Commercial disputes, especially complex commercial cases, are increasingly present in modern regional and Serbian arbitration practices. There are more and more international and local business contracts in which the contracting parties fully trust international and domestic arbitrations to resolve all disputes arising from such contracts.
Often, the parties to a dispute, through their lawyers, use various arguments and interpretations of evidence with the aim of making the arbitration award as favorable as possible. The arsenal of legal means to fight is diverse.
If in arbitration disputes the parties emphasize assertions claiming that a criminal offense was committed within the scope of the business that is the subject of the dispute, the question arises whether such assertions represent a challenge to arbitration, as well as whether arbitrations within their jurisdiction can deal with such assertions, especially bearing in mind that the parties have, by the arbitration agreement or clause concluded, entrusted all disputed issues from their contractual relationship to the jurisdiction of the specific arbitration.
In practice, before Serbian arbitration institutions (but also Serbian courts) or in cases where Serbian companies appear before foreign courts and arbitration institutions, the most likely are assertions of claims about the alleged existence of a criminal offense within a dispute (regardless of whether such an offense has taken place in Serbia or abroad). One example is when a party to the dispute only indicates that a certain business activity that is subject to arbitration constitutes a criminal offense. Another example is when a party to the dispute points out that an investigative or criminal proceeding is being conducted by a certain competent authority regarding a certain business activity that is subject to arbitration, against either the parties to the arbitration dispute or their current or former employees or representatives and, for that reason, asks for the suspension of the arbitral proceedings in order for the arbitration to take into consideration the outcome or certain details of such criminal or investigative proceedings.
What should be the response to such claims? Are these challenges to arbitration? Can it be interpreted that, since the parties entrusted all disputed issues from one contractual relationship to arbitration, they have also entrusted the arbitration to check the existence of a criminal offense within the arbitration procedure – whether a certain act or omission constitutes a criminal offense?
First of all, arbitration is not a court, but it represents a legally permitted out of court method for resolving certain types of disputes. These can only be disputes that are eligible to be settled before arbitration (i.e., objective arbitrability).
The legislation of every country (and Serbia is no exception by any means) regulates which types of disputes the contracting parties can entrust to arbitration. Without going into details here, we can summarize that these are commercial or business disputes, except for the disputes for which the courts have exclusive jurisdiction. Hence, when the contracting parties conclude an arbitration agreement or an arbitration clause, they must be aware that they refer to the disputed commercial or business relations which are eligible to be resolved by arbitration, and which do not fall within the exclusive jurisdiction of the court.
This already makes it clear that the arbitration can never be competent to undertake any type of criminal prosecution, and it does not deal with the criminal law analysis of whether a specific action meets all the criminal law elements required to qualify such an action as a criminal offense. On the contrary, all this is in the exclusive competence of the authorities that are competent for criminal prosecution (e.g., the public prosecutor) and of the courts that are exclusively competent for deciding in criminal proceedings.
To summarize, arbitration proceedings (whether conducted before local Serbian or foreign institutions) are simply not the forum for any type of criminal prosecution nor is it the forum for any type of criminal law analysis.
The analysis in the arbitration award will refer to all issues that are within the competence of arbitration, namely, all disputed issues that are suitable for decision by arbitration. Therefore, asserting the existence of a criminal offense does not or should not constitute an additional challenge to arbitration or a condition for rendering its award.
The efficiency of resolving disputes through arbitration is an important feature that parties often consider when contracting arbitration, and the above-mentioned assertions do not essentially limit the actions of arbitrators, within their jurisdiction.
By Nedeljko Velisavljevic, CEE Partner and Head of Dispute Resolution, and Nenad Kovacevic, Senior Attorney, Petrikic & Partneri AOD in cooperation with CMS Reich-Rohrwig Hainz