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ThejournalofAlternativeDisputeResolutioninKosovoismadepossiblebythesupportoftheAmericanPeople through the United States Agency for International Development (USAID). The contents of thisJournalarethesoleresponsibilityoftheAlternativeDisputeResolutionCenteratAmericanChamberofCommerceanddonotnecessarilyreflecttheviewsofUSAIDortheUnitedStatesGovernment.

Thismaterialmaybereproducedorusedfornon‐commercialpurposesifthepublicationisquotedandidentifiedexactlyasthesourceofinformation.TheviewsexpressedinthisnewsletterdonotnecessarilyreflecttheofficialpositionoftheAmericanChamberofCommerceinKosovo.

AlternativeDisputeResolutionCenterAmericanChamberofCommerceinKosovoAugust2015

TABLEOFCONTENTS:

FOREWORD.......................................................................................................................................................................5

INTERIMMEASURESUNDERKOSOVOARBITRATIONLAWANDUNCITRALMODELLAW....6

THENOTIONOF“ORDREPUBLIC”:ARBITRABILITYOFPATENTLAWDISPUTES..................12

THERELATIONSHIPBETWEENREGULARCOURTSANDARBITRATION:LEGALSTANDARDSANDBESTPRACTICES..................................................................................................................25

THEIMPORTANCEOFALTERNATIVEDISPUTERESOLUTIONTHROUGHARBITRATIONINKOSOVO............................................................................................................................................................................30

REDEFININGINVESTMENTARBITRATIONLAW:THECASEOFKOSOVO.....................................38

MEDIATIONASANALTERNATIVEDISPUTERESOLUTIONMECHANISMINKOSOVO............45

AUNITEDNATIONS’LIAISONHUBANDOMBUDSOFFICEFORINTERNATIONALECONOMICRELATIONS:APROPOSAL.......................................................................................................................................49

FOREWORD

This is the first volume of the Journal of Alternative Dispute Resolution in Kosovo of the AlternativeDisputeResolutionCenteratAmericanChamberofCommerceinKosovo.

Commercial arbitration andmediation in Kosovo are in their inception phase. As such, the increasingdemand for theseservicescalls fora fully informedaudience regarding thepeculiaritiesof thesystem,anditsadvantages.

Currently,thereisanimmenseneedforprofessionalresourcesandmaterialsdedicatedtothisareaoflawin Kosovo. Generally, scarcity of these resources can be grouped in three categories, namely: lack ofacademic and scholarly materials for researchers, academics, professionals and students; lack ofinformationaboututilizingadvantagesofarbitrationandmediationforthebusinesscommunity;andlackofresourcesforbusinessestotrackbestpracticesandnewdevelopmentsintheinternationalarea,fromwhich practices they can benefit. It is exactly these gaps that the Journal on Alternative DisputeResolutionseekstoaddress.

Thisjournalwillserveasaplatformforacademics,legalpractitioners,andbusinesses,asanintegralpartoftheADRsystem,providingaccesstoprofessionalresourcesaboutdevelopmentsinthisareaoflaw.

Thepresentvolumeisacompilationofsevenarticles,addressingtopicsinbothnationalandinternationalarbitration andmediation. The journal has been designed to combine two perspectives, academic andlegal perspective on one hand, and business perspectives in the other hand, and the content of thisvolumereflectsexactlythisframework.

5

UPC341.6(496.51)

INTERIMMEASURESUNDERKOSOVOARBITRATIONLAWANDUNCITRALMODELLAW

byDr.RobertMuharremi1andAnjezëGojani2

I. IntroductionAn interimmeasure is a legal instrument known in almost all legal areas. The function of an interimmeasure is to provide in certain cases temporary protection of the interest of the parties in theproceedingsuntil thedispute is finally resolved. The interest of theparty for an interimmeasuremayincludepreservationofevidenceorassetsfromlossortheirremoval,orsimplytokeepinforceastatus‐quo,preventingchangeofthefactualsituation,until thedisputeisresolved.3Interimmeasuresarealsoimplemented in arbitration proceedings; these measures present a very important instrument forinternationalarbitrationconsideringthespecificrisksthatthisproceduremayencompass.Inmanycasestheeffectivenessofarbitrationproceedingsdependsoninterimmeasures,throughwhichthepartiesmaybebarredfromthedestructionordisposalofassetsorevidence.

ThepurposeofthispaperistodiscusstheprovisionsoftheLawNo.02/L‐75onArbitrationinKosovo,comparingthesewiththeprovisionsofUNCITRALModelLawonInternationalCommercialArbitrationof1985, as amended in 2006. The UNCITRAL Model Law has been prepared by the United NationsCommission on International Trade Law (hereinafter UNICTRAL) and it intends to harmonize andstandardizeinternationalarbitrationrules,theneedsofdraftinganationallawonarbitration,aswellasfordevelopmentofarbitrationproceedings.4ThepaperwillprimarilyfocusondiscussingtheUNCITRALModelLaw,therebycomparingitwithKosovoLawonArbitration,consideringthattheUNCITRALModelLaw represents the international standard for domestic legislation. This paperwill not address court‐ordered interimmeasureswhichmay be issued by a court in relation to arbitration proceedings andwhichareregulatedbytherelevantprocedurallaw,butitwillonlyaddressinterimmeasureswhichmaybeorderedbyanarbitraltribunal.

II. InterimmeasuresundertheLawonArbitrationTheinterimmeasureasan instrumentis foreseenbyArticle15oftheLawNo.02/L‐75onArbitration.Thearbitral tribunal,attherequestofaparty,maygrantan interimmeasure,providedthepartygivescredibleevidence that itmay suffer immediateor irreparabledamageor loss, if suchameasure isnottaken.5Grantingofaninterimmeasureisatthedisposaloftheparties,becausetheymayalsoagreethatthearbitraltribunaldoesnothavethepowertograntinterimmeasures.6Theinterimmeasureorderedby the arbitral tribunal becomes enforceable if the court, on the request of a party, orders itsenforcement.7Thecourtdoesnotordertheenforcementoftheinterimmeasureorderedbythearbitraltribunal,ifthepartyhasalsoaddressedthecourtwitharequestforaninterimmeasure.8Thecourtsandthe arbitral tribunal have competitive jurisdiction regarding the grant of interim measures, becauseregardlessofthearbitrationagreementorthecommencementofarbitrationproceedings,thecourthasjurisdictiontoorderaprovisionalmeasureattherequestofapartyinarbitralproceedings,ifthepartyprovesthatitmaysufferimmediateorirreparabledamageorloss,ifsuchameasureisnottaken.9

1 Dr. Robert Muharremi, ACIArb is a lecturer at the American University in Kosovo. 2 Anjezë Gojani, LL.M., is the Secretary General of the Centre for Alternative Dispute Resolution at the American Chamber of Commerce in Kosovo. 3 N. Blackaby/C. Partasides, „Redfern and Hunter on International Arbitration“, Oxford University Press: 2009, pp. 444-445. 4 See generally the preamble to the UNCITRAL Model Law, available at http://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/07-86998_Ebook.pdf 5 Law No. 02/L-75 on Arbitration, Article 15, paragrapf 1 6 Ibid 7 Ibid, Article 15, paragraph 2 8 Ibid 9 Ibid, Article 8

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The Arbitration Law regulates also some other issues related to interimmeasures. These include theprovision of appropriate security related to the interimmeasure, for which the arbitral tribunal mayorderanyoftheparties.10Inaddition,thepartyinwhosefavourtheinterimmeasureisissued,isobligedto compensate the damages incurred by the other party as a result of its enforcement, if the issuedinterimmeasureisestablishedtobeunjustified.11

TheprovisionsoninterimmeasuresoftheLawonArbitrationareacombinationoftheprovisionsoftheold UNCITRAL Model Law on International Commercial Arbitration, and the German Code of CivilProcedure.TheUNCITRALModelLawon InternationalCommercialArbitration (hereinafter ‘theModelLaw’), in its version of 1985 provides that: “unlessotherwiseagreedbytheparties,thearbitraltribunalmay,attherequestofaparty,orderanypartytotakesuch interimmeasureofprotectionasthearbitraltribunalmayconsidernecessary inrespectofthesubject–matterofthedispute.Thearbitraltribunalmayrequireanypartytoprovideappropriatesecurityinconnectionwithsuchmeasure.”12Article 15 of theLawonArbitrationdoesnotrequiresuchaconnection,wherebyitallowstheissuingofinterimmeasureswhicharenotrelatedtothecaseindispute.

Themain part, which has not been included, is the need of the request for an interimmeasure to berelatedtothesubjectmatterofthedispute.Accordingtotherelevantprovisionofthe1985ModelLaw,aninterimmeasureshallnotbeordered,ifitisnotrelatedtothesubjectmatterofthedispute.Article15oftheLawonArbitrationdoesnotrequiresuchaconnectionandthisallowsforinterimmeasures,whicharenotrelatedtothecaseindispute.Inaddition,theLawonArbitrationrequiresfromthepartywhichproposesinterimmeasurestopresentcredibleevidencethatitmaycausedamageorlossofimmediateorirreparabledamageifnottakensuchameasure.Article17ofthe1985ModelLaw,doesnotimposethisrequirementonthepartywhichproposestheinterimmeasure,butratheritleavesittothefulldiscretionofthearbitraltribunaltodecideonsuchmeasure.

AshortcomingoftheoldModelLawof1985,isthatitdoesnotprovideadefinitionofinterimmeasures,andwhattheyinclude.AnothershortcomingoftheModelLawisthatitdoesnotregulatetheenforcementof interim measures and therefore gives national legislators enough space to determine this issue.13CourtshaveinterpretedtheModelLawprovisiononinterimmeasuressothatthearbitraltribunaldoesnothavejurisdictiontoexecuteanorderforinterimmeasures.14Itisalsohighlydebatable,whetheraninterim measure may be enforced by reference to the New York Convention on Recognition andEnforcement of Foreign Arbitral Awards of 1958 (hereinafter ‘New York Convention’). The New YorkConventioncoversonlyarbitraldecisions,whichcouldbeinterpretedas includingfinalarbitralawardsonly and not the procedural orders, including orders for interim measures.15However, whether theorders for interim measures are incorporated or not, depends entirely on the interpretation of therelevant provisions of the New York Convention by countries which have ratified this Convention, orcountrieswhich,similartoKosovo,haveincorporateditintotheirdomesticlawwithoutratifyingit.16

The Law on Arbitration has also incorporated provisions of the German Code of Civil Procedure,particularly in connection with the enforcement of an interim measure. The German Code of CivilProcedureprovides that the court, at the request of a party,mayallow the enforcement of an interimmeasure, unless the party has not sought an interim measure before the court.17This provision istextually identical toArticle 15, paragraph2, of theLawonArbitration inKosovo.However, there aresome shortcomings withinthis provision aswell, consideringthatit doesnot determinethe criteriaaccording to which the court must assessthe admissibility and the meritsof an interim measure,but gives broad discretion to the arbitral tribunal. The only clear criterion for allowingan interim measure is for the party not to have requested an interim measure from the court.No other criteria are required and the court decides on a case‐by‐casebasisonitsowndiscretion.

10 Ibid, Article 15, paragraph 1 11 Ibid, Article 15, paragraph 3 12 United Nations, “UNCITRAL Model Law on International Commercial Arbitration”, 1994, Article 17. 13 Ibid., pg. 20 14 UNCITRAL, “2010 Digest of Case Law on the Model Law on International Commercial Arbitration”, pg. 86. 15 A. Tweeddale/K. Tweeddale, “Arbitration of Commercial Disputes – International and English Law and Practice”, Oxford University Press: 2007, pg. 309. 16 Ibid. 17 Zivilprozessordnung (ZPO), Article 1041, paragraph 2.

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Journal of Alternative Dispute Resolution in Kosovo

III. InterimmeasuresundertheUNCITRALModelLaw2006TheprovisionsoftheModelLawoninterimmeasuresinarbitrationproceedingswereamendedin2006(respectively in2010, theUNCITRALRulesonArbitration). In2006,UNCITRALhas radically reformedthe rules on interim measures of the Model Law. The same task was conducted in 2010 with theUNCITRALArbitrationRules.

TheModel Law of 2006was amendedmainlywith a view to expanding its scope to include disputesrelating to investment and to arrange interimmeasures inmoredetail andmore efficiently.18Changeshave been effected to eliminate the shortcomings of the discussions above, which are found in theimplementationoftheprovisionsoninterimmeasures.Itwasalsotakenintoconsiderationthatinterimmeasureshavebecomeanimportantinstrumentininternationalarbitrationproceedings.19UndertheoldrulesoftheModelLawitwasnotclearunderwhatcircumstances,underwhatconditionsandaccordingtowhichproceduresanarbitraltribunalcouldorderinterimmeasures.20ItwasalsodebatablewhetherinterimmeasuresundertheModelLaware anautonomouslegalinstrument orwhether they shouldbeinterpretedandimplementedinaccordancewithnationallaw.21

OneofthechangesisthatthenewrulesoftheModelLawprovideadefinitionregardingwhatismeantbyinterim measures. According to the law in question, an interim measure is any measure of limitedduration, which may take the form of a decision or otherwise, and which is ordered by the arbitraltribunalbeforeissuingafinaldecision.22Throughaninterimmeasurethepartyisorderedto(i)Maintainor restore the status quopendingdeterminationof thedispute, (ii) to refrain from taking actions thatcould harm the arbitration procedure, (iii) provide a means of preserving assets out of which asubsequentawardmaybesatisfied,or(iv)preserveevidencethatmayberelevantandmaterial totheresolutionof the dispute.23A specific feature of this definition is that it no longer requires for interimmeasurestobelinkedtothesubjectmatterindispute,whichexpandsthescopeoftheinterimmeasure.24Alsothedilemmaregardingtheformoftheinterimmeasurehasbeensolved;itcanbeissuedbothintheformofadecisionandthereforebeenforceableundertheNewYorkConvention,oritcanbeissued inanyotherform,includinginterimmeasuresinaformofaproceduralorder.

NewModel Law rules determine the conditionswhich the partymustmeet in order to be granted aninterimmeasure.Thepartymustprovidetothearbitraltribunalthat(i)harmnotadequatelyreparableby an award of damages is likely to result if themeasure is not ordered, and such harm substantiallyoutweighs the harm that is likely to result to the party against whom the measure is directed if themeasureisgranted;and(ii)thereisareasonablepossibilitythattherequestingpartywillsucceedonthemeritsoftheclaim.25

Anoveltywithinthe2006ModelLawarethepreliminaryorders.Preliminaryordersareordersthatareissuedattherequestofonepartywithoutnotifyingtheotherparty(exparte).26Suchordersareknowninsomecountries in judicialproceedingsandserveforemergencies,particularlywhenthereisariskthatonepartywilldisposeof itsassets.27The implementationof this instrument inarbitrationproceedingshas been highly controversial and most national laws and arbitration rules have not included thisinstrument.28On the one hand it is argued that such an orderwould help the proceedings andwouldmakethemmoreeffective,whileitisalsoarguedthatifthearbitraltribunalcannoteffectivelyoperateinan emergency, then the party will be denied justice.29On the other hand the implementation of apreliminary order in arbitration proceedings for the issuance of an order without notifying the otherpartyhasbeenrejectedonthegroundsthatitviolatestheprincipleofequaltreatmentofparties.30Ithasalso been argued that such an instrument could be misused and cannot be involved in arbitration

18 M. Rieder/ A. Ernst, “UNCITRAL Arbitration Rules – Institutional Reform”, in: International Arbitration Law Review (2013), pg. 179. 19 United Nations, “UNCITRAL Model Law on International Commercial Arbitration”, Vienna: 2008, pg. 24. 20 M. Rieder/ A. Ernst, pg. 183. 21 Ibid. 22 UNCITRAL Model Law, Article 17, paragraph 2. 23 Ibid. 24 UNCITRAL, “2012 Digest of Case Law on the Model Law on International Commercial Arbitration”, pg. 86. 25 UNCITRAL Model Law, Article 17 A. 26 A. Tweeddale/K. Tweeddale, pg. 304. 27 Ibid. 28 Ibid. 29 Ibid. 30 Ibid.

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proceedings without the necessary security measures.31With the new changes to the Model Lawpreliminaryordersasatypeofinterimmeasureshavealsobeenincluded,whichcanbeissuedwithoutnotifyingtheotherpartyiftheotherparties’noticewouldfrustratethepurposeoftheinterimmeasureandtheneedforinterimprotectionisextremelyurgentorwhentheelementofsurpriseisnecessary.32However, a preliminary order has a duration of no more than twenty days and it is not enforceablethroughcourtproceedings,althoughitiscompulsorybetweentheparties.33Consequently,theeffectofapreliminaryorderisquitelimited.

Aspreviouslynoted,theLawonArbitrationisbasedontheoldversionoftheModelLaw,andthereforedoes not provide the possibility of issuing preliminary orders (the main difference between interimmeasures and preliminary orders being the fact that the latter can be obtained expartes) within themeaning used in the 2006 version of the Model Law. However, it is important to note that in thedesignation of thesemeasures there is a discrepancy between the English version of the law and theAlbanianversion.Article8and15oftheLawintheEnglishversionbaretheexactsametitle‘preliminaryorders’whichinAlbaniantranslatesinto‘urdhëratpreliminar’.Despitethesetwoprovisionsnothavingthe same content, forusersof the law, thenomenclature gives room for confusion.This isparticularlytruesinceitspotentialusersmaybenaturalorlegalpersons,andinafirstreadingitcancreatetheideathatKosovo,asaplaceofarbitration, isa forumwhichprovides theadvantageofapplying forexpartemeasures.Inreality,thisisnotthecase.

Itisunclearwhythelegislatorhasusedthisterm,insteadofinterimmeasures,sincetheoriginalversionof theModel Lawwhich is the basis of the Arbitration Law does not refer to any type of preliminaryorders,andthecoreofthetwoprovisionsofthelatterdoesnotcontainanyexparteelementwhatsoever.Theproblemshouldbeattributedtopoorlanguagetranslation.

Interimmeasures arenameddifferently from state to state. For example, the InternationalArbitrationLawofSwitzerlandreferstointerimmeasuresasprovisionalorconservatorymeasures34,andtheGermanCode of Civil Procedure as interimmeasuresofprotection.35Moreover, the Rules of Arbitration of theInternational Chamber of Commerce in Paris refer to them as conservatory and interimmeasures.36Nevertheless,ininternationalarbitrationthetermpreliminaryorder,particularlyfollowingtheadoptionofthe2006versionoftheUNCITRALLaw,isnotusedtorefertointerimmeasures.

Althoughinacaseofconflictbetweenthetwoversionsofthe law,theAlbanianlanguageisofficialandthustakespriority,37duetothespecificnatureofcommercialarbitrationasinternationaland'borderless',thelegislatorshouldaddressthisdiscrepancyinthefutureamenendmentofthelaw.

Furthermore,perhapsthemostimportantprovisionwithintheamendmentstotheModelLawistheonethat governstheenforcementofan interimmeasure.38Underthenewrule,aninterimmeasureorderedbyanarbitraltribunalismandatory,unlessotherwisedeterminedbythetribunalitself,anditisenforcedbythe competent court at the request of the party, regardless of the state where an interimmeasure isordered.39Therecognitionandenforcementofaninterimmeasuremayberefusedbythecourtonlyontheconditionsunderwhichthecourtmayrefusetherecognitionandenforcementofanarbitralaward.40Withthis, theconditions for therecognitionandenforcementofan interimmeasureofUNCITRALLawwere harmonized with the provisions of the New York Convention concerning the recognition andand enforcementofarbitralawards.

31 Ibid. 32 UNCITRAL Model Law, Article 17B; L. Tucker, “Interim Measures under Revised UNCITRAL Arbitration Rules: Comparison to Model Law Reflects Both Greater Flexibility and Remaining Uncertainty”, in: International Commercial Arbitration Brief 1, Nr. 2 (2011), pg. 19 33 United Nations, “UNCITRAL Model Law on International Commercial Arbitration”, Vienna: 2008, pg. 31. 34 Bundesgesetz über das Internationale Privartrecht [Law on Private International Law], December 18, 1987, as amended by January 1, 2007, (Switzerland), Article 183. 35 Ibid. at 17. 36 Arbitration Rules of the International Chamber of Commerce in Paris in force since January 1, 2012, Article 28, available at file:///C:/Users/Ideapad/Downloads/ICC%20865-0%20ENG_Rules_Arbitration_Mediation.pdf 37 In case of disagreement between different versions of documents published in the Official Gazette of the Republic of Kosovo, the official language versions of the government, in accordance with the Constitution of the Republic of Kosovo, are equally authentic. 38 UNCITRAL Model Law, Article 17H. 39 Ibid. Paragraph 1. 40 Ibid., Article 17I.

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IV. ComparativeinsightsIn relation to interim measures it is important to review the perspective of certain states which areconsideredasstatesofaModelLawregime.Currently,theycanbeclassifiedinthreegroups:StateswhichhavenotchangedtheirrespectiveactsaftertheModelLaw2006;thosethathaverevieweditintermsofthelatter;aswellasstateswhichevenaftertherevisionhavenottransposedsomeoftheprovisionsoftheModelLaw2006(i.e.preliminaryorders).Forcomparativepurposeswewillpresentanexamplefromeachofthesegroups.

i. FranceFranceisamongthestatesthatalthoughithasrecentlyreviseditscorrespondingactofarbitration,thelatter does not reflect the provisions of the Model Law 2006. In France, the provisions relating toarbitrationarecontainedintheFrenchCodeofCivilProcedure.41BasedonArticle1468(1)oftheCode,the arbitral tribunal may order interim measures as it deems necessary, to set conditions for suchmeasures,andifitdeemsnecessarytoattachapenaltytosuchanorder.Thisprovisioncameintoforcein2011, given that the previous decree did not include any provision regarding the jurisdiction of thearbitraltribunaltoorderinterimmeasures.Incomparisonwiththecurrentprovisionregardinginterimmeasures inKosovoArbitrationLaw,whichobliges theparties tosubmitcredibleevidence that itmaycausedamageorlossofimmediateorirreparable,ifsuchmeasureisnottaken,pursuanttoArticle1468(1)oftheCodetheonlytestforthepartywhichhassubmittedarequestforinterimmeasuresistoprovethesuitabilityoftheactionsoughtinlightofthecircumstancesofthecase.42Consequently,thisprovision,givesthearbitrationtribunalsinFranceextensivepowersregardinginterimmeasures.43FrenchCodeofCivilProcedure containsnoprovisions regarding theapplicationof interimmeasures in caseswhereaparty to proceedings refuses to voluntarily implement it, but allows the other party to seek courtenforcementofsuchmeasures.44

ii. NewZealandNewZealandisamongthecountrieswhichhasalmostfullytransposedtheModalLaw2006provisionson interimmeasures. In fact, this is the firstcountrywhichhas transposed these,bychanging the law,whichentered into force in2007.45Themost importantpartof thesechanges is that the legislatorhasallowedthepossibilityforthearbitraltribunaltoissuepreliminaryorders,asoneofthemostcontentiousprovisions of the Model Law 2006. However, as is often considered arbitrary, because of its expartenature and without notice, the possibility of the arbitral tribunal to issue preliminary orders may beexcludedthroughanagreementbetweentheparties.46

iii. BelgiumInBelgium,theprovisionsrelatedtoarbitrationarecontainedintheBelgianCodeofCivilProcedure,inforceasofSeptember1,2013.Thisstateisamongthestatesthatevenafterthereviewofarbitrationact,in terms of the Model Law of 2006, did not include some of its provisions, appearing as a little lessdetailed,inparticularbynotincludingthedefinitionoftemporarymeasures,theconditionsunderwhichinterimmeasuresmaybeorderedandbynottransposingtheprovisionsrelatingtopreliminaryorders.Accordingtothelegislator,thefirsttwoaredoneinordertoavoidviolationofflexibility,andobstructionoftheworkofarbitrators.While,inrelationtopreliminaryorders,thepreparatoryworkssaythattheirimplementation would pose a problem, since "if the arbitrator has such jurisdiction, it may beincompatiblewiththeconsensualnatureofarbitration,andjeopardizetheindependenceofthearbitratorand the right protection”.47Regarding the implementation of interim measures, the provisions of theBelgianCodeprovidethatinterimmeasuresarebindingandenforceableontheparties.

41 French Decree of 13 January 2011 on amendment of the Arbitration provisions in the Code of Civil Procedure, available at http://www.iaiparis.com/lois_en.asp 42 Baker & McKenzie International Arbitration Yearbook: 2012-2013, Baker & McKenzie, pp. 161-162. 43 See generally Arbitration in France: the 2011 reform, Jones Day Commentary, June 2011, available at http://www.jonesday.com/files/Publication/b9ce7786-7e7e-47b9-a628-bc2a9361e704/Presentation/PublicationAttachment/d609618d-63cc-43e9-a0e7-bc6ae3b7663e/Arbitration%20in%20France.pdf 44 Ibid. 45 Law on Arbitration 2007 No. 94, 17 October 2007, available at file:///C:/Users/Ideapad/Downloads/Arbitration%20Amendment%20Act%202007.pdf 46 See generally T.K. Gran in: Promised Land or fire swamp? Interim measures - the New Zealand revolution, available at http://www.kennedygrant.com/docs/Fire%20Swamp.pdf 47 J. Billiet and T. Proshkina, Association for International Arbitration, in: Part 3: State Chapter – Belgium, available at http://globalarbitrationreview.com/reviews/67/sections/233/chapters/2686/belgium/

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V. ConclusionTheArbitrationLaw,whichaimstoregulatethesubjectofarbitrationandenforcementofarbitralawardsmadeinsideandoutsideofKosovoinaccordancewithmodernEuropeanandinternationalstandards,48hasnotupdateditsprovisionsconcerningtemporarymeasurescommensuratethelatestamendmentstotheModel Law. In someparticular positions, the LawonArbitration has already beenmore advancedthantherulesof theModelLawof1985itself,ase.g. regardingtheeliminationof thenecessity for theinterim measures to be connected to the case in dispute and at least the partial regulation of theenforcement of interimmeasures. However,with the amendment of theModel Law, these advantageshavefadedandtheArbitrationLawneedstoberevisedinordertoharmonizeitwiththenewversionoftheModel Law. It should initially (i) to harmonize the definition of "interimmeasure", (ii) specify theconditionsunderwhichthearbitraltribunalshallmakeadecisiontoorderaninterimmeasure,and(iii)supplementtheprovisionsonrecognitionandenforcementofatemporarymeasurebyreferencetothetermsoftheNewYorkConventionontherecognitionandenforcementofarbitralawards.Itshouldalsobe discussed to what extent the legislator will adopt provisions for the preliminary orders, whichrepresentsaninnovationinthefieldofinterimmeasuresinarbitrationproceedings.

It shouldbeemphasized that the rulesofarbitration issuedby thearbitration institutions inKosovo49,suchasKosovoArbitrationRules201150,arelargelyharmonizedwiththenewversionoftheModelLawandinthisrespectaremoreadvancedthantheLawonArbitration.ThisshouldbeacallforthelegislatortomakethenecessaryamendmentstotheLawonArbitrationtoharmonizeitwithModelLaw.

48 Law No. 02/L-75 on Arbitration, preamble. 49 Alternative Dispute Resolution Center at American Chamber of Commerce in Kosovo www.adr-ks.org/ ; Permanent Tribunal of Arbitration attached to Kosovo Chamber of Commerce 50 Available at http://www.adr-ks.org/adr-rules/rules-of-procedure/

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UPC347.77./.78(4/9)

341.6(4/9)

THENOTIONOF“ORDREPUBLIC”:ARBITRABILITYOFPATENTLAWDISPUTES

byLuljetaPlakolli‐Kasumi1

IntroductionOne unique thing about the Alternative Dispute Resolution (ADR), is that it offers the parties anopportunity to settle their disputes through non‐judicial mechanisms that have proven to be moreconvenient inmany aspects than litigating in courts. There, are nonetheless, some requirements, bothprocedural and substantive thatmust be satisfied before parties can refer their case to an arbitrationtribunal,andtheserequirementsdrawalinebetweendisputesthatcanbearbitratedfromdisputesthatareconsideredtobenon‐arbitrable.

Oneofthecoreproceduralrequirementsisthatthepartiesmustagreeinwritingthattheywillresolvetheirdisputesthrougharbitration.Thearbitrationagreement,orthearbitrationclausecontainedinthemaincontractbetweentheparties2servesasthebasisforanarbitrationtribunaltoaffirmitsjurisdictionwith respect to the dispute arising from such a contractual relationship between the parties. Anotherimportantrequirementisthatthedisputewhichisreferredtoanarbitrationtribunalmustresultfromacontractualrelationshipwhichiscommercialinnature,andcapableofbeingdecidedbyarbitration.

Thereisonesubstantiverequirement,orreferredtoasthesubject‐matterarbitrability,basedonwhichstatecourts,inparticular,arerequiredtodrawalinebetweenarbitrableandnon‐arbitrabledisputesonthebasisoftwodifferentpolicyobjectives:ensuringthatsensitivemattersofpublicinterestaredebatedandresolvedbeforenationalcourts,andpromotingarbitrationasavibrantsystemofdisputeresolutionforpartieswhofreelychosetoarbitrateratherthanlitigatetheirdifferences3.

Whilstthefirsttwoproceduralrequirementsmustbesatisfiedatthebeginningofanarbitralproceeding,theissueofthesubject‐matterarbitrabilitycanarisewhenitcomestotherecognitionandenforcementofa foreign arbitral award. A state court can refuse a recognition and enforcement of a foreign arbitralawardonpublicpolicygrounds(ordrepublic).

Public policy arguments often attack the advisability of the arbitration of IP disputes and call for thecreationormaintenanceofalegalobstacletoit.Areasonbehindapublicpolicyargument,whichisusedbysomestates,isthattheydesiretosecludepubliclawfromtheprivatemechanismofarbitration.Thiswould create a situationwhere countrieswould allow infringement but not validity issueswithin thescopeofarbitration4.

Thepresentpaperexaminesthenotionsof“arbitrability”and“ordrepublic”;thefirstonebeingusedasacriteria fordeterminingwhetheranarbitration tribunalhas jurisdictionovera subjectmatter, and thesecondoneasanexceptiontorecognitionandenforcementofarbitralawardsunderdifferentlegislations,

1 LL.M. in International and Comparative Law/ Intellectual Property Law, University of Pittsburgh, School of Law (2006); Professor Assistant, Law Faculty of the University of Pristina; Arbitrator, Permanent Arbitration Tribunal/Chamber of Commerce; Arbitrator, JSM/Permanent Court of Arbitration, Slovakia 2 ) According to UNCITRAL Model law, the requirement that an arbitration agreement be in writing is met by an electronic communication if the information contained therein is accessible so as to be useable for subsequent reference; “electronic communication” means any communication that the parties make by means of data messages; “data message” means information generated, sent, received or stored by electronic, magnetic, optical or similar means, including, but not limited to, electronic data interchange (EDI), electronic mail, telegram, telex or telecopy. 3 “Aribtrability of disputes”: in Gerald Aksen, Karl Heinz Bockstiegel, Paolo Michele Patocchi and Anne Marie Whitesell (eds.), Global Reflections of International Law, Commerce and Dispute Resolution: Liber Amicorum in Honor of Robert Briner (ICC Publishing, S.A. 2005) 4 Smith, M.A. et al, ”Arbitration of Patent Infringement and Validity Issues Worldwide”, Harvard Journal of Law & Technology, Vol. 19, Nr. 2, 2006, p. 305

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anditfocusesprimarilyonthearbitrabilityofpatentlawdisputes.Themainfocusofthepresentpaperistodetermineinwhichjurisdictions,andtowhatextent,arethepublicpolicyargumentsusedtoexcludepatentlawdisputesfromarbitration.Itshouldbenotedfromtheoutsetthatthepaperdoesnotattempttoexaminethenotionofpublicpolicyinitsproceduralcontent,butonlysubstantiveaspectsofit.Indoingso, the paper will mainly focus on the examples of the Western Balkan countries5by also doing acomparativeanalysiswithpracticesfromEUcountries.

1. ArbitrationasanAlterantiveDisputeResolutionmechanisminIPdisputesIntellectual Propery (IP), as an essential element of the modern business world, is the main subject‐matter of contracts involving use, purchase and sale of IP, research and development, joint‐ventures,licensing,andassetpurchaseorstockacquisitionagreements.Nowadays,ithasbecomeatrendthatsuchagreements contain a dispute resolution clause calling for final and binding international commercialarbitration6. There are numerous reasons why parties to such agreements opt for internationalcommercial arbitration rather than submitting their dispute before a national court. Internationalcommercialarbitrationisbuiltuponseveralprinciplessuchasneutrality intermsofbothsitusandtheapplicablelaw,confidentiality,enforceabilityofthearbitraitonawardaccrosstheglobe,impartiality,andfavorable timelines.Theseprinciples, althogether, allow theparties to freelychoosewhere toarbitrateandunderwhichsubstantivelaw,decidewhethertheywanttohavethefinalawardmadeknowntothepublicornot,haveimpartialandprofessionalarbitratorsdecideonthemeritsofthecase,andhavetheircaseresolvedinatimelymanner.Inadditiontothis,thearbitrationinIPdisputeshasproventobemorecost‐effective than litigating before a national court.7Preliminary remedies that can be imposed by anarbitraltribunalareanotherincentiveforthepartiestoagreeonarbitration.

Justlikeatwo‐sidedcoin,theissueofarbitraitonofintellectualpropertydisputeshasitsprosandcons.Thefactorslikecombativeparty,judicialreview,discoveryandtheneedforprecedentorpublicitymaycut against using arbitration in lieu of litigation8. Another reason, why parties might not choosearbitrationoverlitigationinadisputeconcerningIPisthe“territorial”natureofrightsderivingfromIP.This impliesthateverycountryhas itsownspecificrulesongrantingIPrightsto invidualsandusuallydisputesover IPrights thataregrantedbyapublicauthority, thevalidityandtheextentofsuchrightscannot be decided by an arbitral tribunal9. Even if the arbitral tribunal decides on such a dispute, theaward of the arbitral tribunal may not be enforced under the claim that the subject‐matter was notcapableofarbitration.Theissueofarbitrabilityisconsideredinthelightofrelevantpublicpolicy(ordrepublic)considerations10

2. ArbitrabilityofIPdisputes:rationaepersonaeandrationaemateriaeTheterm“arbitrability”isusedtorefertodisputesthatarecapableofbeingresolvedinarbiration,andisdivided into subjective arbitrability (rationaepersonae), andobjective arbitrability (rationaemateriae).SubjectivearbitrabilitydetermineswhetheraStateorotherpublicbodymaybeapartytoanarbitrationagreementandthuswhetheradisputetowhichsuchanentityisapartymaybesubmittedtoarbitration.Objectivearbitrability,whichisthetopicofthepresentpaper,determineswhethertheparticularsubject‐matterofadisputeiscapableofbeingresolvedbyarbitration11.

The issueofsubject‐matterarbitrability isoneof theconditions fortheenforcementof foreignarbitralawards under 1958NewYorkConvention on theRecognition andEnforcement of ForeignArbitrationAwards [hereinafter referred to as the New York Convention]. Article II of the New York Conventionobliges contracting states to recognizearbitrationagreementsover subject‐matters that are capableofarbitration.ArticleV.1.(a)furtherprovidesthatifundertheapplicablelawthearbitrationagreementisconsideredtobeinvalid,recongitionandenforcementoftheawardmayberefused12.

5 Albania, Bosnia and Herzegovina, Croatia, Kosovo, Macedonia, Montenegro and Serbia 6 See Allen B. Green “Intellectual Property Dispute Resolution”, McKenna Long & Aldridge LLP, 2007 7 Alan W. Kowalchyk, “Intellectual Property ADR vs. Litigation: Resolving IP Disputes Outside of Court: Using ADR to Take Control of your Case,” American Arbitration Association, citing the American Intellectual Property Law Association Report of the Economic survey 2005, at I-109. 8 Kyle-Beth Hilfer, “A practical guide to arbitrating IP disputes”, Law Journal Newsletters, May 2004 9 See the Final Report on Intellectual Property Disputes and Arbitration adopted by the ICC Commission on International Arbitration on 28 Oct. 1997, 9:1 THE ICC INTERNATIONAL COURT OF ARBITRATION BULLETIN 37. Also see Jacques Werner, Intellectual Property Disputes and Arbitration - A Comment on a Recent ICC Report, 1:5 J. WORLD INTELLECTUAL PROPERTY 841 (Sep. 1998). 10 See Aksen et al, supra note 3, pg.270 11 Ibid. 12 New York Convention on the recognition and enforcement of foreign arbitral awards (1958) [http://www.uncitral.org/pdf/english/texts/arbitration/NY-conv/XXII_1_e.pdf]

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Notall legal systemsaddress the issueofobjectivearbitrability in thesamemannerand inevery legalsystem therearedisputes that fallunder theexclusiveauthorityofnational courtsand thuscannotbereferred to arbitration. Some intellectual property disputes are in many countries deemed to beinarbitrable and some other types can. Intellectual property disputes may refer to patent, copyright,trademark and design infringements, disputes relating to database rights, domain names, misuse ofconfidential information and trade secrets; breach of different types of contracts, including licensing,distribution,supply,andIPdevelopmentagreementsandsettlementagreements13. IPdisputesassuchcanbedividedintwotypes:IPdisputesthatderivefromacontractualrelationshipandIPdisputesthatderive out of a non‐contractual relationship. The first group includes claims that in most cases areconsidered arbitrable i.e. private contractual arrangements between the parties such as the breach ofcontract or infringement14. The second group of disputes contains claims regarding validity andownershipwherebyonepartyallegesthattheotherpartyhasnotavalidpatentforinstance.Thisclaimcanberaisedeitherasthemainissueormoreoften,asadefenseinaninfringementaction.Arbitrabilityissuesaremorefrequentlyraisedinrelationtotheseclaimsbecausethegovernmentgrantspatentsandachallenge of the patent’s validity in a private setting, i.e., arbitration, directly implicates the publicregistration.15Thepresentpaperfocusesonthelatterclaims.

3. ArbitrabilityofpatentlawdisputesTheissueofarbitrabilitygoeshandinhandwiththefreedomofcontractdoctrine16.Insomejurisdictionsthe contractual freedom of parties prevails and therefore patent related disputes are allowed to bereferred to arbitration. There are other jurisdictions where arbitration of claims involving validity ofpatentsisnotpermittedandawardsonsuchclaimshavenoeffectandcannotbeenforced.IntheUnitedStates,PatentActallowsthearbitrationofpatentinfringementandvalidityclaimsandsuchawardscanbeenforced,whereasinFranceandmanyotherjurisdictions,awardsissuedbyarbitraltribunalinvolvingdecisionsonvalidityofpatentscannotbeenforced inaFrenchCourt.Thearbitrabilityofpatent issuesvariesfromcountrytocountry17.Therearegenerallyfourapproachestotheissueofpatentarbitrabilitythatcountrieshaveoptedforrangingfromthemostrestrictivetothemoreliberalones.

The first approach suggests that claims related to patents (infringement and validity) cannot bearbitrated.Evenifpartiessubmittheircaseinvolvingapatentclaimtoarbitration,theawardwillnotbeenforceable by the national court. South Africa, Singapore and Romania are some countries that haveadopted this approach and is uncommon formany other countries nowadays18. The second approachallowsissuesofinfringementofpatentstobearbitrated,butiftheissueofvalidityofpatentisraisedasdefenceinanarbitrationproceedingconcerninginfringementofpatent,itwillbedealtasapreliminarymatterbythecompetentcourt19.

Thetwoothergroupsofcountriesallowbothinfringementandvalidityissuestobearbitrated,buttheyaresplitwhenitcomestothefinalaward.Thefirstgroupofcountries,outofthesetwo,toleratesafinalawardonthe issueof infringementandvalidityofpatent,but suchanawardhasan interpartes effect,whilethesecondgroupismoreliberalandallowsbothinfringementandvalidityclaimstobearbitratedandhaveanawardonthemeritsofthecasewithanergaomneseffect.Theinterpartesawardwillhavelegaleffectonlybetweenthepartiesinanarbitrationproceedinginvolvingapatentdispute,andwillnotinvalidatethepatent,whereastheergaomnesawardwillbebindingagainstthethirdpartiesaswell.Acountrythathasadoptedthisapproachisthusgivingtheawardfulljudicialeffect.20

13 Karen Fong, “ Arbitration of IP disputes: Eyes wide shut”, found at http://www.inhouselawyer.co.uk/index.php/intellectual-property/7673-arbitration-of-ip-disputes-eyes-wide-shut 14 Anna P. Mantakou, “Arbitrability and Intellectual Property disputes”, Arbitrability: International and Comparative perspectives, 2009, page 270 15 Therese Jansson “ Arbitrability regarding patent law-an international study”, Faculty of Law, University of Lund, Spring 2010; See also, William Grantham “The arbitrability of International Intellectual Property Disputes”, Berkeley Journal of International Law, Vol. 14:173, 1996, p. 182 16 Ibid.p.14 17 Ibid.p.24 18 Bernard Hantiaou “What law governs the issue of arbitrability?”, Arbitration International, Vol. 12, No.4, 1996. See also Marc Blessing “Arbitrability of Intellectual Property Disputes”, Arbitration International, Vol.12, No.2, 1996; See also M. Scott Donahey, “Arbitration of Patent Disputes Internationally and in the United States”, May 2008 found at [http://files.ali-aba.org/thumbs/datastorage/lacidoirep/articles/PLIT0805-Donahey_thumb.pdf] 19 M.A. Smith et al, “Arbitration of Patent Infringement and Validity Issues Worldwide”, Harvard Journal of Law & Technology, Vol.19, No.2, 2006 p. 305 20 Jansson, supra note 13, p.26

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Objective arbitrability restrictions can be explained through two types of arguments: legal and policyarguments. Legal arguments present some obstacle to the objectivearbitrability of patentdisputeswithout attempting to decide whether the presence of the obstacle is desirable. The policyarguments,asmentionedatthebeginingofthepaper,attacktheadvisabilityofthearbitrationofpatentdisputesandcallforthecreationormaintenanceofalegalobstacletoit21.

3.1LegalArgumentsforexcludingpatentdisputesfromthescopeofarbitrationThere are three legal arguments in favor of objective arbitrability restrictions in the field of patents.Accordingtothefirstargument,patentsaregrantedbyacertaincourtoradminstrativeauthorityandassuchtheissueofinfringementandvalidityofpatentsisexclusivecompetenceofthestatebody.Thisdoesnotmeaninanywaythatthepartiescannotrefertheirdisputetoanarbitraltribunal,butwhatevertheoutcomeoftheproceedingswouldbe,suchanawardwouldnotbeenforcedbythestatecourt.22

Thesecondargumentisrelatedtothesovereignnatureofthepatentgrant.Apatentrepresentsasetofrights that are granted to an inventor by a sovereign authority, and only the same authority canextinguishthoserights.23Arbitraltribunalsdonothaveauthoritytoextinguishthoserightsuntilgivensobythestate,anduntilthestatecooperatedinenforcingtheawards.24

Thethirdargumentfocusesonarbitrators’powers.Thecompetenceofanarbitraltribunal is limitedtothepartieswhosubmittedtheirdisputetoarbitation,andtothesubstantivemattersdesignatedbytheparties.25Oncegranted, apatent right canbe licensedorassigned,andwhenadisputearisesout fromsuch a licensing agreement, the arbitral tribunal candecidewho among theparties to thedispute hasrightswithrespecttothatpatent,andeventuallyevendeclarethepatentinvalid,butsuchanawardwillhavealegaleffectonlybetweentheparties(interpartes)andnotinrelationtoeveryone(ergaomnes)26.

3.2PublicpolicyargumentsforexcludingpatentdisputesfromthescopeofarbitrationAccordingtosomescholars,thedecisionthatcertainsubjectsareorarenotarbitrableispurelyamatterofpolicy.27Apatentisnotanone‐sideddealthatonlybenefitsaninventororacompanythatownsthatpatent.To the contrary, there is amajoraspectof it that is in thepublic interest.28Therefore, ineverypatentrelateddispute,whetherit isconductedbeforeastatecourtoranarbitraltribunal,therewillbealways two sets of interests represented; one, the patent right holderwho has been grantedwith thelimitedmonopolyasanincentiveto“invent, investanddisclose’,andtwo,thepartythatrepresentsthepublicinterest.29Thepatentregimesinalljurisdictionsareconstruedinawayastoservebothinterests.Whichoneoutweightstheother,andinwhatcircumstancesisdecideduniquelybyeveryjurisdiction.

AspointedoutbyGrantham,insomepoliticalsystems,restrictionsontheobjectivearbitrabilityofpatentdisputes are based on a desire to separate public law from the inherently private mechanism ofarbitration.30However, clearly articulated justifications of such choices from a policy standpoint have,unfortunately,beenlacking.Debateisoftenlimitedtovaguereferencestothepublicnatureofthepatentgrantwithoutclearlydefiningwhatthesepublicqualitiesmightbeorwhytheirpresenceshouldrequirerestrictions on objective arbitrability.31Accordingly, the confusion in the underlying policy questionregardingarbitrabilityofpatentvalidityresultsfromtheattempttoanswerthreequestions:first,whataretherelevantinterestsofthepublicinavalidityofpatent?;second,cansuchinterestsbeadequatelyrepresentedinanarbitration?And,third,assumingthepublicinterestsarenotadequatelyrepresented,isarestrictionontheobjectivearbitrabilityofpatentvaliditythebestmeansofprotectingthatinterest?32

21 M.A. Smith, supra note 4, p.305-306 22 Ibid. 23 See Ibid.p.306 24 Jansson, supra note 13, p.20 25 Ibid. 26 See William Grantham, “ Arbitrability of International Intellectual Property Disputes”, 14 Berkeley J. Int’l L. 173, p. 186-187 27 Ibid, p.179 28 John Hammond and Robert Gunderman, “Out patent system- Balancing wealth creation with benefits to society.”, The Limited Monopoly™, 2009 29 See M.A. Smith, supra note 4, p.310 30 Grantham, supra note 24, p.183 31 M.A. Smith, supra note 4, p.308; See also Beckman Instruments Inc. v. Technical Dev. Corp. 433 F.2d 55, 63 (7th Cir. 1970). 32 Ibid, p.309

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Theargumentthattheoutcomeofanawardthatrefusestorecognizethevalidityofapatentaffectsonlythepartiesinvolvedandisnotbindingonthirdparties,answerstosomeextentthefirstquestionabove33.Proponents of this argument suggest that because the outcome is not binding on third parties, thearbitrationhasnothingtodowiththepublicpolicy.34Ifthestateremainsintactthroughthistypeofinterpartes resolution, there is little to suggest that patent validity must be excluded from arbitration35.Opponentsofthisapprocharguethatarbitrabilitycannotkeepthebalancebetweenthesocialcostsofapatentandthesocialbenefitsofthatpatent.

Balanceiscentraltothepatentpolicy,butagain,theredonotappeartobeanycost‐benefitassessementsoftheimpactofpatentsystems,noranydatathatcanbeusedtodirectlyassesstheeconomicimpactofpatent systems.Discussionsofpatentpolicy therefore tend tobe theoretical, andanyevidenceused isanecdotal rather than scientifically based.36How come than that patent policy is used as a pretext toprecludearbitrability?

Depending fromthe jurisdiction,patentsaregrantedby courtsoradministrativeauthorities i.e.patentoffices. Given their territorial nature, every country has its own rules, conditions and procedures forgrantingapatent.InKosovo,apatentisgrantedbytheIndustrialPropertyOffice(IPO)thatfunctionsasan independentagencywithin theMinistryofTradeand Industry.37IPOmaintainsaPatentRegister inwhichpatentapplicationsandgrantedpatentsarerecorded.38Accordingtothe law,agrantedpatent isregarded as a property right39that is registered in public registries, and can therefore be transferredpartially or completely bymeans of a license40. Any changes in patent rightsmust be reflected in thepatentregistry.Inothercountriesintheregioni.e.Albania,BosniaandHerzegovina,Croatia,Macedonia,Montenegro and Serbia patent rights are also granted by administrative authorities similar to IPO inKosovo41.Inallthesejurisdictionstherearestatutoryapplicationproceduresforgettingapatentforaninvention,andallofthemhavestatutoryrequirementsthatmustbemetforapatenttobegranted.Theserequirements are usually examined by respective administrative authorities in charge. All thesecharacteristics,whichwillbeadequatelyaddressedintheforthcomingparagraphs,predominantlyspeakofaregionalsystemthatfavorsexclusivejurisdictionofcourtsinmattersconcerningpatentinfringementandvalidity.

Consequently,onemightrightfullyarguethatinallthesejurisdictionsonlycourtsoranyequivalentstatebodycouldmakeanylimitationstoanalreadygrantedmonopolybythepatent,whereascountriesthatdonotperformsuchanexamination,would treatvalidity issuesasarbitrable.42FranceandGreeceareexamplesofcountrieswheregrantingactisbasedonaformalexamination43.Thiswouldbeajustifiablepublicpolicyargument,neverthelesstheliteraturesuggeststhat inpracticeachallengebasedupontheinarbitrabilityofcertain IPdisputesshouldneitherberebuttednorresolved in the lightofpurepublicpolicygroundsaseachstatefreelydeterminescontentandcountoursof itsownnotionofpublicpolicyandassuchitcanvaryfromcountrytocountry.44

4. Definitionofpublicpolicy(ordrepublic)Terms “public policy” and “ordrepublic” in the present paper will be used interchangeably as it is aFrenchexpressionthatistranslatedintoEnglishaseither ‘publicpolicy’or ‘publicorder’45. Thepublicpolicy is often referred as the judicially‐createdmonster capable of totally destroying the freedom of

33 See Interim Award in Case.6097 of 1989, 4 Int’l Comm.Arb. 76 34 Wu Wei-Hua, “International Arbitration of Patent Disputes”, 10 J. Marshall Rev. Intell.Prop.L.284 (2011), p.394 35 Ibid. 36 Hazel V J Moir, “What are the costs and benefits of patent systems?”, Centre for Governance and Knowledge and Development, Working Paper, October 2008 available at http://cgkd.anu.edu.au/menus/PDFs/moir_RegNet%20WP%20Final%20Costs%20and%20Benefits.pdf 37 Industrial Property Office (IPO) http://www.mti-ks.org/?cid=2,381 38 Kosovo Law on Patents [Law No.2004/49], Article 14.1 39 Ibid, Article 41.1 40 Ibid, Article 45 41 In Albania [Directorate of Patents and Trademarks]; in Bosnia [Institute for Intellectual Property of B&H], in Croatia [State Intellectual Property Office]; in Macedonia [State Office of Industrial Property], in Montenegro [Intellectual Property Office], in Serbia [Intellectual Property Office]; See WIPO Directory available at http://www.wipo.int/directory/en/urls.jsp 42 See generally, Jansson, supra note 13, p.21 43 Mantakou, supra note 12, ibid. 44 Trevor Cook & Alejandro I. Garcia, ‘’ International Intellectual Property Arbitration”, Kluwer Law International BV, The Netherlands, 2010, p.; See also F. Gurry, “Objective arbitrability- Antitrust Disputes-Intellectual Property Disputes”, Swiss Arbitration Association Special series 6 (1994): 110-120- the author dismisses the argument that only the body that grants IP rights can decide on challenges to the validity of IPR. According to this division, no other branches, including state courts, can hear disputes as to the validity of IPR. 45 See generally Chaterine Kessedjian, “Public Order in European Law”, Erasmus Law Review [Vol.I, Issue 01], p.26

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contractindifferentssettings.46Itisawell‐settledexceptiontoforeignenforcement47,ofbothjudgmentsandarbitralawards.Asdiscussedabove,theNewYorkConventioninarticlesIVtoVIprovidesgroundsthatmaybeinvokedbycompetentauthorityofthecountrywheretherecongitionandtheenforcementaresought.Publicpolicyisoneofthesegrounds.48Withregardtothepublicpolicygroundforrefusal,thequestionariseswhetherthenotionofpublicpolicyistobeinterpretedinthesamewayinbothdomesticandinternationalcases49.Casesfromdifferentjurisdictionssuggestthattheinternationalpublicpolicyisbasicallynationalasit“canbesanctionedonlybynationaljudges”.50

4.1DefinitionofordrepublicunderinternationallawIt is impossible to give a precise definition of the concept of internationalordrepublic51.There is oneview found inAllsopAutomatic Inc.v.Techoski,where theCortediAppello (CourtofAppeal)ofMilandefined the notion of international public policy as follows: “Wemustsaywheretheconsistency[withpublicpolicy],istobeexamainedreferencemustbemadetothesocalledinternationalpublicpolicy,beinga‘body of universal principles shared by nationals of similar civilizations, aiming at the protection offundamentalhumanrights,oftenembodiedininternationaldeclarationsorconventions’.”52Contrarytothis,courtsintheUnitedStatesandSwitzerlandconstruedthisgroundforrefusalverynarrowly.InCBSandothers v. WAK Orient Power & Light Ltd the court found that the “public policy exception is verynarrow…”53In Switzerland, the Supreme Court rejected the request invoking public policy exceptionsaying that this exception should be narrowly construed so as to be understood as opposing “theenforcement of foreign arbitral awardswhichhurt the Swiss legal feeling in an intolerablemanner andviolatethefundamentalprinciplesoftheSwisslegalsystem.54.However, there isnothing topreventeachcountry from adopting, as part of its conception of international public policy, principles having someclaimtouniversality,whethervoluntarilyorinordertohonoritsinternationalcommitments55.

4.2DefinitionofordrepublicundertheEuropeanlawAccordingtotheTreatyinstitutingtheEuropeanCommunity,memberstatesareallowedtopreventtheapplication of the European Community law by arguing that the rule at stake contradicts their publicpolicyorpublic order.However, theEuropeanCourt of Justice case lawand the secondary legislation,showsthatthememberstatesareclosellycontrolledintheusetheymakeoftheirpublicpolicy.ThishasbeenoftenseenasacriticismtowardsECJfordeprivingstatesofthemostimportanteffectoftheirpublicpolicyexceptions.56InYvonnevanDuynv.HomeOffice,theECJconfirmedthatitistheresponsibilityofthememberstatestodefinetheirpublicpolicy.57However, later inReginav.PierreBouchereau58theCourtchangeditsviewandstartedtointeferewiththeverycontentofthememberstates’publicpolicyinordertocontroltheimpactofthatpolicyontheapplicationoftheEuropeanrules59.Accordingtotheso‐calledsupranationallegalorder,thetermordrepublicencompassestheprotectionofpublic security and the physical integrity of individuals as part of the society60. According to thisdefinition,foranyruletobecharacterizedaspublicpolicyitmustfirstlyaddressarealandsevereenough

46 See Jurgen O. Skoppek, “Employment-at-Will in Michigan: A Case for Retaining the Doctrine”, April 1, 1991 47Jonathan A. Franklin and Roberta J. Morri, 77 Chi.-Kent L. Rev. 1213, 1239 48 See, paragraph 2(b) of Article V, New York Convention, ““Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or(b) The recognition or enforcement of the award would be contrary to the public policy of that country.” 49 United Nations Conference on Trade and Development: Dispute Settlement; International Commercial Arbitration: 5.7 Recognition and Enforcement of Arbitral Awards: The New York Convention, p.38 50 Ibid. 51 M-L.Niboyet et Geouffre de la Pradelle, “Droit International Prive”, L.G.D.J. (2007) no. 307 52 Ibid., p.39 53 See CBS CORP. v. WAK ORIENT POWER & LIGHT LTD. 168 F.Supp.2d 403 (2001) United States District Court, E.D. Pennsylvania. April 12, 2001. The court held that the public policy exception is only applicable when “enforcement would violate the forum state’s most basic notions of morality and justice”. 54 Supra note 38, p.39; see also YCA, Vol. 22 (1997), p. 997. 55 E.Gaillard and J. Savage eds., Fouchard, Gaillard, Goldman on International Commercial Arbitration (Kluwer 1999) at pp. 994-995 56 Kessedjian, supra note 43, p. 25&35 57 Case 41/74, Yvonne van Duyn v. Home Office [1974] ECR, 01337 at 01351. 58 Case 30/77, Regina v. Pierre Bouchereau [1977] ECR, 1999. 59 Kessedjian, supra note 43, p.28 & 29; the paper refers to numerous cases of ECJ i.e. case 5/77, Denkavit,1555 ; the opinion of the Advocate General in the case 34/79, Henn & Darby [1979] ECR, 03795 at 03821; Case C-323/93, Centre d’insémination de la Crespelle [1994] ECR, I- 05077 point 31; Case C-5/94, Hedley Lomasm [1996] ECR, I- 02553, point 18; Case C-1/96, Compassion in World Farming Ltd. [1998] I-01251, where it decided that member states have the freedom to to use their public policy concepts during the negotiation of a directive, but that once the negotiations were closed and a Community text was adopted, member states lost their capacity to use their public policy concepts to curtail the application of the directive or to try to avoid concrete effects of the directive (page 33) 60 Found at http://www.iprsonline.org/unctadictsd/docs/RB2.5_Patents_2.5.3_update.pdf ;

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danger, andnot justanyviolationofa rule;andsecondly, thegoalof thepublicpolicy rulemustbe toprotectafundamentalinterestofthesocietyconcerned61.

Ordrepublic isa legalexpressionwitha longtradition intheareaof internationalprivate law,where itserves as last resort when the application of foreign law leads to a result, which would be whollyunacceptableforthenationallegalorder.62

Definitionsofordrepublicarealsogiveninthecontextofpatentabilityofinventions.UndertheEuropeanPatentConvention(1973) it isstipulatedthat thatEuropeanpatentsshallnotbegranted inrespectof:(a)inventions the publication or exploitation ofwhichwould be contrary to "ordre public" ormorality,providedthattheexploitationshallnotbedeemedtobesocontrarymerelybecauseitisprohibitedbylaworregulationinsomeoralloftheContractingStates…”63Similarly,theTRIPSAgreementusestheterm“ordrepublic” and it assumes “concerns about matters threatening the social structures which tie a societytogether,i.e.mattersthatthreatenthestructureofcivilsocietyassuch64.

As it can be seen there are two possible exceptions to patentability: ordrepublic and morality. TheEuropeanPatentOffice(EPO)hasdistinguishedbetweenordrepublicandmorality.IncaseT356/93,theBoardofAppealoftheEuropeanPatentOfficeobservedthat“itisgenerallyacceptedthattheconceptof“ordrepublic”coverstheprotectionofpublicsecurityandthephysicalintegrityofindividualsaspartofsociety.Thisconceptencompassesalsotheprotectionoftheenvironment65Morality,ontheotherhand,includesthetotalityoftheacceptednormswhicharedeeplyrootedinaparticularculture66.

Asnoted,theconceptofordrepublicisdefinedinaverygeneralmanner,andalthoughtheEuropeanlawmaybeanimportantsourcefortheinterpretationofthatconcept,thereisnogenerallyacceptednotionof“ordrepublic”,andnoreasonforotherWTOMemberstofollowtheEuropeanapproach.Membershaveconsiderableflexibilitytodefinewhichsituationsarecovered,dependingupontheirownconceptionoftheprotectionofpublicvalues.67

4.3DefinitionofordrepublicundernationallawsDifferentcountriesapplydifferentapproachregardingthearbitrabilityofpatentlawdisputes.Thosewhoareagainstarbitratingclaimsregardingthevalidityofapatentrelyonpublicpolicygrounds,andothersare liberalenoughtoallowsuchclaims.Countries likeUnitedStates,CanadaandSwitzerlandarequitepermissiblewhereastheothercountriessharedifferentviews.Belowisanillustrationofwhichcountriesdoandwhichdonotpermitarbitrationofpatentlawdisputes.

4.3.1FranceWithinthecontextoftheFrenchinternationalpublicpolicy,ithastraditionallybeenpossibletoobserveadistinctionbetween ruleswhichensureprotectionofprinciplesofuniversal justiceand foundationsofpolitical and social organization of the French society, and thosewhose role is to safeguard policy forspecificlegislationconcerned.68Article6oftheFrenchCivilCodeprohibitsprivateagreementsthatmayderogatefromthelawsofpublicorder69.ThePatentActof13July1978providesthatrulesonexclusivejurisdiction“arenotanobstacletoresortingtoarbitrationwithintheconditions…”prescribedbytheCivilCode,70but thecase lawconfirmedthat thearbitration isprohibited in the fieldsof lawwhich interestpublicpolicy.71ThedisputesofpurelycontractualnaturewithrespecttoanIParearbitrableandthereisnoanydoubtaboutthat,buttheproblemgetstrickierwhenitcomestotheissueofvalidityofpatent.Thearbitratorscannot issueanawardnullifyingapatentergaomnes,andthere isnosuchaprecedentthat

61 Kessedjian, supra note 43, p.29 62 Rainer Moufang, The Concept of “Ordre Public” and Morality in Patent Law, in Geertrui Van Overwalle (Ed.), Patent Law, Ethics and Biotechnology, Katholieke Universiteit Brussel, Bruxelles 1998, No.13, p.71 63 Article 53 (a) of the European Patent Convention 64 Supra note 43 65 See Case T356/93 66 Supra note 43 67 Ibid. 68 Romuald di Noto, “ L’ordre public international en droit internationaux prives Francais et Allemand” found at [http://www.village-justice.com/articles/ordre-public-international-droit,5354.html] 69 Response du ministere: Justice publiee dans le JO Senat du 14/10/1999, p.3409 70 Pierre Veron, ‘ Is there an alternative to litigation: the role of ADR in patent disputes- A continental perspective”, Conference on International Patent System, World Intellectual Property Organization, March 2002, Geneva p.6 71 Cour d’Appel of Paris, March 24, 1994, Revue de l’arbitrage 1994, No.3, p. 515

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suggeststhatthearbitrationtribunalcannullifyapatent inter‐partesonly,72but ifsuchacaseappears,thecourtswouldusethefollowingreasoning:

“…the validity or invalidity are not to be considered rationepersonae since these conceptsconcernatitleandnotapersonandhencenecessarilybeareffectergaomnes…”73

To sumup, in France the arbitration ispossible in cases concerning the validityof apatent aswell aspatentcounterfeitingorpatentlicenses,butanarbitratormaynotdeclareaFrenchpatentinvalid,sinceFrench public policy is directly concernedwith themeaning of Article 2060 of the Civil Code74whichprovides that “onemay not enter into arbitration agreements inmatters...on controversies concerningpublicbodiesandinstitutionsandmoregenerallyinallmattersinwhichpublicpolicyisconcerned”.75

4.3.2SwedenIn terms of patents, the Swedish Patent Act designates the Swedish civil court of first instance inStockholm as a forum for both infringement and validity issues, but the Act prescribes where to gowithoutclarifyingwhetherthepartiescanrefertheirdisputetoanarbitraltribunal.76Ontheotherhand,Article 1 of the Swedish Arbitration Act that governs the issue of arbitrability states that “disputesconcerningmattersinrespectofwhichthepartiesmayreachasettlementmay,byagreement,bereferredtooneorseveralarbitrators forresolution...’’77. According to the literature a dispute that conflicts with asignificantpublicpolicyorthirdpartyinterestmaynotbearbitrable.78

AccordingtotheSwedishprincipleofordrepublic,foreignjudgments/awardsthatclearlycontravenethebasic principles of the Swedish law may not be recognized or enforced. Some of the statutes givingrecognitionandenforceabilitytoforeignjudgments/awardsexpresslyrefertotheordrepubliclimitations.However,theabsenceofsuchprovisionsdoesnotrestricttheapplicabilityofthisgeneralprincipleundertheSwedishlaw79.Thereisnoexactdefinitionof“ordrepublic”principleundertheSwedishlaw,anditisargued that theboundariesbetween thenon‐arbitrabilityandviolationofpublicpolicyarenotclear.80Basedontheinternationalliteratureandthecaselaw,ProfessorHeumanstatesthatthisruleshouldberestrictively interpreted and that enforcement may be refused if international public policy has beeninfringed,butnotiftheawardisinvariancewithnationalpublicpolicyonly.81

4.3.3GermanyThe German law does not prohibit arbitration of cases regarding intellectual property rights82. TheGermanarbitrationrulesarecontained inthetenthbookoftheGermanCivilProcedureCode(sections1025‐1066 of the Ziviprozessordnung (ZPO)83. As a general rule, only disputes concerning non‐proprietary claimsmay lack arbitrability and only if they cannot, by law, be subjected to a settlementproceedings as well as certain matters of non‐contentious litigation.84However, it is questionablewhether an arbitral tribunal can render an awardon a case concerning the grant,the limitationor thenullityofthepatent,astheseareexclusivejurisdictionsofthePatentOffice,oftheFederalPatentCourtandoftheFederalCourtofJustice.85Accordingtothemajorityoftheauthors,thenullificationofapatentbyanarbitraltribunalwouldconsituteaviolationofthepublicorderwithregardtopatent law.86Withrespect to the definition of “public order” Article 6 of the Introductory Act of the German Civil Code

72 Veron, supra note 70, p.7 & 8 73 Ibid. ; See also Charles Jarrosson under Cour d’Appel of Parism March 24 1994, Revue de l’arbitrage 1993, no, 3, p.515-Georges Bones and Charles Jarrosson, “L’arbitrabilite de litiges de propriete industrielle” in “Aribitrage et propriete intellectuelle”, I.R.P.I. Litec, p.64 74 Robert Briner, “The Arbitrability Of Intellectual Property Disputes With Particular Emphasis On The Situation In Switzerland”, Worldwide Forum on the Arbitration of Intellectual Property Disputes, March 1994, Geneva/Switzerland; See also Decision of the Cour d’Appel de Paris of February 3, 1992, published in: "Propriété Intellectuelle Bull. Documentaire de l’IRPI" 1992, III, 359 75 French Civil Code, Article 2060 as translated by Georges ROUHETTE, Professor of Law, with the assistance of Dr Anne ROUHETTE-BERTON, Assistant Professor of English. 76 Jansson, supra note 13, p. 30 77 The Swedish Arbitration Act of 1999 (SFS 1999:116) 78 Finn Madsen, “Commercial Arbitration in Sweden, 2nd edition, 2006, p.45 79 Sigvard Jarvin, “The Impact of Uniform Law on National Law: Limits and Possibilities”, Answers to the questionnaire addressed to the national reporters, Sweden, April 2008 found at [http://biblio.juridicas.unam.mx/libros/6/2843/26.pdf] 80 Ibid, p.12; See also Lars Heuman, “Arbitration law of Sweden: Practice and Procedure’’, JurisPublishing, New York 2003, p.740 81 Ibid. 82 Veron, supra note 70, p.9 83 Siegfried H Elsing, “ Germany”, Global Arbitration Review, Orrick Holters & Elsing found at [http://www.globalarbitrationreview.com/reference/topics/61/jurisdictions/11/germany/] 84 Ibid., Section 1030 paragraph 1 ZPO 85 Veron, supra note 70, p.9 86 Ibid.

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providesthat“aprovisionofthelawofanothercountryshallnotbeappliedwhereitsapplicationwouldlead to a result which is manifestly incompatible with the fundamental principles of German law. Inparticular,inapplicabilityensues,ifitsapplicationwouldbeincompatiblewithcivilrights”.87

Therearehoweverothervoicesechoingprothearbitrabilityofpatentdisputeswiththerestrictionthattheawardwouldhaveeffectonlyinterpartes.88Theissueofarbitrabilityofpatentdisputesthusremainsunclear.

4.3.4SwitzerlandIn Switzerland the issue of arbitrability of patent disputes is straightforward. The Federal Office ofIntellectual Property published a decision according to which arbitral awards rendered in connectionwiththevalidityofintellectualpropertyrightsarerecognizedasabasisfortheentriesintheregister89.Internationalanddomesticarbitrationaregovernedbytwodifferentrules90andbothofthemprovideforthearbitrabilityofpatentlawdisputes.TheFederalSupremeCourtin1945decidedthatstatecourtsdidnot have exclusive jurisdiction over civil suits but it was only in 1975 when the Federal Office ofIntellectualPropertyheldthatarbitraltribunalsareempoweredinconnectionwiththevalidityofpatents,trademarksanddesigns.91

4.3.5UnitedStatesIntheUnitedStates,thePatentActhasbeenamendedin1982and1984sothatitallowsarbitrabilityofdisputesrelatingtopatents.Beforetheamendmentstookplace,thecourthadjurisdictiononthemattersofinfringementandvalidityofpatents.TheActauthorizesvoluntaryarbitrationtosettleapatent‐relateddispute, subject to the reservation by the Director of the Patent and Trademark Office (PTO) fordetermination of patentability.92According to this approach, the award by an arbitrator is final andbindingonlybetweenthepartiesandhasnoforceoreffectonanyotherperson.Intheeventthesubject‐matterofanawardissubsequentlydeterminedtobeinvalidorunenforceable,byanycourtofcompetentjurisdiction upon application by any party to the arbitration then the award shall bemodified by thecourtofcompetentjurisdictionuponapplicationbyanypartytothearbitration.Suchmodificationswillgovern the rights and obligations between the parties from the date of such modifications.93Laws ofBelgiumandNetherlandsalsopermitarbitrationofpatentownership,validity,infringementandlicensingtobebidingonlyinter‐partes94.

4.4ArbitrabilityofpatentlawdisputesinselectedcountriesoftheBalkansBothintellectualpropertyandarbitrationaretwonewconceptsforcountriesofWesternBalkans,andallthecountrieshaverecentlyreformedtheirlegislativeframeworkandinstitutionalset‐upinordertomeetthemodernrequirementsderivingfrominternationalconventionsandEUDirectivesinbothfields.WhiletherearedifferencesregardingtheextenttowhichthesetwoconceptshavebeendevelopedamongtheWesternBalkan countries, thebottom line is that the case law in the fieldof intellectualproperty andarbitrationstillremainsundevelopedinallofthem.Uptodate,therehavebeenmanypaperswrittenonthe topicof thearbitrabilityofpatent lawdisputes in theWesternEuropeancountriesandworldwide,andforthefirsttimethispaperaddressesthiscomplexquestionbytryingtoagitatesomedebateinthispartofEuropewithrespecttothearbitrabilityofpatentlawdisputes.

87 In the version promulgated on 21 September 1994, Federal Law Gazette [Bundesgesetzblatt] I p. 2494, last amended by law of 12 April 2011, Federal Law Gazette I p. 615 88 Veron, supra note 70, p.10 89 Briner, supra note 74, 90 Swiss Intercantonal Arbitration Convention of March 27, 1968 for domestic arbitration and Chapter 12 of the Swiss Private International Law Act of December 18, 1987 for international arbitration. 91 Briner, supra note 74 92 OKUMA Kazutake, “Arbitration and Party Autonomy”, available at http://www.seinan-gu.ac.jp/jura/home04/pdf/3801/3801okuma.pdf ; For more information regarding the amendment of the U.S. Patent Act see also Karl P.Kilb, “Arbitration of Patent Disputes: An important option in the age of Information Technology”, Frodham Intellectual Property, Media & Entertainment Law Journal, Vol.4, Issue 2 1993, Article 4, Vol.IV, Book 2 93 Roohi Kohli Handoo and Yoginder Handoo, “ Scope”, for Paper presentation at Parallel Session 4: Patent law and litigation at The 5th Annual Conference of the European Policy of Intellectual Property Association, Sept. 20-21, 2010 94 Kenneth R. Adamo, “Overview of International Arbitration in the Intellectual Property Context”, The Global Business Law Review, Vol.2:7, 2011 available at http://www.globalbusinesslawreview.org/wp-content/uploads/2011/12/gAdamo.pdf ; See also Handoo&Handoo, supra note 20, p.8

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4.4.1AlbaniaAlbaniadoesnothaveanArbitrationlawbuttheprovisionsrelevanttoarbitrationarefoundinLawNo.8116of29March1996ontheCodeofCivilProcedureofAlbania(partII,titleIVart.400‐439),andTitleIII,ChapterIXregulatesrecognitionandenforcementofforeignarbitralawardsinAlbania95.Article402of the Civil Procedure Code provides that proprietary claims or claims resulting from proprietaryrelationshipsarearbitrable.Fromthiswordingitisstraightforwardthatclaimswithrespecttocontractsrelatingtointellectualpropertycanbearbitrated.Article53oftheLawNo.9947of7.7.2008onIndustrialPropertyprovides thatTiranaCourtofFirst Instancehas jurisdiction fordecidingon claims regardinginfringement of patent rights but this doesn’t mean that parties cannot refer their disputes to anarbitrationtribunaliftheclaimisdeemed“proprietary”withinthemeaningofArticle402oftheCodeoftheCivilProcedure.Theissuesofvalidityand/ornullityofthepatentmaynotbearbitrablesinceArticle33.5oftheAlbanianLawonIndustrialProperty,providesthatthechallengeforagrantedpatentcanbefiledattheAppealBoardoftheAlbanianPatentOffice,andtheappealagainstthedecisionoftheAppealBoardcanbefiledintheTiranaCourtofFirstInstance.Thereisnocaselawavailablewhichwouldshedsome light to the questionwhether Albanian courtswould enforce a foreign arbitral award on patentvalidity claim with inter‐partes effect only or they would refuse such a recognition on public policygrounds.AccordingtotheLawNo.10428of02June2011onInternationalPrivateLaw,foreignlawwillnotbeappliedwhentheeffectsofitsapplicationareclearlycontrarytothepublicorder.Theconceptof“ordrepublic” inAlbania is used in different pieces of legislation, but it is difficult to find an adequatedefinitionof itandthusinabsenceofcaselaw, it isdifficulttopredictwhatwouldbetheoutcomeofaforeignarbitralawardonpatentvalidityclaim.

4.4.2BosniaandHerzegovinaSinceaccordingtotheDaytonAgreementof1995,BosniaandHerzegovina iscomposedoftwoentitiesandoneadministrativeunit,namely theFederationofBosniaandHerzegovina,RepublicofSrpskaandthe Brcko District, a self‐governing administrative unit under the sovereignity of the Bosnia andHerzegovina96,therearethreeseparatelawsgoverningthearbitration,whichconsistofexactlythesameprovisions.97For thepurposesof thispaper, onlyprovisions contained in theCPAof theFederationofBosniaandHerzegovinawillbeexamined.AccordingtoArticle435CPAanarbitrationagreementmaybeconcluded with regard to any present or future dispute that may arise out of a legal relationshipestablishedbetweentheparties98.WhenratifyingtheNewYorkConvention,Bosniadeclared, interalia,that the local courts will only recognize and enforce awards relating to disputes that qualify as“commercial” under local law.99The procedure for recongition and enforcement of foreign arbitralawards in Bosnia is regulated by the Conflict of Laws Act (CLA) and according to Article 99 a foreignarbitral award will not be enforced if enforcement of such an award would be contrary to the BiHConstitution,theFBiHConstitutionorRSConstitutionand/orpublicorder100.TheconceptofpublicpolicyinBosniaisalsovagueandthereisnoanycaselawinplacethatwouldexplainwhetherpatentvalidityclaimsarearbitrableunder theBosnian legislationandwhethera foreignawardon thepatentvaliditywouldberefusedrecognitiononthepublicpolicygrounds.Withrespecttothearbitrabilityofsuchclaims,it is generallyperceived that claims that cannotbebroughtbefore the courtsbut aredecidedby stateagencies are not arbitrable.101The competent authority for granting patent rights is the Institute forIntellectual PropertyRights ofBosnia andHerzegovina.An appeal against thedecisionof the InstitutemaybefiledwiththeAppellateCommissionwithintheInstituteagainstthefirstinstancedecisionmadebytheInstitute,whileanappealagainstthesecond‐instancedecisionoftheInstituteisnotallowed,buttheadministrativeactionmaybebroughtbeforetheCourtofBiH102.Consequently,onemightarguethatdisputeregardingthevalidityofapatentcannotbereferredtoarbitrationatall.

95 Enyal Shuke, “Albania - Arbitration Law and Practice in Central and Eastern Europe”, Juris Publishing Inc., June 2006 96 Nedeljko Velisavljevic, CMS Reich-Rohrwig Hainz - Sarajevo. 97 Ibid. Note: The three laws are the Civil Procedure Act of the Federation of Bosnia and Herzegovina (CPA), Civil Procedure Act of the Republic of Srpska and the Civil Procedure Act of the Brcko District altogether referred to as Civil Procedure Acts of the Entities. 98 Article 435 of the Civil Procedure Act of the Federation of the Bosnia and Herzegovina 99 Velisavljevic, supra note 96, ibid. 100 Article 99 of the Conflict of Laws Act 101 See generally, contributions given by Sead Miljkovic, Dina Durakovic Morankic, and Vildana Mandalovic on Arbitration in Bosnia and Herzegovina for The Wolf Theiss Guide to: Dispute Resolution in Central, Eastern & Southeastern Europe, p.31 102 http://www.ipr.gov.ba/en/catalogs/view_/postupci-pred-institutom

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4.4.2CroatiaTheCroatiancaselawonArbitrationActhasdefinedthenotionofpublicordersothatitconnotatesthatthe “fundamentalprinciplesof lawandethicsvalid inCroatiaaresubsumed103, and “maynotbeequatedwithmandatoryrules(...)sincepublicpolicy isnotconstitutedbuthetotalityofmadatory lawnorms,butencompassesonlythosewhichguaranteefundamentallegalvalues(social,moral, economic)of thepublicpolicyofacountry,orwhichjeopardizeitspublicpolicy.104Nevertheless,thereisnocaselawthatwouldconfirmwhetherthearbitrabilityofdisputesregardingthevalidityofpatentrightswouldjeopardizeitspublicpolicy.TheCroatianPatentActprovides that theState IntellectualPropertyOfficehasexclusiveauthority to solve patent validity disputes105, whereas Articles 95c‐g of provide for usual civil lawprotectionofpatentrights,whichleadstoconclusionthatthoserightsarearbitrable.106Sincetheconceptofpublicpolicy isnot clearly formulatedeither inCroatiaor in comparative law,andsince there isnorelevantcourtpracticewhichwoulddeterminethestandardsoftheconcept,theimplementationofthisrule will continue to remain within the conscience and professionalism of each judge who is in thepositionofdecidingonrecongitionofarbitralawards.107

4.4.3MacedoniaIn Macedonia, there is no legal defintion of the term public policy, either. However, according to theMacedonian legal theory, the public policy is referring to the most important legal norms in theMacedonianlegalsystem.108AccordingtoArticle107oftheLawonPrivateInternationalLaw,courtswillrefusetheproposalforrecognitionandenforcementofforeignawardsiftheeffectoftherecognitionandenforcement cause violation of the public policy109.According to theMacedonian Law on InternationalCommercialArbitration,thefollowingclaimscanbearbitrated:a)disputesthatconcernrightswhichthepartiesmayfreelydispose(Art.1,para.2)andb)iftheexclusivejurisdictionofacourtofMacedoniaisnotforeseen for this particular type of dispute (Art.1, para.6).110Under Macedonian Law on IntellectualProperty,thecompetentauthorityfordecidingonthevalidityofpatentsisthePatentOffice,111thereforefromthiswording itmightbearguedthat issuesof thevalidityofpatentcannotbearbitratedandthatcourtswouldrefuserecognitionofanarbitralaward.

4.4.4MontenegroThetermordrepublicismentionedintheMontenegrinLawonCivilCodeinseveralarticles,112butthereisnodefinitionofthescopeandmeaningoftheterm.113ArbitrationinMontenegroisgovernedbyPartIVoftheLawofCivilProcedure114,andunderChapter33,Article473thepartiesmayagreeonarbitrationforthesettlementofdisputesregardingrightsofwhichtheymayfreelydispose,unlessitisprovidedbylawthatcertaindisputesshallbeexclusivelysettledbyothercourts.115Withrespecttoclaimsrelatedtopatentrights,theMontenegrinPatentActinArticle14providesthatthelegalprotectionofthepatentwillbe realized in the administrative procedure before the Industrial Property Office, competent for theadministrativeandother issues.Against the finaladministrativeacts, asdefined inparagraph2of thisArticle,claimmaybebroughtbeforetheadministrativecourt.116Withrespecttotheinfringementofanyotherrightsthathavederivedfrompatentrights i.e.damages, the jurisdictionforresolvingdisputes is,

103 High Commercial Court of the RoC, Pz-5712/03-3 of 8 November 2006 104 Supreme Court of the RoC, Gz.19/09-2 of 23 September 2009 105 Articles 80-82 of the Croatian Patent Act 106 Sajko, K : Private International Law, Narodne Novine, Zagreb, 2009, p.351 107 11 Croatian Arbitration Yearbook: 51, 52 108 Contributions for Montenegro for this paper were given by Vangel Dokovski, Assistant Professor of the Law Faculty of the University of Skopje. 109 Article 107 of the Law on Private International Law 110 Arsen Janevski & Toni Deskoski, “Arbitration- Regional and International Legal Aspect: The new Law on International Commercial Arbitration of the Republic of Macedonia, 14 Croat.Arbit.Yearb.89, 95-96 111 Article 9 (1) of the Law on IP, Official Gazette, 21/2009 112 Article 173 (2) : A court shall deny legal assistance to a foreign court if the performance of the action requested is contrary to the public order. Article 174 (2): The action, which is the subject of the petition of a foreign court, may also be exercised in the manner requested by the foreign court if such actions are not contrary to the public order. Article 495 (2): The arbitration board shall upon the request of the party’s record the settlement in the form of an arbitration award, unless it finds that its content violates the public order of the Republic of Montenegro. Article 506 (2): 2) The court finds even if a party has not raised these grounds, that the award is in conflict with the public policy of the Republic of Montenegro 113 Contributions for Montenegro for this paper were given by Aneta Spaic PhD, Assistant Professor at the Faculty of Law of the University of Montenegro. 114 Part IV Arbitration Proceedings, Law of Civil Procedure of Montenegro 115 Ibid, Chapter 33, Article 473 116 Article 14 of the Montenegrin Law on Patents

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under Section XI, Article 76 of the Patent Law assumed to the regular courts.117The latter ones arearbitrableinnatureandunderSectionIII,Article12paragraph5oftheRulesofForeignTradeCourtofArbitration it is provided that the Foreign Trade Court of Arbitration will decide upon...internationalcommercial disputes of the intellectual property nature.118As for the arbitratibility of patent validityclaims, in the absence of case law and explicit provisions defining thismatter, in accordancewith thepreciselydefinedjurisdictionoftheIntellectualPropertyOfficeinMontenegro,validityofpatentswillbeunderitsexclusivejurisdiction.

4.4.5SerbiaInSerbia,allpropertydisputesaboutrightsthepartiesarefreetodisposewith,exceptthoseinwhichthelawexplicitlyprovidesthejurisdictionofthenationalcourt,canbebroughtbeforethearbitrationcourt.Thenationalcourtshaveexclusivejurisdictionoverthedisputesonownershipandpossessionrightsonimmovableproperty;disputesthatariseoutofleaseofimmovablepropertyorusagerightonimmovableproperty etc.119Given that intellectual property rights do not belong to the category of immovableproperty,itcanbearguedthatdisputesresultingfromcontractualrelationshipsinthefieldofpatentsi.e.infringementofapatent,canbesubmittedtoarbitration.Withrespecttothepatentvalidityclaims,thecompetentauthorityforgrantingpatentsundertheSerbianpatentlawistheIndustrialPropertyOffice,andaccordingtothenewchangesintroducedinthePatentLaw,whichenteredintoforceonJanuary4,2012,incaseofaninfringementactionarisingfromthepublishedapplication,thecourtwillstaythecivilproceedingsuntiltheIPO’sissuanceofthefinaldecision.IfthepatentrevocationproceedingisrequestedbeforeIPO,thecourtshallstaytheproceedingsonaninfringementactioninitiatedbytherightholderortheholderofanexclusive license.120Theconclusionwhichcanbedrawn fromthisnewwordingof thenewPatentLaw,itcanbearguedthattheissueofthevalidityofpatentsisexclusivecompetenceoftheIndustrialPropertyOfficeand, inanalogywithcourtproceedings, ifsuchclaimisraisedduringarbitralproceedings,thearbitraltribunalshallstayitsproceedingsonaninfringementactionuntilIPO’sissuanceofthedecisionontheissueofthepatentvalidity.

4.4.6KosovoThe Kosovo Arbitration Law does not specify any limitations regarding types of disputes that arearbitrable,butitsaysthatalldisputesrelatedtocivil‐judicialandeconomic‐judicialrequestsmaybethesubjectofanarbitrationagreement121.Given thatpatentrightsarepropertyrights innature122,partiesarealsofreetosubmitttoarbitrationanydisputearisingfromacontractualrelationship,however,withregard to the claims related to validityof patents it is still questionable.UnderKosovo legislation, theIndustrial Property Office [IPO] which operates under the Ministry of Trade and Industry is thecompetent authority for granting patents123. With respect to the validity of the patent, Article 105provides that the procedure regarding the announcement of no validity of a patent is initiated from awrittenrequestbytheOffice124,andthattheprocedurefordeclaringthepatentinvalidcanbeconductedby the Office through the offices with which the Office has signed cooperation agreements in thismatter.125Fromthiswording,onecouldargue that if there isacooperationagreementsignedbetweenthe Permanent Tribunal of Arbitration and the Industrial Property Office, claims related to validity ofpatentscouldalsobearbitratedand thearbitral tribunalcouldevenrenderanawardwithergaomneseffect,butthisisonlyaguessasthecaselawhasnotconfirmedthisyet.

Withrespecttotheordrepublic,theLawonContentiousProcedureprovidesthatcourtswillnotapproveanyagreementbetween theparties if its content is in contradictionwith the, interalia, rulesofpublicpolicy(ordrepublic)126.KosovoArbitrationLawalsoprovidesthatcourtscanexofficiosetasideorrefusetherecognitionofaforeignarbitralawardonpublicpolicygrounds.Intheabsenceofasounddefinitionof the notion of ordre public, according to law professors, courts in Kosovo rely on the modernjurisprudence according to which the ordre public is interpreted narrowly and it is deemed that an

117 Ibid., Article 76 118 Section III, Article 12, paragraph 5 of the Rules of the Foreign Trade Court of Arbitration 119 See generally contribution for Serbia given by Milan Lazic for the International Comparative Legal Guide to: International Arbitration 2010: A practical cross-border insight into international arbitration. 120 IP News Eastern Europe, Petosevic [http://www.petosevic.com/resources/news/2012/01/000856] 121 Article 5, Kosovo Arbitration Law [Law No.02/L-75] 122 See Ibid. Articles 30-34: the law provides that patents as an object of property can be transferred, licensed, be subject of lien, levied in execution and form part of the bankruptcy estate 123 Article 4 of the Kosovo Patent Law [Law No. 04/L-029] 124 Ibid. Article 105 125 Ibid. Article 103.2 126 Article 3.3. of the Law on Contentious Procedure

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agreementbetweenthepartiesdoesnotviolatethepublicorder.127Basedonitslegislation,Kosovohasall predispositions to follow the model of Switzerland, United States and Canada, but given that thelegislationinthefieldofintellectualpropertyinKosovoisnewandmainlycopiedfromotherjurisdictionsandstillnottestedproperlyinpractice,itisstillearlytoconcludeanything.

CONCLUSIONThosewhowouldchallengethearbitrabilityofdisputesrelatedtopropertyrights,couldarguethattheresolutionofthesedisputesthrougharbitrationwoulddeprivethepartiesoftheopportunityofareviewbyahigherinstancecourt,sincedecisionsinarbitrationarefinal.Nevertheless,thearbitrationagreementisamutualonewherepartiesvoluntarilygiveuptherighttoareviewbyahigherinstancecourtoranyother instance; therefore, this would not be a deprivation since with the arbitration agreement theparties’willisrealized.

Inmoderntrendsofinternationalcommercialarbitrationalmostallcommercialdisputescanbesubjectto arbitration and such a decisionwould not be contrary to the norms of public order. In the field ofpropertyrights,fromahigheranalysis,weseethatthosecountrieswhichpermitarbitrationforpropertyright cases have reached two possible solutions. The first solution is to allow arbitration for propertyrightcaseswhilethearbitraldecisionhasalegaleffectonlybetweentheparties(interpartes).Thesecondsolutionisforcompetentadministrativeauthoritiestoallowabitraltribunalstodecideonissuesrelatedto the validity of patents or based on cooperation agreements, or through a declaration of theseadministrativeauthorities,asisthecaseofSwitzerland,wherearbitraltribunalshavetherighttodecideabout the validity of patents. Thiswould bemore advantageous than the first solution because everyarbitraldecisiononthevalidityofpatentswouldberegistered in thecompetentoffices for intellectualproperty and the arbitral decision would have an ergaomnes legal effect. In this way public interestwould remain unaffected, since such a decision would be given with the approval of the competentadministrativeauthority,andtheefficiencyofarbitrationwhichisknownasamechanismforthequickandprofessionalresolutionofcomplexdisputesforwhichcourtsoftendonothavesufficientcapacitiesorthespecializedknowledgetoresolvethemwouldremainunaffected.

There is a third possibility, which is analogous to court procedures, when in case the issue of patentvalidity israised inanarbitralproceeding,the latterwouldsuspendtheprocedureuntil thecompetentadministrative authority decides on the validity of the patent; however, this solution could delay thearbitralproceedingstherebylosingtheeffectforwhichthismechanismforthealternativeresolutionofdisputesisrenowned.As a conclusion, it can be stated that inKosovo, aswell as in other countries of theWesternBalkans,propertyrightsisanunderdevelopedfield,andcourtswhichhavealargebacklogofunresolvedcases,donot have the adequate expertise in the property rights field. This lack of expertise makes the courtsinefficient in resolving complex disputes of intellectual property. Of all forms of intellectual property,patentlawisunderdevelopedalthoughtheuseofpatentedtechnologyisquitepresentamongthecitizensofthesecountries.Allowingthearbitrabilityofdisputesrelatedtopatentlawwouldeasethebacklogofcasespendingbefore the court andwould offer parties a forumwhere their cases couldbeheard anddecideduponinamoreeconomicalway,faster,andaboveallfromexperiencedarbitrators.Therefore,itisimportanttoconsiderthemodalitiesabouthowtoapproachtheproblemofthearbitrabilityofdisputesrelatedtothevalidityofpatents.

127 This was the view shared with the author by professors of the Law Faculty of the University of Pristina (Prof.Dr.Iur. Iset Morina, LL.M., Professor of the Law on Civil Procedure)

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UPC347.97/.99:341.6

THERELATIONSHIPBETWEENREGULARCOURTSANDARBITRATION:LEGALSTANDARDSANDBESTPRACTICES1

byVisarRamaj

Abstract:

ThispaperaimstoclarifytherelationshipbetweenregularCourtsandArbitrationbyidentifyingstandardsfromapplicablecaseandapplying ittoconcretely identifiedsituations.Thiswillbeachievedbyanalyzingthe Kosovo Law on Arbitration and best practices from Model Arbitration Law of the United NationsCommissionon InternationalTradeLaw (UNCITRAL),KosovoLawonArbitration isbasedonUNCITRALModelLaw,andanalysisofjudicialpracticeofdevelopedcountriesinthesequestions.Aspecificfocusofthispaperare two situations, inonehand is the roleof courts indetermining the jurisdictionof thearbitraltribunal,andtheobligationofthecourtstorefercasestoarbitration,andontheotherhandisrecognitionandenforcementofarbitralawardsbythecourts.

During the conclusion of new business agreements or exploitation of opportunities for growingbusinesses, very little is thought about the courts, arbitration and other methods to resolve possiblefuturedisputes.Thatisbecausebusinessesspendlongtimenegotiatingsubstantivetermsofthecontract,and erroneously believe that discussion of arbitration and courts adversely affects the contract andunderminestheconfidencebytheotherbusinesspartner2.However,businessfrequentlyfacecontractualproblems, including deadlines for completing performance, payment terms, and such problems areinevitable part of the business activity. Therefore, a partywhich foresees arbitration or other disputemechanismsinadvancegainsanadvantageincaseproblemsarisesandincreasesitslegalsecurity.

After theproblemsoccur, if there isnoamicablesettlement,partieshavetwomainoptionstosecureafinalandbindingdecisionforthem,throughcourtsorarbitration.Whiletherighttohaveaccesstoafairtrialatacourtestablishedbylawisfullyguaranteedforall,therighttousearbitrationislimitedonlytothecaseswhere thepartieshaveawrittenagreement togo toarbitration3.Choosingbetweencourtorarbitration is an exclusive choice, meaning that selecting one has the effect of excluding the other.Therefore,businessesand individualswhowish tousearbitrationandutilizeall theadvantages that itoffers,shouldincludethearbitrationclauseinwritinginthecontractorinaseparatedocument.

Anagreementtoarbitraterepresentstheconsentofthepartiestoexcludethejurisdictionofthecourtstodecideorinterveneregardingtheirdisputes4.Thisstemsfromthewilloftheparties,partyautonomy,andconsensualnatureofarbitration,throughwhichitdiffersfromcourtproceedings5.

Therefore,anagreementtoresolvedisputesthrougharbitrationmeansthatnocourtorotherforumhasjurisdiction to intervene in thedispute, except for thearbitration forumwhichhasbeenchosenby theparties. As illustrative example is if you've provided Arbitration in the Centre for Alternative DisputeResolutionoftheAmericanChamberinKosovo,thannoanyothercourtorotherarbitralTribunalmayhavetherighttoresolvethedisputeexceptAmericanChamber.

However,thereareexceptiontothisgeneralprincipleasitiscommonthatarbitrationlawsofthecountryreserve prerogative measures for the courts through which they can intervene in a limited way inarbitration and in some cases also assist the arbitration procedures. This in order to maintain the

1 Paper is focused in international and domestic commercial arbitration. 2 Andrew and Keren Tweeddale, Arbitration of Commercial Disputes, ( Oxford University Press, 2006), 15 3 Kosovo Law on Arbitration, Law Nr. 02/L-75, article 6, 4 United Nations Commission on International Trade Law(UNCITRAL): Model Law on International Commercial Arbitration (Model Law) – (1985,amended 2006), (Secretariat notes), page 275Andrew and Keren Tweeddale, Arbitration of Commercial Disputes, ( Oxford University Press, 2006), 35

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integrity of the country's justice system by placing a control system on arbitration, but also to assistarbitrationasthemainmethodofresolvingdisputesinbusiness.

However,theroleofthejudiciarysysteminrelationtoarbitrationinthefirstplaceshouldbeseenasanassistantrole,givingarbitrationthepowerofthestateintheissuesofenforcementincaseofdisregardornon‐compliancewith theordersanddecisions fromthearbitral institution.6Therefore, thesupervisoryrolecomesonlyassecondary.

KosovoLawonArbitration7providesthatthecourtshavetherighttointerfereonlyinsituationsforeseenspecifically by the law8, a summary of these situations include: a) the appointment, replacement anddismissal of arbitrators, b) the tribunal's jurisdiction, c) recognition, enforcement and annulment ofarbitraldecisionsandd)interimmeasures.Inpractice,interventionsinthesesituationsareverysensitiveandshouldbecarefullyconstructed.

Abovementioned situations are the only situations inwhich courtsmay interfere in arbitration cases.However,itisimportanttounderstandthecontentandstandardsofthisinterventionswhichshouldbecarefullyconstruedandensuringtheintegrityandindependenceofthearbitralprocedures.

Inexercising thesepowers, theroleof theKosovoCourtsshouldbebasedonprinciplesandstandardsthat reflect the interests of the justice system, the judiciary and business community, which choosessolvingtheirdisputesthrougharbitration.Forthepurposesofthispapertheroleofcourtinterventioninarbitrationshallbetreatedinthedimensionofrespectingthejurisdictionofthearbitraltribunal9.

SupremeCourtofUnitedStatesofAmerica,inthefamouscaseofHallStreetv.Mattel,hasclearlystatedthelimitsofinterventionofthecourtsinarbitrationandtheroleofthecourtsindefenseofArbitration.

SUPREMECOURTOFUNITEDSTATES

HallStreetAssociates,L.L.C.V.Mattel,Inc.(No.06–989.Heard:7thonNovember,2007—Decisiondated25thMarch2008

InUnitedStatesofAmericathereexistsanationalpolicywhichfavorsarbitration,andhasonlyverylimitedmeasures forreview,asprovided inArticles9‐10oftheFederalArbitrationAct,necessarytomaintaintheessential virtue of Arbitration as amethod for resolving disputes in a fair way. Any other reading orintervention of courts outside these standards opens the door for legal claims and procedures that cantransform arbitration to a prelude, for a judicial review process that consumes time and ismuchmoreserious.Courtsmustmaintainandprotecttheessentialfeaturesofarbitrationandthenumerousadvantagesthatithasinthebusinessworld.

A) ThejurisdictionoftheArbitralTribunalandtheformulationofthearbitrationagreement

Ifthecourtfacesacasewhichincludesandarbitrationagreementisunderthedutytodismisstheclaimifthedefendantinhisstatementofdefenseinvokesthearbitrationagreement,unlessthecourtfindsthatthearbitrationagreementisinvalidorthatthedisputedsubjectmatterisnotcoveredbythearbitrationagreement.Thismeansthatforthosedisputesinwhichthereisanarbitrationclause,thecourtwillrefuseto take the case andwill refer it to the competent arbitral institution. An illustrative case comes fromCanada:

6 Gary Born, International Arbitration, cases and materials, Kluwer Law, 2011 7 Aiming uniformity and legal security, UNCITRAL has prepared the Model Law. Model Law has been adopted by around 70 states, including Kosovo with some minor changes. 8 Kosovo Law on Arbitration, article 3 9 Starting from the propositions that: a) dispute is arbitrable, b) arbitration clause is in writing, and c) arbitration agreement is not null, invalid, or inoperative.

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FEDERALCOURTOFCANADA

CoopersandLybrantLimitedforBCNavigationSAv.CanpotexShippingServicesLimited10(FederalTrialReporter,79)

"Incaseswherethereisavalidagreementtoarbitrate,andifonepartyrequeststhetransferofthecasetothearbitraltribunal,theapplicablelawrequirestheCourttoreferthecasetoarbitration.

The executedAgreement by the parties contained an arbitration agreement.After Coopers and LybrandLimitedhavecommencedalawsuitincourt,CantopexhasrejectedthejurisdictionoftheCourttodecideinthiscaseandhasrequestedaninjunctiontostoptheproceedingsuntilthereistimetoprepareitsopposition,basedonArticle50(1)(b)oftheFederalCourtofCanadaAct.

CourtapprovesthewholerequestofCantopex.BasedonArticle8oftheModelLaw forArbitrationoftheUNCITRALwhichhasbeenadoptedbytheCanadianFederalLaw,thecourt isobligedtoreferthecasetoarbitration.Thereexistedavalidagreementtoarbitrate,andthepartyhassubmitteditsapplicationintime."

However,courtsincertaincasesmaynotreferthecasetoarbitration11andalsohasthepowertorefuserecognitionandenforcementof theawards issuedby thecompetentarbitral tribunal12,andsuchcasesinvolve where the dispute is not covered by the arbitration agreement or for other circumstances asprovidedforbylaw.Theseclaimsforlackofjurisdictionofthearbitraltribunalarefrequentinfrontofthecourts,especiallybypartiesthathaveviolatedtheobligationsofthecontractandexpecttoloosethecaseandneedlengthierprocedures.

Arbitrationisacreatureofcontract;ArbitrationTribunal's jurisdictionisdeterminedbythearbitrationagreementandreferraltoarbitration13.AsbeendecidedinthecaseofUnitedServiceParcelofAmericav.GovernmentofCanada14theessentialprincipleinarbitrationisthattheTribunalhasjurisdictionoverthecase as much as it is given to it by the agreement to arbitrate. Therefore, in order to determine thejurisdictionof thearbitral tribunal it shouldbeanalyzed the textof thearbitrationagreement and theintentionofthepartiesthatthedisputeshouldberesolvedthrougharbitration.

In the caseswhere the court questions the tribunal jurisdiction to decide a particular case, the courtsshouldhavea standard for thehandlingsuchchallenges.Court’spracticearound theworldshows twomain systems. The first system (mainly common law countries) suggests that we should analyze thewordingofthearbitrationagreementinaverypreciseanddetailedmannertodecidewhatisincludedintheagreementtoarbitrate15.Thesecondsystemproposesthatthewordingoftheagreementtobeofthesecondary importance(mostlycountrieswithcivil law),whilethecourtshouldbase itsdecisionontheintentionoftheparties,whethertheyaimedthatarbitrationagreementcoversthedisputesthatarose16.ThisdoesnotexcludethepossibilitythatKosovo'scourtsalsodecideastandardthatisthecombinationofthesetwo

TheApplicabilityofthefirstsystemshouldbebasedonthelanguageusedintheagreementtoarbitrate.Thelanguageusedinarbitrationshouldbespecificanddependingonthepurposeofthepartiesnormallyusescertainexpressions.Thisisreflectedinthemodeltoarbitrationclausesprovidedbytheinstitutionsdealingwitharbitrationwhichusuallyprovidethreesetsofstatementswithvaryingdegreeofauthorityconferredtothetribunal.Forexapmple:a)Fordisputesarising"from"thecontract‐theinterpretationshould include everything that has originated in the contract17b) For disputes arising "under" thecontract‐narrowinterpretationincludesonlytheinterpretationforthefulfillmentofthecontract18andc) For disputes arising "related to" the contract ‐ the broadest interpretation possible is to includeeverythingrelatedtothecontract19.

AmericanChamberofCommerceinKosovo,asamodelarbitrationclausehasthisclause:

10 Available at UNCITRAT http://daccess-dds-ny.un.org/doc/UNDOC/GEN/V93/855/96/IMG/V9385596.pdf?OpenElement 11 Kosovo Law on Arbitration, article 7 12 Ibid. article 36.2(a)(iv) 13 P. Fouchard, E. Gaillard, B. Goldman, International Commercial Arbitration, (Kluwer Law, 1999), 46 14 http://www.state.gov/s/l/c37/49.htm 15 Food Corp of India v. Achilles Halcoussis [1988] 2 Lloyd’s Rep 56, 61. 16 Tweddale, supra note 3, page 166 17 Sweet Dreams Unlimited v. Dial-a-Mattress Intern 1 F 3d 639 (7th Circuit 1993) 18 Producer (Finland) v. Supplier (USA), (2000) XXV Ybk Comm Arbn 311-23 19 Ashville Investments v Elmer contractors (1987) 37 BLR 55

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"Any dispute, disagreement, or claim arising out or in connectionwith this contract, including breach,terminationorinvalidityofthecontractwillberesolvedthrougharbitrationundertheAmericanChamberofCommerceinKosovo,basedontheRulesofArbitrationoftheChamberitself".

Suchaformulationisconsideredverybroadandincludesanydisputewhichhasoriginorisrelatedinonewayoranotherwiththecontract.

The purpose of the parties, according to the second system, should be interpreted on the basis ofintentionandbusinesspracticesbetweentheparties.Moreover,basedontheprincipleofgoodfaith,thepartyisboundbystatementsandactionsbywhichhasindicatedhisintentiontoincludeornotanissueinthearbitrationagreement20.

According to twootherprinciples that are applicable to our arbitration law, theprinciplekompetenz‐kompentezandtheprincipleofseparabilityfurtherclarifyhandlingofarbitrationagreements.Basedonthe principle of competenz‐competenz it is the authority of the arbitration tribunal to rule on its ownjurisdictioniftherearechallengesfromanyoftheparties.Theprincipleofseperabilityprovidesthatthearbitrationagreementisconsideredasaseparateandindependenttermsfromtheunderlyingcontract.

Finally,settingthestandardsforcourtsinterventioninarbitrationisofprimaryimportancetotheKosovojustice system and should reflect a broad discussion of interested parties and institutions. Thiswouldincrease legal certainty for the parties, confidence in the arbitration as the alternative method ofresolvingdisputesandkeepingthecredibilityofthecourts.

B) RecognitionandEnforcementofarbitralawardsbyregularcourts

Although there isno statistical data, inmost arbitration casesdecisionsare fulfilledvoluntarilyby theparties21.Thisisbecausearbitrationdecisionsareenforceableeasily,noappealisallowed,thelegalbasisfortherefusalofenforcement is limited,andthefact that losingparty ischargedwithadditionalcosts.However,therearecaseswhenapartyfailstofulfillitsobligationsbasedonthedecision,thentheotherpartyasksfromthecourtfortheenforcementofthedecisioninthecountrywheretheassetsofthelosingpartyare22.

Courtsmayrefuseenforcementofarbitralawardsincaseswherecriteriaforrefusalaremetinspecificcircumstances, cases which may include lack of jurisdiction, procedures for appointment of thearbitrators, parties and other23. While these standards are fairly specifically foreseen, there are twoadditional grounds foreseen in the local legislation (Kosovo), that if applicable, may result in non‐enforceabilityofthedecisionfromtherespectivecourt.Thesetwogroundsforrefusingrecognitionandenforcement include:A)thecase isnotarbitrabile inaccordancewiththe local law,B)recognitionandenforcement violates public order24. Such solution is identical with the Model Law25and New YorkConvention26and represent internationally recognized standards in arbitration. Case law shows thatapplicabilityofthisstandarddidresultinuniformity,whileprovidingguidanceinmostaspects,howeverleaving adegree of discretion to local courts. Therefore, for theKosovoCourts in it important to startshapingthelexforilegalstandardsforenforcementandrecognitionofarbitralawards,andincreaselegalsecurityandpredictabilityfortheparties.

As a preliminary issue in the recognition and enforcement of the arbitral awards is the statute oflimitationwithrespecttosubmissionofthearbitralawardforenforcement,thisespeciallywithrespecttointernationalcommercialarbitration.Insuchcases,thecourtmayfacesituationswherethestatuteoflimitationsisdifferentbasedontheapplicablelaw,whichmaybelawapplicablebasedontheagreementoftheparties,lawsoftheseatofarbitration,locallawswheretheenforcementissoughtandothers.Asanexample,statuteof limitations inChina is6months,while in Italy is10years.Basedonthis issue, it isgenerallyacceptedthatregardlessofotherlaws,theapplicablelawforthestatuteoflimitationisthelex

20 Tweddale, supra note 3, page 165 21 Andrew and Keren Tweeddale, Arbitration of Commercial Disputes, Oxford, Oxford University Press, 2006, page 408 22 At this point in time, after the award has been issued, the tribunal is functus officio. 23 Kosovo Law on Arbitration, article 36 24 Ibid. article, 36 (2)(b) and 39.5 25 United Nations Commission on International Trade Law(UNCITRAL): Model Law on International Commercial Arbitration (Model Law) – (1985, amended 2006), article 36(1)(v)26 The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), article V(2)

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foriofthecountrywhereenforcementissought27.Ontheotherhand,theburdenofproofremainswiththepartywhoclaimsthatthestatuteoflimitationsapplies.28

a) ArbitrabilityWithrespecttothequestionthatwhichcasescanbesubmittedinarbitration,theconceptofarbitrability,accordingtotheapplicablelawinKosovo,allcivilandcommercialcasescanbesubmittedtoarbitration.29This definition is not very helpful in practice, where the boundaries between arbitrable and non‐arbitrable cases is blurred. There are several fields in the civil commercialmatters, including patents,intellectualproperty,wheretheissueofarbitrabilityremainsopen.Itwasspecificallythisproblemwithdefiningthe issueofarbitrabilitythereasonwhyUNCITRALdidnotaddress it intheUNCITRALModelLaw.

Inadditiontosettingpredictablestandardsabouttheissueofarbitrabilityandthequestionofwhatcanbe substandard onwhether on this issue theywouldbe treating differently domestic arbitration frominternational arbitration. There is an ongoingdebate on this issue, and a very influential decisionwasissuedbytheSupremeCourtof theUnitedStates inthecaseofMitsubishiMotorsCorpv.SolerChrysler‐Plymouth30whichspecifiedthatinternationalarbitrationwouldbetreatedmorefavorablyandtheissueof arbitrabilitywould be interpretedmore broadly to encompass areaswhich in domestic arbitrationwouldnormallynotbearbitrable.Therefore,itissuggestedthatevenKosovocourtsinterprettheissueofarbitrabilitymorebroadlyinthecontextofinternationalarbitration.

b) PublicOrderViolationofPublicOrderofacountryisaconceptthat,ifapplicable,givestheauthoritytocourtstorefuserecognition and enforcement despite the fact that all conditions for it are fulfilled. Public order inarbitrationisinterpretednarrowlyandincludescaseswherethereisviolationofbasicvaluesof justiceandmoral of a country31, even though the interpretation of the courts changes depending in the stateinterests and internal concepts of state sovereignty, justice and morals. Some of these cases, whichremainhighlycontroversial,includelimitingtheparties’rightstofullyrepresentitscase,impartialityofthearbitrators,conflictofinterest,andothers.

Standardsofthecourtindifferentcountryvarywhenitcomestotheissueofarbitratorshavingservedinpanelswiththesamepartyinseveralcases,wherethearbitratorlimitstheopportunityofthepartiestopresentitsevidences,wherethearbitratorhasworkedwithoneofthelegalcounselsofoneoftheparties,where the arbitrator has previously published very one sided comments with respect to legal issueswhichareintoquestion,andothers.Inaddition,suchcasesarefrequentinarbitration,giventhelimitednumberofarbitratorswhowork in the field.Therefore, itwouldbeverybeneficialandhelpful is suchissuesarediscussedatthejudiciarylevelhereinKosovo.

Inconclusion,enforcementofarbitralawardsbytheregularcourtsrepresentsoneoftheprocesseswhichdetermineshow successfulwill arbitrationbe in a country andhow safe is the environment fordoingbusiness.GiventhelackofexperienceoftheKosovocourtsinthisareaisveryimportantforthecourttoaddresstheseissuesinadvanceinordertocreateuniformity.

27 Government of Kuwait v. Sir Frederic Snow & Partners, [1983] 1 WLR 818, CA 28 Islamic Republic of Iran v. Gould Inc, F 2d 764, 770 (9th circuit, 1992) 29 Kosovo Law on Arbitration, article 5 30 Mitsubishi Motors Corp v. Soler Chrysler-Plymouth, 473 US 614, 105 S Ct Reports (1985) 3346, (1986), XI Ybk Comm Arbn 555-65. 31 Parsons and whittemore v. RAKTA, United States Court of Appeal, 508 F 2d 969 (2nd Circuit 1974)

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UPC341.613(496.51)

THEIMPORTANCEOFALTERNATIVEDISPUTERESOLUTIONTHROUGHARBITRATIONINKOSOVO

byValbonMulaj1

AbstractThisarticleaimstohighlighttheimportanceoftheAlternativeResolutionofDisputesthrougharbitrationinKosovo. In order to better understand the importance of the functioning of arbitration, the AlternativeDisputeResolutionCentreintheAmericanChamberofCommerceandthePermanentArbitrationTribunalof the Kosovo Chamber of Commerce have been established. The legal framework has been completed,beginningwiththeLawonArbitration,theActontheEstablishmentofArbitration,RulesofArbitration,theDecisiononadministrativeprocedureexpenses forArbitration, listofarbitrators.Organizing roundtableswithbusinesses,attorneys,andarbitratorsoftheChambersofCommerceinthecountry.Raisingbusinesses’awarenessforthefunctioningofarbitration inKosovo,and itsbenefitsrelativetootherdisputeresolutionmechanisms.What is the importance of the parties’willingness in arbitration, the place of arbitration,numberofarbitrators, languageofarbitration,the informingofbusinessesfortheroleandsignificanceofarbitrationsothattheydirecttheirdisputesforresolutionthrougharbitration.ThecommitmentofthetwoChambersofCommerce inthecountrytoachievecredibility inarbitration,sothatbusinessesentrusttheirdisputestoarbitration.

Keywords:Arbitration,significance,resolution,alternative,disputes,legal,civil,commercial,procedure,businesses, Chambers, Centre, tribunal, professionalism, confidentiality, informing, mechanisms, court,arbitrator,credibility,arbitrationclause,contract.

1. TheImportanceofAlternativeDisputeResolutionthroughArbitrationThe alternative resolution of disputes through arbitration in Kosovo has a great importance for localbusinesses as well as for foreign investors. Arbitration is one of the alternative and more efficientinstruments of dispute resolution, at a time when businesses are interested in a quicker and lessbureaucratic resolution of a dispute.2In arbitration, besides the advantage of speedy resolution ofdisputes, there are also other advantages such as professionalism, procedure and arbitral decisionconfidentiality, credibility, efficiency, the consideration for theparties’ consent etc.Theawarenessanddemand forarbitrationservices from the lawyerandbusiness communities3, economists, andall thosewhoareinvolvedinissuesofcivildisputeresolutionandcommerciallegaldisputesareimportanttothesuccessofarbitration.

Arbitration isno longeran innovation inKosovo,becauseowing to thecommitmentof theAlternativeDispute Resolution Centre of the American Chamber of Commerce in Kosovo4and the Tribunal ofArbitrationoftheKosovoChamberofCommerce,5businesseshavehadtheopportunitytobeinformedin detail with regard to the role and importance of arbitration in the country. The importance ofarbitrationingeneralisunderstoodbybusinesseswhendisputesarisebetweenthem.Afterthedisputearises, the importance and benefits of arbitration come to the fore relative to courts and othermechanismsfordisputeresolution.

Arbitration,asoneofthemechanismsfordisputeresolution,resolvesalldisputeswhichdealwithciviland commercial issues.6Disputes, which do not fall under these two categories, civil and commercial,

1 Valbon Mulaj PhD candidate, arbitrator at Alternative Dispute Resolution Center at American Chamber of Commerce in Kosovo. 2 Kosovo Chamber of Commerce. See webpage: http://www.oek-kcc.org/2013/en/services/arbitration 3 The Systems for Enforcing Agreements and Decisions Program (SEAD). Report and recommendations for the development as well as sucessful and effective implementation of the system for Alternative Dispute Resolution. This report was prepared with the support of the American pople, through the United States Agency for International Development (USAID). April 30, 2010, p.1. 4American Chamber of Commerce in Kosovo. See webpage: http://www.adr-ks.org 5 See webpage: http://www.oek-kcc.org/2013/en/services/arbitration 6 Article 5 paragraph 2 of the Law on Arbitration in the Republic of Kosovo of 2008. See the official webpage of the Republic of Kosovo: http://gzk.rks-gov.net/ActDetail.aspx?ActID=2579

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cannotbesubjecttoresolutionthrougharbitration.Itiswellknownthatmostdisputesbusinesseshavewithoneanother are civil andcommercial innature; as such, arbitrationhasbeen created inorder toassistbusinessesbyprovidingthemwithefficientandpromptservicesofarbitration.Arbitration,asoneof themechanisms for the resolutionofdisputes, isnota rivalof courts,but rathera facilitator,whichunloads their workload. In its Annual Report for 2013, the Kosovo Judicial Council, besides theachievementsof2013,considersthisasayearofmanychallengesthataccompanythecourts,amongstthemthebacklogofcasesincourts.7During2013,courtsinKosovohavereceived885,677cases,amongstwhich 466,255 remain unresolved.8As a result, the Alternative Dispute Resolution Centres, whichfunctionwithintheKosovoChamberofCommerceandtheAmericanChamberofCommerceinKosovo,are considered as auxiliary to the courts. This is because, since the establishment of arbitration, alldisputes,i.e.disputeswhichusedtoberesolvedthroughcourts,arenowresolvedthrougharbitration.

ArbitrationinKosovo,evenifitusedtobeconsideredasaninnovation,becauseitdidnotfunctionwellinpractice,since2011isnolongerconsideredassomethingnew.That isbecauseinthelastfewyearsitsrole and importance has been well presented to the businesses organized by the Alternative DisputeResolution Centre of the American Chamber of Commerce in Kosovo9and the Permanent Tribunal ofArbitration of the Kosovo Chamber of Commerce.10After the Law on Arbitration in Kosovo came intoforce,11all the legal framework for the functioningof arbitrationwas completed in2011.12Since2011,bothCentresofArbitrationinKosovohavebeenengagedandworkedsothatarbitrationiscredibleandprofessional for thebusinesses.TheAlternativeDisputeResolutionCentreofAmCham,13hasorganizedtrainings,roundtableswitharbitrators,inorderforthemtobeprofessionalinarbitration.AmChamhasalsoorganizedmanyroundtableswithbusinessesontheroleandimportanceofarbitration,14andonthemeansofdisputeresolutionthrougharbitration.15

ThebusinessesthataremembersoftheseChambers,16havehadtheopportunitytoreceiveinformationontheroleand importanceofarbitration,aswellas fortheadvantagesofarbitration intheirdisputes.Businesses which are members of the American Chamber of Commerce in Kosovo17and the KosovoChamber of Commerce,18can resolve their disputes through arbitration if they have included thearbitrationclauseintheircontracts.BusinesseswhicharenotmembersofthesetwoChambers,buthaveincludedthearbitrationclauseintheircontracts,mayresolvetheirdisputethrougharbitrationsimilartothebusinesseswhicharemembersofthesetwoChambersofCommerce.

7 Annual Report of the Kosovo Judicial Council 2013, p, 7. See official webpage of the Kosovo Judicial Council: http://www.kgjk-ks.org/repository/docs/ALB_Raporti_Vjetor_2013_931339.pdf 8 Annual Report of the Kosovo Judicial Council 2013, p, 39. See official webpage of the Kosovo Judicial Council: http://www.kgjk-ks.org/repository/docs/ALB_Raporti_Vjetor_2013_931339.pdf 9 American Chamber of Commerce in Kosovo. See webpage: http://www.adr-ks.org 10 Kosovo Chamber of Commerce. See webpage: http://www.oek-kcc.org/2013/en/services/arbitration 11 Law on Arbitration of the Republi of Kosovo, 2008. See official webpage of the Republic of Kosovo: http://gzk.rks-gov.net/ActDetail.aspx?ActID=2579 12 Such as: Rules of Arbitration in Kosovo, which entered into force on June 24, 2011. Arbitration Rules in the American Chamber of Commerce in Kosovo. Based on the decision of the Board of Governors of the American Chamber of Commerce for the establishment of the Alternative Dispute Resolution Centre and the appointment of the Board of Directors of the ADR Centre. On its meeting of April 19, 2011, the Board of the ADR Centre approved the Rules of Arbitration 2011. See the official webpage of the American Chamber of Commerce in Kosovo: http://www.adr-ks.org/documents/. Charter of the Permanent Tribunal of Arbitration in the Kosovo Chamber of Commerce. Entered into force on June 24, 2011. See the internet address: Charter of the American Chamber of Commerce in Kosovo Alternative Dispute Resolution Center, Year 2011. Decision on the Costs of the Arbitration Procedure in the Kosovo Chamber of Commerce, This decision entered into force on 2011.Decision on the Costs of the Arbitration Procedure in the American Chamber of Commerce in Kosovo, 2011. 13 See webpage: http://www.adr-ks.org 14 Raising the awareness of young enterpreneurs on the importance of arbitration, organized by the ADR Centre of the American Chamber of Commerce in Kosovo. See webpage: http://www.amchamksv.org/news-1416574725.html 15 Businesses discuss methodologies for preparing arbitration cases organized by the ADR Centre of the American Chamber of Commerce in Kosovo. See webpage: http://www.adr-ks.org/news/businesses-discuss-methodologies-for-preparing-arbitration-cases 16 American Chamber of Commerce in Kosovo. See webpage: http://www.amchamksv.org/content/members 17 Ibid. 18 Kosovo Chamber of Commerce. See the list of member businesses of the Chamber in its official webpage.

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2. TherosterofarbitratorsintheAlternativeDisputeResolutionCentres

TheAlternativeDisputeResolutionCentresofthetwoChambers,KCC19andAmCham,20havearosterofprofessional arbitrators,21where parties have the chance to appoint arbitrators from that roster andassignthemasprofessionalarbitratorsintheirdispute.

TheAlternativeDisputeResolutionCentreoftheAmericanChamberofCommerceinKosovomadeacallforapplicationforarbitratorsintheendof2014,22tocompletetherosterofarbitrationswithnewnamesand to give as many options to the parties to name professional arbitrators in their disputes. TheArbitrationCentresarealwaysaddingtotherosterofarbitratorswithspecializedarbitratorsinspecificfields, thereby offering them specialized trainings. Specialization is considered as one of the mainadvantagesofarbitrationbecausepartieshavetheoptiontoappointanarbitratorwhoisspecializedinthefieldinwhichpartiesrequirearesolution.Partiesmayappointarbitratorsthatareinthelistofthearbitrationinstitution.23Partiesmayalsoappointasarbitrators,individualswhoarenotintherosterofarbitrators, under the condition that that person provides a brief declaration about his/her past andcurrentprofessionalexperience.Thisdeclarationmustbeprovided if thearbitrator isappointedbyanappointing authority that is different from the appointing authority designated by the institution ofarbitration.24In this case, parties wishing to appoint an arbitrator in their dispute may appoint thearbitrator from the roster of arbitrators of that institution inwhich they have chosen to resolve theirdisputeorfromtherosterofanotherinstitutionofarbitration.Forexample,thatoccursifthedisputehasbeenreferredtothePermanentTribunalofArbitrationintheKosovoChamberofCommerce,pursuanttothe clause in the signed contract. After thedispute arises, partiesmayappoint the arbitrator from therosterofarbitratorsoftheAlternativeDisputeResolutionCentreoftheAmericanChamberofCommerceinKosovo,25intheeventthatthebiographyandthespecializationofthatarbitratorismoretothelikingoftheparties.

3. TheimportanceofthepartiesconsentinarbitrationandtheinclusionoftheArbitrationClauseincontracts

Partiesdetermine,withtheirconsent(throughthearbitrationagreement),aseriesofaspectsthatrelateto the private nature of this process. These include the type, forum, and the place of arbitration, thearbitratororgroupofcompetentarbitratorsfortheresolutionofthedispute,theapplicableproceduralandsubstantivelaw,thecostofarbitrationetc.26

Partiesinarbitrationhaveabigadvantageinthattheirconsentistakenintoaccount.Theconsentofthepartiesisexpressedthroughtheagreementmadebetweenthemasmutualconsent.PursuanttoArticle5,paragraph1oftheLawonArbitrationinKosovo(LAK),“Adisputecanberesolvedthrougharbitrationonly if an agreement between the parties exists, through which they agree that the dispute will beresolvedthrougharbitration”.27

Ifthepartiesagreeatthesigningofthecontracttoincludethearbitrationclause,itisrecommendedthattheyagreeontheformofarbitration.Ifthepartiesagreeontheinstitutionalformofarbitrationwithinthe Alternative Dispute Resolution Centre of the American Chamber of Commerce in Kosovo, it isundisputed that in the event of a dispute between them, they should refer the dispute directly to theAlternativeDisputeResolutionCentreofAmCham.28This isbecause if thedispute is sent to thecourts,

19 Kosovo Chamber of Commerce. See webpage: http://www.oek-kcc.org/2013/en/services/arbitration 20 Ibid. 21 ADR Centre of the American Chamber of Commerce offers parties the roster of arbitrators. See webpage: http://www.adr-ks.org/arbitrators/. Permanent Tribunal of Arbitration (Kosovo Permanent Tribunal of Arbitration) offers parties the roster of arbitrators. See webpage: http://www.kosovo-arbitration.com/en/list-of-arbitrators. 22 American Chamber of Commerce. See webpage: http://www.adr-ks.org/news/the/ 23 Article 6 paragraph 1 of the Rules of Arbitration 2011, of the American Chamber of Commerce in Kosovo. 24 Article 6 paragraph2 of the Rules of Arbitration 2011, of AmCham. 25 American Chamber of Commerce in Kosovo. See webpage: http://www.adr-ks.org/arbitrators/ 26 Mëneri, Suela: “E drejta e arbitrazhit dhe e ndërmjetësimit ndërkombëtar tregtar”, Tirana, 2012, p. 42. 27 Article 5 paragraph 1 of the Law on Arbitration of the Republic of Kosovo 2011. See the official webpage of the Republic of Kosovo: http://gzk.rks-gov.net/ActDetail.aspx?ActID=2579 28 American Chamber of Commerce in Kosovo. See webpage: http://www.adr-ks.org/introduction/

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thecourtswillreferthecasebacktoarbitration,sincepartieshaveagreedontheresolutionofthedisputethrougharbitration.

Inorder to refer thedisputedirectly toarbitration,partiesmust include thearbitrationclause in theircontract.Thefollowingisamodelarbitrationclause:

“Anydispute,controversyorclaimarisingoutofor inrelationtothiscontract, includingthe validity, invalidity, breach or termination thereof, shall be resolved by arbitrationadministeredby theAmericanChamberofCommerce inKosovo inaccordancewith theRulesofArbitrationoftheAmericanChamberofCommerceinKosovo..29

Partiesshouldalsoconsideraddingthefollowingprovisions:(a) Theappointingauthorityshallbe... (nameoftheinstitutionorindividual);(b) Thenumberofarbitratorsshallbe...(oneorthree);(c) Theplaceofthearbitrationshallbe...(cityandcountry);(d) Thearbitral/mediationproceedingsshallbeconductedin‐‐‐‐language...;(e) Thelawgoverningthecontractis...;30

Onthisbasis,incaseofadisputethepartiesshallreferthecaseforresolutiontotheAlternativeDisputeResolutionCentreoftheAmericanChamberofCommerceinKosovobecauseatthetimeofthesigningofthecontractthepartieshaveagreedonthismodelofthearbitrationclause.

TheKosovoChamberofCommerceusesthefollowingmodelofthearbitrationclause:“Any dispute, controversy or claim arising out of or relating to this contract, or the breach,termination or invalidity thereof, shall be settled by arbitration under the auspices of KosovoChamber of Commerce in accordance with the Arbitration Rules of Permanent Tribunal ofArbitration”.31

Note:Partiesshouldconsideradding:(a) TheappointingauthorityshallbethePermanentTribunalofArbitration;(b) Thenumberofarbitratorsshallbeodd[oneorthree];(c) TheplaceofarbitrationshallbePrishtina,Kosovo;(d) ThelanguagetobeusedinthearbitralproceedingsshallbeAlbanian,SerbianorEnglish;(e) TheapplicablesubstantivelawisKosovolegislation.32

Based on this clause, the parties shall refer the case for resolution to the Permanent Tribunal ofArbitrationof theKosovoChamberofCommerce,becauseat the timeof thesigningof thecontract thepartieshaveagreedonthismodelofthearbitrationclause.

Law and Rules of Arbitration: Why is it important for parties to agree on the law and rules ofarbitration?Itisimportantforthepartiestoagreeonthelawandrulesofarbitrationatthetimeofthesigning of the contract, through the arbitration clause as part of the contract, because then the solearbitratororbodyofarbitrators shallbase thedecisionon the lawand rulesof arbitration thepartieshaveagreedupon.Incasethesolearbitratororbodyofarbitratorsbasisthedecisiononanotherlawandother rules of arbitration for which the parties have not agreed upon, the arbitral decision may beconsiderednullandvoidandthepartiesmayrequestnottoenforcethedecisionbecauseitscontrarytothelawandconsentoftheparties.

29 This model of the arbitration clause was presented to the representatives of businesses, in the Roundtable: “the Strategies for Dispute Resolution and Utilization of Advantages of Arbitration”, organized by the Alternative Dispute Resolution Centre of the American Chamber of Commerce in Kosovo on December 20, 2013, in the offices of the ADR Centre at AmCham. The panel members of this roundtable were: Dastid Pallaska – arbitrator and chairman of the Board of Directors of the American Chamber of Commerce in Kosovo, Merita Emini - Project Management Specialist (Rule of Law) of USAID in Kosovo, Zana Bejta – head of Legal and Regulatory Affairs at IPKO, Robert Muharremi, arbitrator – Manager at Deloitte Kosovo, Visar Ramaj – Secretary General of the Alternative Dispute Resolution Centre of the American Chamber of Commerce in Kosovo. Moreover, besides the businesses, the arbitrators elected for the ADR Centre were also present in this roundtable. 30 The same Roundtable organized by the Alternative Dispute Resolution Centre of the American Chamber of Commerce in Kosovo, on December 20, 2013. 31 Model of the arbitration clauses in contracts, in the Annex to the Rules of Arbitration of KOSOVO 2011. The Assembly of the Kosovo Chamber of Commerce, on June 24, 2011, adopt such rules with protocol number 226. dated 27.06.2011, in Article 35, paragraph 5, of these rules, p. 20. 32 Ibid, the Annex of Kosovo Arbitration Rules, 2011, p. 20.

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Placeofarbitration:Thepartieshavetherighttoselecttheplacewherethearbitralproceedingsaretobeheld.Incasethepartiesdonotwishtoselecttheplaceorcannotagreeonthevenueofarbitration,theArbitralTribunalmaymake theselection.Pursuant toArticle1,paragraph1of theLawonArbitration“Unless the parties have agreed on the place where the arbitration is to be held, such place shall bedetermined by the arbitral tribunal taking into consideration the circumstances of the case and theconvenienceofthepartiesandthetribunal.”33

NumberofArbitrators:Thearbitraltribunalshallbecomposedofeitherasinglearbitratororapanelofarbitrators, provided that the panel is composed of an odd number of arbitrators.34Partieswith theirmutualconsentagreeonthenumberofarbitrators,sothatoneormorearbitratorsresolvetheirdispute.Partieshavefulldiscretionindecidingwhomtoappointfortheresolutionoftheirdispute.Partieschooseto resolve their dispute by arbitrators who are independent and impartial.35In Kosovo, the Law onArbitrationdoesnothaveaprovision for thequalificationof thearbitratorbesides their independenceand impartiality.36Forthisreason,partiesshallbecareful toappoint in theirdisputeanarbitratororabodyof arbitratorswhoare specialized in the field inwhichparties require a resolution. Pursuant toArticle9,paragraph2oftheLawonArbitration“Thepartiesmayagreeonaprocedureforappointingthearbitrator or arbitrators.” If the parties have not agreed on the number of arbitrators, the appointingauthority will decide if the dispute will be referred to a sole arbitrator or to a body of arbitratorsconsistingof threemembers,by consideringall relevant circumstances.37If aparty fails toappoint thearbitratorwithinthirty(30)daysofthereceiptofarequesttodoso,orifthetwoarbitratorsfailtoagreeonthethirdarbitratorwithinthirtydaysoftheirappointment,therelevantappointmentshallbemadebytheCourtupontherequestofaparty.38WhenappointinganarbitratortheCourtshallhavedueregardtothequalificationsanarbitratorisrequiredtohavepursuanttothearbitrationagreement.39

Languageofarbitration:Partiesagreeonthelanguageofarbitrationthroughtheirconsent.Usuallythelanguageofarbitrationselectedistheoneknownbybothpartiessothatadditionalexpensesforlanguagetranslation during the arbitral proceedings are not incurred. As a rule, the choice of language in thearbitralproceedingsreliesontheautonomyoftheparties.40Intheeventthatthelanguageofarbitrationhasnotbeendecidedbytheparties inthearbitrationclauseatthesigningofthecontract,partiesshallagreeonthelanguagetobeusedinthearbitralprocedure.

“Unless the parties have agreed otherwise, the arbitral tribunal shall, promptly after itsappointment,determinethelanguageorlanguagestobeusedintheprocedure.”41“The agreement of the parties or, respectively, the determination of the arbitral tribunal shallapply toanywritten statementand request submittedbyaparty, anyhearingandanyaward,decisionorothercommunicationbythearbitraltribunal.”42

“Thearbitral tribunalmayorder thatanydocumentssubmitted in thecourseof theproceduredelivered in theiroriginal languageshallbeaccompaniedbya translation into the languageorlanguagesagreeduponbythepartiesordeterminedbythearbitraltribunal.”43

33 Article 17 paragraph 1 of the Law on Arbitration in the Republic of Kosovo. See the official webpage of the Republic of Kosovo: http://gzk.rks-gov.net/ActDetail.aspx?ActID=2579 34 Article 9 paragraph 1 of the Law on Arbitration in the Republic of Kosovo. See the official webpage of the Republic of Kosovo: http://gzk.rks-gov.net/ActDetail.aspx?ActID=2579 35 Hetemi, Mehdi, “E drejta ndërkombëtare tregtare – afariste”. Prishtinë, 2007, p, 419. 36 The Systems for Enforcing Agreements and Decisions Program (SEAD). Report and recommendations for the development as well as sucessful and effective implementation of the system for Alternative Dispute Resolution. This report was prepared with the support of the American pople, through the United States Agency for International Development (USAID) April 30, 2010, p, 8. 37 Article 5 paragraph 1 of the Rules of Arbitration 2011. Based on the decision of the Board of Governors of the American Chamber of Commerce for the establishment of the Alternative Dispute Resolution Centre and the appointment of the Board of Directors of the ADR Centre. On its meeting of April 19, 2011, the Board of the ADR Centre adopto these rules of arbitration. 38 Article 9 paragraph 4 of the Law on Arbitration in the Republic of Kosovo. See the official webpage of the Republic of Kosovo: http://gzk.rks-gov.net/ActDetail.aspx?ActID=2579 39 The Systems for Enforcing Agreements and Decisions Program (SEAD). Report and recommendations for the development as well as sucessful and effective implementation of the system for Alternative Dispute Resolution. This report was prepared with the support of the American pople, through the United States Agency for International Development (USAID) April 30, 2010,, p, 8. 40 Mëneri, Suela: “E drejta e arbitrazhit dhe e ndërmjetësimit ndërkombëtar tregtar”, Tiranë, 2012, p. 51. 41 Article 19 paragraph 1 of the Law on Arbitration in the Republic of Kosovo 2008. See the official webpage of the Republic of Kosovo: http://gzk.rks-gov.net/ActDetail.aspx?ActID=2579 42 Article 22 paragraph 1 of the UNCITRAL Model Law on International Commercial Arbitration (Text adopted by the United Nations Commission on International Trade Law, on June 21, 1985, and amended by the same Commission on July 7, 2006). 43 Article 19 paragraph 2 of the Law on Arbitration in the Republic of Kosovo 2008. See the official webpage of the Republic of Kosovo: http://gzk.rks-gov.net/ActDetail.aspx?ActID=2579

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“Thearbitral tribunalshallonlyaccept translationproducedbyatranslatorwhoiscertifiedorotherwiseapprovedbyacourt.”44

4. Why shallbusinesses consider arbitration as one thebestmechanisms for the resolutionoftheirdisputes?ThereasonforthisisthatArbitration,haspreciselybeenestablishedforthebusinessesandisfavorablefor the resolution of their disputes. Arbitration offers professionalism and resolves disputes quicklywhich businesses consider as a considerable advantage. The pre‐arbitral procedure is obviously lessformal,quickerandoffersmanyoptionstofindacompromisedresolutionfromtheparties.45Moreover,the whole arbitral procedure is confidential.46Parties in an arbitration procedure have an advantagebecause their consent is taken into account. The arbitral decisions are voluminous and professionalbecausepartiesappointthesolearbitratororthebodyofarbitratorsbecauseoftheirspecializationinthefieldinwhichpartiesappointthemtofindaresolution.

“The awardof arbitral tribunal shall bemade inwriting and shall be final andbinding on theparties.”47

5. InformingofbusinessesonarbitrationbytheArbitrationCentersArbitrationCenters inKosovo48shall informbusinessesonthe importanceofarbitration inthecountryandabroad,onthelegalframeworkofarbitration,49andontheadvantagesofarbitrationrelativetothecourts.Moreover,theyshallofferagoodmodelofthearbitrationclause50sothatbusinessesatthesigningof thecontract includethatmodelof thearbitrationclauseandarosterofprofessionalandspecializedarbitrators.Inaddition,thesecentersshouldcreateaclosecollaborationbetweenthebusinessesandthearbitration center. Joint meetings shall be held with the arbitration centers, attorneys, notaries, andprivate bailiffs, on the role and importance of arbitration so that the suspicions on the application ofarbitrationareeliminatedanda chainsupport is created.ArbitrationCentersshallhold jointmeetingswithbusinesses’attorneyssothatthey,duringthedraftingofthecontractincludethearbitrationclausein the contract, not solely to increase the credibility of arbitration, but also because arbitration isfavorable for businesses due to the quick resolution of the dispute and the professionalism of thearbitratorsasmentionedabove.However,whatismostimportantforbusinessesisconfidentiality,whereparties and arbitrators of the procedure and the arbitral decision are confidential. Unless the partiesexpressly agree otherwise, the parties undertake as a general agreement to keep the content of thearbitrationprocedure,thedecisions,andordersundisclosed.Moreover,partiesagreenottodiscloseanymaterials submittedbyanotherparty in the frameworkof theprocedure thatarenototherwise in thepublicdomain.Inadditiontheyagreetopreserveandtotheextentthatastatementmayberequestedbyapartywithalegalobligation,toprotectorpursuealegalrightortoenforceorchallengeadecisioninlegalproceedingsbeforeajudicialauthority.51Thisundertakingisalsovalidforthearbitrators,experts,witnesses, persons who act on behalf of another person included in the arbitration procedure, thesecretaryof thearbitral tribunal andeverypersonof thearbitration institutionwho is involved in theadministrationofthearbitrationprocedure.52This ishighlyadvantageousforthebusinessthathas lostthe case and violated the contract because its name will not become available publicly. If the namebecamepubliclyavailable,itwouldhaveanegativeimpactonthebusinessbecauseothercompanieswill

44 Article 19 paragraph 2 of the Law on Arbitration in the Republic of Kosovo 2008. 45 Bilalli, Asllan, “ Zgjidhja e kontesteve afariste nëpërmjet arbitrazheve tregtare ndërkombëtare”. Revistë për Çështje Juridike dhe Shoqërore. E DREJTA, Nr. 3-4/2012., p, 7. 46 Article 41 paragraph 1 of the Rules of Arbitration 2011. 47 Article 31 paragraph 1 of the Law on Arbitration in the Republic of Kosovo 2008. . See the official webpage of the Republic of Kosovo: http://gzk.rks-gov.net/ActDetail.aspx?ActID=2579 48 Alternative Dispute Resolution Centre of the American Chamber of Commerce. See webpage: http://www.adr-ks.org/introduction/ and the Permanent Tribunal of Arbitration in the Kosovo Chamber of Commerce. See webpage: http://www.oek-kcc.org/2013/en/services/arbitration 49 Such as: Law on Arbitration in Kosovo 2008, Charter of Arbitration 2011, Rules of Arbitration 2011, Decision on the cost of the arbitral procedure 2011. 50 A model of the arbitration clause presented to the businesses, prepared by Mr. Visar Ramaj, Secretary General of the Alternative Dispute Resolution Centre of the American Chamber of Commerce in Kosovo, in 2014. This is the model of the clause: “Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof, shall be settled by arbitration under the auspices of Kosovo Chamber of Commerce in accordance with the Arbitration Rules of Permanent Tribunal of Arbitration”. 51 Article 41 paragraph 1 of the Rules of Arbitration 2011. Based on the decision of the Board of Governors of the American Chamber of Commerce for the establishment of the Alternative Dispute Resolution Centre and the appointment of the Board of Directors of the ADR Centre. On its meeting of April 19, 2011, the Board of the ADR Centre approved the Rules of Arbitration 2011. 52 Article 41 paragraph 1 of the Rules of Arbitration 2011, p, 18.

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behesitanttoenterintocontractualobligationswithabusinessthathaspreviouslyviolatedacontract.Assuch,confidentialityinthearbitrationprocedureisimmenselyimportantandisconsideredasoneoftheadvantagesofarbitration.

6. Thecredibilityofarbitrationtotheparties

Ifatypeofinstitutionalarbitrationiscreatedinanestablishedarbitrationcenter,thatcentreshouldhavea duty to achieve credibility from the parties. Credibility is required in arbitration; if that cannot beachieved,arbitrationwillnothaveagenuinedevelopment,inspiteofalltheadvantagesmentionedabovesuchasthespeedof theresolutionofdisputes,theparties’consentetc. Ifcredibility isnotachievedallothersbecomeworthless.Howcancredibility inarbitrationbeachieved?Thiscanbeachieved first,bycompleting the legal framework, appointing a professional management team in the institution ofarbitration, such as the chairperson, deputy chairperson, the secretary of the arbitration centre,appointing professional arbitrators with unique specializations and excellent practical experience.Moreover,thiscanbeaccomplishedbyfacilitatingtheprocedureofsendinganapplicationforadisputeresolution in the arbitration centre, cooperating with the parties from the beginning, maintaining theconfidentiality during the procedure, and reaching a decision from professional arbitrators in thetheoreticalandpracticalaspect.Thearbitrationcentreintheinitialphaseshouldconvinceandassuretheparties that in no case will their position be abused, and to ensure that no other dispute resolutionmechanismwillhavetheprofessionalism,speed,correctness,efficiency,anddeterminationofarbitration.

CONCLUSIONANDRECOMMENDATIONS

EventhoughinKosovothelegalframeworkofarbitrationhasbeencompletedandharmonizedwiththebestfunctioningmodelsofarbitration,themanagementoftheArbitrationCentrehasbeenappointed,therosterofarbitratorshasbeencompleted,itisstillimportanttogiveanumberofrecommendationsforanevenbetterdevelopmentofarbitration:

- ItisrecommendedthattheArbitrationCentresinKosovoorganizemorefrequentmeetingswithbusinesses, providing themmore knowledge on the role and importance of arbitration in thecountryandabroad.

- ArbitrationCentresshouldorganizejointroundtablesontheroleandimportanceofarbitrationtogether with arbitrators, judges of courts, university professors who are specialized inarbitration,attorneys,notaries,privatebailiffs,businessesetc.

- Updatetherosterofarbitratorswithnewarbitratorsspecialized inuniquefieldsofarbitrationforwhich thereareno specializedarbitrators.Thisupdateof the rosterofarbitrators shallbedonewithpeoplewhohavedistinctqualifications.

- Createopportunitiesforarbitratorstotravelabroadandseethebestpracticesofthefunctioningofarbitrationinotherstatessothatpartiesdonotcriticizearbitraldecisionsonthegroundofthelackofprofessionalism.

- ArbitrationCenters shouldprovidearbitratorswith themost recent literatureso that theyareinformedoneverynewpracticeinarbitrationinthecountryandabroad.Moreover,thesecentersshall continuously informbusinessesonthe importanceofarbitration,byproviding themwithbrochures,books,scientificjournalsetc.

- ArbitrationCentersshallpresenttheadvantagesofarbitrationrelativetoothermechanismsofdispute resolution. These centers shall provide convincing arguments on the advantages ofarbitrationrelativetoothermechanismsofdisputeresolution.

- ArbitrationCenterscanconsiderthattheyhavereachedtheirgoalsiftheyaccomplishtoinformand convincebusinesses that arbitration is favorable to them, basedon theprofessionalismofarbitrators, the speed of dispute resolution, the credibility of arbitration, and because theirconsentistakenintoaccountduringthewholearbitrationprocedure.

BIBLIOGRAPHY- Bilalli,Asllan&Kuçi,Hajredin:“Edrejtandërkombëtareprivate”,LibriI,Prishtinë,2009.- Hetemi,Mehdi,“DisatemaaktualetëEkonomisësëTregut”.Prishtinë,2005.- Hetemi,Mehdi,“EdrejtaNdërkombëtareTregtare–Afariste”.Prishtinë,2007.- Brestovci,Faik,“EDrejtaProceduraleCivileII”.Prishtinë,2006.- Mëneri,Suela:“Edrejtaearbitrazhitdheendërmjetësimitndërkombëtartregtar”,Tiranë,2012.

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- Bilalli, Asllan, “Zgjidhja e kontesteve afariste nëpërmjet arbitrazheve tregtare ndërkombëtare”.RevistëpërÇështjeJuridikedheShoqërore.EDREJTA,Nr.3‐4/2012.

MANUALSANDPERIODICALS

- SystemsforEnforcingAgreementsandDecisions(SEAD)Program,Reportandrecommendationsforthedevelopmentandsuccessful,efficientapplicationofthesystemforthealternativedisputeresolution. April 30, 2010. This report has been prepared with the support of the AmericanPeople,throughtheU.S.AgencyforInternationalDevelopment(USAID).

LEGISLATION

- LAWNO.02/L‐75.LawOnArbitrationintheRepublicofKosovoof2008.SeetheofficialwebpageoftheRepublicofKosovo:http://gzk.rks‐gov.net/ActDetail.aspx?ActID=2579

- TheUNCITRALModelLawonInternationalCommercialArbitration(TextadoptedbytheUnited

NationsCommissionon InternationalTradeLaw,on June21,1985, andamendedby the sameCommissiononJuly7,2006).

- CharteroftheAmericanChamberofCommerceinKosovoAlternativeDisputeResolutionCenter,

Year 2011, and Charter of the Permanent Tribunal of Arbitration in the Kosovo Chamber ofCommerce.EnteredintoforceonJune24,2011.

- ArbitrationRulesintheAmericanChamberofCommerceinKosovo.Basedonthedecisionofthe

Board of Governors of the American Chamber of Commerce for the establishment of theAlternativeDisputeResolutionCentreandtheappointmentoftheBoardofDirectorsoftheADRCentre. On itsmeeting of April 19, 2011, the Board of the ADR Centre approved the Rules ofArbitration 2011. See the officialwebpage of the American Chamber of Commerce in Kosovo:http://www.adr‐ks.org/documents/, and the Rules of Arbitration of the Kosovo Chamber ofCommerce,whichenteredintoforceonJune24,2011.

- Decision on the Costs of the Arbitration Procedure in the American Chamber of Commerce in

Kosovo, 2011. Decision on the Amendment of the Decision on the Costs of the ArbitrationProcedureofthePermanentTribunalofArbitration(PTA)intheKosovoChamberofCommerce,No.227onJune27,2011.

INTERNETSOURCES

- AmericanChamberofCommerceinKosovo.Seewebpage:http://www.adr‐ks.org- KosovoChamberofCommerce.Seetheofficialwebpage:http://www.oek‐kcc.org/2013/en;and:

http://www.kosovo‐arbitration.com/- ADRCentreoftheAmericanChamberofCommerceofferspartiestherosterofarbitrators.See

webpage:http://www.adr‐ks.org/arbitrators/.- PermanentTribunalofArbitration(KosovoPermanentTribunalofArbitration)offerspartiesthe

rosterofarbitrators.Seewebpage:http://www.kosovo‐arbitration.com/en/list‐of‐arbitrators.- Raisingtheawarenessofyoungenterpreneursontheimportanceofarbitration,organizedbythe

ADRCentreoftheAmericanChamberofCommerceinKosovo.Seewebpage:http://www.amchamksv.org/news‐1416574725.html

- BusinessesdiscussmethodologiesforpreparingarbitrationcasesorganizedbytheADRCentreoftheAmericanChamberofCommerceinKosovo.Seewebpage:http://www.adr‐ks.org/news/businesses‐discuss‐methodologies‐for‐preparing‐arbitration‐cases

- AmericanChamberofCommerceinKosovo.Seeofficialwebpage:http://www.adr‐ks.org/news/the/

- AmericanChamberofCommerceinKosovo.Seeofficialwebpage:http://www.adr‐ks.org/introduction/

- KosovoChamberofCommerce.Seeofficialwebpage:http://www.oek‐kcc.org/2013/en/services/arbitration

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UPC330.332(496.51)

REDEFININGINVESTMENTARBITRATIONLAW:THECASEOFKOSOVO

byDr.ArdeshirAtai

IntroductionInvestmentprotection standards contained in international investment treatiesareenforceable thoughprivaterightofactionagainsthoststatesinanindependentandneutralforum.Theinvestor‐statedisputesettlement (ISDS) system provides investors access to international arbitration when the host stateexpropriatesorimposesarbitraryregulationtotaxeconomicprofitsofinvestments.Investorprotectionrules benefits foreign investor by reducing the investment risk premium and the costs of importingcapital for thehostgovernment.Thisarticleoutlines therationale for internationalclaimsadjudicationproceduresinvolvingprivateinvestorsandsovereignstates.Theauthorwillhighlightthe;1)weaknessofcustomary international law of diplomatic protection and inter‐state arbitration, 2) role of bilateralinvestmenttreaties(BITs)inpromotingandattractingglobalcapital,3)benefitsofICSIDarbitration,and4) foreigninvestmentlawandarbitrationinKosovo.Lastsectionisconclusion.

1) Diplomaticprotectionandinter‐statearbitrationHistorically,thejudicialsettlementofinvestmentdisputesontheinternationallevelwasconsideredtobetheexclusivefunctionofstates.1Underclassicalinternationallaw,investorsdidnothavedirectaccesstointernationalremediestopursueclaimsagainstforeignstatesconcerningviolationoftheirrights.2Thiswasduetothefactthat,adisputebetweenastateandaforeignnationalwasnotconsideredasinvolvinganinternationaldisputethatcouldberesolvedthroughinternationalprocess.3Therewereanumberofreasons that prevented foreign investors from prosecuting a claim against the host state in aninternationaldisputesettlement forum.First, thehoststatecompliancewith itscontractualobligationsdid not constitute an international obligation therefore violation by the state did not give rise tointernationally wrongful act.4Second, aggrieved foreign investors were unable to rely on contractualbreachesastheirlocalcontractingpartyavoidedresponsibilityforthebreachbyinvokingforcemajeure.Thirdly,theinjurywascausedbyathirdparty;oftenagovernmentalauthority.5Aprivateperson(naturalor legal) lacks the legal personality at international law topursue a claim in their own right, andas aconsequence,corporationsarenotregardedassubjectsofinternationallaw.6Therefore,intheabsenceofa special international forum designed for the settlement of investment disputes, the only remedyavailabletotheinvestoronaninternationallevelisthediplomaticprotectionextendedbyitsownstate.7Thecustomary international lawprincipleofdiplomaticprotection isamethodofdisputeresolution inwhichthehomestateoftheinvestorstakesuptheinvestorclaim(“espousalofclaim”)onitsbehalfwiththe host state through diplomatic negotiation or international arbitration.8In a diplomatic protectionclaim,thepartiestothedisputesettlementproceedingsaretwostates,thehomestateastheclaimantandthe host state as the respondent, without the involvement of the injured private investor. TheInternationalCourtofJustice(ICJ)isaprominentoptionforsettlementofinvestmentdisputesbetweenstates.Anadvantageofdiplomaticprotectionisthatitisaneasilyavailablemethodofresolvingdispute

1 M Sornarajah, The Settlement of Foreign Investment Disputes (Kluwer Law International, The Hague 2000) 151-163; I Brownlie, Principles of Public International Law (7th edn, OUP 2008) 701-708 2 R Dolzer and C Schreuer, Principles of International Investment Law (OUP, Oxford 2008) 200 3 M Sornarajah, The Settlement of Foreign Investment Disputes (Kluwer Law International, The Hague 2000) 153 4 P Weil, ‘The State, the Foreign Investor, and International Law: the No Longer Stormy Relationship of a Ménage A Trois (2000) 15 ICSID Rev: FILJ 401, 403 (‘the investor enjoyed protection as a foreigner, not as a contracting party. The State did not incur international responsibility for having violated the contractual rights of the investor, but for having committed an internationally wrongful act vis-a-vis the investor’s home State.’) 5 J Paulsson, ‘Arbitration Without Privity’ (1995) 10 ICSID Rev: FILJ, 232, 253 6 P Muchlinski, ‘The Diplomatic Protection of Foreign Investors: A Tale of Judicial Caution’ (International Investment Law for the 21st Century 2009) 342 (‘There is some authority in international arbitral jurisprudence for the view that an investment agreement between a State and a foreign corporation is an international contract subject to international law.’) 7 M Hirsch, The Arbitration Mechanism of the International Centre for the Settlement of Investment Disputes (Martinus Nijhoff Publishers, London 1993) 8 8 See P Muchlinski, ‘The Diplomatic Protection of Foreign Investors: A Tale of Judicial Caution’ (International Investment Law for the 21st Century 2009); B Juratowitch, ‘The Relationship between Diplomatic Protection and Investment Treaties’ (2008) 23 ICSID Rev: FILJ 10; A Reinisch and L Malintoppi, ‘Methods of Dispute Settlement’ (The Oxford Handbook of International Investment Law 2008) 691

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involving states parties, as there is no requirement for any advance agreement between disputingparties.9However, the customary international law imposes a number of procedural conditions. Theinvestormusthavecontinuednationalityof thestatethat isseeking itsassistanceatallmaterial times,and secondly, theexhaustionof local remediedby the investor.10Ingeneral,diplomaticprotectionwasnotdeemedasaneffectiveremedybyprivateinvestorsforresolvinginvestmentdisputeswiththehoststate.First,thereisnointernationalobligationonthestateofnationalityoftheinjuredpersontoexercisediplomaticprotection.11Second,thehomestatemaydeclinerequestbytheinvestortoespouseitsclaim,oratanytimeitmaydiscontinuediplomaticprotection,orevenwaivetheclaimofthenationaloragreeto a reduced settlement.12Third, where the home state concludes lump‐sum agreement with theexpropriatingstatetoacceptaportionoftheoutstandingclaimsasasettlementpayment,injuredpartieshavenoentitlementunderinternationallawtoreceivetheproceedsofsuchagreementfromtheirhomeStates.13Fourth, developing countries resent pressure from capital‐exporting countries, whether it isexercisedbilaterallyorinmultilateralarenasuchasinternationallendinginstitution.14However,theroleofdiplomaticprotectionasameansofvindicatingtherightsofforeignersagainsthoststateshasgreatlydiminished,asnewtrendsareevolvingincreationofanindependent,neutralmechanismforresolutionof investment disputes.With the emergence of the international law of foreign investment, the law ofstate contract is now considered as a component of investment law; no distinction is made betweeninvestmentsundera contractand investmentbasedonaunilateral actof thehost State.15Thegradualshiftinpublicinternationallawthatpreviouslyonlyrecognisedstatesastheholderofrighttoprosecuteinternational claim,means that private individuals and corporations can have access to neutral, thirdpartyforumforresolutionofinvestmentdisputes.Protectionofforeigninvestmententailsthreedifferentpotentialmethods;customaryinternationallaw(diplomaticprotectionofhomestateofinvestor),privatelaw(contractualagreementbetweenhoststateandinvestor)andinternationaltreatylaw(investorhasdirectrecourseagainsthoststate)mechanisms.16

2) BITlawArticle38(1)oftheStatuteoftheInternationalCourtofJustice(ICJ),thatiswidelyrecognisedasthemostauthoritativeandcompletestatementastothesourcesofinternationallawprovidesthat;17

a) Internationalconventions,whethergeneralorparticular,establishingrulesexpresslyrecognisedbythecontestingStates;

b) Internationalcustoms,asevidenceofageneralpracticeacceptedaslaw;c) Thegeneralsprinciplesoflawrecognisedbycivilisednations;and,d) Judicialdecisionsandtheteachingsofthemosthighlyqualifiedpublicistsofvariousnations,asa

subsidiarymeansfordeterminationofrulesoflaw.

Foreigninvestorsareprimarilyprotectedbybilateralinvestmenttreaties(BITs)ratherthancustomaryinternationallawalonethatwasthecaseintheearly1970s.Therefore,BITsforallpracticalreasonshasbecomethefundamentalsourceofinternationallawintheareaofforeigninvestment.18Duringthepasttwo decades one of the phenomena in international law has been the extraordinary increase in thenumberofagreementsrelatingtotheprotectionor liberalisationof foreign investmentwithmorethan2,800suchagreementsinexistencenow.19Bilateralinvestmenttreaties(BITs)aredesignedtofacilitateforeign direct investment (FDI) from economies with abundant capital and skilled labour; theOrganisation for Economic Co‐operation and Development (OECD) countries to the less developed

9 A Reinisch and L Malintoppi, ‘Methods of Dispute Settlement’ (The Oxford Handbook of International Investment Law 2008) 691, 712 10 P Muchlinski, ‘The Diplomatic Protection of Foreign Investors: A Tale of Judicial Caution’ (International Investment Law for the 21st Century 2009) 343-359 11 B Juratowitch, ‘The Relationship between Diplomatic Protection and Investment Treaties’ (2008) 23 ICSID Rev: FILJ 10, 13 (‘the law of diplomatic protection entitled such a State to do so, but whether action is taken is, as a matter of international law, entirely a discretionary matter for the State to determine’) 12 R Dolzer and C Schreuer, Principles of International Investment Law (OUP, Oxford 2008) 212 13 A Reinisch and L Malintoppi, ‘Methods of Dispute Settlement’ (The Oxford Handbook of International Investment Law 2008) 713 14 R Dolzer and C Schreuer, Principles of International Investment Law (OUP, Oxford 2008) 212 15 P Weil, ‘The State, the Foreign Investor, and International Law: the No Longer Stormy Relationship of a Ménage A Trois (2000) 15 ICSID Rev: FILJ 401, 412 (‘not only must disputes arising out of foreign private investment be settled by international arbitration; they must also be resolved on the basis of international law.’) 16 B Juratowitch, ‘The Relationship between Diplomatic Protection and Investment Treaties’ (2008) 23 ICSID Rev: FILJ 10, 11 17 MN Shaw, International Law (6th edn, CUP, Cambridge 2008) 70, see also I Brownlie, Principles of Public International Law (7th edn, OUP, Oxford 2008) 5 18 JW Salacuse and NP Sullivan, ‘Do BITs Really Work?: An Evaluation of Bilateral Investment Treaties and Their Grand Bargain’ (The Effects of Treaties on Foreign Direct Investment, 2009) 109, 110-112 19 K J Vandevelde, ‘A Brief History of International Investment Agreements’ in KP Sauvant, LE Sachs (eds), The Effects of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties and Investment Flows (OUP, Oxford 2009) 3, 3

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economies.20BITs have adopted the principles established by customary international law includingminimum standard of treatment, protection of alien property, compensation for expropriation andprinciplesofnaturaljusticeanddueprocessoflaw.Developingcountriesnegotiatebilateralinvestmenttreaties (BITs) as a strategy to attract foreign direct investment.21The first BIT was signed in 1959betweenGermany andPakistan and came into force in 1962. The purpose of theBIT as stated ‘in thepreamblesofthethousandsofexistingBITsistopromotetheflowofFDIand,undoubtedly,BITsaresopopularbecausepolicymakersindevelopingcountriesbelievethatsigningthemwillincreaseFDI.’22BITsserve as commitment device in that countries with weak domestic property rights by explicitlycommittingthemselvestohonouringthepropertyrightsofforeigninvestorsincreasetheirattractivenessaspotential hosts.23BIT threatenpunishment for violationof the commitments undertaken in that thearbitrationprovisionsofBIThavebeensuccessfullyusedbyinvestorstoseekcompensationagainstthehost for allegedly damaging policies far broader than classical expropriation. 24 Corruption,administrative/regulatorymeasures, and allegedly biased law enforcement are examples of actions orpoliciesthathavebeenthesubjectofarbitrationproceedingsunderinternationalinvestmenttreatylaw.Investmenttreatiesprotectinvestorsagainstcontractualbreachbythehoststate,therefore,ifthereisaBITinforcebetweenthehostandhomecountry,anagreementmadebetweenthehomecountryinvestorandthehostgovernmentisbindingforboth,abreachofwhichbythelaterisaviolationoftheBITandtherefore a violation of international law.25BITs perform fourmain functions relating to investments;protection(guaranteescompensationforexpropriation);liberalisation(grantinvestorarighttoestablishcompanies);promotion(providesinvestmentinsurance),regulation(prohibitionofcorruptpaymentsbyinvestors).26Although there are some variations in the national and regional practice, the majorprovisionsofBITsaresimilarandusethefollowingpattern.Preamblelaysdownthegeneralobjectandpurposeofsuchtreaties,albeittheyarenotlegallybindingandmayberelevanttointerpretationoftheagreement.Thescopeofapplicationof the treatycovers thesubjectmatter,definitionof investorsandinvestment (natural and legal persons), territorial application and temporal effect. BITs containsubstantiveinvestmentprotectionstandardsapplicabletoinvestorsandinvestmentsofBITpartner.Theapplicablestandardsareclassifiedintogeneralstandardsandspecificstandards.Generalstandardsarerecognised by general international law such as fair and equitable treatment (FET), full security andprotection, expropriation and compensation standard and standards which have evolved in thecommercialtreatypracticesuchasmostfavourednation(MFN)andnationaltreatmentstandards(non‐discrimination). Specific standards are applicable to particular incident of investment activity such astransfer of funds, compensation for losses due to expropriation, armed conflict or internal disorder.Disputesettlementprovisionininvestmenttreatiesisdividedintothosedealingwithdisputesbetweencontracting countries as to observance and interpretation of treaty and those dealing with disputesbetweentheinvestorandthehostcountry.27ThefunctionofBITsaretosomeextentlikefoundationalorconstitutionaldocumentsthatcreatea long‐termframeworkwithinwhichthehostcountrymustapplyitsinternationalinvestmentlawandpolicybecausetheycreateobligationsthatcannotbealteredmerelybymodifyingdomesticlegislation.28Forthehostgovernments,theprimaryeconomicfunctionofBITsistoactas a commitmentdevice through the investor‐statedispute settlement (ISDS) system.Therefore,investorsmaybringaclaimtoaninternationalarbitraltribunaloutsidethehoststateiftheyfeelthehostgovernment has violated their rights under the BIT.29BITs, exante establish transparency about risk,thereforereduceriskofinvestinginacountry,exposttheyensurethecompanyhavecertainrightssuchaspropertyrightsandpreservethemfromexpropriation.30

20 P Egger and M Pfaffermayr, ‘The Impact of Bilateral Investment Treaties on Foreign Direct Investment’ (The Effects of Treaties on Foreign Direct Investment, 2009) 253, 253 21 KP Gallagher and MBL Birch, ‘Do Investment Agreements Attract Investment? Evidence from Latin America’ (The Effects of Treaties on Foreign Direct Investment, 2009) 295, 295 22 E Neumayer and L Spess, ‘Do Bilateral Investment Treaties Increase Foreign Direct Investment to Developing Countries’ (The Effects of Treaties on Foreign Direct Investment, 2009) 225, 225 23 M Hallward-Driemeier, ‘Do Bilateral Investment Treaties Attract FDI? Only a BIT and They Could BITE’ (The Effects of Treaties on Foreign Direct Investment, 2009) 349, 350 24 T Buthe and HV Milner, ‘Bilateral Investment Treaties and Foreign Direct Investment: A Political Analysis’ (The Effects of Treaties on Foreign Direct Investment, 2009) 171, 210 25 AT Guzman, ‘Explaining the Popularity of Bilateral Investment Treaties’ (2009) 73, 74 26 KJ Vandevelde, Bilateral Investment Treaties: History, Policy and Interpretation (OUP, Oxford 2010) 5 27 P Muchlinski, ‘The Framework of Investment Protection: the Content of BITs’ (The Effects of Treaties on Foreign Direct Investment, 2009) 37-71 28 KJ Vandevelde, Bilateral Investment Treaties: History, Policy and Interpretation (OUP, Oxford 2010) 3 29 E Aisbett, ‘Bilateral Investment Treaties and Foreign Direct Investment: Correlation Versus Causation’ (The Effects of Treaties on Foreign Direct Investment, 2009) 395, 398 30 P Egger and M Pfaffermayr, ‘The Impact of Bilateral Investment Treaties on Foreign Direct Investment’ (The Effects of Treaties on Foreign Direct Investment, 2009) 253, 253

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3) ICSIDarbitrationThe investor‐state arbitration system provides investors with an effective remedy for protection andenforcement of their rights under the international law. The proliferation of investment protectiontreaties, ‘haveopenedupaclearpathforthedirectaccessoftheindividualtointernationalmechanismfortheassertionofclaims...inthisnewcontext,manytimesitistherightoftheindividualaffectedandno longer that of the State of nationality which is asserted.’31The regime established by investmenttreaties, ‘grants innumerable present and future investors the right to arbitrate a wide range ofgrievances arising from the actions of a large number of public authorities,whetherornotanyspecificagreementhasbeenconcludedwith theparticularcomplainant.’32However, the right of the investor tohave access to international arbitration proceedings without an independent and neutral forum foradjudicationofinvestmentdisputesinvolvingasovereignstatewoulddefeattheobjectiveofpromotionand protection of investment through the system of bilateral treatieswhose beneficiary ismainly theprivate investor. Dispute settlement provision lays down the rules of procedure on institution ofarbitration,appointmentofarbitrators,constitutionofarbitraltribunalandrecognitionandenforcement.BITsprovidedifferentoptionsforthesettlementofinvestmentdisputes,asfollows:

a) Competentcourtofthehoststate,b) AdhocarbitraltribunalinaccordancewithUNCITRALarbitrationrulesc) ICCrulesofarbitration,d) ICSID arbitration rules under the ICSID Convention, if or as soon as both contracting parties

accededtoit,ande) Anyothersettlementprocedureagreeduponbythepartiestothedispute.

The host state by granting foreign investor access to international arbitrationmake a commitment tohonouritsobligationsthatshouldfurtherenhancesinvestorconfidence.33BITsincreaseattractivenessofthehostcountrybylayingdownuniformsetofrulesandprocedureforregulationofforeigninvestments.In addition, existence of a BITmay also facilitate obtaining finance andpolitical risk insurance by theforeign investor for capital‐intensive and large infrastructure projects. Investment treaties potentiallypromote FDI flows by reducing the political risk and protecting foreign investment against illegalexpropriation,non‐transferabilityofforeigncurrencyanddiscriminationbythehoststateauthorities.34TheWorldBank,waryoftheneedfortheestablishmentofaninternationalinstitutionforthesettlementof investment disputes, took the initiative the drafting a convention on the settlement of investmentdisputesthatwouldbeacceptabletoworldgovernmentsandsendittothememberstatesforratification,acceptanceandapproval.35TheConventionontheSettlementofInvestmentDisputesbetweenStatesandNationalsofOtherStates(WashingtonConvention)establishingtheInternationalCentreforSettlementofInvestmentDisputes(ICSIDortheCentre)wasadoptedon14October1966.ThecreationofICSIDwasaninnovativestepforprotectionofforeigninvestmentsduetothecombinationoffivepertinentfeaturesofICSIDasfollows:

a) Foreigncompaniesandindividualshavedirectrecourseagainstthehoststate;b) Stateimmunityisseverelyrestricted;c) Internationallawcanbeappliedtotherelationshipbetweenthehoststateandtheinvestor;d) Thelocalremediesruleisexcludedinprinciple;and,e) ICSIDawardsaredirectlyenforceablewithintheterritoriesofallstatespartiestoICSID.36

A primary function of the ICSID Convention is provision of the institutional support for conductingarbitrationproceedingsbetweencontractingstatesandnationalsofothercontractingstates.The ICSIDConventiononlyprovidestheprocedureforarbitrationofinvestmentdisputesanddoesnotcontainanysubstantiverules.AnimportantfeatureofICSIDConventionisapplicationofuniformsetofrulesthroughcodification of customary international law rules on international adjudication. The ICSID is endowed

31 FO Vicuna, ‘Changing Approaches to the Nationality of Claims in the Context of Diplomatic Protection and International Dispute Settlement’ (2000) 15 ICSID Rev: FILJ 340, 343 32 J Paulsson, ‘Arbitration Without Privity’ (1995) 10 ICSID Rev: FILJ, 232, 233 33 UNCTAD, ‘The Role of International Investment Agreements in Attracting Foreign Direct Investment to Developing Countries’ (2009) UNCTAD Series on International Investment Policies for Development (United Nations, Geneva) 15 34 KJ Vandevelde, ‘The Economics of Bilateral Investment Treaties’ (2000) 41 Harvard Intl LJ 469, 488 35 M Hirsch, The Arbitration Mechanism of the International Centre for the Settlement of Investment Disputes (Martinus Nijhoff Publishers, London 1993) 17-18 36 R Dolzer and C Schreuer, Principles of International Investment Law (OUP, Oxford 2008) 20

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withseparateinternationallegalpersonalitythatiscapableofprovidingthebenefitsofafixedsetofrulesandthesupportofanexperiencedarbitralinstitutionalthoughitisnottheCentreitselfthatengagesinarbitration.37As stated in the ICSID’s Preamble its primary purpose is promotion of foreign directinvestmentandprovisionofaprocessforindependentresolutionofinvestmentdisputes.TheICSIDisnotaprivatecentreor state institution thatoperatesunder the lawsofaparticularstate.TheWorldBankinvestment court (ICSID)was established by an international treaty, administered by an internationalorganization,andconductsarbitrationproceedingsinaccordancewiththenormsofpublicinternationallaw.38BITsofferICSIDarbitrationasoneofthemechanismsforsettlementofinvestor‐statesdisputestobeelectedbytheinvestor,providedthatboththehomestateofinvestorandthehoststateinwhichtheinvestment ismade,have ratified the ICSIDConventionandconsented toarbitrationofdisputesundertherulesof ICSID.Wherethe investorhaselectedtopursue itsclaimthroughICSIDarbitration itmustsatisfy the jurisdictional requirements under both the applicable investment protection treaty andprovisionsofICSIDConvention.TheICSIDConventionprovidesthat, ‘thejurisdictionoftheCentreshallextend to any legal dispute arising directly out of an investment, between a Contracting State and anationalofanotherContractingState,whichthepartiestothedisputeconsentinwritingtosubmittotheCentre.’39TheICSIDConventiondoesnotdefinetheterm“investment”sothetribunalmustrefertotheprovisionsof thecontract,bilateralormultilateral treatyandthehoststatenational lawstodeterminewhether the transaction qualifies as an investment pursuant to the instrument defining the term. TheICSIDConvention defines an investor as, ‘any natural personwhohad the nationality of a ContractingState other than the State Party to the dispute’ and defines corporate entities as ‘any juridical personwhichhad thenationalityof aContracting Stateother than the StateParty to thedispute.’40The ICSIDConvention contains provisions concerning applicable law by stating that, ‘the Tribunal shall decide adispute in accordancewith such rules of law asmay be agreed by the parties. In the absence of suchagreement, theTribunal shall apply the lawof theContracting Stateparty to thedispute (including itsrules on the conflict of laws) and such rules of international law asmay be applicable.’41According tocommentators, ‘proceedings under the ICSID Convention are self‐contained. This means that they areindependentof the interventionofanyoutsidebodies. Inparticular,domesticcourtshavenopowertostay,tocompel,ortootherwiseinfluenceICSIDproceedings.NordodomesticcourtshavethepowertosetasideorotherwisereviewICSIDawards.’42

4) ForeigninvestmentlawandarbitrationinKosovoKosovojoinedtheICSIDConvention29June2009.KosovohassignedBITswithBelgiumandLuxembourg,Austria andSwitzerland.43The ratificationofBITswillpromoteandencourageFDI flowsand facilitatearbitrationofinvestmentdisputesattheICSID.Kosovoenactedforeigninvestmentlawin2014entitledthe Law No. 02/L‐33 on Foreign Investment (foreign investment law). The said law incorporatesinternationalstandardsofinvestmentprotectionincludingfairandequitabletreatment,fullandconstantprotectionandsecurity,transferrights.44ThedisputeresolutionprovisionintheForeignInvestmentLawoffers investors the option to refer its disputes againstKosovo to arbitration pursuant to ICSID, ICSIDAdditional Facility, ICC and UNCITRAL arbitration rules.45Kosovo adopted Law No. 02/L‐76 onArbitration (Arbitration Law) based on the UNCITRAL Model Law on International CommercialArbitration.ThemainfeaturesoftheArbitrationLawwillbediscussedinthefollowingparagraphs.AnyarticlesstatedareprovisionsoftheArbitrationLawunlessstatedotherwise.

ArbitrationagreementThearbitrationagreementcanbeeithersignedasaseparateagreementattachedtothemaincontractorpartiesmay includeanarbitrationclause in thecontract. Ineithercase theagreementof theparties toarbitratedisputesmustbeinwritingandclearlystatetheparties’intentiontosettlecontractualdisputesthrougharbitration(arts6&5KosovoArbitrationLaw).

Partyautonomy

37 A Reinisch and L Malintoppi, ‘Methods of Dispute Settlement’ (The Oxford Handbook of International Investment Law 2008) 691, 698 38 M Hirsch, The Arbitration Mechanism of the International Centre for the Settlement of Investment Disputes (Martinus Nijhoff Publishers, London 1993) 19 39 ICSID Convention art 25(1) 40 ibid art 25 (2)(a) and (b) 41 ibid art 42(1) 42 R Dolzer and C Schreuer, Principles of International Investment Law (OUP, Oxford 2008) 223 43 Minsitry of Foreign Affairs of Republic of Kosovo available at http://www.mfa-ks.net/?page=2,72 44 Official Gazette of the Republic of Kosovo available at http://gzk.rks-gov.net/ActDetail.aspx?ActID=8982 45 Foreign Investment Law art 15.2

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An advantage of arbitration is that the parties can freely choose the rules of procedure governing thearbitrationproceedings, languageandplaceofarbitrationaswellasselecting theapplicable lawof thecontract(arts16.3,17,19,29).Partiesarealsofreetochoosethearbitratorswhomaybefamiliarwiththeircaseorpossessexpertiseinspecificindustries.

AdhocorinstitutionalarbitrationTherearetwomaintypesofarbitration:adhocandinstitutional.Inadhocarbitrationthepartiesagreeon the procedures to govern their dispute and can adapt the rules to meet their requirements.46ArbitrationRulesofUNCITRALcontainflexiblerulesofprocedureforadoptionbytheparties inadhocarbitrationproceedings.However,inabsenceofanyrules,thearbitrationlawoftheplaceofarbitrationactsasdefaultrulesandproceduresforarbitration(i.e.:EnglishArbitrationAct1996incasetheplaceofarbitration is London).47In institutional arbitration, the parties choose the arbitration rules of aspecialised institution such as ICSID, International Chambers of Commerce (ICC) in Paris, AlternativeDisputeResolution(ADR)CenterofAmChaminKosovoortheLondonCourtofInternationalArbitration(LCIA).Ininstitutionalarbitrationthepartiescanbenefitfromthesupportofthearbitrationinstitutioninadministration and supervision of the proceedings (e.g.: setting the time schedule for hearings,appointmentofarbitratorsetc.)

SolearbitratororpanelofarbitratorsThepartiescaneitherchoosesolearbitratortodecidethedisputeoreachpartyappointonearbitratorand the two arbitrators will then choose the third arbitrator to act as the presiding arbitrator(chairman).48

InitiationofarbitrationproceedingsOncedisputearisesbetweenpartiestothecontract,thepartywishingtoinitiatearbitrationmaysendanoticeofdisputeorrequestforarbitrationtotheotherpartycontainingthedetailsofdispute(particularsof claim) andname of arbitrator and deadline for other party to respond to the claim and appoint itsarbitrator.

PowersofthearbitraltribunalThe arbitral tribunal has power to decline or accept jurisdiction over the dispute on the basis of theconsentofthepartiescontainedintheircontacttoresolvetheircontractualdisputesthrougharbitration.Therefore, arbitration process is consensual and once the tribunal is established it can determinewhether ithas jurisdictionover thecaseandonthevalidityofarbitrationagreement.49Thecourtswillrecogniseparties’agreement toarbitrateandcannot intervene in thearbitrationproceedings (art3).50Thecourtsmerelyassistthepartiesandtribunalbyissuingordersforcollectingevidenceorotherjudicialactsnotwithincompetenceof thearbitral tribunal (art28).However the tribunalcanonlydecides thequestionsreferredto itby thepartiesandshouldnotexceed itsauthorityover thedisputeandpartiesand/or toomitany issues from itsdeliberationsandaward.Furthermore the tribunalmust justifyandgivereasonforitsaward(art31.2).Otherwisethereisriskofsettingasideorannulmentoftheawardbythecourtsoflaw.

FinalandbindingawardThetribunal’sdecisionisfinalandbindingonthepartiesanduponapplicationbywinningpartythecourtrecognisesandenforcestheaward(art31.1).Thearbitralawardcannotbeappealedorrevisedonthemerits and the losing party may only challenge and resist recognition of the awards on grounds ofproceduralirregularitiesinthearbitrationproceedings(i.e.constitutionofarbitraltribunal,breachofdueprocessandrespondentwasnotgivenachancetopresentitsdefence).Incasethelosingpartyapplyforsetting aside and annulment the court can only review the case on the points of facts to determinewhetherornottherewasfundamentalflawsintheproceedings.Thecourtcanalsoannulanawardifthedisputewasnonnotcapableofsettlementthrougharbitrationand/ifitsagainstpublicpolicy.

Challengingarbitrators

46 Arbitration Law art 16.3 states that, 'subject to the mandatory provisions of this law, the parties may agree upon an arbitration provision'. 47 Kosovo Arbitration Law art 16.4 states that, 'in absence of an agreement by the parties on the procedure and in absence of relevant provisions in this law, the arbitral tribunal shall determine by itself the arbitration rules applying dispute procedures or applying arbitrary rules of an institution of the permanent arbitration'. 48 Arbitration Law art 9.1 stipulates that, 'the arbitral tribunal shall be composed of either a single arbitrator or a panel of arbitrators...` 49 Arbitration Law art 14.1 50 Arbitration Law art 3 states that: 'No court in Kosovo may intervene in arbitration proceedings, unless otherwise provided for in this Law.'

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In arbitrationproceedings theparties can agreeon theprocedures forappointmentof arbitrators (art10.1).Thiscanbedoneeitherat the timeofsendingthenoticeofdisputeorrequest forarbitration tootherpartyoratthetimeofsigningthearbitrationagreement.Inmostcasesthearbitratorsarechosenafterthedisputearises.Incasethereisevidencethatthearbitratorisbiasedortherearedoubtsastotheimpartialityandneutralityofarbitrator,thepartiesmaychallengehis/herappointment(art10.2).Incaseofobjectionbyoneofthepartiesthearbitratorcanbesubstituted.

RecognitionandenforcementofarbitralawardIn case the arbitral tribunals issues a favourable award the investor may apply to the court forrecognitionandenforcementofaward.TheUnitedNationsConventiononRecognitionandEnforcementoftheForeignAwards1957(NewYorkConvention)appliestoarbitrationawardsthatarerenderedinacountryotherthanthecountrywhererecognitionandenforcementissought(art1(1)NYC).UndertheNYCthecourtsofthecountryinwhichenforcementissoughtmustrecogniseandenforcetheawardthesamewayasa local judgment.Kosovohasnot joined theNewYorkConvention.However, theForeignInvestment Law stipulates that, arbitral award issued by foreign tribunals or international arbitrationbodiesshallbeenforceableinaccordancewiththeNewYorkConvention.51Forenforcementoftheaward,the applicantmust submit the arbitral awardor certified copyand the arbitrationagreement togetherwith the translated copiesof thedocuments to the respective court in foreign jurisdiction(s).TheNYCrequiresthearbitrationagreementstobeinwritingandsignedbythepartiestotheagreement.

Conclusion

The emergence of international investment law as an autonomous body has redefined internationaldispute resolutionprocedure. The inter‐relationship and applicationof international lawanddomesticlawenablesthearbitraltribunaltorecogniseregulatoryspaceforsovereignstatestoenforcehealthandsafetystandards,labourlawandhumanrightsandenvironmentalprotection.Asregardspromotionandattraction of international investments in Kosovo, the enactment of foreign investment law is the firststep for creating an investment friendly regime. The ratification of international treaties containinginvestor protection rules will complement the international adjudication procedures and increaseinvestorconfidence inenforcementof ruleof lawandgoodgovernance inKosovo.Thearbitration lawoffers modern and flexible rules for arbitration of investment and commercial disputes. Adoption ofinternational standards promotes the status of Kosovo as an arbitration friendly jurisdiction.InternationalaidagenciesandfinancialinstitutionsandinvestorsmaystructuretheirinvestmenttoenjoybenefitsofBITprotectionincludingaccesstointernationalarbitration.

51 Foreign Investment Law art 15.4

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UPC341.21(496.51)

MEDIATIONASANALTERNATIVEDISPUTERESOLUTIONMECHANISMINKOSOVO

byMahirTutuli

AbstractThisarticlediscussesthelegalbasisofthedisputesettlementprocedurethroughMediationasanalternativemechanism of dispute resolution, as well as the issuing of the enforcement of agreements reached inmediationbythecourtsinKosovo.AftertheintroductoryremarksonMediation,thefirstpartofthisarticlewilldiscuss theagreement to resolve thedispute throughmediation, including voluntaryandmandatorynorms.Thesecondpartofthisarticlewilldealwithtwosituationsrelatedtothefulfillmentofthemediationagreementanddistinguishbetween (a) theagreement reachedbasedon theparties’ consentoutside thejudicial procedure and (b) the case when the procedure was initiated in court and the agreement formediationisreachedundertheinstruction/orderofthecourt,whichisthenapprovedincourt.

I. GeneraldiscussiononMediationKosovo,initsattemptstocreateamodernjudicialsystem,hascreatedthejudicialbasewhichfacilitatesthealternativeresolutionofdisputes,includingarbitrationandmediation.Inthatregard,theAssemblyofKosovohasapprovedtheLawonMediationin2008.1Mediationisanalternativemechanismofdisputeresolution, in which through negotiations, with the assistance of a third party, the parties attempt toreachanagreementonresolvingtheirdispute.2

In principle, the mediation procedure is separate from the court proceedings; nevertheless it is stillrelatedwithcourtproceedings.Thisrelationismanifestedindifferentformssinceincertaincasescourtsinstruct or order parties to resolve their dispute through mediation. Moreover, the enforcement ofagreementsreachedthroughmediationcanbeachievedthroughcourtproceedings.

In addition, in practice there are disputes of an international character which showcase the need toanalyze thecompatibilityofdomestic legislationwith international regulations, inorder toensure thatduring the implementation of provisions, their interpretation is in accordance with internationalpractices.Assuch, the issuesraisedrequireananswerbasedonthe legaldoctrineandcase law,whichwillbefurtherelaboratedinthefollowingtext.

1. MediationAgreementThemediationagreement isdifferent fromthesettlementagreement reachedbetween theparties inadispute.Whilethefirstonecreatesanobligationformediation,thesecondisanagreementtoresolvethedisputeamongstthem.

TheLawonMediationforeseesthat:“Mediationprocedurebeginsatthemomentwhenpartiesagreetobeginwithit”.3Thismeansthatpartiesarefreetodecidebasedontheirconsentiftheywanttoresolvetheirdisputethroughamediationprocedure, the timewhentheprocedureofmediationbegins,andtochoosethemediator.

Besidesvoluntarymediation, inlegalpracticetherearealsoobligatoryformsofmediation.Inprinciple,there are three means through which an obligation is created on the parties to resolve the disputethroughmediation(a)throughthecontract,(b)throughcourtorder,(c)bylaw.Thisobligationdoesnotnecessarilymean that a settlement agreementmust be reached and that thedisputemust be resolvedthroughmediation;howeverthepartywhichassumesthisresponsibility isobligedtoparticipateinthemediationprocedure.

1 Law on Mediation No.03/L-057, decreed on October 3, 2008 (Kosovo). 2 Id., Article 2 3 Id., Article 9(1)

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TheapplicablelawsinKosovodonotprovideformandatorymediationbasedonthelaw;therefore,thereare twomandatoryformsofmediation inKosovo,contractualmediationandthatorderedbythecourtandprosecution.

Contractualobligationformediationincaseofadisputeiscreatedthroughtheagreementofthepartieswhich can be contracted before or after the dispute arises. Themediation contract before the disputearisescanbeaseparatecontractbetweenthepartiesthroughwhichpartiesagreetoresolvetheirdisputeinamediationprocedure,orcanbeadistinctclauseinthemaincontract,throughwhichpartiesdecideonmediationasthemechanismofdisputeresolution,intheeventadisputearises.

Themediation contract after the dispute arises, is defined as the contractwhich parties sign after thedisputeemergesamongstthem,throughwhichtheyagreetoresolvetheirdisputethroughmediation.

The contractual obligation for mediation can be a requirement to engage in other forms of disputeresolution, be it through alternative forms such as arbitration, or through court proceedings; thisrequirementinhibitsthebeginningofotherprocedureswithoutgoingthroughmediation.

Mediation agreements are subject to the general rules that govern contracts as defined in the Law onObligationRelationships.4Ifthemediationagreementisformallyormateriallyvalid,itisenforcedbythecourtsandcreatesanobligationonallpartiesofthemediationagreement,toengageinmediationasanout‐of‐courtproceedingfortheresolutionofthedispute.

Thecontractualobligationformediationdoesnot includetheobligationtoresolvethedisputethroughmediation but only the obligation to enter into a mediation procedure; in case an agreement is notreached through mediation, this is not considered as a non‐fulfillment of the mediation agreement.Violationofcontractingobligationtoparticipateinmediationappearsintwoforms,(i)refusalofapartytoparticipateinmediation;and(ii)theneglectofacontractobligationformediationbythepartyandthedirectinitiationofarbitrationorcourtproceedings.Inthefirstinstance,theotherpartymayrequesttheenforcementof theagreement formediation in courtproceedings,whereas in the second instance, theother party may challenge the initiation of the procedure in court and consider it as premature andpresentthemediationagreementasaproceduralobstacleforcourtproceedings.

Court‐orderedmediation is created based on the court’s order through which it obliges the parties toundergothroughthemediationprocedurerelatedtotheirdispute.TheapplicablelawsinKosovoforeseetwo situations related to the delegation of the dispute in a mediation procedure. The first instanceincludescaseswherethelawforeseesthatcourtscanonlyinstructpartiesformediationbutnotobligethemto.SuchaninstanceisforeseeninArticle9.6oftheKosovoLawonMediation,whichprovidesthat:“Atanystageofthecourtprocedureuntilitscompletion,thecourtmaysuggestthepartiestofollowthemediation procedure”. In this case the parties can ignore the court's suggestion and continue withlitigation.Thesecondinstancedealswithcaseswherethe lawprovides forthepossibilityof issuinganordertosendtheissueinamediationproceedingandinthatcaseanobligationiscreatedonthepartiestoparticipateinamediationproceeding.SuchacaseisforeseeninArticle232oftheCriminalProcedureCodeofKosovo,5according to which the prosecutor can send the dispute for resolution throughmediation and in that case an obligation for themediator arises to conduct themediation proceedingwhereastheaccusedisincludedintheprocedureinspiteofhis/herconsent.

2. ReachinganAgreementinmediationanditsenforcementA settlement agreement is defined as an agreement reached between the parties in the mediationproceedinginwhichtheyresolvetheirdispute.TheLawonMediationprovidesthatreachingasettlementagreementdependsexclusivelyonthewillof theparties, thusrecognizing their fullautonomytoreachthisagreement.6

The Law provides for two situations related to enforcing the settlement agreement and distinguishesbetween(a)theagreementreachedbasedontheconsentofthepartiesonout‐of‐courtproceedingsand(b) in the case where the procedure has been initiated in the court and the settlement agreement is

4 Law on Obligation Relationships No. 04/L-077, decreed on May 30, 2012, (Kosovo) 5 Criminal Procedure Code No. 04/L-123, decreed on December 21, 2012, (Kosovo) 6 Law on Mediation, Article 12.

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reached in mediation conducted based on the instruction/order of the court; this agreement is thenapprovedincourt.

Inthefirstinstance,wheretheagreementisreachedinanout‐of‐courtproceeding,Article12,paragraph4oftheLawonMediationprovidesthattheagreement“…shallhavetheforceofafinalandenforceabledocument” if thesettlementagreementhasbeenprepared inaccordancewithparagraph4ofthesameArticle, i.e. if it ismadeinwritingandifsignedbythepartiesandthemediator.Inthesecondinstance,wheretheproceedingisbeingconductedincourt,Article12.5oftheLawprovidesthat:“Ifthecase‐fileiswith the court, the written settlement agreement should be submitted to the court, which after theapproval,shallhavethepowerofanexecutivedocument”.

Fromtheabovementioned,wecanconclude thatunder the law,dependingonhowtheagreementwasreached inmediation, the enforcement of the agreement is treated in differentways. The agreementreached in out‐of‐court proceedings, in principle constitutes an agreement which creates contractualobligationsbetweenpartiesbasedonrulesofthelawofthecontract,i.e.LawonObligationRelationshipsandtheagreementassuchconstitutesacontractamongthepartiesandthereforeeachpartymayrequestthefulfillmentofobligationsinlitigation.

Dilemmasariseregardingtheproceduretobefollowedbythecourttoenforcethemediationagreement.Shouldtheagreementassuchbetreatedasacontractualobligationoranenforcementdocument?Underthe laws in force, nowhere is it provided that the settlement agreement constitutes an “enforcementdocument”asspecifiedbyArticle22oftheLawonEnforcementProcedure.7Article12(4)oftheLawonMediationinKosovoalsodeterminesthatthemediationagreementisobligatory,butdoesnotqualifyitasanenforcementdocument.

ThepreviousLawontheenforcementprocedure(LawNo.03/L‐008forEnforcementProcedure)didnotprovidethatthesettlementagreementisan“executivetitle”andthatthesettlementagreementcouldnotbe executed directly in an execution procedure, unless the mediation was conducted based on theinstruction/orderofthecourt.

Even though this issue has been brought forward by the new Law on the Enforcement Procedure inKosovo (Law No. 04/L‐139), the law does not clearly determine whether the agreement reached inarbitrationconstitutesanexecutiondocumentwhichcanbeexecuteddirectlyinanexecutionprocedure.Article22oftheLawinparagraph1.4providesthat“enforcementdocumentsareagreementsreachedinthe mediation procedure in accordance with the law on mediation after approval of the Court”.Meanwhile,pursuanttoArticle23,paragraph1oftheLaw,thesettlementagreementisconsideredasa“settlement”buteveninthisinstanceitisnotspecifiedwhetherthisreferstotheagreementreachedinthe mediation proceedings when the issue is referred to mediation by the court or the settlementagreementbasedontheparties’consent,inanout‐of‐courtproceedings.

ThesameuncertaintyisfacedinArticle25oftheLawontheEnforcementProcedureaswell,whichunderparagraph 1 provides that: “Court settlement or settlement reached in administrative procedure,arbitrationenforcementaward,agreementreached inmediationprocedureoragreementreachedinanotherprocedureshallbeenforceableifthecreditwhichshouldbefulfilledhasbecomereachable”.

Basedontheabovementionedprovisions,itisnotclearwhetherthemediationagreementreachedinout‐of‐court proceedings constitutes an enforcement document or it should undergo another judicialprocedure to be considered an enforcement document. Article 22 of the Law under paragraph 1.4requeststhecourt’sapprovalforthesettlementagreementtobeconsideredanenforcementdocument;however, the law does not foresee the procedure through which a court could approve a mediationagreement, in an out‐of‐court proceedings. In this respect there is a legal vacuum which should beaddressedinthefuture,eitherbyamendingthelaworpossiblythroughalegalpositionofthecompetentbodies,whichwouldexplaintheabovementionedinterpretationoftheprovisions.

Inthecurrentlegalsituation,startingwiththefactthattheprovisionsofArticle23(1)and25(1)oftheLawontheEnforcementProceduredonotdistinguishbetweenthesettlementagreementreferredtobythecourtandthatwithoutareferencebythecourt,theenforcementofthemediationagreementshould

7 Law on Enforcement Procedure No. 04/L-139, decreed on 3 January, 2013 (Kosovo)

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bepermittedasprovidedbyArticle25(2)of theLawon theEnforcementProcedure, if the loanwhichmustbefulfilledismadeaccessible.

Lawandcaselawshouldtreatthemediationagreementreachedeitherreferredbythecourtorotherwiseinasimilarmanner,ortheprocedureonhowthesettlementagreementinout‐of‐courtproceedingscanbemadeanenforcementdocumentshouldbedeterminedclearly.TheEuropeanDirectiveonMediation,8speaks in favor of that and provides thatmember statesmust ensure the enforcement of agreementsreachedthroughmediationinthecaseswheretheagreementassuch isnotcontrarytothe lawofthatstate and if such an enforcement is not contrary to domestic law.9This practice has been followed byotherregionalcountriesaswell,whichintheirlawshaverecognizedtheenforcementofthesettlementagreementinout‐of‐courtproceeding.

The Law forMediation inDisputeResolution in theRepublic of Albania10inArticle 22.1 provides that“When the parties agree to resolve the dispute between them, along with the mediator/s, sign therelevantagreement,pursuantto termsandconditions,casesandproceduresprovided in this law.Thisagreementisbindingandenforceableonthesamescalewitharbitraldecisions”.Meanwhile,Article23 which regulates the enforcement of agreements reached through mediation, under paragraph 3provides that“If theactagreementcomplieswith theconditions laiddown inArticle22of thisLaw, itconstitutesanexecutivetitleand,inthiscase,thebailiffserviceischargedwithitsexecution”.Similarlythe Law on the Mediation Procedure in Bosnia & Herzegovina11provides under Article 25 that thesettlementagreementconstitutesanenforcementdocument.

Theagreementreachedinjudicialproceedings – The settlement agreementwith referenceby the court,afterapprovalfromthecourt,theprosecutionoranothercompetentauthority,hasthefunctionofacourtagreement and is considered an executive title which can be enforced directly in an enforcementprocedure.ThisisspecifiedunderArticle12.5oftheLawonMediationwhichprovidesthat“ifthecase‐fileiswiththecourt,thewrittensettlementagreementshouldbesubmittedtothecourt,whichaftertheapproval,shallhavethepowerofanexecutivedocument”.

ThisagreementmaybecontestedbythepartiesonlyundertheconditionssetoutinArticle14.5oftheLawonMediation,whichprovidesthat:“TheCourtortheprosecutionmayannultheagreementattainedthroughmediationwhenitconcludesthatithasbeenboundagainstthelawinforce,whenthewilloftheparties in conflict is not reflected, or when their rights and interests are impinged or when thecompensationisincleardisproportionwiththecauseddamage”.

CONCLUSION

Ingeneral, theapplicable law inKosovoprovidesagood legalbasis for theresolutionof legaldisputesthroughmediation,beitthosearisingfromcontractualdisputesorthosewhicharereferredbythecourtstoreachasettlementbetweentheparties,forexampleincriminalprocedure.Inthefinalphase, i.e.oftheexecutionofthesettlementagreement,basedontheapplicable lawfortheenforcementofdecisionsinKosovo,itisstillunclearwhetherthesettlementagreementreachedinout‐of‐courtproceedingsisconsideredasanenforcementdocument.Inthisregard, itappearsthatthesettlementagreementreachedinout‐of‐courtproceedings(similartothe one reached in court proceedings) is not directly enforceable and can attain the power of anenforcementdocumentonlyaftertheapprovalofthecourt.Withrespecttothisissue,itappearsthatthelegislature has utilized a similar approach to the enforcement of arbitral decisions. Nevertheless, thiscriterion,approvalof thesettlementagreementby thecourt, inpractice isseenasasimpleproceduralactionandnotanobstacleforthepartiesoranobstacleforfurtheractions.

8 Directive 2008/52/EC of the European Parliament and Council of May 21, 2008 on some aspects of mediation in civil and commercial disputes, available at http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32008L0052&from=EN 9 Id., Article 6(1) 10 Law No.10 385, Februrary 24, 2011, Official Gazette of the Repulic of Albania. Promulgated by Decree no. 6922, on March 8, 2011 of the President of the Republic of Albania 11 Zakon o Postupku Medijacije - Službeni glasnik BiH, br. 37/04

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UPC341(4/9)

AUNITEDNATIONS’LIAISONHUBANDOMBUDSOFFICEFORINTERNATIONALECONOMICRELATIONS:APROPOSAL1

byChitraRadhakishun2

A good five years after this article was first published, the relevance of the issues related to disputesettlementitraised,hasfurtherincreased.Thecreationofprominentdisputesettlementbodies,suchastheWorldBankgroup'sInternationalCentreforSettlementofInvestmentDisputes(ICSID)andmorerecentlyoftheWorldTradeOrganization(WTO),theWorldIntellectualPropertyOrganization(WIPO)andunderFreeTradeandRegionalTradeAgreements,arefairlyrecent.Atthesametime,developingcountriesareincreasinglyinvolvedincasesbroughttothedisputesettlementbodiesoftheWorldBank’sInternationalCentre forSettlementof InvestmentDisputesICSID,WIPOandtheWTO. Thecostofdisputesettlementhasoftenbeendisproportionatelyhigh fordeveloping countries,while therulingsof thesebodieshavehadamarkedimpactontheirdevelopmentprocess.

Noteworthy is also the establishment of regional centres for international commercial arbitration inregions in,Africa,Asia, theGulfAreaandLatinAmerica,andthegrowthofoffers for internationalandcommercialservicesforarbitration,mediationandotherformsofAlternativeDisputeResolution.

It should therefore not be surprising that at the highest political levels the validity of the systems forsettlingdisputesinwhichdevelopingstatesaredefendants,isnowbeingquestioned.ThusInternationalDisputes,involvingStates,arecurrentlybeingdiscussedbyHeadsofState,academics,experts,NGOs,onblogs and in publications, and in the press. Several political leaders from the EU (including theNetherlandsandGermany)havefloatedtheideaforaTradeandInvestmentCourt. Civilsociety,attheglobal level, continues toquestion the socialandeconomic impactofawards issuedagainstStatesandtheir impact on attaining lasting socio‐economicpeace.NGOsdealingwith traditional Peace‐making inarmedconflictlookatpeacemakingintheeconomicarea.Attheinternationallevel,UNCTAD'sTDR2014drewattentiontointernationaldisputesettlement.UNCTAD'sforthcomingWorldInvestmentReportwillpresentafurtheranalysis.Atthe28thSessionoftheHumanRightsCouncil,theimportanceofeffectiveinternationaldisputesettlementsystemshasbeenmentioned(March2015).Thelistcangoonandon,allproviding evidence of the fact that dispute settlementhas become a central feature of themultilateralsystem.

Thepaperherereproducedpresentsproposalsaimedatattainingsocio‐economicpeace,amuchneededingredient in the development process. It is hoped that the re‐publishing of these proposals in theAlternative Dispute Resolution Journal will contribute to the current debate on international disputesettlement,aswellastodiscussionsonapost‐2015sustainabledevelopmentagenda,whichstrivesforaworldthatisjust,equitableandinclusive,andwhereinequalitywithinandamongcountriesisreduced.

1 A United Nations' Liaison Hub and Ombudsoffice in International Economic Relations: A Proposal", was first published in : "A Liber Amicorum: Thomas Wälde - Law Beyond Conventional Thought", Edited by Jacques Werner & Arif Hyder Ali (978-1-907174-01-8, CMP Publishing Ltd. Nov. 2009). Also available at: http://www.transnational-dispute-management.com/liber-amicorum.asp 2 About the author: Ms. Chitra Radhakishun is Manager of the Project on Dispute Settlement in International Trade, Investment and Intellectual Property of the United Nations Conference on Trade and Development (UNCTAD). The views expressed are those of the author and do not necessarily reflect those of the United Nations, the organization she is affiliated with.Contact: [email protected]

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I. IntroductionThomasWäldewasanoutspokenperson,happytoprovoke,notafraidofbeingpoliticallyincorrectwhenhe was convinced of being right. He loved launching ideas and stirring debates. It may therefore bebefitting toput forwardsuchaproposal in thisLiberAmicorum.The informedreaderwill, I think, findthattheproposalconnectsdotsbetweeninitiativesthatareslowlytakingforminonewayoranother.

Thiscontributionismadeundermypersonalresponsibility,withnoneofwhatiswrittenattributabletoanyorganizationorinstitutionIam,orwas,affiliatedwith.

II. ANotSoUnorthodoxProposal?Internationaleconomicrelationsareincreasinglygovernedbynational0regionalandinternationalrules,laiddowninamultitudeofinstruments,creatinganinternationaleconomic‐legalregulatoryentangledsystem. In this entangled system, stakeholders from the public and the private sector operate, securecommitments, try to enforce obligations and entitlements and preserve rights. Alongside these actors,UnitedNationsbodiesandothernationalandinternationalinstitutionsengageintheseactivitiesrelatedtofurtheringunderstandingandimplementationoftheserules.WithintheUnitedNations,identifyingtheresponsiblebodiesandtheirconnectionstorelatedactivitiesundertakenelsewhereinthesystem,andatamorebasiclevel,whichservicescouldbeprovidedbythatbody,isadifficulttaskformemberStatesandotherstakeholdersalike.To illustratewithanexample,officials fromnationalor localgovernmentandcommunities,statelawyersorattorneys‐general,NGOs,businessassociationsorchambersofcommerceandindustry,haveahardtimefindingoutifanybodyorbodieswithintheUnitedNationssystem,andifso, which ones, provide training and capacity building in a specific area of trade and investment, orassistanceinnegotiatinginternationalagreements,orcounsellingandadviceinhandlingdisputes.1Within the international economicmazeof rules and regulations, andunder the variousobligations towhich penalties for non‐observation of commitments may be attached, some stakeholders are morechallenged thanothers tooptimizebenefitsandminimize losses in international commercial activities.Thatstakeholdersfromdevelopingcountriesaretypicallytheweakerones,needsnofurtherexplanation.

Themulti‐facetedchallengesdevelopingcountries face,appear intheearlieststagesof theprocessandcan continue to the enforcement stages. Some of the frequently observed challenges are highlightedbelow.2

A. Legal–TechnicalObstaclesThese obstacles may appear when legal notions and drafting techniques applied where drawn fromdifferent legal traditions. Typically, contracts andprocedures grounded in common lawprinciples andconventionswherethehoststateobservesthecivil lawtraditions,maymoreeasilyleadtoproblemsofinterpretation. Examples presented at a recently held Arbitration Forummay be illustrative.3Russianarbitration practitioners raised the indivisible package of ‘U.S.A investment combined with Americanlegalrules’asamajorobstacleandafertilebreedinggroundfordisputes.Germanpractitionersfeltthat

1 For example, technical assistance on regional integration, investment and trade related issues is being provided by various United Nations bodies, and the differences in approach or in comparative advantages are not always clear. In the area of trade and development, the United Nations Conference on Trade and Development (UNCTAD) leads an Inter-Agency Cluster on Trade and Productive Capacity in which the United Nations Industrial Development Organization (UNIDO), the United Nations Development Programme (UNDP), the International Trade Center (ITC), the Food and Agriculture Organization of the United Nations (FAO), the World Trade Organization (WTO), the Five United Nations Regional Commissions, the United Nations Environment Programme (UNEP), and the United Nations Office for Project Services (UNOPS) participate. The objective is the coordination of trade and development operations at the national and regional levels within the United Nations system. Beyond trade, the One United Nations – approach, which is aiming at delivering United Nations products as one, is attempting the same within the so-called United Nations Development Group (UNDG). In the UNDG, 32 United Nations funds, programmes, agencies, departments, and offices that play a role in development, are united within the objective of delivering more coherent, effective and efficient support to countries seeking to attain internationally agreed development goals, including the Millennium Development Goals. 2 These observations are confirmed by UNCTAD research. See for example: UNCTAD (2009), the Economic Development in Africa Report 2009: ‘Strengthening Regional Economic Integration for Africa’s Development’, UNCTAD/ALDC/AFRICA/2009, New York and Geneva: United Nations; UNCTAD (2008), The World Investment Report 2008: ‘Transnational Corporations, and the Infrastructure Challenge’, UNCTAD/WIR/2008, New York and Geneva: United Nations; UNCTAD (2007), ‘Globalization for Development: The International Trade Perspective’, UNCTAD/DITC/2007/1, New York and Geneva: United Nations; UNCTAD (2007), Investor-State Dispute Settlement and Impact on Investment Rulemaking UNCTAD/ITE/IIA/2007/3, New York and Geneva: United Nations; UNCTAD (2004), ‘Multilateralism and Regionalism: The new Interface’, UNCTAD/DITC/TNCD/2004/7, New York and Geneva: United Nations; and reports of UNCTAD intergovernmental meetings on regional integration (www.unctad.org). The author herself has observed these in her work as Manager of the UNCTAD Project on Dispute Settlement in International Trade, Investment and Intellectual Property. Arbitration practice confirms a number of these findings. For example, at the 14th Geneva Global Arbitration Forum in May 2009, Mr. Pierre Lalive, Swiss lawyer and arbitrator, mentioned a number of these obstacles in his presentation. 3 First International Arbitration Forum, organized by the Chambre Européenne d’Arbitrage, 21 May 2009 Kiev, Ukraine.

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the use of Common Law procedures in arbitral proceedings were among the principal causes forincreasing cost and duration of international arbitrations in Germany and, consequently, to a turningawayfromarbitration.

In this context, linguistic obstacles need to be considered. Although not frequently mentioned ininternationaldiscussions, linguisticobstaclesposeachallenge.There isan inherent inequalitybetweenpartieswhenarrangementsandcontractsarenegotiatedanddraftedinwhatitaforeignlanguageforoneparty,especiallywhentheyinvolvetechnicallegalnotions.Subsequently,attheimplementationstage,thelinguisticcapacityofofficials,businesspartnersfromtheprivatesectorandevenlocalmanagement,willpose obstacles of varying degrees to effective communicationwith the foreign investor.While Englishmaybewidelyusedininternationaldealings,theuseofthislanguageisbynomeansuniversal.Afurtherlevelofcomplexitymayarisewhenthelanguageusedisa‘third’languageforbothparties.Furtherstudyonthisobstaclemaybeindicated.

B. Obstacles Related to the Import and Consequences of Arrangements ForStakeholders

When arrangements enter into force, there may still be a lack of understanding of the import andconsequences of commitments these arrangements carry, especially outside the circles of officialsinvolvedinthenegotiatingprocess.Anexamplesif theobligationtheWorldTradeOrganization(WTO)membershipcarriesforaccedingstates.

Understandingtheimportandconsequencesofarrangementsandcommitments,forexampleregardingthepossibleimpositionofpenalties,oftenposesobstaclesintheimplementationstagesoftheagreementfor stakeholders from the private sector, especially when their involvement was limited during thenegotiating stages. Many developing countries have weak public‐private sector communicationstructures.Asaconsequence,thereisinadequatedisseminationofinformation,includingontheimportandimpactofconcludedagreementsonthebusinesscommunity.

Equally,nationalexportersareoftennotawareofpossibilitiesforactionthatcouldbetakenintheirfavorunderinternationalarrangementstheirgovernmentsbecamepartyto.Forexample,exportersmaynotbeawarethatthegovernmentcantakeupclaimsontheirbehalfwhenpunitivetariffsareimposedontheirproducts.AgoodexampleofchangeistheIndianGovernment’sinformationcampaignof2009toguidethe private sector to governmental channels they can approach for exploring safeguard actions underWTOrulesagainstdumping.

C. ObstaclesRelatedtoMonitoringandManagementofObligationsLackofand/orweakadministrativecapacityatthegovernmentallevelisanimportantcauseofweakandineffectivemonitoringandmanagementofobligationsandcommitmentsunderthevariousarrangementsstatesarepartyto.Theever increasingvolumeofcommitments is furtherweakeningthealreadyweakcapacity.Thechallengesareevenmore important,when,as it isnotuncommon,differentdepartmentsand/or levels of government are involved. The problems are compounded when the variousarrangements thestates issignatory to,embodydifferentandevencontradictoryandconflictingrightsanddutiesfortheparties.

D. DisputeManagementObstaclesWhatwhendisputesarise?Theobstaclesmentionedabove,compoundedbyotherfactors,cometoheadatapointofcrisis.Someofthemorefrequentlyobservedchallengesatthedisputemanagementstagearehighlighted.

Lackofcapacitytomanageathreateningdisputeeffectively,ortoassumetheobligationsofthedefendant,posesandobstacleonvariousfronts.Thelackofcapacitycanbecomemanifestinforexampleadheringtoprocedural rules. lax observation of such rules, for example on time frames, could lead to missingdeadlines, and thereby forfeiting rights, at times including even the right to initiate or continuesarbitrationorlitigationonthespecificissues.Thelackofcapacitytodecideonthemosteffectivedisputestrategy, including choosing themost appropriate forum under the concrete circumstances, opting forlitigationoralternativedisputeresolution–arbitration,mediation,conciliation–butalsotoevaluatetheassociatedcost‐benefit‐successratios,mayfurthercompoundthecomplexityofthematterathand.Thechoice of forum is becomingmore andmore important, as the growingnumber of forums that canbe

51


accessed within the web of international and regional arrangements, provides as many challenges asopportunities.

Wheredifferent forumscanbeoptedtosettledisputes in theeconomic field,particularlyon tradeandinvestmentrelatedissues,factorssuchastheestimatedchanceofsuccessundertherelevantrules,costaspects, or keeping open options to approach another forum, need to be given careful consideration.Governmentmayalsoweighpolitical concerns in their considerations, especiallynationaland regionalconcerns.

E. ObstaclesinAdministrativeCoordinationIneffective administrative coordination poses a challenge to effectively pursue a strategy to resolvedisputes. Clarity on which administrative, departmental, or governmental instance is to be in charge,poseshurdles.Localauthoritiesmayforexampletakeadifferentstancefromthecentralgovernmentonhowtodealwiththebusinesspartner.Disagreementonthestrategytopursueislikelytohaveanegativeimpactonresolutionofthedispute.Insufficient knowledge of the applicable relevant and procedural rules, clarity onwhich instance is incharge and agreement on the line of action to pursue, from a toxic cocktail which puts especiallydevelopingcountriesatadisadvantageinthesettlementofinternationaleconomicdisputes.

F. ObstaclesFacedbytheBusinessCommunityThereisoftenalackofeffectivestructurestoassistthebusinesscommunitywhendisputesariseunderregional or international arrangements. Developing countries in general do not have easily accessiblechannelstoallowtradersand/orinvestorstomakeuseofentitlementsunderinternationalschemesandto take claims to dedicated international forums. Many bodies, especially in international trade, areaccessibletomemberstates,withnodirectaccesstothesystemforthebusinesscommunity.Thisholdsforexample,withrespecttogettingthegovernmenttotakeupclaims,inthejargon,espouseclaims,forsubmission to WTO’s dispute settlement bodies on behalf of exporters. The situation is different forforeign investors, who have direct access to arbitration mechanism of the International Centre forSettlement of Investment Disputes (ICSID), if their governments are parties to the ICSID Convention(which is a multilateral treaty). To date, the majority of developing countries are host countries forforeigninvestment,andconsequentlyfindthemselvesgenerallyinthepositionofrespondentratherthanthatofclaimantininvestmentarbitration.

G. ObstaclesinSecuringEffectiveLegalCounselMany developing countries have limited information on commercially and non‐commercially availablelegalcounsel,thescheduleoffeesandtermsofengagement,butalsoontheirmarginofnegotiatingthetermsofengagementwith thecounsel.Manydevelopingcountryofficials findshoppingfora lawyer torepresentthestateinaninternationaldisputeachallengingendeavor.ThisissuehasbeendiscussedonThomasWälde’selectronicdiscussionandintelligenceforum(oninternationaldisputeresolutionandoncommercial disputes in the energy and resources field, Oil‐Gas‐Energy‐Mining‐Infrastructure DisputeManagement(OGEMID)).

Choosinglegalcounseldemandsthecapacitytoassessthequalityofthevariouslegalservicesonoffer.Criteriaweighedinthecomparisonshouldtypicallyincludetheexperience,successrateandreputationofthelawyeror lawfirmaswellasthecostoftheserviceandtheoverallcompetitivenessofthepackageoffered.

As a minimum, counsel should be able to give a prima facie assessment of chances to make a claimsuccessfully, and the government official(s) in charge shouldhave the capacity to evaluate this advice.Ideally,thecounselshouldputinthebasketofoptionssheorhepresents,alsoamicableresolution,suchasconciliationormediation,or,intradedisputes,mutuallyagreedsolutions.Asregardsthelatter,itmaybeillustrativethatoutof392disputesbroughttotheWTOsystemforresolutionbetween1January1995– April2009,about25%weresettledbymutuallyagreedsolutionthroughconsultations(orthedisputewas resolvedotherwisewithout recourse toadjudication).4The legal counsellor iswell‐placedandhassubstantialauthoritytoforwardconciliationormediationasoptionsinothercommercialandinvestmentdisputes.Eventhoughdataonarbitrationarenotpubliclyavailable,evidencefrompracticesuggeststhatnotmany lawyers are inclined to go that route, not least because conciliation andmediation are less

4 See ‘UNCTAD Course on Dispute Settlement in International Trade, Investment and Intellectual Property’, Module 3, Overview, World Trade Organization, www.unctad.org/dispute.

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lucrative as fee‐generators for the lawyers in comparison to arbitration or litigation in internationalforums.

H. ObstaclesinsecuringaidatthedisputesettlementstageThere are various organizations and institutions, both public and private, that provide legal aid ininternationaldisputes,undervaryingconditions, includingwithin theUnitedNationssystem.However,developing countries have limited access to information on available international legal aid and onaccessible support funds. The limited access of information is related to both the effectiveness ofinternational organizations’ information outreach as to the absence of tools and networks to obtainreliableandpertinentinformationattheuser’send.

One example of the better known legal aid institution for international trade disputes, is the Geneva‐based intergovernmentalorganizationAdvisoryCenteronWTOLaw(ACWL).Established in2001withthe stated objective of providing legal advice on WTO law and support in WTO dispute settlementproceedings, it has become a cost efficient and qualitatively competitive alternative to commerciallyavailablelegalcounselfordevelopingcountriesandleastdevelopedmemberstates.

III. KeyelementsforaUnitedNationsresponseThe many challenges faced in the international economic regulatory arena, not least by the weakerstakeholders, notably the developing countries, call for an effective response. In my view, the UnitedNations is the only international institution that can adequately provide a response to meeting thechallengesdescribedabove.

Athree‐prongedresponseisproposed:1. NegotiatingtheMaze:Thecreationofaone‐stopsupport,liaisonandguidancefacility,asafirst

steptofacilitatenavigationthroughthecurrentlyexistingmazeofinternationaleconomiclaws,regulationsandarrangements;

2. LegalAid:Theestablishedofeone‐stopguidancefacilitytodirectstakeholderstoavailablelegalaid, and extension of legal aid resources forweaker international players – primarily, but notexclusively,states–ininternationaleconomicdisputes;

3. AUnitedNationsOmbuds‐office:ThecreationofaUnitedNationsombuds‐office for facilitatedmediationininternationaleconomicdisputes.

A. Support,Liaison,GuidanceandLegalAidTheproposedsupport, liaison,andguidance facilitywouldhaveas itsobjectivehelpingmemberstatesnavigatethecomplexinternationaleconomiclegal‐regulatorymaze.5ItmaybemodelledupontheRuleofLaw facilities launched since 2004 by the United Nations Secretariat.6Work on the Rule of Law wasproposedbecauseitwasfeltthattheorganizationneededtodeepenandrationalizeitsruleoflawwork,and coordinatemore effectivelywithoutside actors.Todate, thiswork is limited to fourpillarsof themodern international legal system, namely international human rights law, international humanitarianlaw,internationalcriminallawandinternationalrefugeelaw.

Asseenabove,similarneedsexistintheareaofinternationaleconomiclaw.Hence,theproposedUnitedNationssupport,liaison,andguidancefacilitycouldhaveasimilarstructureintheareaofinternationaleconomiclaw,focusingontradeandinvestment.Thefacilitywouldactasanavigationtooltoreachtheinternationalbodyofbodies that couldmost adequatelyprovide the service, assistanceor informationsought.

SimilartoactivitiescoordinatedbytheUnitedNations’RuleofLawsecretariat,thefacilitycouldgatherdataanddisseminateinformation,maintainacentralwebsiteand/orprovidelinkstobonafidewebsites,as well as a calendar of activities including of training and capacity building activities relevant tointernationaleconomic law. It couldprovideguidance togovernments, thebusinesscommunityand tonon‐stateactorsonwheretofindassistanceininternationalnegotiations,oronhowtochoosealawyeror arbitrator, and onwhere to source international financial or non‐financial aid for the settlement of

5 Some of the functions proposed are currently being undertaken by UNCTAD. 6 Rule of Law Coordination and Resource Group, Joint Strategic Plan 2009-2011, United Nations, February 2009; Strengthening and coordinating United Nations Rule of Law Activities, Report of the Secretary-General, United Nations, 6 August 2008, A/63/226.

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internationaldisputes.Thelattertaskwouldfeedintothesecondfacilityproposed,namelythelegalaidfacility.

The proposed facility should also provide a forum where actors and stakeholders from national andinternational bodies and from governments, such as government and private sector legal officers,attorneys‐general, representatives of bar associations and associations and associations of arbitrators,providers of national and international legal aid, and of training and capacity building, couldmeet toexchangeinformationandexperience.

B. LegalaidProposalsforprovidinginternationallegalaidkeepresurfacinginoneformoranother.Aone‐stopUnitedNationsfacilityforlegalaidwouldhaveasitsfirsttasktakingstockofexistingactivitiesandinitiatives.On the basis of the existing structures, proposals could bemade for creating an integrated and easilyaccessibleinternationallegalaidstructure.

C. TheUnitedNationsOmbuds‐officeThisproposalcallsforthecreationofaUnitedNationsombuds‐officeforinternationaleconomicdisputes.The ombuds‐office is proposed as an alternative and affordable solution to the increasing difficultiesweakerplayersingeneralanddevelopingcountriesinparticularencounterininternationalarbitration.Thisombuds‐officewouldcombinethemoralauthorityof theUnitedNationswith themoreaffordableforms of dispute settlement and alternative dispute resolution (ADR) increasingly being discussed inarbitrationcircles,namelyconciliationandmeditation.

The ideal shape of the United Nations ombudsoffice needs to be carefully considered. One possibilitywould be to establish a twin‐headed ombuds‐office. In this structure, the two ombudspersons couldrepresent developing and industrialized countries respectively, and also the twomain legal traditions,namelycommonlawandcivillaw.Suchastructurewouldprovideessentialoptionstothememberstatesseekingitsservicesfromtheveryoutset.

Theprincipal roleof theUnitedNations ombudsofficewouldbe to to act as amediator in differences,disagreements, and disputes. The aim would be to achieve an amicable solution and to avoid, wherepossible, increasingly costly and often lengthy international litigation, or institutionalized or ad hocarbitration.Theombudsofficewouldpromotediscussionbetweenthepartiesandmediatebetweentheparties to reachamutuallyagreedsolution. Ideally, theombudsofficewouldachieve fairandequitableoutcomesininternationaleconomicdisputes.

The symptoms witnessed in international economic relations, from international legal frictions anddisputes, especially in investment, trade and commercial transactions, to the explosion of the feverishlegal activities provided by a variety of commercial and non‐commercial service providers andassociations, indicate a need for action. In international matters, where the international communityholds responsibility, the onlymultilateral organization that canprovide legitimate leadership, create aviablestructureforhelpingmemberstatesnavigatethecomplexitiesofthepresenttangledsystemandachievefairandequitableoutcomesininternationaleconomicdisputes,istheUnitedNations.

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