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Introduction |
 Back
in the early ‘90’s it was not the easiest thing to convince a Romanian
contracting party to agree arbitration as an alternative means of
dispute resolution. Romanians were reticent with respect to arbitration
probably due to the more than 50 years of isolation which Romania
endured during the communist regime when Romanian companies – all of
which were state owned – were rarely involved in international arbitral
disputes. Not only were businesses uneducated in the benefits of
alternative dispute resolution, but the curriculum of the law schools
dealt with the whole subject in only a few phrases. Nevertheless, over
the past several years, as the Romanian business environment evolved in
its sophistication, so did its understanding of the importance of
arbitration. With a largely privatized economy, Romanian businesses
enter into increasingly sophisticated transactions with multinational
companies which expect their disputes to be settled by international
arbitration. Arbitrators are usually experienced commercial attorneys
and experts who are better trained to handle complex cases than most
judges – and this probably holds true in other countries as well. Apart
from the fact that foreign businesses have an inclination towards
arbitration stemming from their business culture, their increased
appetite for arbitration on matters related to Romania undeniably arises
from the perception that Romanian justice is corrupt. Indeed, Romania’s
judge’s last year reported to the Ministry of Justice that, in their
view, one out of five cases in the Romanian court system was infected by
corruption. International arbitration is seen by many as a neutral
venue, which is why it is widely perceived as a good alternative to
Romanian courts. This is especially true in cases against the Romanian
State, where judges – and even Romanian arbitrators -- are sometimes
perceived as subject to influence and, therefore, biased. Consequently,
international companies dealing with Romanian entities or the Romanian
State stubbornly insist that their Romanian counterparts agree to
international arbitration outside the borders of Romania. |
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Enforcing an Award |
With the significant increase in the number of international contracts
entered into by Romanian companies, arbitration is no longer seen as an
“exotic” or “foreign” means to settle disputes. As a result, the number
of cases where parties seek the enforcement of foreign arbitral awards
has increased substantially.
Of course, a foreign arbitral award has no effect in Romania, unless it
is recognized by the Romanian courts. According to the applicable
provisions of the Romanian Civil Procedure Code (“the Code”), foreign
arbitral awards which are not complied with can be enforced in Romania
by applying the relevant provisions of Law 105/1992 regarding
international private relationships (“Law 105”). Under the terms of the
Code, an arbitral award is to be qualified as “foreign” when it is
either rendered on the territory of a foreign state or, although
rendered on Romanian territory, it cannot be considered to be a national
award because the “foreign” elements prevail in the case at hand (e.g.,
both of the parties are of foreign nationality and the award was
rendered by applying foreign law).
Law 105 provides for the procedure to be followed for the recognition
and enforcement of foreign court decisions in Romania. The same
procedure applies to the enforcement of foreign arbitral awards.
Arbitral awards may be enforced both when they are rendered by ad-hoc
arbitrators appointed for each case or by an institutionalized arbitral
tribunal. Although the practical difference between the concepts of
“recognition” and “enforcement” is rather narrow, the Supreme Court of
Justice of Romania has decided that, in order to obtain the enforcement
of an award, one must also seek its recognition. Recognition means that
Romanian judges consider the award to be final and binding, while
enforcement refers to the ability to actually implement the award.
In order to grant recognition and enforcement to a foreign arbitral
award, Romanian judges must examine its compliance with a number of
conditions of regularity provided for either by Law 105 or, as the case
may be, by the applicable international convention to which Romania is a
party. It must be noted that in doing so, the courts do not have the
authority to either reconsider the case or modify the arbitral award in
any way. |
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International Conventions |
Law 105 states that its provisions are applicable to the extent that the
international conventions to which Romania is a party do not provide for
different rules. Should this be the case, the provisions of an
international convention regarding the regularity conditions to be
fulfilled by the arbitral award prevail.
The most significant international convention to which Romania is a
party is the United Nations Convention on the Recognition and
Enforcement of Foreign Arbitral Awards – New York, 1958 - (“the New York
Convention”), which has been ratified by 135 nations. The New York
Convention was ratified by Romania with the reservation of applying it
solely to arbitral awards rendered on the territory of Signatory States
with regard to commercial matters.
As concerns the applicability of the international conventions, in a
1998 decision the Supreme Court of Justice of Romania ignored the
express provisions of Law 105 according to which the provisions of
international conventions take precedence, and refused to apply the New
York Convention, instead, applied the conditions provided for by Law 105
. As a result, for practical reasons, lawyers tend to motivate their
requests for enforcement of foreign awards by using mainly the
provisions of Law 105 even in those cases where the New York Convention
applies. For example, in one case, the Bucharest Municipal Court has
granted the enforcement of a foreign arbitral award rendered by the ICC
International Court of Arbitration in Paris, stating that “the award
complied with the conditions provided for by Law 105”. Although the
award was rendered in France, which is a Signatory State to the New York
Convention -meaning the Convention was applicable to the case - both the
Court of Appeal and the Supreme Court of Justice preferred to stick to
the conditions provided for by Law 105.
The consequences of the courts’ refusal to apply the prevailing
provisions of the international conventions are quite significant. On
one hand, Law 105 provides for a larger number of regularity conditions
to be fulfilled by the arbitral award in order to be enforced than the
New York Convention. On the other hand, the latter has reversed the
burden of proof of regularity conditions, as under the terms of the New
York Convention, the arbitral award benefits from a presumption of
regularity. Subsequently, the applicant does not have the obligation to
prove the regularity of the arbitral award, but merely the obligation to
provide the court with the arbitral award and the arbitral agreement.
Thus, based on the New York Convention, the enforcement of the arbitral
award can be denied at the defendant’s request, only if he manages to
prove that the regularity conditions provided by the New York Convention
were not fulfilled. |
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Exequatur |
 The
procedure by which judges examine the international regularity of
foreign awards in order to grant them recognition and enforcement is
commonly known as exequatur. In some cases, judges have construed the
legal provisions in favor of the enforcement of foreign awards by making
use of questionable arguments. For example, in one case, the defendant
argued -- based on art. 167 b) of Law 105 which provides that the award
must have been issued by a court having jurisdiction to hear the case --
that the court which rendered the award had no jurisdiction to hear the
matter. The Bucharest Municipal Court rejected the defendant’s arguments
and stated that, “since the Vienna Commercial Tribunal considered that
it was competent to judge the case, the defendant’s argument regarding
the alleged foreign court’s lack of jurisdiction cannot be examined by
the court of exequatur” . The Court of Appeal did not hesitate to
validate the reasoning of the Municipal Court . Such an argument should
not be accepted, as the conditions provided by Law 105, i.e., among
others, that the foreign award must be rendered by a competent court,
would become void of any substance. Indeed, the Romanian courts should
have instead verified the competence of the Austrian court rather than
just assume that the court had jurisdiction to hear the case.
As concerns the costs of the exequatur procedure, the New York
Convention states that “there shall not be imposed substantially more
onerous conditions or higher fees or charges on the recognition or
enforcement of arbitral awards to which this Convention applies than are
imposed on the recognition or enforcement of domestic arbitral awards.”
Indeed, the stamp duty payable in Romania for the recognition of a
foreign award is similar to that payable for the recognition of a
domestic award.
Once the Romanian court issues the exequatur, the award becomes
enforceable in Romania. The exequatur judgment obliges the defendant to
comply with the foreign arbitral award. In the event that the award is
not complied with, the creditor must file an additional Motion for
Forced Execution. The effective enforcement of foreign awards in Romania
is accomplished by court-appointed officers, who are private persons
duly authorized by the Romanian State. |
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Conclusion |
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There is nothing unusual or problematic in Romanian law regarding the
enforcement of foreign arbitral awards, which is why, in principle, one
may expect Romanian courts to grant recognition and enforcement of such
an award in Romania, provided that all of the legal requirements have
been fulfilled. Romanian courts routinely enforce foreign judgments with
respect to civil and family matters, (e.g., divorce), as well as foreign
money judgments and are increasingly willing to grant similar
recognition and enforcement to foreign arbitral awards. This is most
likely due to the increasing number of international contracts
containing arbitration clauses signed by Romanian companies so that
claims for recognition and enforcement have gradually become a rather
routine matter in Romania. |
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INTERNATIONAL REGULARITY CONDITIONS
FOR RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS
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| A. Law
105/1992 |
B. New York
Convention |
1.
The foreign award must be final and
enforceable in compliance with the laws
of the country where it was rendered.
One may note that this condition is more
restrictive than its equivalent in the New York
Convention, which solely requires the award to
be binding on the parties. The aptitude of the
foreign arbitral award to be final and
enforceable may be proven by the submission
of a certificate issued by the arbitral court. |
1.
The award must have become binding on
the parties.
2. The award must have not
been set aside
or suspended by a competent authority of
the country in which, or under the law of
which, that award was made.
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2. The foreign
award must be issued by an
arbitral tribunal having jurisdiction to
hear the case. This condition is not fulfilled
under the following circumstances:
- the arbitral agreement is not valid; or
- the award was rendered by an arbitral
court which was not validly formed; or
- the award deals with matters not falling
within or beyond the scope of submission of
arbitration. |
3. The arbitral
agreement is valid under the
law to which the parties have subjected it or,
failing an indication thereon, under the law of
the country where the award was made.
4. The parties to the arbitral
agreement
were not incapacitated.
5. The composition of the
arbitral authority
must have been in accordance with the
agreement of the parties, or, failing such
agreement, was not in accordance with the law
of the country where the arbitration took place.
6. The award must not deal
with matters not
contemplated by, not falling within or
beyond the scope of the submission of
arbitration. However, if the decisions on
matters submitted to arbitration can be
separated from those not so submitted, that
part of the award which contains decisions on
matters submitted to arbitration may be
recognized and enforced. |
3. The foreign
award must not violate the
principles of Romanian International
Law public order. For example, the foreign
award must not infringe upon the exclusive
competence of Romanian courts to deal with
the matter and the subject matter of the award
must be capable of settlement by arbitration. |
7. The recognition or
enforcement of the
award must not be contrary to the public
order under the law of the country where
recognition and enforcement is sought.
8. The subject matter of the award must be
capable of settlement by arbitration
under the law of the country where recognition
and enforcement is sought
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4. In the event that the
arbitral award was
rendered in the absence of the non-
prevailing party, it is mandatory that due
service of process related to the hearing
on the merits is assessed, and that such
non-prevailing party has been granted
the possibility to defend itself and to
exercise any and all due remedies
against such award.
5. The foreign award must not have been
obtained fraudulently.
6. There must be reciprocity regarding the
effects of foreign arbitral awards
between Romania and the country of the
arbitral tribunal which rendered the
foreign award. Such reciprocity implies that
each country’s judiciary will, upon fulfillment of
the various national procedures and the
submission of appropriate documentation,
recognize the adjudications issued by the
arbitral courts located in the other country.
7. The case has not been decided upon by a
Romanian court or was not pending
before a Romanian court at the date
when the case was filed with the foreign
arbitral tribunal.
8. A foreign award can be enforced in
Romania within statute of limitations,
which is 3 years, unless the statute of
limitations provided for by the law of the
country where it was rendered is shorter.
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9. The party
against whom the award is
invoked was given proper notice of the
appointment of the arbitrator or of the
arbitrator proceedings. Such party must
have not been otherwise unable to
present his case.
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Editors Note: It is our policy not to mention our clients by name in
The Romanian Digest™ or discuss their business unless it is a matter of
public record and our clients approve. The information herein is correct
to the best of our knowledge and belief at press time. Specific advice
should be sought from us, however, before investment or other decisions
are made.
Copyright 2005 Rubin Meyer Doru & Trandafir, societate civila de avocati.
All rights reserved. No part of The Romanian Digest™ may be reproduced,
reused or redistributed in any form without prior written permission
from the publisher.
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