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Sponsored briefing: Why choose Belgrade as a seat of arbitration?

Senka Mihaj, Nemanja Ilić and Marko Milanović of Mihaj, Ilić & Milanović explain the advantages of carrying out arbitration proceedings in Serbia

One of the key issues when it comes to drafting an arbitration clause, apart from selecting the applicable rules, is the seat of arbitration. The seat is much more than a technical issue. It determines which legal jurisdiction is the arbitration tied, decides on lex arbitri, and determines which national courts may intervene in the arbitration proceedings and the extent of such intervention.

Longstanding practice has established a number of ‘usual’ choices for seat of arbitration, such as Paris, London, Zurich, Geneva and Vienna. While these are all arbitration-friendly choices and serve as seat to a number of internationally-recognised arbitral institutions (such as the International Criminal Court (ICC), London Court of International Arbitration, Swiss Chambers’ Arbitration Institution (SCAI) and Vienna International Arbitral Centre (VIAC)), there are also certain disadvantages with these choices. These relate primarily to costs – travel, accommodation and arbitration venue expenses can easily become exorbitant for arbitration proceedings in those cities. The same goes for cost of legal counsel – engaging law firms from these arbitration centres can often trigger head-spinning lawyer costs. This is particularly problematic in cases where the dispute itself does not concern multi-million amounts and where arbitration expenses can easily build up to a significant fraction of the amount in dispute, or even surpass it. At times, this may cause parties to become reluctant to pursue arbitration at all, even if they have a clear case on merit.

A great way to overcome this issue is to choose an alternative seat of arbitration – one that is arbitration friendly not only when it comes to legislative framework but also to the parties’ wallets. An ideal alternative for parties from Europe and the Middle East, and in particular from Central and Eastern Europe, is the city of Belgrade. There is a multitude of reasons why Belgrade should become the next arbitration hotspot in this part of the world.

Friendly legislation

The legislative framework for arbitration in Serbia is the Arbitration Act from 2006, which offers a safe and familiar legislative grounding for arbitration proceedings, as it is based on the UNCITRAL Model Law of 1985. Serbia is also a signatory to the New York Convention, enabling speedy and efficient recognition of arbitral awards rendered in Serbia. What this means in practice is that choosing Belgrade over cities that are usually chosen would make no difference as to the manner in which the proceedings are conducted or the fate of the arbitral award.

Established arbitration tradition’

‘For a small country, Serbia is home to a number of lawyers capable of successfully resolving even the most complex disputes.’

Belgrade is home to two arbitral institutions: the Permanent Arbitration at the Chamber of Commerce and Industry of Serbia (SCC) and Belgrade Arbitration Center (BAC). The SCC has a 70-year tradition of administering domestic and international arbitration proceedings, while the BAC was established in 2013 with the aim to further popularise arbitration. In addition to administering proceedings under their own rules, both the SCC and BAC can act as appointing authorities under UNCITRAL rules. Belgrade also hosted a number of arbitration proceedings conducted pursuant to ICC, VIAC, SCAI and other rules.

A testament to how entrenched arbitration is in Serbia is the Belgrade Arbitration Conference, now in its tenth year, which is organised every spring by the Faculty of Law and attracts leading practitioners from around the world.

Experienced practitioners

Entrusting your dispute into the hands of Serbian arbitration practitioners guarantees that your dispute will be handled by experts and with the utmost diligence. For a comparatively small country, Serbia is home to a number of lawyers capable of successfully resolving even the most complex and challenging disputes. In keeping with current world trends, in recent years Belgrade has seen the appearance of advisers who primarily focus on dispute resolution, with particular emphasis on both commercial and investment arbitration. In addition to practitioners from law firms, Serbia is home to several distinguished scholars who regularly act as arbitrators in domestic and international disputes.

What should also be noted in this respect is that local practitioners can effectively handle disputes even if Serbian law is not chosen as governing law by the parties. This is because Serbian law shares many similarities with the dynamics of civil law countries (in particular Austrian and Swiss law) and therefore, in the majority of cases, only limited input of foreign lawyers, or no such input at all, would be required.

Rationalisation of costs

‘Compared to traditional arbitration venues, Belgrade has a huge advantage in allowing parties to rationalise their costs.’

Compared to traditional arbitration venues, Belgrade has a huge advantage in allowing parties to rationalise their costs and expenses. Arbitration has often been criticised as very costly. Choosing Belgrade as the seat of arbitration can effectively mitigate the possibility of the arbitration clause becoming a hidden trap in the agreement, as expenses associated with conducting arbitration proceedings (accommodation costs, rental costs during the hearing, etc) are significantly lower in Belgrade compared to cities such as London or Paris. Costs of local counsel and arbitrators are several orders of magnitude lower (hourly fees usually charged in Serbia are at least two times lower than the rates prevailing in Western European countries). For these reasons, Belgrade is an ideal choice for those who wish to have their disputes resolved in a speedy, efficient and competent manner, but who also wish to prevent arbitration proceedings from becoming a money-burning exercise.

With all of the above in mind, parties who wish to agree on arbitration as a dispute-settlement mechanism should consider choosing Belgrade as the seat of arbitration. Parties will be able to afford all traditional advantages of well-established arbitration venues while avoiding the exorbitant costs associated with arbitration. This particularly matters for lower-value agreements where the parties still want to reap all the benefits that arbitration offers and still not break their bank.

Last but not the least, conducting arbitration proceedings in Belgrade also allows for a great experience outside of working hours. With a history spanning millennia and a vibrant nightlife scene, Belgrade allows for an exciting and refreshing cultural experience.

Marko Milanović

Senka Mihaj, Nemanja Ilić and Marko Milanović (pictured left to right), co-founders, Mihaj, Ilić & Milanović

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