Perhaps the issue would have been better stated as this:
This type of behavior (creating a folder outside of its executing folder) is potentially unintended. It is a very strange behavior. It would make more sense if the backups folder was created inside of the server's launching folder, rather than outside, which makes an assumption that the server owns a folder outside of its running folder, which is not always the case.
If this is intended, it is a bad design atypical of what any software should do. It breaks established hosting environments with no viable alternative to designating a different backup location.
A potential solution for shared hosts and users utilizing panels such as Multicraft right now would be to allow access to this backups directory for all servers - <multicraft dir>/servers/backups Though since all servers reside in their own folder within the same parent directory, the backups folder would be shared by each server on the machine - bad design!
Being that this is potentially unintended behavior in their backup system, Mojang should be made aware of this problem.
Can you elaborate - are you referring to the use of Multicraft in order to launch the server? The JAR itself is vanilla.
This is a glaring flaw in the design of the backup system, assuming that the server has ownership over the folder outside of its executing environment. The server software shouldn't be attempting to modify files outside of its running directory.
An addendum to the above, this is reproducible on Windows with no additional launcher as long as the user account doesn't have access to the server's parent directory.
Let's say I want my server to be located in my Users folder, exactly C:/Users/Dusty/. So I place the server JAR there and start it. My user account doesn't own the Users folder though in Windows, so we get the same issue when trying to start:
Because, it's trying to create the /backups folder in C:/Users, not C:/Users/Dusty, which is where the server is running from. The backup location being specified as .\..\backups as per the stack trace is an odd notation, <current dir>\<parent dir>\backups? It seems as if just .\backups may have been intended, indicating to create it in the current directory only.