The need for a new arbitration regime in Croatia emerged after the fall of communism. The unrestricted entrance of international capital and a new way of doing business in Croatia required drastic changes to the system that had been in place. This resulted in a new arbitration law. The basic rules of that law are in line with the UNCITRAL Model Law on International Commercial Arbitration and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

The law of arbitration in Croatia is contained in the Arbitration Act enacted in 2001. The new law has replaced parts of the Croatian Civil Procedure Act (“Zakon o parnicnom postupku”), Conflicts of Law Act (“Zakon o rješavanju sukoba zakona s propisima drugih zemalja u odredenim odnosima”) and Obligations Act (“Zakon o obveznim odnosima”), which had previously regulated arbitration matters. Therefore, the new law not only amended, but also unified provisions on arbitration into one single act. The organisation of arbitration provisions by way of placing them in one document created a more structured and identifiable environment for arbitration and helped towards a better understanding of this area of legal practice.

The Croatian Arbitration Act (“Zakon o Arbitraži”, Official Gazette Narodne Novine 88/2001) came into force on 19 October 2001, comprehensively amending the old law on arbitration. The main purpose of the new Croatian Arbitration Act was to create a modern arbitration law which incorporates the principal features of the UNCITRAL Model Law and New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, codified into a separate act.

Before the enactment of the Arbitration Act in Croatia, ad hoc arbitration was not allowed in domestic disputes. The main institutional arbitration forum, the Permanent Arbitration Court, was established in 1966 within the Croatian Chamber of Economy. Prior to the Arbitration Act it dealt with conciliation as well, however a separate Conciliation Centre was established in 2002.

After the enactment of the new Arbitration Act, new Rules of the Permanent Arbitration Court at the Croatian Chamber of Economy, the Rules of Arbitration of the Permanent Arbitration Court at the Croatian Chamber of Economy (“the Zagreb rules”) and Rules of Conciliation were adopted and came into force in 2002, synchronising the rules with the new law.

Scope of application
The provisions of Croatian arbitration law apply to domestic arbitration, recognition and enforcement of arbitral awards, and competence and operation of the national courts in relation to domestic arbitration and other cases prescribed by the Arbitration Act. It is important to emphasise that domestic arbitration is defined as any arbitration situated in the Republic of Croatia. This does not mean that such arbitration cannot be international (so-called “arbitration with international element”). In such arbitration at least one of the parties is a physical person residing abroad or a legal entity incorporated under foreign law. Therefore, in terms of the Croatian Arbitration Act, domestic arbitration is an arbitration which has its seat in the Republic of Croatia, and it can be in two forms: with or without an international element (depending on the parties). International arbitration is understood as arbitration with a foreign seat, and falls outside the scope of the Croatian Arbitration Act. Article 3 (2) of the Arbitration Act allows for such arbitration in disputes with an international element, unless there is a Croatian lex specialis provision that such a dispute can be resolved only before a Croatian court. If the dispute is without an international element (i.e. between physical persons residing in Croatia or legal entities incorporated under Croatian law), only domestic arbitration can be agreed (i.e. with the seat of arbitration in Croatia). Therefore, an arbitration agreement between two Croatian companies can only provide for domestic arbitration (notwithstanding the fact that the ownership structure of those companies might be foreign). As far as the ability to stipulate domestic arbitration for a certain dispute is concerned, i.e. the arbitrability (Croatian: “arbitrabilnost”) of a dispute, the law considers any dispute in which parties can freely dispose of their rights to be arbitrable.

The structure of the law
The structure of the law follows the UNCITRAL Model Law. There are five parts, which in turn are divided into chapters as follows:

• the First Part contains general provisions on the scope of application and definitions;
• the Second Part in its (i) First Chapter contains general provisions on arbitrability; (ii) Second Chapter regulates the arbitration agreement; (iii) Third Chapter deals with the formation of the arbitral tribunal, challenging of arbitrators and jurisdiction; (iv) Fourth Chapter deals with the provisions relating to the conduct of proceedings; (v) Fifth Chapter deals with the rendering of the award; and (iv) Sixth Chapter with the setting aside of an award;
• the Third Part sets out the rules relating to the enforcement of domestic awards and the recognition and enforcement of foreign awards;
• the Fourth Part regulates court proceedings relating to arbitration; with general provisions being set out in the First Chapter, while provisions relating to proceedings concerning the recognition and enforcement of awards are set out in the Second Chapter;
• the Fifth Part contains interim and final provisions.

Definition (Article 6)
The definition of an arbitration agreement is set out in Article 6. It is an “agreement of the parties to submit to arbitration all or certain disputes that have arisen or may arise in the future between them in respect of a defined legal relationship of a contractual or non-contractual nature”.

An arbitration agreement has to be set out in writing and may be concluded by a separate agreement or may be included as an arbitration clause within a contract.

Therefore there must be a legal relationship as the basis for such an agreement. An arbitration agreement that would refer to disputes arising from non-existing relationships is null and void. Thus, the arbitration agreement may be concluded after the dispute between two parties has arisen, or before, normally when concluding an agreement on a legal relationship out of which a dispute may arise.

The formal requirements of the agreement
The arbitration agreement must be in writing. It can either be contained in a document that is signed by the parties to the agreement or in correspondence between the parties that provides a record of their agreement (letters, telex, fax, telegrams or any other means of telecommunication that provides a record of the agreement, whether signed by the parties or not). There are a number of situations where the agreement is deemed to be concluded in writing (set out in Article 6), such as an offer against which no objection was timely raised, written communication with reference to an arbitration agreement concluded orally, issuance of a bill of lading with an explicit reference to an arbitration clause in a charter party (“Brodarski ugovor”).

A reference in a contract to another document containing the arbitration clause amounts to a valid arbitration agreement if the clause is a part of the contract, but it must satisfy the general requirements of a contractual reference to a separate document. It should be noted that a formal defect in the arbitration agreement is cured if the respondent does not contest it at the latest in their Statement of Defence in arbitration proceedings.

Article 6 (6) should be noted, because it contains stricter rules on the formation of a valid arbitration agreement for consumer contract disputes. Such agreements have to be contained in a separate document signed by both parties. No other agreements may be contained in such a document, except if the document has been drawn up by a notary public.

Claims before court and interim measures
Unless the arbitration clause is null and void, inoperative or incapable of being performed, a national court must dismiss a claim brought before the court that is subject to an arbitration agreement between the parties. Once arbitration proceedings are commenced, no claim concerning the same subject matter in dispute may be brought before a national court. The general consequence is that a court must dismiss any claim regarding the same subject matter as those raised in the arbitral proceedings. However, the court shall do so only upon the objection of the respondent, which has to be raised before going into the merits of the case.

In accordance with Article 44, Croatian courts are still competent to grant interim or protective measures even if a valid arbitration agreement exists. The request for interim measures of protection to a national court does not constitute an infringement or waiver of the arbitration agreement. Such measures may also be imposed by arbitral tribunals, at the request of a party (Article 16).

The constitution of the arbitral tribunal (Articles 9 and 10)
An arbitrator can be any natural person with full capacity. There are no requirements of citizenship or qualifications (i.e. the arbitrator does not have to be qualified as a lawyer or a registered member of the bar.) An active Croatian judge can be appointed only as chairman of the arbitral tribunal or as sole arbitrator. The parties may, in the arbitration agreement, determine the number and names of the arbitrators, or they may simply determine the form of appointment. When the form of appointment is not agreed, parties should follow the procedure laid down in Article 10 (4):

• if there are three arbitrators, each party appoints one arbitrator and the thus appointed arbitrators choose a third arbitrator to act as chairman (Article 10 (4)1). If a party fails to appoint one arbitrator within 30 days from the date of notice that the other party has appointed its arbitrator, or if two arbitrators fail to appoint the third arbitrator within 30 days from the appointment of the second arbitrator, the arbitrator shall be appointed by the national court.
• in arbitrations with a sole arbitrator, the arbitrator is appointed by the national court if the parties fail to agree on the arbitrator (Article 10 (4)2).

The parties are free to determine the number of arbitrators. If the number is not determined, three arbitrators shall be appointed (Article 9).

Grounds for challenge of arbitrators (Article 12)
By virtue of this Article, the arbitrators have a duty to disclose any reasons that might put in doubt their independence or impartiality. This obligation applies both prior to their appointment and throughout the arbitral proceedings. A party may challenge the arbitrator if the party can show a justifiable doubt as to the arbitrator’s independence and impartiality, or if the arbitrator does not possess the qualifications agreed upon by the parties, or if the arbitrator fails to fulfil his duties as prescribed by law (which are stipulated in Article 11).

Challenge procedure, early termination of mandate and appointment of a substitute arbitrator (Articles 12–14)
The parties are free to decide on the procedural rules for challenging arbitrators. However, they cannot exclude the application of Article 12 (7). That paragraph stipulates the procedure in the event of rejection of the challenge. The party challenging the appointment of the arbitrator may, within 30 days (i) from the date of rejection of such challenge; or (ii) from the date of the expiry of a 30-day period for the duration of which the arbitral tribunal failed to decide upon such challenge, request the national court to decide on the challenge. Such pending request does not prevent continuance of the arbitral proceedings and the rendering of the award.

If there is no agreement on the procedural rules for challenge, the statutory provisions of Articles 12 (5) and 12 (6) apply. The party who intends to challenge the appointment of the arbitrator must within 15 days (i) upon becoming aware of the appointment of a biased arbitrator; or (ii) upon becoming aware of circumstances that make him biased, and send a written statement to the arbitral tribunal explaining the reasons for the challenge. The arbitral tribunal should promptly decide on the challenge; however, the arbitrator who is being challenged is not excluded from the decisionmaking process.

Early termination of an arbitrator’s mandate is possible if the parties so agree or if the arbitrator himself withdraws from office (Article 13 (1)).

If the mandate of an arbitrator is terminated for any reason whatsoever, a substitute arbitrator must be appointed in accordance with the rules applicable to the appointment of the replaced arbitrator (Article 14).

Competence to rule on jurisdiction (Article 15)
In accordance with Article 15, the arbitral tribunal shall decide on the issue of jurisdiction itself (“Kompetenz-Kompetenz”). The objection of the respondent that the arbitral tribunal is not competent must be filed before or simultaneously with entering into discussion on the merits of the case. The fact that he has already appointed an arbitrator does not prevent him from filing such an objection. The tribunal may decide on the objection as a preliminary question or as part of the final award. If the tribunal decides on the matter as a preliminary question, each party may request a ruling of the national court (in an emergency procedure) within 30 days from the delivery of the tribunal’s decision.

If the arbitration agreement is included in the main contract, and the main contract is invalid, the arbitration agreement is deemed to be independent. Therefore, the arbitration clause survives the termination of the contract. The principle of separability between the contract and the arbitration clause in Croatia is in line with the provisions of the UNCITRAL Model Law.

Power to order interim measures (Article 16)
Unless otherwise agreed by the parties, an arbitral tribunal is entitled to order such interim or protective measures against a party, upon request of the other party, as the arbitral tribunal may consider necessary in respect of the subject matter of the proceedings. The party that has requested such measures may apply to the competent national court for the enforcement of such measures.

General provisions
Aside from the mandatory provisions of the Croatian Arbitration Act (which are basically the rules for protection of Croatian procedural public policy, such as Articles 36 (1)c, 12 (4), 12 (7), 30 (7), 36, etc.) the parties are free to agree on the procedure to be followed in the proceedings (Article 18 (1)). Therefore, the parties are free to refer to the rules of an arbitration institution. In the absence of such an agreement, the arbitrators are free to conduct the proceedings as they deem appropriate.

The parties shall be treated equally (Article 17 (1)), and shall have a right to respond to the statements and claims of their adversary (Article 17 (2)).

Seat of the tribunal and language of arbitration (Articles 19–21)
The parties are free to agree on the seat of the arbitral tribunal (Article 19). This provision does not refer to the actual place of oral hearings but to the legal seat or place of arbitration. The Croatian Arbitration Act shall only be applicable if the seat is within Croatia, unless otherwise agreed between the parties. The actual oral hearings may be conducted at any place the tribunal considers to be appropriate. If there is no agreement between the parties on the actual seat of the tribunal, the arbitral tribunal shall determine the seat, having in mind the convenience of the seat for the parties. If the seat is not determined, the place stipulated in the award shall be deemed to be the seat.

In accordance with Article 22 of the UNCITRAL Model Law, the parties are free to choose the language of the arbitral proceedings. Failing such agreement, the language is determined by the arbitrators (Article 21).

Statements of Claim and Defence (Article 22)
The claimant has the duty to submit his claim, identify the issues in dispute, and state the facts on which the claim is based. The respondent shall respond to the claim and submit his defence. During the proceedings, both parties may amend or supplement their claim or positions, unless the tribunal considers that such amendments would lead to undue delay.

Oral and written proceedings, notice, taking of evidence (Article 23)
The parties are free to agree on the issue of whether proceedings shall be in writing only or whether there shall be an oral hearing. In the absence of an agreement to hold an oral hearing, the tribunal may order such oral hearing at an appropriate stage if a party requests so. If no such request is submitted, the tribunal may at its own discretion hold an oral hearing or conduct proceedings in writing only, whichever seems more appropriate. The proceedings will be conducted in private, unless the parties expressly request that the proceedings be public.

The parties are entitled to receive sufficient notice concerning hearings and meetings of the arbitral tribunal for the taking of evidence. Furthermore, the parties have the right to receive submissions, documents or communications supplied to the arbitral tribunal by the other party, and expert reports or other evidence upon which the arbitral tribunal may rely (Article 23 (4)).

The parties and the tribunal may apply to the national court for legal assistance when taking evidence (Article 45).

Default of a party to observe the arbitral procedure (Article 24)
Article 24 deals with the issues that may arise if there is a default of a party in the proceedings. If the claimant fails to communicate his Statement of Claim, the proceedings shall be terminated by the arbitral tribunal. If the respondent fails to respond within the agreed or ordered time limit, this does not automatically mean that he shall be treated as admitting the claim. The arbitral tribunal may continue with the proceedings and decide on the basis of the evidence provided. The same applies if a party fails to attend or submit evidence at a hearing.

Witness and the appointment of experts (Articles 25 and 26)
Witnesses are heard at the hearing, without taking an oath (Article 25). The arbitral tribunal has the authority to appoint experts to supply it with a report on specific issues, unless otherwise agreed by the parties (Article 26 (1)1). Furthermore, the arbitral tribunal may require the parties to give the expert any relevant information or to produce and provide documents relevant to the proceedings (Article 26 (1)2).

Choice of law
The arbitrators shall make their decision based on the applicable law as agreed by the parties. The parties are free to decide on the applicable law. Conflict of laws rules are excluded from such application. Failing any designation by the parties, the arbitral tribunal shall apply the law which has the closest connection with the dispute (Article 27 (2)). According to Article 27 (3), the parties may also expressly authorise the arbitrators to render a decision based on principles of equity (ex aequo et bono).

Decisionmaking by the panel of arbitrators
If the arbitral tribunal consists of more than one arbitrator, the decision must be made by a majority of all of its members, unless the arbitration agreement determines otherwise (Article 28 (1)). If a majority cannot be reached, there will be a reopening of the discussion reviewing the reasons for every opinion. If there is still no majority, the award shall be rendered by the tribunal’s chairman (Article 28 (2)).

Settlement
The parties may conclude a settlement during the proceedings and may choose between two options: they may request the arbitral tribunal to terminate the proceedings (Article 29 (1)), or the parties may request the arbitral tribunal to render an award on agreed terms (which has the same effect as an award on the merits of the case). In the latter case, the tribunal must check whether the content of the settlement is in accordance with Croatian public policy.

The arbitral award and its effect (Articles 30 and 31)
The award shall be made in writing and shall be signed by all the arbitrators. In cases where there is more than one arbitrator, and one fails to sign the award, the majority of arbitrators (including the chairman) shall sign the award, and note the obstacle which prevented the missing signature(s) on the award (Article 30 (5)). The award shall state the reasons on which it is based (Article 30 (3)), unless the parties have agreed that reasons are not required, or if the award is given on the basis of a settlement. It should also contain the date of award and the seat of the arbitration (Article 30 (4)). Each party has the right to receive a copy signed by the arbitrators (Article 30 (6)).

Between the parties, the award has the effect of a legally binding and final judgment (Article 31) unless the parties have agreed that the award shall be subject to revision. In general, the finality and enforceability of an award does not differ from that of a binding judgment of a Croatian court.

Termination of proceedings (Article 32)
According to the Croatian Arbitration Act, arbitration proceedings may terminate either as a result of a final award on the merits or by an order of the arbitral tribunal in cases where:

• the claimant withdraws his claim, unless the respondent objects thereto and the arbitral tribunal recognises a legitimate interest on his part in obtaining a final award;
• the parties agree on the termination; or
• the proceedings’ continuation is unnecessary or impossible.

The termination of the proceedings terminates the mandate of the arbitral tribunal as well (Article 32 (2)), with the exception of some specific situations (e.g. the power to render an additional award).

Correction and interpretation of the award (Articles 33 and 34)
The arbitrators may correct clerical mistakes, computational, typographical or similar errors, either on their own initiative or at the request of any of the parties within 30 days of receipt of the award (unless otherwise agreed by the parties). Furthermore, parties can request, if they so agree, an interpretation of the award (or specific parts of it) by the arbitrators within 30 days of receipt of the award or they can request the issuance of an additional award concerning asserted claims not yet decided by the award (Article 33). The interpretation or corrections are considered to be part of the arbitral award itself (Article 34 (2)).

Costs (Article 35)
The arbitrators may decide at their discretion upon the amount of costs to be paid and the allocation of the obligation to pay such costs between the parties. It is, however, common practice that the losing party pays the total amount of the arbitrators’ fees and of the costs of the proceedings, including the other party’s reasonable costs of legal representation (i.e. costs follow the event). The decision on the obligation for reimbursement of costs and the determination of the amount of costs shall be made in the arbitral award or in a separate award (Article 35 (3)).

Setting aside an arbitral award (Articles 36 and 37)
The arbitral award cannot be appealed. It can, however, be the subject of an application to set aside. An award shall be set aside if a party is able to show that:

• the arbitration agreement did not exist, or was invalid;
• the party was unable to conclude the arbitration agreement because of lack of capacity, or was not duly represented;
• the party/claimant was not given proper notice of the commencement of the proceedings or if it was otherwise illegally prevented from presenting its case;
• the tribunal dealt with a dispute not covered by the arbitration agreement or if it contained decisions concerning matters beyond the scope of the arbitration agreement; in the case of severability, only the part of the award going beyond the scope of the arbitration agreement shall be set aside;
• the tribunal was not constituted or composed in accordance with the contractual or statutory provisions; or
• the award does not contain reasons or it is not signed in accordance with law.

The court shall ex officio set aside the award:

• if the proceedings were conducted in a way that violates Croatian public policy; or
• if the matter in dispute is not arbitrable under domestic law.

The application to set aside the award shall be filed within three months of receipt of the arbitral or additional award (Article 36 (3)). However, the setting aside of the award does not automatically invalidate the underlying arbitration agreement. A valid agreement presents grounds for a new arbitration. The court may, upon the request of a party, return the case to the arbitral tribunal so that the tribunal can render a new award.

The court may also, if appropriate and upon request of a party, withhold the decision on setting aside the award, in order to give time to the arbitral tribunal to correct the reasons for setting aside the award.

Recognition and declaration of enforceability of foreign arbitral awards (Article 40)
Croatia is a signatory State to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. It should be noted, however, that when ratifying the New York Convention, the Croatian Government expressly declared that: (a) Croatian courts will only recognise and enforce awards rendered in other States that are party to the Convention; and (b) Croatian courts will only recognise and enforce awards relating to disputes that qualify as “commercial” under Croatian law. The Croatian courts shall recognise and enforce a foreign arbitral award, except if the opposing party is able to prove one of the reasons prescribed in the Croatian Arbitration Act for setting aside the award, or if the award is still not binding on the parties, or if the courts at the seat of arbitration have set aside the award, or suspended the effectiveness of the award.

Recognition and enforcement of foreign arbitral awards shall also be refused if the court finds that:

• the proceedings were conducted in a way that violates Croatian public policy; or
• the matter in dispute is not arbitrable under domestic law.

Court proceedings (Article 41)
The proceedings regarding claims to set aside an award are governed by the Croatian Arbitration Act. All other court proceedings are governed by the rules on non-litigious matters (Article 41 (2)).

Jurisdiction (Article 43)
The generally competent court for judicial tasks in relation to arbitration matters is the Zagreb County Court (“Županijski sud u Zagrebu”). When the subject matter of the arbitral proceedings is within the jurisdiction of the commercial courts, the competent court is the Zagreb Commercial Court (“Trgovacki sud u Zagrebu”).

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