With its geostrategic position and modern and comprehensive legal framework for commercial arbitration, Slovenia endeavours to develop its potential as an attractive and neutral seat of arbitration in international commercial transactions. The 2008 Arbitration Act (the Arbitration Act)1 largely incorporates the 1985/2006 UNCITRAL Model Law on International Commercial Arbitration (the UNCITRAL Model Law) and provides a modern framework for arbitration proceedings in Slovenia. Slovenia is also party to all principal multilateral conventions in the field of international arbitration, including the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), the European Convention on International Commercial Arbitration and the Convention on Settlement of Investment Disputes between States and Nationals of other States (the ICSID Convention).
International commercial arbitration traditionally has strong institutional support in Slovenia. The Ljubljana Arbitration Centre (LAC) at the Chamber of Commerce and Industry of Slovenia and its predecessor, the Tribunal of the Ljubljana Chamber of Trade, Craft and Industry, have been administrating arbitration and mediation proceedings since 1928. Slovenia thus has a longstanding tradition in both domestic and international arbitration proceedings. The currently applicable LAC Rules entered into force on 1 January 2014 and follow the modern international trends in institutional arbitration ensuring parties speedy and efficient arbitration proceedings.
This chapter presents the currently applicable legal framework of international commercial arbitration in Slovenia with special focus on arbitration clauses in (international) construction agreements.
Slovenian Arbitration Act
The Arbitration Act, which governs arbitration proceedings conducted in Slovenia, is largely modelled on the UNCITRAL Model Law. The Arbitration Act expressly provides that its provisions should be interpreted in accordance with the UNCITRAL Model Law.
The most notable deviation of the Arbitration Act from the UNCITRAL Model Law is its express provision on arbitrability. According to article 4(2) of the Arbitration Act, any natural or legal person, including the Republic of Slovenia and other public entities, may conclude an arbitration agreement. Any pecuniary claim can form the object of an arbitration agreement, while with regard to non-pecuniary claims, only disputes concerning a legal relationship in respect of which the parties may reach a settlement are arbitrable. Consequently, most of the disputes concerning family and public law may not be submitted to arbitration.2
On the other hand, consumer and labour disputes may be referred to arbitration, subject to certain provisions ensuring the protection of the weaker party. Consumer and labour disputes are arbitrable solely if the arbitration agreement is entered into after the dispute has arisen. In addition, the arbitration agreement must be concluded in a separate document and hand-signed by the consumer or the employee, respectively. Such arbitration agreement must also define the seat of arbitration. The arbitration tribunal may hold hearings outside the place of its seat only based on prior consent of the consumer or the employee, respectively, or if examining the evidence at the seat of the arbitration would give rise to disproportionate difficulties. Moreover, arbitration proceedings related to consumer and labour disputes must be conducted in Slovenian, unless expressly agreed otherwise. Finally, grounds for challenging the arbitral decisions are also wider in consumer and labour disputes.
The Arbitration Act defines the arbitration agreement as ‘an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined contractual or non-contractual legal relationship'. An agreement to refer all future disputes between the parties to arbitration, without reference to an underlying legal relationship, is hence not allowed.3 Moreover, an arbitration agreement can be concluded in the form of an arbitration clause in a contract or in the form of a separate agreement.
Article 10 of the Arbitration Act defines the form requirements of the arbitration agreement. Following the general principles of the New York Convention,4 the arbitration agreement must be concluded in writing. The Slovenian arbitration law also provides a suitable platform for the resolution of corporate and maritime disputes, providing for the validity of an arbitration agreement in the form of an express reference to an arbitration clause in a shipping contract or in the articles of association, referring all future disputes arising in connection with corporate matters to arbitration.5
Finally, with regard to the validity of the arbitration clause contained in a null or void agreement, Slovenian arbitration law adopted the severability principle.6
Appointment of arbitrators
There are no special conditions under Slovenian law for a person to be appointed as an arbitrator. It is widely accepted in legal theory that any person of age and contractual capacity can serve as an arbitrator.7 Accordingly, there are no statutory prohibitions for judges or other officers of the court to serve as arbitrators. As the UNCITRAL Model Law, the Arbitration Act expressly provides that no person is to be precluded by reasons of their nationality from acting as an arbitrator, unless otherwise agreed by the parties.
Party autonomy is at the forefront of the appointment procedure. However, in the absence of the parties' agreement, the Arbitration Act provides default provisions for the appointment. According to article 13 of the Arbitration Act, the arbitration tribunal consists of three arbitrators, unless agreed otherwise by the parties. Each party appoints one arbitrator, and the two arbitrators thus appointed appoint the third arbitrator who serves as chairperson. If a party fails to appoint the arbitrator within 30 days of receipt of a request from the other party, or if the two arbitrators fail to agree on the third arbitrator within 30 days from their appointment, the appointment is made, upon request of a party, by the District Court of Ljubljana. If parties agreed to have their dispute resolved by a sole arbitrator, but cannot agree on the selection, the arbitrator is to be appointed, upon request of either party, by the District Court of Ljubljana.
The LAC Rules provide for a similar appointment procedure as the Arbitration Act, save for the cases where the parties cannot agree on the appointment of arbitrators, which is then made by the LAC Secretariat. The LAC Rules additionally provide for a special form of arbitration proceedings, not foreseen by the Arbitration Act - the ‘emergency arbitrator proceeding' (EAP). The appointment of an emergency arbitrator is appropriate when a party needs an urgent interim measure that cannot await the constitution of an arbitral tribunal. To ensure the effectiveness of the procedure, the parties must send the application for the EAP to the LAC via email. The application should, inter alia, contain: a copy of the arbitration agreement; a description of the dispute; a statement of the interim measure sought and the reasons therefor; and a description of the reasons for the urgency.
The LAC Board must appoint an emergency arbitrator within 48 hours following the receipt of the application. Thereupon, the decision on interim measures must be made within 15 days from the date of transmission of application to the emergency arbitrator. Such a decision on an interim measure is binding on the parties. Upon conclusion of the arbitral proceedings, the interim measure - as a rule - ceases to be binding, unless the arbitral tribunal decides otherwise.
In line with the modern approach of the Arbitration Act and the UNCITRAL Model Law, the arbitral proceedings and the rules governing them are primarily characterised by party autonomy and subordinately (in matters not governed by the arbitration agreement) by the discretionary power of the arbitral tribunal, whereby both are limited by the mandatory provisions of the Arbitration Act.8 The mandatory provisions include the parties' right to equal treatment, the right to be heard and the rules on the capacity to become a party, on arbitrator challenges, on award challenges and on interim measures.9
Unless otherwise agreed by the parties, the arbitral proceedings commence with the receipt of the request for arbitration by the respondent. The parties are free to decide whether the tribunal should hold an oral hearing or rule based on written pleadings. In the absence of such an agreement, the arbitral tribunal may decide thereon on its own.
The Arbitration Act provides certain limited requirements for written pleadings. The statement of claim must contain a statement of the claim, the facts supporting the claim and the points at issue. The LAC Rules provide that the statement of claim must set out the relief or remedy sought and the statement of facts and legal grounds supporting the claim. On the other hand, the statement of defence must contain a statement whether and to what extent the respondent admits or denies the relief or remedy sought by the claimant and the statement of facts and the legal grounds supporting the defence.
The arbitral tribunal has full authority to determine the admissibility, relevance, materiality and weight of any evidence. The LAC Rules provide that the witnesses and expert witnesses may be heard and examined in the manner set by the arbitral tribunal. Unless otherwise agreed by the parties, the arbitral tribunal may appoint one or more experts and require a party to provide the expert with any relevant information or to provide access to any relevant documents, goods or other property for the expert's inspection. Finally, the arbitral tribunal or a party with the approval of the arbitral tribunal may request the assistance of a court of competent jurisdiction in the taking of evidence.
The Arbitration Act does not govern discovery of documents and the arbitral tribunal does not have specific empowerments in this regard. If any party fails to disclose or produce documents, the arbitral tribunal may continue the proceedings and render the award based on the evidence before it.
If, during the arbitral proceedings, the parties settle the dispute, the arbitral tribunal terminates the proceedings and the settlement may be recorded in the form of an arbitral award, if requested by the parties, except if its content is in conflict with the public policy of the Republic of Slovenia.
The arbitral award must be in writing and must contain a reference to the date and the seat of the arbitration. All arbitrators must sign the award, however, the signatures of majority of all members of the tribunal may suffice if the reason for the failure of an arbitrator to sign the award is set forth therein. The arbitral award must state the reasons for the decisions, unless parties agreed otherwise. As regards the parties, the arbitral award has the effect of a final and binding court judgment.
In addition, the LAC Rules provide that the final award must be rendered no later than within nine months from the submission of the case to the arbitral tribunal, whereby the time limit may be extended only for justified reasons.
As provided in the UNCITRAL Model Law, the Arbitration Act allows the arbitral tribunal award to grant interim measures, unless the parties agreed otherwise. Usually interim measures are granted only after the other party has had an opportunity to present its case with respect to the request, however, in exceptionally urgent cases, the arbitral tribunal award may grant an interim measure before giving the other party the opportunity to present its case with respect to the request and such measure is legally binding for both parties. Contrary to the UNCITRAL Model Law, the Arbitration Act does not define any specific grounds for an interim measure, leaving it to the arbitral tribunal's discretion.
In contrast to interim measures granted by courts, no obligations for third parties arise under interim measures granted by arbitral tribunals,10 as they only have the nature of contractual obligations and their recognition and enforcement are within the jurisdiction of the courts.11 Parties are not limited to the interim measures granted by the arbitral tribunal and may at any time apply also for interim measures in the courts.
Challenge of the arbitral award
The Arbitration Act allows the parties to arbitral proceedings to challenge the arbitral award before the regular courts, subject to procedural rules for commercial disputes. Article 40 of the Arbitration Act, which is very similar to article 34 of UNCITRAL Model Law, provides that recourse against an arbitral award may only be made by an application for setting aside the arbitral award, within three months from the date on which the party making the application has received it. In the event that correction or interpretation of the arbitral award was requested by either party, the time period for the application is extended up to a maximum of 30 days from the date of receipt of the decision of the arbitral tribunal in that matter. The parties may not waive their right to challenge the arbitral award in advance. Article 40 of the Arbitration Act specifies the grounds on which the application for setting aside may be submitted, following closely the UNCITRAL Model Law provisions. The Arbitration Act, however, also contains provisions allowing consumers and employees to challenge the arbitral award on additional grounds:
- in case of violations of mandatory provisions from which the parties cannot derogate; or
- in case of grounds for the setting aside of a judgment and ordering a retrial.
In contrast to the provisions of UNCITRAL Model Law, article 40 of the Arbitration Act expressly provides that an arbitral award is not to be set aside because of a lack of jurisdiction of the arbitral tribunal if a court has already decided on this issue upon an application earlier in the proceedings.
The setting aside of an arbitral award does not affect the validity of the arbitration agreement on which the arbitration was based, which enables the parties to commence new arbitral proceedings.
Recognition and enforcement of the arbitral award
Pursuant to the Arbitration Act, an arbitral award has the effect of a final and binding court judgment, however, only between the parties. Under the Arbitration Act, an arbitral award may be enforced only after the court has declared it enforceable. Arbitral awards rendered by domestic arbitral tribunals may be refused such a declaration only if the subject matter of the dispute may not be settled by arbitration or the award is in conflict with the public policy of the Republic of Slovenia.
With regard to foreign arbitral awards, the Arbitration Act specifically refers to the New York Convention.12 A party seeking the recognition of a foreign arbitral award has to provide an original or a copy of the arbitral award and, upon request of the court, an original or a certified copy of the arbitration agreement, and certified translations in the event the agreement or the award are not in official language of the court.
With respect to the enforceability of interim measures granted by arbitral tribunals, the Arbitration Act specifically provides that the court may refuse to declare an interim measure enforceable if it finds ex officio that it is impossible to enforce the interim measure, and, at the request of a party, appropriately reformulates the interim measure to the extent necessary to ensure enforceability, provided that it does not substantially modify the measure.
Arbitration clauses in (international) construction agreements
In October 2012, the Chamber of Construction and Building Materials Industry of Slovenia (the Chamber of Construction), a member of the Chamber of Commerce and Industry of Slovenia, called upon the Slovenian government to ensure inclusion of arbitration clauses in the public procurement construction and engineering contracts.13 In its letter, the Chamber of Construction referred to the complexity of the disputes and the unacceptable duration of court proceedings, leading to important delays and serious damage to the construction industry. The Chamber of Construction emphasised the efficiency and appropriateness of arbitration as an alternative dispute resolution method, which is well established in international construction and engineering contracts.
The Chamber of Construction also proposed the express reference to FIDIC contracts in the public procurement construction and engineering contracts, the value of which exceeds €100,000, incorporating arbitration clauses.14 Additionally, FIDIC general conditions also provide rules for pre-arbitration proceedings, as well as for dispute resolution before a Dispute Review Board (DRB). If not otherwise agreed by the parties, the DRB is composed of three independent and impartial persons selected by the parties, absent which the members are appointed by the appointing entity designated by the parties in particular conditions of the contract. The DRB's decision, which is immediately binding for both parties, is rendered within 84 days unless agreed otherwise. Either party may give a notice of dissatisfaction to the opposing party within 28 days from receipt of the DRB's decision, following which the parties must attempt to arrive at an amicable settlement. If settlement is not reached in 56 days, the dispute may be referred to arbitration.
The parties are free to agree on rules and procedure for the arbitration or accept clause 20.6 of the FIDIC general conditions, based on which the arbitration proceedings are conducted by three arbitrators in accordance with the International Chamber of Commerce Rules.
According to the data published by the LAC, approximately 30 per cent of all disputes before the LAC are construction disputes. In most of these cases the parties used standard arbitration clauses.
Although owing to the confidentiality of the construction contracts it is impossible to determine precisely the portion of the construction agreements including an arbitration clause, arbitration clauses are in practice included in an increasing number of international, but also domestic construction agreements. This has led the Chamber of Construction to commence the preparation of model construction contracts, which will include the LAC's standard arbitration clause.
- Official Gazette of the Republic of Slovenia No. 45/2008 et seq.
- Ude L, Arbitrazˇno pravo, GV Zalozˇba, Ljubljana 2004, pp. 68-69. See also: Shelkoplyas N, The Application of EC Law in Arbitration Proceedings, Europa Law Publishing, Groningen 2003, p. 248.
- See, eg, Decision of the Higher Court in Ljubljana, Ref. No. II Cp 2060/99 of 5 January 2000.
- See, eg, article 2(2) of the New York Convention.
- Podgorelec P and Primec A, Arbitrazˇna klavzula v ustanovitvenih aktih gospodarskih druzˇb, Podjetje in delo 8 (2013), p. 1261.
- Ude L, Arbitrazˇno pravo, GV Zalozˇba, Ljubljana 2004, pp. 82-83.
- Ude L, Arbitrazˇno pravo, GV Zalozˇba, Ljubljana 2004, p. 101. See also Dika M and Sajko K, Arbitrazˇno rješavanje medjunarodnih trgovacˇih sporova, Ljubljana 1989, p. 25.
- Ude L, Arbitrazˇno pravo, GV Zalozˇba, Ljubljana 2004, pp. 129-130.
- Ude L, Arbitrazˇno pravo, GV Zalozˇba, Ljubljana 2004, pp. 139-143.
- Primec A, Zacˇasne odredbe (zacˇasni ukrepi) arbitrazˇe, Podjetje in delo, 2008, GV Zalozˇba 3-4, p. 542-556; Ude L, Arbitrazˇno pravo, GV GV Zalozˇba, 2004, p. 207.
- The decision of the Constitutional Court Up-20/99, the decision of the High Court of Ljubljana No. I Cpg 215/2007.
- Official Gazette of the Socialist Federal Republic of Yugoslavia, International Agreements No. 11/81, and the Official Gazette of the Republic of Slovenia, International Agreements Nos. 9/92 et seq.
Ulčar & Partners Ltd
Šlandrova ulica 4
1231 Ljubljana - Črnuče
Tel: +386 1 56 05 300
Fax: +386 1 56 05 304
Ulčar & Partners is an expanding Slovenian law firm, specialising in corporate (including M&A and corporate restructuring), commercial law and dispute resolution. Combining youthful enthusiasm, sustained learning and improvement with experience and determination, we have extensive experience in advising major Slovenian companies as well as public entities and international investors and offer comprehensive services to our clients, including labour, competition and environmental law advice. Building on this experience, the firm has evolved in the past few years into one of the leading Slovenian corporate practices and has established excellent business relations with several global law firms as well as local law firms in south-east Europe.