RKIK and Datasel face arbitration costs of hundreds of thousands

Legal costs in a dispute between Estonia’s Centre for Defence Investment and Datasel in Swiss arbitration will run into hundreds of thousands of euros, ERR reports. According to attorney Paul Keres, the losing party will ultimately bear the full cost of experts, lawyers and arbitrators.

The Centre for Defence Investment, known by its Estonian acronym RKIK, has signed 27 contracts to purchase weapons or ammunition for Ukraine. Seven of those contracts have been terminated, and RKIK has already taken five of the resulting disputes to court.

The ongoing disputes between RKIK and Datasel are being handled under the rules of the International Chamber of Commerce in a Swiss arbitration court. Keres said Switzerland was a good choice.

“Swiss arbitration is not bad at all. They are efficient and very capable. I have been there myself, and everything is very well organised,” Keres said.

Keres, who is also Estonia’s representative among the members of the International Chamber of Commerce’s arbitration body, said arbitration was not yet especially common in Estonia.

“It is not as common as in some countries that have enjoyed democracy for a longer time. But these disputes are becoming more numerous, larger and more interesting. Estonia is also seeing an increasing number of representatives with arbitration skills and expertise. So I think we are moving in the right direction,” he said.

Contracts often specify in advance which court will settle disputes. Without such a clause, the case would normally have to be brought where the defendant is based.

Datasel is often described in the media as an Indian-Italian company. It is officially registered in Italy, but its current owners are Indian citizens.

“Confusion may arise over who the owners are. If it is an SRL, which is equivalent to an Estonian private limited company, then it is probably still an Italian company registered in Italy. In that case, without an agreement on jurisdiction, the case should go to Italy. But if it is an Indian company, then it should go to India,” Keres said.

He said arbitration proceedings could be initiated in two ways. The parties may agree to arbitration in advance through a clause specifying where it will take place, which institution will administer it and how many arbitrators will hear the case.

Alternatively, the parties may agree to arbitration after a dispute has arisen, even if the contract originally assigns jurisdiction to an ordinary court.

Keres said an arbitration ruling had the same legal force as a judgment by a state court and was equally binding and enforceable. Arbitration could nevertheless offer greater speed and specialisation.

One advantage is that the parties can have more influence over the proceedings, including choosing the arbitrators. This allows the tribunal to be tailored to the legal issues involved, while the proceedings are generally confidential.