New Legislation on Arbitration in Belarus

Last year Belarus made a significant step towards the wider use of domestic arbitration for resolving economic disputes. In July 2011 the Belarusian Parliament passed a law “On Arbitration Courts” (the “New Law”) to promote alternative dispute resolution, the idea being that using domestic arbitration should be less costly and quicker, arbitrators would be more skilled and the awards would be conclusive and easy to enforce.

Unfortunately, the legal framework regulating the activity of arbitral tribunals has not led to their widespread use. Today in the Republic there are only three permanent international arbitral institutions: the International Arbitration Court at the Belarusian Chamber of Commerce and Industry; the Arbitration Commission at the Belarusian Universal Commodity Exchange; and the Chamber of Arbitrators under the Union of Lawyers. These tribunals can also resolve domestic disputes, but the percentage of such disputes is relatively low. However, the amendment of the New Law in December 2011 may change this situation.

The Situation Prior to Adoption of the New Law

Previously, the basic rules governing the creation and activity of domestic arbitral tribunals were enshrined in the Statute of the Court of Arbitration, which forms one of the annexes to the Code of Civil Procedure. An arbitral tribunal could resolve disputes either between citizens or between citizens and legal entities. The main problem though was that the non-use of this annex meant that arbitral proceedings were presumed to be free of charge – something that was thoroughly unattractive to practising lawyers. You can view more info here on how to get the right kind of legal aid needed to attain justice.

Now the New Law extends the jurisdiction of the arbitral tribunal and the scope of entities that may enter into an agreement to refer the dispute to arbitration to include any disputes arising between citizens, citizens and legal entities or between legal entities. State authorities, including local authorities, though may not be the subjects of an arbitration agreement. To allow them to be the subject of an arbitration agreement would result in disputes directly affecting the rights and legitimate interests of third parties and disputes arising which, pursuant to the laws of Belarus or certain foreign States, cannot be subject to arbitration.
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Simultaneously, the New Law delineates the competence of the domestic arbitration courts and international arbitration courts.

The Main Goal is to Relieve State Courts

At present, the State economic courts handle a huge number of cases (a judge in the capital city can manage about 300 cases per year), but it is not possible to increase the number of judges. Arbitral tribunals are not a substitute for the State courts, but can ensure the greater use by the parties of alternative methods of resolving disputes. The work of arbitral tribunals is closely related to that of the general and economic courts and their support is guaranteed by the State. For example, decisions of the arbitration courts can be appealed to the Supreme Economic Court, and their execution is governed by the Economic Procedural Code.

The obvious advantages of domestic arbitration in Belarus are: confidentiality; proceedings being set in accordance with rules agreed by the parties; more attractive cost; reduced processing times; the ability to choose an arbitrator (who can be an expert in a particular field); and the finality of the decision of the tribunal. The arbitral tribunal may resolve any question or dispute: these can range from those concerning marriage and family relationships to economic disputes.
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The only condition is the consideration of issues relating to the parties in the case in a way which does not affect the rights and legitimate interests of third parties.

Who Can Serve as Arbitrator?

The sole arbitrator must have a law degree and at least three years’ experience in the legal profession. When there is a panel of arbitrators, however, the chairman of the arbitral tribunal must have a law degree and at least three years’ experience in the legal profession, while the other arbitrators must have completed higher education and at least three years’ work experience.
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Information about the arbitrators, as well as the permanent arbitration courts, must be included in the Register of Arbitrators and Permanent Arbitration Tribunals which are run by the Ministry of Justice of Belarus.

Written notification of the individuals who have been elected as arbitrators to resolve a particular dispute is required, and must contain information about them, as well as about the concluded arbitration agreement and time and place of the arbitration. It must be sent to the Ministry of Justice of the Republic of Belarus by the chosen arbitrator not later than three days before the trial. Failure to comply with this requirement will result in the arbitration court’s award not being legally binding and enforceable.

The number of arbitrators presiding over a dispute is determined by the rules of a permanent arbitration court or the arbitration agreement and must be odd. If the rules of procedure of a permanent arbitration court or the arbitration agreement do not determine the number of arbitrators, as a rule, three arbitrators are elected.

Arbitrators are entitled to remuneration for their work, the size of such remuneration to be determined by taking into account the amount of the claim, complexity of the dispute and the time spent on it.

Arbitration is supposed to be cost-effective. If it is not, no one will use it. As such, a balanced approach must be taken in regard to its financing, with terms being set for the purposes of determining judges’ fees and State tax rates for appeals.

Arbitration proceedings

Arbitration is carried out in either Belarusian or Russian, unless the parties have agreed the use of an alternative language.

Once the arbitral tribunal has ruled upon the question of jurisdiction, it will issue a judicial determination to initiate legal proceedings and notify the parties of the time and place of the arbitral proceedings. The defendant is supposed to submit a statement of defence.

Unless a longer period (not greater than one year) is provided by an arbitration agreement, the trial must be commenced within three months of the date of the arbitral tribunal’s determination to initiate arbitration proceedings.

Unless they agree otherwise, the parties must receive notification of the time and place of arbitration no later than 10 days before the trial. Further, unless the parties agree to make them open, hearings will take place behind closed doors.

Failure to provide a statement of defense constitutes neither recognition of the claim in question nor an obstacle to the resolution of the dispute.

Where there is a panel of arbitrators, a ruling of the majority of arbitrators will determine the outcome of the case. The award of the arbitral tribunal must be in writing.

In accordance with the procedural codes of Belarus, a party to arbitration may appeal an arbitral award by submitting an application for annulment to the appropriate court within the State system.

If an award does not include a clause specifying the time within which it must be executed, it must be liable to being executed within the three days immediately after the date of its entry into force. Arbitration court judgments which are not executed voluntarily within the specified time frame will be enforced in accordance with the rules of executive proceedings of Belarus.

Independence and State control

The Supreme Economic Court has proposed certain control mechanisms designed to ensure the independence of arbitration. These include a proposal to consolidate arbitral tribunals within one single association. Meanwhile, the Belarusian Republican Union of Lawyers plans to extend its powers from assuring the creation and qualitative composition of arbitral tribunals to conducting a process of public certification of judges, using as its parameters the expertise, education and knowledge recognised as essential to membership of the profession.

The guarantee of State control, as enshrined by the New Law, is seen in permanent arbitral tribunals – which are created as not-for-profit organisations – being made subject to State registration implemented by the Ministry of Justice. Permanent arbitral tribunals which are created as separate units of legal persons are also subject to registration.

The New Law also provides for the resolution of private law disputes through either a permanent or ad hoc arbitral tribunal, which, in the latter case, is specially formed by the agreement of the parties to resolve a particular dispute, and ends its existence following the end of the trial. This will allow parties to create arbitration courts on an industry-specific basis, such as within banks or other organisations. It also serves as a useful introduction to the practice of signing economic contracts in order to submit disputes to the arbitration.

Despite the fact that some experts doubt the effectiveness of arbitration because of the little-known nature of this means of resolving disputes, many believe that over time arbitral tribunals will be put to good use, occupy a niche and generate a high level of demand in the business community.

Volha Yakimovich and Aliaksandr Danilevich

Minsk, Belarus