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Montenegro’s fresh approach to its arbitration law leads to major innovations after years of partial regulation through different statutes.
The Montenegrin Arbitration Act (Zakon o arbitraži) (“MAA”) entered into force on 26 August 2015, finally providing the country with a modern piece of legislation uniformly regulating arbitration.
The MAA is largely inspired by the United Nations Commission on International Trade Model Law on International Commercial Arbitration of 1985 (as revised in 2006) (“UNCITRAL-ML”). While chiefly addressing the MAA’s salient features, this article focuses on identifying differences between the MAA and UNCITRAL-ML.
The MAA follows modern trends as to the form of arbitration agreements. Although not entirely implementing UNCITRAL-ML’s liberal concepts, the MAA tends to adopt Option 1 of Article 7 and significantly relaxes the strict written form requirement.
The MAA also states that an arbitration agreement may be deemed concluded if a party provides a written notification to the other party on a previous verbal arbitration agreement, and the other party fails to object to it in a timely manner.
Modelled on comparative law and practice, the MAA provides that an arbitration agreement is also validly concluded if a bill of lading expressly refers to an arbitration clause in a charter party.
The MAA does not define substantive arbitrability, but only refers to arbitrability as a ground for setting aside or refusing to recognise an arbitral award. When quoting this condition, the MAA simply provides that subject matter of the dispute should be capable of settlement by arbitration under Montenegrin law, without attributing any further detail to this concept.
The parties are free to agree on any odd number of arbitrators and to set any criteria for their selection. In the absence of an agreement to the number of arbitrators, the MAA’s default position is, just like UNCITRAL-ML’s, a three-member tribunal.
If the parties fail to agree on an appointment, or if one party fails to make an appointment, and, in both cases, the parties have further failed to designate an appointing authority or if an appointing authority fails to perform its function, an arbitrator may be appointed by the commercial court.
Unlike UNCITRAL-ML, MAA provides that the proceedings in ad hoc arbitration commence when the respondent receives notification of the appointment of an arbitrator (or a proposal for appointing a sole arbitrator), accompanied by an invitation to appoint its arbitrator (or declare whether it accepts the proposed sole arbitrator).
Also, until the language of arbitration is determined, the MAA specifies that the submissions may be filed in the language of the main contract, of the arbitration agreement, or in Montenegrin. Where the parties are unable to reach an agreement as to the language of arbitration, the default position for international arbitration is English.
Much like UNCITRAL-ML, the MAA stipulates a rule that a party, knowing of a procedural defect and not objecting to it in a timely fashion is precluded from raising that objection at a later stage, or during the procedure for setting aside or recognition and enforcement of a final award.
One prominent difference compared to UNCITRAL-ML is that the MAA widened the scope of potential waiving parties: while UNCITRAL-ML requires the party to have known of the defect, MAA provides a party that knew or ought to have known of the defect will be precluded from raising its (untimely) objection at a later stage.
The MAA provides for a self-standing system of arbitral interim measures, regulating, among other things, the powers of arbitral tribunals to order, modify, suspend, or terminate interim measures and rules on recognition and enforcement of arbitral interim measures.
Condensed, the main differences from UNCITRAL-ML’s interim measures are these:
(i) within the four types of interim measures, the MAA provides that a party may be ordered to preserve certain assets, which is stricter than the analogous UNCITRAL-ML measure ordering a party to provide a means of preserving assets;
(ii) for granting interim measures, UNCITRAL-ML requires the requesting party to demonstrate (among other things) a reasonable possibility of success on the merits. However, the MAA requires only a showing of any possibility of success, thus slightly lowering the burden of proof. It is yet to be learned whether practice will follow the MAA text or lean towards the intention of the legislature to follow UNCITRAL-ML.
Recourse to a court against an arbitral award can only be made through an application for setting aside. Though not explicitly stated, this recourse can be used only against an award rendered in Montenegro.
The MAA’s grounds for setting aside largely reflect UNCITRAL-ML, save for one additional ground to be proved by the requesting party – the absence of a signature on, or of the reasoning in, the award.
An award rendered outside Montenegro will be recognised and enforced in Montenegro if none of the expressly stipulated grounds for refusal are met. The grounds for refusing recognition and enforcement in the MAA almost entirely correspond to those in UNCITRAL-ML, with the sole exception of the party’s incapacity to conclude an arbitration agreement, which is not listed as a ground for refusal in MAA.
Montenegro embraces modern arbitration rules modelled much after UNCITRAL Model Law, but certain provision are yet to be tested in practice.
authors: Jelena Bezarević Pajić, Tanja Šumar