The New Slovak Arbitration Act Applicable from January 2015: Has it Progressed Sufficiently?

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Given the geographical position of Slovakia – in the heart of Europe – it is bound to be a common place of arbitration. Or at least it should be, in theory. The reality is, however, a bit shadier. I already argued here that if I could choose to arbitrate in Slovakia, I would opt for a different forum every day. I suggested that the Slovak Arbitration Act (Act No. 244/2002; “SAA”) is one of the reasons for my stance and I wanted to briefly address this closely in relation to its newest version. In addition, there is also going to be a new act addressing only arbitration in cases of consumers’ disputes but I will not deal with that in this post. Main changes to the SAA are:

Arbitrability under the Slovak Arbitration Act

This change clarifies that the parties may choose arbitration if their dispute can be settled by an agreement pursuant to Slovak civil law (par. 585 of the Slovak Civil Code). Therefore, there no longer has to be a dispute over assets as under the old legislation. The new SAA also clarifies that an arbitral tribunal has the competence to determine whether there is a legal right.

Permanent Courts of Arbitration

The new SAA states that Permanent Courts of Arbitration (“PCA”) may only be established by a civil association (under Act. No. 83/1990), an association of legal entities under the Slovak Civil Code and by chambers of commerce. This change aims to dissuade regular corporations to establish PCAs for profit and in turn ensure independent arbitral awards. The existing PCAs must comply with this change until the end of 2014.

Lists of Arbitrators

This change is related to the previous one and again aims to dissuade from fraudulent practice of PCAs. There is no need to have a formal list of arbitrators (as under the old law) but the PCAs must publish a yearly report on their websites.

Arbitration Clause

The new SAA reacts to a decision of the Slovak Supreme Court (2 Cdo 245/2010 from 2011), which was later followed by lower courts and it stated that the requirement of a “written” arbitration clause is a more formal requirement than the one contained in the Slovak Civil Code. This is obviously not correct and the correct interpretation is quite the contrary. The new SAA explicitly states that an arbitration clause can be incorporated by reference (e.g. in the articles of association) without a signature on the document.

Interim Orders and Preliminary Orders

The old SAA had an unsatisfactory regulation of these institutes. If the parties agree, an interim order may be rendered even before the arbitral tribunal is constituted and without any submission from the respondent. Such an interim order however is not executable through the courts. This part of the act is completely inspired by Chapter IV A of the UNCITRAL Model Law.

Sabotage of the Arbitration Proceedings

The new SAA clarifies that if one party to the arbitral proceedings petitions a civil court to declare the arbitration clause void, the civil court will discontinue its proceedings once it finds that an arbitration proceeding is ongoing.

Annulment of an Arbitral Award

The most progressive change happened in this part of the SAA because it adopts the reasons for the annulment of an arbitral award from art. 34 of the UNCITRAL Model Law. The period for the initiation of the proceedings on civil courts is prolonged to 60 days (from 30).

Comment

The most glaring problem of the legislation is the regime of the PCAs. The old SAA led to the establishment of more than 130 PCAs because their creation was not regulated at all. They entertain fraudulent practices and essentially destroyed any attempts to advertise alternative dispute settlement processes in Slovakia. The change of the SAA does not address this in full. Yes, some PCAs will cease to exist because their establishers will not care enough to change their legal forms. However, the ones who care only need to register a civil association and the legislation is circumvented. Although this was pointed out to the Committee responsible for the act, no other change was made. The Committee was not satisfied with the Czech Arbitration Act, which is very formalistic because it only allows the existence of arbitral institutions established by law. However, the Czech Chamber of Commerce (which is among the fortunate institutions) enjoys a good amount of arbitrations in the Czech Republic. Although this is in contrast to what is accepted in pro-arbitration countries, I am confident that a similar restriction would benefit arbitration in Slovakia. It is important to establish a reliable institution and that is not going to be possible under the old or under the new SAA.

A progress could also have been made in the area of annulments. France and Belgium benefit from the option provided by the respective lex arbitri to waive the right to seek recourse at the national courts after an award had been rendered. This is currently excluded under par. 42 of the SAA. It is clear that such a waiver adds to the efficiency of the process and would be hugely beneficial in a country where ordinary court proceedings can take a decade. The same issue could have also been addressed differently. For instance, Austria only allows for recourse to one instance in the civil court regime, which is the Austrian Supreme Court. The same would have worked perfectly well in Slovakia.

In conclusion thus, there are huge positives about the new Slovak Arbitration Act but it is still not up there with the pro-arbitration countries’ lex arbitri. Admittedly, it is difficult to take the basis of an old piece of legislation and put various progressive and less formalistic bits and pieces in it. Moreover, if the same happens two-three times in 20 years, the results are inefficient. I submit that the verbatim adoption of the UNCITRAL Model Law and its tweaks in relation to the formal Slovak Code on Civil Procedure would be much more efficient and would require less hassle. In fact, that is essentially what happened with the reform of the interim order and I cannot see a reason why it could not apply to the whole act.

And of course, marry Christmas to all readers who either celebrate Christmas or celebrate Christmas at this time of the year 🙂

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written by Peter Plachy

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