Arbitration procedures and practice in Ukraine: overview

About 50% of the international arbitration disputes resolved in Ukraine are in the metallurgy, agribusiness and food industries. The International Commercial Arbitration Court (ICAC) at the Ukrainian Chamber of Commerce and Industry (UCCI) registers about 300 international cases per year. The larger commercial arbitration cases are typically resolved abroad, including under the auspices of the:

For example, the number of cases with the Ukrainian parties equally tiered with German and Russian parties) was the second largest in the SCC's caseload in 2018, not including those with Swedish parties.

The costs of domestic litigation are not high in Ukraine, although the traditional benefits of arbitration remain attractive. Notably, the resolution of disputes is speedy in Ukraine. In the ICAC in 2019, 90.6% of cases are resolved within six months of constitution of the tribunal.

 

The Law of Ukraine On International Commercial Arbitration adopted in 1994 (Arbitration Act) is the main legislative act governing international arbitration in Ukraine. In addition, the Civil Procedure Code of Ukraine (Civil Procedure Code) governs procedural issues, including the setting aside, recognition and enforcement of arbitral awards. Certain provisions as to the arbitrability of disputes can be found in other acts, including the:

The Arbitration Act almost completely mirrors the UNCITRAL Model Law on International Commercial Arbitration 1985 (UNCITRAL Model Arbitration Law) (in the original version without the 2006 amendments). The only major difference is the scope of application of the Arbitration Act. Under Article 1(2) of the Arbitration Act, the following disputes can be referred by the parties to international commercial arbitration:

 

Mandatory legislative provisions are set out in:

These provisions include requirements in relation to the:

A failure to observe these provisions can be a ground for challenging the arbitral award or for refusal by the competent court of enforcement of the arbitral award.

 

The Arbitration Act does not set out a list of non-arbitrable disputes. According to the Commercial Procedure Code, the following types of disputes are non-arbitrable:

The civil aspects of the following disputes are arbitrable:

Corporate disputes involving company shareholders can only be submitted to arbitration if the company and all of its shareholders have entered into the arbitration agreement. This applies to disputes such as:

 

If Ukrainian law governs the dispute, the parties should be prudent about initiating the arbitration proceedings in good time because the limitation periods in commercial matters are a matter of substantive law and the claims can otherwise be dismissed on the merits.

The general limitation period is three years, and it applies equally to contractual and non-contractual claims as well as to both companies and natural persons. Extended or shortened limitation periods are also applicable to certain types of claims.

The two main international arbitral institutions in Ukraine are the International Commercial Arbitration Court and Industry (ICAC) and the Maritime Arbitration Commission (MAC) at the Ukrainian Chamber of Commerce and Industry (UCCI). Parties also frequently choose the:

The parties are also free to choose Ukraine as a seat for an ad hoc arbitration.

 

Ukrainian law recognises the concept of kompetenz-kompetenz (competence-competence), according to which an arbitral tribunal must decide on its own jurisdiction (Article 16, Arbitration Act). When a party challenges the jurisdiction of the arbitration tribunal, it is a matter for the tribunal to rule on its own jurisdiction. A party can challenge an award given by a tribunal seated in Ukraine in the competent court (at the Kyiv Court of Appeal, with a possibility of appeal to the Supreme Court) or raise a defence when the award is brought for enforcement before the court.

An arbitration agreement must be in writing under Arbitration Act. An arbitration agreement "in writing" for this purpose includes:

The Arbitration Act does not provide for specific requirements for the substantive validity of an arbitration agreement and the general rules of contract law therefore apply.

See above, Substantive/formal requirements.

 

The jurisprudence of both the International Commercial Arbitration Court and Ukrainian courts recognises the validity of asymmetric dispute resolution clauses, which are generally referred to as provisions that grant more rights to one of the parties, including a right for one party to choose between arbitration or litigation. The jurisprudence of the Ukrainian courts has proved the readiness of the courts to uphold such provisions and give them effect.

 

Ukrainian law is silent on the joinder of parties that are not party to the arbitration agreement to the arbitration proceeding. Therefore, the issue of joinder primarily depends on the applicable arbitration rules. In an International Commercial Arbitration Court (ICAC) arbitration, under Article 22 of the ICAC Arbitration Rules, a third party is allowed to join or to be involved in the arbitral proceedings if:

An ICAC tribunal will otherwise be reluctant to join a third party that is not party to the arbitration agreement.

 

An arbitration agreement between the parties is required for a party to compel another party to arbitrate disputes. If a party cannot show the existence of such an agreement between the parties, it will not be able to compel another party to arbitration.

Ukrainian courts have not developed case law extending arbitration agreements to third parties similar to those existing in other jurisdictions. However, the Supreme Court has recently confirmed in respect of Ukrainian law-governed agreements that arbitration agreements are transferred along with the assignment of a contract, making a new creditor bound by an arbitration agreement in the original contract.

 

The Arbitration Act mirrors the approach established in Article 16(1) of the UNCITRAL Model Arbitration Law with respect to the separability of an arbitration agreement. In a recent decision (Case No 756/618/14, dated 27 March 2019), the Ukrainian Supreme Court explicitly endorsed the principle of separability of the arbitration agreement and interpreted this principle. The court concluded that:

If a party commences court proceedings in breach of an arbitration agreement, the court must, on application of the defendant, refuse to consider that claim (Article 226(1.7), Commercial Procedure Code; Article 257(1.5), Civil Procedure Code). The defendant must file such an application before consideration of the case on the merits begins, and before it files its first application on the merits. The court can deny such an application if it finds that the arbitration agreement is null and void, inoperative or incapable of being performed.

An arbitral tribunal seated in Ukraine cannot commence an arbitration unless there is a valid arbitration clause. Under the "competence-competence" concept, the arbitration tribunal can review the validity of an arbitration agreement. The opposing party can later challenge the award (seek to set it aside) in the competent Ukrainian courts or seek refusal of enforcement of such an award.

 

Ukrainian courts have a wide discretion to grant interim measures. However, there is no jurisprudence where the Ukrainian highest courts restrained proceedings initiated abroad in breach of an arbitration agreement.

 

The Arbitration Act does not restrict the appointment of arbitrators. The only requirement is for arbitrators to be independent and impartial. Under the ICAC Arbitration Rules, only arbitrators listed in the Recommendatory List of the ICAC Arbitrators can be appointed by the parties or by the President of the Ukrainian Chamber of Commerce and Industry.

 

There are no specific requirements relating to arbitrators' independence and impartiality under Ukrainian law. The ICAC Rules provide only for basic requirements, such as that an arbitrator cannot be:

IBA Guidelines on Conflicts of Interest in International Arbitration are frequently referred to by the parties in applications to disqualify the arbitrator.

The Arbitration Act and the ICAC Arbitration Rules provide for similar default rules as to the formation of an arbitral tribunal. Under the default scenario, parties jointly appoint a sole arbitrator within 30 days after receipt of a notice from the International Commercial Arbitration Court (ICAC). In an arbitration with three arbitrators, each party appoints one arbitrator and the party-appointed arbitrators, in turn, jointly appoint the presiding arbitrator within 30 days of their appointment. In the case of default in any of the above, the President of the Ukrainian Chamber of Commerce and Industry (UCCI) appoints the arbitrator(s) from the Recommendatory List of the ICAC Arbitrators. In the case of a sole or third arbitrator, the President of the UCCI preferably appoints an arbitrator of a nationality other than those of the parties.

No licence is needed to practice as arbitrator in Ukraine.

An arbitrator can be challenged based on lack of impartiality, independence or qualifications as agreed by the parties. Under the default scenario, a party must challenge an arbitrator in writing within 15 days after it becomes aware of the formation of the arbitral tribunal or existence of the ground for challenge. If an arbitral tribunal dismisses the challenge, a party can as a last resort apply to the President of the UCCI within 30 days after notification of the dismissal to decide this issue.

Under both the Arbitration Act and the ICAC Arbitration Rules, a new arbitrator must be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. Therefore, the same default rules applicable to the initial appointment of the arbitrator(s) apply.

 

The Arbitration Act sets out a broad rule that arbitration proceedings must be commenced when the respondent receives a request for arbitration (Article 21, Arbitration Act). The parties can agree to derogate from this rule.

Ukrainian law does not limit party autonomy in determining procedural rules, provided that the arbitral tribunal treats the parties equally and each party has an opportunity to present its case.

However, the Arbitration Act does set deadlines for pleas:

Nevertheless, the Arbitration Act does not limit the tribunal's discretion to consider such pleas at a later stage. The Arbitration Act also defines the grounds for termination of the arbitral proceedings.

The Arbitration Act provides for default rules for, among other things, the:

In arbitration, the parties are free to agree on the rules of disclosure and Ukrainian law does not explicitly limit the powers of arbitral tribunals in relation to the production of evidence. However, arbitral tribunals lack compelling powers and can apply to local courts to order the production of evidence (see Question 23).

In arbitration, the parties are free to agree on the rules of disclosure, and the scope and procedure for disclosure varies. Ukrainian law does not explicitly limit the powers of arbitral tribunals in relation to disclosure, but arbitral tribunals lack compelling powers and can apply to local courts to order the production of evidence (see Question 23).

In domestic court litigation, there is no obligation to disclose documents that adversely affect the party's own case or support another party's case. A party will disclose only the documents on which it relies, although in certain cases the court can order a party to disclose specific documents.

In arbitration, the parties are free to agree on the rules of disclosure.

The Arbitration Act does not explicitly provide for the confidentiality of arbitration proceedings seated in Ukraine. Therefore, confidentiality depends on the specific rules applicable to arbitration proceedings. Article 68 of the ICAC Arbitration Rules stipulates that the consideration of cases and other related activities of the International Commercial Arbitration Court are confidential, unless otherwise agreed by the parties.

 

The Civil Procedure Code provides local courts with procedural powers to support arbitration by obtaining evidence, including ordering the:

A local court exercises these powers based on a request of the arbitral tribunal or, with the tribunal's consent, based on an application by a party to the arbitral proceedings. In addition, a local court can grant an injunction in support of arbitration on application of a party to the arbitral proceedings.

The Civil Procedure Code establishes a general rule that the appellate civil court at the place of the action to be performed has jurisdiction to consider applications for arbitration-related matters including, in particular, applications to secure evidence, compel witnesses to provide evidence, and so on. An applicant for an injunction in support of arbitration can file the application with the appellate civil court at the seat of arbitration, or location of the defendant or its property.

There is a low risk of a national court intervening to frustrate or delay an arbitration seated in Ukraine. The primary remedy for an aggrieved party is a challenge to the award rendered by the arbitral tribunal. There are few instruments to frustrate or delay arbitration through the national courts.

See above, Risk of court intervention.

 

Neither the Arbitration Act nor court jurisprudence provide a clear answer to the effect on the arbitration of a pending insolvency of one or more of the parties to the arbitration. Article 7 of the Bankruptcy Code provides for a rule consolidating all pecuniary claims to the debtor within bankruptcy proceedings, which will likely apply only to court proceedings. Therefore, arbitration will not automatically be stayed or terminated pending insolvency of one or more of the parties to arbitration. However, there may be difficulties in enforcing the award. In addition, from a practical perspective, it is advisable for the creditor to file its claims in the bankruptcy court, since there is a prescription period of 30 days on official publication of the bankruptcy proceedings, which cannot be renewed. A failure to meet this period will cost the creditor voting rights.

An arbitral tribunal has wide discretion to order interim measures under Article 17 of the Arbitration Act. Specifically, an arbitral tribunal can, at the request of a party, order any interim measure of protection that the arbitral tribunal considers necessary in respect of the subject-matter of the dispute. Under Article 25 of the ICAC Rules, the International Commercial Arbitration Court (ICAC) President or, once composed, the arbitral tribunal, can determine the size and form of a security for interim measures.

Both the Arbitration Act and the ICAC Arbitration Rules do not specifically address the issue of ex parte applications. Therefore, from a practical perspective, nothing prevents the arbitral tribunals or the ICAC President from granting interim measures on an ex parte basis.

The Arbitration Act gives the tribunal the power to order parties to provide security for arbitration costs in relation to the arbitral proceedings or for a specific measure.

 

The Arbitration Act does not impose restrictions on the arbitral tribunal in respect of final remedies. Arbitral tribunals can grant the same remedies as Ukrainian courts.

An award granted in international commercial arbitration seated in Ukraine can be set aside by the local courts.

The grounds for setting aside an arbitral award are set out under Article 34 of the Arbitration Act. Since the Arbitration Act is based on the UNCITRAL Model Arbitration Law, the grounds mirror those set out in Article 34 of the UNCITRAL Model Arbitration Law.

A party to the arbitration proceedings can file an application for setting aside the award with the court of appeal at the seat of the arbitration (Article 454, Civil Procedure Code). Having received the application, the court reviews it for compliance with the formal requirements. If those requirements are satisfied, it commences proceedings within up to five days. The court also sets a deadline for the parties to provide their objections, submissions and evidence. The Civil Procedure Code provides that the court must consider a setting-aside application within 30 days of receipt. However, the actual process tends to take longer. After consideration, the court issues a ruling, which can then be appealed to the Supreme Court.

The Arbitration Act does not allow the parties to waive any rights to seek a setting aside of the award.

 

A party can apply to set aside an award of an international commercial arbitration seated in Ukraine within three months of receiving the award (Article 454(6), Civil Procedure Code; Article 34(3), Arbitration Act). If a party requests the tribunal to correct an error in the award or give an interpretation of the award or make an additional award, the three-month limitation period starts running from the day when the tribunal disposes of the request (Article 454(6), Civil Procedure Code; Article 34(3), Arbitration Act).

 

Legal fees are not fixed by Ukrainian law. In practice, legal fee structures vary, while clients and counsel choose the most suitable arrangements. Third party funding is not well established in Ukraine, and there are no definite rules regarding it. Contingency fees are technically legal, but there is recent jurisprudence from the Ukrainian Supreme Court where it refused to enforce a contingency fee arrangement between an attorney and his client.

The Arbitration Act does not address the issue of cost allocation, and the parties are free to agree on this. Under the ICAC Arbitration Rules, the general rule is that the losing party bears the arbitration fee, and the arbitration fee is allocated proportionally between the parties if a claim is granted in part. The parties bear their own expenses unless the arbitral tribunal finds that the winning party's costs are reasonable and should be borne by the losing party.

Typically, the party claiming costs calculates its costs, and the other party has an opportunity to comment on that calculation.

The tribunal must consider whether the claimed expenses of a party are reasonable and justified. In addition, based on the facts of a particular case, the tribunal may deviate from the general rule as to the allocation of the arbitration fees, additional costs of the International Commercial Arbitration Court and expenses of the parties. For example, the tribunal can take into account a party's bad faith acts or dilatory tactics and order the party to pay the associated additional expenses incurred.

 

Domestic awards (that is, international arbitration awards rendered in Ukraine) are enforceable in Ukraine according to the same procedure as arbitral awards made outside Ukraine. Under Article 477 of the Civil Procedure Code, the Kyiv Court of Appeal acting as the first instance court must consider the enforcement application within two months of the date of filing the application.

A court ruling can be appealed to the Supreme Court, which acts as an appellate instance. The Supreme Court will consider a statement of appeal within 60 days of commencement of the appeal proceedings, but in practical terms it can take up to six months for the Supreme Court to complete appellate proceedings.

 

Ukraine ratified the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention) in 1960 and it entered into force for Ukraine the following year. Ukraine has made the reservation that it applies the provisions of the New York Convention in respect of arbitral awards made in the territories of non-contracting states only to the extent to which they grant reciprocal treatment.

Ukraine is also a party to the:

A foreign arbitration award is in principle enforceable in Ukraine. Article 474(1) of the Civil Procedure Code establishes two regimes for enforcement of foreign arbitration awards:

Since Ukraine is a party to the New York Convention, most foreign awards, including UK and US awards, are recognised and enforced under this Convention. Ukraine is also party to several other international bilateral and multilateral treaties allowing reciprocal recognition and enforcement of arbitral awards.

If a foreign arbitration award originates in a jurisdiction that does not have a relevant international treaty with Ukraine, a Ukrainian court may allow recognition and enforcement of the award under the principle of reciprocity. Article 474(2) of the Civil Procedure Code presumes the existence of reciprocity, unless a party proves otherwise.

An application to enforce a foreign arbitration award is brought to the Kyiv Court of Appeal, acting as a first instance court. On receipt of the application, the court provides a copy of the application to the debtor within five days and grants a month to provide a reply. On receipt of a reply, or if a reply is not received within a one-month period, the court schedules a hearing and issues a ruling granting or refusing the application.

Article 36 of the Arbitration Act mirrors Article V of the New York Convention in setting out an exhaustive list of grounds for refusal of enforcement and recognition of foreign arbitral awards. In addition, there is a similar list of grounds for refusal of recognition and enforcement of foreign arbitration awards in Article 478 of the Civil Procedure Code. The courts must limit their review to the list of grounds set out in these provisions. According to jurisprudence and clarifications from the superior courts, the courts cannot amend or change the relief granted by the arbitration tribunal or review the merits of the arbitration award.

A party can appeal the first instance court ruling granting or refusing enforcement to the Supreme Court acting as a court of appeal. The Supreme Court considers the statement of appeal and can review the reasoning of the first instance court. The resolution of the Supreme Court upholding or cancelling the ruling of the first instance court becomes final and binding on the parties. After the Supreme Court's review, the case file returns to the first instance court, which issues a writ of execution allowing the creditor to commence collection or compel mandatory performance from the debtor.

It is also notable that the ICSID awards do not to undergo the recognition and enforcement procedure under the ICSID Convention. However, there is a recent jurisprudence of the Ukrainian courts reviewing such applications and granting enforcement under the New York Convention.

Article 475(3) of the Civil Procedure Code imposes a three-year limitation period to enforce an international arbitral award (as well as a domestic award). The court can renew an expired limitation period on request of an applicant, if finds that the reasons for late filing are justifiable (Article 475(4), Civil Procedure Code). The procedural law is silent on what reasons are "justifiable" and the court therefore has discretion to define which reasons fall under this term.

Enforcement proceedings in Ukraine are the same whether they are for international arbitration awards rendered in Ukraine or rendered abroad. See Question 32.

The Civil Procedure Code does not set out any consequences for f