ALBANIA

1.LEGAL SYSTEM

2.LITIGATION

3.BUSINESS CRIME

4.INSOLVENCY

5.ARBITRATION

6.ENFORCEMENT

7.PRACTICE TIPS

8.CONTACT

The Albanian legal system is based on codified principles of civil, criminal and administrative law. Judicial precedents are taken into consideration by courts, but without having a binding effect, except for unifying decisions issued by the Joint Colleges of the Supreme Court.

The Albanian court system is composed of District Courts, Courts of Appeal, Administrative Courts and Appellate Administrative Courts, Courts of Serious Crimes and Appellate Court of Serious Crimes, Military Courts and Appellate Military Courts, and the Supreme Court. There is also a Constitutional Court whose influence is increasing, especially due to an expansion of the "constitutional due process" review of other courts' decisions.

In each District Court (court of first instance), there are special court departments in charge to decide on:

-commercial disputes;

-disputes related to minors and family; and

-civil disputes.

Cases in District Courts are heard by a single judge or a panel of three judges. Matters exclusively heard by a panel of three judges include:

-claims valued at more than ALL 20 million (approximately EUR 156,000);

-claims on declaring a person as missing or deceased; and

-claims on removing or limiting the capacity to act of a person.

In the Courts of Appeal, cases are heard by a panel of three judges, while the High Court decides in panels of five judges. In the Supreme Court, Joint Panels also hear cases with the participation of all judges. The Joint Colleges of the Supreme Court are responsible for the unification and amendment of court practice. Panel, administrative and civil colleges established at the Supreme Court pre-hear the claims and decide whether the claim shall be rejected or refer the case for judgement to the panel of three judges.

Decisions of the Supreme Court are proclaimed, along with the reasoning behind the decision, no later than 30 days from the date of the termination of the judicial examination. Decisions of the Joint Panels, along with their reasoning, are published in the Periodical Bulletin of the Supreme Court. Decisions that serve the unification or amendment of court practice are published immediately in the next issue of the Official Gazette.

In certain cases, courts may also grant interim measures.

The Albanian court system is rather efficient, despite the fact that no precise time frame is provided for the rendering of judgments. The time frame is generally allowed to be reasonably defined by the judges.

Decisions by the first instance courts (i.e., District Courts) may be appealed before the Courts of Appeal. As a general principle, all decisions issued by a court of first instance may be challenged in the Courts of Appeal, except for those cases when appeal is excluded by law. An appeal request may only be denied when: (a) the appeal is presented after the deadline provided by law; (b) the appeal is made against a decision where an appeal is not permitted; or (c) the appeal is made by an individual that is not legally entitled to file an appeal.

Upon request of the parties, the Appeals Court may examine facts and other legal aspects examined by the court of first instance, and may allow the presentation of new evidence in support of the appeal.

After considering the case, the Appeals Court can decide to: (a) uphold and leave in effect the decision of the first instance court; (b) change the decision; (c) revoke the decision and terminate the case; or (d) revoke the decision and send the case back to the first instance court for retrial.

Decisions issued by the Court of Appeals are final and may be challenged before the Supreme Court only when: (a) the law has been violated or applied incorrectly; (b) there are grave violations of procedural norms (i.e. Article 467 of the Civil Procedure Code); (c) decisive proof or evidence requested by the parties during trial has not been provided; (d) the reasoning of the decision is clearly illogical; or (e) the provisions on jurisdiction and authority have been violated.

Litigation costs are mainly composed of court and attorneys' fees, expenses for expert opinions and witnesses (including remuneration for any business days missed), and translation costs. The fees, expenses and remunerations for witnesses and translators are defined by the Council of Ministers.

The court and attorneys' fees awarded to the plaintiff shall be charged to the defendant if the claim has been accepted by the court. However, if a party is exempted by the court with respect to the awarding of court fees, the fees shall be charged to the other party only if the claim has been accepted by the court. The defendant shall generally have the right to demand court fees be awarded in proportion to the refused part of the claim. The defendant shall have the right to demand court fees be awarded, even if the case is over.

Final decisions of the court can be enforced by obtaining an instrument of immediate enforceability ("IEI"). The IEI gives its holder the right to have an enforcement order issued by the District court and to have the execution carried out immediately by the bailiffs’ office.

The adjudication of administrative disputes is made through independent proceedings by the administrative courts and within a shorter period of time. The maximum term for administrative proceedings at the administrative courts of first instance is 60 (sixty) days.

Administrative courts are organised as: (i) Administrative Courts of First Instance which are established and function in the same regions as Courts of Appeal; (ii) the Administrative Appellate Court - currently there is only one Appellate Administrative Court which is located in Tirana, Albania; and (iii) the Administrative College of Supreme Court.

Military Courts are composed of Courts of First Instance and a Court of Appeal. Military Courts try military cases. The Military Court of Appeal is responsible for the second level review of complaints filed against decisions of the Military Courts of First Instance. The Military Courts try cases using panels of three judges.

There is also a Constitutional Court, which is not a part of the ordinary court system. It is regulated as an independent body subject only to constitutional provisions. The Constitutional Court ensures respect for all constitutional provisions and delivers final interpretations of these provisions.

According to the Code of Civil Procedure, all disputes (civil or other nature as prescribed by this code and other applicable laws) fall under the jurisdiction of the Albanian Courts. When a civil dispute is in the process of being heard by the Albanian courts, no other body is allowed to hear the matter. In this respect, any agreement that provides differently is deemed invalid.

Submission to the competence of a foreign court shall only be allowed when the trial is related to obligations between two foreign citizens or one foreign citizen and an Albanian citizen, or any foreign citizen that does not live/reside in Albania, as well as when such exemptions have been provided for in international agreements ratified by the Republic of Albania.

In Albania, the Court does not interrupt or suspend its judgment over a dispute, if the dispute, or some other matter related to the dispute, is the subject of examination of a foreign court.

The Criminal Code of the Republic of Albania covers criminal acts such as fraud by individuals or legal entities, money laundering, both active and passive bribery in the public and private sectors and undue influence of public officials.

The Law on the Prevention and Combating of Organized Crime adopted in September 2004 provides the legal basis for combating economic crimes performed by organized criminal groups.

Law No. 9754, dated 14 June 2007 "On the criminal liability of legal entities" provides for the criminal liability of legal entities established in the Republic of Albania. The Law is applicable to all legal entities i.e. to companies that have been established and which operate pursuant to Albanian law but also to local administrative entities, public legal entities, political parties and trade unions.

Pursuant to this law, a legal entity can be held criminally liable for any offence committed in its name or for its benefit: (a) by its managing body or legal representatives; (b) by a person who is under the authority of the person who runs, represents and administers the legal entity; or (c) due to a lack of control or surveillance by the person that runs, represents and administers the legal entity.

The judicial process in a criminal case differs from a civil case. The prosecutor represents the state in most court proceedings, including all criminal prosecutions. The main principle governing the Albanian judiciary system is a fair trial with defendants presumed innocent until proven guilty.

A criminal proceeding is initiated upon the request of a prosecutor, police department or by individuals alleging violations of their rights or that have incurred damages. In the latter case, the allegation is submitted to the Prosecution Office or Serious Crimes Prosecution Office and the prosecutor then decides whether to file charges and, if so, what charges to file. The charges are filed with the District Court in the section for criminal cases or with the Court of Serious Crimes. The prosecutor may issue investigation orders or warrants which in any case should be examined by the court that has the authority to uphold or change such order/warrant.

The police are responsible for investigating allegations of business crime. If they find sufficient evidence of a crime, then an arrest is made. However, it is up to the court to finally decide on the final warrant. Otherwise, the police should submit a report on their findings to the prosecution office and then the prosecutor issues the warrant. This report constitutes a summary of all the events that have preceded the arrest and provides witness names and other relevant information. The report is handed over to the prosecutor.

Most criminal charges involving business crime are judged by the District Court of Serious Crimes located in Tirana. Other criminal charges are judged by the criminal first instance courts. The courts of first instance are organized and operate on a judicial district basis.

The defendant has the right to access all evidence that the prosecutor presents to the judges, may question opposing witnesses, and present its own witnesses and evidence.

Anyone accused of a crime is legally presumed to be innocent until proven guilty by a final court decision. This means that it is the prosecutor who has to convince the court that the defendant is guilty and must provide proof of guilt.

Cases on business crime in the First District Court of Serious Crimes in Tirana are heard by a panel of three judges. Its decisions may be appealed to the Court of Appeal of Serious Crimes located in Tirana. Appeals are decided by panels of three judges working together.

The Albanian legal system does not explicitly provide for the re-examination of criminal cases, including reopening domestic proceedings, in the event of the court finding a serious violation of an applicant's right to a fair trial. According to the provisions of Article 450 of the Albanian Criminal Code, a request for review of a final judgment may be entertained only when:

-the facts of the grounds of the sentence are contradictory to those of another final sentence;

-the sentence relies upon another civil court decision, which has since been revoked;

-after the sentence new evidence has appeared or has been found, which solely or together with the evidence already evaluated, proves that the accused is guilty; or

-it is proved that the sentence has been rendered as a result of the falsification of facts during the trial or due to another act which is by law a criminal offence.

The prosecutor should decide whether to bring the case to court, to dismiss the charges or to suspend the case within 3 (three) months from the date of the notification to the accused of the criminal charges against him/her.

The prosecutor may prolong the period of investigation by a further 3 (three) months. In complex cases, the prosecutor may extend the investigation period to 2 (two) years and upon the expressed written consent of the Attorney General the investigation may be extended to up to 3 (three) years.

However, in most cases the period between the submission of the claim and the indictment being submitted to the court takes approximately 12 (twelve) months.

The period between the indictment and a sentence in the first instance is approximately 12 (twelve) months.

Litigation costs are mainly composed of court and attorneys' fees, expenses for expert opinions and witnesses (including remuneration for any business days missed), and translation costs. However, free legal defence is provided for criminal cases. The fees, expenses and remunerations for witnesses and translators are defined by the Council of Ministers.

Insolvency proceedings in Albania aim to provide an economic and financial solution to a debtor by means of a judicial procedure for the repayment of debts. Two kinds of insolvency proceedings exist:

-Bankruptcy Proceedings (Procedura e falimentimit me likuidim) which generally aim to satisfy the creditors' claims by liquidating the assets of the debtor and distributing the proceeds; and

-Judicial Reorganization Proceedings (Plani i riogranizimit), the ultimate aim of which is to preserve and continue the debtor’s business on the basis of a reorganization plan.

Bankruptcy Proceedings are initiated by the competent court upon an application either by the debtor or by one or more of its creditors.

The business organization plan aims to create appropriate conditions for the organization and continuity of the debtor's business. This plan may provide for the sale of the whole or a part of the business activity, or other appropriate solutions.

The competent court for all forms of bankruptcy proceedings is the District Court where the debtor is resident or where the entity has its legal seat. Bankruptcy proceedings must be timely instituted as soon as the debtor is incapable of meeting its financial obligations. In the case of legal entities, bankruptcy proceedings must be opened even if the entity is over-indebted. In addition, the tax authorities may file a petition for the opening of bankruptcy proceedings if a corporate taxpayer’s balance sheet shows losses for a period of 3 (three) consecutive years. The court must decide within 30 (thirty) days of filing.

The decision of the court to initiate Bankruptcy Proceedings is entered into the Registry of Immovable Property and is delivered to the debtor and to all of its known creditors and debtors. Without a mutual agreement, insolvency proceedings concluded outside the territory of the Republic of Albania shall apply to a debtor's property located inside the territory of the Republic of Albania only if:

-the insolvency proceedings are not contrary to Albanian legislation; and

-the insolvency proceedings do not affect the principles of Albanian legislation, especially the provisions of the Albanian Constitution.

The duration of bankruptcy proceedings will depend on several different factors (e.g. the extent of the assets and liabilities of the debtor, the number of creditors, whether the receiver challenges any transactions of the debtor in court, etc.). Although there is no general rule, in our experience bankruptcy proceedings may last between 12 (twelve) months to 9 (nine) years in more complex cases.

Arbitration in the Republic of Albania is governed by Part II, Title IV, Articles 400 – 439 of the Albanian Code of Civil Procedure. The chapter contains provisions for the regulation of domestic arbitration proceedings, i.e., when all parties are resident in or have the legal seats of their companies within the territory of the Republic of Albania, and when the seat of arbitration is within this territory. The chapter does not apply to international arbitration proceedings. A draft arbitration law containing provisions for international arbitration proceedings, which is based on the UNCITRAL Model Law and sponsored by the World Bank is still being discussed. Albania currently does not have any domestic arbitral institution.

Generally, an arbitration agreement may be concluded for any monetary claim or dispute arising from a commercial transaction. Public law disputes, such as criminal law cases and family matters, including divorce, alimony or paternity disputes, are not arbitrable. An arbitration clause is deemed valid if it is made in writing and is included in the main agreement as part of this agreement, or in a separate agreement referring back to the main agreement. Although the Code of Civil Procedure does not contain explicit content requirements, the clause should specify that any disputes between the parties will be settled by means of arbitration. In addition, the arbitration clause should indicate the parties to the agreement, the scope of the agreement, the arbitral institution or the basis for forming the arbitral tribunal (in case of ad hoc arbitration).

The parties are free to decide on most aspects of the arbitration proceedings, including the seat of arbitration, the language of arbitration, the substantive law and the procedural rules. The parties are also free to decide on the number of arbitrators, although there may only be an uneven number, and the method of their appointment. Arbitrators are appointed by the court if the parties fail to do so.

The arbitral tribunal may, at the request of one of the parties and unless agreed otherwise, order any measure to preserve the interests of the parties in the arbitration. If the parties have not agreed on any rules on this matter, the arbitral tribunal must apply the rules on interim measure that exist in the context of a lawsuit in the court system (Article 418 CPC). Interim measures granted by arbitral tribunals must always be enforced by state courts. The following rules apply:

-at the request of the claimant the arbitral tribunal may grant interim measures to secure the execution of the final award in the arbitration proceedings, if there are reasons to believe that the proper execution of an award in favour of the claimant may become impossible or difficult (Article 202 CPC); and

-a claimant may also request the court to stay the execution of an administrative act (i.e., a decision by ministers or other acts issued by the state administration as provided by the CPC in the section on administrative disputes) (Article 329 CPC). The arbitral tribunal may grant such stay if there is a risk of grave and irreparable harm to the claimant. The arbitral tribunal must provide reasoning for its decision.

Such interim measures are allowed for all kinds of claims and at any stage of the arbitration proceedings, until the decision becomes final and irrevocable. Interim measures preserving rights are also allowed in proceedings before the Court of Appeal, if the award is under its consideration (Article 203 CPC).

The claimant may also request interim measures to preserve its rights in the arbitration even before bringing the claim before an arbitral tribunal. In such a case, the court determines a time period of not more than 15 (fifteen) days within which a request for arbitration must be submitted (Article 204 CPC). If the claimant does not submit a request for arbitration for a claim regarding which a security measure has previously been granted by a court within the relevant time period, the security measure is considered revoked.

If the arbitral tribunal rejects the claim or if the arbitration proceedings are stayed, the arbitral tribunal must also decide on the lifting of the interim measure, which will in any case take effect when the decision to reject the claim or to stay the proceedings becomes final and irrevocable (Article 211 CPC).

Arbitral awards are enforceable in the same way as court decisions. The courts may set aside arbitral awards only under a few conditions, in particular in case of:

-the invalid constitution of the arbitral tribunal;

-an incorrect declaration of the arbitral tribunal of its jurisdiction or lack of jurisdiction;

-the arbitral tribunal has exceeded the scope of the arbitration agreement or has not decided on one or more claims submitted to it;

-the equality of the parties and their right to be heard has not been respected;

-the lack of impartiality and independence of one or more arbitrators; or

-an infringement of Albanian public order.

Albania is not a party to any multilateral conventions on jurisdiction and enforcement of foreign judgments. In the absence of bilateral or multilateral jurisdiction and enforcement of foreign judgments agreements, the provisions of the Code of Civil Procedure apply.

As a general principle, foreign judgments are recognizable and applicable in the Republic of Albania in accordance with the rules provided by the Code of Civil Procedure.

Where the Republic of Albania has entered into a special treaty with a foreign state, the treaty applies.

The foreign judgment is enforceable after its recognition by a decision of the Appeals Court.

A foreign judgment shall not be enforced in the Republic of Albania when:

-according to mandatory provisions, the dispute is subject to the judgment of the Albanian court and not of a foreign court;

-there are procedural violations of the defendant's right to a fair trial and right to be heard;

-the Albanian court has given a different judgment on the same dispute, between the same parties, for the same cause;

-the same dispute is under examination before an Albanian court;

-the foreign judgment became irrevocable in violation of the legislation on which it is based; or

-it is in violation of the fundamental principles of the Albanian legislation (public order).

Regarding the enforcement of foreign awards, Albania is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, with the reservation that the Convention will only be applied to the recognition and enforcement of awards made in the territory of another contracting state.

Albania is also a party to the European Convention of 1961 on International Commercial Arbitration.

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2. LITIGATION

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3. BUSINESS CRIME

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5. ARBITRATION

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6. ENFORCEMENT OF FOREIGN JUDGMENTS AND ARBITRAL AWARDS

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7. PRACTICE TIPS

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CONTACT

OFFICE

Murat Toptani Street

AL-1001 Tirana

+355 4 2274 521

tirana@wolftheiss.com

www.wolftheiss.com/offices/albania

AGIM MUCO

Associate

Wolf Theiss Albania

+355 4 2274 521

agim.muco@wolftheiss.com

Jonida Braja

Associate

Wolf Theiss Albania

+355 4 2274 521

jonida.braja@wolftheiss.com