Bosnia Herzegovina: Bosnian Courts Decline Jurisdiction In Interim Measure Proceedings Due To Existance Of Arbitration Agreement

Last Updated: 17 January 2019
Article by Ilma Kasumagic

Recent final and binding decisions issued by two second instance courts (in Sarajevo and Banja Luka) ruled that national courts do not have the jurisdiction to decide on interim measures when parties agreed on arbitration.

In both cases, parties agreed that disputes arising out of or in connection with their contractual relationship shall be settled by arbitral tribunals seated outside Bosnia. Since respondents in these cases are Bosnian companies, claimants filed for interim measures before the competent courts in Bosnia and Herzegovina; in line with the general rules of laws on civil proceedings. The laws further provide that interim measures can be granted by the court which has the jurisdiction to decide on the main claim. However, they remain silent with regards to the courts' authority to decide on interim measures when such request has been filed prior to or in the course of arbitration proceedings.

In Bosnia and Herzegovina there are no special arbitration laws and only certain aspects of arbitration proceedings are regulated by special chapters in the laws on civil proceedings. Even though the arbitration related provisions refer to the application of certain general civil procedure rules (such as examination of evidence before courts), the laws remain silent if and to what extent rules related to interim measure before the court may be applied if the main claim is to be settled in arbitration.

Thus, the courts of Sarajevo and Banja Luka held that by agreeing to arbitration the parties excluded the jurisdiction of national courts to decide on any issues related to the matter in hand, including on interim measures.

In its decision the court in Banja Luka went one step further by reasoning that due to the mere existence of an arbitration agreement, the relevant dispute does not fall within the competence of the court and thus, the court is obliged ex officio to decline jurisdiction at any time in the course of the proceedings, until the decision on the merits is final and binding. This reasoning could prove to be very problematic since it indicates that there is still a lack of understanding of arbitration in general, which results in a narrow and, to certain extent, wrong interpretation of the mandatory laws. Namely, contrary to the understanding of the court in Banja Luka, in accordance with the relevant law even if an arbitration agreement exists, court jurisdiction may only be declined on the basis of the respondent's timely objection to the court's jurisdiction (which must be raised in the response to the lawsuit at the latest). Accordingly, the existence of an agreement to arbitrate is not a circumstance that can be raised at any time in the course of proceedings in which the court should determine ex officio. 

On the other hand, it is evident that there is a need for a new legal framework that provides a detailed regulation of interim measures in relation to arbitration. In the meantime, it seems that Bosnia and Herzegovina will remain a non-'arbitration-friendly' environment, at least in relation to arbitrations seated outside of Bosnia.

What message does this carry for foreign investors in Bosnia and Herzegovina?

While there are various arguments why parties should refer disputes to arbitration (domestic and international), one should take into account any specific issues that could arise in securing a claim; both prior to or in the course of arbitral proceedings. For such purposes, at least for the time being, investors should rather not rely on interim measures but instead seek security for their interests in another manner, such as, for example, security instruments that are directly enforceable under Bosnian law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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