Croatia

Dalibor Valinčić

Wolf Theiss
Zagreb

dalibor.valincic@wolftheiss.com
Law firm bio

1. What are the current challenges to enforcement of multi-tiered dispute resolution

clauses?

Although multi-tiered dispute resolution clauses are used in practice, there is no publicly
available case law dealing directly with the enforcement of such clauses. We are not aware of
any court decision by which a court (i) found that the prior stages would constitute
"conditions precedent" to initiating litigation, refusing to proceed with litigation either by way
of rejecting the claim or by staying the proceedings, or (ii) held that the prior steps are
irrelevant for initiating litigation continuing the proceedings notwithstanding the fact that the
prior steps agreed to in the clause were not undertaken.

There is apparently an award, not publicly available, rendered in arbitration administered by

the Permanent Arbitration Court of the Croatian Chamber of Commerce in which the tribunal
rejected the claim because the claimant failed to comply with the old FIDIC contract rules
and obtain an expert opinion about the issue in dispute prior to initiating arbitration. The
tribunal held that obtaining an expert opinion in fact constituted an agreement to engage in
mediation. Since this obligation was not honoured, the tribunal rejected the claim on the
basis of the Article 18 of the Croatian Mediation Act, which provides that any c laim filed in
breach of the parties' obligation to initiate mediation will be rejected.

As already mentioned, this award is not publicly available and it has very limited effect on
the creation of trends in the legal assessment of multi-tiered dispute resolution clauses.
Therefore, we believe it should not have material importance for creation of case law related
to the issue of enforcement of multi-tiered dispute resolution clauses.

2. What drafting might increase the chances of enforcement in your jurisdiction?

The issue of enforceability of multi-tiered jurisdiction clauses has not been tested and reviewed
by Croatian courts. As a consequence, there is no direct guidance what the drafters of such
clauses should be particularly aware of. However, we believe that any language that increases the
level of certainty of the parties' obligations under the dispute resolution mechanism would
certainly increase the chances of enforcement of multi-tiered dispute resolution clauses.

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It is important to note that the Republic of Croatia has a Mediation Act in place, which
governs the mediation process. Being a regulated process, reference to mediation may imply
certain features or restrictions that may affect the parties' right of recourse to courts or
arbitration. The most important is that a claim to a court or an arbitral tribunal will be
rejected if the claim has been filed in breach of the claimant's obligation to refer the dispute
to mediation prior to filing a statement of claim.

In that respect, we would recommend, to the greatest extent possible:

 determining the consequences for not undertaking the steps preceding the filing of the
claim with a court or an arbitral tribunal,
 specifying deadlines and time limits for undertaking each prior step, explicitly
stating whether the parties refer the dispute to mediation or any other alternative
dispute resolution tool prior to initiating litigation or arbitration, because such
reference may be relevant for triggering the application of the Croatian Mediation
Act,
 specifying specific mediation rules or institution administering mediation, if
agreed so by the parties.

3. If your courts have enforced such clauses, how have they done so?

As already explained, Croatian courts have not dealt with the enforcement of multi-tiered dispute
resolution clauses.

However, Croatian law contains certain provisions that may be important for the assessment of
potential conduct of Croatian courts if and when enforcement of multi-tiered dispute resolution
clauses becomes a matter under their review.

The Croatian Civil Procedure Act provides, as a condition precedent to initiating a law suit
against the Republic of Croatia, that the claimant is required to file a request for out-of-court
settlement of the dispute with the State Attorney's Office. If the claimant fails to do so, the court
will reject the claim.

The Croatian Mediation Act contains a similar provision, providing that the court will reject the
claim if the claimant, prior to filing a statement of claim, fails to initiate a mediation procedure
that the parties agreed upon.

As a consequence, if a statement of claim is filed with the court without undertaking the prior
steps agreed upon between the parties, we believe the courts will be likely to dismiss the
litigation and award the costs against the claimant.

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