This article sets out to present the competent forums for setting aside an arbitral award within the legislation of Kosovo and in accordance with the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York 1958 and United Nations Commission on International Trade Law (UNCITRAL) Model Law on Commercial Arbitration 1985 with amendments as adopted in 2006. The article aims to show the importance of the systematic interpretation of Law No. 02/L-75 on Arbitration of the Republic of Kosovo, the Convention and the Model Law to find the final meaning of provisions that can serve as grounds to establish jurisdiction for setting aside an arbitral award, whether these provisions are the grounds of jurisdiction for setting aside a national or foreign arbitral award. Read more… (Fis Murati)
The aim of this article is to present the competent forums for setting aside an arbitral award within the legislation of Kosovo and in accordance with the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York 1958 (Convention) and United Nations Commission on International Trade Law (UNCITRAL) Model Law on Commercial Arbitration 1985 with amendments as adopted in 2006 (Model Law). In this article I will show the importance of the systematic interpretation of Law No. 02/L-75 on Arbitration of Republic of Kosovo (Law on Arbitration), the Convention and the Model Law to find the final meaning of provisions that can serve as grounds to establish jurisdiction for setting aside an arbitral award, whether these provisions are the grounds of jurisdiction for setting aside a national or foreign arbitral award. By analyzing several case law sources and referring to the doctrinal approach, the content of the provisions that deal with setting aside an arbitral award will be crystallized. Moreover, through case law, the way the Principal Court of Prishtina (Principal Court) and the Court of Appeals of Republic of Kosovo (Court of Appeals) approach provisions about the competent forums for setting aside an arbitral award that has been rendered by an Arbitral Tribunal with seat outside of Kosovo will be elaborated.
Litigation and Alternative Dispute Resolutions in the Republic of Kosovo
Resolution of a dispute between two or more parties in civil or commercial matter can be achieved through the classical way (litigation) or through alternative ways such as arbitration, mediation, negotiation, etc. Litigation is a dispute resolution procedure, which is led by a judge in a state court and through which the state exercises its judiciary power. The right to solve a dispute before a state court is unquestionable and any agreement by which a person resigns from the right to raise an issue before the court is null. According to article 6 of the European Convention on Human Rights (ECHR) “In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law”. In order to provide subjects with the opportunity to solve their private disputes, this international act requires every signing state to provide for its citizens a fair and public procedure, which is regulated by law and takes place before a tribunal (court) which is created by law.
Resolving a private dispute before a state court is not subject to any agreement to authorize the court for doing so. According to article 252 of Law No. 03/L-006 on Contested Procedure of Republic of Kosovo, contested civil procedure starts with the submission of a written lawsuit. This lawsuit should have a form and should be submitted by the claimant within the time foreseen by material law or procedural law. According to this law, the procedure in front of the court can be initiated every time by subjects who have any claim from material law. In a litigation procedure, parties are not obliged to reach an agreement for litigation as they should do for alternative dispute resolution procedures.
In addition to the litigation procedure, which is the principal procedure for solving disputes between parties, in Kosovo, alternative dispute resolutions are also in place, such as arbitration or mediation, which are regulated by special laws. These ways of resolving civil or commercial disputes are considered alternative because they are additional opportunities for solving civil or commercial disputes. But, one should bear in mind that even though these procedures are considered alternative ways for solving a civil or commercial matter, their importance cannot be equalized with litigation. Raising a dispute before arbitration is subject to the arbitration agreement, the agreement by which parties expressly agree to solve existing or future disputes in front of arbitration, whether contractual or not. If this agreement does not meet legal requirements, the arbitral award may be set aside or its recognition and enforcement refused.
Setting aside of arbitration award
To issue an award by arbitration, there are some conditions that should be met in order for the award to produce legal effects for the parties. These conditions derive from the substantial and procedural law that parties have chosen to govern their relations and arbitration procedure. If the arbitral award was issued even though the procedural law chosen by parties or the fundamental principles of justice were infringed on, it may be set aside at the request of any party from the court of the state where the arbitration which rendered the award is located or the court of the state under the law of which the procedure was organized. For example, if the parties have agreed to arbitrate, but this agreement was made by the party who did not have the capacity to act, any of the parties has grounds to challenge the jurisdiction of arbitration in front of the competent court. If an arbitral award is not set aside by the competent authorities when it should have been, any of the parties have the right to ask the competent court of the state where the recognition and enforcement of the arbitral award was required to refuse recognition and enforcement of it.
Similarities and differences between recognition and enforcement of the foreign arbitral award and setting aside of the arbitral award
The procedure of recognition and enforcement of a foreign arbitral award exists to estimate if an arbitral award rendered by arbitration with seat outside of the country where recognition and enforcement are requested meets the required conditions for enforcement. The reason why these rules exist is to estimate if a foreign arbitral award has been rendered in accordance with material law and procedural law used by the arbitration. This procedure also assesses if the foreign arbitral award settles any dispute, which, in accordance with the law where the recognition and enforcement are requested, cannot be settled by arbitration. Moreover, during the recognition and enforcement procedure the court assesses if the recognition or enforcement of a foreign award would be “contrary to the public policy”. Grounds for refusing the recognition and enforcement of a foreign arbitral award and grounds for setting aside an arbitral award are the same, with one exception, which has to do with the lack of binding effect of the arbitral award as a base to refuse the recognition and enforcement of the foreign arbitral award.
As it is explained below, the approach followed by the Principal Court of Prishtina regarding the differences between the recognition and enforcement of the foreign arbitral award and the setting aside of arbitral award is also followed by UNCITRAL. In the Explanatory Note by the UNCITRAL Secretariat on the 1985 Model Law on International Commercial Arbitration as amended in 2006 (Explanatory Note), it is stressed that even though the grounds for setting aside an arbitral award and grounds for refusing to recognize and enforce a foreign arbitral award are the same, it cannot be said that these types of procedures can be used against the same types of awards. An application for setting aside under article 34 (2) Model Law may only be made to a court in the State where the award was rendered whereas an application for enforcement might be made in a court in any State.
Forums for setting aside arbitral awards
As it is mentioned above, legal grounds for setting aside an arbitral award are the same as for refusing recognition and enforcement of a foreign arbitral award. In international legal acts such as the Convention and Model Law which stipulate the rules about the procedure of arbitration, the competent authority that can set aside an arbitral award is not expressly defined. Consequently, there is no clear distinction between the setting aside of a national arbitral award and a foreign arbitral award. Article 6 of Model Law stipulates that “Each State enacting this model law specifies the court, courts or, where referred to therein, other authority competent to perform these functions”. The issues for which the court would be authorized to interfere in the arbitral procedure are listed in the first sentence of article 6 of the Model Law. This provision requires states which follow the model law to establish specific institutions which would be authorized to also deal with the annulment of arbitral awards, but without making any difference between national and foreign arbitral awards. The same situation is with the Law on Arbitration. The Law on Arbitration has the same content as the above mentioned international legal acts, which means that the issue regarding forums for setting aside an arbitral award is vague.
Article V paragraph 1 (e) of the Convention stipulates the following: The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which,…that award was made. From this sentence, it can be concluded in an indirect way that the authorized body for setting aside an arbitral award is the court of the state where the arbitral tribunal has its seat, or to say it more generally in the territory of the state where the award was rendered.
Regarding the authorization of forums for setting aside an arbitral award, legal theory tries to make it clearer which are the forums that can set aside an arbitral award. In his book “International Commercial Arbitration Volume III” Gary B. Born says, commenting on the Model Law, that under the Model Law, local courts may not entertain an application to annul an award made abroad, even when local law provides the procedural law governing the foreign-seated arbitration. While Kosovo follows the Model Law, the lack of direct provisions which prohibit national courts to annul a foreign arbitral award does not provide legal grounds for these courts to actually do so.
In addition to the above-mentioned approach to choosing the competent court (the court of the state where the award was rendered) to annul an arbitral award, there also exists another approach which allows national courts to set aside an arbitral award issued by arbitration with seat outside of the territory where annulment is claimed. This option is not grounded in a clear way (similarly to the other way of annulment of the arbitral award) by the New York Convention, Model Law and Law on Arbitration, in the chapter where the provisions about the recognition and enforcement of a foreign arbitral award are found. Article V (1) (e) of the Convention sets the basis for refusing to recognize and enforce foreign arbitral award because of the fact that the arbitral award has been set aside or suspended by a competent authority of the country under the law of which, that award was made. Regarding this part of the sentence, there is also another non-clear situation which also leads to different approaches from courts, about which forum has the jurisdiction for annulling an arbitral award: courts of the state under the material law of which the arbitral award was made or courts of the state whose procedural law was used. Thus, the point of contention has to do with the formulation of the last part of the sentence of the above-mentioned provisions saying “or under the law of which, the award has been made”. There have been many approaches to the meaning of the expression under the law of which, the award has been made. For example, in the case “National Thermal Power Corporation v. the Singer Company”, the Supreme Court of India decided that “this sentence means that the law of state under which the award was made refers to material law of that state and consequently Indian’s Courts has jurisdiction to set aside an international arbitral award”. Differently from this decision, in 1990, the United States District Court of the Southern District of New York ruled in the case “Standard Elec. Corp. v. Bridas Sociedad Anonima Petrolera, Indus. Y Commercial” that “the contested language about the country under the law of which that award was made, meant the procedural law of the arbitration and not the substantive law of the contract”. There is no guidance either by the Convention or by the other legal acts mentioned above to the meaning of the expression “under the law of which”. Even though it is quite theoretical but according to the UNCITRAL Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the general approach for the meaning of this sentence is that it refers to the procedural law which has governed the arbitration.
Case Republic of Kosovo v. ICC Arbitration of Paris and Österreichische Staatdruckerei GmbH
A general overview of the case
On June 11, 2014, the Republic of Kosovo brought a lawsuit before the Principal Court of Prishtina (hereinafter referred as “Principal Court”) against the International Court of Arbitration with seat in Paris (hereinafter referred as “ICC Arbitration of Paris”) and Österreichische Staatdruckerei GmbH (hereinafter referred as “OS”), for setting aside the decision on the jurisdiction of ICC Arbitration of Paris. Also in this lawsuit, the Republic of Kosovo asked the court to issue a decision which obliges ICC Arbitration of Paris to pay back the deposit paid by the Republic of Kosovo for procedural expenses and to oblige ICC Arbitration of Paris to pay all procedural costs caused in front of the courts of Kosovo. It should be mentioned that this lawsuit was submitted after ICC Arbitration of Paris issued its final decision, by which the Republic of Kosovo was obliged to pay to the printing house OS around 5 million euro. The lawsuit submitted by Government of the Republic of Kosovo was reviewed by the Principal Court and the Court of Appeals of Republic of Kosovo (hereinafter referred to as “Court of Appeals”).
Ruling of Principal Court
The Principal Court dismissed the lawsuit of the Republic of Kosovo twice on the grounds that Kosovo’s courts do not have the jurisdiction to set aside a decision taken by arbitration which has its seat outside of the territory of the Republic of Kosovo. The Principal Court, by considering only formal requirements (jurisdiction) argued that the Law of Arbitration does not expressly regulate the matter of annulment of a foreign arbitral award, but the national Law on Arbitration has stipulated the procedure of recognition and enforcement of a foreign arbitral award, which means that regarding a foreign arbitral award only the procedure of recognition and enforcement can be applied.
Ruling of Court of Appeals
The Court of Appeals decided to annul the decision of the Principal Court by which the claim for setting aside the award of the International Court of Arbitration was dismissed and to return the case before the Principal Court. Firstly, in its decision, the Court of Appeals mentioned that while in the Law on Arbitration it is not mentioned expressly which kind of arbitral award can be set aside, this means that an arbitral award rendered outside of the territory of Kosovo also can be set aside by courts of Kosovo. Moreover, in this decision the Court of Appeals went further by emphasizing that the parties of the main contract agreed on the applicable law for that contract to be the legislation of Kosovo. Hence, the Court of Appeals took this fact as a connecting factor for the court of Kosovo to have jurisdiction for deciding this case.
The topic of the forums authorized for setting aside an arbitral award is a topic which is still highly discussed and viewed differently by different courts. This is happening because the formulation of the provisions in Convention and Model Law and other national laws make room for it. But, if law practitioners approach these legal acts by a systematic interpretation, it is quite obvious that the aim of the creators of these legal acts was to make a difference between national and foreign arbitral awards by providing provisions for setting aside arbitral awards and provisions for refusing the recognition of foreign arbitral awards. While these international and national legal acts have specific provisions about recognition and enforcement of a foreign arbitral award and rules to refuse the recognition and enforcement of a foreign arbitral award, it isn’t accepted to ask the court where recognition and enforcement is claimed to annul the arbitral award which is made by arbitration with its seat in a different country. If a national court annuls a foreign arbitral award it means that the state is extending its sovereignty beyond its borders.
For a list of references, click HERE.
Author: Fis Murati, European and International Business Law LLM student, University of Debrecen, Faculty of Law
 Morina Iset, Arbitrazhi dhe Procedura e Arbitrazhit, Prishtinë, Kosovo, 2015, pages 29-30.
 ECHR, article 6.
 Law on Contested Procedure of Kosovo, article 252.
 Mornina Iset, Selim Nikci, Komentari I Ligjit për Procedurën Kontestimore, Prishtinë, Kosovo, 2012, page 453.
 Gary B. Born, International Arbitration: Law and Practice, 2012, page 35.
 Gary B. Born, International Commercial Arbitration, Volume III, International Arbitral Awards, 2014, page 2989-2990.
 Explanatory Note by the UNCITRAL Secretariat on the 1985 Model Law on International Commercial Arbitration as amended in 2006, page 5 (accessed on 27.02.2019 through:http://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/MLARB-explanatoryNote20-9-07.pdf.
 Article 39, paragraph 4 and paragraph 5 of Law on Arbitration. See also article 36 paragraph 1 (b) (ii) of UNCITRAL Model Law.
 Article 39 paragraph 4 (e), of Law on Arbitration and Article 36, paragraph 1 (a)(v), of UNCITRAL Model Law.
 Explanatory Note by the UNCITRAL Secretariat on the 1985 Model Law on International Commercial Arbitration as amended in 2006,
 In article 6 of UNCITRAL Model Law, are specified areas where the court can interfere. One of these areas is “setting aside the arbitral award”. But, this provision does not foresees there court of which state has the jurisdiction to decide upon this matter.
 Gary B. Born, International Commercial Arbitration, Volume III, International Arbitral Awards, 2014, page 3004.
 Morina Iset, Arbitration and Arbitration Procedure, Prishtine 2015, pages 177-181.
 Case National Thermal Power Corporation v. The Singer Company, Supreme Court of India, 1992.
 Case “Standard Elec. Corp. v. Bridas Sociedad Anonima Petrolera, Indus. Y Comercial”, United States, U.S. District Court, Southern District of New York, 90 Civ. 0720 (KC). See also case “Steel Corp. of the Phil. v. Int’l Steel Servs”, United State Court of Appeals, Third Circuit.
 See, UNCITRAL Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, page 218.
 Case Republic of Kosovo v. International Court of Arbitration with seat in Paris, France and Österreichische Staatdruckerei GmbH with seat in Vienna, Austria
 (*)It should be emphasized that neither the decision of the Principal Court nor the one of the Court of Appeals became final, because of the fact that the plaintiff withdrew the lawsuit by which it requested the annulment of the decision of ICC Arbitration of Paris. (*)The importance of analyzing this case is to show how the Principal Court of Prishtina and the Court of Appeals of Kosovo had different approaches on interpreting the provisions about setting aside arbitral awards.
 This approach of the Court of Appeals is unacceptable because of the fact that the law which governed the material relations between parties has nothing to do with the procedural law followed by arbitration. As it is explained above, material law of the state which is chosen by parties does not constitute jurisdiction for courts of this state simply because parties have used its material law.