The main dispute resolution methods in Lithuania are court litigation, arbitration and court mediation. Litigation is used in most cases: 201,585 new civil court cases were initiated in 2010 and only 30 new arbitration cases were started in the same period.
Court mediation was introduced only a few years ago. It has been gaining popularity ever since. In January 2011 the Council of Judges approved the possibility of using mediation in civil cases in all Lithuanian courts. Mediation is conducted in the court by special mediators, who are judges or assistant judges or persons with the necessary qualification. The Code of Conduct of European Mediators applies to mediators. If the mediation ends with a settlement agreement, the agreement is confirmed by the court and has the power of a court decision.
Court litigation
The general limitation period for bringing civil claims is 10 years. Various shorter limitation periods are defined for specific types of claims, for example:
- one month for claims arising from the results of a tender;
- three months for challenging the decisions of the bodies of a legal entity;
- six months for claims regarding contractual penalties and defective goods sold; and
- one year for claims arising from insurance contracts, and for claims challenging transactions by debtors.
Parties to a contract have no right to modify limitation periods defined in law. Limitation periods start on the day on which a person becomes aware or should have become aware of the violation of his right (Article 1.127, Civil Code).
Civil cases are heard in accordance with the Code of Civil Procedure (CCP). District courts hear cases at first instance. For large commercial disputes with a disputed amount exceeding Lt100,000 ($42,100), the courts of first instance are regional courts. Disputes such as those related to tax or competition law are heard by the administrative courts. Administrative cases are heard in accordance with the Law on Administrative Proceedings (LAP).
Administrative proceedings have a two instance court system: the regional administrative courts are courts of first instance, which hear cases on their merits, gather and assess evidence, with a court procedure similar to that of first instance civil courts; the second and final instance is the Supreme Administrative Court (SAC). It is the appeal court for all cases heard in regional administrative courts. In specific cases provided in the LAP, it is also the first and only instance to the proceedings.
The following analysis relates to procedures that apply in civil cases, unless specifically provided otherwise.
Representatives in court
Legal entities can be represented in court by members of their executive bodies or their legal representatives (attorneys, in-house lawyers and so on). Only employees holding a master's degree in law and professional advocates can represent legal entities at the appeal level in civil cases. Representation at the cassation instance is exclusively limited to attorneys, meaning that representation by an attorney is mandatory when taking a case to the Supreme Court.
A lawyer from an EU Member State with the professional title conferred by the competent authority in his home country can temporarily provide legal services in Lithuania, including conducting cases in civil courts. He can provide legal services permanently, except representation in the Supreme Court, if he is registered with the bar association of Lithuania.
Litigation fees
Attorneys and their clients can agree the amount of the attorneys' fee, including a fee conditional on the outcome of the case. The law does not prohibit hourly or task-based billing. However, the court has a right to limit legal fees awarded from the losing party in the court case. Recommended amounts for legal fees are defined by the Minister of Justice and courts follow those guidelines.
Legal fees can only be awarded if actually paid and evidence of this provided to the court before the end of the hearing in the main proceedings.
Court proceedings
The most common civil procedure is to file a claim in the district or regional court entitled to hear the case at first instance. If the claim is admitted to the court, it sends a copy of the claim to the defendant with notice about further action needed.
The court gives a 14- to 30-day period for the defendant to provide his reply. The time period can be extended by up to 60 days on request of the defendant but only if extraordinary circumstances are indicated and supported by additional evidence (Article 142, CCP). If the defendant is served with the claim but fails to respond, the court can make a decision without the defendant's participation.
After receipt of the defendant's response, the court can set a date for the preliminary hearing or ask the parties to each provide one additional written response. Each party is given up to 14 days to submit their additional responses (Article 227, CCP). After the preliminary hearing or exchange of additional responses by the parties, the court sets a date for the main hearing.
The average time for civil litigation varies greatly, and it can take from six months to as long as two years for the court of first instance to reach a decision.
Certain disputes can be resolved by summary (documentary) proceedings if, for example, all evidence is in written form and the dispute only relates to financial claims.
Interim measures
The courts can apply interim measures (including interim injunctions) on request of an interested party, if not applying the measure could hinder or make the execution of a satisfactory decision impossible, or at their own discretion, when defending the public interest.
These applications must be decided no later than three working days after receipt. A request for an interim remedy can be submitted at any time during the proceedings, or before submitting the claim (in this case, the claim must be submitted no later than 14 days of the interim remedy application).
An interim measure may be granted if the claimant shows reasonable grounds to believe that it will be more difficult to execute a future court order if the interim measure is not applied (Article 144, CCP). Interim injunctions must be proportional and adequate to the claim.
Interim measures can be applied even if the main proceedings are in another jurisdiction. For example, if the dispute must be resolved by a foreign arbitration tribunal, interim measures can be ordered by the domestic court on application of the claimant.
The defendant can apply to the court requesting the claimant to provide security for damage it may incur due to interim measures (Article 147, CCP). The defendant must prove that recovery of the possible damage may be problematic in future when the case is resolved. Preliminary calculations of possible damage also need to be submitted to the court. The security can be provided as a deposit payable into the court's account or a bank guarantee letter.
Final remedies
There is no exhaustive list of available types of court decisions or remedies. Three main groups of available court decisions are decisions regarding recognition of certain rights or obligations, adjudicating and awarding certain property or rights, and modification of legal relationships.
Damages include the amount of the loss or damage to property sustained by a person and the expenses incurred (direct damages), and lost income (the income he would have received if the unlawful act had not been committed). Where the amount of damages cannot be proved by the party with precision, it is assessed by the court. If the person who is liable has derived profit from his unlawful actions, on demand of the creditor the profit received can be attributed to damages.
Punitive damages are not available in Lithuania.
Evidence
The general principle of burden of proof, established in Article 178 of the CCP, requires a party to prove every submission he makes. Documents submitted must be relevant to the case and must confirm or deny the facts at issue in the case. This depends on the nature of the claim and the method of protecting rights requested by the claimant.
Therefore, there is no obligation on the parties to submit documents that show facts or circumstances contrary to the claims of that party. However, if a party does not have or cannot obtain relevant documents that are in the possession of another party or of a third party, the party can request the court to order the other party or entity to submit those documents. The requesting party should also produce evidence that it cannot obtain those documents by itself.
If the court considers there is not enough evidence to confirm the validity of a party's claim, the claim is dismissed.
Privileged documents
Privilege extends to all communications by the attorney that are carried out on a client's behalf with third parties, and to the information provided by the parties. There is no division of privilege into litigation and legal advice privilege. If the information falls under the umbrella of professional secrecy, it is equally observed in both cases. Privilege extends only to attorneys and attorneys' assistants: in-house lawyers are not protected.
Although there are no specific statutory provisions, due to the European Convention on Human Rights and abolition of restrictions on providing services in the EU, legal advice from foreign attorneys should enjoy the same amount of privilege.
Witnesses and experts
Witnesses of fact must usually give oral evidence. Written testimonies are not usually accepted. However certain exceptions are available, for example evidence signed by the witness and certified by a notary has the power of written evidence, and is considered to be true unless declared otherwise by the court. The parties have a right to cross-examine witnesses of fact.
Experts are appointed by the court on request by a party to the dispute. The party asking for the appointment must define circumstances to be established and questions to be answered by the expert. The court asks the opinion of the other parties but will itself determine final questions for the expert and who the expert will be.
Appeals
First instance decisions of regional courts can be appealed to the Court of Appeals, which hears cases based on their merits. However, no new evidence is gathered, except when it was not admitted by the court of first instance and the appeal court decides to do so. The court's decision must be appealed within 30 days of the decision. If a party is domiciled in another jurisdiction, the appeal period is 40 days.
The appeal court reassesses the evidence to the extent specified by the appeal. An appeal can only be submitted by a party to the proceedings in the court of first instance. An appeal is not allowed for a decision regarding very small amounts of money. A party does not have a right to appeal a decision which was delivered without its participation if the party was duly informed about the proceedings but chose not to participate.
During an appeal the decision is not executed, but the court can permit urgent execution of its decision if a delay would cause serious damage to the successful party. The appeal courts reach a decision in roughly a year.
The appeal court decision can be appealed to the Supreme Court within three months of the appeal decision. The Supreme Court is the third and final instance in civil proceedings. It does not hear claims on their merits. It only examines matters of law in cases where there is reasonable doubt whether lower instance courts applied substantive and procedural law correctly. The investigation of the Supreme Court is also limited by the scope of cassation appeal. Cassation proceedings are usually written, except in cases when the court decides to open an oral hearing. The Supreme Court's decisions are final.
After the court's judgment comes into force the claimant has a right to ask the court to issue a writ of execution, which is submitted to the court bailiff for execution.
A court order issued in the summary (documentary) process is a writ of execution in itself and does not require any additional recognition by the court. It can be directly submitted to the court bailiff for execution.
Cross-border litigation
The parties can choose the governing law in their contract (Article 808, CCP). In that case, all evidence relating to the substance and application of foreign law, official commentary, case law and doctrine must be provided by the parties. If the parties fail to provide evidence on the substance and application of foreign law the court applies Lithuanian law. In specific cases when an urgent procedural decision is required and the applicable substantive law has not been determined, the court makes that decision applying Lithuanian law.
The court hears cases based on domestic procedural laws (lex fori). Foreign law is not applied where the application of it may be inconsistent with public policy established by the Lithuanian Constitution and other laws (Article 1.11, Civil Code). In such cases, Lithuanian law applies.
Persons engaged in commercial activities can agree the choice of jurisdiction in the contract, but only if this does not contradict the laws of that jurisdiction (Article 788, CCP). The choice of jurisdiction is not allowed when the law provides for the exclusive jurisdiction of the Lithuanian courts, for example in disputes related to real estate located in Lithuania. The agreement regarding the choice of jurisdiction must be in writing. The court only considers the choice of law on request of one of the parties – that is, the court does not decline jurisdiction on its own initiative.
Serving documents from jurisdictions which have concluded bilateral treaties with Lithuania on assistance in civil cases is conducted according to the rules in those treaties. The Ministry of Justice is the competent authority for serving documents under those treaties. Lithuania has signed bilateral agreements with Armenia, Azerbaijan, China, Uzbekistan, Turkey, Kazakhstan, Ukraine, Moldova, Poland, Belorussia and Russia. Lithuania is also party to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters 1965. When a document must be transmitted from another EU member state to Lithuania, Regulation (EC) 1393/2007 on the service in the member states of judicial and extrajudicial documents in civil or commercial matters (Service of Documents Regulation) applies.
The Hague Convention on Taking Evidence Abroad in Civil or Commercial Matters 1970 is also applicable in Lithuania. The communication of court assistance in collecting evidence is managed through the Ministry of Justice, when not specifically provided otherwise by a treaty or EU legislation. Requests by EU member states' courts are regulated by the Service of Documents Regulation and Regulation No. 1206/2001 on co-operation between the courts of the member states in the taking of evidence in civil or commercial matters (Evidence Regulation).
Recognition of foreign judgments is within the jurisdiction of the Court of Appeal. To be recognised, the judgment must satisfy the right to fair process and not infringe public order or international private law. The procedure for enforcing judgments of EU member states is regulated by the Brussels Regulation. Recognition and enforcement of foreign judgments in Lithuania follows a simplified procedure since cases are not examined on their merits.
Alternative dispute resolution
There are two main ADR procedures in Lithuania: arbitration and court mediation. The Law on Commercial Arbitration defines the arbitration procedure, while the Rules of Court Mediation govern court mediation.
The primary domestic sources of law governing arbitration procedures are the CCP and the Law on Commercial Arbitration, which came into force on May 2 1996. Both of these sources apply to domestic as well as foreign arbitration proceedings if carried out in Lithuania. The most prominent and – by far – significant arbitral institution in Lithuania is the Vilnius Court of Commercial Arbitration (VCCA)
Arbitral awards delivered in any jurisdiction can be denied recognition in Lithuania on grounds defined in Article 5 of the New York Convention. Unless those grounds are applicable, the Lithuanian courts tend to look favourably upon enforcing arbitration awards.
An application for setting aside an arbitration award must be submitted to the Court of Appeals by the party to the arbitration proceedings during a period of three months after the arbitral award was made. Appeals can be made irrespective of whether the arbitration procedure was conducted as an ad hoc arbitration or as an institutional arbitration. Further appeal is available to the Supreme Court, but is limited to the issues of application of law only.
Recent developments
In 2010 a new version of the Law on Arbitration was been approved by the government and submitted to Parliament for discussions and adoption. The new law implements changes made in 2006 to the Uncitral Model Law on International Commercial Arbitration. Most differences between local and international arbitration procedures have been eliminated to avoid different treatment of proceedings with a foreign element. The proposed law includes express reference to the Uncitral Model Law for the purposes of interpretation of provisions of the Lithuanian Law on Arbitration.
Arbitration agreements concluded by electronic means have been explicitly named as being valid and obligatory, but only if such agreements are recorded and available for future reference. The list of disputes available for arbitration has been extended to include disputes related to damages caused by breach of competition law. The proposed law states that all disputes can be decided by arbitration except those which must be decided exclusively by administrative procedures and those which fall under the jurisdiction of the Constitutional Court.
Implementation of interim measures by the arbitral tribunal has been extended to include a right to order interim measures without notifying the defendant in certain cases. As a general rule the initiation of insolvency case against one party in court will not influence the arbitration process. It remains to be seen if the Parliament will adopt the draft or return it to the government for improvement.
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About the author
Mantas Juozaitis joined the firm in 2009, after having worked for a major Lithuanian agricultural conglomerate from 2003 to 2009 as in-house counsel. His areas of expertise include general business disputes, arbitration, tax litigation and planning, international trade disputes, investment disputes, EU and competition litigation.
He recently acted as counsel to one of the largest Lithuanian agribusiness companies in international commercial arbitration against a group of sugar factories in Krasnodar, Russian Federation, represented a Lithuanian biofuel producer in a dispute regarding contractual damages, and acted for a Lithuanian trading company in arbitration against a German commodity trader in a dispute regarding non-performance of contractual obligations.
Juozaitis has an MBA from the Vilnius University International Business School, an LLM in taxation from Georgetown University Law Centre, an LLM in international and EU law from the Riga Graduate School of Law, a postgraduate diploma in equity and trusts from the University of London, a practice diploma in international arbitration law (from the College of Law of England and Wales), and an LLB from Mykolas Romeris University, Faculty of Law. His working languages are English, Russian and Lithuanian. |
Contact information
Mantas Juozaitis
Motieka & Audzevicius
Gyneju street 4
LT-01109 Vilnius
Lithuania
Tel: +370 5 2000 777
Fax: +370 5 2000 888
Email: info@ma-law.lt
Web: www.ma-law.lt |
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About the author
Ramunas Audzevicius is a partner at the firm and heads the dispute resolution practice and co-heads the competition and tax practices. He is known as an effective negotiator in resolving large, complex and high-value national and international disputes and arbitrations. He has notable experience in Supreme Court andCourt of Appeals litigation. The main part of his work is related to local and international investments, international trade, restructuring and insolvency, antitrust, construction, PPP, energy and natural resources.
He represented a Swiss grain trader in the International Court of Arbitration (London) against the Belorusian State Entity and a Swedish sugar trader against an Azerbaijanian state entity in Malmo. He was also leading counsel to an international financial brokerage company in a regulatory dispute against the Lithuanian Securities Commission, etc.
Audzevicius is a graduate of Vilnius University, the University of Manchester, the Moscow School of Social and Economic Sciences, King’s College London and Harvard Business School.
His working languages are English, Russian and Lithuanian. |
Contact information
Ramunas Audzevicius
Motieka & Audzevicius
Gyneju street 4
LT-01109 Vilnius
Lithuania
Tel: +370 5 2000 777
Fax: +370 5 2000 888
Email: info@ma-law.lt
Web: www.ma-law.lt |