Alternative Dispute Resolution in Romanian context
Among the many forms alternative dispute resolution might take, the most common and relevant one in Romania is arbitration, a practice which flourished in the last decades, with more and more subjects choosing it over court litigation.
Arbitration is an alternative private justice, stipulates the New Civil Procedure Code of Romania in article 541, emphasizing the private character of arbitration and, at the same time, drawing the boundaries to the public policy and the mandatory provisions of the law, which must be respected by the litigants and the arbitral tribunal.
Despite its more recent success, arbitration is not an uncommon practice in the Romanian legal frame. The first regulation of arbitration in Romania goes back to the 19th century, in the provisions of ”Caragea Code” and ”Calimach Code” and, afterwards, in the Code of Civil Procedure adopted in 1865, which had a separate Book, ”On Arbitrators” dedicated to the arbitral proceedings.
Things swiftly changed once the communist regime came to power, as the liberal principles of arbitration came into conflict with the socialist regime. Hence, since private companies became the state property, the internal commercial litigations were resolved by the State Arbitration. However, arbitration was maintained with respect to foreign trade. In 1953, the Arbitration Commission of the Chamber of Commerce of People’s Republic of Romania was established, with the aim of settling international trade disputes between Romanian state-owned companies and foreign parties, if they voluntarily chose this settlement method.
However, it should be noted that multiple conventions have been signed by Romania during the communist years, such as: the New York Convention of 1958, the Washington Convention of 1965, the Moscow Convention of 1972 (until 1997), the UNCITRAL Model Law and the UNCITRAL Arbitration Procedure Rules.[1]
After the fall of the communist regime in 1989, the international commercial arbitration institution was given a new design in order to respond to the new developments of both domestic and international trade relations. In 1993, the Civil Procedure Code was amended and the arbitration provisions were updated, inspired by the UNCITRAL Rules. Moreover, after the change of regime, the Chamber of Commerce and Industry of Romania was re-established, together with the Court of International Commercial Arbitration (as a permanent arbitration institution).
The latest legal reform was made in 2013, when the New Civil Procedure Code was adopted. The Code of 2013 contains the main legal framework with respect to both domestic and international arbitration, and is applicable today. The legal provisions regarding the domestic arbitration can be found in the Fourth Book – entitled ”On Arbitration” and the rules regarding the international disputes and enforcements are incorporated in the Seventh Book.
Therefore, the current Romanian institution managing the arbitral proceedings is the Court of International Commercial Arbitration (CICA). As a result of the growing number of arbitration cases, a new arbitration center was established in Bucharest, in 2016 – the Bucharest International Arbitration Court (BIAC). The center is focused on business and commercial disputes, mainly involving foreign investors and multinationals that activate in Romania.
In what concerns the current legal framework governing arbitration in Romania, the fundamental rules are enclosed in the New Civil Procedure Code (NCPC). The provisions of the NCPC refer to both ad-hoc and institutionalized arbitration, establishing the general principles to be used. Based on the international and national guidelines, CICA has also adopted several sets of rules. The latest set of rule is the 2018 CICA Rules of Arbitration, which aim to establish the principles and regulations to be used in the resolution of domestic and international disputes which are subject to institutionalized arbitration organized by CICA.
The domestic legislation closely follows the UNCITRAL Model Law. As general guidelines, arbitration in Romania is based on fairness, right to a defence and the principle of hearing both sides. In addition to this trilogy, the NCPC contains three other important principles which need to be followed within the arbitral proceedings: party autonomy, confidentiality and the principle of non-intervention by the courts.
Generally, the Romanian legal framework in this field is arbitration-friendly, encouraging parties to create their own rules and mainly enclosing provisions that are applicable when the parties’ agreement lacks. Nevertheless, there are several mandatory provisions the parties must follow, such as the prohibition of some types of disputes from being resolved by arbitration or the requirement that the arbitration agreement be in writing. [2]
In what concerns the types of disputes that cannot be resolved by arbitration, as a general rule, litigations for which Romanian law has reserved exclusive competence to the state courts are excluded from arbitral proceedings. The following precluded fields are worth mentioning: insolvency procedures, administrative disputes, intellectual property or competition cases.
In order to submit a case to an arbitral tribunal, the contracting parties have to either insert an arbitral clause in their contract or to conclude a separate written arbitral agreement, by which they agree to resolve their dispute through arbitration. The arbitral award has the same legal force as a state court decision, with the possibility of challenging it only for very limited and expressly provided grounds.
At both national and international level, arbitration is mainly used in business related disputes, due to its multiple advantages. As Romania has become an emerging business hub once the communist period has ended, with more and more foreign investors and international partnerships, the number and complexity of disputes in this domain have aroused. Hence, a dispute resolution method that could keep up with the constant developments, technology and innovations in the field was needed. As the state courts were more conservative throughout the court proceedings, an alternative dispute resolution method became more and more popular: arbitration.
The predominant sectors in which arbitration is used in Romania are construction, public-private arrangements, transport, information technology and so on. The most frequent disputes referred to an arbitral tribunal in Romania are the cross-border cases, which seek to have their dispute resolved by experienced international arbitrators, who are better equipped and trained to tackle the complexities of international business transactions.
Arbitration provides an effective dispute-settlement, with experts of high reputation which can better adapt to the factual situation, in order to meet the parties’ needs. Compared to Romanian courts, it offers a more flexible and faster procedure, without sacrificing the quality of the judgement, but actually enhacing it due to the trainings and skills the arbitrators usually have. The 2018 CICA Rules of Arbitration enclose numerous tools designed to expedite the arbitral procedures, such as bifurcation, consolidation, fast-track arbitration or long distance communication mechanisms.[3]
Moreover, the possibility granted to the parties to choose the arbitrators, both in institutionalized and in ad-hoc arbitration, has the advantage of allowing parties to opt for ”a trusted judge”, given their expertise. In this manner, the arbitration procedure not only appears to be more trustworthy to the litigants, but can also be adapted to lead to a final decision in an effective and tailored manner.
The flourishing number of cases in Romania can also be seen in the statistics made by ICC. According to their studies, Romanian parties are the third most represented in ICC arbitration disputes for Central and Eastern Europe, in the period of 2018 and 2019.[4]
In a nutshell, Romania represents a blooming ground for arbitration, as it is embraced by more and more domestic companies and foreign ones which invest in Romania. Given the number of advantages and the support of the national legal framework, arbitration is a desired alternative dispute resolution method in Romania. The overall complexity and innovation in the field of arbitration also calls for highly skilled practitioners. Does this represent a threat to the old legal establishments and customs? Should this affect the state court proceedings?
From our perspective, arbitration, alongside the evolution of technology, should represent a stimulus for the development of the legal field and for setting aside the heavy and unnecessary bureaucracy that exists in Romania. The pandemic has also accelerated this trend. Legal firms, as well as institutions, should welcome arbitration as an opportunity to grow and gain expertise in innovative legal fields.
Hopefully, this will lead to a more efficient and tailored judicial system, which will overcome the present drawbacks.
[1] Cristina Ioana Florescu, PhD, A Century of Romanian Arbitration: Historical Milestones, from Tradition to Modernity, published in Law Review, vol. VIII, issue 2, July-December 2018, pp. 236-255.
[2] https://cms.law/en/int/expert-guides/cms-expert-guide-to-international-arbitration/romania, last accessed on 20.05.2021.
[3] https://uk.practicallaw.thomsonreuters.com/9-632-9157?transitionType=Default&contextData=(sc.Default)&firstPage=true, last accessed on 20.05.2021.
[4] https://iccwbo.org/publication/icc-dispute-resolution-statistics/ , last accessed on 19.05.2021.
BCH LAW TEAM