A significant victory in ALITA’s decade-long litigation

Great news from the Court of Appeals of Lithuania – after almost ten years of litigation, the Court of Appeals of Lithuania has ruled in favour of the Ellex client – ALITA, AB group of companies – and refused to recognise and enforce the partial and final arbitral awards of the Foreign Trade Court of Arbitration in Belgrade. More can be found here. 

In this international dispute the Serbian Agency for Dispute Resolutions in Privatization Procedures attempted to claim damages suffered after then-largest Lithuanian alcoholic beverages producer ALITA, AB undertook and allegedly failed to perform obligations arising out of the privatization of Serbian brewery „Beogradska Industrija Piva“ (BIP). Despite the fact that the privatization agreement was concluded with ALITA, AB the arbitral tribunal rendered the partial arbitral award including ALITA, AB group of companies as a defendant in the arbitration proceedings.

By a partial arbitral award, the arbitral tribunal established its jurisdiction by applying Article 68(4) of the Law on Companies of the Republic of Lithuania and, on that basis, extending the arbitration clause in a specific privatization agreement to a non-signatory party, the ALITA, AB group of companies. The arbitral tribunal awarded more than EUR 11 million from the ALITA, AB group of companies in the final arbitral award. The Court of Appeals has refused to recognise and enforce these arbitral awards in Lithuania.

The case of (non)recognition of arbitral awards is a significant milestone in a dispute that has been heard before the Serbian and Lithuanian courts for more than a decade over the privatisation of a Serbian company. The annulment of these arbitral awards in Serbia and the (non)recognition of the arbitral awards in Lithuania have addressed issues related to the extension of the arbitration clause to the non-signatory and the impact of setting-aside of the arbitral awards by the courts of arbitration seat on their (non)recognition and (non)enforcement proceedings.

The long years of litigation before the courts of the Republic of Serbia, including the Serbian Constitutional Court, resulted in a victory for the ALITA, AB group of companies, with the partial arbitral award being annulled in its entirety and the final arbitral award being annulled in favour of the ALITA, AB group of companies.

The refusal of the Lithuanian Court of Appeal to recognise and enforce the arbitral awards not only marked another important step towards a successful conclusion of the dispute but also established important case-law on the recognition of foreign arbitral awards: the Lithuanian Court of Appeals clarified that:

• the motivational part (the court’s rationale) of the arbitral award cannot be considered separately from the resolution part and other components of the award (p. 35 of the ruling). Therefore, the motivational part (the court’s rationale) of the award alone cannot be recognised;
• The purpose of the application for recognition of a foreign court judgment is the possibility to implement its substantive effects in the territory of Lithuania, therefore the applicant must have a legal interest in recognition of the award in relation to a specific person (para. 36 of the ruling).

The project was led by partner Vilija Vaitkutė Pavan and senior associate Agnė Kisieliauskaitė. Also, this great success would not be possible without joint work with colleagues – Dr. Viktorija Budreckiene and Evelina Ivanauskienė, PhD from law firm Balcerio, Budreckienės ir Ivanauskienės kontora and Djordje Novcic from Serbian law firm JPM Jankovic Popovic Mitic.