The arbitration of private legal arguments – an alternative of the standard State legal jurisdiction

 

The standard proceedings of the State legal jurisdiction for settlement of arguments are not the only possible way for the parties to receive justice but more the last means of exit used for that purpose. In a lawful State, having economically advanced society, where the quickness of settlement of the conflicts arisen is of special importance for the safety of the turnover and of the participants in it, more practical and advisable is to look for an alternative of the tardy and sometimes endless long procedures of the standard legal proceedings. Exactly because of that fact, as an alternative of the State legal procedure the arbitration became necessary . In that particular case the matter is only arbitration in order to settle private legal arguments related to property on the basis of an arbitration agreement, and the matter is not anything bearing the name arbitration.

 

In its kind the arbitration is a supreme manifestation of the dispositive principle of the lawsuit and consists in the distributive power of the parties regarding their private legal property relations. According to Art. 365 of the Law on Obligations and Contracts, the parties may settle an argument arisen between them regarding such a legal relation by themselves, by the conclusion of a contract for reaching an agreement. But in case that no any prospects for reaching of agreement exist or in case that such an agreement has not been reached, the parties can give the power by mutual consent to a third person to settle instead of them the private legal dispute arisen between them , by enacting a judgement regarding it, which should be obligatory for the parties. In this case the third person becomes an arbiter , and the settlement of the argument by it represents the arbitration . Because of that the arbitration is a manifestation of non-state , voluntary, contractible, private jurisdiction , and the arbitration procedure is a non-judicial action , based on an arbitration agreement, which is a contract for arbitration in its kind. Therefore without an arbitration agreement there cannot be any arbitration , i.e. in order to be possible one argument to be considered by a certain arbitration court, the parties of the argument shall have an arbitration agreement concluded between each other , which is absolutely compulsory legal requirement for the consideration of the relevant argument by the relevant arbitration instance. 

 

Quite in generally we can say that the arbitration procedure is modeled upon the standard one for the lawsuit . Both proceedings start with a suit application. Before the Arbitration Institution, as well as before the State Court, an ascertainment claim, a conviction claim or a constitutive claim can be brought. Similar are the problems regarding the proceeding prerequisites and regarding the proceedings legitimation, regarding the distribution of the burden of proofs and the types of proofs. Peculiar both to the arbitration and to the lawsuit are the comradeship, participation of third persons, counterclaim, change of the claim, withdrawal and waiver of the claim and others. And as regards to the main differences, they emanate from the fact that the arbitration is not a manifestation of State power , and the lawsuit is its sign, i.e. the difference consists in the reason for the jurisdiction power and in the methods, and namely: power in case of the State Court and voluntariness in case of the Arbitration . 

 

As any procedure, the arbitration has its advantages and disadvantages. The disadvantages of the arbitration towards the State jurisdiction are due mainly to its contractible identity. In this sense is the prohibition for admission of the arbitration to labor related arguments, as the economic inequality of the parties of the argument can lead to organization and procedure of the arbitration that are in favor of the party, which is economically stronger. Another significant disadvantage of the arbitration emanates from the fact that the arbitration institution does not have any State power available and because of that it needs the assistance of the State Court, i.e. the arbitration cannot perform duly its jurisdiction function, for example to collect oral evidences. The main advantages of the arbitration towards the State jurisdiction are, as follows:

 

1. Not referring to the competency of the regular State Courts, both parties entrust the argument to a non-public jurisdictional body, which they feel reliable . The Arbitration Court is an over-national , its jurisdictional power does not emanate from the State sovereignty, as distinguished from the State Courts, whose jurisdiction emanates directly from the State, which fact in certain cases can appear to be of significant importance for the interests of the parties.

 

2. The parties participate in the constitution of the body that takes judgments by the choice of the arbiters .

 

3. The settlement of the argument is done according to a simplified procedure , announced in advance to both parties. They can amend it and adjust it to the peculiarities of the argument. Available is the possibility to specify the procedure of consideration of the lawsuits. This special feature emanates from the contractible kind of the arbitration. Such a stipulation of the lawsuit order is not only absolutely inadmissible before the State Courts, but also raises a lot of questions and pitfalls. In this sense, this difference can be determined as a positive one (for example: stipulation of a higher court membership that the one ordered according to the legislation or according to the Regulations of the relevant institution; likewise in cases, when an argument is considered, which is with big value of the claim, a prohibition can be envisaged for the Arbitration Court to interrogate witnesses and to enact a judgment just on the basis of the written proves).

 

4. The parties confide the argument to the arbiters with special knowledge , which is not always possessed by the ordinary judges. The competitive principle is covered in the arbitration procedure with all might and is constantly followed, while in the State Courts, in spite of the fact that this principle is obeyed as a broad hint, still can be observed the archaic habit of some judges to direct and to support the one or the other party. On the other hand, persons who are foreigners cannot participate before the State Courts of Republic of Bulgaria in the capacity of judges and attorneys-at-law, while the procedure regulations of the arbitration courts are much more liberally in this direction and admit foreign citizens to the lawsuit actions. With this regard advantages could be obtained more with a view to an international legal dispute.

 

5. The speed is one of the big advantages of the arbitration. The procedure is one-institutional. Main priority of the one-institutional procedure is the quickness, likewise the judgments enacted by the arbitration court is final and is not liable to any “revision” by a higher instance and is an additional guarantee for the quicker settlement of the argument. The lawsuits end normally within 4-7 months.

 

6. The arbitration judgments are final , they are subject of voluntary execution and they are distinguished for stability, as they can be attacked only through a claim’s order.

 

7. The arbitration procedure is more economical . The fee collected is not a fixed percentage but becomes smaller with the increase of the claim. The expenses for defense, adepts, translators etc. are made only in one instance. Bearing in mind the quickness and the absence of any chance to appeal the arbitration judgment, from economical point of view the fee is probably the smallest amount of money, which will be saved.

 

8. The arbitration lawsuit is non-public and confidential . Because of that fact the arbitration is able to avoid any aggravation of the relations between the parties. The confidentiality (the sessions of the arbitration court are at closed doors) when considering the arbitration lawsuits, make it a preferable alternative of the public lawsuit, which is held at open doors. In case of trade arguments it is often possible to disclose facts and circumstances (for example a trade secret), which can be avoided by limitation of the publicity through the arbitration.

 

9. The limitations of the international jurisdiction of the State Courts are not valid for the arbitration.

 

10. The accurate party according to the contract can avoid the necessity, the inconvenience, the expenses and the inequality to conduct a lawsuit against the inaccurate party abroad.

 

11. As both parties put up voluntarily with the arbitration, bigger is the probability they to keep their good business relations .

 

12. The execution of the arbitration judgment abroad is guaranteed by the New York Convention in much higher degree, than the execution abroad of the judgments of the State Courts. As the judgment reached in case of arbitration lawsuits is final, it has the force of adjudicated and is not liable to any appeal, according to the Civil Procedure Code of Republic of Bulgaria it is an executive reason, consequently an execution against the debtor can be required and undertaken through it and it has the same force, which has the judgment passed by the State Court .

 

And if we juxtapose the advantages and the disadvantages, the conclusion would be that the advantages of the arbitration preponderate towards the State jurisdiction.

 

There are different kinds of voluntary arbitration regarding private legal arguments their structure and parties accordingly. The arbitration can be ad hoc (incidental) or permanently operating , and in accordance to the place of residence or the head quarters of the parties the arbitration is international or domestic . The arbitration is internal , when both its parties have place of residence or head office in Bulgaria , as well as when one of the parties or both parties are enterprises with foreign share participation having head office in Republic of Bulgaria . The arbitration is deemed international , when the place of residence or the head office of at least one of the parties is not in Republic of Bulgaria but in another country , and the nationality of the parties does not have any significance. The arbitration is ad hoc , when it is established only for the settlement of the dispute or the disputes, indicated in the arbitration agreement, so that after their settlement it ceases its existence and therefore it is called incidental arbitration . A permanently operating arbitration is available, when an arbitration institution is established with a view to the settlement of unlimited number of arguments, which can be confided to it in the future. This institution does not settle the arguments alone. They are settled by arbiters, who act on behalf of the institution, by founding a one-person or a college arbitration court for each separate lawsuit. It is consequently a non-public arbitration establishment , which administrates the performance of arbitration for the lawsuits confided to the institution. Therefore it has bodies, and namely: a chairman, a Presidium, a Secretariate and others, as well as a statute and regulations, according to which an arbitration court is set up for a concrete lawsuit and the arbitration lawsuits are heart.

 

The Arbitration Court at the National Business and Law Association, with a view to the arguments, admitted by this Court for consideration, is a permanent arbitration institution of general competency , i.e. it admits for consideration any kinds of disputes that have an arbitrable subject. Besides, the Arbitration Court at the National Business and Law Association hears not only arguments between the juridical and the physical entities, members of the Association, but arguments irrespective of their parties. Therefore the Arbitration Court at the National Business and Law Association is an opened arbitration institution and settles civil arguments, as well as arguments for filling in any omissions in contracts or for their adjustment to any newly arisen circumstances, notwithstanding with that, whether the head office or the place of residence of the one or of both parties is in Republic of Bulgaria. According to the Law on the International Trade Arbitration the Arbitration Court is not competent to hear non-property arguments and such for financial support, arguments for real rights or possession over a real estate, as well as rights regarding labor legal relations .

 

As we made already reference, in order to one argument to be considered by the Arbitration Court at the National Business and Law Association, the parties of the argument should have an arbitration agreement concluded between them. The arbitration agreement is a contract for arbitration. By it the parties of the contract assign to the arbitration court all or some of the arguments, which could arise or have already arisen between them regarding a certain contractual or out-of-contract private legal property legal relation, which could be a subject of arbitration. In comparison to the contracts of the material law, the arbitration agreement is a procedure contract, because its legal consequences are procedure . The arbitration agreement can be concluded as a separate agreement or it can be included as an arbitration clause in the contract between the parties. The arbitration agreement must be in written form . Written means to be concluded in one of the two ways stated above, the written form deems kept also when the parties exchanged letters, telegrams, facsimiles etc. Like each contract, the arbitration agreement can be concluded under a term or a condition. Bearing in mind that the arbitration agreement is an expression of the will of the parties, it can be supplemented, amended or canceled by mutual consent of the parties. The arbitration agreement can be concluded before, which is the preferable and the safer variant, as well as during or after the argument has arisen. The arbitration agreement is independent from the material legal contract, but this fact does not exclude the possibility both contracts to be damaged by one and the same vice. If the parties do not stipulate anything else, than their consent to assign the argument to the Arbitration Court at the National Business and Law Association means also acceptance of the Regulations of the Arbitration Court at the National Business and Law Association. The Arbitration Court delivers Judgement for its competency. The competency is absolute procedure precondition for the admissibleness of the claim and for consideration of the lawsuit, so in case of lack of competency the lawsuit is terminated. The objection , that the Arbitration Court is not competent, must be made latest with the reply of the Application of Claim, unless with valid reason for the delay. To the objection for incompetence the Arbitration Court should deliver a judgement by a determination or by a resolution regarding the lawsuit.

 

With a view to the requirements of Art. 9 of the Civil Procedure Code, the Law on International Trade Arbitration, the Statute of the Arbitration Court at the National Business and Law Association and the Regulations of the Arbitration Court at the National Business and Law Association, the latter Association recommends to the juridical and the physical entities the following arbitration clause, when concluding their commercial and civil contracts, and namely:

 

“All arguments, emanating from the present contract, having a relation to it or referring to it, including also the arguments, emanating or related to its interpretation, nullity, execution or termination, as well as the arguments concerning the filling in omissions in the contract or its adjustment to any newly arisen circumstances, shall be referred for consideration and settlement to the Arbitration Court at the National Business and Law Association, according to its Statute for lawsuits based on arbitration agreements.” .

 

The recommended arbitration clause is applicable to internal, as well as to international trade and civil contracts:

 

Any disputes arising from this contract or concerning it, including disputes arising from or concerning its interpretation, invalidity, non-performance or termination, as well as disputes about filling gaps in a contract or its adaptation to newly arisen circumstances, shall be settled by the Arbitration Court at the National Business and Law Association in accordance with its Rules for Cases based on Arbitration Agreements.” .

 

As the arbitration agreement forms the basis of the arbitration, it is subordinated to the same legislation, to which the arbitration is subordinated, and namely the legislation according to the place (head office) of the arbitration. The internal arbitration according to § 3 of the transitional and final regulations of the Law on the International Trade Arbitration is subordinated only to the Bulgarian legislation. But according to the New York Convention choice of a legislation for the arbitration agreement is admitted, notwithstanding with that, whether the arbitration is international or domestic. And as Bulgaria is a country included in the New York Convention, the Bulgarian Courts are obliged to accept arbitration agreements subordinated to a legislation chosen by the parties, even if the arbitration agreed by them is domestic, when it is in a country, which is party of the Convention. When the arbitration is international , the parties can subordinate the arbitration agreement to a chosen by them legislation, not only of the New York Convention, but also of the European Convention and of our Law on the International Trade Arbitration. When the parties have not subordinated the arbitration agreement to a chosen by them legislation, than to the arbitration the legislation of the State is applied, where the place of the arbitration is. And as regards to the issues of the legal capacity and the efficiency of the parties of the arbitration agreement, neither the chosen legislation is applied, nor the legislation at the place of the arbitration, but the fatherland legislation of the relevant party.

 

And as regards to the choice of a legislation to be related to the material legal contract, even when there is an arbitration clause included in the contract, this does not mean that the parties subordinate also the arbitration agreement to the chosen legislation. Both contracts have perfectly different subject, functions and legal consequences. The phrasing itself regarding the choice of a legislation for the material legal contract (usually: “When settling the argument the legislation of State X will be applied”) excludes the will of the parties to subordinate the arbitration agreement to the same legislation.

 

In the Regulations of the Arbitration Court at the National Business and Law Association, as well as in the Law on the International Trade Arbitration are settled in details the issues regarding the arbitration procedure, and namely those that refer to the formation and the development of the arbitration process, the handing in of Application of Claim and reply, the lodging of counterclaim and objection for deduction, change of the claim and of the defense against it, the holding of sessions and citations for them, the determination of the price of the claim, the consideration of the lawsuits, the demonstration, the deferment or the ceasing of the lawsuit, the fees and expenses due and the delivery of the arbitration judgement.

 

As we mentioned, the judgement regarding the arbitration lawsuits is final , has the force of an adjudged thing and is not liable to any appeal. According to Art. 41, Par. 1 of the Law on the International Trade Arbitration, with the delivery of the arbitration judgement to one of the parties, it becomes valid, becomes obligatory for the parties and is liable to compulsory execution. Because it is liable to compulsory execution, the convictional arbitration judgement has the same executive power as the court judgement. Like the court judgment, it is an executive reason , so that on the basis of the arbitration judgement can be issued writ of execution . The Writ of Execution is issued on request of the interested party by Sofia City Court. To the application the Arbitration Judgement should be attached, as well as a proof that it has been handed in to the debtor according to the execution. For the procedure for issuance of a Writ of Execution the regulations of the Civil Procedure Code are valid.

 

And least but not last we will point out again, that in case of international arbitration the execution of the arbitration judgement abroad is guaranteed through the New York Convention in much higher degree, than the execution abroad of the judgements of the State Courts.