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Latvia Introduces Set-Aside Mechanism in Major Arbitration Law Overhaul
Latvia has recently undertaken significant reforms to its arbitration law, marking a crucial shift towards enhancing the legal framework governing arbitration in the country. The introduction of a set-aside mechanism, among other changes, aligns Latvia more closely with international arbitration standards. This article delves into the background of these reforms, outlines the specifics of the new set-aside mechanism, and explores other amendments to the Latvian arbitration law.
Background:
The topic of setting aside arbitral awards has been a contentious issue in international arbitration for decades. Belgium, in 1985, eliminated the possibility of setting aside arbitral awards, except when involving a Belgian party. Switzerland, however, provided a more balanced approach in 1989, allowing parties to voluntarily exclude the right to challenge arbitral awards, a model followed by several jurisdictions. Latvia's journey towards a robust arbitration framework has been long and fraught with challenges. During Soviet occupation, state arbitration courts functioned differently from Western arbitration systems, and upon regaining independence, Latvia's initial arbitration laws lacked provisions for setting aside arbitral awards. This gap was highlighted in the Latvian Constitutional Court’s 2023 judgment, prompting legislative action to introduce a set-aside mechanism.
Introduction of the Set-Aside Mechanism:
Following the Constitutional Court’s judgment, the Latvian Parliament is in the process of adopting amendments to include a set-aside mechanism, expected to be fully in place by May 2024. As of March 2024, parties can already apply to general jurisdiction courts to have arbitral awards set aside.
Details of the Set-Aside Mechanism:
The new mechanism, modeled after Article 34 of the UNCITRAL Model Law, allows parties to request the annulment of an arbitral award within 30 days of its issuance. This time frame aligns with the standard appeal period for judgments in Latvian courts. If a party misses this deadline due to justifiable reasons, they can request the court to renew the procedural time limit. Applications will be processed by competent first-instance courts, with the possibility of appealing a decision that dismisses the application to regional courts. No further appeals to the Supreme Court will be allowed. The grounds for setting aside follow the Model Law’s “4+2” approach, distinguishing between grounds to be proved by the applicant and those the court can invoke ex officio.
Processing of Applications:
Upon receiving a set-aside application, the court will forward it to the other parties, granting 20 days for a response. The court aims to decide on the application within 20 days after receiving the response or after the response period lapses. Generally, decisions will be made in written proceedings, though the court may hold hearings if deemed necessary.
No Appeal for Setting Aside Decision:
A unique aspect of the new mechanism is that while parties can appeal a court’s decision to reject a set-aside application, they cannot appeal a decision to set aside an arbitral award. This right to appeal against a negative decision aligns with the right of a party to appeal against the refusal to enforce an arbitral award.
Other Amendments:
In addition to the set-aside mechanism, Latvia has introduced several amendments to address existing legislative gaps. These include allowing witness hearings in arbitration, eliminating compulsory arbitrator lists, removing the requirement for arbitrators to have a legal education, and enhancing court support for arbitration. Courts can now grant interim measures, appoint, challenge and replace arbitrators, secure evidence, summon witnesses, and hear jurisdictional challenges during arbitration proceedings.
Conclusion:
The introduction of a set-aside mechanism is a significant step forward for Latvia's arbitration framework. It not only rectifies a longstanding deficiency but also aligns Latvia more closely with international arbitration standards. Alongside other legislative improvements, these changes are poised to enhance the quality and credibility of arbitration in Latvia, potentially elevating its status within the global arbitration community.
- The new mechanism, modeled after Article 34 of the UNCITRAL Model Law, allows parties to request the annulment of an arbitral award within 30 days of its issuance.
- The grounds for setting aside follow the Model Law’s “4+2” approach, distinguishing between grounds to be proved by the applicant and those the court can invoke ex officio.
- The introduction of a set-aside mechanism is a significant step forward for Latvia's arbitration framework.
