What You Should Know About Enforceability Clauses

Every arbitration award, before it reaches a bailiff, must be approved by a state court - in this case, an appellate court. This occurs in proceedings to grant an enforceability clause. The process is extremely simplified.

The matter is handled by a single judge, who resolves it without holding a hearing and considers really just two things.

Firstly, whether the regulations allow a particular case to be heard in arbitration (certain categories of cases - for example, those concerning alimony - may only be resolved by state courts).

Secondly, whether the arbitration award contains any glaring errors that would make granting an enforceability clause contrary to the fundamental principles of legal order in our country.

If neither of the above circumstances applies, then the arbitration award is approved, and the creditor can proceed with the case to the bailiff.

Statistics indicate that this is the situation in the vast majority of cases.

Hard Data on the Effectiveness of Arbitration

According to information obtained from the Ministry of Justice, in 2017 and 2018, 575 applications for granting enforceability clauses to arbitral awards were submitted to appellate courts. Refusals were issued in just 33 cases, representing less than 6% of all applications. There might have been even fewer if not for a scandal involving a fake arbitration court called “Binar” from Latvia (we will certainly dedicate one of our future posts to this topic).

The effectiveness of arbitration is therefore very high, and appellate courts challenge arbitral awards only sporadically. However, even if a refusal is issued, under the regulations, the case returns to arbitration to correct the irregularities and issue a correct ruling.

Appellate Courts Ready for Thousands of New Applications

Wait a minute - only 575 cases? With such a small number, it's easy to show good performance in terms of the duration of proceedings.

And Ultima Ratio is meant to be a mass solution! Will appellate courts, of which there are only 11 in our country, be able to approve not hundreds, but thousands of new electronic arbitration awards? And all within 1.5 months?

In this case, the statistics from the Ministry of Justice leave no illusions.

In 2018, appellate courts received approximately 118 thousand cases, and district courts approximately 14 million, over a hundred times more. In the same year, an appellate court judge concluded an average of 209 cases, a district court judge – 289, and a local court judge – 820.

The mass influx of new applications for enforceability clauses on arbitral awards will thus not paralyse appellate courts.

They would need to accept about 40 thousand additional such applications annually to come close to district courts in terms of the number of cases handled by a single judge. Of course, appellate courts usually deal with issues of a completely different magnitude. Nevertheless, applications for enforceability clauses are generally simple and repetitive, and thus can be handled with significant involvement of court assistants.