International Commercial Arbitration Law and Practice in Bosnia and Herzegovina: Lessons from Investor-State Dispute Settlement (ISDS) Reform

Abstract

International arbitration, both commercial and investment, is generating increasing interest and practice in Bosnia and Herzegovina (BiH), as well as more generally in the Western Balkans region. The past decade has seen an increased number of international business transactions and investments, but also related disputes involving parties or claims connected to BiH. However, the desired progress and growth of commercial arbitration are hampered by the outdated legislative and institutional framework, and the lingering lack of capacity of the local courts, which are expected to act as domestic legal anchors of arbitration agreements and awards. The sluggish development of the commercial arbitration framework lies in stark contrast to the dynamics in investment arbitration, which is undergoing intensive reforms in BiH and in the world. In this space, BiH has been at the forefront of innovative legal and institutional reforms, revitalizing its investment protection standards and creating mechanisms for their effective application. This paper explores the distinct features of the two legal systems in BiH, looking into the underlying issues faced, their common denominators, and the investment arbitration reform success factors that can be emulated to enhance the commercial arbitration framework. As such, it aims to reverse engineer the adopted reforms and lessons learnt from the investment arbitration sphere that could help unlock the potential of commercial arbitration in BiH. The article will unfold as follows: it will first provide a primer on the existing legal and institutional framework for commercial arbitration in BiH, highlighting their special features, distinct from the prevailing international standards. Then the analysis turns to investment arbitration, outlining the motivations, policy background, and concrete reform measures implemented in this field. Finally, the paper arrives at the potential intersections between the two fields and provides recommendations for their mutual reinforcement.