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Arbitration in
Romania |
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Introduction
With the Romanian Courts hamstrung by procedural rules that often favor
procrastination over justice, the speed and efficiency of alternative
dispute resolution has made arbitration in Romania a more attractive
substitute for judicial indecision. Arbitration is, indeed, a much
quicker and less formal procedure. Arbitral awards are final and
mandatory for the parties, and enjoy international recognition because
Romania ratified the United Nations Convention for the recognition and
enforcement of foreign arbitral awards, executed in New York in 1958.
Additionally, arbitration benefits from the specialized competence of
the arbitrators chosen by the parties and the confidentiality of the
process as opposed to the public nature of courts.
Romania’s arbitral rules were first set forth in Book IV of the Civil
Procedural Code (the “CPC”) in 1865. Almost one century later, in 1953,
the Court of International Commercial Arbitration (the “CICA”) was
established for the settlement of foreign trade disputes. The CICA was
reorganized twice: first in 1990, after the fall of communism, and again
in 2007. After the 2007 reorganization, the CICA emerged as a permanent,
independent arbitral institution for the management of international as
well as domestic arbitration and attached to the Chamber of Commerce and
Industry of Romania.
The CICA is the most frequently used arbitral institution in Romania for
both domestic and international disputes. The CICA is expressly
authorized by law to develop its own set of arbitral rules (the “CICA
Arbitration Rules”) and, unless these rules provide otherwise, the
provisions of the CPC, the Geneva 1961 European Convention on
International Commercial Arbitration, and the 1976 UNCITRAL Arbitration
Rules remain applicable. It should also be noted that a new Civil
Procedure Code, which provides more detailed provisions in relation to
institutional arbitral procedures, is expected to become effective in
July of 2012. Finally, the CICA is the arbitral institution in charge of
the appointment of arbitrators, and the performance of all other aspects
of arbitral procedure, including the management of secretarial matters. |
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Forms of Arbitration |
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According to the provisions of the CPC, the parties to an agreement to arbitrate
may select one or more persons to preside over their dispute and issue a final
and mandatory decision. Additionally, the parties may agree that the arbitration
be hosted by a permanent arbitral institution or a third party. The parties are
entitled to choose between institutional or ad-hoc arbitration.
Institutional arbitration takes place when the parties have entrusted a
permanent arbitral institution to host the arbitration in accordance with its
own set of rules. In Romania, institutional arbitration is hosted by the CICA in
accordance with the CICA’s Arbitration Rules. Ad-hoc arbitration, on the
contrary, takes place when the parties have full freedom to organize the
arbitration and to establish its procedure. Thus, in ad-hoc arbitrations,
the CICA’s competence is limited: it provides, at the arbitrators’ request, data
or documentation regarding the applicable case-law; it ensures access to the
institution’s secretarial services; it provides an adequate location for the
arbitration to take place; it facilitates the arbitration, providing proper
conditions and ascertaining that it is finalized in due time; and it examines,
at the arbitral tribunal’s and the parties’ requests, the draft arbitral award
with regard to form and certain legal aspects, but without having any impact
over the arbitrators’ freedom of decision in the case. |
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Disputes Subject to Arbitration |
According to the CPC, only monetary disputes may be subject to arbitration.
Where the parties have concluded a written arbitration agreement, the CICA is
empowered to rule over commercial and civil disputes, either domestic or
international, through either institutional or ad-hoc arbitration.
According to the CPC and the CICA Arbitration Rules, the arbitration is
considered international where the relationship between the parties falls within
the private legal sphere and contains a foreign element, meaning any element
that ties the legal relationship between the parties to several countries and
consequently to several legal systems. This is the case, for example, when an
individual party to an agreement is a foreign citizen, a legal entity party to
the agreement is headquartered in a foreign country, or the transactions that
form the basis for the arbitration agreement are to be performed in a foreign
country.
Furthermore, there are
specific matters that cannot be the subject of arbitration, such as matters
involving civil status, family relations, bankruptcy proceedings, and labor
disputes, which are subject to special statutory provisions. Any arbitral award
granted with regard to these matters is therefore null and void. |
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The Arbitration Agreement |
Under Romanian law, the arbitration agreement is the agreement by which
the parties appoint one or more persons to settle a dispute and to adopt
a final and binding decision. This may be achieved either by way of an
arbitration clause included in the contract or by a separate agreement.
An arbitration clause establishes that any dispute that may arise from
the contract or in relation to it will be resolved through arbitration,
as well as specifying the arbitrator’s name or the manner in which he or
she will be selected. An arbitration agreement, on the other hand, is
separately concluded for each individual dispute, and it must specify,
under sanction of nullity, the subject matter of the dispute as well as
the arbitrator’s name or the manner in which he or she will be selected.
The CICA has suggested the following text for a contractual arbitration
clause:
“Any dispute under or related to this agreement, including with respect
to the execution, performance or termination hereof, shall be settled by
means of arbitration, by the Court of International Commercial
Arbitration of the Romanian Chamber of Commerce and Industry, in
compliance with the Court organization and operation rules, the Court
procedural rules, and with Art. 4 of the European Convention on
International Commercial Arbitration signed in Geneva on April 21,
1961.”
Although it is not mandatory to do so, parties who choose the CICA as
their arbitral institution frequently utilize this specific text as the
arbitration clause in their agreement so as to avoid a lack of any of
the essential elements that must be included in the arbitration clause.
In addition to these essential elements, the parties may also set the
location of the arbitration and, with regard to international
arbitration, the language to be employed in the debates and any written
evidence, as well as the law applicable to the merits of the case. |
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Arbitrators |
 An arbitrator may be any natural person who, according to his or her
domestic law, has full legal capacity to exercise rights and
obligations. The CPC does not delineate any specific requirements to be
an arbitrator; however, the parties may themselves choose to include
specific conditions for an arbitrator’s eligibility in their contracts,
such as conditions concerning the arbitrators’ professional
qualifications or expertise. Arbitrators may either be Romanian or
foreign nationals. Currently, the CICA’s roster includes 110 Romanian
arbitrators and 42 foreign ones, whose names are maintained in two
separate lists accessible at both the CICA facilities and through its
website. The most notable characteristic of arbitrators is the fact that
they are not the parties’ representatives; on the contrary, they are
independent and impartial in the exercise of their functions.
The number of arbitrators is left to the parties’ discretion. However,
arbitral tribunals comprised of three arbitrators are the most commonly
used in both international arbitration and in arbitration proceedings
hosted by the CICA. Also, where the parties have not specified the
number of arbitrators, the arbitral tribunal will be comprised of three
arbitrators by default.
Where the tribunal is to be comprised of three arbitrators, each party
appoints its own arbitrator, while the third is appointed by the
“nomination authority” (“autoritatea de nominare”), which,
according to the CICA Arbitration Rules, is the president of the CICA’s
Board of Directors. This rule is a product of a recent amendment adopted
alongside the CICA’s new Arbitration Rules, which went into effect last
March. According to the former rules, where an arbitral tribunal was to
be comprised of three arbitrators, the third one was to be appointed by
the two arbitrators previously selected by the parties. On the one hand,
this recent amendment strengthens the role of the CICA within arbitral
procedure, and many litigants perceive it as a reflection of the CICA’s
objective approach to the selection of arbitrators. On the other hand,
other litigants fear that the CICA’s involvement in the arbitrator
selection process is an effective limitation of the parties’ right to
freely select and appoint their own arbitrators in accordance with the
CICA Arbitration Rules. Certainly, however, the “nomination authority”
cannot appoint the third arbitrator unless there is full compliance with
the parties’ wishes as expressed in the arbitration clause or the
arbitration agreement.
Where the parties have selected an even number of arbitrators and the
arbitrators’ opinions are divergent, the arbitral tribunal is
supplemented with an additional arbitrator, appointed in accordance with
the parties’ agreed-upon understanding. However, where the parties are
unable to reach such an understanding, the additional arbitrator is
appointed by a court of law.
The only situation in which the parties’ preferences with regard to the
selection of arbitrators are unrestricted is where the parties have
agreed on a single-arbitrator tribunal. Provided that the respective
arbitrator is included in the arbitral institution’s roster of
arbitrators, and provided that there is no conflict affecting that
specific arbitrator, there is no way in which the nomination authority
may intervene in the parties’ selection of the respective arbitrator.
Regardless of the number of arbitrators, however, all arbitrators must
be included on the CICA’s roster of arbitrators if an institutional
arbitration is to take place. Where the parties intend to appoint
additional arbitrators who are not included on the CICA’s roster, they
must resort to ad-hoc arbitration. |
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Arbitral Procedure |
General aspects
Arbitral procedure must ensure full compliance with the principle of
equality of treatment and the right to legal defense as guaranteed by
the Romanian Constitution, and it must be designated by the parties’
arbitration agreement. Where an ad-hoc arbitration is to take
place, the parties’ freedom in constructing their procedural guidelines
is restricted by compliance with public order, morality, and imperative
legal provisions. Where an institutional arbitration is to take place,
however, the parties have basically agreed, by their appointment of a
particular arbitral institution, to their compliance with its
arbitration rules. Where the parties have not agreed to the applicable
arbitration rules it will be the arbitrators’ responsibility to
establish them. However, regardless of the specific form of arbitration,
the procedural rules are quite clear and provide for a much less
bureaucratic procedure than the common law would.
Confidentiality
The CICA Arbitration Rules expressly state the arbitral tribunal’s
obligation to ensure the confidentiality of the arbitration. A breach of
this obligation by one of the arbitrators is grounds for removal of the
respective arbitrator. The confidentiality obligation covers all matters
and information included in the proceedings; the members of the arbitral
tribunal are not allowed to divulge any information they come across
during the exercise of their function as arbitrators. Moreover, the
confidentiality obligation covers the arbitral file itself—no one, aside
from those persons directly involved in the proceedings, is allowed
access to the respective file without the parties’ written consent. The
confidentiality obligation is even more robust, since it also covers
arbitral awards, which cannot be published in full without the parties’
consent—they may only be published in part or as a summary without
mentioning the parties’ names or any other information that may
compromise the parties’ interests. Arbitral files may be examined, but
only with the prior authorization of the President of the Arbitral
Court, or, in his absence, of the First-Vice-President of the Arbitral
Court, exclusively for technical or documentary purposes, and only after
the respective arbitral awards have become final.
The robustness of the confidentiality obligation has been heralded as a
great advantage of arbitration proceedings, as opposed to the public
nature of common law proceedings. As global companies are very much
aware, professional secrets are essential to the survival and success of
any business these days, and their breach may cause losses that such
businesses cannot afford. In this context, arbitration proceedings,
which are able to ensure the required degree of confidentiality, seem
like the best alternative.
Rules of evidence
 Where neither the arbitration agreement nor the tribunal has established
the rules of evidence, the general rules as stated in the provisions of
the CPC are applicable. Basically, according to the general rules of the
CPC, any party is entitled to produce evidence in support of its
arguments; both parties have access to evidence submitted by the other
party and are entitled to produce counter-evidence; and the arbitral
tribunal is entitled to decide upon the admissibility of any type of
evidence allowed by law. Even though this may work well in theory, it
may prove to be difficult in practice, since any evidence beyond
ordinary written documentation may be difficult for the arbitral
tribunal to properly manage. Additionally, since the arbitral tribunal
lacks the authority to adopt coercive measures against any experts or
witnesses brought by the parties, the tribunal must resort to a regular
court of law to enforce such measures, which may burden the otherwise
non-bureaucratic and relatively short arbitration proceedings.
Oral arguments
Oral arguments with regard to the dispute are to take place in the
parties’ agreed-upon language. Where the parties have failed to assign
the language of choice for the arbitration proceedings, the language of
the contract or another international language, as established by the
arbitral tribunal, will apply.
The parties’ failure to be present at the hearing will not prevent oral
arguments from taking place, except for where the parties have requested
the arbitral tribunal to grant an adjournment, but only for cause. Such
a delay in the proceedings may be granted only once by the arbitral
tribunal, which significantly shortens the proceedings as a whole.
Moreover, the arbitral tribunal has to issue its decision no later than
five months following its appointment, and to determine the award and
communicate it to the parties within one month of its issuance. Compared
to the numerous years of common law trials, the option of having final
and binding decisions in one year (at most) seems extremely appealing to
many litigants. |
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The Arbitral Award: Cancellation |
As mentioned above, the arbitral award is final and binding upon the
parties. On the one hand, this is perceived to be a great advantage of
arbitration by most potential litigants trying to avoid the bureaucratic
and often cumbersome common law proceedings. On the other hand, this may
be a source of concern to other potential litigants, since they have to
run the risk of not being able to appeal a potentially unfavorable
decision.
The arbitral award may only be cancelled by way of a “claim for
cancellation” (“actiune in anulare”), which may be submitted
within one month of the award’s announcement to the court superior to
the court that had been competent to preside over the respective file.
However, such a claim for cancellation of the arbitral award may be
submitted only based on the specific grounds set by the provisions of
the CPC, which may be either procedural or substantive. Procedural
grounds cover potential flaws in the arbitration proceedings, such as
where: the arbitral tribunal ruled over the proceedings while there was
no arbitration agreement or the tribunal’s jurisdiction was based on a
null or inoperable arbitration agreement; the arbitral tribunal was not
set up in compliance with the arbitration agreement; or the arbitral
award did not include the decision itself, did not mention the date and
location of the issuance of the award, or is not signed by the
arbitrators. Substantive grounds for a claim for cancellation of the
arbitral award apply where such an award breaches morality, interferes
with the public order or clashes with any imperative legal provisions.
However, regardless of the grounds of such a claim for cancellation, the
claimant must understand that, even if such a claim were successful,
this would not trigger a second analysis of the case. This is a risk
that the claimant must undertake. |
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Enforcement of the Arbitral Award |
The arbitral award is mandatory with regard to the parties to the
arbitration, and it must be enforced either willingly by the parties,
or, where this is not possible, by way of an enforcement procedure. The
enforcement of the arbitral award depends on whether the award is
domestic or international. A domestic arbitral award is an award issued
based on arbitration proceedings that have taken place in Romania, and
its enforcement follows the basic rules for enforcement as set by the
CPC. Basically, domestic awards are binding upon the parties. Where the
parties have not willingly complied with the award, then the injured
party may obtain a “writ of enforcement” in order to be able to enforce
the award.
The enforcement of an international arbitral award depends on whether
the award was issued in a European Union Member State or outside the
European Union. In the first scenario, the provisions of EU Regulation
no. 44/2001 are applicable. Although it is rather simple, the procedure
set by this regulation entails both the recognition and the enforcement
of the respective award in Romania. In the second scenario, the
provisions of Law no. 105/1992 are applicable, which provide for the
recognition of the arbitral award subsequently followed by its
enforcement. The basic legal grounds for the recognition and enforcement
of international arbitral awards may be found in the 1958 New York
Convention, to which Romania is a party.
The duration of the recognition and enforcement of an international
arbitral award is hard to estimate, considering that this largely
depends on the workload of the court competent to rule over it, on the
evidence submitted in support of the procedure, and on the level of
communication between the Romanian court and the courts of the country
where the arbitral award was issued (where any flaws in the
documentation submitted in the file require such communication between
the courts). |
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Conclusion |
 On the one hand, there are some widely recognized advantages to
arbitration proceedings, such as the somewhat less stringent
formalities, the duration of the proceedings, and the opportunity to
appoint arbitrators. Even the possibility of obtaining a final and
binding award is seen by most as a great advantage. On the other hand,
this may be also seen as a limitation of the right to appeal an
unfavorable decision, which is derived from the Constitutional rights to
“free access to justice” and the “right to defense.” Consequently
parties must be intently aware of the full implications of arbitration
proceedings. Moreover, the costs involved in arbitration proceedings are
often considered to be extremely high, as their calculation encompasses
both the litigation itself and the arbitrators’ fees. Arbitration
certainly provides for a flexible and quick means for the settlement of
disputes, but it is also clear that the parties must pay close attention
to the manner in which the arbitration clause or the arbitral agreement
is drafted. The parties must also be vigilant throughout the proceedings
and closely observe all the applicable rules, preferably with the
support and assistance of specialized counsel active in the field. In
the absence of the parties’ proactive and alert behavior, an otherwise
good cause—having disputes resolved more quickly through
arbitration—would become a nullity, and the recourse to arbitration
would not fulfill the purpose for which arbitration was initially
created—resolving parties’ pecuniary problems in a more efficient
manner. |
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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 2012 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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