Montenegro amends its Arbitration Act: Key changes and missed opportunities

On 27 February 2026, the National Assembly of Montenegro adopted amendments to the 2015 Montenegrin Arbitration Act ("Montenegrin Arbitration Act").

Although the amendments were presented as an alignment with internationally recognised standards, particularly those embodied in the UNCITRAL Model Law on International Commercial Arbitration ("UNCITRAL Model Law"), they do not amount to a comprehensive reform.

Clarification of the objective arbitrability concept, however old dilemmas remain

Even though the 2015 version of the Montenegrin Arbitration Act did not contain a definition of objective arbitrability, this omission did not create significant problems in practice. Nevertheless, the clarification introduced in Article 2a is useful, as it stipulates that arbitration may be agreed for disputes concerning the rights that the parties may freely dispose of, unless exclusive jurisdiction of courts in Montenegro is stipulated for a particular matters. By connecting objective arbitrability with the rights the parties may freely dispose of, the amendment reflects a widely accepted approach in continental Europe.

However, certain issues regarding objective arbitrability remain unresolved, specifically the relationship between the concept of objective arbitrability and the provisions of the Montenegrin law establishing exclusive jurisdiction of Montenegrin courts in disputes concerning immovable property.

Namely, Article 119 of the Private International Law Act ("PIL Act") provides that Montenegrin courts have exclusive jurisdiction in disputes having as their subject-matter in rem rights concerning immovables or lease of immovable property located in Montenegro, while Article 42 of the Civil Procedure Act ("CPA") stipulates that the Montenegrin courts have exclusive jurisdiction when adjudicating "disputes on the ownership and other in rem rights concerning immovables, possessory disputes concerning immovables, as well as disputes out of relations for lease of immovables", when the immovable is located on the territory of Montenegro.

As the recent decision of the Montenegrin Constitutional Court demonstrates, these provisions create a dilemma as to whether a dispute concerning monetary claims for rent payment, which is a right the party may freely dispose of, is arbitrable.

It is regrettable that the legislative initiative for the amendments to the Arbitration Act was not combined with an initiative to amend the cited provisions of the PIL Act and the CPA in order to clarify that exclusive jurisdiction of Montenegrin courts is limited to disputes concerning rights in rem over immovable property and does not extend to monetary claims arising out of lease agreements which the parties may freely dispose of.

Missed opportunities to deal with the outdated provision on subjective arbitrability

One of the most problematic aspects of the Montenegrin Arbitration Act – the distinction between internal and international arbitration – has remained unaddressed.

Unlike Article 1(3) of the UNCITRAL Model Law, which adopts multiple criteria for determination if an arbitration is international, such as the place of arbitration, the place of performance of substantial obligations, or the place most closely connected to the dispute, the Montenegrin Arbitration Act relies solely on the parties' nationality to distinguish between internal and international arbitration. Specifically, Article 2(1) of the Montenegrin Arbitration Act stipulates that arbitration involving parties who are individuals residing in Montenegro or legal entities registered in Montenegro is "internal arbitration" while arbitration involving disputes with a foreign element between parties at least one of whom is an individual residing abroad or a legal entity registered abroad is "international".

The distinction between internal and international arbitration is conceptually flawed.

Unlike UNCITRAL Model Law, the Montenegrin Arbitration Act was not conceived as a law regulating international arbitration only. Consequently, there was no need for defining internal and international arbitration, especially when the law does not articulate any consequence of this distinction.

If the intended consequence is to say that two or more Montenegrin parties may submit their dispute only to "internal arbitration", the definitions of "internal" and "international" arbitration are inapt, as it remains unclear whether an arbitration under the rules of an international arbitral institution would qualify as "internal" if the seat of arbitration is in Montenegro. It is also unclear whether "internal arbitration" refers only to ad hoc arbitration with its seat in Montenegro or to an arbitration administered by an institution established in Montenegro (provided its seat is in Montenegro).

If anything, the continuing presence of the rigid distinction between "internal" and "international" arbitration may only discourage parties from selecting Montenegro as a seat of arbitration. A next round of amendments to the Arbitration Act should do away with Article 2(1).

Rules on witness examination

Not many arbitration laws contain provisions specifically governing witness examination. Instead, the organisation of witness examination is usually left to the arbitrators. In contrast to the mainstream on this issue, the Montenegrin legislator decided to codify certain aspects of witness examination process.

The amended Montenegrin Arbitration Act prescribes that, as a general rule, witnesses are to be examined at a hearing, while they may be examined outside a hearing with their consent and if neither party objects to this. Moreover, the arbitral tribunal may request from a witness to submit written responses to specific questions, provided the parties do not oppose such procedure.

Dual deadline for setting aside arbitral awards

According to the amended Montenegrin Arbitration Act, a party dissatisfied with the award may file a lawsuit seeking its annulment within three months from the receipt of the award, and in any event no later than within one year from the date of the award. Where correction, interpretation, or supplementation of the award was requested, the three-month period runs from the delivery of arbitral decision on such request, while the one-year objective time-limit runs from the date of the original award.

The one-year objective time limit is a deviation from the UNCITRAL Model Law, which provides only for the subjective three-month period. Even though the one-year final deadline ensures that the validity of an arbitral award cannot remain open to challenge indefinitely, it is a double-edge sword as it may spark a guerilla tactic of avoiding the service by the party unhappy with the award.

The amendments also empower the court seized of a request to annul an award to suspend the proceedings at a party’s request, in order to allow the arbitral tribunal to eliminate the alleged ground for the annulment. This solution mirrors the approach embodied in Article 34(4) of the UNCITRAL Model Law.

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The amendments to the Montenegrin Arbitration Act reflect gradual progress rather than structural transformation. While the amendments enhance procedural clarity, they do not fully capitalise on the opportunity to position Montenegro as a modern and competitive arbitration-friendly jurisdiction in the region. Future legislative efforts will have to address the remaining gaps in order to popularize both arbitration in Montenegro and Montenegro as the desired seat of arbitration.