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Guide To Regional Arbitration (volume 4 - 2016)

Institutions Worth a Closer Look: Eastern Europe

03 November 2015

For such a big region, eastern and central Europe has few hidden gems when it comes to local arbitration providers. But there are reasons for this.

The concept of arbitration didn’t really exist in the Soviet Union (except, to a slight degree, at the interstate level). When the Berlin Wall came down in 1989, some states took a while to legalise it (taking missteps along the way).

Others – chiefly Russia – legalised it with such a bang that the ensuing free-for-all did more harm to the concept than good.

Anyone could start an arbitral institution – and many did, leading to sub-standard arbitrations that were often overturned by courts. Arbitration also didn’t have the advantage of gridlocked local courts (which helped to create busy centres in the Middle East and Latin America). Quite the reverse: eastern European courts are fast and cheap.

Therefore, there isn’t the same busy arbitration scene that there is in other regions. Nevertheless a few provider organisations do stand out.

International Commercial Arbitration Court at the Russian Federation’s Chamber of Commerce and Industry (ICAC (MKAS))

Why’s it white-listed?

That’s a tough one. Let’s just say it would have been difficult to include a chapter without mentioning a provider; and when we proposed the idea of an eastern and central Europe chapter, this came back as an earnest recommendation.

So why is the ICAC worth putting on the white list?

As one source had it, the ICAC is the best game in town – it’s just that the competition isn’t up to much. Russians themselves have a preference for sending anything major or complicated abroad, to institutions such as the LCIA, the SCC and the ICC.

The ICAC is also worth knowing about because it’s a good example of a certain style of centre prevalent in the region.

What are the grumbles?

They’re the same grumbles that one hears more broadly in the region; namely, that it’s a very quick and brutal style of arbitration. Cases are decided largely on the basis of documents. There’s a hearing, but it’s always abbreviated, and parties only get one real chance to make their case – at the outset – in the statement of the claim or its reply.

But if there’s a hearing, isn’t there an opportunity to elaborate more?

You’d think so. But the reality is hearings are booked around the availability of the ICAC’s hearing rooms and the arbitrators. So sometimes even the parties can’t make the date. If they can’t, there’s no chance to reschedule because the hearing rooms are booked solid. That’s why longer hearings are out of the question too.

Why do they do it this way?

It’s an adaptation of local court procedure. Arbitration didn’t exist in the days of the Soviet Union, except at an interstate level, but a quasi-commercial form of court did: the arbitrazh system. When the first arbitral chambers came along (and in Russia that happened in a completely unregulated way, leading to hundreds more) they only had the arbitrazh courts’ procedure to draw on when writing their rules. The results at times could be quite wacky (rules allowing arbitrators to compel the participation of third parties, or to amend awards if new circumstances come to light). The ICAC didn’t go that far, but the courts explain much of its character.

Which parts of its character?

Why it’s so fast and why it strives to be so cheap. Basically, it’s because the courts are. An average Russian court completes each case in under three months. The appeal only takes another two. And they cost next to nothing to use.

Unfortunately for the ICAC and others, keeping up with the arbitrazh system makes upping its game difficult.

Why’s that?

Mainly it’s about the arbitrators and how much the institution pays. Russian lawyers view accepting an appointment at the ICAC as tantamount to pro bono work, so they don’t really want appointments. International names feel much the same.

Who gets appointed?

Academics who are very happy to eke out their income. Or sometimes members of the ICAC’s staff.

Why do people continue using it?

Well, in relative terms, it’s not that busy. Russians seem quite happy going to their local courts (the arbitrazh system turns around 800,000 matters a year). That said, the ICAC got 241 cases in 2012, which isn’t a bad figure. For the right case, it’s actually quite good.

What kind of case?

Something uncomplicated and with a pretty finite value – eg, the sale of goods. Around 64 per cent of ICAC cases are in fact in that bracket, concerning sums of less than US$1 million.

Are there any issues that should be raised?

One or two. Lawyers appearing there will need to present a notarised power of attorney (if it was issued abroad). And this should specify power to engage in all of the most likely amendments to the claim (adjusting the amount; withdrawing it; settling it). This requirement isn’t in the rules but it is common practice. Be aware, too that when it’s an international dispute, there’s no must-come-from-a-third-nation rule for the chair, who will have to be appointed from the ICAC’s list. Finally, the language of the arbitration is presumed to be Russian unless the agreement says otherwise.

Is that it?

Pretty much. If you want a dinner-party fact, Dmitry Medvedev is on the approved list of arbitrators. However, he is “temporarily unavailable to take part in proceedings”.

Court of Arbitration at the Polish Confederation of Private Employers Lewiatan (Lewiatan)

Why’s it white-listed?

Because it’s a good example of a new style of arbitral institution that is starting to be seen around this region.

Why’s that?

Largely because of dissatisfaction with existing offerings (see above and below).

What’s different about it?

It’s a bit more modern all-round. It was launched in 2005 but its rules are from 2012, and were amended in 2015. They’re pretty reflective of international best practice. They refer to the IBA’s guidelines on conflicts, and the rules on the taking of evidence. It’s also ahead of the curve on use of approved lists.

Ahead how?

It doesn’t use them. Parties have a completely free hand when appointing. If the centre has to make an appointment, then it’s done by the nominating committee, which comprises a number of recognised private lawyers.

Is it popular?

Reasonably. So far it’s handled about 120 cases. But there’s an increase in case figures nearly every year. At the moment it gets around 33 matters a year, and has seven full-time staff in its secretariat. It’s regarded as a decent case administrator.

How come it’s doing so well?

Largely it reflects dissatisfaction with other providers, and in particular how they’ve tried to control the appointment process. The employers’ federation is more open to appointment on merit.

Who oversees it?

The courts are managed by an arbitration committee, comprising a president of the court of arbitration – Beata Gessel-Kalinowska vel Kalisz of the law firm Gessel – three vice presidents and three committee members.

There’s also an appointing committee, chaired by Bartosz Kruzewski of Clifford Chance.

Appointing committee? But don’t the parties have a free hand?

They do. It only steps in in a situation of default or inertia.

Court of Arbitration at the Polish Chamber of Commerce (Polish Chamber of Commerce)

Why’s it on the white list?

It’s Poland’s oldest – and in some ways biggest – arbitral provider.

How old is it?

It’s 66. It grew out of the Polish Chamber of Foreign Trade, established on 1 January 1950. It deals with about 400–500 cases a year, believed to be the largest caseload in eastern or central Europe.

How much of that work is international?

About 20 per cent.

Is it old school or new school?

It certainly tries to keep up with international best practice, and let parties control the process fully. New rules came into effect in 2015 (replacing the 2007 rules) along with a new president, Maciej Laszczuk, who now leads its 15-strong council in taking responsibility for arbitrator appointments and challenges, the criteria for inclusion in the institution’s list of recommended arbitrators, and decisions relating to the publication of awards.

Any pitfalls?

In the past there were some concerns about the process of appointing arbitrators.

What were they?

It used to have an approved list system (it still does for chairs and sole arbitrators). There were concerns that the wider Chamber of Commerce exerted too much influence over who was on it (by controlling the committees that manage the list).

And now?

You be the judge. The list is certainly large, but some think it’s still missing some of the more obvious people to include. It was out of dissatisfaction with existing providers that initiatives such as the Lewiatan came along.