ARBITRATION IN THE REPUBLIC OF MACEDONIA

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1 Prof. Dr Arsen Janevski Faculty of Law Justinian I Skopje ARBITRATION IN THE REPUBLIC OF MACEDONIA Establishment and Procedure Rules Having regard to the fact that in former SFRY the Former Trade Arbitration in the Economic Chamber of Yugoslavia, with seat in Belgrade, was the only institutional court of arbitration authorized for resolving of the disputes including international element, and the Permanent Elected Courts within the Economic chambers of the Republics were authorized for resolving of the domestic disputes (ones that do not include international element), following the independence of the Republic of Macedonia, a need for establishment of Permanent Elected Court (Arbitration) in the Economic Chamber of the Republic of Macedonia (hereinafter: Arbitration) 1 occurred. It is arranged with the adoption of the Law on the Economic Chamber of the Republic of Macedonia 2. The Arbitration is established in March The Assembly of the Economic Chamber of the Republic of Macedonia adopted the Rulebook on the Permanent Elected Court (Arbitration) 3, and the Executive Board of the Economic Chamber of Macedonia adopted the Rulebook on the costs in the procedure in front of the Permanent Elected Court (Arbitration) 4. The Rulebook is used in all the procedures in front of the Arbitration, not taking in consideration the time when they were brought. In accordance with the Rulebook, the Arbitration is defined as an institution within the Economic Chamber of the Republic of Macedonia, which is independent in its activities. The procedures for mediation and reconciliation, that is, resolving of the disputes occurring between the trade enterprises in the relationships they freely arrange in relation with the traffic of goods and services (trade disputes), or disputes occurring in the relation with the rights these enterprises freely owe, with exception of those for which there is an exclusive authorization of a court, determined by a law or other kind of regulations (Article 5 of the Rulebook) may be brought in front of the Arbitration. Also the organizations and associations of citizens may present the disputes, originating from the mutual dipozitive relationships in relation with their economic activities, as well as the disputes originating from those relationships with the legal entities and the citizens, in front of the Arbitration (Article 6 of the Rulebook). 1 Permanent Elected Court (Arbitration) within the Economic Chamber of Macedonia 2 Law on Economic Chamber of the Republic of Macedonia published in the Official Journal of the Republic of Macedonia No. 38/90 and 10/91. 3 Rulebook on the Permanent Elected Court (Arbitration) is adopted on the basis of the Article 19 of the Law on the Economic Chamber of the Republic of Macedonia and on the basis of the Article 72 of the Statute of the Economic Chamber of the Republic of Macedonia, at the meeting held on The Rulebook on the costs in the procedure in front of the Permanent Elected Court (Arbitration) is adopted on the basis of the Article 26 of the statute of the Economic Chamber of the Republic of Macedonia, in accordance with the Article 53 of the Rulebook on the Permanent Elected Court in the Economic Chamber of the Republic of Macedonia, and it is adopted by the Executive Board of the Economic Chamber of the Republic of Macedonia, at the meeting held on

2 The Arbitration may resolve the disputes including an international element, in case the following conditions are fulfilled: a) if it is a trade dispute on the rights which the parties freely owe; b) if the parties agree the authorization of the Arbitration; c) if at least one of the parties is a physical entity with a permanent residence in a foreign country, that is, a legal entity with seat in a foreign country and d) if there is not foreseen an exclusive authorization of the Macedonian Court for the dispute (Article 7 of the Rulebook). The agreement on the authorization of the Arbitration is in written form which may be in a form of an arbitrary clause within the frame of the agreement or in a form a special arbitrary agreement, which undoubtedly determines that a certain dispute is resolved by the Arbitration in accordance with the provisions of the Rulebook. The parties may foresee the exceptions to the provisions of the Rulebook in their Agreement, under the condition, it is not contrary to the law and order of the Republic of Macedonia (Article 8 of the Rulebook). The arbitration is obligated to apply the right the parties have agreed on as an authoritative for the essence of the dispute. In case the parties have not agreed on the authoritative right, the Arbitration shall apply the right that the rules for the conflict with the law refer to, and which it considers to be applicable. The Arbitration may decide according to the equity, in case the parties have definitely authorized the Arbitration and if the right authoritative for the arbitrary procedure allows that. In any case the Arbitration is obligated to adopt the decision in compliance with the provisions of the Agreement and to take in consideration the trade customs authoritative for that kind of activity (Article 9 of the Rulebook). The procedure in front of the Arbitration, is usually conducted in Macedonian, however, the parties may agree to conduct the procedure in any other language. The arbiter individual, that is, the Council of Arbitration, right after the appointment, determines the language in which the procedure shall be conducted unless the parties have agreed otherwise. In case one of the parties does not know the language, in which the procedure shall be conducted, the Arbitration shall appoint a translator for the foreign citizen who does not know the language, at his/her cost, not taking in consideration the result of the procedure. The Arbitration pursues its activities through the President of the Arbitration, Deputy President and the arbiter. The arbiters, according to the rule, are selected from the Arbitration list of arbiters, however, each party has the right to select an arbiter not included on the list of arbiters. In that case, there is a need for his/her consent, attached to the lawsuit, objection or reply to the lawsuit. During the selection of the arbiter, the parties are obligated to select the deputies. The deputies are appointed, provided some of the arbiters cannot come, in that case the procedure shall be conducted in front of the deputy and the procedure shall continue. The Arbitration has a secretary, appointed by the Executive Board of the Chamber in accordance with the Statute of the Chamber. The Secretary of the Arbitration may be present at all the appearances at court and meetings of the Arbitration, at which there is voting for adoption of a decision. The Secretary of the arbitration is obligated to be present at all the appearances at court and meetings of the Arbitration, if the arbiter individual or at least one of the members of the Council of Arbitration has not graduated at the Faculty of Law. The Secretary is authorized to remind the arbiters of the legal issues important for the adoption of the decision, and especially for the issues concerning the contents and the form of the monetary activities undertaken during the procedure. 2

3 The disputes in front of the Arbitration are resolved by the Council composed of three arbiters, unless the parties have agreed that the dispute shall be resolved by an arbiter individual. Provided that the parties have agreed that an arbiter shall resolve the dispute, they are obliged to submit the name of the arbiter to the Secretary of the Arbitration. In case the parties fail to do that within 30 days from the day when the reply to the lawsuit is submitted to the Secretary of the Arbitration, that is, from the day of the expiration of the time limit, the arbiter is appointed by the President of the Arbitration. When the dispute is resolved by a Council of Arbitration composed of three arbiters, each of the parties appoints a member of the Council, and they appoint the President of the council of arbitration by mutual consent. If the party does not appoint an arbiter of his/her deputy in its lawsuit or the reply to the lawsuit, the Secretary of the Arbitration shall call it to appoint an arbiter and his/her deputy within 15 days. In case the party fails to do that within the foreseen period of time, the President of the Arbitration shall appoint an arbiter. The President of the Arbitration shall appoint the President of the Council of Arbitration, provided the members of the Council of Arbitration do not appoint the President of the Council of Arbitration within 30 day from the day of their appointment. If the President of the Council of the Arbitration does not accept the appointing or has reasons for his/her disqualification, the members of the Council of Arbitration are obligated, within 8 days, to appoint a new arbiter for the position of a President of the Council of Arbitration. If they fail to do that within the foreseen period of time, the President of the Arbitration shall appoint the President of the Council of Arbitration. The appointed arbiters may be disqualified. They are obligated to inform the parties about the reasons for disqualification, in case the reasons existed prior to their appointing or if the reasons occurred later on. The disqualification of the arbiters may be required in case there are reasons leading to justified suspicion in the objectivity and the independence of the arbiter. The party may require disqualification of the arbiter, it appointed, due to the reasons it became aware of following his/her appointment. The party that requires disqualification of an arbiter is obligated to submit the request to the Arbitration within 15 days from the day when it became aware of the appointment of the arbiter, or within 15 days from the day when it became aware of the reason for disqualification, if those reasons appeared upon the appointment of the arbiter. The opposite party, the arbiter, whose disqualification is required and the other arbiters must be informed about the request for the disqualification. The notice has to be in written form and has to contain the reasons due to which there is a request for disqualification. It is interesting that the Rulebook does not contain the provisions on the person deciding for the disqualification of a member of the Council of Arbitration. There is a gap that may lead to dispute, especially when it comes to the arbiter who denies withdrawing, when there is a request for his/her disqualification. It would be logical for the President of the Council of Arbitration to decide on the disqualification of the members of the Council of Arbitration, and the President of Arbitration to decide on the disqualification of the President of the Council of Arbitration. In case there is a change in the composition of the Council of Arbitration, the hearing is usually repeated. In accordance with the parties, the Arbitration may decide not to repeat the hearing. However, if there is appointing of a new arbiter individual, the hearing must be repeated. When it comes to the arbitrary procedure, it is characteristic that the Arbitration may conduct the procedure in a manner it considers to be most appropriate, under condition to treat the parties equally and each party to be given the 3

4 opportunity to present the facts and the legal statements, requests and attitudes in all the phases of the procedure, unless otherwise determined in the Rulebook. The Arbitration decides whether there shall be appearance at court due to hearing of the witnesses, court experts or the parties, or the procedure shall be conducted on the basis of the documents and other process materials 5. The party that submits submissions, documents or notices to the Arbitration, is obligated to deliver the same documents to the opposite party. The procedure is started with a lawsuit. The lawsuit shall contain all the facts that the lawsuit with which a monetary procedure is being brought consists of, this lawsuit also has to contains the statements on the Arbitration Agreement, if it is concluded, statements on the appointment of the arbiter and the indication of the value of the issue of the dispute. If there are documents, transcripts of the main Agreement and the Arbitration Agreement, unless it is included in the main Agreement, they must be attached to the lawsuit. The plaintiff may supplement all the documents he/she considers to be important or may cite other documents or other evidence he/she intends to submit. The rules do not include precise provision on the reply to the lawsuit, however, Article 32 of the Rulebook foresees that within the period of time determined by the Council of Arbitration, the defendant fails to submit a reply to the lawsuit, not stating the justified reasons; the arbitration decides that the procedure shall continue. It is clear from this provision that the reply to the lawsuit is permitted. The Rulebook also does not contain a precise provision on the Countercharge, which according to our opinion does not mean that the countercharge is not permitted. The Arbitration decides for the other submissions that the parties shall be obliged to deliver, that is, which submission may be delivered and determines the time limit within which they must be delivered. During the Arbitration procedure the party may amend its lawsuit, with exception when the Arbitration considers it not to be appropriate to allow such changes, taking in consideration the dragging out of the procedure due to that, or the damage that might be caused to the other party, or taking in consideration the other circumstances. Considering the time limits for submissions, the Rulebook foresees that the Council of Arbitration determines the time limits and they should not be longer than 30 days. The Council of Arbitration may prolong them when it finds it to be justified. Having regard to the results from failures of the parties, the Rulebook foresees that the arbitration may continue with the procedure even when there is no reply to the lawsuit submitted, and when the party did not appear at court although it was properly invited, not stating the justified reasons for that, as well as, when one of the parties fails to submit the written evidence within the time limit, not stating justified reasons for it, although it was properly invited to do that, the Arbitration may adopt decision on the basis of the evidence it possesses. Considering proof, the Rulebook includes provisions that determine a possibility of the Arbitration, at any time, to require from the parties to submit documents or other evidence within the period determined by the Arbitration. Arbitration may assign one or more court experts. The parties are obligated to make all relevant notifications available to the arbitration or give the important documents and goods on inspection if required. The Council of Arbitration, upon receipt of the court expert report shall forward transcription of the same to the parties and they shall 5 The provision included in Article 27, paragraph 2 of the Rulebook is not completely clear. It has the following wording: The Arbitration decides whether there shall be an appearance at court or the procedure shall be conducted on the basis of documents and other process materials due to hearing of the witnesses, court experts or the parties. 4

5 be able to give their opinion in written form. On a request of one of the parties, the court expert, upon submition of the report, may be heard at a trial where the party may ask questions. In case of an oral trial, the Council of Arbitration is obligated to inform, occasionally, the parties of the date, time and place of the scheduled trial. If there is a hearing of witnesses, each party is obligated, at least 15 days before the trial, to submit the names and addresses of the witnesses, which they have intention, to offer to the Council of Arbitration and the parties, stating the case of the witnessing and the language of the witness stand. The trial is not public except, unless otherwise agreed between the parties. The Council of Arbitration may determine interim measure, on a request of any party, if it considers it necessary in relation to the case of dispute. The Council of Arbitration adopts the decision with the majority of votes. In relation to the process questions, the decision shall be adopted by the President of the Council of Arbitration. The Council of Arbitration may reconsider and change the decision on a proposal of arbiter. The verdict shall be in written form. It is valid and obligatory to the parties. The Council of Arbitration is obligated to explain the verdict, unless the parties have agreed that the same is not necessary. The arbiters are obligated to sign the verdict, which has to include a date and place of adoption. If the Council of Arbitration is composed of three arbiters and if one of them does not sign the verdict, that must be established in the verdict. The verdict may be published only if both parties agree. The Arbitration shall deliver a transcript of the verdict to the parties, signed by the arbiters. The Arbitration may adopt a partial verdict before adoption of a final verdict. It is interesting that the Rulebook does not provide for adoption of inter- verdicts. Each party, upon receipt of the verdict, within 15 days, at the same time notifying the other party, has the right to request for interpretation of the verdict from the Council of Arbitration. The interpretation of the verdict must be in written form and within 15 days of the day of receipt of the request. The interpretation is an integrated part of the verdict. In case when there are technical or other similar errors, each party, notifying the other party, within 15 days, may, upon receipt of the verdict, require from the Court of Arbitration to eliminate all errors. The Council of Arbitration may conduct this on its own initiative. The verdict is corrected in written form. Upon receipt of the verdict, each party, within 15 days, notifying the other party, to request from the Council of Arbitration to adopt an additional verdict for the requests for which the Council of Arbitration failed to adopt a decision. If the Council of Arbitration considers that the request for adoption of an additional decision is founded and that the error may be corrected without further trials or presentation of evidence, is obligated to supplement its decision within a period of 30 days upon receipt of the request. If the parties settle the dispute by an agreement, during the procedure, the Council of Arbitration adopts a decision for termination of the procedure, or if the parties require, and the Council of Arbitration accepts, it adopts a verdict according to the Agreement. The Council of Arbitration is not obligated to explain the verdict. If prolongation of the arbitration procedure before adoption of the verdict becomes unnecessary or impossible, the arbitration is obligated to notify the parties for its intention for termination of the procedure. The arbitration is authorized to adopt a decision for termination of the procedure only if a party or parties do not object the same. The Council of Arbitration shall submit a transcript of the decision for 5

6 termination of the arbitration procedure to the parties, or a transcript of the verdict based on the Agreement. Apart from the above mentioned provisions for the procedure, the Rulebook includes additional provisions that regulate the procedure for mediation for resolving the disputes with an agreement. Thus, according to these provisions, upon request of one of the parties within the frame of authorizations of the Arbitration, a procedure for settlement of disputes by an agreement may be conducted. A good arbitration agreement is not necessary for the procedure for settlement of a dispute by an agreement. The request for conduction of this procedure is submitted to the Secretary of Arbitration who, within 30 days of submission shall request from the opposite party to give their opinion for this request. If the opposite party objects the procedure for settlement of a dispute by an agreement or fails to deliver its opinion within the determined period, it shall be considered that the procedure for settlement of a dispute by an agreement failed. If the opposite party agrees to the proposal for settlement of a dispute by an agreement, the President of the Arbitration shall assign one arbiter or somebody else for a mediator. The mediator inspects the statements and the proposals of the parties, and if necessary collects certain notifications and conducts hearings of the parties. The mediator completes a written proposal for an agreement and submits the same to the parties. If the parties conclude an agreement, its content shall be entered in a register signed by the parties and the mediator. The register for the conducted settlement of a dispute by an agreement is valid as a court decision. If the parties fail to settle the dispute by an agreement, it shall be considered that the procedure for settlement of a dispute by an agreement failed. The statements of the parties, submitted in the procedure for settlement of a dispute by an agreement, do not have significance for the further arbitration procedure. Apart from these rules, normative acts of the arbitration and the Law on Monetary procedure of the Republic of Macedonia 6, and the Law on Settlement of the Conflict between the Law and the Regulations of other countries in certain relations 7. Cooperation of the Arbitration with other arbitrations and numbers of cases The Arbitration of the Economic Chamber of the Republic of Macedonia has, so far, concluded cooperation agreements with the arbitrations of the following countries: Croatia, Slovenia, Serbia and Montenegro, Bulgaria, Ukraine, and the Russian Federation. From its establishment until today, there have been 24 requests submitted for conducting of a procedure in front of the Arbitration, from which 3 cases relate to domestic legal entities, and the rest of the cases relate to disputes with international element. Relatively small number of cases in front of the Arbitration were influenced by many factors, such as: the political condition in the country and the region; the small number of investments in the country; and especially the discussion in the last two years whether the Economical Chamber should continue its work, in the current 6 The Law on Monetary Procedure is published in the Official Journal of the Republic of Macedonia No. 33/98 and 44/ Law on Settlement of the conflict between the Law and the Regulations of other countries in certain relations Official Journal of the SFRY, No. 43/82, 72/82, which are in compliance with article 5 of the Constitutional Law for Conduction of the Constitution of the Republic of Macedonia, is applied as a republic regulation ( Official Journal of the RM, No. 52/91) 6

7 manner, or it should be replaced by several economical chambers established by the economical subjects of the Republic of Macedonia, according to the specific activities they conduct. Furthermore, on 4 th of July, the Assembly of the Republic of Macedonia adopted a Law on Economical Chambers 8, and with the date of entering into force of that Law, the Law on Economic Chamber of the Republic of Macedonia from 1990 was withdrawn (article 37 of the Law from 2002). Until the establishment of the new economic chambers (whose term was three months upon entering into force of the new law) the Economic Chamber of the Republic of Macedonia should have continued with its work (article 35 from the Law from 2002). It is of great significance for the Arbitration that article 36 of the Law from 2002, the procedures that were initiated until the enforcement of the law that were not finished shall be finished by the Permanent Elected Court (Arbitration) of the Economic Chamber of the Republic of Macedonia. This provision had its own influence on all subjects that had agreed an arbitration not to bring disputes in front of the current arbitration, due to the fact that it was to end its work, i.e. terminate its operations, and on the other hand influenced and created insecurity of the subjects that have submitted requests in front of the arbitration to consider their withdrawal and to agree for settlement of the disputes to be in jurisdiction of the courts. After adoption of the Law and its enforcement, an initiative was submitted for introduction of a procedure for assessment of the consent of the Law on Economic Chambers with the Constitution of the Republic of Macedonia, and at the same time a request was submitted to the Constitutional Court of the Republic of Macedonia to adopt decisions that shall terminate the Law on Economic Chambers 9 until adoption of the final decision. The Constitutional Court of the Republic of Macedonia firstly adopted a decision, which determines a temporary measure for the termination of conduction of the Law on Economic Chambers, and after the final decision that annuls articles 34 and 35 from the Law on Economic Chambers, with which the Economic Chamber of the Republic of Macedonia continued to exist together with the Permanent Elected Court (Arbitration) within the Economic Chamber of the Republic of Macedonia. Is the Law on Arbitration necessary for the Republic of Macedonia? The Rulebook for Arbitration, adopted in 1993, has not been amended so far, although it has not resolved all issues in relation to the procedure. Due to this fact, a question has been raised for a longer period whether it is necessary to amend the same, or initiate preparation of a Law on Arbitration. At this moment, activities have been initiated, supported by the international community, which lead towards creation of the Law on Arbitration. There are a lot of questions asked during this process. There is a question whether Macedonia should undertake the UNICETRAL model- Law on International Trade Arbitration. 8 The Law on Economical Chambers was published in the Official Journal of the Republic of Macedonia, No. 54/ See: Initiative for bringing a procedure for assessment of the constitutionality of the Law on Economic Chambers, published in the Official Journal of the Republic of Macedonia, No. 54, from 15 th of July 2002, No /1, from Skopje, and Decree of the provisions from the Law on Economic Chambers ( Official Journal of the Republic of Macedonia No. 54/2002), which are opposite to article 55 from the Constitution of the Republic of Macedonia, No /2, from , Skopje; and Initiative for conducting a procedure for assessment of the constitutionality of article 36 from the Law on Economic Chambers, No /1, from , Skopje. 7

8 Undertaking the rules of that law, the Macedonian arbitration legislation would be more transparent for the foreigners too, which would have positive influence on the development of the international arbitration legislation in Macedonia, and with that enticement of the foreign deposits. Having into consideration that the management of the arbitration in the Republic of Macedonia is greatly adjusted with the modern tendencies for development in that area, undertaking of the rules from the model- law would not cause special difficulties. The other question is whether the rules of the model-law should be included in the LMP or it should be a separate law. I think that it should be a special law. This is due to the fact that the model-law is differently composed in relation to the text of the LMP and due to the fact that in that manner it would be easier to determine the compliance of the decision with the decisions of the laws of the other countries that have accepted the rules of the model-law. In this context, it is especially important whether the rules of the model-law should be accepted for all arbitrations or only for the international. The question should be well examined and possible implications of the taken decisions should be taken into consideration. The preparation of the Law on Arbitration, the decisions that are included in the laws for arbitrations in the other countries where there are almost adopted should be taken into consideration. 8