1. How do courts in your jurisdiction define the notion of arbitrability when applying the New York Convention?

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1 To: Members of the IBA Recognition and Enforcement of Awards Subcommittee, IBA Arbitration Committee From: Dr Cosmin VASILE, Violeta SARANCIUC Date: 30 April 2016 Subject: Country Report Romania: Arbitrability under the New York Convention 1. How do courts in your jurisdiction define the notion of arbitrability when applying the New York Convention? (a) (b) Do they make a distinction in defining the notion for the purposes of Article II (1) of the New York Convention ( a subject matter capable of settlement by arbitration ), of Article II (3) (... unless it finds that the said agreement null and void, inoperative or incapable of being performed ) and of Article V (2) (a) ( The subject matter of the difference is not capable of settlement by arbitration under the law of that country )? Do they make a distinction between subjective arbitrability (capacity of a person to be party to an arbitration) and objective arbitrability (capacity of a subject matter to be resolved by arbitration)? (a) Romanian courts apply the underlying principles of Article II(1), Article II(3) and Article V(2)(a) of the New York Convention ( NYC ), although do not always specifically mention the NYC tets, but rather resort to equivalent legal provisions available in the national law, which are in line with the NYC. Courts do not make a distinction when defining arbitrability in the contet of enforcing arbitration agreements and in the contet of setting aside or recognition and enforcement of arbitral awards. According to a general definition of arbitrability provided in a judgment of the High Court of Cassation and Justice: [ ] in order for an arbitration agreement to produce effects, it must address a domain in which the settlement of disputes arisen between parties is capable of being entrusted to arbitration, whereas the parties which conclude the arbitration agreement must have the standing and capacity required in this respect 1. As reflected in this definition, as a rule, Romanian courts do not disconnect the arbitrability objections (as per Article II(1) of the NYC) from the question of validity and/or operability of the arbitration agreement (as per Article II(1) of the NYC). Most often, courts view inarbitrability as a cause that renders the agreement to arbitrate invalid and/or inoperative. 1 High Court of Cassation and Justice, Sec. Cont. Adm. Fisc., Decision no. 3246/ Plantelor St., District 2, Bucharest RO , Romania Phone: Fa: office@zrp.ro Registered with ANSPDCP under no

2 For eample, the issue of arbitrability has been recurrently encountered in disputes regarding administrative contracts concluded by state-entities, especially when such contracts fell within the scope of the public procurement legislation. The somewhat unstable and inconsistent legislative framework, generated a relatively rich case law concerning the arbitrability of these disputes. Some courts eamined the arbitrability of such disputes as a condition for the validity of the underlying arbitration agreements at the date of their conclusion 2. Other courts eamined the arbitrability objections in relation to the operability of the arbitration agreement, by looking at whether at the date of the submission the dispute was arbitrable, or in connection to both, validity and operability of the arbitration agreement 3. Neither of the courts denied that arbitrability is a standalone ground for review, but nevertheless reviewed it in terms of whether the agreement to arbitrate was rendered invalid or inoperative. (b) Until the entrance into force of the New Code of Civil Procedure (15 February 2013), subjective arbitrability was not regulated under the Romanian law, although the concept itself was an established one among the scholarly writings. Under the New Code of Civil Procedure Article provides, for the purpose of international arbitration, that if one of the parties is a state or a state company or a state-controlled entity this party cannot avail of its own law for contesting the arbitrability of a dispute or its capacity to be party to an arbitral process. For purely domestic arbitrations, subjective arbitrability is regulated less liberally. Romanian courts have not shown particular concern for defining the concept of subjective arbitrability, although have dealt with issues covered by this concept adopting the traditional view that the faculty of the state and state-controlled entities to enter arbitration agreements is a matter of capacity. The validity and/or operability of arbitration agreements concluded by the state or state-controlled entities had remained for quite some time a controversial subject in the case law, despite the lack of legal provisions restricting the subjective arbitrability of disputes involving these entities. In fact, the issue continues to generate discussions up to date. However, the relevant case law questions arbitrability on the basis of rather objective criteria and concerns mainly domestic arbitration agreements, whereas, as regards international arbitration, Article II the 1961 Geneva Convention has withstood as a general source of arbitrability in respect of disputes involving states and state-controlled bodies. A relatively recent decision of the Bucharest Court of Appeals upheld the general capacity of a state to arbitrate by reference to Article II of the Geneva Convention combined with Article of the New Code of Civil Procedure Do the courts in your jurisdiction consider that arbitrability is a condition of validity of the arbitration agreement, or rather a requirement for the jurisdiction of the arbitral tribunal? Conceptually, the arbitrability is considered to be a matter of jurisdiction of the arbitral tribunal, to the effect that, procedurally, the inarbitrability of a dispute translates into the lack of jurisdiction of the arbitral tribunal. 2 High Court of Cassation and Justice, Sec. II Civ., Decision no. 287/ , High Court of Cassation and Justice, Sec. II Civ., Decision no. 1167/ ; High Court of Cassation and Justice, Sec. Cont. Adm. Fisc., Decision no. 3483/ Bucharest Court of Appeals, Sec. V Civ., Decision no. 1665/ Bucharest Court of Appeals, Sec. VIII Cont. Adm., Decision no. 5348/

3 At the same time, however, Romanian courts have traditionally considered arbitrability as either a condition for the validity of the arbitration agreement, under the law in force at the date of its conclusion 5, or a condition for the operability of a validly concluded arbitration agreement, eamined under the law in force as at the date of the submission to arbitration 6. The approach which eamines the operability of the arbitration agreement reflects a rather jurisdictional character of arbitrability, by preventing arbitration in disputes which are not capable of settlement by arbitration at the date of the submission, although a valid arbitration clause has been concluded in respect of such disputes and remains in force. Conversely, the other approach, which focuses on the validity of the arbitration agreement, eploits the substantive character of arbitrability. Altogether, what is clear is that the courts have not adopted a uniform view on the question at issue. 3. Applicable law (a) (b) Which law do the courts in your jurisdiction apply to assess the arbitrability or nonarbitrability of a dispute at the stage of recognizing and enforcing the arbitration agreement and referring (or not) the dispute to arbitration (Article II NY Convention)? The le fori (law of the deciding court)? The law of the place of arbitration? The le contractus? Another law? Is there a difference of approach when assessing subjective and objective arbitrability? (a) There is hardly any representative case law allowing one to spot with precision the approach of the Romanian courts on the question of applicable law with respect to arbitrability at the stage of enforcing the arbitration agreement. However, in the known cases, courts have considered the le fori as a threshold for assessing the arbitrability of disputes. This approach has acquired a legislative ground in the provisions of the New Code of Civil Procedure, under Article As regards the questions of subjective arbitrability, in what regards international arbitrations, the courts have usually resorted to Article II of the 1961 Geneva Convention, which is part of the Romanian legal order, whereas now have an additional source in the provisions of le fori, namely in Article of the New Code of Civil Procedure, which sets forth even more plainly that a state entitiy is not able to invoke its own law, whether it deals with questions of arbitrability in general, or with its own capacity to conclude arbitration agreements and participate in arbitrations. 5 High Court of Cassation and Justice, Sec. II Civ., Decision no. 287/ , High Court of Cassation and Justice, Sec. II Civ., Decision no. 1167/ ; High Court of Cassation and Justice, Sec. Cont. Adm. Fisc., Decision no. 3483/ Bucharest Court of Appeals, Sec. V Civ., Decision no. 1665/ , Constanta Court of Appeals, Sec. II Civ. Cont. Adm., Decision no. 40/ ; Bucharest Court of Appeals, Sec. VIII Cont. Adm. Fisc., Decision no. 585/ Article NCPC: [Arbitration Objection]: if the parties concluded an arbitration agreement in respect of a dispute which is arbitrable under Romanian law, the Romanian court shall decline jurisdiction ecept for the cases when: a) the defendant has not raised the arbitration objection until the first hearing date with regard to which it was legally summoned to appear; b) the court finds that the said arbitration agreement is obsolete or inoperative; c) the arbitral tribunal cannot be constituted or the sole arbitrator cannot be appointed due to reasons that are evidently attributable to the defendant. 3

4 There is no reason to believe that the courts would disregard objective arbitrability requirements provided in the le arbitri or in the le voluntatis, especially since this cumulative approach finds support in Article 6 of the 1961 Geneva Convention, which, as mentioned above, is part of the Romanian legal order and a generally established and preferred source of law among the Romanian courts. (b) As already mentioned above, the Romanian courts have not shown a particular interest in defining the concept of subjective arbitrability. Irrespective of purely theoretical concerns, when dealing with issues of subjective and objective arbitrability, courts adopt a similar approach, by connecting the eamination with the validity and/or operability of the agreement to arbitrate. 4. Substantive content of arbitrability/non-arbitrability (a) In your jurisdiction, does statutory or case law set a general standard for assessing whether a dispute is arbitrable or not? (b) If there is a statutory source for arbitrability in your jurisdiction, please indicate it below (if not, indicate non-applicable ): (c) Which disputes are held to be non-arbitrable under the statutory or case law of your jurisdiction? (a) Both the previous Code of Civil Procedure (1865) and the New Code of Civil Procedure (15 February 2013) contain provisions regarding objective arbitrability. As already mentioned elsewhere above, the New Code of Civil Procedure has additionally regulated, for the first time, arbitrability based on subjective criteria. Nevertheless, the standard of assessment set out in the law in respect of arbitrability is rather a general one, leaving the courts quite a wide discretion to apply arbitrability criteria as they consider appropriate. (b) For the purpose of international arbitration, the statutory source for arbitrability is provided in Article of the New Code of Civil Procedure which reads as follows: (1) Any case of a patrimonial nature is capable of being subject of an arbitration if it regards rights the parties can freely dispose of and the law of the seat of the arbitral tribunal does not reserve eclusive jurisdiction to courts of law. (2) If one of the parties to the arbitration agreement is a state or a state company or a state-controlled organisation, this party cannot avail of its own law for contesting the arbitrability of a dispute or its capacity to be party to an arbitral process. For comparison, in purely domestic arbitrations, Article 542 provides as follows: (1) The persons with full capacity to act can agree to settle by means of arbitration the disputes between them, ecept for those that concern the civil status, capacity of persons, inheritance, family relations, as well as the rights of which the parties cannot dispose. 4

5 (2) The state and public authorities have the faculty to conclude arbitration agreements only if authorised by law or by international conventions to which Romania is party. (3) The legal persons of public law which have in the object of their activity economic activities, have the faculty to conclude arbitration agreements, unless the law or the incorporation or organisation act provides otherwise. The former Code of Civil Procedure made no specific distinction between domestic and international disputes and provided generically for the parties liberty to conclude arbitration agreements in respect of any patrimonial disputes concerning rights the parties could settle by transaction (Article 340 of the 1865 Code of Civil Procedure). As mentioned above, courts have eercised a wide discretion in resolving questions of arbitrability. Generally, the courts have eamined whether the dispute has a pecuniary nature and whether it concerns rights of which the parties can dispose. Nevertheless, when applying these thresholds, in certain respects, the approach of the Romanian courts can be characterised as uneven. For eample, courts have adopted different views on whether the eclusive jurisdiction of certain courts over a domain can be a relevant test to eamine. The relevance of the question is highlighted when the law confers eclusive jurisdiction to certain courts, but remains silent regarding the possibility to settle the disputes by means of arbitration. The issue is then whether the intention of the legislator was to eclude arbitration as method of dispute resolution or simply delineate the jurisdiction among the state courts (or the specialised divisions of the state courts). In disputes regarding corporative rights between a company and shareholders, this test has been applied. It has been held that the parties cannot dispose of the Company Law provisions which directed such disputes to the jurisdiction of the court of law at the place of the company s registered office. On this basis, the settlement by arbitration of these disputes was ecluded 8. Other courts, when eamining similar disputes, focused instead on whether the right submitted to arbitration was of a pecuniary or non-pecuniary nature, admitting indirectly that pecuniary disputes can be, in principle, submitted to arbitration 9. Likewise, when dealing with public procurement contracts, some courts held that a legal provision reserving eclusive jurisdiction to administrative courts over disputes concerning such contracts renders the domain inarbitrable 10. Other courts, supported by a decision of the Romanian Constitutional Court 11, held that, unless the law ecludes arbitration eplicitly, one cannot infer that a dispute is inarbitrable on the mere basis that it is given within the jurisdiction of administrative courts (instead of civil courts) Bucharest Court of no. 663/A/ Bucharest Court of Appeals, Sec. V Com., Decision no. 1645/ Bucharest Court of no. 585/ ; High Court of Cassation and Justice, Decision no. 3483/ Constitutional Court, Decision no. 331/ Bucharest Court of no. 1665/

6 (c) As outlined above, according to the general statutory standard which is applicable in international arbitrations, the non-pecuniary disputes or those regarding rights of which the parties cannot dispose, as well as those attributed within the eclusive jurisdiction of the state courts are inarbitrable. At any relevant stage, courts assess the arbitrability objection on the basis of the above criteria. For eample, it is generally admitted that the disputes which come within the eclusive jurisdiction of the bankruptcy judge are inarbitrable, but, nevertheless, not all the disputes concerning an insolvency debtor fit this description, since the threshold is whether a given dispute is of a pecuniary nature and whether the insolvency administrator/the insolvency debtor can enter a settlement in respect of the rights involved i.e., can dispose of them 13. It has been therefore held that the insolvency debtor can commence arbitration against its own debtor on the basis of a validly concluded arbitration agreement 14. Inarbitrability objections are often raised in relation to disputes concerning company/corporative governance relations. As already outlined above, the case law is uneven in respect of the (etent of) arbitrability of such disputes. The prevailing view is however that the disputes concerning the annulment of resolutions taken by the shareholders assembly and non-pecuniary disputes between the company and shareholders are inarbitrable 15, whereas other disputes of a patrimonial nature may be submitted to arbitration. Likewise, disputes between shareholders are capable of settlement by arbitration. Debates are ongoing in respect of the etent of arbitrability in this domain. The special accelerated procedures for the recovery of uncontested debts on the basis of applications for an order for payment (a kind of summary judgments) have likewise generated uneven case law, as some courts held that these procedures come within the eclusive domain of the state courts. Debate is ongoing in what concerns the arbitrability of disputes involving intellectual property rights. It is held that insofar as the disputes concern the non-pecuniary prerogatives conferred by the intellectual property rights (or the eistence of these rights) or the validity of patents, trademarks, such disputes are inarbitrable, whereas a pecuniary claims in respect of intellectual property rights are capable of settlement by arbitration. By far the most controversial case law in respect of arbitrability was generated by disputes involving administrative contracts in general and public procurement contracts in particular. However, it should be noted that such case law has mainly concerned purely domestic disputes, whereas in international disputes, Article II of the 1961 Geneva Convention, reinforced by an eplicit provision in Article of the New Code of Civil Procedure, prevents the state and statecontrolled entities from availing of their own law for contesting the arbitrability of a dispute or their capacity to be party to an arbitration. The list of dispute that could potentially raise arbitrability questions is not ehausted by the above mentioned eamples, which rather reflect the matters which have generated a case law. One 13 Bucharest Court of no. 54/ idem. 15 Bucharest Court of Appeals, Sec. V Com., Decision no. 1645/

7 should, however, make the assessment on the basis of the general thresholds provided in the law, in which regard other domains, to the etent that such concern undisposable rights (for eample, competition and untitrust disputes, criminal matters in general), or non-pecuniary claims, are able to raise questions of arbitrability. 5. Table of cases Please append to the report a table of cases where arbitrability was addressed in the specific contet of the New York Convention, based on the following template: Case designation NY Convention Provision (II.1,, V.2.a) High Court of Cassation and Justice, Decision no. 3246/ (case file no /3/2009) Summary of ground for objecting to arbitrability of the dispute The dispute concerned a construction contract concluded between a state-controlled company and a foreign contractor. The defendant objected to court proceedings commenced by the state-controlled company and availed of the arbitration agreement. The defendant submitted that the construction contract in dispute provided for arbitration under ICC Rules, whereas the dispute was of a contractual, pecuniary and commercial nature. The arbitrability objection concerned the administrative nature of the contract in dispute and the public interest involved. The first instance administrative court held the dispute inarbitrable and upheld its jurisdiction. Arbitrabili ty objection admitted Arbitrabili ty objection rejected The High Court reversed the judgment of the first instance holding that the contract was not of an administrative nature, whereas the agreement to arbitrate was valid under the law in force at the date of its conclusion and not rendered inoperative by the subsequently enacted legislation. Further the High Court held that the public authorities have the faculty to enter valid arbitration agreements by virtue of Article 2 (1) of the 1961 Geneva Convention. Bucharest Court of no. 1665/ II.1 The dispute concerned a concession agreement between a company and a state agency in respect of a land plot which was in the private property of the state. The objection to arbitrability was based on the alleged invalidity of the arbitration agreement under the law in force at the date of its conclusion and inoperability of the arbitration agreement under the law applicable at the date of the submission to arbitration. The Bucharest Court of Appeals upheld the first instance decision and rejected the arbitrability objection holding that: (i) the law provided no interdictions regarding the settlement of the given pecuniary dispute by means of arbitration; (ii) the state agency s statute provided no eplicit prohibitions in respect of arbitration, whereas the absence of an eplicit authorisation cannot be assimilated to an eplicit prohibition; (iii) the arbitration agreement was not rendered inoperative at the entrance into force of the Law no. 554/2004 on the 7

8 Bucharest Court of no. 585/ administrative contentious as the land plots in dispute were privately owned and the contract was not administrative. The case concerned an application for an order for payment filed under the special accelerated procedure aimed at the recovery of uncontested debts. The objection to arbitrability was based on the priority of the special proceedings for an order for payment over the arbitration proceedings and inoperatibility of the arbitration agreement in respect of the order-for-payment proceedings. The court upheld the objection on the basis that the jurisdiction of the arbitral tribunal is confined to the disputes concerning the merits of the contractual relationship, whereas all the other disputes, which do not open the merits, come within the jurisdiction of the state courts. Further the court held that the arbitration clause was inoperable (and invalid) in view of the legislation in force at the date of the conclusion of the arbitration agreement, which provided for the eclusive jurisdiction of the administrative courts over disputes concerning public procurement contracts. Bucharest Court of no. 5348/ II.1 The dispute concerned a construction contract concluded between a Romanian local public authority and a foreign joint venture acting in capacity as contractor. The public authority objected to arbitrability, availing of the administrative nature of the contract and of the nondisposable nature of the rights involved, as well as of the eclusive jurisdiction of the administrative courts over contracts governed by the public procurement legislation. For all these reasons, the public authority submitted that the arbitration agreement was inoperative. On the other hand, the public authority denied the relevance of Article II of the 1961 Geneva Convention on the basis that it concerns the capacity to enter arbitration agreements rather than matters of objective arbitrability. The court upheld Article II of the 1961 Geneva Convention and further held that the contract in dispute was not concluded under the public procurement legislation, but on the basis of the PRAG procedure and in accordance with a Financing Memorandum concluded between the EC and the Romanian Government. As a consequence, the court held that the agreement to arbitrate ecluded the eclusive jurisdiction of the courts of law. High Court of Cassation and Justice, Decision no. 1167/ The dispute concerned the performance of a FIDIC-based construction contract concluded with a public authority. The contractor commenced court proceedings in breach of the arbitration agreement, relying on the eclusive jurisdiction of the state courts under the public procurement legislation. The High Court reversed the judgment of the appellate court and dismissed the action as inadmissible, giving effect to the arbitration agreement. The High Court considered the mandatory effect of a Ministry Order which imposed upon 8

9 the parties the obligation to use FIDIC form contracts and found that, insofar as the law imposed a contract form containing an arbitration agreement, such an agreement could not be held inoperative. High Court of Cassation and Justice, Decision no. 287/ II.1 The dispute concerned the performance of a FIDIC-based construction contract concluded with a public authority on the basis of an Order issued by the Ministry of Economy which imposed upon the parties the obligation to use FIDIC contract forms, containing an ICC arbitration agreement. Objection to arbitrability: the dispute comes within the jurisdiction of the administrative courts, since the contractual relationship is of an administrative nature. Both, the special provision contained in the public procurement legislation and the general provision contained in the administrative contentious legislation provide for the eclusive jurisdiction of the administrative courts. The Ministry Order which imposed the FIDIC contract forms is inferior to the above mentioned legislative acts and cannot derogate therefrom. The arbitration agreement is null and void. The High Court considered the mandatory effect of a Ministry Order which imposed upon the parties the obligation to use FIDIC form contracts and found that, insofar as the law imposed a contract form containing an arbitration agreement, such an agreement could not be held inoperative. The Ministry Order was the authorisation to resort to the arbitration alternative. Bucharest Court of no. 663/A/ The subject matter of the dispute was the annulment of the company s general assembly resolutions. The company s articles of incorporation provided for the settlement by means of arbitration of any disputes between the shareholders. (case file no /3/2013) The objection to arbitrability was based on the provisions of the Company law regarding the eclusive jurisdiction of the court at the place of the company s registered office. Suceava Tribunal, Decision no. 319/ upheld by Decision no. 1088/ The application for the opening of the insolvency proceedings comes within the eclusive jurisdiction of the bankruptcy judge. Bucharest Court of no. 54/ II.1 The arbitral dispute concerned a debt recovery claim filed by the insolvency debtor. The objection to arbitrability relied on the opening of the insolvency proceedings before the commencement of the arbitration proceedings. 9

10 Suceava Court of no. 532/ (case file no. 3829/40/2014) V.2.a) The court dismissed the objection to arbitrability, holding that the insolvency debtor could validly conclude an arbitration agreement regarding rights it was able to dispose of, whereas at the date of the conclusion of the arbitration agreement the debtor s self-management power was not lifted. A public policy argument was raised by the court of its own motion in relation to the inarbitrability of a dispute concerning the registration of ownership rights with the land registry, on which occasion the court found that the parties could not agree on procedural rules that are contrary to public policy. The arbitral award ordered registration with the relevant land registry of the ownership rights passed from the respondent party to the claimant party by means of a previous arbitral award. The party against whom the award was invoked raised no grounds for resisting recognition and enforcement. However, the court took into eamination, of its own motion, the inarbitrability of the dispute in view of mandatory and public policy nature of the legislative framework concerning the registration of the ownership rights with the land registries. Bucharest Court of no.1645/ Constitutional Court, Decision no. 331/ The court of first instance denied recognition and enforcement of the award. The judgment was upheld by the appellate court and is final. The objection to arbitrability concerned the non-pecuniary nature of the rights in dispute, since the legal action sought the eclusion of shareholder from a company and the dissolution of a company. - Seized of a non-consitutionality objection directed against the legal provisions regarding arbitrability in the contet of the special public procurement legislation which provided for the eclusive jurisdiction of the courts, the Constitutional Court held that insofar as the law did not epressly prevent public law entities to resort to arbitration, the jurisdiction of the arbitral tribunal should be verified only in terms of objective arbitrability. As such, the Court found that the public procurement legislation did not contain an epress prohibition in respect of arbitration but, instead, it simply did not refer to arbitration at all. 10