1. Arbitration Reform and Development Georgian Perspective Presented by: Lasha Gogiberidze Partner, BGI Legal Member of the Board, AmCham Georgia March, 2014

2. General Overview First Law on Arbitration was adopted in April 1997; – Gradual development of local arbitration institutions in late 90s early 2000; – Interesting experiment by the government in 2004 as a part of tax system overhaul – repealed rather quickly; – Substantial increase in cases (and complaints) in 2005 – 2008; – Considerable push against arbitration both from executive and judicial branches 1997 Law repealed entirely in 2009 and replaced with new Law on Arbitration

3. Peculiar Differences between the two legislative acts

4. Signing Formalities 1997 Law Requirement for the arbitration agreement to be in writing; Stipulation as per requirements of the 1997 Law: – Name of the parties – Subject matter of Arbitration – Place and time of the agreement

5. Signing Formalities 2009 Law Substantially the same requirement for the agreement to be in writing, BUT; – Far broader scope of what constitutes “an agreement in writing, including Electronic exchange; Exchange through complaint / response; Other matters elaborated in much greater detail than 1997 law BUT: – Rather specific requirement for entering into the arbitration agreement by individuals, namely: Has to be co-signed by the lawyer to the party or Has to be notarized

6. Injunctive Relief Rather general statement in 1997 Law; – Basically stipulating ability of a party to apply for one. 2009 version provides much more detailed procedures, including: – Procedural considerations for review of injunctive relief requests by parties to arbitration; – Explicit provision regarding compensation of damages in case of damages / undue hardship inflicted on the opposing party (in case of wrongful or frivolous claim); – Rather detailed procedures for recognition and enforcement of the same; – Specific language covering ability of the parties to apply to courts for injunctive relief while having arbitration agreement in place.

7. Recognition and Enforcement 1997 Law Grounds for appeal were limited to the following: – Award contradicts administrative and penal legislation; – Certain procedural violations; – Certain criminal case being brought against the arbitrator Interestingly the last part was used by the government rather eagerly

8. Recognition and Enforcement 2009 Law Generally follows NY convention requirements, however: – Interestingly provides for what appears to be parallel regime without much of a distinction. Separate venues for enforcement of local and foreign awards – Probably follows the foreign court judgment recognition procedure.

9. Other Points 2004 tax “experiment” – Quickly repealed (various speculations as to the grounds for repeal) Criminal prosecutions – Government trying to use 1997 law exclusionary provision by initiating criminal cases against arbitrators; – Some were, unfortunately, rather grounded Conflict of interest issues – Lawyers having “side show” arbitration tribunals and inserting the same in clients’ contracts – problem? – Lack of transparency and disclosure re the same

10. Issues to Consider In drafting / implementation of the law

11. Subject Matter of Arbitration Can / should all disputes be subject to arbitration; usual suspects include: – Land related disputes; – Trademark disputes – Certain corporate issues However, overlaps also occur and would be nice to address those properly, namely: – Loan vs. related security agreements; – Corporate decisions vs. shareholder disputes; – Foreclosure vs. disputes under underlying loan documentation; – Title to the land vs. dispute under immovable property sale purchase agreement. Consider local vs. international aspects of all of the above; Many need to take determination based on outcome of the discussion as per next slide

12. Ability / Capacity of the parties to arbitrate Legal entities: – Local vs. foreign, ownership issues, any ensuing restrictions: Land related Ownership related; Public sector related Public entities: – international concessions; – International market (consider ECM / DCM); – local procurement / administrative agreements – Anything else?

13. Ability / Capacity of the parties to arbitrate (continued) Individuals – General capacity pros and cons – Need for rigorous execution and procedural formalities – Employment related matters – Consumer protection – As opposed to banning individuals from arbitration altogether (and then applying the same in the context of subject matter

14. Dual / Asymmetrical Arbitration Clauses Clauses allowing one of the parties to file general claim in courts (whether local or foreign); Trend for resenting / dislike of the same by courts As a result, better to have those provided explicitly (again, consider linked agreements (e.g. loan vs. underlying security agreements)

15. Recognition and Enforcement Local vs. foreign – need to have a bifurcated structure – Depending on ability to directly apply NY Convention Enforcement (through courts?) – Allowing for possibility to by-pass court (by advance agreement of the parties / going immediately to enforcement bureau – sward with two edges

16. Other Public Policy vs. Public Order (as in Georgian law) – issues to consider: – Any particular source in the country that can be a good reference point? – Overt vs. “behind the scene” policies (issue with ISDA буюу Олон улсын своп, деривативийн холбооны асуудал, шийдвэр гүйцэтгэл – Russian default); – Other issues?

17. Thank You! BGI Advisory Services Georgia 18, Rustaveli Ave, Tbilisi, Georgia bgilegal@bgi.ge