The In-House Lawyer

IN THIS ARTICLE WE WILL FIRST EXAMINE the competences of the specialist Bucharest Stock Exchange (BSE) Arbitration Court, and then take a look at the arbitration procedure rules, the arbitral tribunal and related proceedings. In the second part of our article, we will cover the arbitral decision and the means to challenge such a decision, as well as the arbitration of matters related to capital markets by other arbitration bodies.

BSE ARBITRATION COURT

The Bucharest Stock Exchange SA (BSE), the operator of the Romanian securities regulated market, has set up a permanent arbitration body – the BSE Arbitration Court (BSEAC) – to deal with specialised arbitration on capital market matters.

Organised on the basis of the former capital market law (Law no. 52/1994)¹, the BSEAC is currently governed by the procedure rules adopted by the BSE Committee, as approved by the regulatory authority – the National Securities Commission – through decision no. 372 of 31 January 2006 (the Procedure Rules).²

Competence of the BSEAC

The BSEAC is a permanent arbitration body organised by the BSE for the settlement of patrimonial disputes resulting from operations carried out on the regulated markets and the alternative trading system operated by the BSE, when such disputes arise between:

• participants at the BSE trading system;³
• participants at the BSE trading system and issuers of financial instruments admitted to trading on the regulated markets operated by the BSE;
• issuers of financial instruments admitted to trading on the regulated markets operated by BSE;
• clients and participants at the BSE trading system; and
• between intermediaries, between intermediaries and their agents, between agents and their clients and employers, resulting from BSE market operations or operations on different markets.

ARBITRATION AGREEMENT

The parties to a dispute may submit a claim to the BSEAC for arbitration if:

1. there is an arbitration clause agreed under the contract existing between such parties; or
2. the parties agree to arbitrate once the dispute has occurred.

The agreement to arbitrate (either in the form of an arbitration clause or a separate agreement) has to be in writing as a condition of validity. The Procedure Rules expressly state that the validity of the arbitration clause is independent of the validity of the contract where such clause is included.

ARBITRAL TRIBUNAL

The arbitral tribunal has the competence to rule on its own competence to decide the case. Should there be no contrary provision in the arbitration clause or in the agreement to arbitrate, it is deemed that the parties accept the Procedure Rules applicable to the arbitration by the BSEAC.

As a rule, disputes submitted to arbitration by the BSEAC are to be heard and decided by a panel of three arbitrators. However, should all the parties agree, the dispute may be decided by a sole arbitrator. In the case of a three-person arbitration panel, each party must nominate one member of the panel and one potential replacement, from among the persons recorded on the published list of arbitrators of the BSEAC.⁴The claimant must indicate their nominations in their request for arbitration. The respondent has to make their nomination within ten days of receiving the request for arbitration. The two panel members nominated by the parties will then choose the third arbitrator, who will also chair the arbitration panel.

Should one of the parties fail to nominate an arbitrator, or the two arbitrators fail to agree on the person to chair the panel, the claimant may request the chairperson of the BSEAC to proceed with such nomination.

The chosen arbitrators have to accept their appointment in writing within five days of receiving the nomination proposal. Each of them has to sign an engagement to arbitrate impartially and in full compliance with the applicable Procedure Rules.

The arbitrator may be recused for reasons questioning their independence or impartiality. The party that nominated the respective arbitrator may request their recusal only for causes subsequent to nominating them.

ARBITRATION PROCEEDINGS

The request for arbitration must be filed in writing, identify the parties, indicate the arbitration clause or agreement, the subject matter and claimed value, de facto and de jure grounds for each of the claims, along with the documents or other evidence in support, the arbitrator and the person to replace the arbitrator.

Should any of the required information be missing, the chairperson of the BSEAC will ask the claimant to supplement the request within five days. The respondent then has 30 days to submit a statement of defence. Any counter-claims may be filed either together with the statement of defence or separately, up until the first hearing of the case.

Once the arbitral tribunal is constituted, the file will be transmitted to the tribunal (or the sole arbitrator, if that is what has been agreed). The tribunal will set up the hearing, summoning the parties at least 15 days in advance of the hearing date.

Any motion regarding the existence or validity of the arbitration agreement, the constitution of the tribunal, the limits of the arbitrators’ competence or the proceedings may be raised up until the first hearing, unless a shorter term has been set by the tribunal. Also, any written evidence has to be submitted by the date of the first hearing. The tribunal may allow only the evidence already referenced by a party in its submissions filed until the first hearing and communicated to the other party. By way of exception, further evidence may be allowed by the tribunal if it appears to be necessary following the hearing and producing such would not cause delay to resolving the case.

The whole arbitration file is confidential. No third party may have access to the file unless such access is agreed in writing by the parties and approved by the arbitral tribunal.

ARBITRAL DECISION

The arbitral tribunal has to pass its decision in the case within five months of being constituted, unless the parties have agreed otherwise. Any decision on incidental matters will suspend the respective term.

The tribunal has to decide the case on the basis of the main contract, the relevant legal provisions, the commercial practice, or, if external elements, the law of the jurisdiction chosen by the parties.

Should the parties expressly agree, the arbitral tribunal may resolve on the case ex aequo et bono (in equity and good conscience).

If the tribunal fails to decide on one of the claims, the arbitral decision may be completed further to a request filed by any of the parties within ten days of receiving the decision. Correcting any clerical, computational or typographic errors may also be requested within the same time limit.

The arbitral decision communicated to the parties has the effect of a final court decision. It may be enforced after the competent court issues the writ of enforcement.

The decision may be challenged in court by filing a motion to annul on the following grounds:

1. the dispute could not be resolved through arbitration;⁵
2. the arbitral tribunal has decided on the case in the absence of an arbitration clause or agreement or on the basis of an arbitration clause that is null or ineffective;
3. the arbitral tribunal was not constituted in accordance with the arbitration clause;
4. the party was absent from the hearing where the debates took place and the summoning proceedings were not legally fulfilled;
5. the arbitral decision was passed after the expiry of the term set out by the Procedure Rules;
6. the arbitral tribunal either decided on matters that were not requested, or failed to decide on matters that were requested, or granted more than was requested by a party;
7. the arbitral decision does not contain the resolution or the grounds, it does not show the date and place of being passed, or it is not signed by the arbitrators;
8. the resolution in the arbitral decision provides for something that may not be put into practice; or
9. the arbitral decision violates the public order, the moral order or mandatory legal provisions.

The parties may not waive their right to challenge the arbitral decision until after the decision has been passed. The term for the motion to challenge the arbitral decision is one month from the decision being communicated.

ARBITRATION OF CAPITAL MARKET MATTERS BY OTHER ARBITRATION BODIES

A question may be raised as to whether disputes related to operations carried out on the BSE trading system may be referred for arbitration to another arbitration body.

More precisely, could a dispute of this kind, involving an external element (eg, where one of the parties is a foreigner or a legal entity registered abroad) be arbitrated by the Court of International Commercial Arbitration (CICA) attached to the Court of Commerce and Industry of Romania?

In our view, the answer would be yes, as the competence of the BSEAC is not exclusive, but alternative both to the courts of law and to ad-hoc arbitration. Therefore, the parties have the freedom of choosing the body to decide on their disputes. It is obvious that such an alternative is available as long as the arbitration clause does not exclude arbitration in front of the CICA instead of arbitration by the BSEAC; in the absence of an arbitration clause the other party has to agree that the dispute be arbitrated by such other arbitration body.