Introduction
Facts
Decision
Comment
Arbitration in Slovakia has historically been underdeveloped and therefore underutilised. A study prepared for the European Parliament in 2014 noted the "very troubled state" of arbitration in Slovakia, principally because of the "structural weaknesses" in Slovak arbitration law and "opposition to arbitration from within the Slovak judiciary".(1)
The tide turned in 2015 when Slovakia adopted a wide-ranging amendment to its Arbitration Act.(2) The amendment has:
- separated the regulation of consumer arbitration into a stand-alone law; and
- liberalised commercial arbitration by implementing provisions of the United Nations Commission on International Trade Law (UNCITRAL) Model Law 2006.
Since the 2015 reform, commercial arbitration in Slovakia has become progressively more predictable; in the past six years, Slovak court judgments reflect a higher degree of deference to arbitral findings and a general friendliness towards arbitration.(3)
A recently published order of the Supreme Court regarding case 5Obdo/98/2018 from 29 January 2020 (the order) follows this trend.
The case concerned an attempt to set aside an award rendered by the Arbitration Court of the Slovak Chamber of Commerce and Industry that ordered the applicant to pay €524,083.42 in connection with a construction project (the award). The applicant filed the annulment application under a previous version of the Arbitration Act. However, the content of the annulment grounds under that law largely remained in the newly formulated, UNCITRAL-based annulment grounds. Therefore, regardless of the reform, the order is relevant to the application of the post-2015 arbitration law.
The applicant argued that the tribunal had failed to accord the right to a fair hearing on equal basis to both parties.(4) The Supreme Court considered the following arguments:
- The arbitral tribunal had not provided reasons for its award. Alternatively, the reasons were insufficient to such an extent that the award was not reviewable. In the arbitration, the applicant argued that the order form relating to the construction works at dispute had been backdated and was therefore invalid. The applicant argued that the tribunal had failed to address this contention in the award.
- The arbitral tribunal had effectively denied the applicant's right to submit final observations, which is a customary procedural right in Slovak civil court proceedings. The award failed to reflect the content of the applicant's final observations and, moreover, it was likely that the award had been made before the applicant had even submitted its observations.
Both the Bratislava I District Court and the Bratislava Circuit Court had rejected the annulment application. The applicant appealed on limited legal grounds to the Supreme Court.
The Supreme Court rejected the appeal and upheld the arbitral award. The Court considered that the applicant's arguments, rather than taking issue with procedural fairness, amounted to a disagreement with the merits of the arbitral award and a dissatisfaction with the (unfavourable) reasoning of the tribunal. Such arguments cannot lead to an annulment. The Court held the following:
Annulment proceedings before the ordinary courts . . . are not a continuation of the arbitration and do not constitute further appeal proceedings. The substantive correctness of a meritorious arbitral award is not the subject matter of annulment proceedings. In annulment proceedings, the ordinary courts investigate the proceedings before the tribunal and the arbitral award in the taking of evidence and, therefore, as matters of fact. Only subsequently do these issues become matters of law, but solely in consideration of the procedures adopted by the arbitral tribunal within the annulment grounds set in [the Arbitration Act].(5)
Moreover, as regards the second argument listed above, the Court considered that the arbitral award had not been made after the applicant's final observations. The lower courts had taken evidence in relation to that issue by admitting minutes from the tribunal's final deliberations and voting, and the courts had concluded that the award's date of issuance found in the award itself had been a clerical error.
This order continues the trend of arbitration-friendly decisions by the Slovak courts. It provides welcome reassurance that, on annulment, the Slovak courts will not interfere with substantive findings of arbitral tribunals, and that clerical errors are not grounds for annulment.
For further information on this topic please contact Peter Plachy at Allen & Overy Bratislava sro by telephone (+421 2 5920 2400) or by email ([email protected]). The Allen & Overy Bratislava sro website can be accessed at www.allenovery.com.
Endnotes
(1) T Cole, I Bantekas, F Ferretti, Ch Riefa, BA Warwas, P Ortolani, Legal Instruments and Practice of Arbitration in the EU (Study for the JURI Committee. Brussel), European Parliament, 2014, p 161.
(2) Slovak Arbitration Act 244/2002 Coll, on arbitration proceeding.
(3) For further details please see the following ILO updates:
- "Has Slovakia become an arbitration-friendly jurisdiction?";
- "Termination of contract does not terminate arbitration clause"; and
- "Equal treatment of parties".
(4) The applicant made further arguments but those were more pertinent to the Supreme Court's assessment of the grounds for extraordinary appeal under the Civil Procedure Code.