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Latest judgment of the Constitutional Court, which recognizes a person’s rights to challenge arbitration agreements in general jurisdiction courts

  • Latvia


    On 28 November 2014, the Constitutional Court pronounced a judgment in case No. 2014-09-01, by which in found that Section 24, Paragraph one of the Law on Arbitration Courts and Section 495, Paragraph one of the Civil Procedure Law, which determine that jurisdiction of a dispute is decided by the court of arbitration itself, including in cases where a party disputes existence or validity of an arbitration agreement, incompliant with Section 92 of the Constitution (Satversme) of the Republic of Latvia. The Constitutional Court found the abovementioned provisions incompliant to the extent they prohibit challenging the competence of the court of arbitration in a general jurisdiction court.

    So far the abovementioned provision of the Civil Procedure Law has caused huge problems in practice in cases where a party considered the arbitration agreement forged or invalid due to other reasons and wished to challenge it in a general jurisdiction court instead of the court of arbitration “agreed” under the invalid arbitration agreement, hence referring the dispute for reviewing to a state court. Most often in such cases the party had to face either a refusal to accept the statement of claim or – where the courts of first instance had accepted and reviewed the case – the position of the Senate of the Supreme Court that proceedings had to be closed since the dispute had to be reviewed by the court of arbitration itself.

    Ilze Kramiņa, the partner at Eversheds Bitāns, considers that the judgment of the Constitutional Court is a considerable, positive step forward in ensuring one’s right to fair trial. She indicates that sometimes also the clients of Law Offices Eversheds Bitāns have to face intentionally forged or otherwise invalid arbitration agreements, while the difficulty related thereto is caused by the position of the general jurisdiction courts not to review disputes concerning the validity of such agreements, recommending referring to the respective court of arbitration. However, if the respective court of arbitration turns out to be registered at the office of the opponent’s representative or a “court of arbitration” owned by a close relative, it is clear enough that a legal outcome when challenging the validity of the arbitration agreement in the court of arbitration itself cannot be expected. Also, raising complaints at the stage of issuing the writ of execution regarding the arbitration award did not always render the preferred result. Therefore it is indeed tremendous satisfaction for that the Latvian legal system has made a big step forward in the direction of the developed legal systems and further on persons will not be denied the right of protection of their interests protected by the law in a fair trial with regard to invalid arbitration agreements.

    In addition, Ilze Kramiņa draws attention to that the persons who have received a general jurisdiction court ruling with a rejection to review the validity of the arbitration agreement may consider the usefulness of filing an application for new reviewing of the case due to new established circumstances. Since the Civil Procedure Law recognizes declaring a legal provision used in the adjudication of a matter incompliant with a legal provision of higher legal force as a new established circumstance, a person may apply for new reviewing of the respective case within three months following the pronunciation of the judgment of the Constitutional Court, provided that not more than 10 years have passed since the date of coming into force of the court ruling in the respective case.


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