This article was featured in Jus Mundi‘s 2025 Arbitration Year in Review, an annual publication analyzing arbitration developments across 40+ jurisdictions on 6 continents. This edition brings together young practitioners and senior experts to capture the year’s most significant legislative reforms, enforcement trends, and institutional innovations.
THE AUTHORS:
Jadranka Jakovcic, Consultant, Arbitration Chambers
Zrinka Mustafa Prelić, Attorney at Law
Tamara Manasijević, Arbitrator and Counsel, ARP
Legal Framework and Arbitral Landscape
Croatia adopted its Arbitration Act (“AA”) in 2001. The AA has remained unchanged since its enactment and closely follows the United Nations Commission on International Trade Law (“UNCITRAL”) Model Law on International Commercial Arbitration (2006). Although formally based on the 1985 version, it is widely accepted that the AA reflects the 2006 UNCITRAL Amendments.
The institutional arbitration landscape remains equally stable. Established in 1853, the Permanent Arbitration Court at the Croatian Chamber of Economy (“PAC CCE”) continues to be the principal arbitral institution in Croatia, administering the majority of arbitrations seated in the country.
Against this backdrop, 2025 saw significant developments in Croatia’s investment regulatory landscape.
Amendments to the Foreign Investment Screening Act
In 2025, Croatia significantly reformed its Foreign Direct Investment (“FDI”) screening framework with the unanimous adoption of amendments to the Foreign Investment Screening Act (“FDI Act”) (2025), thereby strengthening the State’s ability to review and, where necessary, restrict foreign investments on grounds of national security and public order, in line with the European Union (“EU”)-wide FDI screening framework.
The amended FDI Act aligns Croatia more closely with Regulation (EU) 2019/452 on the screening of foreign direct investments. It introduces a more comprehensive and structured screening mechanism, expanding both the scope of reviewable investments and the institutional powers of the competent authorities, including Croatia’s participation in the EU cooperation mechanism for information exchange and coordinated assessment of foreign investments.
Under the revised regime, a broader range of transactions are subject to mandatory notification and potential screening, including acquisitions by non-EU investors of at least 10% of voting rights or equivalent influence in Croatian companies operating in designated sensitive sectors. These sectors include, inter alia, critical infrastructure and technologies, the supply of critical inputs, access to sensitive information, and media freedom and pluralism.
The amendments further clarify the notion of “foreign investor” and extend screening obligations to indirect and certain greenfield investments, including those structured through EU-based entities ultimately controlled by non-EU persons, and allow authorities to review non-notified transactions within statutory time limits.
Institutionally, the amendments enhance the role of the interministerial screening mechanism, with the Ministry of Economy designated as the central coordinating authority. The screening authorities are empowered to impose conditions, prohibit a transaction, or unwind investments completed in breach of notification obligations. The Act also introduces clearer procedural timelines and strengthens enforcement mechanisms, including administrative fines for non-compliance.
The adoption of the amended FDI Act reflects Croatia’s broader policy trend towards increased regulatory scrutiny of foreign investments in sensitive sectors, consistent with EU-wide developments and Croatia’s Organization for Economic Co-operation and Development (“OECD”) accession efforts. While the new regime does not target any specific country or category of investor, it is expected to have practical implications for cross-border transactions involving undertakings operating in sensitive sectors identified by the Act, as well as for investors structuring acquisitions through indirect ownership or control, including via intermediary entities.
Statistical Trends and the Rise of Construction Arbitration
In recent years, arbitration in Croatia has been marked by a notable increase in construction-related disputes, particularly those arising from public procurement projects.
By way of comparison, in 2023, the PAC CCE registered 19 new cases, 6 of which concerned construction disputes representing EUR 6.6 million of the EUR 34 million total in dispute. The trend intensified in 2024, when construction disputes accounted for 13 of 24 new cases and EUR 17.4 million of the EUR 28.6 million total.
As of December 2025, the PAC CCE recorded 20 new cases, 15 of which involved construction disputes, primarily concerning road construction and ancillary infrastructure, as well as railway construction and reconstruction projects.
Annulment and Recognition & Enforcement Practice
Croatia continues to be regarded as an arbitration-friendly jurisdiction, particularly with respect to judicial control of arbitral awards.
Over the last decade, Croatian courts have annulled only two arbitral awards. This record reflects a consistently restrained judicial approach and strong respect for the finality of arbitral awards.
Croatian courts have also demonstrated a consistently pro-enforcement stance in proceedings for the recognition and enforcement of foreign arbitral awards. In all cases that were finally adjudicated, recognition and enforcement were granted in favor of the applicant, in accordance with the New York Convention (1958) and domestic arbitration law.
Judicial Developments
Supreme Court: Violation of the Right to Be Heard
In decision Gž-17/2024-2, 29 October 2024, the Supreme Court of the Republic of Croatia (“Supreme Court”) set aside a decision of the Commercial Court in Zagreb granting recognition and enforcement of a foreign arbitral award rendered under the auspices of the London Maritime Arbitrators Association.
The Supreme Court found that the first-instance court had ruled on the recognition request without reliably establishing that the opposing party had been properly served and given an opportunity to be heard. Although the lower court assumed that the respondent had failed to submit a timely response, the case file contained no clear proof of service.
Relying on Article 49(2) of the AA, the Supreme Court emphasized that courts are obliged to enable the opposing party to respond to a recognition application. The absence of evidence that this procedural safeguard had been respected constituted a serious violation of the right to be heard. The decision was therefore set aside, and the case remitted to the first-instance court.
The ruling confirms that, while Croatian courts generally favor recognition and enforcement of foreign arbitral awards, compliance with fundamental due process requirements remains a non-negotiable prerequisite.
In its decision No. Revd-5287/2024, 28 May 2025, the Supreme Court rejected an application for extraordinary legal remedy against an appellate decision that had upheld an arbitral award of the PAC CCE. The award was challenged on the basis of an alleged violation of the claimant’s right to be heard, as the arbitral tribunal rejected the claimant’s request to hear the parties through their oral testimony and instead based its decision on documentary evidence and the respondent’s written witness statements.
The Supreme Court found that both parties had been afforded a reasonable opportunity to present their arguments and evidence and were therefore treated equally. The Court emphasized that a violation of the right to be heard arises only where a party is prevented from submitting arguments, proposing evidence, or commenting on the opposing party’s submissions, and not where the arbitral tribunal, acting within its discretion, rejects a specific evidentiary request and provides reasons for doing so, as in the present case. The Court further noted that the claimant had the opportunity, but failed, to submit documentary and written witness evidence.
Violation of Ordre Public and No Révision au Fond
The Croatian courts have consistently interpreted public policy narrowly and have rarely upheld this annulment ground.
In its decision No. P-2204/2024, 14 March 2025, rejecting an application for annulment of a PAC CCE award, the Zagreb Commercial Court reaffirmed that public policy comprises only the fundamental legal, social, economic, and moral principles on which the Constitution of the Republic of Croatia is based. The Court emphasized that annulment proceedings do not permit review of the correctness of the award, and that not every breach of mandatory law falls within the narrow public policy exception.
In the same vein, a public policy objection was rejected by the Supreme Court in decision Gž-25/2024, 6 May 2025, thereby upholding the recognition and enforcement of a VIAC (Vienna International Arbitration Centre) award. Addressing the award debtor’s argument that the award violated public policy because it was contrary to “common sense,” the Supreme Court held that a debatable, or even incorrect, application of domestic law does not constitute a violation of public policy.
In judgment P-1187/2022, 7 November 2025, the Commercial Court in Zagreb dismissed a claim for partial annulment of a final ICC (International Chamber of Commerce) award in an international construction dispute. The claimant argued that parts of the award were contradictory, insufficiently reasoned, and contrary to Croatian public policy. The Court rejected these arguments, reiterating the strictly limited scope of judicial review in annulment proceedings.
The Court emphasized that Croatian courts are not entitled to review arbitral awards on the merits. Judicial scrutiny is confined to the exhaustively listed statutory grounds for annulment. The Court held that, where the dispositive part of the award clearly determines the parties’ rights and obligations, any inconsistencies in the reasoning do not justify annulment so long as the inconsistency is not such that the content of the decision cannot be discerned. The Court further clarified that Croatian public policy does not extend to alleged errors of fact or law, nor to dissatisfaction with the outcome of the arbitration. Only violations of fundamental legal principles may justify judicial intervention. While the decision is not yet final, it reflects a consistent judicial approach favoring the finality and autonomy of arbitration.
Arbitration Agreement and Action before Court
In decision No. Pz-4500/2024, 27 December 2024, the High Commercial Court of the Republic of Croatia upheld a Commercial Court decision declining jurisdiction in a dispute over a bank guarantee, on the basis that the applicable general terms contained an arbitration clause. The guarantee beneficiary had initiated court proceedings against the issuing bank, seeking payment under a performance guarantee. The beneficiary relied on the bank’s general terms and conditions referenced in the guarantee, which contained a jurisdiction clause.
The bank objected to the Commercial Court’s jurisdiction, arguing that the guarantee also referred to the bank’s general terms for guarantee and letter‑of‑credit business, which provided that all disputes were to be finally resolved by arbitration under the Rules of the International Arbitration of the PAC CCE (1992). Both court instances upheld the objection.
They held that:
- the bank’s general terms for guarantee and letter‑of‑credit business were special terms that took precedence over the bank’s general terms and conditions; and
- that the reference to those special terms which contained an arbitration clause, constituted a valid arbitration agreement pursuant to Article 6(4) of the AA regardless of the fact, emphasized by the beneficiary, that there was no express reference to the arbitration clause in the text of the guarantee.
This conclusion applied notwithstanding the beneficiary’s argument that the text of the guarantee did not expressly refer to the arbitration clause itself.
European Court of Human Rights (“ECHR”) Proceedings Relating to the Croatia v. MOL Saga
In September 2025, the ECHR communicated applications lodged by Zsolt Hernádi and Ivo Sanader against Croatia, in which the applicants allege violations of Article 6 of the European Convention on Human Rights (1950) in connection with domestic criminal proceedings, which were also addressed in the long-running arbitration proceedings between MOL and the Republic of Croatia. The Croatian Government has been invited to submit written observations by mid-January 2026.
While no determination has yet been made on admissibility or on the merits, the proceedings are being closely followed as part of the broader legal context surrounding these disputes. MOL and the Republic of Croatia have two ongoing arbitrations:
- one initiated in June 2024 before ICSID (MOL v. Croatia (III)), and
- one initiated in 2022 in ad hoc proceedings under UNCITRAL Arbitration Rules (1976) (MOL v. Croatia (II)).
Prominent Arbitration Events in 2025
The ICC Croatia Third Annual Regional Conference on Arbitration and ADR – Construction Project Disputes convened in Dubrovnik on 6–7 October, featuring leading construction practitioners discussing risk allocation, dispute boards, and the latest trends in contract preparation and dispute resolution.
On 4-5 December, the regional arbitration community gathered in Zagreb for the 33rd Croatian Arbitration Days, with panels focusing on construction disputes and broader international arbitration topics.
These events underscore the importance of the construction sector in Croatia and the country’s engagement with international arbitration developments.
Conclusion
Taken together, recent statistical developments and judicial practice confirm Croatia’s position as a stable and arbitration-friendly jurisdiction. The growing prominence of construction and infrastructure disputes before the PAC CCE highlights arbitration’s increasing role in resolving complex construction matters. At the same time, Croatian courts continue to balance support for enforcement and finality with strict protection of due process, reinforcing legal certainty and predictability for arbitration users. At the regulatory level, the 2025 amendments to Croatia’s foreign investment screening regime signal enhanced oversight of foreign investments in sensitive sectors, aligning Croatia more closely with EU practice.
Discover more insights into the latest developments in arbitration in 2025 from around the world now
ABOUT THE AUTHORS
Jadranka Jakovcic is a New York-qualified attorney specializing in international arbitration and public international law, with a focus on investment treaty disputes. She is a Consultant with Arbitration Chambers in London and holds a leadership role within Young ICCA.
Zrinka Mustafa Prelić is an independent attorney-at-law qualified in Croatia and holds an LL.M. degree from Penn State Law. Her practice focuses on disputes, with an emphasis on international and domestic commercial arbitration. She is a Croatian delegate to ICC Commission for Arbitration and ADR.
Tamara Manasijevic is an attorney-at-law with the arbitration boutique ARP in Vienna. She acts as arbitrator and counsel in international commercial arbitration, focusing on construction, engineering and energy disputes. Tamara is admitted to the Bar in Croatia and is a registered EU lawyer in Austria. She is a founding member and a current Board member of ArbCEE.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
