Croatia: Arbitration

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This country-specific Q&A provides an overview of the legal framework and key issues surrounding arbitration law in Croatia.

This Q&A is part of the global guide to Arbitration.

For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/arbitration/

  1. What legislation applies to arbitration? Are there any mandatory laws?

    Arbitration in Croatia is governed by the Arbitration Act, published in the Official Gazette no. 88/2001 on 11 October 2001 and in force as of 19 October 2001.

    Although the parties to the arbitration proceedings are free to choose the rules of conduct, there are some mandatory rules which the parties cannot deviate from. These rules are the rules on arbitrability and public order, as well as some mandatory rules of the Arbitration Act, such as the provisions on fair trial and equal treatment, provisions on grounds for challenge of arbitrators, provision on the appointment of the judges of regular courts in Croatia as arbitrators, provisions on written award, content, annulment and origin state of the award, and the competence provisions.

  2. Is the country a signatory to the New York Convention? Are there any reservations to the general obligations of the Convention?

    Croatia is a party to the New York Convention. The Convention was initially acceded by the former Socialist Federal Republic of Yugoslavia in 1982 and entered into force on 8 October 1991. After the dissolution from Yugoslavia, Croatia became a party to the Convention by way of notification on succession of 26 July 1993.

    Croatia adhered to the reservations to the general obligations of the Convention made by the former Yugoslavia. Thus, the Convention is applied only to those arbitral awards which were adopted on the territory of another contracting state after the Convention entered into effect and with respect to the disputes which are considered as commercial under Croatian law.

  3. What other arbitration-related treaties and conventions is the country a party to?

    Apart from the New York Convention, Croatia is a party to the 1965 Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States, the 1961 European Convention on International Commercial Arbitration, the 1927 Geneva Convention on the Execution of Foreign Arbitration Decisions and the 1923 Geneva Protocol on Arbitration Clauses.

  4. Is the law governing international arbitration based on the UNCITRAL Model Law? Are there significant differences between the two?

    Croatian Arbitration Act is based on the UNCITRAL Model Law, with some differences relating to the scope of application. Unlike the UNCITRAL Model Law, Croatian Arbitration Act applies both to national and international disputes, as well as to disputes which are not necessarily considered as commercial.

  5. Are there any impending plans to reform the arbitration laws?

    There are no impending plans to amend the Arbitration Act.

  6. What arbitral institutions (if any) exist? Have there been any amendments to their rules or are there any being considered?

    The only arbitral institution in Croatia is the Permanent Arbitration Court established at the Croatian Chamber of Economy. Rules of conduct of the Arbitration Court are the Rules of Arbitration of the Permanent Arbitration Court of the Croatian Chamber of Economy, or so called Zagreb Rules. Zagreb Rules entered into force in 2011 and were subsequently amended in 2015 and 2017.

  7. What are the validity requirements for an arbitration agreement?

    The arbitration agreement may be concluded in the form of an arbitration clause or in the form of a separate arbitration agreement.

    The Arbitration Act provides that the arbitration agreement needs to be concluded in writing. Written form requirement is satisfied if the agreement is contained in documents signed by the parties or in an exchange of letters, telex, faxes, telegrams or other means of telecommunication that provide a record of the agreement, irrespective whether signed by the parties.

    It shall be also deemed that an arbitration agreement is concluded in writing: a) if the arbitration agreement is contained in one party’s written offer, or b) if one party refers to previously concluded oral arbitration agreement in written notice and other party fails to raise timely objection against such offer/notice and such failure to object may be considered to constitute acceptance of the offer/content of the notice according to usages in commerce.

    Further on, it is possible agree on arbitration by making incorporation by reference. There are also specific provisions for consumer contracts and bill of lading.

  8. Are arbitration clauses considered separable from the main contract?

    The Arbitration Act provides for separability of the arbitration clause from the main contract. An arbitration clause forming part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision of the arbitral tribunal that the contract is null and void does not automatically invalidate the arbitration clause.

  9. Is there anything particular to note in your jurisdiction with regard to multi-party or multi-contract arbitration?

    In Croatia there are no specific rules regarding multi-party or multi-contract arbitration.

  10. How is the law applicable to the substance determined?

    The arbitration agreement is governed by the law designated by the parties and, failing such designation, by the law applicable to the merits or Croatian law.

  11. Are any types of dispute considered non-arbitrable? Has there been any evolution in this regard in recent years?

    After entry into force of the Arbitration Act in 2001, Croatia placed itself amongst the states which allow arbitration on the widest variety of disputes. Thus, the parties may agree on arbitration for the settlement of disputes with respect to the rights of which they may freely dispose.

    Croatian law limits the possibility of choosing the seat of arbitration outside of Croatia. The parties may agree on the arbitration outside Croatia only in the disputes with an international element and provided that Croatian courts do not have exclusive jurisdiction to hear such disputes.

  12. Are there any restrictions in the appointment of arbitrators?

    Judges of Croatian courts can only be appointed as presiding arbitrators or sole arbitrators.

  13. Are there any default requirements as to the selection of a tribunal?

    Unless otherwise agreed by the parties, arbitral tribunal consists of three arbitrators in which case each party appoints one arbitrator and they party appointed arbitrators jointly appoint the presiding arbitrator. If arbitrators are not appointed in that manner, an appointing authority shall have that power. In cases where there is sole arbitrator and the parties fail to agree on the person of arbitrator, the appointing authority shall have the power to appoint him.

  14. Can the local courts intervene in the selection of arbitrators? If so, how?

    In cases where it is necessary to appoint arbitrator and there is no agreement between the parties on the appointing authority, the appointing authority is the president of the Commercial Court in Zagreb or a judge authorized by him.

  15. Can the appointment of an arbitrator be challenged? What is the procedure for such challenge? Has there been an increase in number of challenges in your jurisdiction?

    An arbitrator may be challenged: i) in case of justifiable doubts regarding his independence or impartiality, ii) if the arbitrator does not possess qualifications agreed to by the parties, and iii) if arbitrator fails to fulfill his obligation conduct the arbitration in expeditious manner.

    The parties are free to agree on the procedure for challenge of arbitrator. In the absence of such agreement, a party indenting to challenge has to send substantiated written statement explaining reasons for the challenge within 15 days from becoming aware of such reasons or becoming aware of the appointment. Unless the challenged arbitrator resigns of or the other party agrees to the challenge, the arbitral tribunal (including the challenged arbitrator) shall decide on the challenge.

    If a challenge is unsuccessful, a party may request the appointing authority to decide on the challenge. Such procedure does not preclude continuation of arbitral proceedings.

    In practice, there are not many procedures for the challenge of arbitrators.

  16. What happens in the case of a truncated tribunal? Is the tribunal able to continue with the proceedings?

    In case of termination of the arbitrator’s mandate during the arbitration proceedings, due to any reason provided by the Arbitration Act, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. Prior to the appointment of a substitute arbitrator the tribunal cannot continue the proceedings.

  17. Are arbitrators immune from liability?

    Arbitrators are not immune from liability.

  18. Is the principle of competence-competence recognised? What is the approach of local courts towards a party commencing litigation in apparent breach of an arbitration agreement?

    The Arbitration Act expressly provides that the arbitral tribunal is authorized to decide on its jurisdiction, including any objections regarding the validity or existence of the arbitration agreement.

    If a party commences court proceedings in breach of arbitration clause, the court shall, upon respondent’s objection, declare lack of jurisdiction of the court, annul all actions in court proceedings and dismiss the statement of claim (unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed). The respondent may object to the jurisdiction of the court at the latest at the preliminary hearing, and if no such hearing is held, at the main hearing during discussion on the merits, until the response is given to the statement of claim.

  19. How are arbitral proceedings commenced? Are there any key provisions under the arbitration laws relating to limitation periods or time bars of which the parties should be aware?

    Unless otherwise agreed by the parties, if the arbitral proceedings are organized and administered by an arbitral institution, the arbitration proceedings commence on the date when arbitral institution receives the statement of claim. In other cases where the arbitration proceedings are not organized and administered by the arbitral institution, the arbitration proceedings commence on a day when the respondent receives notice that the opposing party appointed an arbitrator or proposed a sole arbitrator, accompanied by the statement of claim and an invitation to appoint the other arbitrator or to declare whether it accepts the sole arbitrator.

    The Arbitration Act does not contain provisions on the statute of limitation, thus, the statute of limitation is regulated by the substantive law applicable to the subject matter of dispute.

  20. What happens when a respondent fails to participate in the arbitration? Can the local courts compel parties to arbitrate? Can they order third parties to participate in arbitration proceedings?

    In case the respondent fails to participate in the arbitration, the arbitration court shall continue the proceedings, whilst the respondent’s omission per se will not be treated as an admission of the claimant’s allegations. The parties or third parties cannot be compelled to actively participate in the arbitration proceedings.

  21. In what circumstances is it possible for a state or state entity to invoke state immunity in connection with the commencement of arbitration proceedings?

    It is generally understood that the state may act not only as a state (iure imperii), but it may also act in a commercial capacity (iure gestionis). This means that the state may not invoke immunity in the arbitration proceedings which are of private or commercial character.

  22. In what instances can third parties or non-signatories be bound by an arbitration agreement or award?

    In general, third parties and non-signatories cannot be bound by an arbitration agreement or award since they take effect only inter partes. However, in exceptional cases, non-signatories may participate in the arbitration and be bound by an arbitral award, e.g. in cases where the agreement, which is the subject matter of arbitration, is concluded in favour of a third person which is not a signatory thereof.

  23. What interim measures are available? Will local courts issue interim measures pending the constitution of the tribunal?

    Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order any party to take such interim measures of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute.

    A party to the arbitration may request a national court to issue interim measures before or during the arbitral proceedings, thus regardless of whether the arbitral tribunal has been constituted or not.

  24. Are there particular rules governing evidentiary matters in arbitration? Will the local courts in your jurisdiction play any role in the obtaining of evidence?

    Unless otherwise agreed by the parties, the arbitral tribunal shall decide on admissibility, relevance and weight of any evidence, as well as whether to schedule and hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents.

    The arbitral tribunal, or a party with the approval of the arbitral tribunal, may request legal assistance from a competent national court in taking evidence that the arbitral tribunal itself could not take.

  25. What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings?

    There are no specific ethical codes or professional standards that apply in general to arbitrators conducting arbitration proceedings. However, the Permanent Arbitration Court established at the Croatian Chamber of Economy has its own Code of Ethics that applies to arbitrators conducting the arbitration proceedings within the Arbitration Court.

    Counsels in the arbitration proceedings, who are attorneys at law in Croatia, are in general bound by the Code of Ethics of the Croatian Bar Association.

  26. How are the costs of arbitration proceedings estimated and allocated?

    At the request of a party, the arbitral tribunal shall determine how the costs of arbitration proceedings (including representation costs and the costs of arbitrator’s fees) shall be allocated; i.e. which of the parties (and to what extent) shall be obliged to reimburse the costs of the other party. The arbitral tribunal has discretion in determining the allocation of costs, taking into account all circumstances of the case, including the outcome.

  27. Can pre- and post-award interest be included on the principal claim and costs incurred?

    Pre-award interest can be included in the award (if it was included in the claim and up to the extent permitted by substantive law). Post-award interest is the statutory default interest if the amounts determined by the award are not paid by maturity. The matter of post-award interest is determined by enforcement regulations (an award is enforceable under the same conditions as a final court judgment).

  28. What legal requirements are there for the recognition of an award?

    Recognition of foreign awards in Croatia is governed by the New York Convention.

    All arbitral awards not falling within the scope of the New York Convention are recognized in Croatia in accordance with provisions of the Arbitration Act.

    According to the Arbitration Act, the party seeking recognition and enforcement of an award has to submit to the court: i) a petition for recognition in writing, ii) an award (original or certified translation) with certified translation to Croatian (where applicable), iii) an arbitration agreement (original or certified translation) with certified translation to Croatian (where applicable).

    A foreign award shall be recognized, unless the court finds, upon objection of party: i) that there are grounds for setting aside of the award, ii) if it finds that the award has not yet become binding on the parties, or iii) has been set aside or suspended by a court of the country in which or under the law of which, that award was made.

    Recognition and enforcement of a foreign award shall be refused if the court finds that: a) the subject-matter of the dispute is not capable of settlement by arbitration under Croatian law, or b) the recognition or enforcement of the award would be contrary to the public policy of Croatia.

  29. Does the law impose limits on the available remedies? Are some remedies not enforceable by the local courts?

    The Arbitration Act does not impose any limits as to available remedies which may be ordered by the arbitral tribunal. Thus, unless otherwise agreed by the parties, the arbitral tribunal may order any remedy which could be ordered by a national court. In any case, local court will not enforce remedies ordered by the arbitral tribunal which are contrary to the Croatian public order.

  30. Can arbitration proceedings and awards be appealed or challenged in local courts? What are the grounds and procedure?

    The awards of arbitral tribunal may not be appealed before local courts. As a default rule, the awards have the force of the final judgment and there are no appellate proceedings against them. However, the parties may agree on the appeal procedure before an arbitral tribunal of higher instance.

    An award can, however, be contested before courts in proceedings for setting aside of an award.

    The award may be set aside by the court if party making such application demonstrates that:
    a) there was no arbitration agreement or such agreement was not valid;
    b) a party to the arbitration agreement was incapable of concluding the arbitration agreement or to be a party to an arbitration dispute or that a party was not duly represented;
    c) the party making the application for setting aside was not given proper notice of the commencement of the arbitral proceedings or was otherwise unable to present its case before the arbitral tribunal;
    d) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration;
    e) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the Arbitration Act or agreement of the parties which could have influenced the content of the award;
    f) the award has no reasons or has not been signed.

    If an application for setting aside is made, the court examines ex officio existence of the following reasons which are grounds for setting aside of the award:

    a) if the subject matter of the dispute is arbitrable under Croatian law,
    b) if the award is conflict with the public policy of Croatia.

    The parties may also agree that the application for setting aside can be submitted on the grounds that the party applying for setting aside found new facts or the opportunity to present new evidence on the basis of which an award more favorable to him could have been made if these facts were known or evidence produced in the hearings.

  31. Can the parties waive any rights of appeal or challenge to an award by agreement before the dispute arises (such as in the arbitration clause)?

    The parties may not waive in advance their right to challenge an award by initiating proceedings for setting aside of the award. Argumentum a contrario, parties would be free to renounce the right to commence the setting aside procedure after the award has been delivered.

  32. To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?

    Enforcement Act provides that enforcement on the assets of a foreign state in Croatia can be conducted only provided that: a) foreign country agrees to such enforcement, or b) the minister of justice gives consent to such enforcement, after obtaining of a prior opinion of the minister for foreign affairs.

  33. To what extent might a third party challenge the recognition of an award?

    Third party may oppose recognition of the award only for procedural reasons.

    For foreign awards falling within the scope of the New York Convention, recognition of an award may be challenged only for the reasons stated therein.

    For the foreign awards recognized in accordance with the Arbitration Act, the grounds for refusal of recognition are the same as the grounds for refusal of enforcement (please refer our to answer to question 28). The court examines ex officio if the subject matter of the dispute is arbitrable under Croatian law and if the award is in conflict with the public policy of Croatia, while the existence of other reasons has to be invoked and proved by the opposing party.

    The decision of the court in recognition proceedings is subject to an appeal.

  34. Have there been any significant developments with regard to third party funding recently?

    We are not aware of any such developments (or other legislative developments regarding arbitration) in Croatia.

  35. Is emergency arbitrator relief available? Is this frequently used?

    Croatian Arbitration Act does not provide for emergency arbitrator relief. In general, interim relief may be granted only after the tribunal has been constituted. The newest version of Zagreb Rules provides that in emergency situations, in cases where there is an arbitration clause providing for the application of Zagreb Rules, the president of the Permanent Arbitration Court of the Croatian Chamber of Economy may order interim measures even before the constitution of the arbitral tribunal, which shall be reviewed by the tribunal once it is constituted.

  36. Are there arbitral laws or arbitration institutional rules providing for simplified or expedited procedures for claims under a certain value? Are they often used?

    The newest version of Zagreb Rules provide special rules for expedited procedures. They are applied for disputes without an international element where the value of the claim does not exceed EUR 100,000, unless the parties agree otherwise in their arbitration agreement. They can be applied for other disputes as well if the parties agree to use the expedited procedure. These have been enacted recently and we are not aware that they have been used often.

  37. Have measures been taken by arbitral institutions to promote transparency in arbitration?

    We have not observed any particular measures taken by the arbitral institutions.

  38. Is diversity in the choice of arbitrators and counsel (e.g. gender, age, origin) actively promoted? If so, how?

    No, the choice of arbitrators and counsel is at the discretion of the parties and mostly takes into account their experience and professional qualifications.

  39. Have there been any developments regarding mediation?

    No recent developments have been observed. The current Mediation Act is in force since 2011, and there are sporadic initiatives to encourage parties in litigation to attempt court-assisted mediation, which is rarely successful.

  40. Have there been any recent court decisions considering the setting aside of an award that has been enforced in another jurisdiction or vice versa?

    No recent developments have been observed. Croatian courts rarely set aside arbitral awards because the reasons are fairly restricted.