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Ukrainian court confirms enforceability of UNCITRAL award rendered against Russian Federation
Author: Markiyan Kliuchkovskyi, Oleksandr Volkov
Source: Thomson Reuters Practical Law . – 31 July 2019
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The Kyiv Court of Appeal has allowed the recognition and enforcement of Crimea awards rendered under the Ukraine-Russia bilateral investment treaty (BIT) against Russia. Russia had refused to participate in the arbitrations. On an application to enforce the award, the Ukrainian court found that the New York Convention provides a presumption of enforceability, which obliges a petitioner to show only an arbitration agreement and an award itself, without an obligation to prove that the agreement, arbitral procedure and an award comply with any other requirements. If the defending party raises no objections and invokes no grounds to refuse recognition and enforcement, the Ukrainian court would only be concerned with Article V(2) of the New York Convention, which obliges it to ex officio consider arbitrability and public policy defences. Here, the court determined that the parties had a duly concluded arbitration agreement and that the required procedural steps had been complied with. The court found that the award was final and binding, was not contested and was not executed, and that no grounds existed to refuse recognition and enforcement under Article V of the New York Convention, including the arbitrability and public policy grounds. In light of the recent trend that has seen the recognition and enforcement of Crimea awards, the court found no difficulties in determining that a dispute over unlawful taking of property, resolved under the bilateral investment treaty, is arbitrable and the award may be enforced with no harm to public policy. (The Public Joint-Stock Company "State Savings Bank of Ukraine" v Russian Federation represented by Ministry of Justice, Case No 824/66/19 (17 July 2019).)

On 17 July 2019, the Kyiv Court of Appeal granted a petition by Ukrainian state-owned company (Oschadbank) and allowed the recognition and enforcement of a UNCITRAL award regarding the annexation of Crimea rendered against the Russian Federation.

In 2015, Oschadbank began arbitration proceedings against Russia under the Agreement between the Government of the Russian Federation and the Cabinet of Ministers of the Ukraine on the Encouragement and Mutual Protection of Investments (27 November 1998) (the Ukraine-Russia BIT). It claimed compensation for expropriation of its assets in Crimea that were unlawfully annexed in 2014. Russia refused to participate and, on 26 November 2018, the three-member Paris-seated tribunal rendered a billion-dollar award.

In spring 2019, Oschadbank filed an enforcement petition before the Ukrainian courts under the New York Convention, to which both Russia and Ukraine are parties. On 2 May 2019, the Kyiv Court of Appeal informed the Russian Embassy in Ukraine and the Russian Ministry of Justice (MOJ) of the petition and granted them a month to provide a reply. Russia remained silent and did not appear at the hearings on 25 June 2019 and 17 July 2019.

On 17 July 2019, the Kyiv Court of Appeal rendered its ruling. In light of the non-appearance of Russia, the court had to be persuaded that Russia's procedural rights were ensured. In this respect, the court found that Russia was duly notified of the proceedings, since both its Embassy in Ukraine and the MOJ received notices from the court. In addition, the court cited the European Court of Human Rights jurisprudence, in particular, a decision in Ponomaryov v. Ukraine, and ruled that parties are obliged to undertake actions to be informed of court proceedings of which they are aware.

The Ukrainian court then interpreted that the New York Convention provides a presumption of enforceability of an arbitral award, which obliges a petitioner to show only an arbitration agreement and an award itself, without an obligation to prove that the agreement, arbitral procedure, and an award comply with any other requirements. If the defending party raises no objections and invokes no grounds to refuse recognition and enforcement, the Ukrainian court would only be concerned with Article V(2) of the New York Convention, which obliges it to ex officio consider arbitrability and public policy defences. Here, the court determined that the parties had a duly concluded arbitration agreement, as set out in Article 9(2) of the Ukrainian-Russian BIT, which is part of Ukrainian law, and that the required procedural steps regarding the appointment of the arbitral panel and notifying all parties to arbitration had been complied with. More importantly, having no evidence to the contrary, the court found that the award was final and binding, was not contested and was not executed. Finally, the court found no grounds to refuse recognition and enforcement under Article V of the New York Convention, including the arbitrability and public policy grounds.

In light of the recent trend that has seen the recognition and enforcement of Crimea awards, the court found no difficulties in determining that a dispute over the unlawful taking of property, resolved under the relevant BIT, is arbitrable and the award may be enforced with no harm to public policy.

Russia is likely to appeal the ruling to the Supreme Court, and probably will rely on its public allegations that it launched a set aside procedure in the French courts, or invoke a state immunity defence. Based on other recent the Supreme Court decisions, these arguments are unlikely to prevent recognition and enforcement of the award.

Case: The Public Joint-Stock Company "State Savings Bank of Ukraine" v Russian Federation represented by Ministry of Justice, Case No 824/66/19 (17 July 2019).