LITHUANIA Law and Practice Contributed by: Kęstutis Švirinas, Ieva Rimavičienė, Domantė Lunytė and Luka Tamulionytė, Sorainen
(e) of the New York Convention permits refusal of rec- ognition on this basis, Lithuanian jurisprudence does not treat annulment as an automatic bar to enforce- ment. Lithuanian courts have historically followed the ter- ritorial approach when assessing the enforceability of arbitral awards annulled at the seat of arbitration. This was notably demonstrated in case No. 2T-1-881/2021, where the Court of Appeal of Lithuania stayed enforce- ment proceedings pending the outcome of annulment proceedings in Serbia. The court reasoned that if the Serbian courts upheld the annulment, the award would no longer be enforceable under Article V(1)(e) of the New York Convention, which allows refusal of recognition where an award has been set aside at the seat. Following the Serbian Supreme Court’s confirma- tion of the annulment, the Lithuanian court refused to enforce the partial award, emphasising that the annulment itself was a sufficient ground for refusal. Although the court briefly acknowledged that annul- ment might not always be decisive – particularly where the respondent contests enforcement – it ultimately declined to assess the substantive grounds for annul- ment, reinforcing its territorial stance. However, a 2023 judgment by the Supreme Court of Lithuania suggests a potential shift (case No. e3K-3- 177-381/2023). The Supreme Court of Lithuania has clarified that under Article VI of the New York Conven- tion, courts have discretion – but not an obligation – to suspend recognition proceedings of a foreign arbitral award when annulment proceedings are pending in the country of origin. Suspension is allowed only if it better serves the parties’ interests, which requires assess- ing (i) the good faith of the annulment request, (ii) the likelihood of its success, and (iii) whether suspension would cause undue delay. Courts must be cautious, as suspension conflicts with arbitration’s principle of speedy dispute resolution. To prevent abuse, courts may require the opposing party to provide security for enforcement. Ultimately, suspension is permitted only in exceptional cases, based on careful evaluation of all relevant circumstances.
As such, the Lithuanian approach is still evolving, with courts exercising discretion based on the specific cir- cumstances of each case and the procedural posture of the annulment proceedings. Sovereign Immunity at the Enforcement Stage Lithuanian law recognises the principle of sover- eign immunity from enforcement, particularly when enforcement is sought against property used for the state’s public functions (eg, military assets, such as warships). In such cases, enforcement is generally barred. However, sovereign immunity may not be invoked where the enforcement targets property used for commercial purposes, or where the state has acted as a participant in civil law relations. This reflects the restrictive doctrine of sovereign immunity, which dis- tinguishes between public and commercial acts of the state. 9.2 Approach of the Courts Both the New York Convention and the Law on Com- mercial Arbitration provide that violation of public policy constitutes grounds for refusing recognition and enforcement of arbitral awards in Lithuania, as well as for setting aside domestic arbitral awards. In practice, Lithuanian courts frequently invoke public policy when considering such applications, and the concept is applied with notable width. Although the Law on Commercial Arbitration does not define “public policy”, its meaning and scope have been developed through case law and legal schol- arship. In line with international arbitration doctrine, Lithuanian courts tend to interpret the notion of pub- lic policy as encompassing international public policy, which protects fundamental principles of due process, as well as mandatory legal norms that reflect univer- sally recognised principles of law. The purpose of the public policy exception is to safeguard the funda- mental values of the Lithuanian legal system from the effects of arbitral awards that threaten those values, even once final and binding. When assessing whether an arbitral award contra- venes public policy, Lithuanian courts do not re-exam- ine the merits of the dispute, the factual findings of the
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