North Macedonia, a dynamic and evolving jurisdiction in Southeast Europe, is governed by a legal framework that aims to facilitate dispute resolution in both commercial and investment contexts. The arbitration regime in North Macedonia was enhanced when, in 2006, the North Macedonian government passed a new modern law, the International Commercial Arbitration Act. This legislation was enacted as part of a comprehensive reform intended to make North Macedonia a more attractive destination for foreign enterprises. Although it has made significant progress in positioning arbitration as a feasible alternative to conventional litigation and aligning with international standards, several obstacles persist that impede its effectiveness and acceptance.
Legal Framework
In North Macedonia, two primary pieces of legislation govern arbitration:
- The International Commercial Arbitration Act (the “Arbitration Act”) – The Arbitration Act regulates international arbitration, while setting forth the procedures for arbitration, including the selection of arbitrators, the conduct of hearings, and the enforcement of arbitral awards. The arbitration process generally concludes within six to nine months, and the decisions rendered are enforceable documents. This act is based on the 1985 UNCITRAL Model Law on International Commercial Arbitration.
- Litigation Act – Since the Arbitration Act entered into force in 2006, the Litigation Act governs only domestic arbitration. Interestingly, the Litigation Act does not, in fact, explicitly define domestic arbitration as such. However, it is generally understood that domestic arbitrations are those that do not involve any international element.[1]
Additionally, the North Macedonian International Private Law Act governs procedures related to the recognition and enforcement of foreign arbitral awards.[2]
The Arbitration Act establishes the following primary features of arbitration:
- Confidentiality – Arbitration proceedings are generally closed to the public, thereby ensuring that all documentation on the record remains confidential.[3]
- Finality of Awards – Arbitral awards are generally final and not subject to appeal, which provides certainty for parties involved in disputes.[4]
- Flexibility – Parties have significant discretion in accordance with the principle of party autonomy. Therefore, they can decide upon the rules governing their arbitration process, including the selection of arbitrators and procedural rules.[5]
Arbitral Institution in North Macedonia
The main permanent arbitration institution in North Macedonia is the Permanent Court of Arbitration, which operates as a part of the Economic Chamber of North Macedonia. It is established in accordance with the Law on Chambers of Commerce and the Statute of the Economic Chamber of North Macedonia.[6] On 29 April 2021, it released new arbitration rules (the Skopje Arbitration Rules).
The Arbitration Agreement
For an arbitration agreement to be valid and enforceable under North Macedonian law, the Parties need to agree in writing to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship.[7]
Choice of Law
Concerning the choice of law, the parties are free to choose the applicable law to the substance of the dispute. Failing any designation by the parties, the arbitral tribunal shall apply the law of a State with which the subject matter of the dispute is most closely connected.[8]
Rules of Procedure
The parties have the liberty to mutually agree on the procedure that the arbitral tribunal shall follow in conducting the proceedings. Lacking such an agreement, the arbitral tribunal may, in accordance with the provisions of the Arbitration Act, conduct the arbitration as it deems appropriate. The arbitral tribunal has the authority to decide on the admissibility, relevance, materiality, and weight of any evidence.[9]
Place of Arbitration
The parties are free to agree on the place of arbitration. In the absence of such an agreement, the arbitral tribunal shall determine the place of arbitration. It will take into consideration the circumstances of the case, including the convenience of the parties.[10]
Recognition and Enforcement of Arbitral Awards
Since 1981, North Macedonia has been a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). Consequently, Article 37 of the Arbitration Act stipulates that the recognition and enforcement of foreign awards shall be conducted in accordance with the provisions of the New York Convention.[11]
Investment Arbitration in North Macedonia
Investment arbitration is an area in which North Macedonia seeks to improve its standing. Although it has signed at least 42 Bilateral Investment Treaties (BITs), challenges persist regarding the handling of investment disputes and the enforcement of awards.
Therefore, before making an investment, potential investors should carefully consider the practical implementation of the legal framework offering protection against expropriation and unfair treatment. They should also be aware of issues with local laws, unclear guidelines, and weak dispute resolution mechanisms.
Conclusion
Arbitration in North Macedonia offers both significant opportunities and notable challenges. Although the legal framework supports efficient dispute resolution, there is a need for greater awareness and understanding of arbitration proceedings. Generally, there is still a tendency to favour court proceedings. Additionally, there is far too little promotion of arbitration as a dispute resolution mechanism. Therefore, improving the overall infrastructure supporting arbitration is necessary.
[1] S. Moravcevic, International Arbitration Comparative Guide (19 March 2021).
[2] S. Moravcevic, International Arbitration Comparative Guide (19 March 2021).
[3] Economic Chamber of Macedonia, From Arbitration Legislation Reform to Enhancing the Business Climate (28-29 March 2019).
[4] Economic Chamber of Macedonia, From Arbitration Legislation Reform to Enhancing the Business Climate (28-29 March 2019).
[5] S. Moravcevic, International Arbitration Comparative Guide (19 March 2021).
[6] See https://arbitraza.mchamber.mk/index.aspx?lng=2.
[7] Arbitration Act, Articles 2.6 and 7.
[8] Arbitration Act, Article 28.
[9] Arbitration Act, Article 19.
[10] Arbitration Act, Article 20.
[11] Arbitration Act, Article 37.
