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.
|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.|
|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.
|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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