UKRAINE

1. ARBITRATION

Ukrainian law provides for separate legal regimes with respect to domestic and foreign or international arbitration proceedings. The primary law regulating domestic arbitration covering disputes between Ukrainian parties is the Law of Ukraine "On Courts of Arbitration" No. 1701-IV dated 11 May 2004. The Law of Ukraine "On International Commercial Arbitration" No. 4002-XII dated 24 February 1994 (the "ICA Law") regulates international arbitration proceedings conducted in Ukraine. The ICA Law is based on the UNCITRAL Model Law on International Commercial Arbitration.

According to the ICA Law, the following disputes can be submitted to an international arbitration in Ukraine: disputes arising out of cross-border contracts in the course of foreign trade and other forms of international economic relations, provided that the place of business of at least one of the parties to the dispute is situated outside of Ukraine; disputes involving enterprises with foreign investments or international associations or organizations established in Ukraine. The ICA Law may be interpreted as stating that disputes between two Ukrainian legal entities, provided that at least one of such entities has a foreign shareholder, may be subject to international arbitration.

The ICA Law provides that an international arbitration proceeding in Ukraine may be conducted either by a tribunal set up specifically for a given case (ad hoc arbitration), or by an arbitral institution. The ICA Law provided for the establishment of the following two permanent Ukrainian arbitral institutions: the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry ("ICAC") and the Maritime Arbitration Commission at the Ukrainian Chamber of Commerce and Industry ("MAC").

Pursuant to the Ukrainian law, the parties to an arbitration agreement can submit to arbitration any civil or commercial international dispute, except for the following disputes which fall within the exclusive competence of Ukrainian courts: disputes on the validity of state acts and acts of legal entities; disputes arising out of the conclusion, amendment, termination and performance of public procurement contracts; disputes regarding privatization of state property; disputes regarding registration of rights to real estate (including land plots) located in Ukraine; intellectual property rights and securities; corporate disputes between shareholders of a legal entity and disputes between a legal entity and its shareholder (except for cases when such disputes arise out of an agreement and all shareholders have concluded an arbitration agreement with the legal entity); disputes concerning the protection of economic competition (except for civil law aspects of disputes arising out of agreements); insolvency disputes; disputes between a legal entity and its manager(s) on compensation for damages caused to the legal entity; as well as other disputes the jurisdiction over which is expressly granted to Ukrainian courts. However, there is no exhaustive list of disputes that fall within the exclusive competence of Ukrainian courts.

Importantly, the fact that corporate disputes between shareholders of a legal entity and disputes between a legal entity and its shareholder could not be submitted to arbitration in the past (i.e. prior to December 2017) has affected the corporate structures for investing in Ukraine, especially those involving a shareholders agreement. As a result, many joint venture projects are structured using non-Ukrainian holding entities at the level at which shareholders agreements are signed. This allows the parties to provide for arbitration in the shareholders agreements or other documents among shareholders and the companies.

However, in view of the recent legislative changes that took effect in December 2017 and which now allow arbitration with respect to corporate disputes when there is an arbitration agreement in place between a legal entity and all of its shareholders, it is expected that more parties will be encouraged to opt for settling / deciding their corporate disputes in Ukraine rather than on an off-shore level using foreign corporate structures.

Arbitration agreements must be made in writing and may be either in the form of an arbitration clause in the contract between the parties or in the form of a separate arbitration agreement. An arbitration agreement is also deemed to be made in writing if it is contained in documents signed by the parties or in an exchange of letters, telex, telegrams or other means of electronic communication which provide for a record of an agreement, or in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and is not denied by the other. A reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement provided that the contract is executed in writing and the reference may be interpreted as making the arbitration clause an integral part of the contract.

An arbitration agreement must expressly indicate the full name of the arbitral institution and the disputes that the parties have agreed to submit to arbitration. However, any deficiencies of the arbitration agreement's wording, any doubts as to its validity and enforceability should be interpreted in favour of the validity and enforceability of the arbitration agreement. The parties are free to agree on the substantive law, the procedural rules, the seat and language of arbitration, the number of arbitrators and the method for their appointment. If the parties do not agree on the applicable procedural rules in the arbitration agreement the tribunal applies the rules that it finds most suitable in the circumstances.

An arbitral tribunal shall resolve a dispute in accordance with the applicable law agreed by the parties to the arbitration agreement. If the parties fail to choose the applicable law, the arbitral tribunal will determine the applicable law in accordance with the conflicts of law rules as provided for by the Law of Ukraine “On Private International Law” No. 2709-IV dated 23 June 2005.

According to the procedural rules of the ICAC, the duration of arbitration proceedings should not exceed 6 (six) months; however, this term may be extended in certain cases when an extension is required and can be justified.

The ICAC and MAC arbitration rules allow a party to obtain injunctive relief at its request. An arbitral tribunal may demand that a party should provide security deemed to be appropriate in connection with such measures. Such injunctive relief may be granted at any stage of an arbitral proceeding, as well as before the proceedings commence. An arbitral order for injunctive relief is binding on the parties and remains in force until a final arbitral award is made. However, the enforcement of such an arbitral order for injunctive relief in the Ukrainian courts may be practically difficult.

According to the ICA Law, a party may apply with an application for assistance in the collection of evidence directly to the state court.

An arbitral award made under the ICA Law is final and binding for the parties. If a losing party refuses to perform it voluntarily, an award can be enforced according to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

The ICA Law does not provide for the possibility to appeal awards on their merits. An award may be challenged only by initiating proceedings to set aside the award before a state court and only on the following grounds:

-invalidity of the arbitration agreement due to the incapacity of one of the parties to conclude an arbitration agreement or due to other grounds envisaged in the applicable law;

-absence of proper notification of arbitration proceedings;

-lack of arbitrability according to the arbitration agreement;

-incorrect composition of the arbitral tribunal or incorrect arbitration procedure;

-the award has not yet become binding on the parties or has been set aside or suspended by a court;

-the recognition or enforcement of the award would be contrary to the public policy of Ukraine; or

-the subject-matter of the dispute may not be subject to arbitration under Ukrainian law.

2. ENFORCEMENT OF FOREIGN ARBITRAL AWARDS

Foreign court judgments and arbitral awards are recognized and enforced in Ukraine based on an international treaty between Ukraine and the relevant foreign state or based on the reciprocity principle. In case of the absence of a treaty providing for recognition and enforcement, foreign judgments and awards may be recognized and enforced based on the reciprocity principle, which is presumed (unless proven otherwise).

With respect to the recognition and enforcement of awards of international arbitration proceedings, Ukraine is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the 1961 European Convention on International Commercial Arbitration, the provisions of which were implemented into Ukrainian procedural laws. When it comes to awards rendered in non-contracting states (i.e. states which are not parties to the above-mentioned conventions), Ukraine will apply the New York Convention only under the reciprocity principle.

According to the Civil Procedure Code of Ukraine, generally, applications for enforcement should be submitted within 3 (three) years of the adoption of the arbitral award.

In order to obtain recognition of and enforce an arbitral award, a claimant has to apply to the court of appeals having jurisdiction over the city of Kyiv. An application for enforcement must contain details of the parties to the arbitral proceedings, the composition of the arbitral tribunal that rendered the award, the date the award was rendered and the date it was received by the person seeking enforcement, etc.

With respect to the enforcement of a foreign arbitral award, an application for recognition and enforcement should be supported by the following documents: (a) an original or a certified copy of the arbitral award; (b) an original or a certified copy of the arbitration agreement; (c) evidence of payment of the filing fee; (d) a document confirming the powers/authority of the applicant (if the application for enforcement is submitted by its representative), and (e) a certified translation into Ukrainian of all documents listed above. Failure to observe the formal requirements as to the documents that must be submitted to the court will result in returning the application for enforcement of the arbitral award to the applicant without the application's consideration.

According to Article 478 of the Civil Procedure Code, a state court must reject the application for recognition and enforcement of an arbitral award if:

-the party against whom enforcement is sought provides evidence that

-no due notification to that party about the arbitral proceedings took place;

-the arbitration agreement is invalid;

-the arbitral award goes beyond the scope of the arbitration agreement;

-the composition of the arbitral tribunal or arbitral proceedings were not in line with the arbitration agreement or applicable law; or

-the arbitral award did not become binding or was set aside; or

-if the court finds that:

-the dispute may not be referred to arbitration according to the law; or

-recognition and enforcement of the award would contradict Ukrainian public policy.

-Specific grounds for refusing the recognition and enforcement of foreign arbitral awards are also set out in the ICA Law and they are the same as those for setting aside a domestic award.

Once the Ukrainian court issues an enforcement letter, it can be submitted to the state or private (depending on the subject matter of the case) enforcement service for compulsory enforcement. The debtor may file a complaint with the relevant court against officers of the enforcement service responsible for enforcement of the foreign arbitral award.

TYPE OF PROCEEDINGS

PROCEDURE AND ASSUMPTIONS

PRACTICE TIPS

There is no formal discovery in Ukraine.

Document Production

Limited.

-The arbitration fee payable for non- monetary claims amounts to USD 1,800.

-Arbitration proceedings may also involve additional expenses.

Arbitration Proceedings

Duration may be longer or shorter depending on the case.

Approximate Duration

Approximate Costs

PROCEDURAL COSTS

ATTORNEYS’ FEES (NET)

Simple case

Complex case

Procedural costs at the ICAC include primarily the registration fee and the arbitration fee:

The registration fee is USD 600.

The amount of the arbitration fee varies depending on the amount in dispute, number of arbitrators involved, complexity of the case and administrative charges.

Examples: If the amount in dispute is

-USD 200,001 to USD 500,000 - the arbitration fee is USD 9,200 + 2% of the amount above USD 200,000;

-USD 500,001 to USD 1,000,000 - the arbitration fee is USD 15,200 + 1% of the amount above USD 500,000;

-USD 5,000,001 to USD 10,000,000 - the arbitration fee is USD 38,700 + 0.3% of the amount above USD 5,000,000;

-above USD 50,000,000 - the arbitration fee is USD 118,700 + 0.1% of the amount above USD 50,000,000.

If the case is considered by a sole arbitrator, the arbitration fees are subject to a 20% decrease.

Assumptions based on the amount in dispute of EUR 1,000,000: Review of 100 pages of documents; no challenge to the jurisdiction of the arbitral tribunal; two exchanges of submissions; review of correspondence with arbitral tribunal; no experts; preparation for an oral hearing and participation; preparation and review of one post-hearing brief. Approx. total cost: EUR 40,000 to EUR 50,000.

Assumptions based on the amount in dispute of EUR 1,000,000: Review of 500- 1,000 pages of documents; no challenge to the jurisdiction of the arbitral tribunal; up to four exchanges of submissions; review of correspondence with arbitral tribunal; experts are involved; preparation for multiple oral hearings and participation in them; preparation and review of post-hearing briefs. Approx. total cost: EUR 80,000 to EUR 100,000 or more depending on the specifics of the case.

The expected duration of arbitration proceedings at the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry (ICAC) is 6 months.

Ukrainian law provides for the following stages of enforcement procedure:

-submission of application on recognition and enforcement of a foreign arbitral award to the local court; and,

-enforcement proceedings.

The duration of court proceedings is not clearly specified by Ukrainian law. In general, such proceedings should not last more than two months. But usually it may take longer to complete the proceedings as the judge has discretion to extend the time frame of the proceedings.

The duration of enforcement proceedings depends mainly on whether the debtor has enforceable assets and whether the enforce- ment measures are opposed by the debtor.

The court fee for filing the application on recognition and enforcement amounts to 0.5 living wage, i.e., approx. EUR 25.


The submission of an application for recognition/enforcement and representation in court:

EUR 6,000 to EUR 12,000.

Approximate Costs

COURT FEES

ATTORNEYS’ FEES (NET)

Enforcement of Foreign Arbitral Awards

-In order to recognize and enforce a foreign arbitral award, the applicant should submit a list of documents provided for under the relevant provisions of an international treaty to which Ukraine is a party or under Articles 468 and 476 of the Civil Procedure Code of Ukraine.

-All documents must be translated into Ukrainian.

Approximate Duration

The information in this chapter was correct as of 1 January 2018. If you have any questions about the content of this chapter,

or would like further information about arbitration in Ukraine, please contact

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