New Arbitration Legislation: a Joint Way to Success

New Arbitration Legislation: a Joint Way to Success

On 1 March 2019 the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry (the ICAC) and the National Academy of Legal Sciences of Ukraine (NALS) under support of the Supreme Court hosted a round table “Results of the implementation of a new arbitration legislation: achievements and challenges”.

The event was attended by more than 70 participants, including Supreme Court justices, judges of other state courts, ICAC arbitrators, leading lawyers and scientists from all over Ukraine. The aim of the event was not only to discuss the application of new arbitration legislation, but to propose possible effective steps to implement the pro-arbitration policy of Ukraine.

Mykola Selivon, the President of the ICAC, during the opening remarks mentioned the latest developments of the legislation of Ukraine, which took effect last year, as well as noted the remarkable progress of the Supreme Court practice regarding international commercial arbitration cases: “In just one year the Supreme Court shaped the court practice, which is in line with the best international standards, and fosters an proarbitration environment in Ukraine”.

The Head of the Supreme Court, Valentyna Danishevska, reported that the Supreme Court supports the activity of the international commercial arbitration and arbitration tribunal as these ways of dispute resolution help to overcome the huge number of cases that are registered by courts every day. Mrs. Danishevska assured that the Supreme Court sees the key vectors that need to be changed. The Head of the Supreme Court also emphasized the importance and necessity of retaining new legal positions: “Maintaining progressive approach towards Ukrainecourt practice is not only the task of the Supreme Court. It is as much the task of judges, attorneys, academicians, and the users of the court system”At the same time, according to the Head of the SC constructive criticism is very welcomed as it helps judges to be highly prepared to solve relevant issues directly during the cases consideration.

Oleksandr Petryshyn, the President of the NALS, noted: “The Supreme Court and the judiciary got fresh start and new stimuli for moving forward. In particular, we restored the significance of shaping the court practice. This is totally in line with our pro-European development vector”.

Secretary of the Plenum of the SC, Secretary of the First Judge Chamber of Criminal Cassation Court in the Supreme Court, Dmytro Luspenyk, talked that only new procedural law gave an opportunity for the state court to support arbitration, in particular, by adoption of preliminary interim measures, such as: securing evidence and providing a claim security with the possibility of cross-undertaking in damages.

Justice of the Grand Chamber of the Supreme Court, Olena Kibenko, during the report on the new legal findings of the Supreme Court on arbitration, drew attention to the pro-arbitration approach followed by the Court and added that this approach should be key principle of judiciary regarding the international commercial arbitration. According to Mrs. Kibenko, the judiciary is currently overloaded with cases and can be unloaded not only through some procedural filters but through the alternative ways of dispute resolution: “These include both mediation, arbitration tribunals and the international commercial arbitrationThe latter has proven its utmost efficiency for decades”, – said the speaker.

According to Olena Kibenko, the Grand Chamber of the Supreme Court has formed a number of conclusions regarding the interpretation of inaccuracies in the arbitration agreement, ensuring the principle of its autonomy, which should affect further practice in the consideration of such cases. In particular, the court must interpret doubts in favor of the validity and enforceability of the agreement. If there is an error in the name of the arbitration institution, however, this institution can be identified, or the agreement contains a reference to the rules that should be applied or the place of arbitration, even if there is an error in the name of the institution, the arbitration agreement can be executed.

In addition, the speaker described the recent practice of the Supreme Court regarding the use of such category as a public order in resolving the issue of authorizing an arbitration award in Ukraine. The justice also referred to the issue that aroused an active discussion among the audience – regarding the possibility of a court consideration of the applications for recognition of an arbitration agreement as invalid, separately from the application for permission to enforcement of the arbitral awards or the revocation of such an award. The judge of the Grand Chamber of the Supreme Court, Larysa Rogach, also participated in the discussion on this issue, mentioning that the Supreme Court is trying not only to formulate a legal opinion but to ensure that it has become a stable practice for all instances. “If we fail to accomplish this key task, the effectiveness will be compromised.  The Grand Chamber will issue good, quality rulings, which might not be used by the rest of the judiciary”, – said the justice. Therefore, she added, it is important to report the position of the SC to lower courts, as well as to a wide range of lawyers.

ICAC arbitrator, Tetiana Zakharchenko, talked about the relevant issues of arbitration activity, in particular, about the invalidity of arbitration agreements. While reporting on the question about how deeply the state court should study the validity of an arbitration agreement, she said that this issue should be resolved prima facie, giving the opportunity for the arbitrators to be the first to make a decision on their competence. State courts have every chance to review the validity of arbitration agreements either if the arbitration award is being challenged or when granting the permission for the enforcement of the arbitral award”,  – noted Tetiana Zakharchenko. She also supported the position of the Supreme Court regarding the extension of the arbitration agreement to the successor in case of the assignment and transfer of debt and drew attention to the non-indissoluble opinion of the court that, in case of the disappearance of a foreign element in the replacement of the party in the obligation, the dispute in this case should be considered by state courts, and not arbitration.

The Vice-President of the ICAC, Liudmyla Vinokurova, reported about the Article 5 of the Law of Ukraine “On International Commercial Arbitration” as an efficient instrument of counteracting the initiation of parallel processes. According to the Vice-President “The limited so-called formal-legal state courts control of the arbitration courts’ activity is recognized as the general rule for the most developed law-enforcement, which is recognized as a pro-arbitration approach. The ability to file an individual claim with state court about the recognition of the arbitration agreement invalid, is still very risky. If party to an arbitration is entitled to submit claim to commercial court regarding the invalidity of the arbitration agreement, such party is vested with un fair benefits that can be abused. In fact, this will allow to initiate simultaneous hearings and сause a delay in arbitral proceedings, which will make commercial arbitration less efficient. Eventually, this may lead to a significant delay in the restoration of the violated right».

While discussing the issue of recognition and enforcement of an arbitration agreement, Pavlo Byelousov, Partner at Aequo law firm, noted: “first of all, according to the Civil Code of Ukraine it is generally unacceptable to discuss the possibility of recognizing an arbitration agreement as null and void, since the validity of such an agreement is not directly determined by the legislation of Ukraine. Secondly, the position of courts in considering issues regarding the validity, efficiency and enforceability of arbitration agreements, that the arbitration agreement shall contain an exact name of the arbitration institution for consideration of which the parties intended to submit their dispute, is unclear. The 1994 Law “On International Commercial Arbitration” provides the parties with an opportunity to conclude an arbitration agreement on a transfer of all or certain disputes to any arbitration, regardless of whether it is specially created for consideration of a separate case (ad hoc arbitration) or is carried out by a permanent arbitration institution (institutional arbitration)”. Instead, the abovementioned Ukrainian courts’ approach to an arbitration agreement completely ignores the specified provisions of the law and the possibility of concluding and enforcing an arbitration agreement on the transfer of the dispute to ad hoc arbitration, summarized Pavlo Byelousov. The justice of the Commercial Cassation Court of the Supreme Court Konstantin Pilkov participated in the discussion of the aforesaid article, emphasizing that it is extremely important to find new ways to develop the pro-arbitration climate in Ukraine.

Natalia Kuznetsova, theVice-President of the NALS of Ukraine, Head of the Kyiv Regional Center of the NALS of Ukraine, noted that the efficiency of the arbitration depends on many things, while the main one is that all the arbitration institutions today are fighting for the client and doing everything possible to get the case. Apart from internal factors (time, process flexibility, participants’ trust, etc.), there are still some external factors that also affect the efficiency of arbitration in Ukraine. “This is about how the national legislation treats an arbitration institution. If arbitration is not supported at the state level, no parties will arbitrate in this country” – she said.

The justices of the Civil Cassation Court of the Supreme Court Yuliia Chernyakand Serhiy Pogribniy joined the discussion reporting on the implementation of new procedural legislation as a pledge of effective arbitration in Ukraine. Yuliia Chernyak noted that in most cases the Civil Cassation Court of the Supreme Court was on the side of international commercial arbitration when considering disputes on recognition and enforcement of arbitral awards. The judge also noted that when reviewing decision of the courts of first instance that refused to recognize or enforce the arbitral award because of the non-submission of an extractor of the executive document according to the Kyiv Agreement on procedure for resolving disputes related to the conduct of economic activity of 1992, the Civil Cassation Court explained that in such cases the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 should apply as lexspecialis. Yuliia Chernyak added that it is important to differentiate the procedure of recognition and enforcement of arbitration agreements and the procedure of recognition and enforcement of foreign judgements. Serhiy Pogribniy mentioned that consideration of issues on the recognition and enforcement of foreign arbitral awards should firstly be guided by the rules of the international New York Convention of 1958, secondly by the rules of substantive law, which do not contradict either the meaning or spirit of this Convention, and then by the rules of the procedural legislation, e.g. the Civil Procedural Code of Ukraine.

Participantsoftheround table took part in the discussion and emphasized the relevant practice and issues of support and promotion of international commercial arbitration by the state courts. Gennadii Tsirat, Partner at JURVNESHSERVICE, commented: “The Supreme Court applies a more pro-arbitration approach to the issues of validity and enforceability of arbitration agreements. Many issues, however, still need to be addressed. One of them is the position of commercial courts when they decide on the validity of an arbitration agreement. If one of the parties refers to an arbitration agreement as void, denying the authority of the arbitration court, should the state commercial court review the arbitration agreement in question prima facie, or, go into a thorough analysis. Another issues, which need to be addressed, are the acceptability of individual claims to commercial courts on invalidity or unenforceability of arbitration agreements. I hereby refer to Article 5 of the Law of Ukraine “On International Commercial Arbitration”, which prohibits any interference of state courts into the activities of the international commercial arbitration, other than those set forth by this Law”.

Oleksandr Droug, Partner at Sayenko Kharenko law firm, mentioned“the Supreme Courtlatest practice is generally positive and fosters the development of the arbitration climate in Ukraine. However, selected issues, in particular, the ability to change creditor, the position of the Supreme Court is vague and raises concerns of the parties to arbitration agreements, and to the collectors, that have already received an arbitration award and seek to enforce them on the territory of Ukraine”. According to Oleksandr:The Supreme Court says that the new creditor does not become party to the arbitration agreement, and thus shall resort to state courts to resolve disputes (in cases when the debtor does not acknowledge its liability as decided by the arbitration award). According to general rules, the new creditor shall acquire all rights of the previous creditor. The scope and the terms of such rights shall not differ from those existing at the moment of the transfer of rights. The standing of the Supreme Court on this issue does not align with the court practice of foreign jurisdictions on the same issue”.

The President of the ICAC, Mykola Selivon, summed up the results of the round table, thanking all those present for important thoughts and valuable comments, and noted that: “summarizing all speakersthe Supreme Court, other state courts, in particular, Kyiv Court of Appeal, decide cases from proarbitration standpoint. They have finally agreed on long-standing issues concerning international arbitration. The key assignment of the arbitration community now is to promote new proarbitration positions, in particular, at the local level”.

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On 1 March 2019 the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry (the ICAC) and the National Academy ...

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International Commercial Arbitration Court
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