations.53According to DeWaal, thanks to the Kanun’s exhaustive guidelines on boundary

recognitionandmarking,allthecooperativefarmlandinMirdita(Albania)hadbeenrestored

tothehereditaryownersby1992.54

CelikandShkrelidescribethemediationpracticeaccordingtotheKanunasfollows.Oneofthe

parties,usually theperpetratororhis family, requests themediators to intervene inorder to

avoid further violence.55The purpose of the intervention by the mediators is to achieve

forgiveness, reconciliation between the families and to stop the continuation of violence.56

Mediators, who are required to be impartial, are selected based on their social prestige,

background, family origin, experience and reputation in the community.57A key feature of

Albanian traditional mediation is that it is group mediation.58More mediators with high

reputationareasocial incentiveforthegroupsinvolvedtoacceptamediatedsolution,asthe

familyfeelsmorerespectedandhonouredwhenmanyimportantpeoplecomeandaskthemto

forgiveanoffence.59Agroupofmediatorsisalsoaninsuranceagainstcheatingandrenegingon

commitments by the parties, to which an individual mediator may have a higher risk of

exposure.60Asanexception,individualmediatorsaretherulewhenprivate,sensitiveissuesare

involved,suchasthehonourofawoman.61

Forgivenessisonlyapartialresultoftraditionalmediation,astheultimategoalistoreconcile

thepartiesandtheirfamiliesinordertorestorethesocialrelationshipandestablishpeace.62In

ordertoachievethis,mediatorsusuallyshyawayfrommakingaproperinquiryintothefacts 50 De Waal, Clarissa. (2004). “Post-Socialist Property Rights and Wrongs in Albania: An Ethnography of Agrarian Change”. Conservation & Society 2. Page 24. 51 Ibid. Page 27. 52 Ibid. Page 27. 53 Ibid. Page 27. 54 Ibid. Page 27. 55 Celik, Ayse Betul and Shkreli,Alma. (2010). “An analysis of Reconciliatory Mediation in Northern Albania: the Role of Customary Mediators”. Europe-Asia Studies. Volume 62, Issue 6. Page, 896. 56 Ibid. Page, 896. 57 Ibid. Page, 897. 58 Ibid. Page, 897. 59 Ibid. Page, 897. 60 Ibid. Page, 897. 61 Ibid. Page, 898. 62 Ibid. Page, 905.

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andtodeterminewhoisguiltyandwhonot,whichareconsideredtobecounterproductivefor

restoringsocialrelationships.63

ModernmediationpracticesinAlbaniastillfollowtheserules.Bloodfeudreconciliationisdone

throughneutral intermediaries.When intermediaries conclude their conciliation, theyusually

dosobyagreeingwith theoffendingparty topay “bloodmoney”, i.e. anamountofmoney in

consideration for forgiveness paid to the family which is the victim. This payment, which is

regulated in the Kanun, includes livestock ormoney. Reconciliationmay also be successfully

concluded by arranging formarriage between the two parties. A successfulmediation is still

celebratedwithatraditionalritualstatedintheKanun,named“bukaepajtimit”(mealofpeace),

which is served by the offending family and includes the perpetrator’s family and the

mediators.64Onlyafterall theseritualsandpaymentsaremade,thecrosssign,asrequiredby

theKanun,isputonthedoorasasignofasuccessfulreconciliation.65

TheKanunalsorecognizesauthoritativedisputeresolutionintheformofadjudication.Dispute

settlementthroughtheissuanceofabindingdecisionisconductedbyatribunalconsistingof

elders. 66 The elders are typically the leaders of brotherhoods or tribes, which were

organizational units of the Albanian society, but also men who had a good reputation and

experiencewithdisputeresolutionpractices.67Theeldersdonotonlyadjudicatedisputes,they

also have the authority to make new laws, and thus they combine legislative and judicial

functions.

Acasemaybebroughtbeforetheeldersprovidedthatthepartiessubmittotheeldersapledge,

whichmay traditionally includeaweapon,abullet,awatchora tobaccobox.68Leaving these

itemsasapledge indicates that thepartiesaccept the jurisdictionof theeldersand that they

accept their decision as binding.69A decision issued by elders without such a pledge is not

bindingonthecommunityandundertheKanun.70

When thedispute involvespeople fromdifferent villagesor communities, the tribunal of the

elders must include elders from both communities.71As the Kanun requires elders to be

impartial72they are subject to an oath promising that they will adjudicate impartially and

63 Ibid. Page, 905. 64 Gjeçov, Shtjefën and Fox, Leonard. (1989). Kanuni i Lekë Dukagjinit / The code of Lekë Dukagjini. New York. Gjonlekaj Publishing Company; Kanun of Leke Dukagjini, paragraph 982) 65 Kanun of Leke Dukagjini, paragraph, 983. 66 Ibid, paragraph ,993. 67 Ibid, paragraphs: 992 and 994. 68 Ibid, paragraph, 1022. 69 Ibid, paragraph, 1019. 70 Ibid, paragraph, 1020. 71 Ibid, paragraph, 1004. 72 Ibid, paragraph, 1015.

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strictlyinaccordancewiththerulesoftheKanun.73Thesanctionforabreachofimpartialityis

lossofreputationandrefusaltoincludethispersoninthegroupofelders.Inasocietywhere

honouristhehighestvalue,thissanctioncanbeveryharsh.

Decisionsofeldersareusuallynotsubjecttoappeal.74Itisonlyifthepartiesconsiderthatthe

elders were not impartial that they may request the replacement of the elders.75Such

replacementofeldersmayoccurthreetimes.76Ifthepartiesarestilldissatisfied,thentheirlast

resort is the House of Gjonmarkaj77, which due to its traditional authority and power in

NorthernAlbaniawasconsideredtobetheguarantoroftheKanun.Onceadecisionismadeby

the elders, all tribal and family leaders are required to respect the decision and assist in its

enforcementwhensorequestedbytheelders.78AftertheElderscometoadecisiontheyleaveit

up to the local lords (bajraktars) to enforce theirdecision. If thedecisionof theElders isnot

accepted by the parties, then the lords are responsible to make sure that the decision is

enforced,whichmayincludepunitivemeasures,suchasdestroyingtheoffender’sproperty,or

excludingtheoffenderandhisfamilyfromthecommunity.

AlthoughtheKanunisavailableinapublishedversion,manyofitsrulesareoutdatedandnot

directlyapplicabletopresentrealities,suchastheroleoftheHouseofGjonmarkajwhichtoday

isinfactminimal.TherulesoftheKanunarealsodifficulttounderstandandthereforeopento

interpretation.AsCelikandShkreliobserve,differentinterpretationsoftheKanunaboundfor

several reasons.79Despite the fact that theKanun is valuedhighly, detailed knowledge of the

rulesoftheKanunisrare,evenamongthosewhoapplyitasmediatorsorarbitrators.80Asits

rulesneedtobeadaptedtonewdevelopmentsandcircumstances,andthereisnocentralized

authority to provide guidance, thosewho apply the Kanun have extensive discretion in how

they do this. Interpretation may also be influenced by group interests, which may result in

different interpretations depending on the interests involved.81So despite the existence of a

publishedversion,theactualrulesoftheKanunmaydiffernotonlyintimebutalsofromplace

to place. Thismakes the knowledge of local interpretations of theKanun important and it is

thereforedifficult tospeakofonlyone“Kanun”.After the fallofcommunism,manyAlbanians

livingunder theKanunmovedsouthwardsandbroughtwith them their interpretationof the

Kanun which they passed on to the new local communities. However, these communities 73 Ibid, paragraph, 1031. 74 Ibid, paragraphs: 1001, 1002, 1034, 1036. 75 Ibid, paragraph, 1038, 1039. 76 Ibid, paragraph, 1041. 77 Ibid, paragraph, 1041. 78 Ibid, paragraph, 996. 79 Celik, Ayse Betul and Shkreli,Alma. (2010). “An analysis of Reconciliatory Mediation in Northern Albania: the Role of Customary Mediators”. Europe-Asia Studies. Volume 62, Issue 6. Page, 894. 80 Ibid. Page, 895. 81 Ibid. Page, 895.

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interpretedthenormsoftheKanunintheirownwaywhichresultedindifferentpracticesand

interpretations of the Kanun. For example, the traditional rule states that vengeance is not

permitted against people younger than the age of 16 years old and females, is no longer

respected.82Fischerhas alsonoted that theKanun isbeingmisinterpreted and in somecases

morethanoneliveistakenforrevenge.83

III. Kanun:LaworCustom?

In literature the Kanun is frequently referred to as customary lawwithoutmaking a proper

distinctionbetweenlawandcustom.84Evencourtsandinternationalorganizationsrefertothe

Kanun as a collection of Albanian customary law.85Celik and Shkreli observed that although

there isaMediationLaw inAlbania,mediatorshaveengaged inconflictsbetween familieson

thebasisofcustomarylaw,i.e.theKanun.86Thisimpliesthattheprinciplesandrulescollected

in theKanunhave the forceof lawandare applied inparallel to formal lawenactedby state

authorities. The question to be answered is if the principles and rules codified in the Kanun

constitutelegallybindingcustomarylaworiftheymerelyreflectsocialcustomwhichissubject

tosocialenforcementbutnotnecessarilyenforcementbystateagencies.

Whilebothlawandcustomarepartofasociety’snorms,legalformalismsuggeststhatitisonly

formallawswhichareenforceablebystatecourtsandotherinstitutions.Formallawsarethose

legalactswhicharepassedbytheconstitutionallydeterminedlegislatorinaccordancewiththe

constitutionallyprescribedprocedure. Inaddition to formal laws, legal theoryalsorecognizes

customarylaw,whichhasundercertainconditionstheforceofformallaw.However,thereisa

difference between customary law and custom, as the latter is a social normwhich may be

enforced by social sanctions butwithout possibility for recourse to state enforced sanctions.

Customarylawisusuallydefinedaspracticeaccompaniedbyopinionjuris,i.e.thebeliefthatthe

practice is legally obligatory.87Its relevance is more important in international law than in

82 “Albania: Blood Feuds”. (2008).Research Directorate: Immigration and Refugee Board of Canada.Ottawa. 83 Ibid. 84 Elsie, Robert. (2012). “Northern Albanian Culture and the Kanun.” University of Leiden. Page, 1; Tarifa, Fatos (2008). “Of Time, Honor, and Memory: Oral Law in Albania”. Volume 23. Page,3; Mustafa, Mentor and Young, Antonia. (2008). “Feud narratives: contemporary deployments of kanun in Shala Valley, northern Albania.” Slovene Anthropological Society. Page, 96 85 District Court in Mitrovica, Decision No. Pnr. 43/2010 of 25 May 2012, at 10; OSCE, Manual per Punonjesin e Sherbimit te proves, 2009. Page, 11. 86 Celik, Ayse Betul and Shkreli, Alma. (2010). “An analysis of Reconciliatory Mediation in Northern Albania: the Role of Customary Mediators”. Europe-Asia Studies. Volume 62, Issue 6. Page, 886. 87 Ruthers, Bernd/ Fischer, Christian/ Birk, Axel (2016). “Rechtstheorie”. Page 158.

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national legalsystems,since innational legalsystemscustomary lawacquires for the forceof

formallawonlywhenacceptedandappliedbythecourts.88

Whileitmaysoundcommonsensetorecognizelawonlyasformallawinthesensedescribed

above,jurisprudencetheoriesdiffersubstantiallyastowhatcountsaslaw,andlegalformalism

isonlyoneofthemanyapproachestounderstandingwhatthelawisinsociety.Legalformalism

ispartofamajorschoolof thought in jurisprudence, i.e. legalpositivism,whichprovidesthat

lawisa‘socialfact’,whichmaybefoundintheactualpracticesortheinstitutionsofsociety.89

Legal positivists distinguish law ‘in the legal sense’ from law in the non‐legal sense, such as

custom,etiquette,andmoralnorm.90Theytreatas lawonly thosenormswhichderive froma

lawmakingauthoritythatexistsasapoliticalorsocial fact.91Themost importantadvocateof

legalpositivismisJohnAustinwhopurportsthatlawisthecommandofapoliticalsovereign.92

Customwouldthusbecomelawonlywhensocommandedbythepoliticalsovereign.

Part of legal positivism, thoughwith adifferent approach andunderstandingof law, isH.L.A.

Hart’sanalytical jurisprudence,whichHarthimself calledsoftpositivism.93Hart considers the

customaryruleswhichareobservedbyprimitivesocietiesthathavenolegislaturesorcourtsor

otherauthorityas laws.94Hart’spointofdepartureistheideathatnormscreateobligations.95

Theseobligationsareenforcedbysocietyandmembersofsocietyhaveasenseofobligationto

respect the norms.96A modern legal system emerges when a society displays primary and

secondary rules of obligation. Primary rules of obligation are commonly accepted norms of

conductwhichareconsideredbymembersofsocietytobebindingandwhichareenforcedby

socialsanctions.ForHart,theseprimaryrulesofobligationarelaw.However,inamodernlegal

systemsecondaryrulesofobligationcomplementprimaryrulesofobligation.Secondaryrules

ofobligationprovideruleson(i)recognizingwhichlawsarevalid(ruleofrecognition),(ii)rules

hownormsshouldbechanges(ruleofchange),and(iii)rulesonadjudicationbasedonprimary

rulesofobligation(ruleofadjudication).Itisonlytheunionofprimaryandsecondaryrulesof

obligationwhichcreatealegalsystem.AsHartpointedout,primitivesocietieshaveasetoflaws

(only primary rules of obligation), while modern societies have a system of laws (union of

primaryandsecondaryrulesofobligation).

88 Ibid. Page, 159. 89 Ratnapala, Suri. (2009). “Jurisprudence.” Cambridge University Press. Page, 21. 90 Ibid. Page, 25. 91 Ibid. Page, 25 92 Ibid. Page, 46. 93 Ibid. Page, 48. 94 Ibid. Page, 69. 95 Ibid. Page, 49. 96 Ibid. Page, 50.

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For Hans Kelsen, another representative of legal positivism, law is a coercive order which

attempts to bring about a certain behaviour by attaching to the opposite behaviour socially

organizedcoerciveact.Lawsderivetheirvalidityfromabasicnorm,whichineffectreferstothe

constitutionofacountry.ForKelsen, lawcanalsoconsistofcustomanddoesnotnecessarily

requireformallawspassedbylegislatorsorotherstateauthorities.Eventhebasicnorm,from

which all other laws derive their validity, may be custom, provided that the basic norm is

effective. A basic norm is effectivewhen the norms created in conformitywith it are by and

largeappliedandobeyed.

Anotherjurisprudentialschoolislegalrealism.Likelegalpositivists,legalrealiststrytoexplain

lawasitis,andnothowitshouldbe.Thedifferencebetweenthetwoisthatlegalrealistslookat

thelawasitreallyis,andtheycometotheconclusionthatthelawinreallifeisdifferentfrom

thelawasitiswritteninlawbooks.Lawisnotwhatthelawmakersdeterminetobelaw;lawis

whatthejudgesinterpretinpracticetobethelaw.Forlegalrealists,bestrepresentedbyOliver

WendellHolmesJr.,lawembodiesthestoryofanation’sdevelopmentandisthereforetheresult

of an evolutionary process. Law emerges as the result of human actions even without the

directionofformallawmakers.Lawmaythereforeexistindependentofandeveninopposition

to thewillof thepolitical sovereign.Fromthisperspective,according toHolmes,custommay

havethepoweroflawevenifstatutorylawprovidesthecontrary.Whilelawisgroundedinthe

socialdevelopmentofasociety, it is thecourtswhichdeterminewhat the lawactually is.For

Holmes,lawconsistsonlyinthepredictionsofwhatthecourtswilldoinparticularcases.Karl

Llewellyndevelopedthisideafurtherbysuggestingthatalawyerwhowantstofindoutwhat

thecourtsactuallydomustengageinthesystematicstudyofjudgmentsofcourts.Itwouldnot

beenoughtolookonlyatthelawasitiswritteninastatute;theinterpretationofthelawandits

application in practice by the courtswould bemore important, as this would truly discover

whatthelawactuallyis.

Afundamentallydifferentapproachistakenbythenaturallawjurisprudence.Accordingtothis

school,natural lawisahigherformof lawwhichis independentofhumanwill, it isuniversal

andtimelessanditisbasedonreasonandmorality.Lawsmadebypoliticalsovereignshaveto

bemeasuredagainstsuchnaturallaw.Lawthatisnotinaccordancewithnaturallawwouldbe

unjustlawandwouldthereforenotbelaw.Theconceptofnaturallawthusreferstorulesand

principles deducible from nature, reason, or the idea of justice.97Among the Roman jurists,

natural law was viewed as the law derived from the nature of human beings, and as law

97Orakhelashvili, Alexander. (2008) “The Interpretation of Acts and Rules in Public International Law.” The Oxford University Press. Page, 61.

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expressive of the basic ideas of justice.98In themiddle ages, the divine concept of God‐given

naturallawacquiredincreasingrelevance.99

Sociological jurisprudence has a different approach to understanding the idea of law.

Sociological jurisprudenceisamethodofstudyinglawthatcombinesthelawyer’sviewofthe

law,technicalknowledgeofthelaw,andinsightsproducedbythesociologyoflaw.100Lawyers

limit the term ‘law’ to the formal law of the state, comprising statutes, official commands,

judicialprecedents,andsuchlike.Sociologistshaveamuchbroaderviewofthelaw.Lawinthis

wider sense encompasses all forms of social controls, including customs, moral codes and

internal rules of groups and associations such as tribes, clubs, churches and corporations.101

Formallawisonlyahighlyspecializedformofsocialcontrolinvolvingspecializedagencieslike

legislatures andcourtsbut socialorder ismaintainednotonlyby the formal law,but alsoby

manysocialrules,standardsandpracticesnotfoundin lawbooksandstatutes.102Thelawsof

anassociation, according to lawyers, existbecauseof thevalidity that state lawconfersupon

them.103Customary laws are law because a state organ such as a court or parliament has

recognizedthemaslaw.104Moralrulesandrulesofsocialetiquettearenotlawsinthelawyer’s

sense.105Thesociologistoflaw,incontrast,treatsalltheserulesaspartofthe‘socialreality’that

is law.106Emile Durkheim, an early proponent of sociological jurisprudence, explained that a

societyexistsbecauseofinterdependenceandbondingamongagroupofindividuals,whichhe

calledsocialsolidarity.107Lawwouldbethevisibleevidenceofsocialsolidaritywhichisfound

inthesociety.108Heacknowledgedthatthelawwillnotprovidefullevidenceofsocialsolidarity.

Therearecustomsthatpeopleobservebutwhicharenotrecognizedbyauthoritiesaslaw,orin

factarecontraryto law.Normally,customisnottheoppositeof lawbut isthebasisof law.A

customarises inoppositionto lawonlyinexceptionalcircumstances.This iswhenthe lawno

longercorrespondstothestateoftheexistingsociety.109

ThesevariousviewsonwhatislawprovidedifferentanswerstothequestioniftheKanunislaw

or just social custom. Following Hart’s analytical jurisprudence, the Kanun would reflect

primary rulesof obligationsand thusqualify as law.The sameconclusionwould follow from

98 Ibid. Page, 61. 99 Ibid. Page, 61. 100 Ratnapala, Suri. (2009). “Jurisprudence.” Cambridge University Press. Page, 188 101 Ibid. Page, 188 102 Ibid. Page, 188. 103 Ibid. Page, 188. 104 Ibid. Page, 188. 105 Ibid. Page, 188. 106 Ibid. Page, 188. 107 Ibid. Page, 198. 108 Ibid. Page, 199. 109 Ibid. Page, 199.

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Kelsen’sunderstandingof law,provided thatKanunas custom is largely appliedandobeyed.

From a natural law perspective, it could be argued that the Kanun is law as it reflects the

society’sviewsofmoralityandjustice.SociologicaljurisprudencewouldalsoviewtheKanunas

asocialrealityandaformofsocialcontrolwhichhasthereforethequalityoflaw.

Fromtheperspectiveoflegalformalismandlegalrealism,theKanunwouldonlybeconsidered

lawifsodeterminedbythestatelegislatureorbystatecourts.Inthisrespect,differentpartsof

theKanunmayreceivedifferentlegaltreatment.Ontheonehand,itisevidentthatgjakmarrja

(vendetta) isnotacceptedby formal lawwhichactuallyprescribesmoreseveresanctions for

murder committed for the purpose of revenge.110On the other hand, as Mustafa and Young

observe,therulesoftheKanunonmediationandreconciliationarecompatiblewithstatelaw111

andthereisevidencethatcourtpracticetakesthemintoconsiderationandreferstothem.112

IV. KanuninKosovo’sADRPractice

As already stated, Kosovo adopted a Law on Mediation in 2008 which was drafted with

assistancefrominternationaldonororganizations.Whilethereisnodoubtthatcompliancewith

modern mediation practices is important, this does not prevent the inclusion of traditional

aspectsinordertomakemediationmoreeffectiveandacceptableinpractice.Fourissuesmay

behighlightedinthisregardwhichcouldserveasastartingpointforfurtherdiscussion.

First of all, traditional mediation continues to be practiced in parallel to law‐mandated

mediationbutthereis littletonoconnectionbetweenthetwoformsofmediation.Whilelaw‐

mandated mediation is more or less strictly regulated, traditional regulation is left outside.

However, both formsofmediationhave the same social function, i.e. to settledisputesoutof

courts through reconciliation. The question therefore is why there is no comprehensive and

integratedlegalframeworkcoveringbothtypesofmediation.

The second issue relates to the type of mediation regulated by law. The typical situation

regulatedintheLawonMediationismediationbyonemediator.Whilethelawallowsformore

than one mediator when the parties so agree, the rules are designed to suit one‐mediator

processes.Giventhatmediationistraditionallyconductedingroupsofmediatorswithvarying

degreesofparticipation,itmaybeworthconsideringincludingrulesongroupmediation.

The third issue deals with the qualifications needed to become a mediator. Mediation in

accordancewithcodifiedrulesistypicalforlargeandbureaucraticsocietiesanddoesnotreally 110 Criminal Code of the Republic of Kosovo, Article 179, paragraph 1.8. 111 Mustafa, Mentor and Young, Antonia. (2008). “Feud narratives: contemporary deployments of kanun in Shala Valley, northern Albania.” Slovene Anthropological Society. Page, 102. 112 Judgment of the Supreme Court Kosovo, Pml. Nr. 220/2014 dated 19 November 2014.

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suit traditional societies.While professionalism is a key feature ofmediation in bureaucratic

societies,personalreputationandcredibilityaremoreimportantintraditionalsocieties.Kosovo

LawonMediationrequiresamediatorto(a)haveauniversitydiploma,b)tohavesuccessfully

passedthetrainingcourseformediation,c)tohavemediatedundersupervisionofamediator

atleastinsix(6)sessions,d)tonothavebeenconvictedforaknowinglycriminalactwhichis

punishablewithoversix(6)monthsimprisonment,ande)topossesshighmoralqualities.113A

person who fulfills these criteria will be certified by theMediation Committee and then the

Ministry of Justice issues a license to such person in order to practice as a mediator. These

criteriaandthisprocesseliminateallthosepeoplewhohavegoodreputationandcredibilityin

their community, and who are trusted, as these people do not necessarily have a university

degreeortheyarenotnecessarilywillingtoundergothelicensingprocess.However,theabove

appears to be a necessity for “institutionalized”mediation,which also includes disputes that

requireacertainacademicandprofessionalbackgroundtosolvecomplexcivilorcommercial

disputes.Butwillthelawreallypreventthemfromengagingintraditionalmediation?Certainly

not, but itwill direct them intomediation that is socially desired and accepted butwhich is

legallyinagreyarea.

Thefourthissueisrelatedtothemediatorlicensingprocess.Thelicensingprocessmightbea

problembecausethosewhoarelicensedmaynotnecessarilyenjoythetrustoftheparties.Since

trust in the mediators is essential for successful mediation, a license alone without the

necessarytrustisuseless.Theperverseconsequencemaybethatpartieswhowouldotherwise

be willing to engage in mediation will refuse to do so because they have no recourse to a

mediator they trust. The unintended consequence could be that disputes which could be

resolved bymediationwould either not be resolvedwith a fair chance of escalation or they

would end in litigation and further burden the already overloaded judiciary. Commercial

disputes are especially sensitive to trust in mediators given that confidential business

information and relations will be at stake. It is unlikely that businesses would open up to

mediatorswhotheydonottrustevenifsuchmediatorisprofessionallyqualifiedandlicensed.

The law should therefore allow for thepossibility to permit a person to be amediator if the

partiestothedisputeagreetoselectsuchapersonastheirmediator,evenifthatpersonisnot

licensed.Intheend,theresultofmediationisthatthepartiesagreetoanamicablesettlementof

theirdisputewhichreflectstheprincipleofpartyautonomy.Sowhyshouldthisprinciplenot

alsoapplytotheselectionofthemediatorifbothpartieshavetrustinsuchperson.

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

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V. Conclusion

The traditional Albanian rules and dispute resolution mechanisms codified in the Kanun

providearichsourceornormativematerialwhich,ifappliedwisely,couldcomplementmodern

alternativedisputeresolutionmethodsandmakethemmoreeffectiveandsociallyacceptable.It

is amatter‐of‐fact that daily life in Albania andKosovo is still influenced by the rules of the

Kanun,whichmay,dependingonthedifferentjurisprudentiallenses,evenamounttocustomary

lawandnotonlysocialcustom.TheKanun isasocial realitywhetherone likes itornot. It is

thereforenotusefultodemonizeitasarchaic.Itshouldratherbeusedconstructivelytodesign

andimplementalternativedisputesettlementpolicieswhicharesociallyacceptableandinline

with traditionandcustom.TryingtoavoidtheKanunby ignoring,orevendemonizing it,will

just achieve what past regimes have achieved, namely that it will continue its social life in

paralleltotheformallegalsystemandthatitwillresurrectwithfullforcewhentheformallegal

system shows signs of weaknesses. However, complementing the formal legal system with

traditionalpeacefuldisputeresolutionmethodsmaynotonlyachievebettersocialacceptance

oftheformaldisputesettlementmechanisms.ItmayalsohaveacivilizingeffectontheKanun

itselfas its interpretationandapplicationwouldbebettercontrolledandensuredthat it is in

linewiththemodernvaluesthatKosovoaspiresto.

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UDC34(084.47)

ConfidentialityinArbitration:AnEssentialChangingAttribute?

FisnikSalihu*

Abstract

Thispaperwilldiscusstheissueofconfidentialityinarbitration,andcurrenttrendsthatwere

influencedby latestdevelopments in the field.This topichasbeenaheateddebate formany

years.Consideredasaself‐evidentoranimpliedterminarbitration,thelatestdevelopmentin

arbitrationhascontributedtoamorerelativeviewonthisprinciple.Namely,thedecisionofthe

HighCourtofAustralia inEssov.Plowman case isconsidered tobeofgreat influence in the

forthcomingdevelopments.

The confidentialityprinciplehasbeen regardeddifferentlydependingon the jurisdictionand

the institutional arbitration rules of that particular jurisdiction. Some jurisdictions and

institutional rules recognize confidentiality in arbitration. On the other hand, some other

jurisdictionsare reluctantand, therefore,have imposed exceptions to the application of this

principle.

Inthispaper,Iwillrefertoanddiscussanumberofcases,applyingthecomparativemethod.

Thepaperwillfirstgiveageneraloverviewandadefinitionoftheprincipleofconfidentiality.I

will specifically discuss the main Institutional Arbitration Rules endorsing the duty of

confidentialitytoarbitralinstitutions.Iwillthenfocusonsomenationallawsalignedwiththe

mostimportantcourtdecisionsontheissueofconfidentiality.

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I. Introduction

Arbitrationisanimportanttechniqueusednowadaysbypartiestoresolvetheirdisputes.As

analternativedisputeresolutionmechanism,arbitrationisoneofthemostcommonmethod

used worldwide not only by commercial partners but also by states. Compared to court

litigation, arbitration is considered to have several advantages. The main advantages of

arbitration as an out‐of‐court method for resolving disputes are flexibility of the arbitral

proceedings, one instance process and the confidentiality of proceedings. In general, the

latter advantage is one of themain reasonswhy parties opt for arbitration as opposed to

courtlitigationinwhichcasetheproceedingswouldbeopentothepublic.

Theaimofthispaperistodiscussandaddressthemainissuesoftheconfidentialityprinciple

in international commercial arbitration. The principle is one of themost debatable topics

amongthescholarsandlawpractitionersandthesamehasbeenconsideredinperpetuityby

many arbitral tribunals and state courts. While the classical approach perceived

confidentialityasaself‐evidentprincipleinarbitrationproceedings,currentarbitralawards

and state court decisions have put this topic in a controversial level and thus leading to

differentapproaches.Thequestionthatariseshereiswhethertheprincipleofconfidentiality

isofabsolutenature?Towhatextentdoes theruleapply?Whatare theexceptions, if any,

whichprevail in this case?Thedecisionof theAustralian court inEssov.Plowman caseof

1995,whichrejectedtheprincipleofconfidentiality inarbitralproceedings,has influenced

thischangeinperception.

Some legal instruments such as the United Nations Commission on Trade Law rules

(UNCITRAL)1are silent on this issue. On the contrary, some other sources specifically

provide for the obligation of confidentiality, these being London Court of International

Arbitration (LCIA)2and the World Intellectual Property Organization Arbitration Rules

* Fisnik Salihu is an Attorney at law with several years of experience in the banking sector. He is an arbitrator with American Chamber of Commerce in Kosovo and European Handball Federation Court of Arbitration in Vienna, Austria. Fisnik finished his basic legal studies at University of Prishtina in Kosovo, and he has a master’s degree from the University of Groningen in the Netherlands in International Economic and Business Law. 1 UNCITRAL Arbitration Rules (as revised in 2010). See UNCITRAL Arbitration Rules (as revised in 2010) at:http://www.uncitral.org/pdf/english/texts/arbitration/arb-rules-revised/arb-rules-revised-2010-e.pdf (last accessed 23 April 2016). 2 Article 30 of LCIA Arbitration Rules (2014). See LCIA Arbitration Rules at: http://www.lcia.org/Dispute_Resolution_Services/lcia-arbitration-rules-2014.aspx# (last accessed 05 May 2016).

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(WIPO).3Thesamedistinctionisevidentinthenationallawsofdifferentstatesthatgenerally

usearbitration.Forinstance,thelawsinAustraliaandintheUnitedStatesaresilentonthis

issue. The national laws of England and France, however, recognize the duty of

confidentiality. The paper will also touch upon the importance of the confidentiality

agreementsbetweentheparties.

II. Thenotionofconfidentiality

There isnouniformdefinitionof theconfidentialityprinciple inarbitrationproceedings.A

number of authors, however, have tried to define the principle. For instance, the

distinguishedauthorL.AMistelisindefiningtheconfidentialityprinciplehasconcludedthat

“Confidentiality in its purest formmeans that the existence of the arbitration, the subject

matter,theevidence,thedocumentsarepreparedforandexchangeinthearbitrationandthe

arbitrator’sawardandotherdecisionscannotbedivulgedtoanythirdparties”.4Yet,upuntil

now,nodefinitiononconfidentialityhasbeenprovidedbyanystatutoryprovisionsorcase

laws, not to mention that there is an ongoing debate on this issue, which makes it even

hardertogiveanexactdefinition.

Inorder tohaveabetterunderstandingof the topic, itwouldbeuseful todiscuss the link

betweenprivacyandconfidentiality.Differentinternationalarbitrationrulesprovideforthe

hearingsinarbitrationtobeprivate.Forinstance,Article21(3)oftheICCrulesprovidesthat

“TheArbitralTribunalshallbeinfullchargeofthehearings,atwhichallthepartiesshallbe

entitled to be present. Save with the approval of the Arbitral Tribunal and the parties,

persons not involved in the proceedings shall not be admitted”. The same approach is

endorsedbytheUNCITRALrules,respectivelyArticle26(3)whichstatesthat“Hearingsshall

beheldincameraunlessthepartiesagreeotherwise.Thearbitraltribunalmayrequirethe

retirementofanywitnessorwitnesses,includingexpertwitnesses,duringthetestimonyof

suchotherwitnesses,exceptthatawitness,includinganexpertwitness,whoisapartytothe

arbitrationshallnot, inprinciple,beasked to retire”.Similarprovisions couldbe foundon

WIPO5andLCIA6rulesaswell.

Authors have also discussed the privacy of arbitral proceedings. Redfern and Hunter, for

instance,wrote that “International commercial arbitration is not a public proceeding. It is 3 Article 75-75 of World International Arbitration Rules (Effective from June 1, 2014). World International Arbitration Rules (effective from June 1, 2014) at http://www.wipo.int/amc/en/arbitration/rules/ (last accessed 5 May 2016). 4 See L.A Mistelis, “Confidentiality and Third Party Participation” UPS V. Canada and Methanex Corporation v. United States’ (2005) 21. 5 Article 56 of World International Arbitration Rules (effective from June 1, 2014). 6 Article 20 of LCIA rules (2014).

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essentiallyaprivateprocessandthis isseenasaconsiderableadvantageby thosewhodo

notwantdiscussioninanopencourt,withthepossibilityoffurtherpublicationelsewhere,of

thekindof allegationswhichcananddoarise in commercialdisputes–allegationsofbad

faith, of misrepresentation, of technical or managerial incompetence, of lack of adequate

financialresources,orwhateverthecasemaybe”.7

“Privacy”inanarbitrationhearingisthereforeuncontroversial.Ifthehearingistobeheldin

private,itwouldseemtofollowthatthedocumentsdisclosedandtheevidencepresentedat

thehearingshouldalsobetreatedasprivate.Itwouldbeillogicaltoexcludenon‐participants

from an arbitration hearing if they would later on, become familiar with the case and its

outcome through printed articles or authorized websites. However, a broader duty of

confidentialityininternationalarbitrationisnowfarfromclear.8

III. Privacyandconfidentiality

Althoughcloselyrelated,privacyandconfidentialityinarbitrationaretwodifferentconcepts.

As Dr. Julian D.M Lew says “privacy is concerned with the rights of persons other than

arbitrators, parties andwitnesses to attendmeetings andhearings and to knowabout the

arbitration.Confidentialityistheobligationofthearbitratorsandthepartiesnottodivulge

or give out information relating to the contents of the proceedings, documents or the

award”.9Arbitration is a private and confidential procedure between two ormore parties,

which means that only the involved parties in the arbitration proceedings or their

representativesmayattendthearbitrationproceedingsatanytime.Inthiswaythepublicis

excluded. Privacy is now simply taken for granted as one of the ordinary and necessary

incidentsofarbitration,arisingfromthefact that(saveincasesofstatutoryreferences)an

arbitrationproceeding is theoutcomeofaprivateagreementbetweenpartiestowithdraw

their dispute from the courts, and submit it to the decision of a private tribunal. If the

principleofprivacyisbreached,thearbitrationmaybecompromised.10

Although the privacy of proceedings is taken for granted, parties can expect that the

confidentiality of the arbitration proceedings is respected only if it includes all parties

involved in the process and all parties shall respect the duty of confidentiality. Therefore, 7 Redfern, A and Hunter, M, “Law and Practice of International Commercial Arbitration”, 3rd Edn, 1999, Sweet &Maxwell. 8 Redfern & Hunter, “On International Arbitration”, 5 e druk, 2009, page 137. 9 See Expert Report of Dr. Julian DM Lew in Esso/bhp v. Plowman (1995), International Arbitration l, No.8, page. 285. 10 See Baker v Cotterill (1849) 18 LJQB 345; Giacomo Costa Andrea v British Italian Trading Co Ltd [1961] 2 Lloyd’s Rep 394 at p 402.

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confidentiality in arbitration proceedings consists of two phases: confidentiality prior to

awardandconfidentialityaftertheaward.Whetherpartiesareunderthedutytonotdivulge

any informationfromthearbitrationproceedingsduringanyofthesestages, isamatterof

statutoryprovisionsornationallaws.

Confidentialitymaybearesultofprivacy,butthetwonotionsarenotsynonymous.However,

certainisthefactthatconfidentialitycannotexistintheabsenceofprivacy.Thetwoconcepts

are interrelated; confidentiality canbedefinedonly throughprivacy.Onederives from the

other,althoughitishardtotellwhereoneendsandwhereonestarts.11Thatbeingsaid,we

can assume that there is a wide compromise on the issue of privacy in arbitration

proceedings.However,theprincipleofconfidentialityisnotentirelyaffirmedyet.

IV. Newtrendsofconfidentiality

A. Institutionalrules

Theprincipleofconfidentialityissetoutindifferentrulessuchasinstitutionalrules,lawof

theplaceofarbitration,lawgoverningthecontractorthearbitrationagreementitself.Asfar

asthedutyofconfidentialityisconcerned,therearethreegroupsofinstitutionalrules.12The

first groupof rules is silent on thedutyof confidentiality, e.g.UNCITRAL rules.UNCITRAL

rulesprovideonly for thedutyof confidentiality of the award,whichmaybemadepublic

only with the consent of the parties. The International Centre for the Settlement of

Investment Disputes (ICSID) Convention13is also silent on the topic of confidentiality.

However,theConventionprovidesfortheprotectionofprivacysinceanarbitratormustsign

a trust declaration which reads ‘I shall keep confidential all information coming to my

knowledgeasaresultofmyparticipationinthisproceeding,aswellasthecontentsofany

awardmadebytheTribunal’.14

The secondgroupof rules consistsof institutional rules that include limitedprovisionson

confidentialitysuchastheAmericanArbitrationAssociationrules.15

11 See Katalin Ligeti “Confidentiality of Awards in International Commercial Arbitration”, Central European University, 29 March 2010. 12 See Pryles Michael, “The Leading Arbitrators Guide to Arbitration, Confidentiality”, Juris Publishing, page 416. 13 Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, International Centre for Settlement of Investment Disputes, Washington 1965. This convention entered into force on October 14,1966. 14 Article 6 of ICSID Arbitration rules. 15 American Arbitration Association Rules Amended and Effective October 1, 2013.

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Thethirdgroupofrules,suchastheLCIA16rulesandWIPOArbitrationRules,includespecific

provisions on confidentiality. TheWIPO rules provide a broad summary of provisions on

dutyofconfidentiality.Thedutyofconfidentialityinarbitrationproceedingsexistsfromthe

mereexistenceofthearbitrationandshouldbemaintainedaftertheawardaswell.17There

are, however, a few exceptions to this duty, respectively; when parties consent to the

publicityoftheproceedings,whentheissuefallswithinthepublicdomain,orwhenthereisa

needtocomplywithalegalrequirement.18

B. Caselaw

If institutional rules that are applicable to a certain arbitration proceedings are silent to

confidentiality then respective national laws may serve as a source of reference. Many

national courts worldwide, which have considered the duty of confidentiality, have in

principlefollowedtwodifferentapproaches.Asmentionedearlier,nationallawsonthisissue

differsincesomestatesrecognizethedutyofconfidentiality,whilesomeotherdonot.New

Zealand,theUnitedKingdomandFrancebelongtothefirstgroupofstates.

NewZealand isoneof the fewcountries thathavecodified thedutyof confidentiality.The

1996 Arbitration Act of New Zealand19has expressly stipulated the duty of confidentiality

duringthearbitralproceedingsandaftertheaward.20

On the other hand, a number of English courts have recognized an implied obligation of

confidentiality,butdealwithparticularclaimsofconfidentialityonacase‐by‐casebasis.For

instance,inDolling‐Bakerv.Merrettcase,21theEnglishCourtofAppealfoundthatanimplied

obligationofconfidentialityexistedinthearbitrationprocessincludingdocumentsprepared

in contemplation of arbitration or used in the process, transcripts, notes of evidence,

testimonialevidence,andtheaward.22ThecourtruledsimilarlyinHassanehInsurancecoof

Israel & Ors v. Stuart J.Mew case whereby one of the parties discovered and used the

documentsofthearbitration.Thecourtheldthatconfidentialityisimpliedinallarbitration

agreementsandmustbebaseduponcustomaryorbusinessefficacy.23

16 Article 30 of LCIA Arbitration Rules (2014). 17 Articles 75-78 of WIPO Arbitration rules. 18 Article 75 of WIPO Arbitration rules. 19 Arbitration Act of New Zealand of 1996. Date of assent 2 September 1996. 20 See provisions 14I to 14G of Article 14 of the Arbitration act of New Zealand. 21 See Dolling-Baker v Merrett [1991] 2 All ER 890(Eng. C.A. 1991). 22 Ibid, 2 All ER 890. 23 See Hassneh Insurance Co. of Israel v. Mew, 2 Lloyd’s Rep. 243 (Q.B. 1993).

27


Courts in France have recognized a similar implied duty.24In Aitav.Ojjeh case the party

whichrequestedannulmentoftheawardbythecourtwasfoundtohavebreachedtheduty

ofconfidentialityandwasorderedtopayafine.25

AmongthecountriesthatdonotrecognizethedutyofconfidentialityareAustralia,Sweden

and the United States. With regards to Australia, the court judgment in Esso Australia

ResourcesLtdv.TheHonourableSidneyJamesPlowmancase26has created uncertainty as to

whatconstitutestheessentialattributeofarbitration.TheHighCourtofAustraliaconcluded

that whilst the privacy of the hearing should be respected, confidentiality was not an

essentialattributeofaprivatearbitration.27Specifically,thecourtfoundthatarequirement

to conduct the proceedings in camera did not translate into an obligation prohibiting

disclosureofdocumentsandinformationprovidedinandforthepurposeofarbitration.The

courtthenconcludedthatalthoughacertaindegreeofconfidentialitymightariseincertain

situations, it was not absolute. In a particular case, the “public’s legitimate interest in

obtaining information about the affairs of public authorities prevailed”.28This case was

considered as a “u‐turn” of the classical approach on confidentiality in arbitration and

showedthatconfidentialityinarbitrationmaynotbeassured.

AsimilarapproachwasconfirmedbytheSwedishCourtofAppealsinthecaseofA.I.Trade

FinanceInc.v.BulgarianForeignTradeBankLtd.(Bulbank).29TheSwedishCourtofAppeals

held that there isnodutyof confidentiality inarbitration implied in law.Rather, the court

substituted a duty of loyalty and good faith, which would restrict disclosure of certain

informationpertainingtothearbitration,dependingonthecircumstancesofthecase.30

The U.S. Federal Arbitration Act31does not include any provision that imposes duty of

confidentiality.Thisattitudewasconfirmedbyjudicialdecisionsinduetime.Inthefamous

caseofUnitedStatesv.PandableEasternCorporation,32theU.S.CourtofAppealsfortheThird

Circuit ruled explicitly that the confidentiality of the arbitration proceedings will not be

necessarilyallowedifthereisnotanyagreementbetweenthepartiesoranyproceduralrules

24 See “Confidentiality in Arbitration: A Valid Assumption? A Proposed Solution!” by Claude R. Thomson and Annie M. K. Finn, Dispute Resolution Journal vol. 62, no.2 (May July 2007). 25Aita v. Ojjeh Cour d'appel de Paris, Aita v. Ojjeh (18 February 1986), 1986 Revue de l'Arbitrage 4. See Also Claude R. Thomson and Annie M. K. Finn, Dispute Resolution Journal vol. 62, no.2 (May July 2007). 26 See Esso Australia Resources Ltd. & Others v. Plowman, 183 C.L.R. 10, 128 A.L.R. 391 (1995). 27 Ibid, 183 CLR 10. 28 Redfern & Hunter, page 138. 29 A.I. Trade Finance Inc. v. Bulgarian Foreign Trade Bank Ltd. (Bulbank), 14 Mealey‟s Int‟‟l Arbitration. Rep. 4. A1(1999) 23 CA Paris. 30 Ibid, Claude R. Thomson and Annie M. K. Finn. 31 United States Federal Arbitration Act, 9 USC 1-16 (2000). 32 See United States of America v. Pandahle Eastern Corp. 868 F.2d 1363 (3d Cir. 1989).

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arbitration.Inaddition,inLawrenceE.JaffePensionPlanv.HouseholdInternationalInc.case33

UnitedStatesDistrictCourtfortheNorthernDistrictofIllinoisalsocompelledtheproduction

of documents from a former arbitration, notwithstanding an explicit confidentiality

agreement between the parties covering all documents disclosed in connection with the

arbitration.Theabovereferencedcasesclearlyshowthattheprincipleofconfidentialityhas

movedfromtheclassicalapproachtoanewtrend,whichconfirmsthatthereisuncertainty

onitsapplication.

V. Confidentialityoftheaward

Asmentionedinthebeginningofthispaper,confidentialityoftheawardortheoutcomeis

the second phase of the duty of confidentiality. Institutional rules such as ICSID34and

UNCITRAL35provide that there should be a prior consent between the parties in order to

make the award public. In the case of Giovanna a Beccara and others v Argentina36the

tribunalheldinteraliathatunlessthepartiesagreedotherwise,therewasnogeneraldutyof

confidentiality in ICSID arbitration rules.37However, the tribunal is entitled to decide the

applicabilityoftheprincipleofconfidentialityonacase‐by‐casebasis.38

Ithasalwaysbeenrecognized,however,thattherearecircumstanceswherebyanawardmay

needtobemadepublic.Oneexamplewouldbethepublicationoftheawardforthepurpose

ofenforcementbyanationalcourt.39TheLCIArules40includesimilarprovisionsonthistopic.

Namely, according to these provisions prior consent between the parties for any possible

disclosureoftheawardisrequired.Inaddition,WIPOrules41clearlystatethatdisclosureof

the award is available only when the parties consent, or when it falls within the public

domainasaresultofanactionbeforethecourtorwhenprotectingthirdparty’slegalrights.

With regards to case law, judicial decisions in France and England have shown that the

confidentiality of the award is respected. The only distinction between these two

33 See Lawrence E. Jaffe Pension Plan, et al. v. Household International, Inc., et al. 02-CV-5893-Final Judgment And Order Of Dismissal With Prejudice As To Arthur Andersen LLP 1 / 9. 34 Article 48 of ICSID Arbitration Rules. 35 Article 34, para.5 of UNCITRAL Arbitration Rules (2013). 36 ICSID Case No ARB/07/05. 37 Ibid, para. 75. 38 Ibid, para. 91. 39 Redfern & Hunter, page 140 40 Article 30, para. 30.1. 41 Article 77 of WIPO Arbitration Rules.

29


jurisdictions is that while the confidential duty is unqualified in the former, there are

exceptionalcircumstancesinwhichdisclosuremaybeorderedinthelatter.42

Potter LJ inAlishippingCorporationv.ShipyardTrogircase43mentioned four exceptions to

thedutyofconfidentiality;first,whenapartyconsenttothedisclosure;second,ifthecourt

makesanorderorgrants leaveof thedisclosureofsuchdocuments; third, if is reasonably

necessarytoprotectthelegitimateinterestofthepartytothearbitration;fourth,wherethe

interest of justice requiresdisclosure.44Similarly, in theHassnehInsuranceCo.ofIsraeland

othersvMewcase,45thejudgeheldthattheawardwas‘potentiallyapublicdocumentforthe

purposesofsupervisionbythecourtsorenforcementinthem’46andthereforedecidedthat

the award may be disclosed in circumstances where the disclosure was reasonably and

necessarytoestablishorprotectaparty’slegalrightsvis‐à‐visathirdparty.47Anothercase

insupportofthisviewisnotedintheICSIDrulesappliedinAmcov.TheRepublicofIndonesia

case48where thecourtheld interaliathat: as to the ‘spiritof confidentiality’of thearbitral

procedure,itisrighttosaythattheConventionandtherulesdonotpreventthepartiesfrom

revealingthecase.49

It is understandable that at least the unsatisfied party will not consent easily to the

publication of such an awardwhichmay be critical for that party. The Swedish Supreme

Court award in the caseofBulgarianForeignTradeBank(Bulbank)v.A.ITradeFinanceInc.

(AIT)mayserveasanillustration.

Representatives of AIT provided the decision to the journal Maeley’s International

Arbitration Report for publication. After noticing the publication, Bulbank revoked the

arbitrationagreement claiming fundamental breachof the contract and requested that the

arbitration panel should declare the arbitration agreement invalid. Since the panel was

hesitanttodeclarethearbitrationagreementinvalid,Bulbankcontestedthefinalaward.The

Swedish Appellate Court ruled against the proposal that the publication of the award

42 See Emem Uduak Udobong, “Confidentiality in Arbitration: How valid is this Assumption?”, University of Dundee, Scotland. 43 See Ali Shipping Corp v Shipyard Trogir [1998] 2 All ER 136, [1999] 1 WLR 314, [1998] 1 Lloyd’s Rep 711. 44 Ibid, para. 36. 45 See Hassneh Insurance Co of Israel & Ors v Steuart J Mew [1993] 2 Lloyd’s Rep 243. 46 Ibid, pages 245-248. 47 Redfern, A and Hunter, M, Law and Practice of International Commercial Arbitration, 3rd Edn, 1999, Sweet &Maxwell. 48 Amco Asia Corporation and others v. Republic of Indonesia (ICSID Case No. ARB/81/1), Decision on Annulment , May 16, 1986, ICSID Reports, Vol. 1, 1193, pp. 515-16. 49 Redfern & Hunter, page 142.

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constituted a fundamental breach and did not support the implied concept of

confidentiality.50

In theEuropeancontext it is important tomentionArticle6(1)ofEuropeanConventionof

HumanRights51whichprovides that “Judgmentsshallbepronouncedpubliclyby thepress

andpublicmaybeexcludedfromallorpartofthetrialintheinterestofmorals,publicorder

ornationalsecurityinademocraticsociety,wheretheinterestsofjuvenilesortheprotection

oftheprivatelifeofthepartiessorequire,ortheextentstrictlynecessaryintheopinionof

thecourtinspecialcircumstanceswherepublicitywouldprejudicetheinterestsof justice”.

Althoughthesaidprovisionprovidesforanopenandtransparentoutcomeofthetrials,the

sameprovisionwasaffirmedasnotapplicableinarbitration.InSuovaniemiv.Finlandcase52

the ECHRheld thatwhen parties submit their disputes to arbitration it is considered that

theyhavewaivedthisprovisionfrombeingappliedandagreenottorelyonthisprovision.53

It is evident that parties cannot always expect that the award or the outcome of the

arbitrationwillbeconfidential,astheywouldprefer.Forexample,partiesinarbitrationhave

anoutmostinteresttokeeptheirtradesecretsprotectedasmuchaspossibleduetothefact

that disclosure would cause a significant harm to their business. The above referenced

judicialdecisionshavealreadymadeitclearthattheremaybeafewexemptionswhichwill

prevailtothedutyofconfidentialityincaseofpublishingtheaward.AccordingtoThomson

andKinn,“aconcurrentandsometimesoverridingpublicinteresthastoberecognized.Itis

appropriatetoliftthecloakofconfidentialityinanumberofcircumstances”.Theymention

ninesituationsinwhichthepublicinterestoverridesdisclosure.54

First,thesubjectmatterortheexistenceofthedisputeand/oritsoutcomemustbepublicly

reportedbecauseitmaybeamaterialtothefinancialconditionofapubliccompany.Second,

disclosureofthedisputeandthesurroundingcircumstancesoroutcomemayberequiredby

shareholders, partners, creditors or otherswho have a legitimate business interest in the

affairs of one of the parties to the dispute. Third, one of the partiesmay conclude that its

commercial interestandthe interestsofshareholdersandpotentialshareholderswouldbe

enhancedbypubliclydisclosinginformationaboutthedisputeandanyresultingawardand

that,accordingly,ithasadutytomakesuchadisclosure.Fourth,oneorbothpartiesmaybe

50 See Katalin Ligeti ‘Confidentiality of Awards in International Commercial Arbitration’, Central European University, 29 March 2010. 51 European Convention of Human Rights as amended by Protocols Nos. 11 and 14 supplemented by Protocols

Nos. 1, 4, 6, 7, 12 and 13. The European Convention on Human Rights (ECHR) was drafted in 1950 and entered

into force on 3 September 1953. 52 Suovaniemi v. Finland Case no. 31737/96, February 23, 1999 European Court of Human Rights. 53 See more at: http://hudoc.echr.coe.int/eng?i=001-4942. 54 Ibid, Claude R. Thomson and Annie M. K. Finn.

31


subjecttoobligations(e.g.,asafiduciary)todiscloseinformationinspiteofanyexpressor

implied term to the contrary in the arbitration agreement. Fifth, itmaynot bepossible or

propertoshieldthecompany’sauditorsandoutsidevisitorsfromthefactandnatureofthe

dispute,thesurroundingcircumstances,andtheultimateaward,whetherconfidentialornot.

Sixth, the partiesmay be in duty to disclose information to insurers. Seventh, the parties

mustbefreetopresenttheawardandrelevantsurroundingcircumstancesinapubliccourt

toeitherenforceorappealtheaward.Eighth,thepartiesmaybeobligedtodiscloseevidence

fromthearbitration inanotherproceeding.Ninth,evidenceof illegalcriminalconduct that

should be reported to public authorities may be uncovered during the course of the

proceedings. In addition to disclosure of awards when required by law, another type of

disclosure takes place when an arbitral institution, such as the ICC publishes ‘edited and

redacted’copiesofarbitralawards,asaguideforthebenefitoflawyersandarbitrators.55

Considering the above exceptions, onemay legitimately question confidentialitywhen the

publicinterestis inconflictwiththedutyofconfidentiality.Beforethecaseissubmittedto

arbitration, parties expect that confidentialitywill be the starting point of the arbitration.

However,thisisnotentirelycorrectsincepracticeshowsthatsometimespublicinterestwill

prevailand,therefore,thedutyofconfidentialitywillnotbeabsolutebutlimited,judgedona

case‐by‐casebasis.

In arbitration related literature, there are pro and contra arguments with regards to the

confidentialityprinciple.Argumentsinfavourofconfidentialityusuallymentionthefactthat

thedutyofconfidentialityiswhatdistinguishesthisdisputeresolutionmechanismasunique.

On the other side arguments against the duty of confidentiality comprise of the fact that

application of confidentiality in arbitration may encounter and produce inconsistent

decisions.Therefore,non‐disclosureof informationandclosedproceedingswillnothelp in

the development of arbitration practice and training of arbitrators. More transparency is

needed and this may be possible only through open processes which will benefit public

interest.

VI. Conclusion

Confidentiality in arbitration remains one of the advantages of this alternative dispute

resolutionmechanismandthemainreasonwhypartieschoosetoarbitrate.Thedebateover

confidentiality developed during the last decades and there is no consensus in the

55 Redfern & Hunter, page 140.

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international arbitration community. This tendency was challenged and influenced by

judicial decisions which did not consider confidentiality as an essential attribute of

arbitration. Even though, the privacy is widely accepted as an attribute of arbitration,

confidentialityisstillpartofacontroversialdebate.TheEssoAustraliaResourcesLtd.et.al.v.

Plowman case caused a serious oscillation in international arbitration community by not

endorsingtheprincipleofconfidentialityor,endorsingit,onlyundercertaincircumstances.

Institutional arbitration rules are different with regards to this topic. Some institutional

arbitration rules provide specific provisions on confidentiality (e.g. LSIA, WIPO), other

institutional arbitration rules provide limited provisions on confidentiality (AAA), and the

thirdgroupofinstitutionalarbitrationrulesissilentonthisissue(e.g.UNCITRAL,ICC).Ata

nationallevel,therearenationallawprovisionsthatrecognizeconfidentialityexplicitly(e.g.

NewZealand),orthroughcourtdecisions(e.g.UnitedKingdom).Ontheotherside,thereare

national laws thatdonot recognize thisprinciple (e.g.Australia, theUnitedStates).Hence,

thereare legal inconsistenciesacross jurisdictions,where theprincipleofconfidentiality is

treateddifferently.

Consequently, parties in arbitration should be aware of the fact that existence of the

arbitration agreement itself does not automatically provide for the information and the

award tobekept confidential. In this respectparties shoulddraft confidential clauses that

wouldexplicitlyspecifytheconfidentialitytermsintheiragreementoragreeforinstitutional

arbitrationrulesthatsupportconfidentiality.

Confidentiality and public interest may also conflict with each other. In this case, which

principlewould prevailwill depend on the law governing the contract or national court’s

rulings.Thetendencyofconfidentialityshowsthatintherecentdecadestherehavebeena

number of decisions that were justified in favour of the public interest. In EssoAustralia

ResourcesLtd.et.al.v.Plowmancase the court reasoned the public’s legitimate interest in

obtaininginformationabouttheaffairsofpublicauthoritiesshouldprevailovertheprinciple

ofconfidentiality.

Considering the above, the contractual parties are advised to draft explicit provisions on

confidentiality before entering into legal obligations. If parties want to be assured that

arbitration proceedings and the award shall be confidential, then they have to include

confidentiality clauses in their contract. These clauseswill apply if the respective national

lawdoesnotprovideanyconfidentialityprovisions.This isparticularly importantafterthe

decision inEssov.Plowmanm,where in absence of an explicit provision on confidentiality,

33


there is always a possibility that a given court will reject confidentiality as an essential

conceptinarbitrationproceedings.

Lawyers will not be certain that the arbitration proceedings and the outcome of the

arbitrationwillbekeptconfidentialastheymayexpect.However,thedutyofconfidentiality

canbe imposedbydraftingaconfidentialclauseaspartof theagreementorbyrelyingon

institutionalprovisionsruleswhichexpresslystipulatetheapplicabilityofconfidentiality.

Asa finalpoint,confidentiality inarbitrationremainsanopen issueandnothingshouldbe

takenforgranted.Balancingbetweentheprivateandpublicinterestseemtobeataskforthe

arbitrationcommunityinthefuture,whichisnotaneasytask.However,theapprovalofthis

standarddoesnotnecessarilymeanthatallunresolvedissuesregardingtheconfidentialityin

arbitrationwillhavetheappropriatesolution.

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UDC343.3

CaseCommentary:NationalIranianOilCompanyvCrescentPetroleumCompanyInternationalLimitedandCrescentGasCorporationLtd[2016]EWHC510(Comm)

KlentianaMahmutaj*

Key words: Bribery and Corruption, International Arbitration, Public Policy,

EnforcementofArbitralAward,NationalLaw.

Introduction

ThiscasewasconsideredbytheHighCourtofJusticeofEnglandandWales,whichfollowinga

three‐dayhearing,gavejudgmenton3March2016.

The Claimant (National Iranian Oil Company, NIOC) and the First Defendant (“Crescent

Petroleum”) entered into a long‐term gas supply and purchase contract (the “GSPC”) on 25

April2001.In2003CrescentPetroleumwishedtoassigntheGSPCtotheSecondDefendant,its

subsidiary(“CrescentGas”).

In July2009theFirstandSecondDefendantscommencedarbitrationbasedonanarbitration

clause included in theContract claiming thatNIOCwas in breachof theGSPCbecause it had

failedtodeliveranygas.NIOCchallengedthejurisdictionoftheTribunal(DrGavanGriffithsQC

(presiding),DrKamalHossainandDrAssadollahNoori)overtheclaimsbybothDefendantson

(amongstothers) thegroundthat theGSPCwasprocuredbycorruption.1TheTribunal issued

an award on jurisdiction (the “Award”) which dismissed NIOC's jurisdictional challenge and

declaredthattheGSPCwasvalidandbindingontheparties.

NIOCbroughtapplicationsunderss.67and68oftheUnitedKingdomArbitrationAct1996in

theEnglishHighCourttoappealand/orsetasidetheawardonvariousgrounds,includingthat

* Klentiana Mahmutaj is a Barrister practicing in London, UK. Klentiana lectures and publishes regularly on

Public International Law, on legal matters pertaining to state immunity, extraterritorial application of the

European Convention of Human Rights and corruption in international arbitration. 1 The Claimant also challenged the jurisdiction of the arbitrators on the basis that Crescent Gas was not a proper

party (see National Iranian Oil Company v Crescent Petroleum Company International Limited and Crescent

Gas Corporation Ltd [2016] EWHC 510 (Comm) (‘Crescent’) at [3]) to the arbitration on the basis that the

assignment was not valid. However, this aspect of the case together with an argument on separability of the

arbitration clause and the applicable law at [7] are not dealt with by this article.

35


theGSPChadbeensecuredthroughcorruption.TheCourtrejectedthisandtheothergrounds,

andrefusedtosetasidethetribunal’saward.ThisarticleexaminestheCourt’sreasonsfordoing

soongroundsofpublicpolicyandcorruptionallegations.

Thejudgment

NIOCchallengedtheawardpursuanttos.68oftheArbitrationAct1996onthebasisthatthe

award or the way in which it was procured, was contrary to public policy. The Defendants

appliedtostrikeoutthatclaimonthebasisthatithadnoreasonableprospectofsuccess.

Englishlawandenforcementofanaward

Section68oftheArbitrationAct1996states:

(1)Apartytoarbitralproceedingsmay(uponnoticetotheotherpartiesandtothetribunal)apply

tothecourtchallenginganawardintheproceedingsonthegroundofseriousirregularityaffecting

thetribunal,theproceedingsortheaward.

…

(2)Seriousirregularitymeansanirregularityofoneormoreofthefollowingkindswhichthecourt

considershascausedorwillcausesubstantialinjusticetotheapplicant—

…

(g)the award being obtained by fraud or the award or theway inwhich itwas procured being

contrarytopublicpolicy;

TheArbitralTribunalandtheevidentialfindingsoncorruption

TheissueofwhethertheGSPCwasprocuredbycorruptionwasconsideredbytheTribunalina

30‐dayhearing.Theyexamineddocumentswhichapparentlyshowedanagreementforcorrupt

payments between a Mr Yazdi and a Mr Hashemi. The payments were apparently aimed at

influencing the outcome of the proposed contract negotiations between NIOC and Crescent

Petroleum. The Award set out the explanation advanced by the Defendants including the

assertionthat‘nobodyatCrescent’treated‘theproposedagreement’(bywhichtheyappearto

have meant an agreement for payments between Mr Yazdi and Mr Hashemi) seriously.

Accordingtotheevidence,MrYazdihadalsobeengivenashortpresentationbyCliffordChance

oncorruptionasawaytolethimdownpolitelywithoutcausingoffence.2

However,theTribunalfoundontheevidencethatCrescenthadgivenshiftingexplanationsand

thatithadbeen‘lessthanfrankinitsexplanationthattheDraftAgreementsweremerelya“ploy”

2 Crescent at [34].

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to“test”MrYazdi’3However,theTribunalconcludedthattheywerenotsatisfiedonthebalance

ofprobabilitiesthattheGSPCwasobtainedthroughcorruption.TheTribunalwasunabletofind

thatMrHashemihadaidedCrescentinobtainingtheNIOCBoard’sapprovalfortheGSPC.4Inits

assessment of the facts, the Tribunal found that ‘noallegedcorruptcontractualarrangements

betweenCrescentandMrHashemiwereultimatelyexecuted’ and that therewasnoevidence ‘to

surmise theeffect that theagreement topay confidential third‐party feesmayhavehadon the

GSPC’5.

TheTribunal,however,recognisedthatcorruptionwasdifficult toproveandthatoftendirect

evidence would not be available. Instead inferences could be drawn from circumstantial

evidence.6In this context, they found that therewas no indication that ‘themembersofNIOC

Boardwereeithercorruptor influencedbyanycorruptarrangements’ and no causal link had

been established between any corrupt arrangements and the final terms of the GSPC which

wereapprovedbytheNIOCBoard7.Whilsttherehadbeendiscussionsaboutcorruptpayments,

theyhadnotbeenacteduponandtheTribunalwassatisfiedthatthecorruptplanhadnotany

effecton theoutcome.Therefore theTribunal concluded that theGSPCwasa lawful contract

whichhadnotbeenprocuredbycorruption.ItwentontofindthattheClaimantwasinbreach

oftheGSPCbyfailingtodelivergas.

RevivalofthecorruptionargumentbeforetheEnglishcourt

NIOC did not adduce any new evidence to demonstrate that the GSPC had been procured

through corruption. Instead, they asserted that the contract was “tainted” by the previous

dealingsbetweenMrYazdiandMrHashemiand thiswasof sufficientconcern that theCourt

shouldsetasidetheaward.Whilst thiswasanovelargumentofsome interest, itdidnot find

favourasitlackedsupportinEnglishlaw.

InitsanalysistheCourtconsideredfirstwhetherGSPCwasitselfanillegalcontractand,second,

if not, whether it was procured through bribery. In this context, the court clarified the

3 Crescent at [35]. 4 Ibid. 5 Crescent at [36]. 6 Circumstantial evidence is a fact that can be used to infer another fact. 7 Crescent at [36].

37


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

EnglishLaw8.

i) Illegalcontracts

First the Court dealt with illegal contracts and it stated that such contracts, for example a

contracttopayabribe,wouldnotbeenforceableintheEnglishcourts,irrespectiveofwhether

theywouldbeillegalornotundertherelevantforeignlaw.

TheCourt reviewed the relevant case lawand found that a contract to pay abribewould be

unenforceable9andthatanactiontorecoveranamountpaidwhichwasitselfabribewouldbe

barredbecausethecourtwillnotassistawrongdoerwhoreliesonhisownillegalconduct in

order to recover (exturpicausanonorituractio).10In theEnglishHighCourt caseofNayyarv

DentonWildeSapte11the bribe had not occurred but was attempted. The Court held that an

attempted bribe was an ‘actwhich ismore thanpreparatorywhich isdonewith the intent to

bribe’,buttheCourtnotedthatthiswasstillinthecontextofafindingthat‘proofofapayment

whichisintendedtobeacivillawbribeissufficienttoengagetheexturpicausaprinciple.Itisnot

necessarytoestablishtheillegalpurposeasbeingeffectivelycarriedout.’ The decisive factor in

that casewas that the actionwas for recovery of the corrupt payment, so the exturpicausa

principle applied. This wasmaterially different from the potentially corrupt activities in the

instantcase.TheDefendantswerenotseekingtorecoverabribetheyhadpaidandtheTribunal

foundthatthepotentiallycorruptactivitieshad,inanyevent,cometonothing.Theactionhere

was to enforce a contract ‘whichwasunaffectedbyanysuchacts,eveniftheywerepreparatory

acts’(emphasisadded).12

TheCourtthereforeheldthattheGSPCwasnot(andwasnotsuggestedbyNIOCtobe)anillegal

contractandthereforewasnotautomaticallyunenforceableintheEnglishcourts.13

8 Under English law the question of whether to enforce an award on public policy grounds engages public policy

considerations about the enforceability of the underlying contract. 9 Lemenda Trading Co. Ltd v. African Middle East Petroleum Ltd [1986] QB 448. 10 Nayyar v. Denton Wilde Sapte [2010] Lloyd's Law Rep (Prof Neg) 139. For an interesting and more general discussion of the illegality principle in English law see Bilta (UK) Ltd (In Liquidation) v Nazir[2015] UKSC 23; [2016] A.C. 1. 11 Ibid. 12 Crescent at [42]. 13 Crescent at [49(1)].

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ii) Legalcontractsprocuredbybribes

TheCourt then consideredwhether an award regarding a legal contract procuredbybribery

was automatically unenforceable and, if not, in what circumstances a court should refuse to

enforceit.

Itexplainedthatadistinctionexistsbetweenacontractwhichisitselfillegal(e.g.acontractto

payabribe) and thereforeunenforceableonpublicpolicy groundsanda contractwhichwas

legal butwas procured by bribery. The latterwas not unenforceable as long as the innocent

partyhadhadarighttoavoidthecontract.

Insupport for thisproposition, theCourtreiterated14theapproach inHoneywellInternational

MiddleEastLtdv.MeydanGroupLLC.15Inthatcase,RamseyJhadacceptedsubmissionsbythe

partyseekingtoenforcetheawardtotheeffectthat:16

‘evenifMeydan'sallegationsofbriberywereestablished,theywouldnot,asamatterofEnglishlaw,

resultinenforcementbeingcontrarytopublicpolicy.ItsubmitsthereisnoprincipleofEnglishlawto

theeffectthatitiscontrarytoEnglishpublicpolicytoenforceacontractwhichhasbeenprocuredby

bribery. It submits that the distinctionmust be drawn between the enforcement of contracts to

commitfraudorbriberyandcontractswhichareprocuredbybribery.Itsaysthatwhilstcontractsto

commitbriberyare contrary topublicpolicyandwillnotbe enforced, contractswhichhavebeen

procuredbybriberywouldberenderedvoidablebyEnglishlaw,providedthatcounter‐restitutioncan

bemade.…thus,asamatterofEnglishlawpublicpolicy,thecourtswillenforceacontractprocured

bybriberysubjecttotheinnocentpartyhaving,intheappropriatecircumstances,arighttoavoidthe

contract.… [Whilst bribery is clearly contrary to English public policy and contracts to bribe are

unenforceable,asamatterofEnglishpublicpolicy,contractswhichhadbeenprocuredbybribesare

notunenforceable’(emphasisadded).

The Court stated that the lack of fresh evidence beyond that heard during the arbitral

proceedings was a significant factor behind Ramsey J’s decision. Similarly, NIOC had not

adducedanyfreshevidenceinsupportoftheallegationsofbriberyandcorruption.TheCourt

accepted the Tribunal’s findings of fact that the GSPC had not been procured by corruption.

Furthermore, given that there was no fresh evidence to suggest otherwise or any other

exceptional circumstances, theCourtwouldnot interferewith thearbitralaward.17TheCourt

concluded:18

14 Crescent at [43]. 15 Honeywell International Middle East Ltd v. Meydan Group LLC [2014] 2 Lloyd's Law Rep 133. 16 Ibid. at [178]. 17 Crescent at [49]. 18 Crescent at [49(2)].

39


‘ThereisnoEnglishpublicpolicyrequiringacourttorefusetoenforceacontractprocuredbybribery.

Acourtmightdecide toenforce thecontractat the instanceofoneof theparties. It isnot thatthe

contractisunenforceablebyreasonofpublicpolicy,butthatthepublicpolicyimpactwouldnotrelate

tothecontractbuttotheconductofonepartyortheother.’

iii) Contracts“tainted”bycorruption

NIOC presented an interesting argument, which did not fall squarely in either of the two

categoriesabove.It invitedthecourttorefusetoenforceanawardonthebasisthattheGSPC

was ‘tainted’bycorruption,inthesensethatithadbeenprecededby,eventhoughunaffected

by, a failedattempt tobribe. In those circumstances,NIOCargued that the contractoroneof

moreofthepartiestoithadbeentaintedbytheprecedingcorruptivebehaviourandinthelight

of recent international Conventions to outlaw bribery, and the increase of legislation to

criminaliseit,theCourtshouldrefusetoenforceit.

The Court found this argument ‘attractive’ but ultimately unarguable. It concluded that the

introductionoftheconceptoftaintingofanotherwiselegalcontractwouldcreateuncertainty,

andinanyeventwhollyunderminedpartyautonomy.19TheCourtcommented:

‘There iscertainlynoEnglishpublicpolicytorefusetoenforceacontractwhichhasbeenpreceded,

andisunaffected,byafailedattempttobribe,onthebasisthatsuchcontract,oroneormoreofthe

partiesto it,haveallegedlybeentaintedbytheprecedentconduct.…Theremaybemanycontracts

whichhavebeenprecededbyundesirableconductononesideorotherorboth–lies,fraud,threats

andworse–buttheCourtwouldnotinterferewithacontractenteredintobysuchparties,evenifone

ormoreofthosepartieshadcommittedcriminalactsforwhichtheycouldbeprosecuted,unlessthe

contract itselfwas illegalandunenforceable,oroneormoreoftheactsofsuchparties inducedthe

contract,inwhichcaseitmightbevoidableattheinstanceofaninnocentpartysoinduced’.20

Discussion

This case offers a valuable contribution to the jurisprudence on the role of corruption in the

enforcementofawardsandcontractsininternationalarbitration.Whilsttherehasbeenarecent

trend in internationalarbitration for losingparties to invoketheiropponents’corruptionasa

basis for resisting enforcement of the award, it has proved difficult to succeed. As far as the

English courts are concerned, this case is a useful illustration of that failing trend and also

19 Crescent at [49(3)]. 20 Crescent at [49(3)].

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provides a clear explanation ofwhy it is difficult to invoke corruption as a valid basis to set

asideanaward.

WhilstEnglishcourtsreadilyrefusetoenforceawardsbasedoncontractswhichareillegalper

se, including those providing for bribery and corruption, their approach to enforcement of

awardswhereotherwiselawfulcontractswereobtainedbycorruptionismorenuanced.Inthis

scenario,thecourtsarelesslikelytointerferewiththeenforcementprocessifthecontractwas

voidableandtherelevantpartieshavehadtheopportunitytoavoidit.21However,itseemsthat

if the parties have not had the opportunity to avoid the contract, therewould still be public

policygroundstorefusetoenforceanotherwiselegalcontract.

In this case, theEnglishCommercial Court had little difficulty indismissingNIOC’s argument

that contracts should be unenforceable even though they were neither illegal nor procured

throughcorruptionbutwheretheywereprecededbycorruptbehaviourwhichhas‘tainted’the

contractoranyofthepartiestoit.TheCourt’sanalysisistechnicallycorrecttotheextentthat

suchcorruptbehaviourisirrelevantbecauseitdoesnotaffectthecontentofthecontractorthe

meansbywhichthecontractwassecured. Italsoreflects thecurrentapproachof theEnglish

courtstokeepinterferencewitharbitralawardstoaminimum,andwhilstupholdingtheruleof

law,theyaimtoprotectpartyautonomyasoneoftheunderpinningprinciplesofarbitration.

However,itcouldbearguedthatthisapproachisalsoatoddswiththeincreasingfightagainst

corruption, which is illustrated by both domestic and international legal instruments,22and

relatedpoliticalinitiatives.23Afterall,publicpolicyshouldbeadynamicconceptwhichreflects

changes in society and its core values rather than a stagnant one that is artificially detached

fromthosechanges.24Thereforeitisarguablethatwhatconstitutesanactwhichiscontraryto

publicpolicyshouldberevisitedinordertoreflectsocietalchangestowardsamoreproactive

fight of corruption. But whilst there is scope for legislative or judicial change, there is one

obvious problem with extending the categories of unenforceable contracts surrounded by

21 For a discussion on voidability of contracts in English law see the expert opinion of Lord Mustill submitted by Kenya in World Duty Free Co. Ltd. v Republic of Kenya ICSID CASE NO. ARB/00/7) at para. 164. In that case, corruption was raised during the arbitral proceedings by the respondent who argued that a claim based on illegality must be dismissed. 22 See for example the UK Bribery Act 2010, the UN Convention Against Corruption (2005), the OECD Anti-Bribery Convention (1999) andthe EU Convention Against Corruption Involving Officials (2005). 23 See for example recent anti-corruption summit held in the UK: http://www.telegraph.co.uk/news/2016/05/12/explained-david-camerons-global-anti-corruption-summit/. 24 See for example, the Singapore Court of Appeal’s decision in AJU v AJT[2011] SGCA 41 in which it reiterated that public policy was a ground on which to set aside and refuse enforcement as per Article 34(2)(b)(ii) the UNCITRAL Model Law on International Commercial Arbitration as set out in the First Schedule to Singapore’s International Arbitration Act but that public policy meant international public policy and it must involve either exceptional circumstances or a violation of the “most basic notions of morality and justice”.See also Hwang and Lim, ‘Corruption in Arbitration: Law and Reality’(2012) 8 Asian International Arbitration Journal, Issue 1, pp. 1–119, para. 133.

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corruption:therewouldbesubstantialdifficultiesindeterminingwhenacontractissufficiently

‘tainted’ by corruption and that itself is unlikely to be conducive to legal certainty.

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UDC347.7

IntellectualPropertyCasesinArbitration

ArbereshaZogjani*andFlorijeManajZogaj**

Abstract

Creating an intellectual property product takes time, efforts and commitment.Why such effort

trying to protect it from being infringedwhen knocking on the right door gives you a quicker

resolution?!IntellectualpropertyandarbitrationarebothnewconceptsinKosovointermsoftheir

implementation.Nevertheless,thesituationisnotthesameasfarasenactmentofthelegislationis

concerned.CombinationofIPandarbitrationoffersatotalnewapproachforthepublic,namely,

fortheauthorsofdifferentworks.Beinganauthor inanenvironmentwhereauthors’rightsare

considered luxury, one cannotafford tohireaprivate lawyer toprotect its rightsall the time;

neitherdotheyhavetimetospendincourt.Therefore,theArbitralTribunalmayeasilybecomethe

“goodpart”ofthedispute.Achievingthisresultconstitutesthepurposeofourpaper.

Throughananalyticalmodel,weaimtoofferan“e‐onestopshop”forauthors,providingthemthe

needed informationaboutarbitrationand itsadvantagescompared tocourt litigation, sincewe

arestronglyconvincedthatifarbitrationbecomesafamiliarwordforIPowners,itwilleventually

becomeapracticethattheywillemployinthefuture.TyinguparbitrationandIPallowsustogain

awin‐winresult,asnotonlytheawarenessonarbitration,butalsothe importanceofenforcing

authors’rights,willberaised.

Inthispaper,authorsencloseinformationonintellectualproperty,alternativedisputeresolutions,

more specifically arbitration, the comparison between arbitration and litigation, legal and

institutionalinfrastructureaswellasanalyzecases.

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Whatisintellectualproperty?

The notion of Intellectual Property Rights (IP rights or IPR) entails the legal rights resulting

from an intellectual activity in the industrial, scientific, literary or artistic fields. The main

purposeofIPistoprotecttheauthorsandotherproducersofintellectualmaterialsandservices,

therebyprovidingthemtherightstocontroltheuseofworks,namely,theirproductswithina

specifiedtimeperiod.1

IPprotectsawiderangeofcreationsof themind thathavean identifiableeconomicvalue. In

general,IPrightsaredividedintotwomaincategories:

1) Copyright(whichprotectsoriginalcreationsembodiedinwhateverformofexpression

such as literary works, musical works, artistic works, photographic works, motion

pictureworksandthelike)2,and

2) Industrial Property (which is subsequently divided into patents, trademarks, trade

secretsandindustrialdesigns).3

This paperwill cover only the first category of IP rights, respectively copyright and how the

ownersofcopyrightedworkscangetuseofarbitrationinresolvingtheirdisputes.Accordingto

theKosovoLawonCopyrightandRelatedRights4,copyrightbelongstotheauthorforher/his

original work in the field of literature, science and art. That is, only the original works of

authorship are protected by copyright. Whilst, the following works, although original, are

expresslyexcludedfromprotection:ideas,guidelines,official laws,bylaws,regulations,official

materialsandpublicationsofparliamentarybodies,officialtranslationsofofficialmaterials,and

* Arberesha Zogjani holds an LL.M Degree in Contracts and Commercial Law from the University of Pristina –

the USAID long distance program. Her short version of the master thesis, titled “Protection of the musical work

as copyright: Kosovo Case” is currently published at the European Union Foreign Affairs Journal, while a more

comprehensive paper of the same topic remains published at Social Scientific Research Network. Her other

related papers were published and presented in various other occasions, including the 3rd International Scientific

Conference “European Integration process of Western Balkan countries”.

** Florije Manaj Zogaj holds a LL.M Degree on International and European Law from Riga Graduate School of

Law in Latvia. Florije is a licensed Trade Marks Agent in Kosovo. Her other research work is to court

management, as she is co-drafter of the Manual on Court Management and Standard Operation Procedure, as

part of the USAID project and research project “Finding our Voices”, regarding the involvement of youth and

female in the Kosovo Justice System. 1 World Intellectual Property Organization, Intellectual Property, Publication No. 895 (E), pages 9-10.

2 Article 1, Law No. 04/L-065 on Copyright and Related Rights 3 World Intellectual Property Organization, What is Intellectual Property, Publication No.450 (E), 2010, page 2. 4 Law No. 04/L-065 on Copyright and Related Rights

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administrative and judicial acts, official materials published for public information, folklore

performancesanddailynews5.

Copyright

The Law on Copyright and other Related Rights provideswhat type ofwork is protected by

copyright.Namely, itspecifies thatcopyrightedworksareoriginalexpressionsrepresented in

anyform,inparticular:

Verbalworks(speeches,lectures,narrativesandsimilar);

Literaryworks (textbooks, brochures, daily newspaper and other texts of the literary

domain,scientificandprofessionalliteratureaswellascomputerprograms);

Musical works with or without text, and regardless if they are presented through

musicalnotesorinanyotherform;

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

drama;

Choreographicandpantomimeworks;

Filmicandotheraudiovisualworks;

Photographic works and other works made through a similar process of the

photography such as artistic photography, photo montage, posters, photos of the

reports;

Artworksintheareaofpainting,sculpture,graphicsanddrawings;

Architecturalworks such as charts, plans, templates and the buildings built based on

architecturalandengineeringworks,urbanism,panoramaandinteriordesign;

Stenographyworks;

Applicativeartworksaswellasindustrialandgraphicdesign;

Cartographicworksintheareaofgeographyandtopography;

Scientific,educationalor technicalpresentationssuchas: technicaldrawings,graphics,

charts,expertiseandthree‐dimensionalpresentations.6

Derivativeworksaswellascollectionsofworksarealsoconsideredasworkofauthorship.7

However,whoisconsideredtheauthorofthework?Theanswertothisquestionisnotalways

assimpleasitmaylookinthefirstplace.Inmanycontentiouscases,courtsareaskedtodecide

preciselyon this question, respectively thequestionof ownership.However, the lawsetsout

5 Article 12, Law No. 04/L-065 on Copyright and Related Rights. 6 Article 8, Law No. 04/L-065 on Copyright and Related Rights, Republic of Kosovo. 7 Articles 10 and 11, Law No. 04/L-065 on Copyright and Related Rights, Republic of Kosovo.

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certainrulesastowhoisconsideredtheauthorofthework.Firstofall,theownershipvestsin

thepersonwhosenameor firm, pseudonymormark appears in the copy of thework. If the

workdoesnothaveanyoftheseelementsofauthorship,however,thantherightsremainwith

thepublisher.Ifthepublisherisanonymoustoo,thentherightsshallbeenjoyedbytheperson

disclosingtheworkitself.8

Astheauthorofanoriginalwork,youareentitledtothefollowingrightsprovidedbythelaw:

Theso‐calledmoralrights,9whichareapplicabletoalltypesofworksofauthorshipandinclude:

Therighttofirstpublication;

Therighttorecognitionofauthorship;

Therightoftheintegrityofwork;

Therighttoremorse;

Anothergroupofrightsare theso‐calledeconomicrights10or therightof theauthor toenjoy

the monetary profits from the exploitation or use of their copyrighted work. The most

importanteconomicrightsoftheauthorare:

Therighttoreproducethecopyrightedwork;

Therighttodistributethecopyrightedwork;

Therightofrentalofthecopyrightedwork;

The right to publicly perform, communicate and broadcast the copyrighted

work;

Therightofpublicdisplay;

Therighttodisclosethecopyrightedwork;

Adaptationrights.

Otherrights11providedbythelawsuchas:

Therighttoaccessandexposure;

Therightforresale;

Thepubliclendingright;

Therightforspecialremuneration.

Anothergroupofrightswhichareprotectedbythecopyrightlawbutasaseparatesetofrights

are related rights. Theseworksdonotmeet the original criterion requiredby copyright law.

8 Article 14,Law No. 04/L-065 on Copyright and Related Rights. 9 Sub Chapter D, Law No. 04/L-065 on Copyright and Related Rights, Republic of Kosovo. 10 Sub Chapter E, Law No. 04/L-065 on Copyright and Related Rights, Republic of Kosovo. 11 Chapter III, Law No. 04/L-065 on Copyright and Related Rights, Republic of Kosovo.

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Theseworksare,however,protectedsincetheycontributetomakingtheworksavailabletothe

public.Theserelatedrightsinclude:12

Rightsofperformers;

Rightsofproducersofphonograms;

Rightsoffilmproducers;

Rightsofbroadcasters;

Rightsofproducersofdatabases;

Rightsofpublishers.

Alltheserightsare,however,subjecttotimelimitations.Inprinciple,thecopyrightrunsduring

thewholelifetimeoftheauthorandseventy(70)yearsafterhisdeath.Incaseofco‐authorship

works, the copyright lasts seventy (70) years from the death of the last surviving co‐author.

Whendealingwith anonymous and pseudonymousworks and collectiveworks, on the other

hand,thecopyrightshallrunforseventy(70)yearsafterthelawfuldisclosureofthework.13

Thecopyrightedworkscanbeadministeredintwoways;individually,whichisexercisedbythe

holder personally or through the representative, and collectively through collective societies

authorizedbytheOfficeofAuthorsRightsandRelatedRights.14

AnyoriginalworkofauthorshipenjoysprotectionasprovidedbytheLawfromthemomentof

itscreation.Iftheseworksareinfringed,theauthorcanfileaclaimandaskforcompensation.

Theconfusionoccursexactlyatthispoint:whichproceduretofollow‐LitigationvsAlternative

DisputeResolution!

It is important to mention that in order for authors/parties to enter into an arbitration

procedure,theyshouldagreeamongthemselvestosolvetheirdisputeandhaveanarbitration

clauseintheiragreement.

12 Chapter IX, Law No. 04/L-065 on Copyright and Related Rights, Republic of Kosovo. 13 Article 61, Law No. 04/L-065 on Copyright and Related Rights, Republic of Kosovo. 14 Chapter X, Law No. 04/L-065 on Copyright and Related Rights, Republic of Kosovo.

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AlternativeDisputeResolution

UnderstandingofADRanditshistoryinKosovo

AlternativeDisputeResolution(ADR)meansvariousprocessesofsettlingdisputesoutsidethe

court room, and helping parties resolve disputes without a trial. This is achieved through

mediation, arbitration or negotiation. A few other procedures of ADR are acknowledged

worldwide, these being neutral evaluation and collaborative law. However, these two

proceduresareyetnotapplicableinKosovo.

ADRhasnumerousadvantages,somelistedbelow:

Fastersolutions;

Lessexpensive;

Partiesplayacrucialrole;

Longlastingoutcomes;

Greatersatisfaction;

Improverelationships.

Mediation is an ADR form inwhich a neutral third person calledmediator helps the parties

reach a voluntary resolutionof adispute.As such,mediation ismore informal,more flexible,

less expensive and faster than litigation. It can help people resolve civil, family, juvenile and

othermatters.

ArbitrationisalsoanADRwherebyaneutralpersoncalledarbitrator,selectedbypartieshears

the arguments from both sides and analyzes the evidences submitted and then decides the

outcomeofthedispute,assuchitisawidelyacceptedmechanism.

Lookingbackathistory,arbitrationwasoneofthemostpreferreddisputeresolutionmethods

intheMiddleAges,whilethefirstformalruleswereadoptedinEnglandandtheU.S.inthe15th

and 16th centuries. Western European countries started promoting arbitration in the 20th

century,whereas in the former Yugoslavia, ADRwas introduced during the 1960s and early

1970s15.

Sincearbitrationexpands thephysicalborders, itwasnecessary to set rules for international

arbitration,andthiswasdonebytheUnitedNationsMissiononInternationalTrade(INCITRAL)

which in 1976 adopted rules applicable to international arbitration, including a model 15USAID System for Enforcing Agreements and Decisions Program in Kosovo, Report and Recommendations for developing and implementing and appropriate and effective alternative dispute resolution system, April 2010, Kosovo, page 11.

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arbitration clause, rules for appointment of arbitrators and conduct of arbitral proceedings,

rulesfortheform,effectandinterpretationoftheaward16.

After the Yugoslavia dis‐solvation, Kosovo Chamber of Commerce adopted the regulation on

PermanentArbitrageCourtin1999.Fiveyearslater,respectivelyin2004,theKosovoAssembly

adoptedanewLawontheKosovoChamberofCommercewhich,amongothers,providedforthe

establishmentoftheADRmechanismknownastheCourtofArbitration.

TheUNCITRALModelArbitrationLaw,theEuropeanCommunityDirective93/13.EECaswellas

theexpertiseofdifferentmissions,suchastheUSAID,werecloselyconsultedwhendraftingthe

KosovoLawonArbitrationNo.02/L‐75whichwaspassedbytheAssemblyin2007.Otherthan

theLawonArbitration,theapplicablelegislationinKosovoforthisfieldistobeconsideredthe

LawonEnforcementProcedureNo.03/L‐008,RulesofArbitration inKosovo2011aswellas

theDecisionontheExpensesoftheProcedure.

AstheLawonArbitrationisthemainlegalsource,itisworthmentioningitskeyelements17:

Arbitrationoccursonlyifbothpartiesagreedtosolvetheirdisputethrougharbitration;

Apartymaybeanaturalandalegalperson;

Itisapplicabletodisputesinallcivilandeconomicmatters;

It is required that a court rejects an action if the respondent raised the issue of the

existenceofanarbitrationagreementinhisstatementofdefense;

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

composition);

Eachpartyhastheburdenofprovidingitsclaim;

Ininternationalarbitrationcases,thetribunalappliesthelawdesignatedbytheparties,

in the absence of which, the tribunal applies the law consistent with the private

internationallawprinciples;

Theunsuccessfulpartyshallbearallthecosts,unlessotherwiseagreed;

Thearbitralawardhastheeffectofafinalandbindingcourtdecision.

16 USAID System for Enforcing Agreements and Decisions Program in Kosovo, Report and Recommendations for developing and implementing and appropriate and effective alternative dispute resolution system, April 2010, Kosovo, page 12. 17 Law on Arbitration, No.02/L-75, Republic of Kosovo.

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ArbitrationCenteroftheAmericanChamberofCommerceinKosovo

Another functionalADRCentre inKosovo is theArbitrationCenterwhich functionsunder the

umbrellaoftheAmericanChamberofCommerceinKosovo(hereinafterreferredasAmCham

Arbitration Center). American Chamber of Commerce in Kosovo (herein after referred as

AmCham)isaleadingbusinessassociationinKosovoofficiallyaccreditedbytheUnitedStates

ChamberofCommerceinWashingtonD.C.AmChamisalsoamemberoftheEuropeanCouncil

of American Chambers of Commerce (ECACC). Though established in 2004, it has been fully

operativesince2006.Infurtheranceofitseffortstostrengthenthecountry’sbusinessclimate

and economic growth, AmCham Kosovo has established its Arbitration Center, mandated to

facilitatethealternativeresolutionofdisputesthrougharbitrationandmediation.18

The AmCham Arbitration Center provides its services to its members and to the business

community throughout Kosovo. Resolving disputes through the Center offers several

advantages: fasterresolution; lesscostlyproceedings;closedhearingsandconfidentiality; less

adversarialprocess;professionalarbitratorsandmediators;easierinternationalenforcementof

awardsandfinalandbindingdecisions.19

Arbitration Center is regulated by the Charter of the American Chamber of Commerce in

Kosovo20.AmChamArbitrationCenteroffers to its client’s valuable information regarding the

filingprocedure,anditoffersstepbystepguidelines.ItalsooffersanArbitrationClause,Model

ArbitrationAgreement;Application for InitiationofArbitration; Fee Schedule; Compilationof

ArbitrationRulesandworkshopsandotherforumstodiscussADRissues.

TheAmChamArbitrationCenterconsistsof the followingbodies: SteeringCouncil; Secretary

General;andArbitrationPanels;21andhasarosterof41arbitrators,excellentinternationaland

localexperts,involvinglawyers,professorsandotherlegalprofessionals.Therosterconsistsof

11internationaland30localexperts,9ofwhicharewoman.

KosovoPermanentTribunalofArbitration

KosovoPermanentTribunalofArbitrationfunctionsundertheKosovoChamberofCommerce

umbrella,thoughassuch,itisfullyindependent.TheTribunalsubmitsannualworkingreports

18http://www.amchamksv.org/adr-center.html 19 See above. 20 Charter of the Alternative Dispute Resolution Center, approved in 2014 http://adr-ks.org/introduction/charter-of-the-amcham-adr-center/ 21 Article 4, See above.

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aswellasfinancialannualreportstotheKosovoChamberofCommerce,whichatthesametime

remainsthesigningauthorityofallMemorandumsofUnderstandingsonarbitration22.

ItscompositionconsistsofLeadership(composedoffivemembers:Chair,DeputyChair,General

Secretary and two other members appointed for four years), President and Secretary23.

Currently, theKosovoPermanentTribunal ofArbitration lists 27 arbitrators in its list, out of

which8internationalarbitratorsand19localarbitrators.

The arbitration procedure is governed by the Law Non Arbitration and Kosovo Rules of

Arbitration2011.Alldisputesrelatedtocivil‐judicialandeconomic‐judicialrequestsmaybethe

subjectofanarbitrationagreement,unlessprohibitedbylaw.24

The Law on Arbitration states that no court in Kosovo that may intervene in arbitration

proceedings, and if an action is brought before it concerning a matter that is a subject of

arbitration, should be rejected by court as inadmissible, unless the court finds that the

arbitrationagreementisnullandvoidorthatthedisputedsubjectmatterisnotcoveredbythe

arbitrationagreement.

If for instance,youasanauthorhaveadispute,youcanonlystartanarbitrationprocedureif

you and the other party reach a consensus to solve your dispute through arbitration, and as

suchyoumay choose tobe representedor assistedbyanotherperson,whose contactdetails

shouldbecommunicatedtoallpartiesandthearbitrationtribunal.25

The arbitral tribunal can be composed of one or three members – depending on the

circumstances of the case and the parties’ preferences, though usually it does consist of one

arbitrator.Differently from litigation and courtprocedure, in arbitration, a party can appoint

thearbitratorhim/herself,andthatnotonlyfromthelistofarbitratorsthattheTribunalowns

butalsoanotherpersonoutsidethelist,forwhomthepartyshouldpresentastatementofhis

professionalexperience.26

Inordertoprotecttheparties,theLawonArbitrationandtheRulesofArbitrationforeseethat

anyarbitratormaybechallengedbyeitherpartyifcircumstancesshowthattherearejustifiable

doubtsforthearbitrators’ impartialityorindependence,or ifthearbitratordoesnothavethe

qualificationsagreedtobytheparties.

Similarly to litigation, parties to arbitral proceedings should present the claim and counter

claims.Thoughcontrarytolitigation,inarbitration,thetribunalshalldecidewhethertoholdan 22 The Kosovo Permanent Tribunal of Arbitration Establishment Act, 27.06.2011, Kosovo. 23 The Kosovo Permanent Tribunal of Arbitration Establishment Act, 27.06.2011, Kosovo. 24 Article 5, Law No.02/L-75 o Arbitration. 25 Kosovo Rules of Arbitration 2011. 26 Article 6, Kosovo Rules of Arbitration 2011.

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oralhearingor toproceedwith theprocedurebasedonthedocumentsandwrittenmaterials

presented, or the tribunal may also decide to hold a combination of both, oral hearing and

writtenproceedings.Whereas in either case, eachpartyhave theburdenofproving the facts

reliedtotheclaimordefense.

Article24oftheLawonArbitrationforeseethatpartiescanpresentwitnessestothehearings,

andtodoso,theyshouldinformthearbitraltribunalandtheotherpartyaboutthename,the

addresses,thesubjectaswellasthelanguagethatthetestimonyofthewitnesseswillbegiven,

atleastfifteendaysbeforethehearing.Expertscanalsobeapartofthearbitralprocedureifnot

otherwiseagreedbyparties.

Ifmorethanonearbitratorhasbeenappointedinthearbitralproceedings,theawardshallbe

madebyamajorityofallmembers,whileincaseofquestionsofprocedure,thechairmanmay

decideonhis/herown.

The award shall be made in writing. The award is final and binding for the parties, with

completely thesameeffectas the finalcourtdecision.27Theawardcannotbeappealedbefore

anycourt.However,courtcansetasideanarbitralawardundercertaincircumstancessuchas:

A) Theapplicantprovesthat:

Apartytothearbitrationagreementdidnothavethecapacitytoact;

Thearbitrationagreement isnot validunder the lawdeterminedasapplicableby the

parties or the arbitral tribunal, or in absence of such determination, under the law

applicableinKosovo;

Theapplicantwasnotgivenpropernoticeoftheappointmentofanarbitratororofthe

arbitralproceedingsorwasotherwiseunabletopresenthiscase;

Theawarddealswithanissuenotcontemplatedbyornotfallingwithinthetermsofthe

submission toarbitration,or it containsdecisionsonmattersbeyond the scopeof the

submission to arbitration, provided that, if the decisions on matters submitted to

arbitrationcanbeseparatedfromthosenotsosubmitted,thatpartoftheawardwhich

containsdecisionsonmatterssubmittedtoarbitrationmayberecognizedandenforced;

Thecompositionofthearbitraltribunalorthearbitralprocedurewasnotinaccordance

with the provisions of this Lawor a valid arbitration agreement, under the condition

thatsuchdefecthadanimpactonthearbitralaward.

B) Thecourtfindsthat:

Arbitrationisprohibitedbylaw;

Theenforcementoftheawardleadstoaresultwhichisinconflictwithpublicpolicy28.

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

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RecognitionandEnforcementofthearbitrationtribunalawards

Arbitral award is final and has the same value as the court judgment. One very important

element is that courts cannot abrogate awards issued by an arbitration tribunal. Courts can

analyzeandannulthearbitralawardunderveryfewcircumstancesasforeseenbytheLawon

Arbitration29and as presented above. One of the reasonswhy arbitration is extensively used

worldwide is the easy recognition and enforcement of the arbitration award, especially

comparedtoenforcementprocedureofcourtsjudgments.Ifregularcourtsdonotrecognizeor

enforcearbitrationawards,thenthereisnovaluetothataward.Themainreasonwhyarbitral

awardsareenforceableinasimilarmannerindifferentcountriesisexactlybecauseoftheNew

YorkConventionontheEnforcementofArbitralAwardsof1957andwhichenteredintoforcein

June1959. The said convention is applicablewith regards to recognition and enforcementof

arbitral awards issued in a countrydifferent from theplacewhere theaward is sought tobe

enforced.

Kosovo has not signed, nor ratified the New York Convention. However, the Law on

Arbitration30provides for the recognition and enforcement of arbitral awards, both domestic

andforeignawards.Article38oftheLawonArbitrationstatesthat:

“An arbitral award made by an Arbitral Tribunal in Kosovo shall be enforced when declared

enforceablebythecourt”.

Whereas in caseswhen the arbitration procedureswere held outsideKosovo, but the award

shallbeenforcedinKosovo,courts inKosovoareobligedtoenforcesuchaward.Article39of

theLawonArbitrationstatesthat:

“Kosovo courts shall recognize arbitral awardsmade outside ofKosovo as effective and enforce

themifsuchawardsarerecognizedandarepublishedasenforcedaccordingtoparagraph2till5of

thisArticle”.

Request for the recognition and enforcement of the award should be addressed to the Basic

Court inPristina,CommercialDepartment.Therequest for recognitionshouldalso includeas

enclosures the original decision or a notarized copy of the award, a copy of the arbitration

agreement, and translation thereof if thosedocuments arenotdrafted inoneof theKosovo’s

officiallanguages.31

Ifsuchrequestisapproved,enforcementisthesameasinothercourtcases.

28 Article 36, Law No.02/L-75 on Arbitration. 29 Law on Arbitration No.02/L-75, see above. 30 Law on Arbitration No. 02/L-75, Article 38 – 40. 31 Law on Arbitration, see above.

53


Kosovohasasolidlegalframeworkonarbitrationandrecognitionandenforcementofarbitral

awards,beingdomesticorinternational.Existenceofasolidlegalframeworkmeanssecurityfor

thepotentialusersofarbitration inKosovo(artists, creators,writers,etc.).Thequestion is to

what extend is the public and professional community aware of these alternative dispute

resolution mechanisms and to what extend they are using these methods32. Apart from the

backlogofcasesinallcourtinstances,anotherissueisthepublicperceptionaboutthejudiciary

system in general. Courts, however, remain themost popular institution to address disputes.

This is so despite the fact that based on many public polls33judiciary is the least trusted

institution,andjudgesaretheoneswhoarelesstrustedinthejusticesystem.Otherreportsand

researches34showcourtsasoneinstitutionthatisnotdoingtheirjobinaddressingcorruption

andmoreseriouscrimecases35.

Considering all the above, arbitration is certainly the best alternative for dispute resolution,

whichneeds,however,togetmoreattentionandtobeusedmorefrompartiesfacingadispute.

Kosovoinstitutionsneedtohighlighttheimportanceofarbitrationmoreandencourageprivate

persons and legal entities to use arbitrationmore oftenwhen they face with an IP or other

commercialrelateddisputes.Generalpublicandprofessionalsneedtobeeducatedthatsucha

possibilityexistsanditiscertainlymoreeffectiveandquicker,particularlywhenitcomestothe

recognition and enforcement of the arbitral award. To elaborate the recognition and

enforcementofarbitralawards,acasestudyiselaborated.

Casestudy

TheSupremeCourtinKosovorecentlyruledonacaseregardingrecognitionofanarbitration

award36. Claimant in this was a European Union based company, whereas the respondent a

Kosovostateownedentity.Thearbitralawardwasissuedin2013bytheInternationalChamber

ofCommerce/InternationalCourtofArbitration.According to therequest forrecognitionand

enforcement of the arbitration award, the Basic Court in Pristina, Commercial Department,

approved in its entirety the claimant’s request. Respondent appealed the decision before the

Kosovo Court of Appeals.37Court of Appeals refused the appeal of the respondent since,

accordingtotheirreasoning,therewerenogroundfortheappeal,and,therefore,reinforcedthe

decision of the first instance court. The respondent used the so‐called revision procedure to 32 See below responses from questionnaire. 33http://justice.public-communication.net/polling-reports-on-kosovo-criminal-justice-system/ 34http://www.kdi-kosova.org/index.php?fq=6 35http://kli-ks.org/korrupsioni-ne-kosove-luftimi-apo-promovimi-i-korrupsionit-2/ 36 Supreme Court of Kosovo, case No.E.Rev.Nr.28/2015. Since we did not get permission from parties in this case, we cannot mention the names of the Company. 37 Case No. Ae.no.129/2014.

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bringthecasebeforetheSupremeCourt.Therevisionrequestwasbasedontheallegedbreach

of theprocedural andsubstantive lawand, accordingly, respondentasked the court to cancel

thedecisionsofbothinstancesandremandthecaseforreconsideration.TheClaimantcertainly

objectedthisrevisionrequestascompletelyungrounded.

TheSupremeCourtdecidedthattherevisionrequestshouldnotbeallowed.Thedecisionwas

basedontheLawonArbitration,articles38and39,concludingthatthesaidlawdoesnotallow

forappealsagainstdecisionsfortherecognitionandenforcementofarbitralawards,andthat

generalarticlesofthecontestedprocedurearenotapplicabletothisspecificprocedure.

Thedecisionsofallinstancecourtsareabsolutelycorrectandinlinewiththehigheststandards

in the field.TheSupremeCourtdecision is averygoodexample tobe followed in the future.

Thisdecisioncanbeused inthe futureasa judicialpracticeandcanbeusedby lawyers,asa

lesson learned for them,butalso toeducate theirclients in the importanceof therecognition

andenforcementofforeignarbitrationawards.Thiscasecanalsobeusedasagoodexampleto

show investors that Kosovo Courts are reliable and willing to work on recognition and

enforcementofarbitrationawards.

55


CourtStructureinKosovo

CommercialDepartmentoftheBasicCourtofPristina38hasthecompetencetohearanddecide

on intellectualproperty relatedcases.This is anewcompetence introduced toKosovo’s legal

system.ThisdepartmentisfacingdifferentchallengesasfarasthehandlingofIPrelatedcases

isconcerned.Basedontheinformationcollectedbyaninterviewwithacommercialdepartment

judge,Mr.Murat Paqarada39, the following are themain challenges that court is facingwhen

handling intellectual property cases: lack of expertise among judges as well as lack of

knowledgeamongthepartiesthemselves.

IntellectualPropertyCasesinArbitration–Benefits

Aspreviouslymentioned,comparedtolitigation,arbitrationhasnumerousbenefits.Oneofthe

firstreasonswhymostofusdonotturntocourtsisthedelayinhavingourcasedecided.Thisis

mostlybecauseof thebacklogthatKosovoCourtshavebeenfacingand“backlog”meansover

400,000casesnotbeingtreatedfortwoyears.

Whenmeasuring court efficiency,we take into consideration the timeframes and the quality

offered, as a result of which we get the number of cases solved per year versus the cases

receivedduringthatsameperiodoftime.Handlingcaseswithanunprecedenteddelaycertainly

damagenotonlythepartiestothedispute,butalsothejudiciaryperformanceasawhole.Asa

party,beingaplaintifforadefendantyouarederivedfromtheprincipleofsolvingacasewithin

areasonabletime,nottomentionthatitisverylikelythatyourevidencesarelostordamaged

bythetimeofdecision.Ontheotherhand,thejudicialsystemwillalwaysbecategorizedasnon‐

efficient.Mostimportantly,citizenswillhavenofaithinjudiciary.

Thetablebelowshowsthestatisticsonthebacklogofcasesintheentirecountry,through1999‐

2015–althoughthe2015casesarenottobeconsideredasbacklog.Thesestatisticshavebeen

collectedbytheStatisticalDepartmentoftheKosovoJudicialCouncil.

38 Article 13, par. 1.5, Law on Court, see above. 39 Interview conducted by authors of this paper as a part of the research, dated: 19th of May 2016.

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SeriousCrimes

Criminal Juvenile Civil Economic Administrative

YEAR 1999 3 0 0 5 0 02000 16 8 2 9 0 02001 27 11 0 30 0 02002 41 14 0 52 0 02003 71 19 0 89 0 02004 88 34 0 538 0 02005 221 141 0 535 0 02006 257 648 5 771 0 02007 312 480 21 1060 0 02008 199 280 4 1316 0 02009 115 307 3 1167 0 12010 128 553 3 1587 0 72011 178 1412 11 2524 0 332012 287 3617 32 4715 10 1732013 1282 6841 65 6254 147 6992014 886 8731 193 8929 440 22142015 1439 15405 367 11354 562 2253TOTAL 5550 38501 706 40935 1159 5380KosovoJudicialCouncil,ReportonBacklogcasesupuntil31.12.2015

Asseenfromtheabovestatisticaltable,therearecommercialrelatedcases,IPcasesbelonging

tothisgroupofcasesthatarefouryearsold.

Whenmeasuringthecourtefficiency,wetookintoconsiderationnotonlythetimeframetohave

a case decision, but also the quality of the decision. What do we intend when we mention

“qualitativejustice”?

Several indicatorscanbepositionedasapuzzle inordertocreatethebig“qualitative justice”

picture.Theseindicatorsare,forinstance:

- Aspecializedlawyer;

- Aspecializedjudge;

- Fewerexpenses.

It is really unfortunate, but intellectual property is still being considered as a new topic in

Kosovo,immediatelygivingtheanswertothequestiononthelevelofspecializationofajudge

orlawyerinIP.

Historicallyseen,however,duringthetimeofYugoslavia,Kosovowaspositionedquitewellin

thisarea.Notonlylawswereinplace,butalsothecollectiveassociationsuchasSokoj(Serbian

OrganizationforMusicianAuthors)wasveryeffectiveinadministeringtheauthors’rights.After

the war of 1999 this regime stopped covering the territory of Kosovo and for several years

afterwards,Kosovodidnothavethelegislativeinfrastructureinplace.

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ThegovernmentofKosovo foryearshadotherpriorities. IPprotectionandenforcementwas

barely seen in thegovernment todo listsbefore itwas raisedas an issue in theEUProgress

Reports. In 2010, the Kosovo government approved the National Strategy in Intellectual

Property,whichprovidedalistofactivitieswiththepurposeofincreasinghumanandtechnical

capacities as well as strengthen the cooperation among the enforcement institutions40.

FollowingtheadoptionoftheStrategy,theKosovogovernmentreachedanagreementwiththe

courtrepresentatives,wherebycourtswouldofferprioritytoIPrelatedcasesandplacethemin

acourseofthreemonthsfromthedateofreceivingthecase.

Withthepurposeofanalyzingthehandlingofcopyrightrelatedcasesbycourts,weperformed

an interviewwitha judge fromthePrishtinaBasicCourt,DepartmentofCommercialMatters,

Mr.MuratPaqarada41.Fromtheinterview,wefoundoutthatthereisonlyonecopyrightrelated

casependingdecisionbeforethecourt.

In the referenced case,42the plaintiff filed a damage claim in the value of 100,000.00 EUR

because of the copyrights infringement against the defendant,which is a publishing/printing

house.Togetmoreinformation,wehavebeenincontactwiththeowneroftheprintinghouse,

inthiscasethedefendant43whoprovideduswiththefactsofthiscase.

The authorized representative of the family of a deceased author approached the

publishing/printinghousein2005andauthorizedthecompilationandpublicationofthework

of the deceased. So, the parties agreed that the printing house publishes the work of the

deceasedauthor.Thepublishinghouseclaimstohaveproperlypaidthefamilyofthedeceased

authorforthetransferofpublishingrightstothem.

On July 11,2013, the family of the deceased author filed a copyright infringement lawsuit

claimingthattheircopyrightsassuccessorshavenotbeenrespected,andassuchtheyaskedthe

courttograntdamagesintheamountof100,000.00EUR.

In the first instance court issued the decision on January 30, 2015 refusing the copyright

infringementclaimonthebasisofArticle1,paragraph2andArticle2oftheLawonInheritance.

Because the decision was found to have breached some procedural rules, the Appeal Court

remandedthecasebacktothefirstinstancecourt,andthecaseispendingaseconddecisionfor

threeyearsnow.

Tounderstandhowthepartiesfeelaboutthehandlingofthecasebythecourt,wecontactedthe

printinghouse,whichwasthedefendantinthiscase.Whenaskedabouttheapproachofjudges 40 National Strategy in Intellectual Property 2010-2014, Republic of Kosovo. 41Interview conducted by authors of this paper as a part of the research, dated: 19th of May 2016. 42 C.Nr.295/2013 43 Because this case is still not closed, we are referring to parties as anonymous.

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towardsthiscaseandIPingeneral,therepresentativeoftheprintinghousesaidthatitwasnot

of themost satisfactory level; however he admitted that judges are trying. In his opinion, it

wouldbeadvisabletohaveaspecializedIPunitwithintheCommercialdepartment.

Withoutanyprejudicewithregardstothehandlinganddecisionintheabovereferencedcase,it

wouldbeunrealistictoexpectmiraclesfromjudgeswhenfacedwithanIPrelatedinfringement

case.Namely, according to aUSAID report44, there is no criterionwhen assigning a case to a

judge.Thecaseisusuallyassignedtoajudgewhoismorecomfortabletohandlethecaseand

basedontheirpreviousexperiencewithsimilarcases.However,beingawarethattherearenot

manycopyrightinfringementcasesorIPinfringementcasesingeneral,onecannotexpectthat

the deciding judge be at a satisfactory level with regards to the knowledge of the law. One

additional factorthatmaycontributetothe lackofexpertiseamongtherelevantenforcement

institutionsisexactlytheuniversitycurricula.IPclasswasputintheuniversitycurriculaonly

recently.

Thesituationisnotthatdifferentamongthelawyers.Tobecomealawyer,oneshouldpassthe

BarExam,whichconsistsof thewrittenandoralpart.However, IP law isnotasked inanyof

these parts, expect as an area of law belonging to commercial law in general. That is, no

particularspecializationisrequiredinordertopracticelawandregisterasanattorneyatlaw

withtheKosovoChamberofAttorneys.

Havingsaidthat,itcaneasilybeconcludedthatthecourtroomisnotthewisestchoicetomake.

Therefore, authors should think of following another, more suitable, alternative dispute

resolution mechanism. From a quick review of the professional background of the 27

Arbitrators listed in the Kosovo Tribunal of Arbitration, 14 of them have Commercial Law

and/orIntellectualPropertylistedastheirfieldsofspecialty45.BasedontheRulesofArbitration

in Kosovo, parties can themselves propose another person as Arbitrator – outside the list of

arbitrators published in the Tribunal, giving authors even more space to have a specialized

persondecidingtheircase.

Another factor that authors should consider when choosing the resolution method, is the

estimatedcoststobeincurred.Inanumberofsituations,arbitrationislessexpensivethancourt

litigation.The tablebelowshows the fees tobe incurred in thecourseofbothprocedures.At

first, both fees are approximately of the same amount. However, the representation fees in

arbitrationareapproximately600EURfordisputesworthabove10,000€.Ontheotherhand,

therepresentationcostsincourtlitigationremain270,40€persession,whichdependingonthe

numberofpartiesandthelawyer’srecognition,canbeincreasedupto811.20€. 44 USAID’s Justice System Strengthening Program, Stocktaking Report. 45 http://www.kosovo-arbitration.com/lista-e-arbitrave

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ThecostsinthearbitrationprocedurearegovernedbytheDecisiononCostsofProceedings46

basedonwhichtheregistrationfeeforarbitrationproceedingsis:

a) 250EURiftheamountofthedisputeislessthan100.000EUR,and

b) 500EURiftheamountofthedisputeismorethan100.000EUR.

Ifthecaseweretobedecidedbyasinglearbitration,thearbitrator’sfeesshallbecalculatedin

accordancewiththefollowing:

EquivalentvalueofthesubjectofthedisputeinEUR

Amountoffees:baseCandpercentageDfortheamountinexcessoverA–inEUR

FromA ToB BaseC %D5,000 600

5,000 20,000 600 720,000 50,000 1,650 550,000 100,000 3,150 3100,000 500,000 4,650 1,5500,000 2,000,000 10,60 1

2,000,000 5,000,00 25,650 0,55,000,000 10,000,000 40,650 0,410,000,000 20,000,000 55,650 0,1

Over20,000,000 65,650 0,05

For comparativepurposes, beloware the feesof an attorney at lawasper the tariffs on civil

procedures47:

Typeofsubmission

Mattervalue Basis Clauseforover50%

Lumpsum30%

Total:

Claim‐Request

Dispute–lowvalue 60€ 18€ 78€

Dispute–bigvalue 80€ 24€ 104€

Representationinlowvaluedisputes(persession)

60€ 118€ 23,40€ 101,40€

Representationindisputesinwhichthevalueofthedisputeexceedsthesmallcontextupto10.000€

80€ 34€ 31,20€ 135,20€

Representationindisputesinwhichthevalueofthedisputeexceedsthevalueof10,000€

160€ 48€ 62,40€ 270,40€

It isworthmentioningthattheabovefeesaretheminimumfees.Hencethepartiescanagree

withtheirrepresentativesthatthesefeestobeincreased,dependingonthequalityofthework

andthevolumeof theengagement.TheTariffActalsospecifies that for therepresentationof 46 Kosovo Permanent Tribunal of Arbitration, Decision on Costs of the Proceedings 47 Extract from the Kosovo Lawyers Tariff

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the second party, the remuneration raises up to 50% for each party – reaching the value of

405.60€andcanalsoreachtheamountof300%specifically811.20€48.

ResearchFindings

Thus,inordertogettheopinionoftheauthorsthemselvesandthatofotherinterestedparties,

wehaveconductedaresearch,thefindingsofwhicharepresentedinthissection.

The respondentsweremostlyof artistic (writers,musicians,producer,photographer, graphic

designers),legalandITprofessionalbackground.Despitethefactthatthemajorityareholders

of authors’ rights, they have only basic knowledge on their rights as authors, mostly gained

throughmediaandtheCopyrightlawinKosovo.Thisoutcomeisalsoevidentfromthemerefact

thatanumberof therespondentswereof theopinion that ideasareprotectedby the lawon

copyright.

Interesting answers were given to our question: “Is there any case where your right as an

author has been infringed, specifically, is there any case where your work has been used

withoutyourpermission?Ifyes,whatwasyourreaction?”Someoftheseanswersarepresented

below:

“Myauthor’srightshavebeeninfringedseveraltimes,andmostofthetimesIhavenot

takenanyactions,as there isnobenefitoutof it.Therehavebeencaseswhere Ihave

raisedmyconcernstotheinfringersthemselves,andreceivednotevenanapology.The

mostbizarreof all is the fact thatwhenmybookwith a topic inPublicRelationshas

beenusedwithoutmypermission, Ihaveconsultedseveral lawyersandnoneof them

were specializedorhadbasic knowledgeon copyrights, therefore, I gaveup frommy

rights.”

“Yes,myauthor’srightshavebeenandarebeingmisused,andthisisdonemostlybythe

mediathemselves,whichshouldbetheonesknowingtheserightsthebest.Sinceafter

thewar,mywritingsandpublications(literaryworks:poetry,poems,analysisetc.)are

being constantly published and re‐published through most of our media with no

permissionfrommyside.Ihaveneverreacted,asIamawareofthefactthatthereisno

legalmechanismtosupportme,henceIdidnothavetimetowaste.”

“My photographs have been used several times by ourweb portals, never asking for

permission. If there is a copyright infringement for a photography used in an

internationalweb‐portal,itmeansthatautomaticallythatphotographywillbeoutofuse

48Extract from the Kosovo Lawyers Tariff

61


from that portal, whereas here in Kosovo, such infringements are happening

continuouslydespiteauthors’concernsandnotificationsontheinfringement.”

“Myphotographhasbeenusedbyanauthorasafrontpageofhisbook,andwhenasked

toatleastprovidemewithacopyofabookasapresent,herefusedtodoso.”

o “Mydesignshavenotbeenusedbyotherssofar,atleastasfarasIamconcerned.

Buttothecontrary,Ihaveusedother’sworkandthatbeingfullyconscious,but

for several reasons. Starting from the basics, I use design programs without

paying for a license though I know that this constitutes an infringement, but

thereisnootherwayformetofunction.ThemainreasonwhyIuseaprogram

without a license is that our local standards do not allow us such exclusivity.

BuyingalicensedprogrammaycostmeasmuchasIpayoneortwoemployees

per year, and if I do so, Iwouldhavenever been able to covermy company’s

expensesattheendoftheyear.

o Anotherimportantelementisthewaythattheworkingenvironmenttreatsus,

comparedtomyinternationalcolleaguesof thesameprofession, inwhichcase

usingaprogramwithoutalicenseorusinganotherworkwithoutapermission

orprioragreementisaveryshamefulact,justasinourenvironmentgoingtoa

shopandstealingsomething,theequivalenceisthesame.Iconsiderthatalsothe

wayinwhichprogramsandotherauthors’workshavebeenpresentedtous,has

impacted the way we use them now. In Kosovo we are used to downloading

programsandotherworksandkeepusingthemwithouteventhinkingonhow

togetthelicenseforit,whileinmostofothercountries,itgoeswithoutsaying

thatbeforeusingaprogramyoupayforthelicense.

o Anothersituationwhereweusesomebodyelse’sworkwithoutpermissionare

picturesandfonts,andthishappensbecausewebelievethatKosovoisasmall

country,ourclientsarealsosmall–geographicallyseen,andwebelievethatthe

original (foreign)authorswillneverget to seeourwork.Though Ihadonce a

case when I downloaded a program, and the company that produced it

approachedme,emphasizingtheneedtocompensatethedamagedonetothem

bydownloadingtheprogramandusingitwithoutalicense.Weexchangedalot

ofemailsandattheendbecauseIonlyusedtheprogramtwice(andthatmore

for studies), we reached an agreement based on which I would delete the

programandnotuseitanymorewithoutalicense.”

“Bardhi Guda: I am a publisher of several dictionaries: In cooperation with famous

authorswepublishedtheEnglish‐Albaniandictionaries,whichweresoldatthepriceof

2500 Lek, around 18 EUR, as well as German‐Albanian dictionaries through two

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publishinghouses.Thesedictionariesarearesultofalongandextensivework,andwe

asagroupwerewellawareof intellectualpropertyrightsaswellasobligationsbased

onthe lawofAlbaniaas there isourhometownsince1994‐1995.But,soonthereafter

we started operating in Kosovo andMacedonia also, and that iswherewewere also

interestedinIPLawsofthesecountries.Backonthattime,Kosovowasstillapplyingthe

YugoslavianlawonCopyright.Asapublishinghouse,weweresellingourdictionariesto

Kosovoclientsalso,andatsomepointtheirrequesttobuybooksdroppeddown.This

was themoment thatwe started thinking that there should be somethingwrong and

cameinKosovoforavisit.Whenwecamehere,werealizedthatourbookswerebeing

re‐producedwithoutourpermission,thoughtheylookedthesameinthefirstlook,but

thequalitywasloweraswellasthepricewascheaper.Astheburdenofproofwasonus,

wespentmuchtimetocollectall thefactsandfinallyachievedto filetheclaimbefore

the court.We also engaged a lawyer to help us, but because of the complexity of the

Yugoslavian lawstillapplicableat that time,heresigned.After this,wealsopresented

ourfactstoUNMIK,butneverheardback.”

It’sinterestingtomentionthefactthatonlyoneoftherespondentsconsultedtheCopyright

Office for a case of copyright infringement and the same person is in the process of

registeringhis/herworkwiththeCollectiveRightsAssociation,sothatthemanagementand

theenforcementofhisrightsisdonebytheassociation.

The findings of the research show that there are several grounded reasonswhy authors,

whoarewellawareoftheirrights,havenottakenanyactionsincaseofinfringement,and

thosereasonscanbegroupedasfollows:

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

contest.

SocialMentalityReasons:Reactingagainstcopyrightinfringementcancauseenemies;

hencenoactionshavebeentaken.

o “IwrotepoetryforanAlbaniansoldier,whofoughtandlosthislifeinKumanovo.

I found out that this poetrywas being used by one of our famous actors and

singers, as a lyric for his song, without my permission. I have never reacted,

believingthatIwouldbemisunderstoodfromthepublic,especiallyinthattime

whenKumanovo49casewasstillahottopic”.

49 Beg Riza was one of 40 armed Albanians from Kosovo and Macedonia group who clashed with Macedonian

police in 2015 in Kumanovo. The Kumanovo case for Albanian opposition parties in Macedonia was considered

to be "a simulation of Macedonian Security Forces to produce a justification to terrorize Albanian population in

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LegalInfrastructureReasons:Nolegalmechanismsorjudicialwilltofighttheongoing

infringements.

o “Beingawareofthebigamountofcaseswhenbookshavebeenphotocopiedand

sold without authors’ consent and prior agreement, and most importantly

knowingthatsuchcasestookalotofplaceinourmedia,andneveranactionhas

beenundertakenbytheauthorities,Iconsideredthatreactingagainstmyauthor

rights,wouldjustbeawasteoftime”.

Oneof the respondents,whoat the same timeclaims tohavebeendamagedbyanewspaper

which had his photographs of 1999 used and sold to another newspaper without any

consultation,filedaclaimwiththeBasicCourtin2013.However,nodecisionhasbeenrendered

yet.

Respondents’opinionsonaddressingcourtswhenitcomestoanIPrelateddisputegenerallyis

thesame.Mostofthemwouldnotturntocourts,notthattheyarenotawarethatcourtsarethe

appropriate authority to bring justice in disputes, but because courts are not efficient and

endlesstimewouldbeneededtosolveadispute.

Therestofthefindingsshowthatacourtroomwouldbeanoptiononlywhen:

Thereisnoagreementamongthepartiestosolvethedisputethrougharbitration;

There is no possibility to solve the dispute through a mutual agreement among

parties,throughmediation;

Legalconsultantsadvisethatacourtistheonlyplacetoturnto.

Another question raised for the respondents was: “What is your opinion on arbitration

procedure,andwouldyouchoosearbitrationincaseofaneventualdispute?”Incomparisonto

theprevioussection,mostofourrespondentswouldnothesitatetogotoarbitrationtoresolve Macedonia trying to identify them with terrorists", while Macedonian opposition parties considered this case "as

Government's act to buy time for themselves and to avoid early requested elections".

The same time Macedonian Government authorities considered this case "a terrorist attack of Albanians from

Kosovo and Macedonia against security forces of Macedonia aiming to destabilize the state itself". Whereas

internationals never qualified it as a terrorist attack not being sure whether this was a game of Macedonian

secret service related to so called "bomb cases" when Macedonian opposition party published secret tape

recordings of their government high state officials in preparing many similar simulated cases. However there is

not a small number of Kosovo Albanians who believed "That those 40 armed people were invited by Kumanova

Albanians to protect them from prepared Macedonian Secret Service to massacre those Macedonian Albanians

there". Having this in mind many Albanians wrote and devoted to them even artistic stories considering them

as heroes. In such an atmosphere for any author fighting for his copyright could be considered "low level" and

the average society could consider them kind of a people who want to benefit from the National tragedy"...

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theirIPrelateddisputes.Mostofthemcategorizedarbitrationasthemostefficientandflexible

method.IthasbeenconsideredthatevenifpartieswouldfileanIPinfringementclaimbefore

the court, and a judge would render a decision, the unsatisfied party would do everything

possible to find excuses and not obeywith the court decision. Themostly used justifications

wouldbe:

“Thecourthasnotanalyzedwellenoughthefacts,hencethedecisionisnotadequate”;

“The decision has been taken and themeasures have been taken just to complywith

internationalstandardsandnotbecausetheyshouldhavereallybeenapplicable”.

Someoftherespondentswouldchoosearbitrationnotbecauseofthefactthattheyknowmuch

about it but just to avoid courts.Having said that, it isworthmentioning that the awareness

about arbitration and its rules should be in the focus of the Arbitration Tribunal, Kosovo

AuthoritiesandNationalandInternationaldonorprojects.

Inthisregard,itisinterestingtoseethepointofviewofoneoftherespondents,whoistheonly

webdesignerinterviewed.Whenaskedwhetherhewouldaddressarbitrationorcourt,hesaid:

“Arbitration,justbecauseitisnotnamedCourt.”

“CourtwouldbeanoptiononlyandonlyifIwouldhavecloseconnectionswiththelawyersand

judgeswhowouldmakesurethatmytimewouldnotbewasted,otherwise,no.Wastingmuch

timeinfollowingacase isnotawisechoiceforme,neither formycompany,aswhateverthe

compensationwouldbe,itwouldbeimpossibletocoverthelossescausedbyallthetimespent

runninginthecourt.”

Having inmindtheanswersgiventoourquestionnaire, there isaneed forawarenessraising

campaignsandthecampaignshouldfocusinthefollowing:

Whichcasescanbeasubjectofthearbitrationprocedure?

Howdoesanarbitrationprocedurestart?

HowlegitimateandbindingisanArbitrationTribunalaward?

Therewasonlyonesingleopiniondifferentfromallabovedescribedregardingarbitrationand

thatwould be cited as follows: “IconsiderthatinKosovo,Arbitrationisnotfunctional.Iwould

choosearbitrationonlyandonlyinextremedespair.”

TheKosovoIntellectualPropertyOfficeaswellastheKosovoMinistryofCultureseemstobe

consideredasthefaceofthisfieldfromourrespondents.Onlyfewrespondentslistedalsoother

publicinstitutionsastheonesinchargetoprotectcopyright,suchas:KosovoPolice,Customs,

ProsecutionandCourts.

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Kosovohas latelysigned theStabilizationAssociationAgreement(SAA)50,whichhasaspecial

chapterforIntellectualProperty,anditsAnnexVIIlists22internationalagreementsapplicable

inthisfield.WhenaskedwhetherSAAisconsideredtobeagoodinstrumentin“installing”the

obligationtorespecttheauthor’srights,similarresponsesweregiven.Moreover,itcanbeeasily

said that SAA is also being seen as the last hope to make the war against IP infringement

functional, as there is legal adopted and applicable infrastructure, there is also institutional

infrastructureandthereareauthors.

Inordertosummarizewhatwaselaboratedsofar,webringthefocusonthecoreelementsofit:

Litigation ArbitrationOnly4judgesareengagedinIntellectualPropertycases/CommercialDepartmentofPristinaBasicCourt,servingforthewholeKosovoregion.

AmChamADRCenterhasarosterof41arbitrator.27arbitratorsfromthelistofKosovoPermanentArbitrationTribunalcanbeengagedinIntellectualPropertyCases.Newarbitratorscanbeproposedbyparties.

Ajudgeisonlyassignedbythecourttodecideonacase,partiescannotselecthim/her.

Partiescanselectthearbitratortodealwiththeircaseinanarbitrationprocedurethemselves.

Thestatisticsshowsthatthereisabacklogof1159casesintheCommercialDepartment.

Nobacklogatall.

Representationforadisputeof10,000€canreachtheamountof811.20€

Representationforadisputeof10,000€canreachtheamountof600€

Afinalcourtdecisionisbindingforparties.Acourtdecisionhasthesamepowerasanarbitrationaward.

Anarbitrationawardisbindingforparties.Theawardhasthesamepowerasacourtdecision.

Kosovocitizenshavenofaithinjudiciary. Newmechanism,nobadreputation.

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

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Conclusion

Whilepreparingthispaper,authorshaveconductednotonlydeskresearchbutalsofieldwork

hence allowing them to realize the state of play better and understand the problems from a

closerperspective.

It is concluded that for arbitration, there is still a need to put efforts on awareness raising

campaigns, though not in the same levelwith the campaign needed for intellectual property

rights.

Based on the interviews conducted, authors strongly believe that Kosovo’s society is easily

accepting and acknowledging arbitration, and not only for the advantages of it, but also as a

meritofthebadreputationofthejudicialsystemingeneral.

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UDC347.7(083.47)

RecognitionandEnforcementofKosovomadeArbitralAwardsinNewYorkConventioncountries:AComparativeStudy

AnjezëGojani*

Abstract

Caught in themidst of consistent efforts towards the development of international commercial

arbitration inKosovo, it is inevitable to talkabout the elephant in the room.Due to its special

statusasacountry,theRepublicofKosovoisnotyeteligibletobecomeacontractingstatetothe

Convention on Recognition and Enforcement of Foreign Arbitral Awards (hereinafter: theNew

YorkConventionorConvention).1Thisstatusquo ispuzzling,andassuch itmay introduce legal

obstaclestotherecognitionandenforcementabroadofthearbitrationawardsrenderedinKosovo.

Theobjectiveofthispaperistoprovideananswertothefollowingquestions:towhatextentare

KosovomadearbitralawardsenforceableinNewYorkConventioncountries;and,fromapractical

viewpointdoestheabsenceofKosovototheNewYorkConventionsignatorylistpresentatangible

problemforchoosingKosovoasaseatofarbitration.

ThepaperwillnotdiscussthelegalstatusoftheRepublicofKosovotowardssigninginternational

treaties,thisbeingthepublicinternationallawaspectofthetopic.Norwillthepaperanalyzethe

issueontheassumptionofahandfulofcountrieswhichmightassessthatKosovohassucceeded

theconventionfromthe formerYugoslavia.Inaddition, inabsenceof legalpractice,thepaper is

confinedtoatheoreticalanalysisonly.

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

in Kosovo. 1 The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958), available at

http://www.newyorkconvention.org/english

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I. Introduction

ThedevelopmentofcommercialarbitrationinKosovo,andtheeffortsinpromotingthecountry

as<<arbitrationfriendly>>arenotrarelyperceivedasambiguouswithregardstothelastloop

ofthecycle,namelytherecognitionandenforcementofarbitralawardsrenderedinKosovoasa

seatofarbitrationandwhichseekenforcementabroad.Itisapparentthatthepotentialusersof

arbitrationinKosovohavetheperceptionthattheawardsoriginatingfromthecountrywould

notberecognizedandenforcedinotherjurisdictions.Thisisduetoasetofobstacles:firstly,the

currentnon‐abilityofKosovotobecomeacontractingstate totheNewYorkConvention,and

secondly, due to the non‐recognition of Kosovo statehood. And perhaps rightly so. The legal

certaintyinenforcingarbitralawardsisdistinguishedastheonecrucialelementtobeassessed

bythepartieswhenselectinginternationalarbitrationasadisputeresolutionmechanism.

This paper will first provide a brief overview of the national legislation related to the

recognitionandenforcementofarbitralawards inKosovo,namely the treatmentprovidedby

theapplicablearbitrationlegislationtoforeignarbitralawardsthatseekenforcementinKosovo.

The focus of the paper will be the individual approach of several New York Convention

signatories towards enforcement of arbitral awards rendered in non‐Convention states.

Although a mere review of respective national legal provisions will not allow for a

comprehensiveassessment,itwillcertainlyprovideanestimateofthelevelofrisk(ifsuchrisk

exists at all) in choosing Kosovo as a seat of arbitration, should the award be bound to

enforcementabroad.

II. ArbitrationinKosovo

Kosovo has a Law on Arbitration2that governs arbitration proceedings, including the

recognition and enforcement of arbitration awards. The legislator has chosen to explicitly

mentionEuropeanandinternationalarbitrationstandardswithinthepreamble.3Itcanbesafely

assumed that theadoptionof these standards isobvious for twoof themost celebrated legal

texts of the field, theUNCITRALModel Lawon InternationalCommercialArbitration4and the

NewYorkConvention.

The lawisaseparatepieceof legislationasopposedtomanycountrieswhichhavechosento

regulate this area within their civil procedure codes, and it addresses both, international

2 Kosovo Law on Arbitration No. 02/L-75. 3 Ibid., the preamble to the Law on Arbitration states the following: “…For the purpose of establishing a set of modern rules, that govern arbitration and the recognition and enforcement of arbitration awards made inside and outside of Kosovo, and that are in line with recognized European and international arbitration standards.” 4 UNCITRAL Model Law on International Commercial Arbitration (1985), with amendments as adopted in

2006, available at http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.html

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commercialarbitrationanddomesticarbitration.Duringthedraftingprocessthelegislatorhas

reliedheavilyontheprovisionscontainedinarbitrationlawsofcountrieswithwell‐developed

commercial arbitration systems, including the German5and Austrian6arbitration acts. Also,

withseveralmodifications,thelawmainlyembracestheprovisionsofthefirstversionofModel

Lawof1985,asasetofrulescommittedtotheentirearbitralprocess.Lastly,thelawhascopied

almost entirely the provisions of the New York Convention, the grounds for refusal of

recognitionandenforcementofarbitralawards,andtheformrequirementstherein.

i) RecognitionandenforcementofdomesticarbitralawardsinKosovo

The last step in the procedure after the arbitral tribunal has rendered a final award is

enforcement.Thisbeingsaid,therecognitionandenforcementprocedurebecomesofparticular

importance when a party does not voluntarily comply with the final arbitral award. The

respectiveprovisions of the lawon recognition and enforcementmake a distinctionbetween

domesticawardsandforeignawards.

Theprocedureforrecognitionandenforcementofdomesticawardsisstraightforward.Thelaw

does not make reference to the recognition itself, thereby implying that the recognition is

immediate and informal, undergoing a non‐contested procedure.7As for the enforceability of

theawardtheprocedureissimple–thereshouldbenogroundsforsettingasidetheawardand

thearbitral awardora certifiedcopyof it shall accompany the request.Todate, thenational

courtshavenotfacedmanysituationsofenforcingdomesticarbitralawards,mainlyduetothe

mechanismbeinganoveltywithinthelegalsystemofthecountry.

Itisalsounfortunatethat,forthepurposesoflegalresearch,theaccesstocourtdocumentsfora

numberofdomesticarbitrationsalreadyconductedisarockyroadtofollow.Theaccesstosuch

decisionsiscrucial inordertocreateanideaofthelevelofunderstandingof judgesandtheir

legalawarenessinreachingdecisionsonrecognitionandenforcement.Theapproachofjudges

towardsdomesticarbitralawardsmay,byreference,presentagoodindicatoroftheirapproach

towardsforeignarbitralawards.

ii) RecognitionandenforcementofforeignarbitralawardsinKosovo

Asidefromdomesticawards,thelawalsoaddressestherecognitionandenforcementofforeign

arbitral awards. Although it does not define a foreign arbitral award, the title of Article 39

5 Code of Civil Procedure (Bundesgesetzblatt (BGBl., Federal Law Gazette), as promulgated on Dec. 5, 2005. 6 Austrian Code of Civil Procedure, RGBl. Nr. 113/1895 as amended by the 2013 Amendment to the Austrian Arbitration Act -“SchiedsRÄG 2013”, BGBl. I Nr. 118/2013 in force as of 1 January 2014. 7 Ibid., Art. 38(1).

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implies that any award made outside Kosovo is considered as foreign. Hence, the legislator

distinguishestheseatofarbitrationasthedeterminingfactorforthenationalityoftheaward.

Article 39 stays entirely within the framework of the New York Convention. The following

paragraphisoneofthepeculiaritiesofthelaw:

“Kosovo courts shall recognize arbitral awardsmade outside ofKosovo as effective and enforce

themifsuchawardsarerecognizedandarepublishedasenforcedaccordingtoparagraph2till5of

thisArticle.”8

It is evident that by enacting the said provision, Kosovo has ensured that all foreign arbitral

awardsarerecognized.Infact,thecontentofthisarticlecaneasilybeconsideredasadefacto

reciprocity clause. While in determining the nationality of the arbitral award the place of

renderingtheawardisconclusive,Kosovodoesnotimposeanyrestrictionswhatsoever.Tothis

end,anyforeignawardwillberecognizedandenforcedprovidedthegroundsfordismissalare

notsatisfied.

Infurtherglaceofthesamearticle,itisevidentthattheArticleIVoftheConventionregarding

provisionsontherequestforrecognitionandenforcement,ArticleV(1)ongroundsforrefusal

ofrecognitionandenforcementwhichmaybeinvokedbytheparties,aswellasArticleV(2)on

exofficiogroundsforrefusalofrecognitionandenforcementhavebeenadoptedwithinArticle

39ofthelaw.

Although the law does not expressly refer to the New York Convention, as for instance the

GermanCodeofCivilProcedure,itbasicallyfollowsthesamegroundsandformrequirements.

With this approach the legislator hasmade adefacto unilateral accession to the convention.

AccordingtoArticle39(4),thegroundsfordismissalofrecognitionandenforcementare:

a) apartytothearbitrationagreement,underthelawapplicabletothisagreement,didnothavethe

capacitytoact;orthearbitrationagreementwasnotvalidunderthelawdeterminedasapplicable

by thepartiesor, in theabsenceof suchdetermination,under theapplicable law in the territory

wheretheawardwasmade;

b) thepartyagainstwhomtheawardisinvokedwasnotgivenpropernoticeoftheappointmentofan

arbitratororofthearbitralproceedingsorwasotherwiseunabletopresentitscase;

c) theawarddealswithanissuenotcontemplatedbyornotfallingwithinthetermsofthesubmission

toarbitration,oritcontainsdecisionsonmattersbeyondthescopeofthesubmissiontoarbitration,

providedthatifthedecisionsonmatterssubmittedtoarbitrationcanbeseparatedfromthosenot

8Ibid., Art. 39(1).

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sosubmitted,thatpartoftheawardwhichcontainsdecisionsonmatterssubmittedtoarbitration

mayberecognizedandenforced;

d) thecompositionofthearbitraltribunalorthearbitralprocedurewasnot inaccordancewiththe

lawapplicabletoit;and

e) the award has not yet become binding on the parties, or has been set aside or suspended by a

competentauthorityoftheterritoryinwhich,orunderthelawofwhich,theawardwasmade.

Based on the above, the onlyminor distinctionwith the language of the convention is to be

found in subparagraph (d), a distinctionwhich is of nomaterial significance. The convention

usesthefollowinglanguagewhendefiningsubparagraph(d):

… thecompositionofthearbitralauthorityorthearbitralprocedurewasnot inaccordancewith

theagreementoftheparties,or,failingsuchagreement,wasnotinaccordancewiththelawofthe

countrywherethearbitrationtookplace.9

Apart from the above grounds for dismissalwhich can only be invoked by the party against

whom the recognition and enforcement is sought, Kosovo local courts may exofficio refuse

recognition and enforcement under two situations: first, if the dispute is not capable of

settlementbyarbitrationunder the lawapplicable inKosovo, andsecond, if such recognition

and enforcementwould be contrary to the public policy ofKosovo.10Again, the local lawhas

adoptedentirelyArticleV(2)oftheConvention.

Furthermoretotheabove,thelawcombinestheprovisionsoftheModelLawandtheprovisions

of theConventionwhensettingthe formrequirementsandtheprocedure forrecognitionand

enforcement.The followingdocumentsshouldbesubmittedwhentherequest forrecognition

andenforcementofanarbitralawardisfiled:

a) theauthenticatedoriginalawardoradulycertifiedcopythereof;

b) theoriginalarbitrationagreementoradulycertifiedcopythereof;and

c) a duly certified translation of thearbitration agreement and thearbitral award intoan official

languageofKosovoiftheawardoragreementisnotmadeinanofficiallanguageofKosovo.11

Inastrictreadingoftheaboveonecanapprisethattherequirementoftheoriginalawardorthe

certifiedcopyofitcorrespondstoboththeModelLawandtheNewYorkConventionwhilethe

requirement of providing the original arbitration agreement corresponds to the New York

Convention.Also,thecertifiedtranslationrequirementisadoptedfromtheModelLaw.Theidea

9 New York Convention, Art. V(1)(d). 10Kosovo Arbitration Law, Art. 39(5). 11 Ibid., Art. 39(3)

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behindthisdistinctionistodemonstratethatthelawdoesnotimposemoreonerousconditions

thanmostdomestic lawsofothercountries, theModelLaw,or theNewYorkConvention, for

partiesseekingrecognitionandenforcementofaforeignawardinKosovo.

III. TheNewYorkConvention

Yearsago,itwasrightfullysaidthattheenforcementofanarbitralawardisthe“weakestlinkin

theentirechainofinternationaldisputeresolution”.12Currently, inaspanof fifty‐sevenyears,

thereare156parties13totheNewYorkConventiononRecognitionandEnforcementofForeign

ArbitralAwards.ThelastcountrytoaccedewasAndorrain2015.14Withthisnumbercovering

the vast majority of independent countries, this weak link is slowly closing down, therefore

continuously contributing to further developing international arbitration into the preferred

disputeresolutionmethod.Nonetheless,therearestillahandfulofcountrieswhichsubjecttoa

rangeofreasonsremainnon‐signatoriestotheConvention,Kosovoisincluded.

The idea behind the New York Convention, back in its drafting days was to facilitate the

recognition and enforcement of arbitral awards, mainly because this process included the

involvementof national courts, thusmaking room forpotential barriers in enforcement.This

legal uncertainty was gradually altered by the number of countries which adhered to the

Convention, thereafter contributing to further development of international commercial

arbitration.

For thepurposeof this discussion, themost relevantpart of theConvention is theprovision,

whichprovides for thescopeof theConvention,andthenationalityofawardsthat fallwithin

the scope of this Convention. According to Article I (1), the Convention applies to all foreign

awards,namelythearbitralawardsmadeintheterritoryofaStateotherthantheStatewhere

therecognitionandenforcementofsuchawardissought.

In terms of its scope, for countries thatwished to limit the application of this Convention, it

providestworeservations,namely:

“When signing, ratifying or acceding to this Convention, or notifying extension under articleⅩ

hereof,anyStatemayon thebasisof reciprocitydeclare that itwillapply theConvention to the

recognitionandenforcementofawardsmadeonlyintheterritoryofanotherContractingState.It

12 Marc Blessing, “The New York Convention: the major problem areas”, New York Convention of 1958, ASA Special Series No. 9, 1996, at p. 20. 13 At the time that this article is being written, the official web page of UNCITRAL available at http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention_status.html provides that there are 156 signatory countries. 14 The Convention has entered into force for Andorra on September 17, 2015.

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may also declare that it will apply the Convention only to differences arising out of legal

relationships,whethercontractualornot,whichareconsideredascommercialunderthenational

lawoftheStatemakingsuchdeclaration.”15

Thelatterreservationistheso‐calledthe“commercialreservation”,whichisnotofrelevanceto

the arguments of this paper. The countries that have opted in to this reservationwill refuse

recognitionandenforcementofaforeignarbitralawardifthedisputeisnotcommercialunder

thenationallawofthecountrywhereenforcementissought.16Thus,itallamountstothenature

ofthedispute,makingthisreservationofarathersubstantivekind.

i) Reciprocityreservation

The reciprocity reservation17limits the Convention’s scope of application to foreign arbitral

awardsmadeintheterritoryofoneofthecontractingstatesoftheConvention,therebyruling

outitsapplicationtoforeignawardswhicharerenderedinnon‐signatorystates.Redfernet.al.

havemaintained that this limitation isbecomingarelic, therefore therestrictionsposedby it

shouldnotbeexaggerated.Therationaleof thisstatement liesonthe fact that thenumberof

countriesthatareadoptingtheconventionisgrowingyearbyyear,thereforelinkingthemajor

tradingnationsanddiminishingthesignificanceofthisreservation.18

Forasmuch as the latter displays the reality it is not the reality which applies to awards

renderedinKosovo.ThecountryisnotinapositiontoadheretotheConvention,yetmorethan

halfofthesignatoriestotheNewYorkConventionstillapplythereciprocityreservation.

ThequestionthatariseshereiswhetherunderthesecircumstancesKosovomadeawardswill

risk finding theproperenforcement forumabroad?Ageneralanswercouldpointout the fact

that the non‐application of the New York Convention does not imply a per se refusal of

recognitionandenforcementofanawardofthisorigin.Rather,theenforcingstatewillenforce

theawardbasedon adifferent legal instrument, including thenational lawwhich sometimes

containsmorefavorableprovisionsorothertreatiesandconventions.

ii) Morefavorablenationallawprovisions

15 New York Convention, Article I(3). 16 New York Convention, Art. I(3). 17 Ibid. 18 Alan Redfern; Martin Hunter; Nigel Blackaby; Constantine Partasides “Law and Practice of International Commercial Arbitration” (2004), Ed. 4, at p. 442.

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Inlinewiththepreviousparagraph,partieslookingfortheenforcementofanarbitralawardare

allowed to shop amongst the New York Convention, the national law, or other treaties and

conventions.With the influence of the New York Conventions, thismight be rarely relevant.

Nevertheless, the freedomof choice becomes particularly relevant for awards that cannot be

enforcedundertheconvention.

According to Van den Berg, the rationale of the drafters of the New York Convention went

beyond the establishment of a uniform regime of recognition and enforcement of arbitral

awards, heading towards facilitating recognition and enforcement of foreign arbitral awards

through allowing the application of national law or other treaties which might make this

processeasier.19This isembodiedwithinArticleVII (1)of theConvention, alsoknownas the

morefavorablerightprovision:

… The provisions of the present Convention shall not affect the validity ofmultilateral or

bilateralagreementsconcerning therecognitionandenforcementofarbitralawardsentered

intoby theContractingStatesnordepriveany interestedpartyofany righthemayhave to

availhimselfofanarbitralaward inthemannerandtotheextentallowedbythe laworthe

treatiesofthecountrywheresuchawardissoughttobereliedupon.

Thechoicesofferedbytheprovisionrangebetweenthenationallawoftheenforcingcountryor

othertreatiesinforce,bothbilateralandmultilateraltreaties.Itwillbeassumedherethatfor

themostpart,Kosovomadearbitralawardswillhavetochoosethedomesticlawofthecountry

of enforcement, considering the absence of bilateral treaties of this kind, but also the

controversialapplicabilityofothermultilateraltreaties.

IV. Enforcement of Kosovo‐made arbitral awards in New York Convention

jurisdictions

Inconsiderationofthefactthattherearenoclearprecedents,mainlyduetoalownumberof

arbitrationawardsmadeinKosovoandseekingenforcement,adegreeofuncertaintytotheidea

of arbitrating in Kosovo is certainly present. For this reason, it is of interest to analyze the

approach takenby the legislationregarding thematteratstakeofarangeofcountrieswhich

currentlyareandcouldbepotential tradepartnerswithKosovo,namely theEuropeanUnion

memberstatesandTurkey.

19 Albert Jan van den Berg, “The New York Convention of 1958: An Overview”, p. 21, available at

http://www.arbitration-icca.org/media/0/12125884227980/new_york_convention_of_1958_overview.pdf

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Atthetimeofthispaper,outoftwenty‐eightEUmemberstateswhicharecontractingstatesto

the Convention, eighteen of them still have a reciprocity clause in force. The following

paragraphswillpresentanoverviewoftherelevantlegislationoftwelveEUmemberstatesand

Turkey.Fromapracticalviewpoint, fornineoutof thirteencountriespresentedbelowwhich

have adhered to the reciprocity clause, an interested party will have to assess whether

arbitratinginKosovopresentsariskylegalmove.SaveforGreece,allothercountrieswhichare

presentedbelowhaverecognizedKosovostatehood.

Austria

TheAustrianCodeofCivilprocedureexplicitlyrefers to theNewYorkConventionwhereas it

also cross refers to the relevant provisions on the recognition and enforcement of foreign

arbitralawards,withinExekutionsordnung,theAustrianEnforcementAct.20Thelegislatorhere

wasoriginallyaproreciprocityparty.Nonetheless,in1988itwithdrewfromthisreservation.

Hence,ifhypotheticallythereciprocityreservationwouldstillbeinforce,onehastosearchfor

otherinstrumentswhichprovidesufficientlegalbasisforrecognitionandenforcementofnon‐

convention arbitral awards. In this line, the country is a party to a number of international

treaties and conventions that could eventually provide enough scope for enforceability of a

foreign so callednon‐convention award. Such instruments include theGenevaConvention on

the Execution of Foreign Arbitral Awards,21the European Convention on International

CommercialArbitration,22aswellastheConventionontheSettlementof InvestmentDisputes

betweenStatesandNationalsofotherstates(“theICSIDConvention”).23

Thus, in absence of applying the New York Convention, a common ground for Austria and

Kosovo couldbe the ICSIDConvention. TheRepublic ofKosovo is a party to this convention,

whichhasenteredintoforcein2009.Unsuitably,anarbitralawardmaynotalwaysfallwithin

thescopeofthisconvention,asnoteverydisputecanqualifyasaninvestmentdispute‐bound

tobearbitratedinaccordancewithICSIDarbitrationmechanism.

20 Austrian Code of Civil Procedure, RGBl. Nr. 113/1895 as amended by the 2013 Amendment to the Austrian Arbitration Act -“SchiedsRÄG 2013”, BGBl. I Nr. 118/2013 in force as of 1 January 2014. 21 The entry into force of the New York Convention was intended to replace this convention. Thus, the New

York Convention states which are also signatories to this treaty can no longer apply the Geneva Convention; see

New York Convention, Art. VII(2) 22 European Convention on International Commercial Arbitration (1961), United Nations Treaty Series, Vol. 484, p. 349. 23 Convention on the Settlement of Investment Disputes between States and Nationals of other states (Washington), in force as of October 14, 1966.

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Furthertotheabove,animportanttreatytoberecognizedhereisthebilateralagreementwith

Austria on Promotion and Protection of Investments.24This agreement is commonplace

between countries and does indeed favor arbitration as an alternative dispute resolution

methodintheeventofadisputebetweenthetwo.Nonetheless,thecontentoftheagreement,

oncemore, confirms the importanceof theNewYorkConvention in internationalarbitration.

Article16oftheagreement,whichcanbeperceivedassafeguardrecognitionandenforcement

clause,maintainsthat:

“AnyarbitrationunderthisPartshall,attherequestofanypartytothedispute,beheldinastate

that isparty to theConventionon theRecognitionandEnforcementofForeignArbitralAwards

signed inNew York on 10 June 1958. Claims submitted to arbitration under this Part shall be

consideredtoariseoutofacommercialrelationshiportransactionforpurposesofArticle1ofthe

NewYorkConvention.”

Basedontheabove,onecansafelyconcludethattheriskofrefusalofrecognitionofawardsin

investmentdisputesbetweenthetwocountriescanbeavoided.

Despite the existenceof ICSIDand the aforementionedBIT, thequestionof enforcingKosovo

madearbitralawardsinAustria(excludinginvestmentdisputes)becomeseasierwiththelack

of the reciprocity reservation. This context implies that Kosovo awards will be enforced in

Austriawithin thescopeof theNewYorkConvention,andwillbe treatedasequal toarbitral

awardsfromsignatorycountriestotheConvention.

Belgium

BelgiumhasadoptedoneofthetworeservationsprovidedwithinArticleI(3)oftheConvention.

This country, which has ratified the Convention in 1975, has declared that it will apply the

Convention to the arbitral awards which has been made only in the territory of another

contractingstate.Thus,attheoutset,thereservationmightbeperceivedasaharshlimitationto

enforcementofawardsofadifferentorigin.

Nonetheless,shoulditnotbepossibletoapplytheconvention,therecognitionoftheawardsof

thisdecentshallbebasedontherelevantrulesoftheBelgianJudicialCode.25Therulesofthe

code26on the application of foreign awards have a similar content to the provisions on the

24 Agreement between the Government of the Republic of Kosovo and the Government of the Republic of

Austria on Promotion and Protection of Investments, ratified on February 16, 2010, available at

http://www.mfa-ks.net/repository/docs/Marrveshja_Ks-Aus_(anglisht).pdf 25 Belgian Judicial Code (Code Judiciaire), September 1, 2013. 26 Ibid., Art. 1719 through 1723.

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recognitionandenforcementofdomesticawards.Thus, inconsiderationof the fact thatthese

rulesdonotprovidemoreonerousconditions,thepartiesareinthepositiontochoosethemore

favorableprovisionsforenforcement‐theConventionorthenationallaw.

ApartfrombeingasignatoryoftheNewYorkConventionasthemostfamousinstrumentofthis

kind,27BelgiumandKosovohavesignedabilateral investment treaty in2010.28Similar to the

bilateral treaty between Kosovo and Austria, the provisions of this treaty request that any

arbitration arising out of it should be held in a New York Convention country.29Thus, the

currenttreatieswhichmightseemrelevanttothispaperareclassicBITsbynatureherebynot

remotelysimilartoabilateraltreatyonrecognitionandenforcementofarbitralawards.

Basedon theabove,and inconsiderationofa lackof abilateral treaty for thepurposeof the

recognition and enforcement proceedings, all requests for recognition and enforcement of

Kosovomade arbitral awards inBelgium canbe based on the legal provisions of theBelgian

JudicialCode.

Bulgaria

WhenBulgariabecameaparty to theNewYorkConvention in1962, thecountryadoptedthe

Article I (3) reciprocity reservation. Facing this circumstance, a request for recognition and

enforcementofanon‐conventionawardshallbebasedonadifferentlegalinstrument.Hence,a

party in possession of an arbitral award from a non‐convention country to be enforced in

Bulgaria should request the latter based on the respective provisions of the Private

InternationalLawCode.30

TheseprovisionsaresomewhatsimilartothecontentoftheNewYorkConvention,andrefusal

ofrecognitionandenforcementmaybegrantedonlyifoneoftheconditionswithinArticle118

through120hasbeensatisfied.31

Bulgaria is also aparty to theEuropeanConvention on International CommercialArbitration

andthe ICSIDConvention.The formerdoesnotapply toKosovo,whereas the lattermayonly

applytorecognitionandenforcementofICSIDawardspertainingtoinvestmentdisputes.

27 Belgium is also a party to the European Treaty on International Commercial Arbitration (1961). 28 Agreement between the Government of the Republic of Kosovo and the Belgium-Luxembourg Economic Union on the Reciprocal Promotion and Protection of Investments, available here http://www.mfa-ks.net/repository/docs/Marrveshja_Ks-Belgjike018_(anglisht).pdf 29 Ibid., Art. 12(3). 30 Bulgarian Private International Law Code, in force as of May 17, 2005. 31 Ibid.

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Croatia

Asopposedtothecountriesdiscussedabove,Croatia isoneof the fewsignatoriestotheNew

York Conventionwhich has adhered to both, the reciprocity reservation and the commercial

reservation. This approach may be perceived as hostile to Kosovo made arbitral awards.

However, because the Convention will not apply to the latter awards, the Croatian Law on

Arbitrationprovidesfallbackprovisionsontheenforcementofnon‐conventionawards.

AccordingtoArticle40(1)oftheCroatianArbitrationLaw,therearethreegroundsforrefusalof

recognitionandenforcementof foreignawards,namely1)theopposingpartyisabletoprove

reasonsprescribedintheCroatianArbitrationActforsettingasidetheaward,2)theawardis

stillnotbindingon theparties;or3) thecourtat theseatof thearbitrationhassetaside the

awardorsuspendedtheeffectivenessoftheaward.32

CzechRepublic

CzechRepublictodaycontinuestoapplythereciprocityreservationofArticleI(3),thereafter

strictlyapplyingtheConventiononlytothearbitrationawardsmadeinasignatorycountry.As

the circumstances dictate, if a Kosovomade arbitral awards is seeking enforcement in Czech

Republic,thepartyshouldturntothePrivateInternationalLawAct.33

Inthisregard,incomparisontothenationallegislationofthecountriesdiscussedabove,thisact

ispeculiarinoneaspectofit.Article120readsasfollows:

“Thearbitralawards issued ina foreign countrywillbe recognized in theCzechRepublicas the

Czechand enforcedarbitralawards, if reciprocity is guaranteed.Reciprocity is considered to be

guaranteedalso inthecasethatonestatedeclaresgenerally foreignarbitralawardsenforceable

undertheconditionofreciprocity.”34

Itisevidentthat,Czechlegislationisratherrestrictive,asituses“double‐reciprocity”.Basedon

this,anawardwhichdoesnotfallwithinthescopeoftheConventionmightalsonotbeeligible

for recognition if the country of origin does not declaratively guarantee enforcement of all

foreignawards.Inthissense,Article39oftheKosovoLawonArbitrationcanbeinvokedasthe

reciprocityclauseofthecountryoforiginofthearbitralaward.Absentprecedent,onecanonly

assumethatCzechcourtswillrecognizethelatterasadeclarationofreciprocity.

32 Arbitration in Croatia, by Hrvoje Bardek (CMS), p. 258, available at

https://eguides.cmslegal.com/pdf/arbitration_volume_I/CMS%20GtA_Vol%20I_CROATIA.pdf 33 Czech Private International Law Act, in force as of January 1, 2014. 34 Ibid.

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France

France is one of the countries that have adhered to the reciprocity reservation. Despite this,

through its national legislation, France has decided to offer more favorable provisions on

recognitionandenforcementofforeignawards.Thislegalregimenistheultimatealternativeto

recognitionandenforcementofarbitralawardsrenderedinKosovo.

According to Article 1520 of the Code of Civil Procedure,35an arbitral award can be refused

recognition and enforcement when: (1) the arbitral tribunal wrongly upheld or declined

jurisdiction;or(2)thearbitraltribunalwasnotproperlyconstituted;or(3)thearbitraltribunal

ruledwithoutcomplyingwiththemandateconferreduponit;or(4)dueprocesswasviolated;

or(5)recognitionorenforcementoftheawardiscontrarytointernationalpublicpolicy.These

grounds are less burdensome if compared to the content of Article V of the New York

Convention.

Because of the above, the significance of the reciprocity reservation in France has vastly

diminished, to the extent of being of no practical significance. This stance of the French

legislationanditsapplicationofthenationalcourtsensurethatanarbitralawardrenderedin

Kosovowillnotbedeniedrecognitionandenforcementbecauseofitsorigin.

Germany

Germanywithdrewthereciprocityreservationin1998,therebycommittingitselftorecognizing

and enforcing all foreign arbitral awards regardless of their place of origin. As opposed to

approach of the previous discussed EU member states, the German legislation is

straightforward in the sense that the Code of Civil Procedure solely refers to the New York

Convention,36anddoesnotofferotherprovisionsforthepartiestobeabletochoose.Itseems

that because of the lack of the reciprocity reservation, the German legislator did not see the

needindraftingotherprovisionsfornon‐conventionawards.

The civil procedure code also de facto refers to Article VII of the Convention, by way of

acknowledging that other recognition and enforcement instruments which may be more

favorablewill not be affected by the Convention provisions. Based on the above, the parties

seekingrecognitionandenforcementofKosovomadearbitralawards inGermanywillnotbe

limitedindoingso.

35 French Code of Civil Procedure, Book IV – Arbitration, in force as of May 14, 1981. 36 German Code of Civil Procedure, Art. 1061.

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Volume 2

Greece

Greece, as one of the countries to the New York Convention has made the reciprocity

reservation.TheapplicationoftheConventionhasbeenallowedthroughalegislativedecree,as

animplementinglegislation.37However,inconsiderationofthereservation,thedecreeisofno

relevancetothearbitralawardsoriginatinginKosovo.

Insuchscenario,thepartiesshouldturntotheGreekCodeofCivilProcedure,38whichappliesto

all foreignawardsthatareissuedbythenon‐conventionstates. Inaddition,theexistenceofa

precedentofthiskindwouldbeofmuchimportanceforthepurposesofthisdiscussion,mainly

becauseofthestanceofGreecetowardsthestatehoodofKosovoanditsrecognition.

Italy

Italy has not adhered to any of the reservations offered by the New York Convention. The

implementinglegislationofthelatteristheCodeofCivilProcedure,39withitsrelevantsectionin

arbitration.Facinga lackof thereciprocityreservation, thegrounds for refusalof recognition

andenforcementarethesameforallforeignarbitralawards,includingKosovomadeawards.

TheNetherlands

TheNetherlandsisoneofthecountrieswhichhavedeclaredthatitwillapplytheConventionto

the recognitionandenforcementof awardsmadeonly in the territoryof another contracting

state, thereby embracing the reciprocity reservation. This circumstance guarantees the non‐

applicationoftheConventiontotheawardsoriginatinginKosovo.

Fortheabovereason,oneshouldturntoArticle1076oftheDutchCodeofCivilProcedure.This

provision intendstoregulaterecognitionandenforcementofawards incaseswherenoother

treaty isapplicable.Thegrounds for refusingsucharbitralawardsare the following:novalid

arbitration agreement under the law applicable thereto exists; the arbitral tribunal was

composed in violation of the applicable rules; the arbitral tribunal did not comply with its

mandate; the arbitral award is open to appeal to arbitrators or the courts in the country in

whichtheawardwasmade; thearbitralawardwassetasidebyacompetentauthorityof the

37 Legislative Decree 4220/1961, Art. 36, Statute 2735/1999. 38 See generally Enforcement Of Foreign Judgments And Foreign Arbitral Awards In Greece, by Meidanis

Pagoulatos & Associates Law Office, available at http://www.greeklawdigest.gr/topics/judicial-system/item/19-

enforcement-of-foreign-judgments-and-foreign-arbitral-awards-in-greece 39 Italian Code of Civil Procedure - Book IV, Legislative Decree of February 2, 2006.

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countryinwhichthatawardwasmade.Thecourtcanalsorefuserecognitionandenforcement

ifitiscontrarytopublicpolicy.

Poland

Poland is one of theNewYork Convention signatory countrieswhich havemade both of the

reservationsof theConvention. Thus, similar to theNetherlands and the countriespresented

above, inabsenceofapplicationoftheConvention,onefallsbacktotheprovisionsofnational

lawregardingrecognitionandenforcementofforeignarbitralawards.

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

According to Article 1214 and 1215 of the code,40the grounds for refusal of recognition and

enforcementare:1)therewasnoarbitrationagreement,theagreementisnotvalid,ineffective,

orhaslostitseffectiveness;2)thepartywasnotgivenpropernoticeoftheappointmentofan

arbitrator,orofthearbitralproceedings,oritwasotherwiseunabletopresentitscasebefore

thearbitral tribunal;3) thearbitralawarddealswithadisputenotcoveredbyorbeyondthe

scopeof thearbitrationagreement;4) the compositionof thearbitral tribunalor thearbitral

procedurewereviolated;or5)thearbitralawardhasnotyetbecomebindingforthepartiesor

hasbeensetasideor theenforceability thereofhasbeensuspendedbythecourt inwhich,or

underthelawofwhich,theawardwasmade.

Slovenia

Slovenia had initially made a reservation with regards to the reciprocal application of the

Convention. However, in 2008 the country withdrew the reciprocity clause reservation. The

SlovenianArbitrationActmakesdirectreferencetotheNewYorkConventionforthepurposes

ofrecognitionandenforcementofarbitralawards.41

Because of the fact that Slovenia opted out of reciprocity, the provisions on recognition and

enforcementapplyequallytoallforeignarbitralawards,regardlessoftheirorigin.42

40 Polish Code of Civil Procedure, Part VII – Arbitration, as amended on October 17, 2005. 41 Slovenian Arbitration Act (2008), Art. 42(2). 42 See generally Recognition and Enforcement of Domestic and Foreign Arbitral Awards in Slovenia, by Aleš Galič, available at http://www.pf.uni-lj.si/media/04.galic.sum.eng_2013.pdf

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Volume 2

Turkey

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

Nonetheless,theTurkishlegislatorhasmadesuretoremoveanystringentrestrictionstowards

foreignarbitralawardsthatarenot fromaNewYorkConventioncountry.TheActonPrivate

InternationalandProceduralLaw43stipulates thatall finalandenforceableorbinding foreign

arbitral awards upon the parties may be subject to enforcement, provided that none of the

grounds for dismissal, which are to a large extent similar to Article V of the Convention,

exist.44Thus, according to the national law, all foreign arbitral awards are subject to

enforcement,ifallpresetconditionsaresatisfied.

V. Conclusion

The New York Convention is the drive behind the success of international commercial

arbitration. In a business world with thousands of cross‐border economic transactions, the

sustainabilityofcommercialarbitrationanditsfurtherdevelopmentiscrucial.

In searching for answers to the thesisof thispaper,unfortunately, auniformresponse isnot

easy to be found. Different countries address the question differently, but alwayswithin the

already allowed contours of international commercial arbitration. The New York Convention

signatories,whoapplythereciprocityreservation,offeraparallellegalregimenforrecognition

and enforcement of non‐convention awards within their respective national legislation. For

countries applying an opt‐out of such reciprocity thereof, the convention is applicable to the

Kosovomadeawardsequallytootherforeignarbitralawards.

Inconsiderationoftheaboveoptions,theideaofarbitratinginKosovoshouldnotbeperceived

wrongly, therefore, as uncertainwith regards to enforcementof arbitral awards abroad.This

beingaccurateforthemainKosovotradingpartners,attheveryleast.

Thus, in assessing the risk of the parties in remaining without a forum for recognition and

enforcementofanawardrenderedinKosovoasaseatofarbitration,wecansafelyassumethat

suchriskisinsignificant(orabsent–herebyavoidingtorunintothedangerofexaggeratingthis

statement).

43 Turkish Act on Private International and Procedural Law No. 5718, in force as of September 12, 2007. 44 Ibid., Art. 60 – 62.

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