With the intention of meeting the demands of the business market, Macedonian law has fully recognised the value of arbitration as an effective and efficient forum for international commercial dispute resolution. Macedonian arbitration law, which has been gradually amended over recent years, permits parties to tailor the procedure to their needs and preferences in compliance with internationally accepted standards.
As such, the 1985 UNCITRAL Model Law on International Commercial Arbitration (the Model Law) was fully incorporated into Macedonian legislation via the Law on International Commercial Arbitration. Similarly, Macedonia’s main arbitration institution, the Permanent Court of Arbitration attached to the Economic Chamber of the Republic of Macedonia, altered its structure and operation. The new Rulebook of the Permanent Court of Arbitration, enacted on 20 April 2011, modernised the work of the court and the conduct of arbitration proceedings.
The Law on International Commercial Arbitration and its scope of application
The Law on International Commercial Arbitration (LICA) came into force on 7 April 2006,1 thus amending the provisions of chapter 30 of the Law on Civil Procedure.2
The LICA applies exclusively to international commercial arbitration seated in the Republic of Macedonia. An arbitration is considered to be international if at least one of the parties, at the time of concluding the arbitration agreement, is a natural person with a permanent residence or stay outside the territory of the Republic of Macedonia, or is a legal entity whose head office is not in the territory of the Republic of Macedonia; or the place where a substantial part of the obligations under the commercial relationship are to be fulfilled, or the place with which the subject matter of the dispute is most closely connected, is not located on the territory of the Republic of Macedonia.
Under the LICA, disputes concerning rights that are freely disposed of by the parties can be settled through arbitration, if so agreed in writing. If a claim is filed in a state court for a dispute that is currently the subject of arbitral proceedings between the same parties, upon objection of the respondent, the court shall abolish the actions undertaken and declare its lack of jurisdiction. The respondent’s objection for a lack of jurisdiction must be raised before entering into a discussion (either in writing or at the oral hearing).
Appointment of arbitrators and conduct of the procedure
In line with the Model Law, the LICA allows parties to freely determine the number of arbitrators, without requiring an odd number of arbitrators to be selected. If the parties cannot reach an agreement, then as a default rule the panel will consist of three arbitrators.3
Parties are free to agree on a procedure for appointing the arbitrators. Failing such agreement, each party will appoint one arbitrator and the two arbitrators thus designated will appoint the president of the panel.4
Moreover, parties are given the freedom to tailor the procedure to meet their needs in the arbitration agreement. This includes, inter alia, the place of the arbitration and the language of the procedure.5
Enforcing and challenging an award
An award enacted in conformity with the provisions of the LICA (domestic award) has the capacity of a final judgment and can be enforced without delay.
Any award enacted outside Macedonia is considered a foreign arbitral award and will thus be recognised and enforced in accordance with the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.6
Under the LICA, claims for annulment are the sole legal instrument available for challenging an arbitral award. Such a claim must be submitted to the competent court, Basic Court Skopje II,7 and be based on at least one of the limited grounds for setting aside the award, including that:
- a party in the procedure was incapable of concluding the arbitration agreement or to be a party to the arbitration agreement;
- the arbitration agreement was not concluded or was not valid under the law that the parties subjected the agreement to;
- the party that filed the claim has not been duly informed about the appointment of the arbitrators or the initiation of the arbitration procedure;
- the arbitral award refers to a dispute not anticipated by the arbitral agreement or not covered by the provisions of the arbitral agreement, or contains decisions on issues beyond the limits of the arbitration agreement. If the award regarding the issues subject to the arbitration can be separated from those issues not being subjected to arbitration, the part of the arbitral award containing provisions referring to the issues not being subjected to the arbitration may be annulled;
- the composition of the arbitral tribunal or the arbitration procedure has not been in accordance with the arbitration agreement of the parties;
- the subject matter of the dispute can not be settled by arbitration in accordance with the laws of Macedonia; or
- the arbitral award is in conflict with the public policy.
So far, there is no recorded case in which an arbitral award was annulled with any state court in Macedonia.
The Permanent Court of Arbitration attached to the Economic Chamber of the Republic of Macedonia
The Permanent Court of Arbitration (the Court) was established in 1993 within the Economic Chamber of the Republic of Macedonia. It has the authority to administer both domestic and international disputes.
The organisation and work of the Court was regulated by the Rules of the Permanent Court of Arbitration, which, in order to meet the current practices in arbitration, was replaced by the new Rulebook of the Permanent Court of Arbitration (the Rulebook) on 20 April 2011.
The Rulebook aimed to improve the efficiency and effectiveness of arbitration proceedings conducted by the Court. Significant changes were implemented in terms of achieving greater autonomy of the Court, and a new organisational structure of the Court was established.8 The presidency, the president and the secretary of the Court were introduced as the official bodies of the Court. The appointment of the arbitrators and the presidents of the arbitral tribunals in the cases provided by the Rulebook were, inter alia, included with the authority of the president of the Court.9
The Rulebook stipulates that parties may agree for the dispute to be resolved by a sole arbitrator or a panel of three arbitrators.10 For disputes that do not exceed €30,000, a sole arbitrator is appointed to resolve the dispute unless the parties have expressly agreed otherwise; for disputes that exceed €30,000, a panel of arbitrators shall be appointed unless the parties have expressly agreed for the dispute to be resolved by a sole arbitrator within 15 days of the delivery of the statement of claim to the respondent.
The panel of arbitrators, unless otherwise agreed by the parties, comprises one arbitrator appointed by the claimant in the statement of claim, one arbitrator appointed by the respondent in the statement of defence, and the president of the panel appointed by the president of the Court.
Where there are multiple parties as claimant or respondent, the multiple parties shall jointly, whether as claimant or respondent, appoint an arbitrator.11 If the parties fail to reach an agreement in appointing an arbitrator, the president of the Court will appoint one from a list of arbitrators.
Arbitrators, as a rule, are chosen from a list of arbitrators. The Court maintains such a list for disputes with and without international elements, which involves the country lead experts in the area of dispute resolution. Currently, there are 59 arbitrators listed for disputes with international elements and 27 arbitrators for domestic disputes.
This does not limit the right of the parties to appoint an arbitrator outside of these lists. In any case, the president of the panel of arbitrators must always be chosen from the lists of arbitrators of the Permanent Court of Arbitration.
The Republic of Macedonia is a party to the 1923 Geneva Protocol on Arbitration Clauses,12 the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards,13 the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the 1965 Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID), and the 1961 European Convention on International Commercial Arbitration.14
Further, in the Republic of Macedonia, there are over 30 bilateral investment treaties in force and an additional seven are in the process of ratification.
The above allows international arbitration for disputes between the Republic of Macedonia and a foreign investor. So far, the Republic of Macedonia has been involved in three reported investor–state disputes brought in front of international arbitral panels.
In 2007, Greek company Hellenic Petroleum sued the Republic of Macedonia at the International Chamber of Commerce (ICC) and won compensation due to violation of the sales contract of the oil refinery OKTA.15
In 2009, electricity provider EVN AG sued the Republic of Macedonia under the ICSID Rules of Arbitration. On 2 September 2011, upon request by both parties to the dispute, the arbitral tribunal issued an award on agreed terms pursuant to Rule 43(2) of the ICSID Arbitration Rules, incorporating the settlement reached by the parties.16
Also in 2009, Swiss confectionary affiliate Swisslion sued the Republic of Macedonia at the ICSID. In the decision rendered in July 2012, the tribunal decided that the respondent had breached its obligations under public international law by failing to accord fair and equitable treatment to the claimant’s investment. However, all other claims of the claimant were dismissed and the respondent was ordered to pay €350,000 of the claimant’s legal costs and expenses.17
The working commission for drafting the Law on International Commercial Arbitration commenced its work with acknowledge-ment of the breakthrough and the affirmation of the international commercial arbitration as a universally recognised instrument for resolving international commercial disputes. By bringing the arbitration law of Macedonia in line with the efficient and effective operation of the arbitration proceeding on an international level, the commission adopted a decision to adhere, to the extent possible, to the original text and structure of the Model Law.
Macedonia signed and ratified the most influential international agreements concerning the area of arbitration. Thus, it can be concluded that the Macedonian legal system concerning arbitration is well-developed and follows the international developments in the area of dispute resolution.
Further, the new organisational structure of the Permanent Court of Arbitration attached to the Economic Chamber of the Republic of Macedonia established in 2011, according to the Court’s statistics, has led to a decrease in the duration of the proceeding. The average duration is now three to six months.18
The steady increase in investments in south east Europe has caused a remarkable increase in the number of companies seeking a more time-efficient and cost-effective process for dispute resolution. The amendments and additions in the process of alternative dispute resolution were conducted with this need in mind. The latest changes took effect with the goal of presenting Macedonia as an attractive arbitration venue.
- The Law on International Commercial Arbitration was published in the Official Gazette of the Republic of Macedonia, No. 39/2006, on 30 March 2006, and entered into force eight days after its publication.
- The Law on Civil Procedure was published in the Official Gazette of the Republic of Macedonia, No. 79/2005, on 21 September 2005, and amended with No. 110/2008, 83/2009 and 116/2010.
- The Law on International Commercial Arbitration, article 10.
- The Law on International Commercial Arbitration, article 11, para 3.
- The Law on International Commercial Arbitration, article 20 and article 22.
- Law for the ratification of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (Official Gazette of the SFRY No.11/81).
The Convention applies only to the recognition and enforcement of awards made in the territory of another contracting state, and only to differences arising out of legal relationships that are considered to be commercial in SFRY.
With article 5 of the Constitutional law for applying the constitution of the Republic of Macedonia (Official Gazette of the SFRY No.11/81), the Republic of Macedonia has enacted that the laws of the Socialist Federal Republic of Yugoslavia are applicable in the Republic of Macedonia.
- At the time of its enacting, the LICA anticipated the Basic Court Skopje I as a competent assistance court. However, following the enactment of the Law on Courts in 2006, the Basic Court Skopje I, was established as a criminal court. The authority to act in regard to civil cases is now given to the Basic Court Skopje II.
- Prof Arsen Janevski, PhD, Explanatory Statement in regard to the new Rulebook of the Permanent Court of Arbitration, 23 May 2012.
- Article 7 of the Rulebook of the Permanent Court of Arbitration attached to the Economic Chamber of Macedonia, No. 07-1177/8, from 20 April 2011 and the Decision on Amendments and Modifications of the Rulebook of the Permanent Court of Arbitration attached to the Economic Chamber of Macedonia, No. 3479/8, from 15 December 2011, enacted by the Assembly of the Economic Chamber of Macedonia.
- Ibid, article 26 para 1, 3 and 4.
- Ibid, article 31 para 1.
- Ratified in the Official Gazette of the FNRJ MD No. 4/1959.
- Ratified in the Official Gazette of the SFRJ MD No. 4/1959.
- Ratified in the Official Gazette of the SFRJ MD No. 12/1963.
- ICC case No.13176/FM.
- ICSID case No. ARB/09/10.
- ICSID case No. ARB/09/06.
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