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In Need of an Arbitration Law

In Need of an Arbitration Law

Bosnia and Herzegovina
Typography

The unique political and administrative landscape of Bosnia and Herzegovina has resulted in far too many legislative levels and regulations for a country of its size.

Unsurprisingly, then, Bosnia and Herzegovina currently has four laws on litigation procedure: The Law on Litigation Procedure before the Court of Bosnia and Herzegovina, two laws adopted on entity levels (the Law on Litigation Procedure of the Federation of Bosnia and Herzegovina and the Law on Litigation Procedure of Republika Srpska), and the Law on Litigation Procedure of Brcko District (a self-governing administrative unit). When it comes to alternative dispute resolution methods in Bosnia and Herzegovina, there are three laws on mediation in place: the Law on Mediation Procedure of Bosnia and Herzegovina, the Law on Mediation Procedure of the Federation of Bosnia and Herzegovina, and the Law on Mediation Procedure of Republika Srpska. Otherwise, apart from the vivid regulatory set-up of litigation and the rarely used mediation option, Bosnia and Herzegovina still does not have a separate piece of legislation regulating arbitration, which, at the moment, remains merely a section of the litigation laws.

Nonetheless, for quite a while now, arbitration has been the most widespread alternative method for settling disputes, and its significance continues to grow, as long-lasting and exhausting litigations are something that disputing parties, especially legal entities, seek to avoid. Efficiency, the ability to choose professional arbitrators, flexibility, informality, and confidentiality of the procedure are just some of the advantages that make arbitration a preferable method for dispute resolution, especially when it comes to commercial disputes. The adoption of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards back in 1958 had a crucial impact on the development and growth of international arbitration. Bosnia and Herzegovina is one of the Convention’s 156 contracting parties.

Arbitration in Bosnia and Herzegovina is governed by the Law on Litigation Procedure of the Federation of Bosnia and Herzegovina, the Law on Litigation Procedure of Republika Srpska, and the Law on Litigation Procedure of the Brcko District. Each of these laws contains only 20 articles dedicated to arbitration, all regulating the validity of the arbitral agreement and certain aspects of the procedure (i.e., appointing and challenging the arbitrators, obtaining court assistance in processing evidence, and the adoption, form, and annulment of the arbitral award). In all three laws, these provisions are almost identical. On the other hand, the recognition and enforcement of foreign arbitral awards is regulated by several articles in the Law on Resolving Conflict of Laws with Regulations of Other Countries in Certain Relations of Bosnia and Herzegovina. In addition, particular aspects of arbitration in certain special cases are regulated by other laws. 

In other words, in light of the scattered and poor regulatory framework of arbitration in Bosnia and Herzegovina and the virtual ignorance of its value as a dispute resolution tool, it is clear now more than ever that Bosnia and Herzegovina is in need of drastic legislative improvements and a coherent approach to this issue.

The United Nations Commission on International Trade Law adopted the Model Law on International Commercial Arbitration, which provides an excellent starting point and guide to many legislatures in the process of adopting or improving their arbitration legislation. A total of 73 countries have adopted arbitration laws relying upon the Model Law, including many of the countries surrounding Bosnia and Herzegovina with which it shares more or less the same legal heritage, such as Croatia, Serbia, Montenegro, Slovenia, and others.

While it is perhaps unnecessary to say that arbitration is an important option for participants in legal transactions, it is worth noting that its impact on the state itself is also potentially tremendous, even though unrecognized, due to the fact that its use inevitably contributes to an unburdening of courts. Overloaded courts, as is the case with many in Bosnia and Herzegovina, aggravate litigation procedures and burden the state budget. Thus, it is in the interest of the state to promote arbitration and encourage the parties to agree on its use. However, the mind set of politicians and legislators is just not there yet. 

Further development of arbitration in Bosnia and Herzegovina depends on the adoption of a single legislative act governing arbitration in a unified, detailed, and comprehensive manner. Despite its importance, it would not be a demanding task, in light of the Model Law and the positive examples from other jurisdictions.

Stakeholders in Bosnia and Herzegovina, from representatives of the civil society itself to the competent ministries and judicial authorities, should take positive action and initiative to pass the law on arbitration at all relevant levels, or even just one single level, applicable to all – by far the best model.    

By Adis Gazibegovic, Managing Partner, and Saida Porovic, Associate, SGL - Saracevic & Gazibegovic Lawyers

This article was originally published in Issue 3.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.