Arbitration has a tradition in most of the Central European countries. Arbitration as a way of dispute settlement was known and practiced before the Second World War by most of these countries, as at that time most of them were market economies.
After the Second World War, most states of Central Europe became part of the political and economic area of the Soviet Union, this lasted from the late forties until the late eighties. From market economies those systems were changed to centrally planned economies.
Most countries belonged to COMECON, the economic organisation which organised trade between and among those countries. In this system, the trade of goods and services were first agreed by the states themselves in bilateral agreements, which were the result of coordination of the central plans of each state.
The implementation, however, was in the hands of state-owned foreign trade companies which concluded civil law contracts for the delivery of those goods and services. In this system, in the centrally planned economy, there was no room for party autonomy; the companies’ duty was to fulfill the plan. Most elements of those contracts were consequently defined by the bilateral state agreements; for example, the type of goods and services, quality, quantity, price and other essential elements of a contract.
If, however, there were violations on the contract level such as non-performance, late-performance or defective quality, the only way of dispute settlement was arbitration between those companies based on the civil law contracts with the exclusion of state courts. In these thousands and thousands of arbitration cases, companies learned and practised the technique of arbitration. This resulted in a broad knowledge of arbitration techniques in the region.
However, it was arbitration but only as far as arbitration techniques were concerned, as three essential elements of arbitration were not observed:
- The parties were not free to decide whether they wished to settle their dispute by arbitration; arbitration was the only way for dispute settlement and it was obligatory if the parties could not settle their dispute in an amicable way.
- The parties were not free to choose the nature and place of the forum, as the place of arbitration was always and exclusively the permanent arbitration court of the chamber of commerce at the seat of the defendant.
- The parties freedom to appoint arbitrators were limited as well. They could appoint arbitrators only from a list of arbitrators prepared by the respective arbitration court.
In spite of those elements, this system made the arbitration techniques widely known and practised in COMECON trade and paved the way for real arbitration culture for the nineties.
The existence of trade and dispute settlement was, however, not only between and among these COMECON countries. As the cold war eased, the companies of Central Europe had ever-growing trade relations with the Third World and with the West, namely trading partners from market economics. Arbitration was almost always provided in the contracts as the way of dispute settlement because neither party trusted the court system of the other. It was real arbitration without the limits already mentioned. Arbitration took place in the arbitration institutions in countries of Central Europe, but in most cases, were discussed in such well-known arbitration institutions, as the ICC, Swiss arbitration, and at the Vienna International Arbitrational Centre (“VIAC”).
At that time, most states and representatives of states of the region were already very active in the development of the framework of international arbitration. They ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards; they actively participated in the accomplishment of the UNCITRAL Arbitration Rules and of the UNCITRAL Model Law on Arbitration and they were among the first (both states and institutions) to imlement them.
These developments made it possible, so that after the change from the economic and political system and returning to market economy, many of the Central European countries, based on the adoption of the Model Law and Arbitration Rules, were able to satisfy the requirements of international and domestic arbitration. Nowadays a considerable part of companies’ economic disputes, both domestic and international, follow the way of arbitration.
We now have countries in the region which organise seminars on arbitration and where arbitration is an independent subject at universities.
Still, there is room for development and for improvements as considerable differences exist among those institutions and in the legislative framework of arbitration. There are arbitration courts where the number of domestic cases are around 250 per year, while in others it is much less, even none. There are arbitration courts where the number of international cases are around 100, while in others less than 10. Even if we consider the differences in magnitude of the economy of the different countries, these differences in arbitration cases indicate an uneven development of arbitration.
There are many differences across the region in the approach to arbitrate, for example, how close the rules of the different arbitration institutions follow the UNCITRAL Arbitration Rules and how close the laws follow the UNCITRAL Model Law on Arbitration. What these differences do show, however, is that the application of them is present everywhere in Central Europe.
There is a difference in their activity in the international field - in their participation in international seminars; a difference in the number of books published on arbitration and in general a difference in the arbitration culture.
There is a difference in arbitration institutions and their experts. It could be said that the arbitration institutions of Poland, the Czech Republic, Hungary and Romania are the most reknown and you can frequently meet the experts in arbitration courts in the West as well.
While differences exist, such differences exist in most part of the world. Central Europe is already on track. It is part of the development of arbitration in the world; it is no more a different kind of animal.
In most countries of the region, the culture of arbitration is present, the relation between courts and arbitration rests on international requirements, decisions of the courts being set aside are rare and the recognition and enforcement of foreign arbitral awards have a satisfactory record. Arbitration is more developed than it is in many other regions of the world.
We do not have to highlight special features of arbitration in Central Europe, but rather to emphasise that it is part of the worldwide arbitration practice. There are strong, acknowledged arbitration institutions, and others, less acknowledged. There are both more and less developed legislative frameworks on arbitration, but, as mentioned, such differences exist in most parts of the world.
What is clear though is that Central Europe is a safe place for arbitration and when considering the arbitration agreement, the same commercial decisions should be taken as they would for other established arbitration areas around the world.