Arbitration in Bosnia and Herzegovina presents a complex landscape influenced by the country’s unique legal structure and historical context. Despite the presence of established arbitration institutions, such as the Arbitration Court at the Foreign Trade Chamber of Bosnia and Herzegovina, arbitration remains an underutilized mechanism for dispute resolution.
Legal Framework
The legal framework for arbitration in Bosnia and Herzegovina is governed by three separate Civil Procedure Acts:
- Civil Procedure Act of the Federation of Bosnia and Herzegovina (2003) – Articles 434–453;
- Civil Procedure Act of the Republic of Srpska (2003) – Articles 434–453;
- Civil Procedure Act of the Brčko District (2018) – Articles 427–446.
It should be noted that each of these Acts regulates arbitration essentially in the same manner, while basing provisions on the UNCITRAL Model Law.
Arbitral Institutions in Bosnia and Herzegovina
There are two main arbitral institutions in Bosnia and Herzegovina:
- Arbitration Court at the Foreign Trade Chamber: Established in 1998 in Sarajevo, handles both domestic and international disputes.
- Foreign Trade Arbitration at the Chamber of Commerce of the Republic of Srpska.
Both institutions require that disputes are commercial in nature and do not fall under exclusive local court jurisdiction while providing a set of procedural rules (Arbitration Court Rules and the Foreign Trade Arbitration Rules). However, still many commercial entities avoid arbitration due to perceived shortcomings in legal provisions that govern these processes.[1]
The Arbitration Agreement
For an arbitration agreement to be valid, the parties need to agree in writing and sign it, to submit to arbitration any present or future dispute that may arise out of a legal relationship established between the parties.[2]
However, according to the Federation CPA, a party may submit a request to the court to annul the arbitration agreement in the following situations:
- If the arbitrator is to be appointed jointly by the parties, and the parties fail to agree;[3]
- If the person named as the arbitrator in the agreement cannot or does not want to preside over the case;[4]
- In case the parties decide not to request the court to appoint the arbitrator;[5]
- If the arbitrators cannot reach an award by majority or the parties have agreed on how to settle the dispute.[6]
Choice of Law
The parties are free to choose the applicable law to the substance of the dispute.[7] Additionally, Article 445 of the Federation CPA provides that the tribunal can decide ex aequo et bono if expressly agreed to by the parties.[8]
Seat and Language of Arbitration
Bosnian and Herzegovinian law does not contain specific provisions regarding the seat and language of arbitration. Thus, the parties are free to agree on both.[9] However, if the parties have not reached an agreement, the arbitral tribunal will have the authority to decide on the seat and language.[10]
Recognition and Enforcement of Arbitral Awards
As previously noted, Bosnia and Herzegovina is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), although it has expressly declared that:
- It will only recognise and enforce awards rendered in another State that is a party to the New York Convention.
- Only awards related to disputes qualifying as “commercial” under the law of Bosnia and Herzegovina can be recognised and enforced.[11]
The procedure for the recognition and enforcement of foreign awards is outlined in Chapter IV of the Conflict of Laws Act.[12]
Annulment
Articles 450-452 of the Federal CPA outline the annulment procedure for an award. The request for annulment may be submitted within 30 days of receiving the award. The competent court is the one that would have jurisdiction in the first instance if an arbitration agreement has not been concluded.[13]
Case Law
To date, there have been at least five investor-State arbitrations initiated against Bosnia and Herzegovina:
- ALAS International Baustoffproduktions AG v. Bosnia and Herzegovina;
- EGS v. Bosnia and Herzegovina;
- Goljevšček and others v. Bosnia and Herzegovina;
- Aggarwal and others v. Bosnia and Herzegovina;
- Mittal v. Bosnia and Herzegovina.
Goljevšček and others v. Bosnia and Herzegovina is an interesting case, with a poor outcome for Bosnia and Herzegovina.
Goljevšček and others v. Bosnia and Herzegovina
Claims stemmed from actions and failures by the Government of the Republic of Srpska that reportedly obstructed the claimants’ efforts to develop two hydroelectric power plants on the Vrbas River. In 2004, the claimants’ subsidiary, HES Vrbas, entered into concession agreements to construct and operate the plants. However, the projects were never realized, purportedly due to the Republic of Srpska’s refusal to grant necessary permits, its failure to approve a revised project design, and its allocation of concession rights – without a public tender – to the State-owned company ZP Hidroelektrane for the construction of a competing facility on the same river.[14]
The Award was rendered on 18 April 2022, finding breaches of fair and equitable treatment, including denial of justice.[15] It is important to note that one year after the arbitration proceedings commenced, the Government of the Republic of Srpska entered into an agreement with the Council of Ministers of Bosnia and Herzegovina, committing to cover all the costs associated with the proceedings.[16]
Following this Award, the Republic of Srpska initiated ICSID annulment proceedings. The Decision on Annulment dated 1 May 2024 upheld the Award, obliging Bosnia and Herzegovina to pay BAM 90 million (approximately EUR 50 million) in damages to the Slovenian company.[17]
Enforcement proceedings are ongoing. Until this point, Viaduct initiated enforcement proceedings against three buildings of the Central Bank of Bosnia and Herzegovina in Banja Luka, Brcko, and Mostar before local courts. Additionally, it has requested enforcement against state funds held in domestic bank accounts and before courts in Luxembourg and Belgium targeting Bosnia and Herzegovina’s assets and accounts abroad.[18]
Mittal v. Bosnia and Herzegovina
This case pertains to the investment of an Indian company in Global Ispat Koksna Industrija d.o.o. Lukavac, a producer of metallurgical coke. The proceedings were initiated in 2023 under the Bosnia and Herzegovina – India Bilateral Investment Treaty (BIT).[19] It has been reported that the claims involve fair and equitable treatment, including denial of justice claims, full protection and security, as well as indirect expropriation.[20]
Challenges Facing Arbitration
The development of arbitration in Bosnia and Herzegovina faces several challenges:
- Legislative Provisions: Certain clauses allow parties to circumvent arbitration agreements, creating uncertainty about their enforceability.
- Jurisdictional Ambiguity: The lack of explicit rules regarding an arbitral tribunal’s ability to determine its own jurisdiction presents additional difficulties for parties seeking resolution through arbitration.
- Preference for Traditional Methods: There is a tendency to prefer court proceedings over arbitration due to familiarity.
Conclusion
Bosnia and Herzegovina has made progress in developing an arbitration framework. However, further legislative reforms are required to improve its effectiveness as a dispute resolution mechanism. Addressing current issues and clarifying procedural rules could increase confidence among commercial entities in using arbitration. As Bosnia and Herzegovina continues to develop legally and economically, enhancing its arbitration system will be important for supporting international trade and investment.
[1] I. Osmanovic, Bosnia and Herzegovina: High Time to Tackle Legislative Loopholes Making It Possible to Avoid Arbitration (8 July 2020).
[2] Civil Procedure Act of the Federation of Bosnia and Herzegovina (“Federation CPA”), Article 435.
[3] Federation CPA, Article 441.
[4] Federation CPA, Article 441.
[5] Federation CPA, Article 440.
[6] Federation CPA, Article 446.
[7] A. Zubovic-Devedzic, I. Osmic, International arbitration law and rules in Bosnia & Herzegovina (10 August 2020).
[8] Federation CPA, Article 445.
[9] A. Zubovic-Devedzic, I. Osmic, International arbitration law and rules in Bosnia & Herzegovina (10 August 2020).
[10] Federation CPA, Article 445.
[11] Commercial disputes under Bosnian and Herzegovinian law are disputes which arise from commercial contracts concluded between business entities within the scope of their registered business activities.
[12] Conflict of Laws Act, Chapter IV, Articles 97-101.
[13] Federation CPA, Articles 450-452. See also Article 440(3).
[14] Investment Policy Hub, Goljevšček and others v. Bosnia and Herzegovina, available at: https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/752/goljev-ek-and-others-v-bosnia-and-herzegovina.
[15] Investment Policy Hub, Goljevšček and others v. Bosnia and Herzegovina, available at: https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/752/goljev-ek-and-others-v-bosnia-and-herzegovina.
[16] Sarajevo Times, Republika Srpska must pay Slovenians 90 Million BAM (8 May 2024), available at: https://sarajevotimes.com/republika-srpska-must-pay-slovenians-90-million-bam/?utm.
[17] Sarajevo Times, Republika Srpska must pay Slovenians 90 Million BAM (8 May 2024), available at: https://sarajevotimes.com/republika-srpska-must-pay-slovenians-90-million-bam/?utm. See also GAR, Bosnia fails to annul hydroelectric plant award (3 May 2024), available at: https://globalarbitrationreview.com/article/bosnia-fails-annul-hydroelectric-plant-award?utm.
[18] Radio Slobodna Evropa, Slovenija krenula u zapljenu imovine BiH zbog duga Republike Srpske (26 March 2025), available at: https://www.slobodnaevropa.org/a/slovenija-bosna-hercegovina-viaduct-odsteta/33358660.html.
[19] Investment Policy Hub, Mittal v. Bosnia and Herzegovina, available at: https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/1299/mittal-v-bosnia-and-herzegovina. See also Sarajevo Times, Indian Businessman initiated Arbitration Proceedings against BiH (15 April 2023), available at: https://sarajevotimes.com/indian-businessman-initiated-arbitration-proceedings-against-bih/?utm.
[20] Investment Policy Hub, Mittal v. Bosnia and Herzegovina, available at: https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/1299/mittal-v-bosnia-and-herzegovina.