MONTENEGRO

1. ARBITRATION

The Montenegrin Arbitration Law came into force on 26 August 2015. Prior to its coming into effect, arbitration proceedings and matters of recognition and enforcement of arbitral awards were governed by regulations on litigation and conflict of laws. The new law is expected to popularize arbitration as an alternative dispute resolution mechanism, especially for corporate entities, and develop the practice of the Arbitration Court attached to the Montenegrin Chamber of Commerce.

The Arbitration Law applies to both domestic and international arbitration proceedings, i.e. to which parties are natural or legal entities, with residency in or outside of Montenegro. Arbitration is not possible where other Montenegrin regulations provide that certain disputes are not arbitrable.

The arbitration agreement, whether as an integral part of the parties’ contract or as a self-standing arbitration agreement, must be in writing, but is always deemed to be in writing if contained in documents signed by or exchanged between the parties by means of communication which provide written evidence of the parties’ mutual agreement. There are several other scenarios which are considered to fulfil the written form requirement. For example, the parties can also incorporate an arbitration agreement into their contract by referring to a different document containing the arbitration agreement (e.g. general terms and conditions). Interestingly, if one of the parties, after an agreement is reached verbally, submits a written notice to the other party in which it refers to the previously concluded verbal agreement, and the other party does not timely object to the contents of the notice, then the written form requirement is met, as this is considered accepting an offer in Montenegrin commercial practice.

Notably, if a claimant initiates arbitration proceedings in cases where there is no previous written arbitration agreement and the respondent accepts the arbitration in written form, or participates in the proceedings without objecting before entering into the merits of the dispute, it is considered that the written form requirement is met and the parties have a valid arbitration agreement. On the other hand, if the parties agreed on arbitration, and a claimant initiates litigation proceedings, a party to such proceedings must object in order for the court to declare itself not competent and reject the claim. A party can, however, seek temporary protective measures before the court even if there is a valid and standing arbitration agreement. The court will not declare itself not competent and reject the claim if the arbitration agreement is not valid, enforceable or has ceased to be in effect.

When it comes to arbitration proceedings, the number of arbitrators is decided by the parties’ agreement, but it must be an odd number. In case of failure of the parties to determine the number, an arbitral tribunal of three members will decide the dispute. The parties can agree on the procedure for appointing the arbitrators. However, if nothing was stipulated in the arbitration agreement or otherwise agreed between the parties, the arbitrators are appointed in accordance with a procedure provided in the Arbitration Law.

The Arbitration Law does not impose heavy requirements on the personality of an arbitrator – an arbitrator can be any individual with legal capacity, regardless of citizenship. Of course, a specific arbitrator must be and remain throughout the proceedings independent and impartial, and the Arbitration Law provides the possibility for challenge and exemption of an arbitrator in this respect.

During the proceedings, the equality of the parties is one of the key principles introduced by the Arbitration Law. Namely, the arbitral tribunal must ensure that each party has the opportunity to present its arguments and evidence, as well as to make statements on the actions and propositions of the opposing party. The rules of the proceedings are determined by the parties, but, if not, the arbitral tribunal has the authority to conduct the proceedings in a way it deems appropriate. The arbitral tribunal can decide to conduct the proceedings on the basis of written submissions only, but at request of a party will schedule an oral hearing (if oral hearings were not explicitly excluded by the parties’ agreement). The Arbitration Law provides that the arbitral tribunal also has the competence to order interim measures at the request of a party.

The arbitral tribunal decides on the dispute in accordance with the governing law and rules chosen by the parties, excluding the conflict of law rules. If the governing law is not so determined, the arbitral tribunal applies adequate conflict of law rules. The tribunal will consider also commercial practice for a given transaction when deciding on the matter, but will only decide ex aequo et bono if explicitly authorized by the parties.

Arbitration proceedings are generally finalized by a final arbitral award. In that respect, any arbitral award rendered by an arbitral tribunal on the territory of Montenegro has the legal effect of an enforceable title and can be enforced in accordance with enforcement regulations as a local award. Such local award can be subject to annulment proceedings before the Montenegrin court by way of a lawsuit for annulment. The Arbitration Law contains an exhaustive list of grounds for such challenge (Article 48 Arbitration Law) which include:

-invalidity of the arbitration agreement;

-lack of due process;

-ultra petita;

-incorrect composition of the arbitral tribunal;

-formal invalidity of the award;

-lack of arbitrability; and

-violation of Montenegrin public policy.

A challenge must be filed within 3 (three) months from the notification of the award.

2. ENFORCEMENT OF FOREIGN ARBITRAL AWARDS

Regarding the enforcement of foreign awards, i.e. arbitral awards rendered by arbitral tribunals seated outside of Montenegro, it should be noted that Montenegro is party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, as well as to the 1961 European Convention on International Commercial Arbitration.

PRACTICE TIPS

TYPE OF PROCEEDINGS

PROCEDURE AND ASSUMPTIONS

Arbitration Proceedings

Document Production

-The costs of the arbitral proceedings are usually paid in advance by the parties. Unless agreed otherwise by the parties, they are obliged to bear the relevant costs of the advance payment equally,  for which they share a joint and several liability.

-The costs of arbitration depend primarily on the amount in dispute. However, the amount of documents, number of witnesses, need for expert opinions, duration of the proceedings, etc., may also be of importance in this regard.

-Unless otherwise agreed between the parties, the arbitrators have a large discretion regarding the award of incurred reasonable costs. The award of legal fees is usually not determined by a reference to any statutory tariff, and is primarily based on the success rate of the parties in the proceedings.

Approximate Duration

Approximate Costs

PROCEDURAL COSTS

Simple case

Complex case

ATTORNEYS’ FEES (NET)

Simple case

Complex case

Costs of proceedings before the CoA include the registration fee (i.e. EUR 200), the arbitral tribunal’s fees, administrative fees, and any additional procedural costs incurred by the arbitral tribunal and the CoA. The amount of the arbitrators’ fees and administrative fees shall be determined by the CoA Secretariat in accordance with the CoA Tariff, based on the respective value of the dispute.

Assumption: The amount in dispute is EUR 1,000,000:

CoA - registration fee of EUR 200, administrative fees of EUR 6,550, sole arbitrator fees of EUR 13,600, fees for panel of three arbitrators of EUR 34,000 (i.e. 2½ times the amount for the sole arbitrator).

Assumption: The amount in dispute is EUR 10,000,000:

CoA - registration fee of EUR 200, administrative fees of EUR 11,300, sole arbitrator fees of EUR 15,550, fees for panel of three arbitrators of EUR 38,750 (i.e. 2½ times the amount for the sole arbitrator).

Assumptions based on an amount in dispute of EUR 1,000,000: Review of 100 pages of documents; no challenge to the jurisdiction of the arbitral tribunal; two exchanges of submissions; review of correspondence with arbitral tribunal; assistance with the preparation of 4 witnesses; review of 4 written witness statements; no experts; preparation of oral hearing and participation in an oral hearing; preparation and review of one post-hearing brief. Total approximate cost: EUR 70,000.


Assumptions based on an amount in dispute of EUR 10,000,000: Review of 1000 pages of documents; no challenge to the jurisdiction of the arbitral tribunal; two exchanges of submissions; review of correspondence with arbitral tribunal; assistance with the preparation of 8 witnesses; review of 8 written witness statements; document production up to 500 pages; preparation and review of expert opinions; preparation of oral hearing and participation in an oral hearing; preparation and review of one post hearing brief. Total approximate cost: EUR 175,000.

-Should a party ignore the arbitral tribunal’s order for production of a certain document, the arbitral tribunal is entitled to issue its decision on the basis of the evidence already presented. However, the arbitral tribunal shall freely evaluate the consequences of the omission of one party to produce the required document when issuing its final decision in the respective proceedings.

The arbitral tribunal is authorized to order a party to produce a document or any other evidence that the arbitral tribunal deems relevant for the resolution of the proceedings.

According to the Rules of the Court of Arbitration at the Montenegrin Chamber of Commerce (CoA), the arbitral tribunal sets a time frame for the resolution of each dispute. As a rule, disputes are generally resolved within one year from the date of receipt of the relevant case file, subject to certain exceptions.

Approximate Costs

COURT FEES

ATTORNEYS’ FEES (NET)

The enforcement of arbitral awards varies depends on a series of factors including the identification of the debtor’s assets, financial means, the response of the debtor, and the perseverance of the enforcement authorities in the fulfilment of their duties.

According to the Law on Court Fees, a fee in the amount of EUR 50 is payable for the court decision on recognition of a foreign arbitral award.

Other fees concerning the enforcement proceedings are payable depending on the value of the claim.

Application for recognition/enforcement:

Simple Case: EUR 400 to 1,000.

Complex Case: EUR 1,000 to 4,000.

Enforcement of Foreign Arbitral Awards

Approximate Duration

-The party seeking recognition/enforcement of arbitral awards must provide the court with the following documentation: the original arbitral award or a duly certified copy thereof, an agreement on arbitration or a document on acceptance of arbitration in the original or a duly certified copy thereof, and a certified translation of the abovementioned documents.

-For enforcement of arbitral awards under the New York Convention, the creditor must provide the court with the authenticated original award or a duly certified copy thereof and the original arbitration agreement or a duly certified copy thereof.

The information in this chapter was correct as of 1 January 2018. If you have any questions about the content of this chapter,

or would like further information about arbitration in Montenegro, please contact

CONTACT

ANÐELKA TODOROVIĆ

Advokat / Attorney-at-Law

+381 11 330 2900

andjelka.todorovic@wolftheiss.com