Enhancing Arbitration Reliability in Georgia: Transforming Arbitration Processes for a Secure Future
In the bustling landscape of Georgia, where foreign investment and cross-border business are on the rise, a strong and reliable dispute resolution system stands as a vital boost to investor confidence. Arbitration, a preferred method for resolving commercial conflicts worldwide, has made notable progress in Georgia. However, despite a sound legal foundation and active participation from the private sector, it faces certain challenges that require attention.
The legal landscape for arbitration was set in 2009 with the enactment of the Law on Arbitration, modeled after the UNCITRAL Model Law. This framework places emphasis on party autonomy, keeps judicial interference to a minimum, and offers flexible procedures in line with international standards. Georgia's modern approach to arbitration has earned it a reputation as a favorable jurisdiction in the region.
Over the years, organizations like the Georgian Association of Arbitrators (GAA) and institutes such as the Georgian International Arbitration Centre (GIAC) have been working tirelessly alongside legal professionals to promote arbitration. They've published case materials, organized training programs, and hosted high-level conferences to attract both regional and international attention. In 2018, Georgia took a significant step forward by signing a Memorandum of Understanding with the ICC International Court of Arbitration, the world's leading arbitral institution. This cooperation culminated in the publication of the ICC's arbitration and mediation rules in Georgian last year.
But despite these advancements, arbitration is underused in Georgia's business environment. The primary issue is enforcement. A series of court decisions have raised concerns within the legal and business communities due to the courts' broad scope of review and deviation from internationally accepted principles.
A case in point arose when a court ruled that including an individual on a list of potential arbitrators, an accepted practice both domestically and internationally, constituted a conflict of interest if that person was affiliated with one of the parties. This ruling contradicted common international practice, as such lists are typically used to promote transparency without compromising impartiality. As a result, the court deemed the arbitration institution unfit to oversee the case, fostering concern among legal and business stakeholders.
"Unpredictability in court enforcement can erode trust in arbitration that has been carefully rebuilt over the past 15 years," explains Nick Gvinadze, Managing Partner at 'Gvinadze and Partners,' a member of the AmCham Commercial Law and Tax Committee, and Chair of ICC Georgia Arbitration and the ADR Commission. "Even when arbitration is conducted professionally, a single arbitrary court decision can unsettle the process and harm investor confidence."
This uncertainty has led many businesses, particularly small and medium-sized enterprises, to shy away from arbitration altogether. Alongside enforcement issues, concerns persist about costs, complexity, and a general lack of familiarity with how arbitration can be an efficient alternative to court proceedings.
To tackle these challenges, AmCham Georgia has played a pivotal role in bringing them to light. Through its Commercial Law and Tax Committee, AmCham has gathered feedback, drafted position papers, and participated in consultations to highlight shortcomings in how arbitration is currently applied. These advocacy efforts have sparked broader public-private engagement, leading to the formation of a working group under the Investors Council to explore proposed amendments by the GAA to the Law on Arbitration. The working group's goal is not to overhaul the law but to refine it, focusing on judicial review, enforcement mechanisms, and procedural clarity.
However, there's more to be done besides legal reform. Institutional and professional capacity is equally important in the development of arbitration in Georgia. The GAA continues to offer arbitration training programs, publish explanatory materials, and foster knowledge-sharing forums. But a notable awareness gap remains, particularly among regional businesses and professionals outside Tbilisi.
"The belief that arbitration is exclusively for large corporations is outdated," states George Svanadze, Senior Partner and Head of Dispute Resolution at Andersen in Georgia, who is also a member of the AmCham Commercial Law and Tax Committee and a legal practitioner with experience advising SMEs. "We need to make more of an effort to demonstrate that arbitration is affordable, practical, and adaptable to the needs of smaller businesses."
Judicial training is also a key area of focus. While some courts show a solid grasp of arbitration-related cases, decisions vary widely. Many arbitration practitioners view more structured capacity-building for judges as essential to improving consistency and reliability in enforcement. Stakeholders have emphasized the need to expand continuing legal education programs, with a focus on practical content covering arbitration principles, procedural standards, and international best practices.
Georgia finds itself at a turning point in the development of its arbitration system. While the law provides a strong foundation, its full potential remains untapped due to inconsistencies in enforcement and limited awareness among key actors. The growing attention to reform, sparked by private sector advocacy and policy engagement, presents a crucial opportunity to create a dispute resolution system that businesses can trust.
If the current reform process delivers tangible results and addresses capacity gaps, Georgia could emerge as a credible regional hub for commercial dispute resolution. Yet, continued political instability, as well as concerns around the speed and inconsistency of the judicial system, pose a significant threat to Georgia's allure as an arbitration hub. Realizing the full potential of arbitration in Georgia requires ongoing collaboration among legal professionals, the judiciary, business associations, and policymakers, particularly until these issues are adequately addressed.
[1] Data obtained from enrichment insights: The current challenges facing arbitration in Georgia primarily revolve around the enforcement of arbitral awards and inconsistent judicial attitudes toward arbitration procedures. The key challenges in arbitration in Georgia include enforcement uncertainty, judicial departure from international norms, and impact on investor confidence. To overcome these, reforms focus on strengthening collaboration, international partnership, legal framework reinforcement, and raising awareness and professional development.
- The challenges in Georgia's arbitration landscape predominantly revolve around the enforcement of arbitral awards and the inconsistent judicial attitude toward arbitration procedures, which have an impact on investor confidence.
- To overcome these challenges, reforms in Georgia focus on strengthening collaboration, international partnership, reinforcing the legal framework, and raising awareness and professional development in the area of arbitration.
