Although the Supreme Court takes a generally positive approach to arbitration, its jurisprudence sometimes creates more uncertainty than stability. Parties that include an arbitration agreement in their contract have a reasonable expectation that a future dispute will be examined by an arbitral tribunal, not by a court. However, this is not always the result, especially if the other party challenges the validity of the agreement. The kompetenz-kompetenz principle, which empowers arbitral tribunals to determine their own jurisdiction, is enshrined in the Law on Commercial Arbitration. However, the Supreme Court has been inconsistent on the issue in the past - it has often ruled on arbitrators' jurisdiction, rather than leaving the question to the tribunal itself. It recently held that a court must refrain from assessing an arbitration clause if the question of the tribunal's jurisdiction is already in dispute in arbitration proceedings.

The Supreme Court considered the issue in a case in which one of the parties had brought suit before a court, whereas the other had applied to the arbitral tribunal as stipulated in the agreement between the parties.(1) The Supreme Court held that since the matters involved the same parties and had the same object and grounds, the court should reject the lawsuit and leave the arbitral tribunal to resolve the question of its own competence. In so doing, the Supreme Court dismissed the reasoning applied by the lower courts that Article 19 of the law gives tribunals exclusive jurisdiction to decide on their own competence.

However, it is unclear what the court's position would be if a dispute over the tribunal's jurisdiction were to arise in an identical case in which arbitral proceedings had not been initiated. In the absence of parallel arbitral proceedings, the court's rationale does not apply. The Supreme Court has rejected the argument that an arbitration clause operates to bar the courts from assessing the validity of the clause before the arbitral tribunal resolves the issue. There remains the question of how far the courts can go in assessing the validity of an arbitration agreement.

The New York Convention 1958 provides that a court, when approached with a matter in which the parties have agreed to resolve their dispute by arbitration, should refer the parties to arbitration unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed. However, applying this statement in practice is not straightforward. The Supreme Court's decisions offer contradictory indications as to the extent to which a court may examine the validity of an arbitration agreement. In some decisions the Supreme Court has stated that a review at first sight is sufficient; in other cases it has argued that the court must fully assess the validity of the agreement.

The Supreme Court has tried to strengthen the position of arbitration in Lithuania, but the courts have potentially been left powerless to protect a pro-arbitration policy.

For further information on this topic please contact Rytis Paukste at Lideika, Petrauskas Valiunas ir partneriai LAWIN by telephone (+370 5 268 1888), fax (+370 5 212 5591) or email ([email protected]).

Endnotes

(1) Case 3K-3-116, March 16 2010.