Ukrainian law provides for separate legal regimes with respect to domestic and foreign or internationalarbitration proceedings. The primary law regulating domestic arbitration covering disputes betweenUkrainian parties is the Law of Ukraine "On Courts of Arbitration" No. 1701-IV dated 11 May 2004. TheLaw of Ukraine "On International Commercial Arbitration" No. 4002-XII dated 24 February 1994 (the "ICALaw") regulates international arbitration proceedings conducted in Ukraine. The ICA Law is based on theUNCITRAL Model Law on International Commercial Arbitration.
According to the ICA Law, the following disputes can be submitted to an international arbitration inUkraine: disputes arising out of cross-border contracts in the course of foreign trade and other forms ofinternational economic relations, provided that the place of business of at least one of the parties to thedispute is situated outside of Ukraine; disputes involving enterprises with foreign investments orinternational associations or organizations established in Ukraine. The ICA Law may be interpreted asstating that disputes between two Ukrainian legal entities, provided that at least one of such entities has aforeign shareholder, may be subject to international arbitration.
The ICA Law provides that an international arbitration proceeding in Ukraine may be conducted either by atribunal set up specifically for a given case (ad hoc arbitration), or by an arbitral institution. The ICA Lawprovided for the establishment of the following two permanent Ukrainian arbitral institutions: theInternational 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 orcommercial international dispute, except for the following disputes which fall within the exclusivecompetence of Ukrainian courts: disputes on the validity of state acts and acts of legal entities; disputesarising 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 disputesbetween shareholders of a legal entity and disputes between a legal entity and its shareholder (except forcases when such disputes arise out of an agreement and all shareholders have concluded an arbitrationagreement with the legal entity); disputes concerning the protection of economic competition (except forcivil law aspects of disputes arising out of agreements); insolvency disputes; disputes between a legalentity and its manager(s) on compensation for damages caused to the legal entity; as well as otherdisputes the jurisdiction over which is expressly granted to Ukrainian courts. However, there is noexhaustive 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 alegal 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 shareholdersagreement. As a result, many joint venture projects are structured using non-Ukrainian holding entities at thelevel at which shareholders agreements are signed. This allows the parties to provide for arbitration in theshareholders 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 allowarbitration with respect to corporate disputes when there is an arbitration agreement in place between a legalentity and all of its shareholders, it is expected that more parties will be encouraged to opt for settling / decidingtheir 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 inthe contract between the parties or in the form of a separate arbitration agreement. An arbitrationagreement is also deemed to be made in writing if it is contained in documents signed by the parties or inan exchange of letters, telex, telegrams or other means of electronic communication which provide for arecord of an agreement, or in an exchange of statements of claim and defence in which the existence ofan agreement is alleged by one party and is not denied by the other. A reference in a contract to adocument containing an arbitration clause constitutes an arbitration agreement provided that the contractis executed in writing and the reference may be interpreted as making the arbitration clause an integralpart of the contract.
An arbitration agreement must expressly indicate the full name of the arbitral institution and the disputesthat the parties have agreed to submit to arbitration. However, any deficiencies of the arbitrationagreement's wording, any doubts as to its validity and enforceability should be interpreted in favour of thevalidity and enforceability of the arbitration agreement. The parties are free to agree on the substantivelaw, the procedural rules, the seat and language of arbitration, the number of arbitrators and the methodfor their appointment. If the parties do not agree on the applicable procedural rules in the arbitrationagreement 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 tothe arbitration agreement. If the parties fail to choose the applicable law, the arbitral tribunal will determinethe applicable law in accordance with the conflicts of law rules as provided for by the Law of Ukraine “OnPrivate 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 canbe justified.
The ICAC and MAC arbitration rules allow a party to obtain injunctive relief at its request. An arbitraltribunal may demand that a party should provide security deemed to be appropriate in connection withsuch measures. Such injunctive relief may be granted at any stage of an arbitral proceeding, as well asbefore the proceedings commence. An arbitral order for injunctive relief is binding on the parties andremains in force until a final arbitral award is made. However, the enforcement of such an arbitral order forinjunctive 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 evidencedirectly to the state court.
An arbitral award made under the ICA Law is final and binding for the parties. If a losing party refuses toperform it voluntarily, an award can be enforced according to the New York Convention on the Recognitionand Enforcement of Foreign Arbitral Awards.
The ICA Law does not provide for the possibility to appeal awards on their merits. An award may bechallenged only by initiating proceedings to set aside the award before a state court and only on thefollowing grounds:
-invalidity of the arbitration agreement due to the incapacity of one of the parties to conclude anarbitration 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 FOREIGNARBITRAL AWARDS
Foreign court judgments and arbitral awards are recognized and enforced in Ukraine based on an internationaltreaty between Ukraine and the relevant foreign state or based on the reciprocity principle. In case of theabsence of a treaty providing for recognition and enforcement, foreign judgments and awards may berecognized 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 ForeignArbitral Awards and the 1961 European Convention on International Commercial Arbitration, theprovisions of which were implemented into Ukrainian procedural laws. When it comes to awards renderedin non-contracting states (i.e. states which are not parties to the above-mentioned conventions), Ukrainewill apply the New York Convention only under the reciprocity principle.
According to the Civil Procedure Code of Ukraine, generally, applications for enforcement should besubmitted 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 ofappeals having jurisdiction over the city of Kyiv. An application for enforcement must contain details of theparties to the arbitral proceedings, the composition of the arbitral tribunal that rendered the award, the datethe 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 enforcementshould be supported by the following documents: (a) an original or a certified copy of the arbitral award; (b) anoriginal or a certified copy of the arbitration agreement; (c) evidence of payment of the filing fee; (d) a documentconfirming the powers/authority of the applicant (if the application for enforcement is submitted by itsrepresentative), and (e) a certified translation into Ukrainian of all documents listed above. Failure to observethe formal requirements as to the documents that must be submitted to the court will result in returning theapplication 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 forrecognition 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 arbitrationagreement 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 alsoset 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. Thedebtor may file a complaint with the relevant court against officers of the enforcement service responsiblefor enforcement of the foreign arbitral award.
TYPE OF PROCEEDINGS
PROCEDURE AND ASSUMPTIONS
There is no formal discovery in Ukraine.
-The arbitration fee payable for non-monetary claims amounts to USD1,800.
-Arbitration proceedings may alsoinvolve additional expenses.
Duration may be longer or shorter dependingon the case.
ATTORNEYS’ FEES (NET)
Procedural costs at the ICAC includeprimarily the registration fee and thearbitration fee:
The registration fee is USD 600.
The amount of the arbitration fee variesdepending on the amount in dispute,number of arbitrators involved, complexity ofthe case and administrative charges.
Examples: If the amount in dispute is
-USD 200,001 to USD 500,000 - thearbitration fee is USD 9,200 + 2% of theamount above USD 200,000;
-USD 500,001 to USD 1,000,000 - thearbitration fee is USD 15,200 + 1% of theamount above USD 500,000;
-USD 5,000,001 to USD 10,000,000 - thearbitration fee is USD 38,700 + 0.3% ofthe amount above USD 5,000,000;
-above USD 50,000,000 - the arbitrationfee is USD 118,700 + 0.1% of the amountabove 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 indispute of EUR 1,000,000: Review of 100pages of documents; no challenge to thejurisdiction of the arbitral tribunal; twoexchanges of submissions; review ofcorrespondence with arbitral tribunal; noexperts; preparation for an oral hearing andparticipation; preparation and review of onepost-hearing brief. Approx. total cost: EUR40,000 to EUR 50,000.
Assumptions based on the amount indispute of EUR 1,000,000: Review of 500-1,000 pages of documents; no challenge tothe jurisdiction of the arbitral tribunal; up tofour exchanges of submissions; review ofcorrespondence with arbitral tribunal;experts are involved; preparation for multipleoral hearings and participation in them;preparation and review of post-hearingbriefs. Approx. total cost: EUR 80,000 toEUR 100,000 or more depending on thespecifics of the case.
The expected duration of arbitrationproceedings at the International CommercialArbitration Court at the Ukrainian Chamber ofCommerce and Industry (ICAC) is 6 months.
Ukrainian law provides for the followingstages of enforcement procedure:
-submission of application on recognitionand enforcement of a foreign arbitral awardto the local court; and,
The duration of court proceedings is notclearly specified by Ukrainian law. In general,such proceedings should not last more thantwo months. But usually it may take longer tocomplete the proceedings as the judge hasdiscretion to extend the time frame of theproceedings.
The duration of enforcement proceedingsdepends mainly on whether the debtor hasenforceable 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 livingwage, i.e., approx. EUR 25.
The submission of an application for recognition/enforcement and representation in court:
EUR 6,000 to EUR 12,000.
ATTORNEYS’ FEES (NET)
Enforcement of Foreign Arbitral Awards
-In order to recognize and enforce aforeign arbitral award, the applicantshould submit a list of documentsprovided for under the relevantprovisions of an international treaty towhich Ukraine is a party or underArticles 468 and 476 of the CivilProcedure Code of Ukraine.
-All documents must be translated intoUkrainian.
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