Commercial arbitration reform
On 1 January 2015 sweeping changes to Slovakia's arbitration legislation finally came into effect. Of most relevance to international finance parties are the changes to the regulation of commercial arbitration in Slovakia, which is now fully harmonised with the 2006 version of the UNCITRAL Model Law. There is also a new alternative dispute resolution system applicable to contracts involving consumers, and a new framework for the operation of domestic arbitration institutions. This article considers the key changes for finance parties.
In Slovakia, commercial parties often rely on arbitration as a means of resolving disputes because of the lack of commercial expertise in state courts, and to avoid lengthy court proceedings. In addition, banks are obliged by law to offer to all clients, consumers as well as businesses, arbitration clauses submitting disputes to the Permanent Arbitration Tribunal of the Slovak Banking Association.
Since 2002, Slovakia had an arbitration friendly Arbitration Act based on the 1985 UNCITRAL Model Law. However, several crucial provisions were not aligned with the 1985 Model Law. Moreover, the judiciary often displayed a rather hostile stance towards arbitration, which gave rise to effective restrictions on arbitration. By way of example, courts held that actions for declaratory relief (eg regarding the validity of a contract) are non-arbitrable or that arbitration clauses incorporated by reference are null and void. Whilst many of these court decisions were in consumer claims, many argued that the same restrictions applied in commercial arbitration too.
The Ministry of Justice appointed an expert group with a wide mandate to draft an amendment to the Arbitration Act and to separate consumer arbitration into a separate piece of legislation with distinctive principles and stricter oversight. The law relating to commercial arbitration is now contained in a new Arbitration Act, and the following key changes have been made.
Thirdly, the amendment restricts the establishment of arbitration institutions. Similar to some other Central and Eastern European countries, Slovakia is contending with an unwelcome proliferation of arbitration institutions, many of whom are either inactive or, more alarmingly, used as private law enforcement tools by certain businesses and law firms. Before the amendment, there were more than 150 so-called "permanent arbitration courts" in Slovakia, which have mainly been established by private companies. Under the new regime, the only legal entities which will be allowed to establish a new permanent arbitration court are: (i) chambers of commerce; (ii) non-profit professional associations; and (iii) specifically named private law entities, such as the Slovak Olympic Committee.
Calls for a complete monopolisation of institutional arbitration in favour of a handful of existing institutions have not been followed. The new regime will allow for healthy competition between arbitral institutions, but will put a much greater emphasis on the transparency of their dealings and will prevent situations involving conflicts of interest from arising. Each domestic arbitral institution will be required to publish an annual report listing, in summary form, relevant information on its activities in the previous year.
