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GEORGIA: An Introduction to Dispute Resolution

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Georgia is on the right track of implementing progressive legal reforms as well as exploiting new economic opportunities such as the New Silk Road Project headed by China, and also receives investment from IFIs. Georgia’s response to the COVID-19 pandemic included launching remote court hearings as early as March 2020.

Legal reforms 

Georgia is implementing a reform of the business law to make it more attractive to international investors. The draft laws such as the Law on Rehabilitation and Collective Satisfaction of Creditors as well as the Law of Georgia On Entrepreneurs are a good illustration of creating a more friendly business environment and strengthening corporate protection. The reform envisages making use of company restructuring as a tool of recovery in distressed situations more than filing for bankruptcy.

Additionally, the reform encourages the application of the Alternative Dispute Resolution (ADR) rules as a form of dispute resolution. Parties now have the freedom of choice of arbitrator/mediator correspondingly in arbitration/mediation proceedings. Also, there is no restriction on foreign law firms/individuals to engage in and advise on arbitration/mediation in Georgia. Non–residents do not require work permits to carry out arbitration/mediation services. Third-party funding is also allowed in the field of international arbitration and the related proceedings.

Additionally, the amendments to the Arbitration Law in 2015 set a fixed fee to request the recognition and enforcement of the arbitral award. They also provide an opportunity to conduct ad hoc arbitrations as well as to apply directly to court for the interim measures before the arbitration. The current Arbitration Law fully reflects the standards and rules stipulated in the UNCITRAL Model Law on International Commercial Arbitration and United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention 1958).

The law on mediation was passed by the Parliament in 2019. As a result, important amendments were made to the Civil Procedure Code of Georgia. The mediators also established a professional association. Today referring a case to mediation substantially cuts the costs of conflict resolution. One of the latest developments in ADR is the Memorandum of Understanding, aimed at enhancing dispute settlement services and practice to promote a favourable business environment and legal culture in Georgia and more widely across the region, and which was signed by the International Court of Arbitration of the International Chamber of Commerce and the Government of Georgia. Arbitration professionals are united in the Georgian Association of Arbitrators that stipulates the disciplinary rules for conducting an arbitration as well as ensuring the supervision of the Code of Ethics. Two arbitration centres currently operate in Georgia: Dispute Resolution Center (DRC www.drc.ge) and Georgian International Arbitration Centre (GIAC www.giac.ge). Georgia is one of the first signatories among 46 countries to the UN Convention on Mediation (Singapore Convention on Mediation).

Traditional ways of dispute resolution are still popular in Georgia, with the independence of courts ensured by the Constitution of Georgia. The courts system consists of the Constitutional Court and the courts of general jurisdiction that include city courts, the Court of Appeal and the Supreme Court of Georgia.

As the courts are overloaded with cases, disputes professionals are supportive of ADR methods in dispute resolution. In line with Article 64 of the Constitution, the High Council of Georgia ensures the independence of courts as well as appointing and dismissing judges.

Economic development 

The country’s geographical location makes it a potential beneficiary of such initiatives as the New Silk Road Project headed by China that looks to expand and upgrade infrastructure in a number of countries to ease the transportation of goods and energy from Asia to Europe as well as from the North to the South. Georgia’s railway, energy and transportation sectors are set to benefit from the project. Additionally, Georgia receives significant strategic investment from the international financial institutions such as EBRD, ADB, and WB for its infrastructural projects. As an EU Accession country, Georgia is following and implementing the legal obligations set out in the Association Agreement.

Georgia’s economic opportunities as a business and transport hub are a result of its location at the crossroads of Eastern Europe and Western Asia. The country’s economy is supported by three operating ports with another deep-water port in Anaklia in development. Also, strategically important oil and gas pipelines, including the North-South Main Gas Pipeline (NSMGP) that supplies gas to Turkey and the European Union, cross the country. Georgia is also looking to expand its tourism industry with the government’s ‘Tourism Strategy 2025’ plan seeking to raise the income from tourism to USD 6.6 billion i.e. a share of up to 7.9% of the country’s GDP.

Georgia has a number of trade agreements with other countries and regions, including the Deep and Comprehensive Free Trade Area (DCFTA) with the EU, and a Free Trade Agreement (FTA) with the Commonwealth of Independent States (CIS), China (including Hong Kong), European Free Trade Association (EFTA) countries, Ukraine and Turkey. Georgia is in ongoing negotiations for trade agreements with India and Israel as well as the USA.

In response to the COVID-19 pandemic, Georgia declared a state of emergency and a lockdown was in place throughout April 2020. As in most countries, Georgia expects a rise in litigation because of the number of contracts being breached. Georgia’s response to the COVID-19 pandemic included launching remote court hearings already in March 2020 for criminal and other urgent cases, with civil cases expected to follow.