The Issue of Non-Implementation of Court Decisions in Bosnia and Herzegovina Now Affecting Arbitration Awards

Road to non-implementation

Bosnia and Herzegovina has earned a negative reputation on the issue of non-implementation of judgments. The issue has become an example of systemic failure affecting the very notion of the rule of law and the possibility of the country to fulfill its international obligations. The reasons for such practice can be partially explained by factors such as fragmentation of the legislative and executive governments, the inactivity of the judiciary, chronic political instability, or just simply a lack of a culture of respect for the rule of law as one of the founding notions of the state. The practice of non-implementation ranges from the now well-known example of the Sejdić and Finci v Bosnia and Herzegovina case¹, to non-implementation of judgments of national courts, most prominently, the decisions of the Constitutional Court of Bosnia and Herzegovina.² The non-implementation of judgment by the European Court of Human Rights in the case of Sejdić and Finci and Bosnia and Herzegovina and subsequent string of similar cases has even become an issue on a country’s path to EU integration. The practice endures notwithstanding the fact that non-implementation of decisions adopted by national and international courts may constitute a criminal offence under different Criminal Codes applicable throughout the country.³

Unfortunately, the practice of non-implementation of decisions has recently spread to decisions of arbitration tribunals as well, as was recently seen in the example of the case of Viaduct.⁴ The case is concerning because it cuts through different aspects, such as reliance by the investors on bilateral investment treaties (BITs), the position of arbitration, which is generally underused in Bosnia and Herzegovina, and the allocation of payment obligations in fulfilling the international obligations created by the state or other sub-state governments (including entity and cantonal governments).

The Viaduct crossing over to the arbitral award

The case of Viaduct relates to the investor-state arbitration proceedings under the auspices of the International Centre for Settlement of Investment Disputes (ICSID), initiated by Slovenian company Viaduct Ltd. Portorož and two Slovenian nationals, over hydroelectric concessions on the river Vrbas. The applicants relied on the bilateral investment treaty between Bosnia and Herzegovina and Slovenia⁵, and on the ICSID Convention⁶, of which Bosnia and Herzegovina is a signatory. Both treaties give a way for the investors to initiate international arbitration proceedings against the state. The ICSID arbitral tribunal decided in 2022 that, inter alia, there was a failure to meet the obligations of equitable and fair treatment, a standard notion in the bilateral investment treaties. The ICSID ad-hoc Committee rejected the application for annulment of the initial award in 2024, which awarded the applicants approx. EUR 39 million with interest.

The facts of the case are particularly interesting because of the interplay between the State’s international obligations and the division of competences between different levels of government within the constitutional order of Bosnia and Herzegovina. The state is a signatory of bilateral investment treaties; however, due to the division of powers under the Dayton Constitution, many questions are under the competence of entities and even cantonal governments. Such a situation is also visible in the Viaduct case. The state-level government of Bosnia and Herzegovina has competence to conclude international agreements and to conduct foreign trade policy; hence Bosnia and Herzegovina as a state is a signatory to bilateral investment treaties. However, crucial questions related to economic policy and, relevant to this case, policy on awarding concessions are under the competence of other levels of government, entity and cantonal governments alike.⁷ Therefore, the state-level government of Bosnia and Herzegovina is often in a situation of assuming obligations without full control over their fulfilment. In the area of EU integration, the so-called “Coordination mechanism” was designed to ensure that different levels of government fulfil their tasks and make their contributions, however, the mechanism itself has proven to be ineffective, as seen by the unnecessary delays in the process of compiling the answers to the EU Commission questionnaire following the country’s membership application.⁸

In the case of Viaduct, the issue arose after the applicants, through their locally established company, obtained concessions from the entity government of Republika Srpska (RS) for the construction of hydropower plants on the river Vrbas. However, the plants were never built due to failure to issue necessary permits. Subsequently, the entity government granted the same concession to another state-owned company, ZP Hidroelektrane. The arbitral tribunal found that there was a breach of the fair and equitable treatment principle under the BIT and awarded the claimant approximately 39,9 million EUR of the 51 million EUR requested. It is interesting to note that, according to published reports, an offer of early settlement of the dispute, which was rejected, was set at around 1 million EUR. That showcases the lack of case management, legal analysis, and dispute resolution strategy when it comes to international arbitration proceedings.

Destination: non-implementation

The real issues started, however, during the enforcement of the arbitral award. The refusal of the entity government to pay the required amount led to the requests of the applicants to seize the assets of the Central Bank of Bosnia and Herzegovina, to freeze the assets of the State Air Navigation Agency, and to initiate enforcement proceedings in Belgium and Luxembourg against the state of Bosnia and Herzegovina. Bosnia and Herzegovina, as a signatory of the ICSID Convention, is ultimately under the obligation to enforce the awards and pay the required debt, since internal division of competences and set-off of payments is plainly of no concern to the investors. The issue, as often in Bosnia and Herzegovina, turned into a political debate. The crux of it was the question of payment of debts caused by the actions of the entity governments that turned into an obligation addressed to the state itself. Since no solution was found, an extraordinary intervention of the (now former) High Representative in Bosnia and Herzegovina, Christian Schmidt, resolved the issue at hand through a Decision ordering the transfer of funds from the blocked settlement reserve deriving from road-toll revenues and attributed to the RS. This was, however, a “one-time fix” which was not codified in any way into a permanent solution for future problems of the same kind. Those can already be identified, with reports of impending arbitrations and disputes with sums dwarfing those in the Viaduct case, one being the case of the Gacko power plant and the requests by the Croatian HEP (Hrvatska elektroprivreda). It can also be concluded that, without the intervention of the High Representative, the issue would most likely linger indefinitely.

It can be seen that the issue of non-implementation of judicial decisions in Bosnia and Herzegovina, a practice seen in the cases of judgments of the European Court of Human Rights and the Constitutional Court of Bosnia and Herzegovina, has now spilled over to the realm of international arbitration. This situation includes the decisions of both state and non-state courts and tribunals alike, since it relates to decisions and awards of arbitral tribunals, as well as subsequent judicial decisions (foreign or national) initiating enforcement of such awards. In this case also, the state is failing to meet its obligations under international conventions related to arbitration, such as the ICSID Convention.

The addition of arbitral decisions to the list of decisions ignored, unimplemented, or partially implemented carries additional layers. Firstly, the economic layer and the message to the investors. Most of the BITs have built-in provisions granting investors access to international arbitration.⁹ If investors are not sure that their investments are going to be protected, and in the case of a dispute, the arbitration venue is not going to be a reliable option, the country receives a detrimental factor in attracting foreign investors. Bosnia and Herzegovina is already facing issues of attracting foreign investors due to political instability, and additional risk factors may jeopardize turning away the investors who are willing to look past those issues. In addition to a skilled workforce, proximity to the EU market and a relatively low corporate tax burden, the existence of a network of BITs was one of the “selling points” in attracting foreign investment. Second issue, related to the economic interests of the investors, is the question of the rule of law and their fundamental human rights of access to justice. Arbitration is an alternative dispute resolution mechanism that is conducted by ad hoc or institutional tribunals under which parties have much greater control over the proceedings; however, the ultimate decision on the merits (arbitral award) is adopted by an independent tribunal and is given equal validity to a judgment adopted by a state court.¹⁰ Arbitration awards are often chosen by investors who seek to bypass the perceived or real bias of the national courts. Reputable arbitration institutions, such as ICSID, are widely regarded as equitable, and their awards are recognized and enforced all over the world, especially in EU countries.¹¹ If the claimants cannot rely on the country to implement the arbitration award (which in many cases takes time and considerable financial resources) it impacts on their human rights, primarily related to property rights and access to justice and non-discrimination, granted, among others, by the European Convention on Human Rights and Basic Freedoms.

Stepping away from the investor’s perspective, the saga over enforcement of the arbitration award in the case of Viaduct laid bare the issue of allocation of responsibility for the financial obligations between different levels of government in Bosnia and Herzegovina. Bosnia and Herzegovina is not the only country in Europe that has different levels of government with different competences. The acts of different levels of government can be deemed as wrongful by different judicial and arbitration courts and tribunals, yet the responsibility, in view of international law, rests with the state.¹² The ad hoc solution of the High Representative leaves the problem open and unresolved in future cases. The way the problem is resolved (allocation of collected funds) may be seen as a possible solution; however, the legal basis for it being reused is lacking. Bosnia and Herzegovina must codify and establish a mechanism of allocation of financial burden in the cases to come.

Finally, the issue of non-implementation of judicial decisions must be resolved. As mentioned, the non-implementation of decisions by national and international courts is foreseen as a criminal offence (where the statutory elements of the relevant criminal offence are met) and a more active role of the prosecutors’ offices is ultimately needed. Instead, Bosnia and Herzegovina is facing an unfortunate spillover of the practice of non-implementation of decisions onto arbitration awards and subsequent decisions in enforcement proceedings. Without the intervention of the High Representative the issue would not be resolved still, and in fact is still not resolved in a permanent manner.

1. Sejdić and Finci v Bosnia and Herzegovina [2009] VI ECHR 279 (or application nos 27996/06 and 34836/06)
2. Constitutional Court of Bosnia and Herzegovina, ‘Zaključci i preporuke’ (Conference ‘Izvršenje odluka Ustavnog suda Bosne i Hercegovine’, Jahorina, 13–14 June 2023) ustavnisud.ba accessed September 2026.
3. Ena Kazic Çakar, Harun Halilovic, Non-compliance with the Constitutional Court decisions. A case study of Bosnia and Herzegovina, on “Diritto pubblico comparato ed europeo, Rivista trimestrale” 3/2024, pp. 567-592, doi: 10.17394/114673
4. Viaduct d.o.o. Portorož, Vladimir Zevnik and Boris Goljevšček v. Bosnia and Herzegovina, ICSID Case No. ARB/16/36 (Award, April 18, 2022; Decision on Annulment, May 1, 2024).
5. Bosnia and Herzegovina–Slovenia BIT. (2001). Agreement between Bosnia and Herzegovina and the Republic of Slovenia on the Reciprocal Promotion and Protection of Investments.
6. ICSID Convention. (1965). Convention on the Settlement of Investment Disputes between States and Nationals of Other States, opened for signature March 18, 1965, 575 U.N.T.S. 159.
7. Constitution of Bosnia and Herzegovina, Annex 4 to the General Framework Agreement for Peace in Bosnia and Herzegovina, Dec. 14, 1995, 35 I.L.M. 75 (1996).
8. Halilovic H, ‘How Not to Do European Integrations: Bosnia and Herzegovina and Legal Challenges in Accession Process to European Union’ (2024) 7(4) Access to Justice in Eastern Europe 143-76.
9. Vandevelde, K. J. (2010). Bilateral investment treaties: History, policy, and interpretation. Oxford University Press.
10. Gary Born, International Commercial Arbitration (3rd edn, Kluwer Law International 2021)
11. Dolzer, R., Kriebaum, U., & Schreuer, C. (2022). Principles of international investment law (3rd ed.). Oxford University Press.
12. International Law Commission. (2007). Articles on responsibility of states for internationally wrongful acts. In Yearbook of the International Law Commission 2001 (Vol. II, Part 2). United Nations.