On 5 April 2017 the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry organized a round table on “Arbitrability of disputes: moving in what direction?” in order to professionally discuss the draft law “On Amendments to the Economic Procedure Code of Ukraine, Civil Procedure Code of Ukraine, the Code of Administrative Procedure of Ukraine and other legislative acts”. The draft law was registered in the Verkhovna Rada of Ukraine on 23 March 2017 under No. 6232.
The participants of the round table – arbitrators, representatives of the judiciary, academics and leading practitioners – generally assessed positively the draft law and amendments to the procedural codes as a necessary element of judicial reform and efficiency of justice. In particular, it was noted that for the first time in the procedural legislation of Ukraine the procedure for performing functions of assistance to international commercial arbitration was clearly regulated, regulation of the procedure for recognition and enforcement of international arbitral awards was improved.
At the same time the participants spoke critically about some of the provisions of the Draft Civil Procedure Code, the Draft Economic Procedure Code and the proposed amendments to the Law of Ukraine “On International Commercial Arbitration”.
First of all, the arbitration community of Ukraine is concerned about new rules regarding the possibility of referring disputes under the jurisdiction of economic courts to the resolution of international arbitration, taking into account their possible negative consequences for the development of international arbitration in Ukraine and the investment attractiveness of our state in general. These are the proposed versions of articles 21 and 23 of the Draft Economic Procedure Code of Ukraine.
Mykola SELIVON, President of the ICAC at the Ukrainian CCI, noted that the consolidation of provisions on the possibility/impossibility of referring disputes to international commercial arbitration (arbitrability of disputes) in Article 23 of the Draft Economic Procedure Code is a step backward and limitation of international commercial arbitration competence, because the current version of a similar article 12 of the Economic Procedure Code applies only to arbitration tribunals. In his opinion, it is necessary to take into account that the subject of legal regulation of the above-mentioned procedural codes is the procedure of legal proceedings in economic courts and courts of general jurisdiction, determination of the categories of disputes subordinated to these courts. These codes should not regulate the competence of arbitration tribunals and international commercial arbitration, which are types of non-state jurisdictional activity to resolve disputes in the field of civil and economic legal relations. This is the task of special laws – the Law of Ukraine “On Arbitration Tribunals” and the Law of Ukraine “On International Commercial Arbitration”.
Olena PEREPELYNSKA, President of the Ukrainian Arbitration Association, added that “the proposed format for the normative consolidation of these issues in the Economic Procedure Code will lead to the fact that the general courts within the civil process will have to apply the provisions of the Economic Procedure Code, and even in various, perhaps already inactive editions (for example, as of the date of the conclusion of the contract out of which the dispute arose, or as of the date of commencement of the arbitral proceedings, or as of the date of the arbitral award, etc.)”. Based on these considerations, the amendment of Article 22 of the Draft Civil Procedure Code of Ukraine is more acceptable and takes into account the specifics of the arbitral proceedings in full, since it contains a blanket rule that refers to the relevant provisions of the core laws. This approach is consistent with the practice of foreign pro-arbitration jurisdictions. For example, in the German law countries the main criteria for the arbitrability of a dispute is the possibility to conclude a settlement agreement between the parties to a dispute that allows to separate the relations that contain a public legal element (in defense of which arbitration limits are imposed) – disputes out of such relations, respectively, will be non-arbitrable. In contrast, the Draft Economic Procedure Code of Ukraine does not contain clear criteria for the removal of this or that category of disputes from the jurisdiction of international commercial arbitration – added Olena PEREPELYNSKA.
Sergiy GRYSHKO, partner of Redcliffe Partners, expressed notes to part 3 of Article 23 of the Draft Economic Procedure Code of Ukraine and to the similar within the meaning Article 22 of the Draft Civil Procedure Code of Ukraine. The first part of this legal rule regarding the interpretation by the court of all doubts about the validity, effect and feasibility of the arbitration agreement in favor of its validity, effect and feasibility – is progressive and will positively effect the activities of arbitration tribunals and international arbitration. At the same time, the second part of this rule was criticized, and it was suggested to delete the words “if the court concludes that at the time of its conclusion the parties had obvious intentions to refer the dispute settlement to a particular arbitration tribunal, international commercial arbitration” since if the court’s doubts must be construed in favor of the validity of the arbitration agreement, why the parties shall prove “obvious intention” to refer the dispute to international commercial arbitration or the arbitration tribunal. Conversely, if the parties have demonstrated this “obvious intention”, so what in this case may the state court doubt? – said Sergiy GRYSHKO.
The participants of the round table expressed also a number of comments on the wording of provisions relating to certain categories of disputes and their removal from the list of arbitrable ones.
First of all, it is the provision of part 2 of Article 23 of the Draft Economic Procedure Code of Ukraine, according to which disputes under paragraph 3 of part 1 of of Article 21 of the Code arising out of the contract, shall be referred to international commercial arbitration only on the basis of the arbitration agreement made between the legal entity and all its participants.
The conclusion of contracts between participants and a legal entity is carried out on a case-by-case basis, which makes corporate disputes non-arbitrable and deprives subjects of such legal relations of the right to apply to international commercial arbitration, and will adversely affect the investment attractiveness of our state, said Sergiy UVAROV, senior lawyer of AVELLUM. Considering the foregoing, taking into account the private legal nature of the international commercial arbitration and the fact that the provisions of Article 12 of the current edition of the Economic Procedure Code of Ukraine regarding the arbitrability of corporate disputes are not applicable to international commercial arbitration but relate solely to arbitration tribunals, Sergiy UVAROV proposed that part 2 of Article 23 of the Draft Economic Procedure Code of Ukraine shall be amended as follows:
Regarding changes proposed by the authors to the Draft Law of Ukraine “On International Commercial Arbitration” Mykola SELIVON noted that it is necessary to preserve the legal regulation, which has proved its effectiveness and efficiency, and introduce only those changes that are caused by an update of procedural law, specifically, in Article 6 of the Law of Ukraine “On International Commercial Arbitration”, which defines the jurisdiction of the state courts to fulfill their control functions and contributing to arbitration.
It also seems strange that the authors of the draft law, having developed a new version of the Economic Procedure Code ignored the Law of Ukraine “On Arbitration Tribunals” and did not adjust the latter in accordance with the Code, in particular Article 6, the round table participants noted.
A lively discussion was aroused by a rule providing for the possibility to conclude an arbitration agreement by exchanging electronic messages.
Liudmyla VYNOKUROVA, associate professor of the chair of economic law of Taras Shevchenko National University of Kyiv, having listened to the proposal to amend paragraph 2 of Article 7 of the Law of Ukraine “On International Commercial Arbitration” by adding the words “electronic messages”, suggested the phrase “by electronic messages” be replaced by the words “electronic messages if the information contained in them is available for further use” with a view to preventing the court from doubting the validity of the arbitration agreement.
The participants of the round table also strongly disagreed with the proposed by the authors of the draft law exclusion of Annex No.1 and Annex No.2 to the Law of Ukraine “On International Commercial Arbitration”, by which the Regulations on the International Commercial Arbitration Court and the Maritime Arbitration Commission at the Ukrainian Chamber of Commerce and Industry are approved, since such an exclusion will lead to the abolition of the legal framework for the activities of the ICAC and MAC at the UCCI, which will pose risks to the rights and interests of both domestic and foreign business entities which disputes are considered by these permanent arbitration institutions, and further significantly complicate the recognition and enforcement of arbitral awards of the ICAC and MAC at the UCCI, both on the territory of the state and abroad.
Summing up the discussion Mykola SELIVON informed the audience that all proposals and comments on draft law No.6232 of 23 March 2017 will be summarized and sent to Ruslan KNYAZEVICH, Chairman of the Verkhovna Rada Committee on Legal Policy and Justice.