US companies do not have to deposit security for litigation costs

Serbia

On November 9 2010 Skechers, a famous US shoe company, sued Safran, a Serbian company which imported and sold sneakers similar to Skechers’ Shape-Ups sneakers, for trademark and copyright infringement, as well as unfair competition.

Safran requested that Skechers deposit security for litigation costs, arguing that Skechers does not have a presence in Serbia and that there was a risk that the company would not reimburse Safran’s litigation costs if Safran won the case (the United States is not a member of the 1954 Hague Convention on Civil Procedure, which provides for free access to the courts).

Skechers refused to deposit security for litigation costs and invoked the 1881 Treaty on Commerce between Serbia and the United States. The treaty provides, among other things, that citizens of Serbia and the United States are to have full reciprocity and access to the courts. Skechers argued that, therefore, it did not have to deposit money as security for litigation costs. Safran countered that the treaty is no longer applicable, because there is no factual reciprocity.  

The Court of First Instance refused Safran’s request. Safran appealed, and the Appellate Court referred the matter back to the Court of First Instance, instructing it to seek the opinion of the Ministry of Justice. The ministry responded that the 1881 treaty is in force, but that there is no factual reciprocity between the United States and Serbia, because Serbian citizens in the United States are required to deposit security for litigation costs when suing in a state in which they do not have residence.

The Court of First Instance ordered Skechers to deposit security. Skechers then appealed, arguing that Serbia and the United States are bound to respect the 1881 treaty until it is revoked by a special procedure provided for by the treaty. Further, Skechers argued that the United States does comply with the treaty and invoked a US Supreme Court decision in which the court explicitly held that the treaty must be respected.

The Appellate Court then refused Safran's request that Skechers deposit security for litigation costs. The decision is final.

Although judgments and decisions in Serbia do not set precedents, they do serve as guidance for judges for future cases. The above decision of the Appellate Court regarding the payment of security for litigation costs is significant because it recognises:

  • the right of a US company to sue in Serbia without depositing security for litigation costs, even when the company does not have a presence in Serbia; and
  • that the 1881 Treaty on Commerce between the United States and Serbia is in force and must be complied with until it is terminated or suspended following a specially prescribed procedure.  

Gordana Pavlovic and Maruska Bracic, Cabinet Pavlovic, Belgrade and Brussels

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