Getting access to Arbitral Justice in Central and Eastern Arbitration has been one of the rising issues among investors and interested arbitration experts. The issue that has led to divided opinions has not been considered from a comprehensive approach. CEE states are considered to be relatively traditional and protective of their local companies compared to their western counterparts. This, to an extent, gives a feeling that getting justice may not be easy following contracts disputes.
With construction contracts being one of the major sources of arbitral disputes in CEE, major concerns on the ease and challenges of getting arbitral justice have continued to be a talking point. The aim of this article is to consider certain factors in CEE to determine whether it is easy to get arbitral justice or not.
Conditions for Getting Arbitral Justice in construction arbitration in CEE
The Type of Contract
It is one thing to draft a contract and another to ensure that the clause embedded in the contract is encompassing. It is common that construction projects usually require more than one contracted firm handling every process. in most instances, a project may require that multiple firms work with the employer to achieve the project goal. With that being the case, there are two ways contracts could work: the web Bilateral contract and Chain Bilateral Contract.
The Bilateral web contract allows the employer to contract one firm and that firm of its own et to contract other firms that the employer may be aware of but have no direct contractual relationship with. The arbitration clause in this type of contract usually has just one arbitration clause: the employer and the main contractor. This means that if one subcontracted firm refuses to deliver, the employer may find it extremely difficult to bring that firm to the tribunal.
Suppose the employer opts to take action against the main contracting firm. In that case, the firm may find it difficult to take arbitral action against the subcontracted firm unless their contract has an arbitration clause.
This type of complication is one of the major reasons why employers and main contractors may find it difficult to gain arbitral justice during breaches. In most cases, the employer or main contractor may end up being the biggest losers.
The Chain Bilateral contract also provides its own challenges. In this type of contract, the employer directly employs multiple contracting firms for a project, with each carrying out their own expertise. Each firm has its dedicated contracts that may all or may not include arbitration clauses. In the event that the inability of one firm to complete its project affects another firm timeline such that the latter is exposed to liquidated damages, arbitration action may arise.
However, the firm seeking compensation may not gain easy access to an award as the employer may also take action against the other firm that causes the delay. When this happens, it becomes extremely difficult for a clear-cut decision, and the most affected party may get lesser compensation than its losses.
These two cases simply show how the type of contract may delay easy access to award justice in the CEE where they are very common.
State Friendliness to Arbitration
The second major talking point that determines how easy a party can get access to arbitral justice is if the state is friendly to arbitration, while the majority of CEE states will rant enforcement of arbitral awards and ensure that seekers et full compensation as recommended by the award, there are others that are quite critical and hold local companies’ protection as a priority. Investing in such a state may lead to certain difficulties in getting fair access to justice.
Some states may claim that the cause for rejection of the award is based on encroachment of the state public policy. These policy breaches are not thoroughly explained in many cases, leading to a rightful feeling of unfair treatment among investors.
Unclear conditions and terms of Arbitrations
If an arbitration clause is considered unclear and unreliable for award enforcement, it will be difficult for parties seeking arbitral justice to enforce the CEE. This is true in other regions and is a standard rule of international arbitration. Therefore, it is extremely important that investors ensure that all conditions and terms in their clauses are not ambiguous, vague, and succinctly clear.
From the factors considered in this article, it is obvious that Getting justice in CEE depends on many factors, with the majority of them rising from the arbitral clause. Other factors include personal preferences of the States, where some appear friendlier than others. In essence, the possibility of an aggrieved party getting arbitral justice would depend majorly on the agreed clause and its complimenting nature to the state law with which it was drafted.
Once an arbitral clause does not contain any loophole and is not dubious or filled with uncertain terms, then pursuing justice in CEE will essentially be no different from any other part of Europe and NYC member states in particular. However, drafting a great construction contract is highly connected to the ability to get top expert arbitrators that understand the workings of the CEE space.
Rättsakuten is a major arbitration institution that is an expert in drafting construction contracts arbitral clauses such that it protects their clients’ investment rights and the ease of getting justice during disputes and possible enforcement of arbitral awards. Investors can contact the firm for more inquiries on its services.
Rättsakuten is a leading law firm focused on Commercial Arbitration and Dispute Resolution. Based in Sweden, Rättsakuten handles dispute resolution and Arbitration matters before the SCC (Swedish Chamber of Commerce), ICC, HKIAC, and several other Arbitration tribunals