The FINANCIAL — “Arbitration in Georgia is facing problems in terms of attracting clients” said Maka Nachkhebia, Director of Dispute Resolution Center (DRC), which is one, among the few institutional arbitrations in the country which has managed to remain afloat.
The FINANCIAL — “Arbitration in Georgia is facing problems in terms of attracting clients” said Maka Nachkhebia, Director of Dispute Resolution Center (DRC), which is one, among the few institutional arbitrations in the country which has managed to remain afloat. “Institutional arbitrations alone cannot manage on its own to convince the parties that they can avail themselves of the benefits of arbitration for resolving business disputes. Government support by improving legislative framework for arbitration is crucial in this term. We expect this kind of support from the new Government” Nachkebia said.
The existing legal framework, lack of support from the national courts and improper court practice are the main problems in the arbitration system in Georgia today. “There is not proper communication between the courts and arbitration, because the previous government did not have the vision and wilingness to support arbitration. Hence, the opportunity to refer disputes to arbitration is comparatively rare.” Nachkebia said.
Dispute Resolution Center (DRC), which was founded in 2008, has handled about 2,000 cases so far. Most of the cases involve disputes related to the credit system. Nachkebia believes that it would enhance the development of the country’s economy and attract more investors if we have the opportunity to offer arbitration friendly legal environment to businesses. It would lead to increased capital in Georgia.
“The recent changes in legislation, namely in the law on Notary and the law on Enforcement, show the pervious Government’s negative attitude towards arbitration. Notary and Executors have the authority by law to mediate between the parties and their subsequent agreements are legally enforceable. This is, in my view, contrary to the nature of mediation. Ironically, a notary can issue an enforcement order while arbitrators cannot. This was a wrong decision of the Government in my opinion.
Many people do not even know what arbitration or mediation means. For the development of alternative dispute resolution technics it is important to get proper promotion from the Government and make the legislation more relevant,” she told The FINANCIAL.
“The country’s economy cannot be developed if only the courts continue to handle business disputes,” said Nachkhebia.
“If the arbitration system is developed, if there are competent arbitrators here, it would contribute to capital flowing into the country,” she added.
DRC was founded in Georgia at a time when about 200 arbitration companies (meaning institutional arbitrations) were operating in the country. They were not competent, did not have a good image and decisions made by them were often out of legislation frameworks, according to Nachkhebia. So DRC had to do its best to gain the confidence of people and, as the company’s representative proudly says, that this goal has been successfully achieved.
“Out of 200 companies only about ten of them are left on the market. We have such a regulated technical side that DRC has no competitor on the market. We are the only company in Georgia who does clerical work through electronic system. Documents of each case referred to DRC is scanned and uploaded on to our server and the parties have the luxury to access the documents and follow the case electronically. All of this is done to successfully manage the cases and gain the confidence of our clients,” she added.
DRC offers two mechanisms for the resolution of disputes: arbitration and mediation. Both allow the parties to avoid the risk of any long-term litigation.
Q. How developed is arbitration and mediation in Georgia and what are people’s attitudes towards them in general?
A. The practice of the dispute resolution through mediation is just breaking ground in Georgia. It is well known in the United States, Japan, and European and Asian countries, it is even popular enough in certain Eastern European countries. Parties will, by the resolution of disputes through mediation, avoid any court and arbitration formalities, termination of business relations and conflicts and enable the settlement of disputes through a mutually beneficial way by the execution of a mediation agreement.
Arbitration development has undergone through several stages in Georgia, which can be divided into two main periods: before and after 2010 – when the new Law on Arbitration came into force. The new law incorporated some positive fundamental new concepts, including the especially notable fact that any arbitration award issued after 1 January, 2010, requires acknowledgement and enforcement by the court. This enabled the development of healthy competition and revealed the successful, independent and qualified institutional arbitrations, among them the DRC as a leader.
Q. How independent is arbitration? What is the difference between a court and arbitration in terms of independence in making decisions?
A. Nowadays arbitration is seen as a business. If we appoint arbitrators that are not qualified enough or are not impartial, it would hurt our image; parties would no longer refer disputes to us, hence, that would kill the business and arbitration. We also ensure the speedy process, as we realise that the timely return of any moneys invested in a business facilitates their reinvestment in another business. Thus, we do acknowledge the importance of and take full responsibility for our role.
Arbitration has many advantages. One advantage of arbitration compared to going to court is that the parties can choose the arbitrators themselves. This creates a better quality of independence. According to DRC rules, if the parties cannot choose the arbitrators, DRC would appoint them. The parties have the access to their CV’s and information about their experience as the arbitrators.
Another advantage is that arbitration is less formal than court proceedings. An arbitrator has more opportunities to lead the parties towards agreement. In the case of agreement both parties are satisfied and have more chance for enforcement without any problems.
Confidentiality is also very important advantage of arbitration, as very many clients do not wish to expose their disputes and their financial interests to public scrutiny.
Besides, arbitration enables disputes to be decided by professionals who have a real understanding of the dispute and the issues that typically arise.
Finally, the most important to the parties for any decision is its enforceability. While the court decisions cannot be always enforced internationally, it becomes more important to have arbitration award that can be enforced under the New York Convention.
Q. How often does it happen that an arbitrator’s award is challenged? Give us a statistic of disputes as well.
A. Since the January 1, 2010 none of DRC arbitral awards have been challenged at the court. DRC has a quality control system. We check all the awards very carefully and doing so we ensure that an award that leaves the institution is free of any mistakes and is enforceable. DRC is famous for its professional arbitrators, its quality system and therefore is respected by the courts. Thus less time is needed for the enforcement of arbitral awards issued by DRC. As a result the clients are always satisfied.
In general request for arbitration has been increased due to the increased number of business transactions. During last month and a half, we have received 198 requests for arbitration.
We have recorded 64 cases in 2008; 547 cases in 2009; 294 cases in 2010; 367 cases in 2011; and 817 so far in 2012.
Q. What about expansion, do you plan to open offices in other cities of Georgia as well?
A. We have modern electronic clerical work system. Clients from any country of the world can refer cases to DRC electronically. So it is not necessary for us to have offices in other cities of Georgia, we can, however, arrange hearings in other cities. We have recently recorded two cases from Samtredia for example, received through our electronic system. We aim to attract more clients from around the country and other parts of the world.
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