"Vilnius Court of Commercial Arbitration: Specific Legal Features"
On 14 March 2017 in Kiev a seminar "Vilnius Commercial Arbitration Court: Legal Features", supported by Ukrainian Arbitration Association was held.
Vytautas Nyakrosius, Chairman of the Vilnius Commercial Arbitration Court, and Gediminas Dominas, Partner of the law firm DOMINASDERLING gave a speech.
The speakers' reports aroused a lively discussion among the Ukrainian audience. Here is the review of the workshop.
Vytautas Nyakroshyus commenced his speech by noting that the main feature of Lithuanian arbitration is the existence of a single regulation for national and international arbitration, which allows arbitral institutions to arbitrate both domestic and international disputes.
The Law of the Republic of Lithuania on Commercial Arbitration (the Law), in force since 1996 (a new version of this law was adopted in 2012, based on the UNCITRAL Model Law 1985,), is the main regulatory source of arbitration in Lithuania.
According to the provisions of this Law, disputes related to family, administrative, constitutional violation and those related to patents, registration of trademarks should not be resolved through arbitration. Disputes arising from labor and consumer contracts should be referred to arbitration if the arbitration agreement was concluded after the actual occurrence of the dispute.
It is noteworthy that claims for disputes involving state or municipal enterprises, institutions or organizations, with the exception of the Bank of Lithuania, should not be submitted to arbitration without the consent of the founder of such legal entity.
Initiation of the bankruptcy procedure against one of the parties to the arbitration agreement does not affect either the arbitration proceedings, the validity of the arbitration agreement, the dispute arbitrability, or the competence of the arbitral tribunal to resolve the dispute. However, a party participating in the bankruptcy procedure cannot enter into a new arbitration agreement at the same time.
With regard to the jurisdiction of state courts in disputes arising from contracts containing an arbitration clause, a court must refuse to accept claims if there is an arbitration clause in respect of the subject matter of the dispute. When making a decision on the jurisdiction of the case, the court should first check the existence of the arbitration clause. In case the court accepts the claim, but later determines that the case should be referred to arbitration, the court must leave the claim without consideration.
Gediminas Dominas in his speech emphasized that in practice the courts are strictly abide by this rule. He cited the case of Orlen Lithuania v. Liberty MutualInsurance Europe et.al, in which the Supreme Court of Lithuania (the SCL) in 2010 decided that "[in] accordance with the laws and practices of the Supreme Court of Lithuania, if the parties entered into an arbitration agreement, in the absence of an action to invalidate such an arbitration agreement, neither the parties, nor the court can change this agreement. Whereas the arbitration agreement is valid, the court should not consider the dispute ".
Mr. Dominas highlighted that in its numerous decisions the SCL explained that the revision of arbitration decisions concerning matters of fact or application of substantive law is not allowed in Lithuania. Thus, the court has no right to decide the case on its merits and to check whether the arbitrators have correctly established the circumstances of the case, investigated and evaluated the evidence.
The parties can come to an agreement on the number of arbitrators, the procedure for appointing an arbitrator, the order of the arbitrator's challenge, the place of arbitration, the language of arbitration, the oral or documentary (written) examination of the case, the time for filing a claim and the withdrawal of the claim. They can also agree on other issues where the law applicable to the arbitration procedure does not prohibit to the parties to agree.
Since Lithuania is a party to the 1958 New York Convention, an arbitral award rendered in any country, party to the New York Convention, can be respectively recognized and enforced in Lithuania.
As Gediminas Dominas pointed out in his presentation, in 2002, the SCL issued a decision stating that "when applying the 1958 New York Convention, one should pay attention to the necessity set out in the Convention to ensure its unified application throughout the world. Therefore, in the application and interpretation of this Convention, the courts should analyze and rely on foreign case law relating to the interpretation and application of this Convention."
Vytautas Nyakroshuis also dwelled on the history of arbitration institutions in Lithuania and on how Lithuanians came to the present concept. The reorganization of two permanent arbitration institutions of Lithuania - the Arbitration Court of the International Chamber of Commerce of the Association of Lithuania and Vilnius International Commercial Arbitration resulted in establishment of the VCCA as a single institution in 2003.
As of today, the VCCA has developed regulations for the conduct of commercial, sport and financial arbitration.
Administration of proceeding is carried out in Lithuanian, English or Russian languages (without additional payment). VCCA also conducts arbitration in other languages, but in this case, the parties bear the translational costs individually.
The founders of the VCCA are the Lithuanian Confederation of Industrialists, the Association of Lithuanian Banks, the Association of Lithuanian Chambers of Commerce and Industry, the Lithuanian Confederation of Businessmen (the National Committee of the International Chamber of Commerce in Lithuania), the Lithuanian National Road Carriers’ Association “LINAVA” and the Lithuanian Association of Lawyers “INFOBALT”.
Regarding the procedural moments, to initiate the arbitration proceedings the interested party (claimant) should file a claim or notice of arbitration to the VCCA and pay the registration fee.
It should be noted that if the parties agreed on the application of the Rules of the VCCA, it is considered that they thereby agreed that all procedural documents will be handed to them by e-mail. As exception, procedural documents can be handed personally, by registered mail, courier mail, other electronic communication devices or any other means that confirm the fact that the sender has send the message.
If the arbitration agreement does not stipulate the number of arbitrators, it is assumed that the parties agreed to resolve the dispute by a sole arbitrator, unless either of the parties requests a dispute resolution consisting of three arbitrators. The request is submitted in form of claim (notice of arbitration) or statement of defence (as response to the notice of arbitration). The Rules of the VCCA prescribe the procedure of three arbitrators appointment in this situation. A party has the right to appoint an arbitrator choosing a person who is not on the list of arbitrators recommended by the VCCA. The Chairman of the VCCA shall decide the issues of the arbitrators challenge. Its decision is final and cannot be appealed.
Before the proceeding commencement, the arbitral tribunal is entitled to decide on its own competence to resolve the dispute, including cases of doubt about the existence or validity of the arbitration agreement. The party's statement on the lack of competence of the arbitral tribunal to resolve the dispute should be made no later than the submission of the response to the claim (for notification of arbitration).
In the absence of any other agreement between the parties, provided that a party without a good reason does not submit a binding procedural document or fails to participate in a hearing of the arbitral tribunal, the tribunal may continue the arbitral proceedings and make an award based on the already tendered evidence to the case or render procedural decisions.
The parties may apply for interim measures both to the arbitration tribunal and to the state court. Meanwhile, the processes in arbitration and state court can be conducted in parallel and is completely independent of each other.
In terms of figures, over the period 2000-2016, the total number of arbitral awards has reached approximately 400-500, 44 of which were challenged, and 6 - canceled by the court.
The awards were cancelled on such grounds as the lack of jurisdiction (the dispute should not have been submitted to arbitration) (Lietuvosgelezinkeliai v. Mazeikiunafta, 2004; East China Automobile Association Ltd. v. ECAA Europe, 2016), non-arbitrability of the dispute in general (NCC statyba v. Svilda, 2005, WTE Wasertechnik v. Environmental Projects Management Agency, 2011). Several awards were considered as contrary to public policy (Niskama v. Eidina, 2015, Elgamos Grupė, Instra v. THE7, 2016)
The speaker also drew attention to the relatively moderate arbitration fees of the VCCA compared to other arbitration institutions, such as ICC, SCC, LCIA, AAA and others.
Among other advantages of consideration Lithuania as a place of arbitration Gediminas highlighted the favorable geopolitical location, modern legal thinking of arbitrators, arbitration-friendly Lithuanian legislation, progressive jurisprudence, along with sufficient number of specialists and lawyers with extensive practice in the field of national and international arbitration.
[1] Prepared by Anastasiia Zaichenko, Junior lawyer at Integrites