Georgian Court Recognizes DABs as a Pre-Arbitration Procedure

Georgia is positioning itself as an ADR-friendly jurisdiction. It is a Model Law country and has taken consistent steps to modernize its alternative dispute resolution (ADR) framework. In 2019, Georgia further strengthened this position by adopting a new Law on Mediation, thereby ensuring that both arbitration and mediation are comprehensively regulated at the legislative level.

However, until recently, Georgian legislation did not expressly recognize the institution of the Dispute Adjudication Board (DAB). This legislative silence initially resulted in inconsistent judicial approaches, particularly in cases involving multi-tier dispute resolution clauses that required parties to refer disputes first to a DAB and subsequently to arbitration.

This paper examines the evolution of Georgian court practice in this area, focusing on two key decisions of the Tbilisi Court of Appeals and their significance for Georgia’s positioning as an ADR friendly jurisdiction.

The Initial Approach of the Tbilisi Court of Appeals (2021)

On 19 November 2021 Case #2b/9384-19, the Tbilisi Court of Appeals adopted a restrictive approach toward DABs.

In its decision, the Court stated that alternative dispute resolution mechanisms and their implementing institutions – such as arbitration, mediation, simplified enforcement proceedings, and notarial writs of execution – are regulated by Georgian legislation. By contrast, the Dispute Resolution Board and the procedural rules governing its operation were not defined under Georgian law and were therefore considered unfamiliar to the domestic legal system.

The Court held that the parties’ agreement to refer the dispute to arbitration was conditional upon the submission of an appeal against the decision of the DAB, and that the parties’ arrangement was limited to the challenge of the DAB decision. However, as the institution of the DAB is not recognized under Georgian law, the Court found that it lacked the legal basis to assess the validity and lawfulness of the DAB decision forming the subject matter of the dispute. Consequently, the Court concluded that the contract did not contain a clear and unequivocal arbitration agreement providing for the resolution of the dispute between the parties. Accordingly, in the absence of such an arbitration agreement, the arbitral tribunal lacked jurisdiction to hear the dispute.

Relying on this reasoning, the Court concluded that a multi-tier arbitration agreement requiring prior referral of disputes to a DAB, followed by arbitration, was null and void. On this basis, the Court annulled the arbitral award in its entirety under article 42.2(a.a.) of the Law of Georgia on Arbitration (Arbitration agreement is not valid or is null and void according to the law chosen by the parties have subjected it, and in the case of absence of such an indication, in accordance with the legislation of Georgia).

This decision was criticized in the Georgian legal community. It was argued that, given that this mechanism is widely recognized at the international level and has become an integral component of the standard forms of contracts used by international financial institutions and FIDIC, as well as in Georgia – where various state bodies are parties to such agreements - it would not be advisable to disregard it entirely. Where such a mechanism is based on a contractual foundation, namely the agreement of the parties, it falls squarely within the principle of freedom of contract, as recognized and reinforced by Georgian law, pursuant to which parties are entitled to conclude agreements not expressly provided for by legislation, provided that such agreements do not contravene mandatory legal norms. 

The Shift in Judicial Approach: The 2025 Decision

A significant shift occurred with the decision of the Tbilisi Court of Appeals Case #2b/1222-23, dated 27 June 2025, in which the Court departed from its earlier restrictive stance.

Factual Background

The dispute arose from a construction contract concluded between a state entity (employer) and a foreign commercial entity (contractor). The contract contained a multi-tier dispute resolution clause providing, first, for referral of disputes to a DAB and, subsequently, for arbitration.

Both the decision of the DAB and the arbitral award resolved the dispute in favor of the contractor.

Following the conclusion of the arbitral proceedings, the state entity applied to the Tbilisi Court of Appeals seeking annulment of the arbitral award. Among other arguments, it relied expressly on the Court’s earlier case law, asserting that because Georgian legislation does not regulate DABs, the arbitration agreement was vague and unenforceable, and the arbitral award should therefore be set aside.

The Court’s Reasoning

The Court rejected this argumentation.

It emphasized that the parties’ agreement clearly demonstrated their common intention: if they failed to resolve their dispute through the agreed pre-arbitration procedures, the dispute would be finally referred to arbitration. According to the Court, the arbitration agreement contained an unequivocal expression of the parties’ will to submit contractual disputes to arbitration in circumstances where amicable settlement could not be achieved through the pre-arbitral mechanism, including by the decision of the DAB.

On this basis, the Court recognized the DAB as a legitimate pre-arbitration mechanism, upheld the validity of the multi-tier arbitration agreement, and left the arbitral award in force.

Significance of the New Approach

This decision marks an important development in the Georgian ADR system.

First, it reaffirms the principle of party autonomy, a cornerstone of international arbitration. By focusing on the parties’ clearly expressed intention rather than formal legislative recognition of a specific ADR mechanism, the Court aligned itself with international best practices.

Second, the decision enhances legal certainty for foreign investors and international contractors, particularly in construction and infrastructure projects where DABs are commonly used as an efficient dispute-management tool.

Third, the Court’s reasoning demonstrates a functional and pragmatic understanding of ADR mechanisms, recognizing that contractual dispute resolution techniques may validly operate alongside, and in support of, arbitration – even in the absence of detailed statutory regulation.

Conclusion

The revised approach of the Tbilisi Court of Appeals is fully consistent with Georgia’s aspiration to position itself as an ADR friendly jurisdiction. DABs are increasingly recognized worldwide as an integral component of modern ADR systems, particularly in complex construction projects.

Importantly, the Georgian experience demonstrates that the establishment of a specific legislative framework for DABs is not strictly necessary. As in many jurisdictions, effective recognition can be achieved through court and arbitral practice that treats DABs as contractually agreed pre-arbitration mechanisms.

This evolution in judicial approaches represents a positive and forward-looking development, reinforcing Georgia’s credibility as a reliable venue for international dispute resolution. 

The author of this post was involved as counsel in one of the cases discussed above. Those proceedings have been definitively concluded by a final judgment of the Court of Appeal. The analysis presented above reflects the author’s own independent academic assessment.