Within the last two decades, over 30 new states emerged within the international community. From a political, economic, as well as a legal point of view, the formation of a state is always an expedition into unchartered waters.

On a domestic level, the establishment of a sound legal system is the prerequisite for a stable framework within which a community can operate. To build a sustainable framework not only requires know-how and experience, but also the unyielding resolution to promote change. Such a system should cater to the state’s and its population’s needs, but should also reflect international standards as, from a public international law perspective, a state’s ability to act on the international stage usually depends on the degree of recognition afforded to it by the international community.

Europe’s youngest state is currently undergoing the process of optimising its legal system and gaining international recognition. Kosovo’s declaration of independence on February 17, 2008 was the subject of intense political debate, but the country has made substantial efforts to position itself within the international community. Kosovo’s political leaders have recognised the importance of attracting foreign investments and the resulting requirement to provide a stable framework for resolving disputes.

Therefore, Kosovo has started to negotiate and conclude its first bilateral investment treaties (BITs) as an independent nation. In 2010, the first BIT was completed with Belgium and Luxembourg. Other treaties, such as the Austria – Kosovo BIT, are currently in the process of ratification. Additionally, Kosovo has a BIT with Albania originating from the time when it was a UN Protectorate. The time frame for establishing a reliable investment protection framework, based on major numbers of BITs, of course depends largely on Kosovo’s recognition as a state by the international community. It remains to be seen how the recently rendered ICJ Advisory Opinion, concluding that the Kosovo declaration of independence did not violate international law, will influence this development in the long term.

Since 29 June 2009, Kosovo is also a party to the ICSID convention. In addition, Kosovo has passed a number of domestic laws and regulations relating to and dealing with the promotion of foreign investments. Its arbitration law was passed in 2007 and is based largely on the UNCITRAL Model Law in its version before the 2006 amendment.

Furthermore, given the present absence of a greater number of BITs, Kosovo has undertaken to close the gap in foreign direct investment protection by setting down principles of protection in a domestic legislative act. The Law on Foreign Investment 2005 offers investors substantive protection, relying on terminology that is well known from international investment treaties. Examples include provisions on fair and equitable treatment, and full and constant protection and security. Also, it refers to various arbitral mechanisms for dispute resolution, including arbitration under the ICSID Convention. Finally, it explicitly stipulates the state’s obligation to enforce awards rendered in these arbitration proceedings in accordance with the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention), “regardless as to whether or not that convention is otherwise binding on Kosovo”. At the moment, Kosovo is not a party to the New York Convention. It can be expected that, given the state’s efforts in creating a reliable environment for arbitration, the question of accession to the New York Convention will be raised in the near future.

In cooperation with the United States Agency for International Development (USAID), the state is currently also pursuing further means of establishing an effective local alternative dispute resolution (ADR) system. The overall goal is to promote ADR as a whole in Kosovo and to create a framework for the swift enforcement of contractual rights. Specific steps planned for the near future include the establishment of a permanent arbitral institution in alliance with the Kosovo Chamber of Commerce as well as the creation of training programs for judges, practising lawyers, and law students in order to provide a broad base of specialist expertise within the country.

On an overall level, Kosovo is ambitiously striving to establish an investment protection and arbitration system. Kosovo has clearly recognised the importance of foreign direct investment for building a growing economy. It has a modern arbitration law and provides unusually high standards of investment protection on the basis of domestic legislation. Its recent ratification of the ICSID Convention and its fervent pursuit in negotiating and concluding BITs are strong evidence of this. However, its role as a seat for international arbitration in the future will depend considerably on the international enforceability of awards rendered within its territory and, ultimately, on its performance and reception on the international political stage.


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5 comments

  1. Dear Dr. Konrad,

    I enjoyed reading your update on the situation of Arbitration in Kosovo. Let me add some of my thoughts for discussion: although your statement that “[a]t the moment, Kosovo is not a party to the New York Convention” is clearly true, I find the question that you raised – whether the New York Convention is applicable with regards to Kosovo – a quite interesting one.

    Some of the states that emerged from the pre-1990s Yugoslavia have declared that they are bound by certain international obligations of the former Yugoslavia, such as Slovenia in 1992 (cf. Ude, Arbitražno pravo, Ljubljana 2004, p. 39). Kosovo, to my knowledge, has not done so. If the situation in Kosovo described by Schwarz in 2002, who stated that “[a]ktuell ist wohl niemand in der Lage, das geltende Recht des Kosovo eindeutig zu bestimmen“ (currently, possibly nobody is able to clearly determine the law applicable in Kosovo; Schwarz, Das anwendbare Recht des Kosovo, IPRax 2002, p. 238), has not significantly changed, then it might as well be possible that such a declaration exists, and the convention is applicable by virtue of such declaration.

    It is also possible to consider the following: Section 1.1 b) UNMIK/Reg/2000/59 declared that the law in force in Kosovo prior to 22 March 1989 is applicable in Kosovo (cf. Schwarz, p. 240). This regulation still seems to be in force in 2009 (cf. Morina, Das “neue Zivilgesetzbuch” des Kosovo, ZfRV 2009, p. 228). Since the New York Convention was ratified by the SFR Yugoslavia prior to that date (Službeni List SFRJ, International Treaties, 1 October 1981, 11/1981), one might conclude that the New York Convention is still applicable even in the independent Republic of Kosovo. This is, however, only my own conclusion, and I do not know whether the authorities in Prishtina see it the same way.

    If one were not to accept Kosovo’s independence, but to consider Kosovo and Metohija as a Serbian province, like many countries in the world continue to do, then the problem of applicability of the New York Convention does not arise, since Serbia is clearly a party to the convention.

    Thus, I believe the only problem that remains is the enforcement of arbitral awards rendered in the territory of Kosovo in Serbia. To quote Vladimir Pavić, “it would be safe to assume that civil and commercial judgements issued in Kosovo would be incapable of being enforced in Serbia for all practical purposes” (Pavić, “European Judicial Area” in Civil and Commercial Matters and the CEFTA countries, in: Bordaš/Stanivuković, VIIth Private International Law Conference – Enlargement of the European Judicial Area to CEFTA Countries, Collected Papers, Novi Sad 2010, p. 41). This could also be true with regards to arbitral awards rendered for instance by a permanent arbitral institution in alliance with the Kosovo Chamber of Commerce, however: if an arbitral award will be rendered by an ad hoc arbitral tribunal with its seat in Kosovska Mitrovica, a Serbian court should come to the conclusion that this is a domestic Serbian award. The same could be true for an ad hoc arbitral tribunal in e.g. Prishtina, if the Serbian court concludes that the arbitral award rendered is not on behalf of Kosovo as a sovereign state.

    My conclusions – and points for further discussion – therefore are:
    1. Regardless of whether Kosovo is seen as an independent state or as a Serbian province, the New York Convention is applicable.
    2. If 1. should not be true, then the New York Convention is at least applicable in Kosovo from the point of view of those countries that did not recognize the Republic of Kosovo.
    3. Arbitral awards rendered within the territory of Kosovo might or might not be enforced by the courts in Serbia, depending on whether the arbitral award in question is on behalf of Kosovo as a sovereign state or not.

    Only as a side note, it might be interesting from an Austrian point of view that the conclusions made here – keeping in mind that Austria has recognized the Republic of Kosovo – should to this extent also be true for the Agreement between the Republic of Austria and the Federative People’s Republic of Yugoslavia on the Recognition and Enforcement of Commercial Arbitral Awards, dated 18 March 1960 (Supplement to Službeni List FNRJ 5/1961, respectively Austrian BGBl. 1961/115; cf. Neuteufel, Das Verhältnis des Übereinkommens der Vereinten Nationen über die Anerkennung ausländischer Schiedssprüche zu anderen Abkommen, ÖJZ 1967, p. 231).

    Best regards,
    Michael Wietzorek

  2. Dear Dr. Konrad,

    It was nice to read your analysis on the situation of arbitration in Kosovo. If Kosovo were to establish itself as a seat for international arbitration, I believe that this could be beneficial also for the arbitration community in the neighbouring countries such as Albania, Macedonia and Montenegro, due to their similar cultural background.

    In an international arbitration in Kosovo, not always will the parties agree to have an arbitral tribunal consisting of three citizens of Kosovo. For example, in a case of an Austrian company against a company from Kosovo, the Austrian party could nominate an arbitrator from Albania, who would not share the same nationality of any of the parties, but who would understand the language and the way of thinking of the party from Kosovo. Besides this, the four countries mentioned could become alternatives: in my example with a party from Kosovo and one from Austria, a seat in Vienna or Prishtina might not be negotiable
    – Tirana, Skopje or Podgorica might be an alternative in such a case.

    Best regards from Tirana,
    Oriola Uka

  3. Dear Dr. Konrad,

    I appraise you for this article and for many valuable information provided therein that your research has engrasped.

    With the Declaration Act of Independence of Kosovo, as one can see from the declaration act itself, Kosovo undertakes to respect laws of former Yugoslavia which are non-discriminatory and not inconsistent with the its laws. For UNMIK law (regulations) they are still applicable but they are being replaced at large with the domestic laws of the post-independence period.

    On the other hand binding norms of international law and all agreements entered into or conventions adhered to by former Yugoslavia (cf. before the UNSC resolution on dissolution of SFRY was adopted) on its behalf are respected. As this is the matter of state’s legacy, and the statehood, given the contested statehood of Kosovo by many states, it cannot unilateraly deposit its ratification act of many conventions for it will encounter a fierce opposition therefrom “on the grounds of suitability to become a party” . As a result of that Kosovo has until now only managed to forge the membership into IMF and WB.

    On the arbitration, the law on arbitration is a solid basis that lays ground for a future institution on arbitratioin matters be it established with the Chamber of Commerce or elsewhere. The important point is however the fact that the ‘foreign investors’ are provided not only the legal security but security of their assets as the liability is assumed directly by the state of Kosovo which is not very often the case with other countries.

    With profound regards

    Eset Berisha
    MA EU Studies (spec. EU law)

  4. Dear Mr. Berisha,

    thank you for your comment! Indeed, Art. 9 of the Kosovo Declaration of Independence, in its English translation available on http://www.kosovo-assembly.com, starts with the words:

    “We hereby undertake the international obligations of Kosovo, including those concluded on our behalf by the United Nations Interim Administration Mission in Kosovo (UNMIK) and treaty and other obligations of the former Socialist Federal Republic of Yugoslavia to which we are bound as a former constituent part, including the Vienna Conventions on diplomatic and consular relations.”

    As I take it from your words, Kosovo considers itself bound by the New York Convention, following this Art. 9 of the Declaration of Independence?

    Thank you very much for this comment,
    best regards,
    Michael Wietzorek

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