Alternative Dispute Resolution in the Special Chamber of Kosovo’s Supreme Court

By Jill Wechtler

Prepared for a Seminar on the Law of Nationbuilding

Chicago-Kent College of Law

www.kentlaw.edu

May, 2004

INTRODUCTION

            Kosovo, like many other post-socialist territories, is undergoing a complicated and controversial transition to rule of law and market economics. Privatization of socially and publicly owned enterprises is an essential step in Kosovo’s progress, but it is the subject of great controversy because it touches upon some of Kosovo’s most sensitive social issues: ethnic tension, unemployment, slow progress under United Nations administration, and ownership and sovereignty over the territory and its assets.

            The Special Chamber of the Kosovo Supreme Court stands as the arbiter of nearly all legal disputes that will arise from the privatization process. If parties bring the expected number of complaints, the Special Chamber may face overload. If parties bring the expected variety of complaints, the Special Chamber may be charged with resolving disputes better suited for a forum other than the courtroom. Alternative dispute resolution mechanisms like negotiation, mediation, and arbitration could provide the Special Chamber with the tools better to serve parties and society as a whole. 

            This paper seeks to examine current conditions and responses in Kosovo to determine whether alternative dispute resolution would be a helpful endeavor. It then analyzes various types of alternative dispute resolution mechanisms, weighing the strengths and weaknesses of each. This paper also summarizes the results of several alternative dispute resolution projects in developing countries and in Kosovo, seeking trends that would highlight effective approaches. Finally, this paper provides an overview of an alternative dispute resolution package that could help the Special Chamber meet its goals.

BACKGROUND

I.                    Current conditions in Kosovo

Five years after the NATO strikes ending Milosevic’s aggression in Kosovo, [1] the former autonomous province of Yugoslavia remains in serious economic trouble. Shortly after NATO forces drove Milosevic’s army out of Kosovo, the United Nations Security Council issued Resolution 1244, establishing the United Nations Mission in Kosovo (“UNMIK”). UNMIK is the UN-run interim administration charged with providing “transitional administration while establishing and overseeing the development of provisional democratic self governing institutions to ensure conditions for a peaceful and normal life for all inhabitants of Kosovo.” [2] As a result of intense international efforts and work by local Kosovar authorities, [3] great strides have been made towards the protection of human rights and the rule of law.

Slow economic development, however, impedes improvement in the daily life of Kosovo’s residents. During the era of Yugoslav power, industries were set up as Socially Owned Enterprises (“SOE”s). This was a murky form of property ownership in which workers’ councils held possessory rights, but not ownership, of the enterprises. [4] Kosovo’s industries became dependent on the internal Yugoslav market for their supplies and for sale of their products. [5] From 1989 to 1992, Yugoslavia stripped Kosovo of its autonomous province status and subsequently forced most Kosovar Albanians out of their jobs. [6] With the dissolution of Yugoslavia, Kosovo’s industries lost their market and fell into disuse. [7] “Few of the SOEs are producing anything at all today, and even fewer are able to bring their product to market.” [8] Equipment and infrastructure are outdated and in serious disrepair. Some enterprises owe hundreds of thousands of DM in unpaid bills to utility companies. [9] Last May, the United Nations Development Programme reported that 49 to 57% Kosovo’s population remains unemployed. [10] The population is 50% composed of 16 to 24 year olds, and more than 70% of these residents are unemployed. [11] The combination of high unemployment, slow progress, and young population is a recipe for frustration.

One step in remedying this situation is the privatization of socially and publicly owned enterprises.

II.                 Privatization

To rid Kosovo of its underperforming industries and to boost employment and resource availability, UNMIK established a program for the privatization of socially and publicly owned enterprises. Pursuant to UNMIK Regulation 2002/12, the Special Representative of the Secretary General (Head of the UN’s operations in Kosovo) created the Kosovo Trust Agency (“KTA”). [12] The KTA is an independent body charged with administering Kosovo’s publicly and socially owned enterprises. [13] As its name implies, the KTA is required to administer the enterprises as trustee for their owners. [14] Its authority extends to publicly and socially owned enterprises that are “registered or operating in the territory of Kosovo,” and covers the enterprise assets present in the territory of Kosovo. [15] The KTA is authorized to “[c]arry out ancillary activities to preserve or enhance the value, viability and governance of Enterprises.” [16] These ancillary activities include a broad range of available options, including reorganizing management, “[a]ssuming direct control over an Enterprise,” granting leases, “[t]ransforming Enterprises into Corporations,” establishing corporate subsidiaries, and initiating bankruptcy proceedings. [17] For socially owned enterprises, the KTA has broader enumerated authority – the KTA can establish subsidiaries, transfer all or some of the enterprises’ assets to the subsidiaries, and sell some or all of the subsidiaries’ shares; and it can entirely liquidate enterprises. [18] As part of the legal framework backing up the operation of the KTA, UNMIK promulgated Regulation 2003/13 granting 99 year leases on Kosovo’s SOEs. [19]

The Kosovo Trust Agency essentially applies two methods of privatizing Socially Owned Enterprises. [20] One method is the spin-off. [21] The KTA conducts spin-offs according to a two step process. First, the KTA creates a new Joint Stock Company or Limited Liability Company. The KTA transfers all or some of the old company assets to the new company, but it does not transfer the liabilities of the old enterprise. Initially, the old company holds the shares of the new company. The old enterprise acts as a holding company, and the KTA administers the old company. The KTA holds the new shares in trust, allowing creditors of the old company to assert claims against the assets. [22] In the second step of the spin-off process, the KTA sells the new company stocks to private investors. The KTA holds stock sale proceeds in trust, and parties may continue to assert ownership and creditor claims against those proceeds. [23]

Another method the KTA applies to privatize SOEs is voluntary liquidation. [24] The KTA uses this method for enterprises that have no chance of staying afloat. Liquidation proceeds according to the UNMIK regulation on business organizations. [25] Like with a spin-off, the KTA holds liquidation proceeds in trust, and parties can assert ownership and creditor claims against the defunct enterprise. [26]

Pursuant to UNMIK Regulation 2002/12, all claimants asserting suits against the KTA must proceed in the Special Chamber of the Kosovo Supreme Court. [27]

THE SPECIAL CHAMBER OF THE SUPREME COURT

I.                    Existing mechanisms

On June 13, 2002, the Special Representative of the Secretary General created a Special Chamber within the Kosovo Supreme Court for the adjudication of claims “relating to the decisions or actions of the Kosovo Trust Agency.” [28] The Special Chamber consists of five judges, three of whom are international personnel and two of whom are Kosovo residents. [29] All judges are assigned by the Special Representative of the Secretary General, [30] and work under six-month contracts. [31]

The Special Chamber has primary jurisdiction over claims including, among others: challenges to actions by the KTA taken pursuant to UNMIK Regulation No. 2002/12, including the imposition of fines; claims for financial losses caused by such actions by the KTA; claims brought against an enterprise under KTA administration that arose before or during the KTA’s administration of the enterprise; claims for recognition of interest in property under KTA administration; KTA requests for enforcement of KTA authority; and claims for recission of transactions by an SOE undergoing liquidation. [32]

Claimants must pass through a number of procedural hoops to file a suit properly. Any claimant wishing to file suit against the KTA must first give notice to the KTA. [33] Then, challenges to KTA actions must be filed within nine months of the date that the party knew or should have known about the KTA action. [34] Parties initially sued by the KTA or an enterprise may, however, file counterclaims “within the time limits established by Applicable Law.” [35] Claims must be presented to the Special Chamber in writing. [36] Claims must include:

(a)    The name and address of the claimant;

(b)   The name and address for service of the lawyer, if any, acting for the claimant;

(c)    The name and address for service of the respondent;

(d)   The relief sought by the claimant;

(e)    The subject matter and all material facts pertaining to the claim, the grounds for the primary jurisdiction of the Special Chamber over the claim and a summary of the legal arguments on which the claim is based; and

(f)     Where damages are claimed, a Schedule of Damages setting out the categories of loss or damage, the amount of money claimed in each category, and the evidence that is to be offered in support of that category of loss or damage. [37]

Claims must be signed, and claimants must submit six copies. [38] Claimants may submit pleadings and documents in English, Albanian, or Serbian, but must also provide an English translation, pay for an English translation, or request financial support for an English translation. [39]

If a respondent chooses to submit a defense, the respondent has one month after receipt of service to do so. [40] The defense must include:

(a)    The name and address of the respondent;

(b)   The name and address for service of the lawyer acting for the respondent;

(c)    The response to the relief sought by the claimant;

(d)   All material facts pertaining to the defense and a summary of the legal arguments upon which the defense is based; and

(e)    When damages are requested by the claimant, a response to the claimant’s Schedule of Damages. [41]

Parties must comply with further requirements for the submission of additional written materials, [42] the conduct of hearings, [43] the presentation of evidence, [44] and appeal. [45]

The Special Chamber has a few caseload management mechanisms available to it. It has authority to refer claims to any court that has the appropriate subject matter jurisdiction, [46] but a case referred to another court can later be appealed to the Special Chamber. [47] The Special Chamber can also delegate collection of evidence in simple cases to panels of two or more judges, [48] and can delegate collection of evidence in cases involving less than 10,000 Euros to an individual judge. [49] The Special Chamber also has authority to “encourage the parties to reach a negotiated settlement.” [50] Negotiated settlements become final and binding once the Special Chamber has received the result in writing and endorsed it. [51]

II.                 Likely claims

As of January 15, 2004, the Special Chamber had received only one or two cases that will ultimately be adjudicated by the Court. [52] Though it received twenty five claims between September 2003 and January 2004, only two deal with privatization. [53] The Special Chamber believes that one of these may be decided by the European Court of Human Rights (“ECHR”) because it involves human rights issues in addition to minor privatization issues, [54] but no clear mechanism for appeal to the ECHR exists, given that claims may only be made by or against Contracting states under the European Convention on Human Rights. [55] The United Nations, the United Nations Mission in Kosovo, and the Kosovo Trust Agency are not Contracting states. [56] Therefore, the case involving both privatization and human rights issues may remain in the Special Chamber. Most of the remaining twenty-three cases will probably be referred to the Kosovo Commercial Court. [57]

Once the privatization process begins full operation, however, former Chief Justice John Murphy expects the Special Chamber to receive up to 700 legitimate cases. [58] Claims by employees of SOEs undergoing privatization may constitute the largest percentage of these cases. Under UNMIK Regulation 2003/13, employees of socially owned enterprises undergoing the type of privatization described in section 8 of UNMIK Regulation No. 2002/12 are entitled to 20% of the proceeds from the sale of shares of the subsidiary corporation. [59] Each SOE’s representative body of employees must work with the Federation of Independent Trade Unions of Kosovo to create a list of eligible employees. [60] The Kosovo Trust Agency reviews the lists and posts them officially, then places the reserved privatization proceeds into an escrow account for distribution by the Federation of Independent Trade Unions of Kosovo. [61] The Special Chamber has jurisdiction to resolve complaints about the Agency’s list of eligible employees and the distribution of funds. [62] Workers and other complainants must make their complaints within twenty days of the Agency’s posting of the eligible employee lists. [63] The Special Chamber then has only forty days to resolve each claim. [64] Workers have already engaged in several demonstrations pressing their views of privatization’s shortcomings, [65] and are likely to continue their efforts by resorting to the Special Chamber.

Another type of dispute former Chief Justice Murphy expects the Court to face is conflict surrounding re-privatization of enterprises that were previously privatized under Serb authority. [66] Since 1999, UNMIK has essentially “re-nationalized” these enterprises. [67] UNMIK now charges the KTA with re-privatizing these enterprises in a manner consistent with applicable law and norms of non-discrimination. [68] Concerned about problems arising from unclear property ownership, the United Nations chose not to allow UNMIK to invalidate three Serbian laws from the 1990s under which “Milosevic-era ownership transformations had been effected.” [69] The UN further declared that the KTA should change its policies to evaluate carefully the ownership of each SOE before privatizing it. [70] Paul Csiszar, from the KTA, has expressed concern that the KTA will need to move slowly with the privatization process to avoid serious problems arising from re-privatization. [71]

Re-privatization disputes could include, for example, claims by investors who purchased enterprise assets during the Serb-authorized privatization and now challenge the authority of the KTA to re-privatize the enterprises or challenge the ownership interests of new investors. Some critics of the privatization process also argue that re-nationalization and re-privatization violate international norms of access to judicial process and compensation for deprivation of property rights. [72]

Relatedly, but somewhat more generally, the Special Chamber may receive claims from parties who believe that the privatization process in general violates property and due process rights because the KTA has failed to determine adequately whether certain enterprises are in fact socially or publicly owned. [73] Apart from unclear title arising from previous privatization under Serbian authority, ownership is clouded by socialist ownership structures, by Milosevic’s destruction of ownership documents, and by years of undocumented property transfers. [74]

Still more claims may arise from the controversy itself. The Kosova Chamber of Commerce has threatened to file suit against the KTA for stopping privatizations. [75] On the other hand, the Republic of Serbia has threatened to file suit if the KTA continues privatizing enterprises. [76] By March 10, 2003, however, Belgrade stated that it would accept privatization, but wanted to protect its interest in Belgrade-guaranteed international debts still owed by Kosovo’s enterprises. [77] UNMIK spokeswoman Sarah Hackaj specifically stated that such claims would have to be taken to the Special Chamber. [78]

A wide variety of other likely claims exist. The Special Chamber is authorized to adjudicate claims that the KTA has wrongly imposed fines on an enterprise or its employees or management personnel. [79] When the KTA liquidates an enterprise, creditors who do not file their claims in time to have them addressed by a Liquidation Committee must instead proceed directly to the Special Chamber. [80] More simply, creditors who are owed money by privatized enterprises may file suit if they are not satisfied with KTA decisions, and workers who feel that they have uncompensated ownership interests may take their claims to the Special Chamber. [81]

In sum, the Special Chamber of the Supreme Court is likely to receive a mix of claims by and against the KTA, Kosovo residents (natural persons), Serbian citizens and authorities, and businesses from Kosovo and abroad. The Special Chamber will, in turn, need to use a mix of case management tools to deal with the special characteristics of each type of dispute. For example, workers’ claims for their share of privatization proceeds will require the Special Chamber to act quickly and with sensitivity to workers’ legal inexperience. Claims by foreign investors will, on the other hand, require the Special Chamber to operate in the well-developed and sophisticated field of international commercial litigation.

III.               Special needs

In the context of rebuilding an economy devastated by years of Socialist control and ethnic war, the Special Chamber must meet a number of special needs. Former Chief Justice Murphy expresses particular concern about operating with the backdrop of Kosovo’s underdeveloped “culture of litigation.” [82] He explains that many claimants appear at the Special Chamber with no legal representation, and having had no help in preparing their filings. [83] While pro se litigants can get a list of attorneys from Kosovo Legal Services, many cannot afford lawyers, and pro bono representation is not common. [84] Even when parties are able to hire lawyers, most currently practicing lawyers were trained under the old socialist system, [85] and virtually all Kosovar Albanian lawyers had a period of ten years during which they were prohibited from practicing. [86] Many pleadings are presented in handwritten Albanian with no English translation and no copies. [87] Registrar Steven Farrell is regularly put in the position of explaining to complainants what their pleadings must include. [88] This misunderstanding of litigation procedure and underavailability of affordable legal representation create a special need for the Special Chamber to accommodate parties who are not legally savvy.

The Special Chamber must also meet Kosovar society’s special need for confidence-building measures. Having had little opportunity to develop a modern legal system, Kosovo’s residents continue to struggle with the concept of rule of law in everyday life. Former Chief Justice Murphy emphasizes that the general population has little awareness of the right to sue in court for wrongs committed against them. [89] Furthermore, former Chief Justice Murphy notes that judges of the Special Chamber frequently face both invitations for favor and physical threats. [90] The Special Chamber has yet to handle a significant number of cases, but the culture throughout the rest of Kosovo’s legal system can shed some light on likely conditions for the Special Chamber. Judges sitting in the main chamber of Kosovo’s Supreme Court and in Kosovo’s district and municipal courts fear for their personal safety because of bombings, beatings, and other violence. [91] Additionally, Kosovo’s municipal courts face growing backlogs due to heavy caseloads, unfilled vacancies for judgeship positions, failure to abide by time requirements, and difficulties in securing the attendance of parties at hearings. [92] These delays “cause legal insecurity, lead to inefficient use of the court’s resources, and affect the courts’ ability to establish the truth.” [93] Such shortcomings undermine Kosovars’ confidence in the legal system and in the rule of law generally. If justice through official channels is too slow, residents have little reason to depart from their unofficial channels. Furthermore, the Special Chamber has a special need to build confidence by holding public and transparent hearings. Throughout Kosovo, residents face difficulty simply finding information about the date and place of hearings in municipal courts. [94]

Even if litigants understand the procedural requirements and have the best intentions of operating within the official legal system, they still face special difficulties caused by conditions in Kosovo. For example, parties have trouble determining addresses of opponents, and even more trouble sending notification, because of street name changes, a culture of using descriptions rather than addresses, and security concerns in minority areas. [95] Litigants may also have difficulty providing evidence to support ownership claims because authorities of the Milosevic regime often destroyed property records; because Milosevic’s laws against property transfer to Albanian Kosovars created a period of undocumented property transfer; and because Serbians, Albanians, and members of other ethnic groups all forced each other out of properties at different times during the conflict. [96]

Additionally, the Special Chamber is charged with adjudicating cases that have a special need for quick decision. As previously discussed, the privatization drive is one of the key components of Kosovo’s strategy to improve the economy, reduce unemployment, and move Kosovo towards a better future. Kosovars are increasingly frustrated with the lack of jobs, [97] and they are increasingly believing that UNMIK does not support privatization and therefore does not support reaching the standards that many demand before status talks. [98] Delays cause by lengthy litigation of privatization disputes will only increase this frustration. The privatization process has operated in fits and starts since its beginning, [99] so the Special Chamber would serve its constituents well if it could handle disputes expeditiously and consistently once the process is up and running again.

ALTERNATIVE DISPUTE RESOLUTION

I.                    In general

When traditional litigation does not meet the needs of parties or of a legal system as a whole, decisionmakers can turn to a wide variety of alternatives. The term “alternative dispute resolution” typically refers to three types of solutions: arbitration, mediation, and negotiation. A boundless supply of other alternatives exist outside these mainstream alternatives, such as ombudspersons, early neutral evaluation, and community justice centers. [100]

Negotiation is a bargaining process in which parties and their representatives attempt to reach an agreeable solution to their dispute. [101] No third party attempts to direct the discussion or impose a judgment. [102] It is the least formal of the three main types of alternative dispute resolution. [103] In some legal systems, courts encourage parties to attempt to settle their disputes through negotiation before they proceed to court adjudication. [104]

Mediation is a process in which a neutral third party assists parties in reaching a voluntary compromise to resolve their dispute. [105] Mediators do not have authority to impose a judgment on the parties. [106] Mediation is more formal than negotiation, but less formal than arbitration. [107] Mediators do not hold evidentiary hearings; rather, they oversee informal meetings designed to provide a forum for discussion of the parties’ positions. [108] Mediation is well-suited for disputes in which parties are likely to reach an agreement with some help and/or where they will be in a continuing relationship after resolution of the conflict. [109] Some benefits of mediation include: the process can educate the parties on potential alternative solutions and encourage creative solutions, [110] the process can diffuse hostility rather than polarizing differences, [111] and the process can produce cooperative solutions that typically encourage a high rate of voluntary compliance. [112] Some negative implications of mediation include: lack of full due process safeguards, increased likelihood that a more powerful party will be able to exert behind-the-scenes influence, results need not be based on legal principle, and results are generally non-binding & unenforceable by courts. [113]

Arbitration is a proceeding in which one or more neutral third parties impose a decision on the disputing parties after hearing arguments and evidence. [114] It is the most formal of the three main types of alternative dispute resolution. [115] Arbitration is well-suited for disputes in which the parties are unlikely to reach a cooperative agreement, but prefer a quicker and less adversarial resolution than that provided by court adjudication. [116]

In private arbitration, parties choose to take their dispute to arbitration, and their agreement normally provides that the arbitrators’ decision will be final and binding. In this type of arbitration, the parties exercise great control over the proceeding. They can choose the individuals who will serve as arbitrators, what substantive law will apply, what procedural rules will be followed, and many other specific aspects of the process. [117] Arbitration has many special features that both offer benefits and include negative implications. Arbitration is less formal than court adjudication. This offers the benefits of speed and ease for the parties, but necessarily reduces procedural protections like discovery and rules of evidence. [118] This reduction in procedural protection can weigh heavily on unrepresented and inexperienced parties who face institutional repeat customers. Private arbitration allows the parties to choose their arbitrators. [119] They can therefore choose specialists and individuals who sympathize with their positions. [120] On the other hand, this freedom can exacerbate differences in bargaining power between parties, because less experiences parties will be less able to choose the best arbitrators and will not be afforded the same impartiality that a judge should provide. [121] Private arbitration proceedings and awards can be kept confidential. [122] This can facilitate freer communication and can make resolution of disputes less onerous to businesspeople who wish to protect their reputation and business secrets. Confidentiality can, however, undermine the evenhanded application of the law and upset public perception that justice is being done because it reduces accountability of decisionmakers and hides justice from public view. [123] Arbitration is also typically viewed as being less costly than court adjudication. [124] This may be more true in common law systems than in civil law systems, because civil law litigation tends not to cost as much as complex common law litigation. Finally, arbitration generally produces results that are more psychologically satisfying for parties because it has less of a tendency to polarize positions than court adjudication does. [125] This, too, may be more true in common law systems than in civil law ones.

In the context of international commercial disputes, private arbitration offers additional benefits. “In transborder commercial matters, choosing to arbitrate goes almost without saying because international arbitration is instrumental to neutrality, the provision of the necessary expertise, effective dispute resolution, and the enforcement of awards.” [126] Judgments pronounced by foreign courts are notoriously difficult to enforce. Arbitral awards, however, are much easier to enforce because, as of 2003, 133 nations had become members of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). [127] According to the New York Convention, “[e]ach Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon.” [128] A number of contracting states have agreed to enforce arbitral awards made within the territory of non-contracting states. [129] For those states that only enforce awards made in the territory of other contracting states, the Convention’s applicability is less clear, but still arguable – though neither UNMIK nor the PISG are contracting states, the former Yugoslavia was, and Serbia and Montenegro is. [130] Additionally, for reasons ranging from perceptions of unfairness to unfamiliarity with foreign procedures, parties simply do not want their cases decided in the courts of a foreign state; this alone is generally reason enough to choose international commercial arbitration. [131] “Arbitration clauses have become standard fare in international business dealings.” [132]

In court-annexed arbitration, a court may encourage or require parties to attempt to resolve their dispute through arbitration before proceeding to court adjudication. [133] Court-annexed arbitration is often non-binding – if one party does not accept the award, the parties proceed to court adjudication. [134] In some systems, courts wishing to discourage litigation of such awards impose penalties on parties who reject the award and receive a court judgment that is less advantageous. [135] Courts can, however, also use binding arbitration. [136] Court-annexed arbitration is well-suited for reducing caseloads and streamlining issues for adjudication.  One negative implication of court-annexed arbitration that is not associated with private arbitration is that, when courts use mandatory arbitration, they force parties to take their disputes to arbitration, where they will not be afforded full due process protection. [137]

II.                 Mechanism in place

a.       Mechanisms in place in other developing countries

            Though alternative dispute resolution may seem too advanced and too foreign to be suitable for developing legal systems, experience shows that dispute resolution mechanisms can “transfer will into evolving democracies and are urgently needed in some cases.” [138] Rule of law requires more than a functioning court system. It requires that the will to live according to the law touch every level of society. Dispute resolution mechanisms incorporating local conflict solutions create a more holistic legal system that is easier to “establish, acculturate, and apply” than a top-down court system. [139]

Many developing countries have used alternative dispute resolution to achieve their access-to-justice goals. For example, Argentina uses mediation to reduce greatly the caseload in its courts and to help provide timely access to justice. [140] During a one year pilot program starting in April of 1996, Argentina sent 75,010 cases to mediation, and only 17,526 (23.15%) were returned to the courts for trial. [141] During the same year, 29,986 cases were drawn from the Commercial Court of Appeals, and only 9167 (30.57%) were brought back to the courts. [142] These successes led the Argentinean government to endorse and expand alternative dispute resolution in the country, resulting in the establishment of Community Justice Centers, the spread of private arbitration of commercial disputes, and provision of pretrial labor conciliation. [143] Other Latin American countries, including Brazil, Columbia, and Costa Rica, have followed Argentina’s example and used arbitration to speed their integration into the globalized economy. [144] These Latin American experiences show that alternative dispute resolution of commercial claims is within the reach of developing economies, and that it can provide a basis for more widespread acceptance of mediation and arbitration.

            Alternative dispute resolution has also provided success throughout Central and Eastern Europe. Poland has used arbitration and mediation in its privatization program, addressing conflicts that arise during the transfer ownership from the state to private investors. [145] Poland and Hungary use mediation to resolve labor disputes. [146] Because it recognizes that dispute resolution mechanisms are critical to the development of a strong market economy, the World Bank approved credit supporting Albania’s creation of commercial mediation and arbitration processes. [147] These Central and Eastern European experiences show that alternative dispute resolution is an effective option for dealing with economic and social reform in the post-socialist context.

b.      Mechanisms in place in Kosovo

Though Kosovo has not yet implemented formal ADR in association with its courts, [148] it has used non-litigation dispute management programs to make social progress. One widely recognized and trusted institution is the Ombudsperson Institution in Kosovo. The Ombudsperson Institution is an independent body charged with providing redress for abuses of authority by the interim administration or by Kosovar governing institutions. [149] Any person or entity can make a complaint to the Ombudsperson. [150] To make a complaint, a person can go to the office of the Ombudsperson and start the process by talking to a trained expert, [151] who helps the complainant to fill out the application form. [152] Complainants do not need legal representation. [153] Applicants can submit their forms “in any of the languages used in the region or in English.” [154] Complainants can ask that their names be kept confidential, and Ombudsperson staff are bound not to disclose sensitive information. [155] After receiving an application, the Institution of the Ombudsperson can inform the respondent parties and ask for “information, observations and/or envisaged solutions.” [156] All authorities under the Ombudsperson’s jurisdiction must provide requested information and must permit the Ombudsperson to access their premises without restriction. [157] The Ombudsperson may ask the applicant to respond to the respondents’ statement. [158] The Ombudsperson may issue recommendations to respondents for remedying any violations, and may refer cases to the SRSG or to the media if respondents fail to comply. [159] The Ombudsperson may also choose to act as a mediator, making him or herself available to the parties for purposes of facilitating “friendly settlement.” [160] When parties reach a friendly settlement, write it down, and fulfill the commitments they agreed to, the Ombudsperson makes the agreement official by dropping investigations. [161]

            Mediation services are also available in Kosovo through centers established by non-governmental organization Partners for Democratic Change. Working with Municipal Mediation Committees, Municipal Committees of Communities, and Reconciliation Councils, Partners for Democratic Change helped to settle fifty disputes during its first year of operation in Kosovo. [162] Mediation provided successful resolution neighborhood, property, family, business, and employment conflicts, as well as minor criminal cases and blood feuds. [163] Partners for Democratic Change believes mediation to be an especially appropriate mechanism for Kosovo because it encourages the satisfaction of all parties to a dispute, thus minimizing desire for revenge. [164] Partners-Kosovo is working with local leaders to advocate the adoption of mediation legislation by the Kosovo Assembly. [165]

            Bits of information are available about several other arenas for ADR in Kosovo. For example, the Kosova Chamber of Commerce states that it has established a Court of Arbitration for business disputes. [166] Additionally, UNMIK has specifically announced that “parties to a foreign investment may specify any arbitration or other dispute resolution procedure upon which they may agree, and if such an agreement between the parties so provides, any judgment resulting from such an agreed procedure shall be final and shall be enforceable, without review or appeal in any manner, in any court of competent jurisdiction in Kosovo.” [167] In another example, the Banking & Payments Authority of Kosovo has passed a rule requiring creation of an arbitration forum for insurance disputes. [168]

RECOMMENDATIONS

I.                    Negotiation

The Special Chamber already has the authority to “encourage the parties to reach a negotiated settlement,” [169] which becomes final and binding once the Special Chamber has received the result in writing and endorsed it. [170] The Special Chamber should exercise this authority robustly. Special care should be taken, however, in cases where unrepresented or inexperienced parties (e.g. former SOE employees) are confronting the KTA or another institutional party that has sophisticated representation and/or litigation experience. When making the decision whether to endorse a written settlement agreement pursuant to Administrative Direction No. 2003/13, section 23.4, the Special Chamber should consider the differential in the parties’ negotiating power.

II.                 Mediation

Availability of mediation, particularly court-annexed mediation, would benefit the Special Chamber and the parties it serves. Mediation would be particularly well-suited to cases in which parties are evenly matched in resources, education, and litigation experience. Mediation would provide an informal forum in which parties with little understanding of formal rule of law could gain better understanding of the law while reaching a mutually agreeable solution. Mediation would also be particularly beneficial in such cases because its high compliance rate would further the rule of law among those residents who need it most.

While private mediation would help parties to reach an agreement without initiating litigation in the Special Chamber, several interests would be served better by court-annexed mediation. Most importantly, court-annexed mediation would allow the Special Chamber to play a supervisory role in the mediation. One major downfall of mediation is the lack of procedural protection for unrepresented and inexperienced parties, and mediators appointed by and supervised by the court could go a long way towards leveling the playing field between the KTA and unrepresented parties submitting pleadings in handwritten Albanian. Additionally, court-annexed mediation would be useful for streamlining issues for litigation by the Special Chamber. Because of the potential complexity of privatization disputes, and because many parties appear at the Special Chamber with claims that have not been framed as legal issues, mediation could bring a great deal of clarity to court proceedings.

The Special Chamber could begin using court-annexed mediation with or without amendment of UNMIK Regulation No. 2002/13. The Court already has express power to encourage negotiated settlement, and no regulation pertaining to the Special Chamber prohibits it from using alternative dispute resolution in aid of its exercise of jurisdiction over privatization claims. Parties to an international investment are already free to choose privately arbitration or another dispute resolution mechanism, [171] and extending the use of ADR into the Special Chamber would be a natural step. Furthermore, UNMIK has expressed views in favor of alternative dispute resolution - its own official “Standards for Kosovo” call for “Alternatives to litigation for resolving civil disputes” to be “expeditiously developed and effectively used.” [172] Alternatively, UNMIK could amend Regulation No. 2002/13 expressly to allow the Special Chamber to refer cases to mediation in much the same way as it is already permitted to refer cases to other Kosovo courts with proper subject matter jurisdiction. Possible language could amend section 4.2  to read: “Notwithstanding section 4.1, the Special Chamber may refer specific claims, categories of claims, or parts thereof, to any court having the required subject matter jurisdiction under applicable law, or to a mediator appointed by the Special Chamber…” Section 4.3 could then be amended to read: “A decision of a court or result of a mediation to which a matter has been referred by the Special Chamber pursuant to section 4.2 may be appealed only to the Special Chamber…”

III.               Arbitration

Availability of arbitration would also benefit the people of Kosovo, foreign investors, and the Special Chamber. Private arbitration would offer expeditious decision at little or no cost to the public, while providing some degree of procedural protection. Quick decision of cases would help to jumpstart the faltering privatization process and hopefully allow resources to begin flowing within the Kosovar economy. Private arbitration would lighten the Special Chamber’s anticipated caseload if lightening becomes necessary, allowing it to address only the more novel questions of law and public policy. It would also make Kosovo’s privatization process much more appealing to investors.

Private arbitration does, however, face some practical difficulties in addition to the negative implications previously addressed. One serious concern is that allowing private arbitration might lead domestic investors to refuse to sign a contract with the KTA unless it contained a mandatory arbitration clause. If this were to occur, a large number of cases would be prevented from reaching the Special Chamber, undermining the Court’s ability to establish any consistent application of law to Kosovo’s privatization process. The Special Chamber’s credibility might also be undermined if all experienced investors choose private arbitration over litigation. Given the Special Chamber’s special need to build confidence and to build local capacity, private arbitration could detract from its mission.

Court-annexed, non-binding arbitration may be a better option for the Special Chamber. Though some benefits associated with arbitration are less pronounced in court-annexed non-binding arbitration, court-annexed arbitration could provide the needed balance between the benefits of arbitration and the detriments of private decisionmaking. If court-annexed arbitration were implemented, the Special Chamber could have discretion over which cases it refers to mandatory arbitration and which cases it approves for voluntary arbitration, thus allowing it to keep those cases it needs to establish consistency and credibility. It could refer routine cases to arbitration, decreasing its caseload. Court-annexed arbitration would not provide the same level of caseload relief as private arbitration because the Special Chamber would still be responsible for oversight and assignment, but resources could still be saved. To maintain the speed and certainty benefits of private arbitration, the Special Chamber could institute a rule of procedure requiring parties to pay a penalty if they reject an arbitral award then continue to court adjudication and receive a less favorable award.

As with court-annexed mediation, the Special Chamber could begin using court-annexed arbitration with or without amendment of UNMIK Regulation No. 2002/13. The same rationale for finding authority within the current regulatory scheme applies. If UNMIK chose to amend Regulation No. 2002/13 to give express authority for both arbitration and mediation, possible language could amend section 4.2 to read: “Notwithstanding section 4.1, the Special Chamber may refer specific claims, categories of claims, or parts thereof, to any court having the required subject matter jurisdiction under applicable law, or to a mediator or arbitration panel appointed by the Special Chamber…” Section 4.3 could then be amended to read: “A decision of a court or arbitration panel, or a result of a mediation to which a matter has been referred by the Special Chamber pursuant to section 4.2 may be appealed only to the Special Chamber.”

IV.              Proposed system

One possible system of court-annexed ADR for the Special Chamber could include:

-               Appointment of an ADR Administrator to coordinate all alternative dispute resolution processes in the Special Chamber;

-               A “help desk” positioned close to the building entrance, which would serve as the first stop when potential litigants visit the Special Chamber;

-               Encouragement of negotiated settlement;

-               Resources and legal mechanisms for voluntary mediation or arbitration of disputes upon request of the parties and approval by the Rapporteur assigned to the case;

-               Mandatory mediation of disputes chosen on a case-by-case basis by the full court, with mediators appointed by the court; and

-               Mandatory non-binding arbitration of disputes chosen on a case-by-case basis by the full court, with arbitrators appointed by the court.

Appointment of an ADR Administrator would help ensure the creation and maintenance of a high-quality system of court-annexed alternative dispute resolution. The ADR Administrator should be an outside expert in alternative dispute resolution with experience in the establishment and functioning of court-annexed systems. The Administrator could begin his or her work by helping the Special Chamber to design and implement a system that meets the needs of the Court and Kosovar society. The Administrator could participate in selection and training of mediators and arbitrators. He or she could also ease the burden on the Court caused by the process of screening cases for referral to ADR by interviewing parties and passing on reports or recommendations to the judges. At the outset, the Administrator could work with the judges to establish guidelines on which types of cases would be best suited to mediation or arbitration. He or she would be available to answer questions from parties considering the various forms of ADR and from judges in the process of referring cases or approving cases for voluntary ADR.

            A “help desk” positioned as the first stop for potential litigants when they visit the Special Chamber would help to address the difficulties caused by Kosovo’s underdeveloped culture of litigation. The help desk would work closely with the Registrar and with the ADR Administrator to assist those offices and to comply with due process and impartiality requirements while assisting potential litigants. Ideally, the help desk would be operated by an independent body to allow the Special Chamber to remain in the role of impartial decisionmaker while the help desk takes on a more advocacy-driven role. When represented parties arrive at the building seeking to file claims, the party’s attorney could simply check in with the help desk and proceed to file their complaints with the Registrar. When unrepresented and inexperienced parties arrive at the building seeking to file claims, representatives at the help desk could discuss the claims with the parties and help the parties to frame their claims as proper allegations for submission to the Court. Help desk representatives could also screen complaints to ensure that formalities are met. Ideally, the help desk would be equipped with a computer where parties or help desk representatives could type up handwritten claims and print the requisite number of copies for parties who could prove financial need. If possible, the help desk could be staffed by some representatives who speak both Albanian and English or both Serbian and English so that translation assistance could be offered to applicants who can show financial need. These steps would provide the Registrar with properly formulated claims, relieving that office’s current burden of sorting through raw information, and allowing the Registrar to maintain greater impartiality. Like some “help desk” setups in the United States, the Special Chamber help desk could be staffed by law students and volunteers, with supervision by one or two licensed and compensated lawyers.

            As previously discussed, the Special Chamber should robustly exercise its authority to encourage negotiated settlement. Though the judges take no part in the negotiation and cannot direct the process, [173] the Court should encourage parties to set conference dates. Perhaps the Special Chamber could also provide information on negotiated settlement and maintain a room for use by the parties.

In terms of actual mediation and arbitration mechanisms, the Special Chamber could establish a system in which parties could voluntarily agree to take their cases to court-annexed ADR, and in which the full court can, in its discretion, refer some cases to mandatory mediation or arbitration. In consultation with the ADR Administrator or other ADR expert, the Special Chamber could establish guidelines for determining which cases to refer to ADR. Also in consultation with an ADR expert, the Special Chamber should establish whether any categories of cases should be excluded from using the Court’s alternative dispute resolution mechanisms. For example, the Special Chamber judges may wish to keep control over cases alleging discrimination in the creation of employee eligibility lists for privatization proceeds, so that it can ensure consistent, unbiased, and visible decision on this issue. When parties voluntarily agree to mediate or arbitrate, the Rapporteur assigned to the case could be given authority to deny the request if submitting the case to ADR would undermine the public interest or cause injustice to the parties. When the Special Chamber designates cases for mandatory ADR, parties should be permitted to submit motions to reconsider, which the Court would grant if characteristics of the case so require.

For use by all three options, the Court could maintain a list of qualified mediators and arbitrators. When parties voluntarily agree to use the court-annexed ADR options, they should be allowed to choose their own neutral(s) from the list because of the benefits associated with party participation in the process. In the case of mediation, the parties could choose their mediator by agreement or by striking candidates from a short list provided by the Court or ADR Administrator and then receiving a random assignment from the remaining candidates. For arbitration, the parties could each choose one arbitrator from a list of candidates with applicable expertise provided by the Special Chamber or the Administrator, then the two selected arbitrators could choose a third from the same list. For mandatory ADR, the Special Chamber judges or ADR Administrator should assign mediators and arbitrators to avoid causing injustice to unrepresented, inexperienced, or otherwise less-powerful parties who may not be equipped to choose neutrals who would serve their interests. The Court or ADR Administrator could evaluate the case and select a group of neutrals with applicable expertise from its standing list, then randomly assign mediators and arbitrators to help avoid any appearance of favoritism.

The Special Chamber should seek to ensure that its list includes well-qualified neutrals with a variety of professional, personal, ethnic, national, and gender backgrounds.  Like many courts in the United States that maintain similar lists, the Special Chamber could seek recommendations from the bar association and other organizations. Such other organizations could include the office of the SRSG; the PISG; the Federation of Independent Trade Unions of Kosovo; workers’ councils from various SOEs; local governments, courts, and civil institutions in Serb enclaves; and any of the wide variety of law and business-focused international organizations. Mediators and arbitrators may be lawyers, but not all need be. Because of the more formal and legalistic nature of arbitration, lawyers are often well-suited to serve as arbitrators. Like some U.S. jurisdictions, the Special Chamber could allow properly trained law students to serve as volunteer mediators. Once the Special Chamber receives recommendations, the ADR Administrator or other ADR expert could work with the judges of the Court to evaluate candidates and select neutrals representing the necessary variety of backgrounds. The candidates would then be trained by an independent organization or by the ADR Administrator or other exert working with the Special Chamber. Candidates who complete the training and display adequate aptitude would then be added to the list.

If the Court prefers to maintain a long list of approved neutrals (perhaps to prevent institutional mindset), the neutrals could maintain other employment and be “on call” for infrequent assignment. If the Court prefers to maintain a short list (perhaps to build a small corps of experienced, closely supervised neutrals), neutrals would serve the Special Chamber on a near full-time basis.

CONCLUSION

            A system of court-annexed alternative dispute resolution could help the Special Chamber to meet it goals, while maintaining supervision over the handling of each case. Negotiation, mediation, and arbitration can provide quick, relatively inexpensive results that are appropriate to the cultural, social, and economic conditions in Kosovo. Alternative dispute resolution overseen by the Special Chamber could reduce the Court’s expected caseload, provide timely resolution of privatization claims that have been bogged down by controversy, and serve as a tool for expanding the use of ADR in the territory as a whole. Support structures for the Special Chamber and for alternative dispute resolution can help ensure the professional establishment and management of such an ADR system.

            If the Special Chamber proceeds with the creation of a court-annexed system of alternative dispute resolution, other issues outside the scope of this paper will need to be addressed. Future efforts might include plans for the timing of each step of the process, standards for the appeal of ADR results to the full Court, and funding.