This country-specific Q&A provides an overview of the legal framework and key issues surrounding arbitration law in the 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/
What legislation applies to arbitration in your country? Are there any mandatory laws?
Arbitration in Croatia is governed by the Croatian Arbitration Act, published in the Official Gazette No. 88/2001 on October 11, 2001 as in force since October 19, 2001.
Although the parties to the arbitration proceedings are free to choose the applicable arbitration rules, there are some mandatory rules that 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 the fair trial and equal treatment, provisions on the grounds for challenge of arbitrators, provisions on the appointment of the judges of Croatian courts as arbitrators, provisions on written arbitral awards, content, annulment and state of origin of the arbitral award, and the competence-competence provisions.
Is your country a signatory to the New York Convention? Are there any reservations to the general obligations of the Convention?
Croatia is a signatory of the New York Convention. The Convention was initially acceded by the former Socialist Federal Republic of Yugoslavia in 1982 and entered into force on October 8, 1991. After the dissolution from Yugoslavia, Croatia became a party to the Convention by way of notification on succession of July 26, 1993.
Croatia adhered to the reservations to the general obligations of the Convention made by the former Socialist Federal Republic of Yugoslavia. Thus, the Convention is applied only to those arbitral awards that were adopted on the territory of other contracting states after the Convention entered into effect and with respect to disputes which are considered as commercial under Croatian law.
What other arbitration-related treaties and conventions is your country a party to?
Apart from the New York Convention, Croatia is a party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ”ICSID Convention”) from 1965, the European Convention on International Commercial Arbitration from 1961, the Convention on the Execution of Foreign Arbitral Awards (the ”Geneva Convention”) from 1927 and the Protocol on Arbitration Clauses (the ”Geneva Protocol”) from 1921.
Is the law governing international arbitration in your country based on the UNCITRAL Model Law? Are there significant differences between the two?
The Croatian Arbitration Act is based on the UNCITRAL Model Law, with some differences relating to the scope of application. Unlike the UNCITRAL Model Law, the Croatian Arbitration Act applies both to national and international disputes, as well as to disputes that are not necessarily considered as commercial.
Are there any impending plans to reform the arbitration laws in your country?
There are no impending plans to amend the Croatian Arbitration Act.
What arbitral institutions (if any) exist in your country? 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. Arbitration Rules of the Permanent Arbitration Court are the Rules of Arbitration of the Permanent Arbitration Court of the Croatian Chamber of Economy (the ”Zagreb Rules”). The Zagreb Rules entered into force in 2011 and were subsequently amended in 2015.
What are the validity requirements for an arbitration agreement under the laws of your country?
The arbitration agreement may be concluded in the form of an arbitration clause or in the form of a separate arbitration agreement.
The Croatian Arbitration Act provides that the arbitration agreement needs to be concluded in writing. The 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 if: a) the arbitration agreement is contained in one party’s written offer, or b) one party refers to the previously concluded oral arbitration agreement in a written notice and the other party fails to raise a timely objection against an 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.
Furthermore, it is possible agree to arbitration through incorporation by reference. There are also specific provisions for consumer contracts and bill of lading.
Are arbitration clauses considered separable from the main contract?
The Croatian 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.
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.
How is the law applicable to the substance determined? Is there a specific set of choice of law rules in your country?
The Croatian Arbitration Act prescribes that the arbitral tribunal will decide according to the legal rules as chosen by the parties as being relevant to the substance of the dispute. Any referral to the law or legal system of a particular state shall be interpreted, unless the parties expressly agree otherwise, as a direct reference to the substantive law of that state, and not to its rules on the determination of the applicable law.
If the parties do not chose the applicable law, the arbitral tribunal shall decide according to the legal rules which the arbitral tribunal considers to be in a close connection to the dispute.
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 Croatian Arbitration Act in 2001, Croatia placed itself amongst the states that allow arbitration in the widest variety of disputes. Thus, the parties may agree on arbitration for the settlement of disputes with respect to rights of which the parties may freely dispose with.
Croatian law limits the possibility of choosing the seat of arbitration outside of Croatia. The parties may agree to arbitration outside of Croatia only in disputes with an international element and provided that Croatian courts do not have exclusive jurisdiction to hear such disputes.
In your country, are there any restrictions in the appointment of arbitrators?
Judges of Croatian courts can only be appointed as presiding arbitrators or sole arbitrators.
Are there any default requirements as to the selection of a tribunal?
Unless otherwise agreed by the parties, the arbitral tribunal consists of three arbitrators in which case each party appoints one arbitrator and the party appointed arbitrators jointly appoint the presiding arbitrator. If the arbitrators are not appointed in that manner, an appointing authority shall have that power. In cases where there is a sole arbitrator and the parties fail to agree on the arbitrator, the appointing authority shall have the power to appoint the sole arbitrator.
Can the local courts intervene in the selection of arbitrators? If so, how?
In cases where it is necessary to appoint an 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 the president of the Commercial Court in Zagreb.
Can the appointment of an arbitrator be challenged? What are the grounds for such challenge? 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 the 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 fulfil his obligation to conduct the arbitration in an expeditious manner.
The parties are free to agree on the procedure for the challenge of the arbitrator. In the absence of such an agreement, a party indenting to challenge the arbitrator has to send a substantiated written statement explaining the reasons for the challenge within 15 days from becoming aware of such reasons or from becoming aware of the appointment. Unless the challenged arbitrator resigns 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. This procedure does not preclude the continuation of arbitral proceedings.
In practice, the number of procedures challenging the arbitrators is rising.
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 Croatian 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.
Are arbitrators immune from liability?
Arbitrators are not immune from liability.
Is the principle of competence-competence recognised in your country?
The Croatian 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.
What is the approach of local courts towards a party commencing litigation in apparent breach of an arbitration agreement?
If a party commences court proceedings, breaching the an arbitration clause, the court shall, upon the respondent’s objection, declare the lack of jurisdiction of the court, annul all actions undertaken in the court proceedings and reject the statement of claim (unless the court 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 preliminary hearing, at the latest, and if no such hearing is held, at the main hearing during the discussion on the merits, until the answer is given to the statement of claim.
How are arbitral proceedings commenced in your country? 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 the arbitral institution receives the statement of claim. In other cases where the arbitration proceedings are not organized and administered by an arbitral institution, the arbitration proceedings commence on the date when the respondent receives the 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 Croatian 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 the dispute.
What happens when a respondent fails to participate in the arbitration? Can the local courts compel parties to arbitrate?
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.
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 (actum iure imperii), but it may also act in a commercial capacity (actum iure gestionis). This means that the state may not invoke immunity in the arbitration proceedings that are of a private or commercial character.
In what instances can third parties or non-signatories be bound by an arbitration agreement or award? Can local courts order third parties to participate in arbitration proceedings in your country?
In general, third parties and non-signatories cannot be bound by an arbitration agreement or arbitral award since they the arbitration agreement has effect only inter partes. However, in exceptional cases, non-signatories may participate in arbitration proceedings and be bound by an arbitral award, e.g. in cases when the agreement, being the subject matter of arbitration, is concluded in favour of a third person that is not a signatory thereof.
The parties or third parties cannot be compelled to actively participate in arbitration proceedings.
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 Croatian national courts to issue interim measures before or during the arbitral proceedings, thus regardless of whether the arbitral tribunal has been constituted or not.
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 Croatian national court in the taking of evidence that the arbitral tribunal itself could not take.
What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your country?
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 Permanent Arbitration Court.
Counsels in arbitration proceedings that are attorneys at law in Croatia, are in general bound by the Code of Ethics of the Croatian Bar Association.
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 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.
Can pre- and post-award interest be included on the principal claim and costs incurred?
Pre-award interest can be included in the arbitral award (if they were included in the claim and up to the extent permitted by substantive law). Post-award interest are statutory default interest if the amounts determined by the arbitral award are not paid at maturity. The matter of post-award interest is determined by enforcement regulations (an arbitral award is enforceable under the same conditions as a final court judgment).
What legal requirements are there in your country for the recognition of an award?
The New York Convention governs recognition of foreign arbitral awards in Croatia.
All arbitral awards not falling within the scope of the New York Convention are recognized in Croatia in accordance with provisions of the Croatian Arbitration Act.
According to the Croatian Arbitration Act, the party seeking recognition and enforcement of an arbitral award has to submit to the court: i) the petition for recognition in writing, ii) the arbitral award (the original or a certified translation) with a certified translation to Croatian (where applicable), iii) the arbitration agreement (the original or a certified translation) with certified a translation to Croatian (where applicable).
A foreign arbitral award shall be recognized, unless the court finds, upon the objection of party, that: i) there are grounds for setting aside the arbitral award, ii) the arbitral award has not yet become binding for the parties, or iii) the arbitral award has been set aside or suspended by the court of the country in which or under the law of which, that arbitral award was issued.
Recognition and enforcement of a foreign arbitral 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 arbitral award would be contrary to the Croatian public order.
What is the estimated timeframe for the recognition and enforcement of an award? May a party bring a motion for the recognition and enforcement of an award on an ex parte basis?
The estimated timeframe for the recognition and enforcement of an arbitral award in Croatia is anywhere over one month.
The Croatian national courts will not accept motions for the recognition and enforcement of arbitral award submitted by third parties.
Does the arbitration law of your country provide a different standard of review for recognition and enforcement of a foreign award compared with a domestic award?
The Croatian Arbitration Act prescribes a different standard of review for the recognition and enforcement of a foreign arbitral awards compared to domestic arbitral awards.
Croatian national courts will not enforce a domestic arbitral award if the party opposing the enforcement demonstrates that: a) there was no arbitration agreement or the arbitration agreement was not valid; b) a party to the arbitration agreement was incapable of concluding the arbitration agreement, or, was incapable of being a party to an arbitration dispute, or, a party was not duly represented; c) the party making the application for the setting aside of the arbitral award was not given proper notice of the commencement of arbitral proceedings or was otherwise unable to present its case before the arbitral tribunal; d) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission for arbitration, or contains decisions on matters beyond the scope of the submission for arbitration; e) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the Croatian Arbitration Act or agreement of the parties that could have influenced the content of the arbitral award; and f) the arbitral award has no reasons or has not been signed.
Croatian national courts will not enforce a foreign arbitral award if the party opposing the enforcement demonstrates that: a) the subject matter of the dispute is arbitrable under Croatian law; and b) the arbitral award is conflict with the Croatian public order.
Does the law impose limits on the available remedies? Are some remedies not enforceable by the local courts?
The Croatian 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 that could be ordered by a national court. In any case, the local court will not enforce remedies ordered by the arbitral tribunal that are contrary to the Croatian public order.
Can arbitration proceedings and awards be appealed or challenged in local courts? What are the grounds and procedure?
The arbitral awards issued by arbitral tribunals may not be appealed before Croatian national courts. As a default rule, the arbitral award has the force of a final judgment and there are no appellate proceedings against it. However, the parties may agree on the appeal procedure before an arbitral tribunal of a higher instance.
An arbitral award can, however, be contested before Croatian national courts in proceedings for the setting aside of the arbitral award.
Croatian national court may set aside the arbitral award if the party making such an application demonstrates that:
a) There was no arbitration agreement or the arbitration agreement was not valid;
b) A party to the arbitration agreement was incapable of concluding the arbitration agreement, or, was incapable of being a party to an arbitration dispute, or, a party was not duly represented;
c) The party making the application for the setting aside of the arbitral award was not given proper notice of the commencement of arbitral proceedings or was otherwise unable to present its case before the arbitral tribunal;
d) The arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission for arbitration, or contains decisions on matters beyond the scope of the submission for arbitration;
e) The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the Croatian Arbitration Act or agreement of the parties that could have influenced the content of the arbitral award;
f) The arbitral award has no reasons or has not been signed.
If an application for the setting aside of the arbitral award is made, the Croatian national court examines ex officio the existence of the following reasons that are grounds for the setting aside of the arbitral award:
a) If the subject matter of the dispute is arbitrable under Croatian law and
b) If the arbitral award is conflict with the Croatian public order.
The parties may also agree that the application for the setting aside of the arbitral award may be submitted on the grounds that the party applying for the setting aside discovered new facts or the opportunity to present new evidence on the basis of which an award more favourable to it would have been made if these facts were known or evidence produced during the arbitral proceedings.
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 arbitral award by initiating proceedings for the setting aside of the arbitral award. Argumentum a contrario, parties are free to renounce their right to commence the procedure for the setting aside of the arbitral award after the arbitral award has been delivered.
To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?
The Croatian Enforcement Act provides that enforcement over the assets of a foreign state in Croatia can be conducted only provided that: a) the foreign country agrees to such an enforcement, or b) the Croatian Minister of Justice gives its consent to such an enforcement, after obtaining a prior opinion of the Minister of Foreign Affairs.
To what extent might a third party challenge the recognition of an award?
A third party may oppose the recognition of the arbitral award only because of procedural reasons.
For foreign arbitral awards falling within the scope of the New York Convention, the recognition of an arbitral award may be challenged only for the reasons stated therein.
For foreign arbitral awards recognized in accordance with the Croatian Arbitration Act, the grounds for the refusal of recognition are the same as the grounds for the refusal of enforcement (please refer to 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 arbitral award is in conflict with the Croatian public order, while the existence of other reasons has to be invoked and proved by the opposing party.
The decision of the Croatian national court in the recognition proceedings is subject to appeal.
Have there been any significant developments with regard to third party funding in your jurisdiction recently?
We are not aware of any such developments (or other legislative developments regarding arbitration) in Croatia.
Is emergency arbitrator relief available in your country? Is this frequently used?
The Croatian Arbitration Act does not provide for emergency arbitrator relief. In general, interim relief may be granted only after the arbitral tribunal has been constituted. The newest version of the Zagreb Rules provides that in emergency situations, in cases where there is an arbitration clause providing for the application of the 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 arbitral tribunal once it is constituted.
Are there arbitral laws or arbitration institutional rules in your country providing for simplified or expedited procedures for claims under a certain value? Are they often used?
The newest version of the Zagreb Rules provides special rules for expedited procedures. The special rules can be applied in disputes without an international element where the value of the claim does not exceed EUR 100,000.00 unless the parties agree otherwise in the arbitration agreement. The special rules can be applied for other disputes as well if the parties agree to the expedited procedure. The special rules have been enacted recently and we are not aware that they have been used often.
Have there been any mass (arbitration) claims in your jurisdiction?
We have not observed any mass (arbitration) claims before the Permanent Arbitration Court of the Croatian Chamber of Economy.
Have measures been taken by arbitral institutions in your country to promote transparency in arbitration?
We have not observed any particular measures taken by the Permanent Arbitration Court of the Croatian Chamber of Economy.
Is diversity in the choice of arbitrators and counsel (e.g. gender, age, origin) actively promoted in your country? 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.
Have there been any developments regarding mediation in your jurisdiction?
No recent developments have been observed. The current Croatian Mediation Act has been in force since 2011, and there are sporadic initiatives to encourage parties in litigation to attempt court-assisted mediation, which is rarely successful.
Have there been any recent court decisions in your country considering the setting aside of an award that has been enforced in another jurisdiction or vice versa?
No recent developments have been observed. Croatian national courts rarely set aside arbitral awards because the reasons are rather restricted.
Is corruption an issue that is regularly raised in your jurisdiction? What standard do local courts apply for proving of corruption?
The issue of corruption is not regularly raised in Croatia.
The Croatian national courts evaluate all the facts that the court and the parties consider important for proper adjudication.