The Legal 500: 2nd Edition Arbitration Country Comparative Guide - Ukraine
Автор: Олексій Дідковський, Дмитро Шемелін, Катерина Шокало
Джерело: The Legal 500: 2nd Edition Arbitration Country Comparative Guide

1.   What legislation applies to arbitration? Are there any mandatory laws?

The Law of Ukraine "On International Commercial Arbitration" adopted in 1994 (the "Arbitration Act") is the main legislation act governing the international arbitration in Ukraine. Furthermore, the Civil Procedure Code of Ukraine (the "CPC") governs the procedural issues as to the setting aside, recognition and enforcement of arbitral awards. Certain provisions as to the arbitrability of disputes may be found in other acts, including the Commercial Procedure Code of Ukraine (the "CoPC") and the Law of Ukraine “On Private International Law” (the "PILA").

2.   Is the country a signatory to the New York Convention? Are there any reservations to the general obligations of the Convention?

Ukraine ratified the New York Convention in 1960 and it entered into force for Ukraine the next year. As for the reservations, Ukraine applies the provisions of the New York Convention in respect of arbitral awards made in the territories of non-contracting States and only to the extent to which they grant reciprocal treatment.

3.   What other arbitration-related treaties and conventions is the country a party to?

Ukraine is a party to the European Convention on International Commercial Arbitration (entered into force for Ukraine in 1994), to the Agreement on Settlement of Disputes Related to Commercial Activity (between CIS countries, since 1992) as well as to the ICSID Convention.

4.   Is the law governing international arbitration based on the UNCITRAL Model Law? Are there significant differences between the two?

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

  1. disputes arising out of contractual and other civil law relations in the course of foreign trade and other forms of international economic relations if the place of business of at least one of the parties is situated abroad; and
  2. disputes arising between enterprises with foreign investment, international associations and organisations established in Ukraine; disputes between the participants of such entities, as well as disputes between such entities and other subjects of the law of Ukraine.

5.   Are there any impending plans to reform the arbitration laws?

In October 2017 the Ukrainian Parliament adopted the Draft Law No 6232 "On the amendments to the Commercial Procedure Code of Ukraine, Civil Procedure Code of Ukraine, the Code of Administrative Procedure of Ukraine and other legal acts" (the "Draft Law"). The Draft Law has not been signed by the President of Ukraine yet, however, considering that it is the President of Ukraine who introduced this Draft Law, it is expected to be signed shortly. The most significant amendments introduced by the Draft Law are outlined below in the respective chapters.

6.   What arbitral institutions (if any) exist? Have there been any amendments to their rules or are there any being considered?

There are two international arbitral institutions in Ukraine – the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry (the "ICAC") and the Maritime Arbitration Commission at the Ukrainian Chamber of Commerce and Industry (the "MAC"). The ICAC New Arbitraiton Rules were approved on 27 July 2017, are currently widely discussed, and will be effective as of 1 January 2018. The major amendments are as follows:

  1. introduction of the expedited arbitral proceedings;
  2. more detailed regulation of the issue of the interim measures, including the requirements for the motion for interim measures, modification or termination of interim measures, cross-undertakings.
  3. introduction of obligatory determination of the amount of the claim, even if the claim or its part is non-monetary;
  4. regulation of the issue of the procedural succession.

7.   What are the validity requirements for an arbitration agreement?

As regards the validity of an arbitration agreement, the Arbitration Act sets forth primarily that the arbitration agreement shall be in writing. An arbitration agreement "in writing" includes an agreement contained in a document signed by the parties or in an exchange of letters and other means of telecommunication which provide a record of the agreement, or in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by another. The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement provided that the contract is in writing and the reference is such as to make that clause part of the contract. Meanwhile, sometimes Ukrainian courts decide the issue of formal validity of arbitration agreement in a highly formalistic way. For instance, in ANT YAPI Turkey v Ukrnekstpulbrut LLC case the court considered the application of the ANT YAPI Turkey for setting aside the arbitral award. The court of appeal decided that the arbitration clause was not valid based on the lack of signature on the Russian version of the Addendum of the Guarantee Agreement (the text of which prevailed) notwithstanding inter alia that the English version thereof was duly executed. This case is now pending before the court of cassation, so there is still a hope that this decision will not illustrate the approach of Ukrainian courts.

As regards the substantial validity of an arbitration agreement, the Arbitration Act does not provide for specific requirements and, therefore, the general rules of contract law apply.

8.   Are arbitration clauses considered separable from the main contract?

The Arbitration Act mirrors the approach established in the Article 16 (1) of 1985 UNCITRAL Model Law with respect to the separability of the arbitration agreement.

9.   Is there anything particular to note in your jurisdiction with regard to multi-party or multi-contract arbitration?

The Arbitration Act does not address this issue and the ICAC Arbitration Rules provide for typical default procedure in case of multi-party arbitration.

10.         How is the law applicable to the substance determined?

According to the general rule the arbitral tribunal shall apply the rules of law chosen by the parties. In absence of such choice the arbitral tribunal determines the applicable rules of law based on the conflict of laws rules which it considers applicable in the particular case. In Ukraine, such rules of conflict of laws are mostly established in the PILA. Meanwhile, notwithstanding the parties' choice of law the mandatory provisions of Ukrainian law prevail and, therefore, shall be applied by the arbitral tribunal.

11.         Are any types of dispute considered non-arbitrable? Has there been any evolution in this regard in recent years?

The Arbitration Act does not provide for the list of non-arbitrable disputes. Meanwhile, the CoCP and the PILA contain the provisions which Ukrainian courts in a number of cases interpret as the provisions establishing non-arbitrability of certain disputes. In particular, according to the CoCP the following categories of disputes may not be referred to the domestic arbitration ("treteiskyi") court:

  1. disputes on invalidation of public acts,
  2. disputes arising out of the public procurement contracts,
  3. disputes arising out of corporate relations and between the company and its participants (founder, shareholder, member), including a former participant, as well as between the participants and related to the establishment, activities, management and liquidation of the company, the rights and obligations of the participants of such company, and excluding the labour disputes;
  4. other disputes as provided by law.

Notwithstanding the reasonable grounds to apply the above-mentioned provisions on non-arbitrability merely to the domestic arbitration, which is subject to separate regulation, Ukrainian courts tend to apply them to international arbitration as well. This topic has been the hot debate in Ukraine particularly in respect to the arbitrability of corporate disputes.
Pursuant to the PILA Ukrainian courts exercise exclusive jurisdiction over certain types of disputes, including the following:

  1. disputes concerning the real estate located in Ukraine;
  2. intellectual property disputes involving registration of intellectual property rights or issuance of certificate (patent) in Ukraine;
  3. disputes arising out of bankruptcy proceedings of the company registered in Ukraine;
  4. disputes concerning the issuance or cancellation of securities issued in Ukraine.

According to the amendment to the Law of Ukraine "On privatization of state property" adopted in early 2016 the disputes between seller and purchaser arising out of or in connection with the contract for sale of the object of privatization may be referred to international commercial arbitration.
Based on the amendments established in the Draft Law, certain changes in arbitrability of disputes are expected. The Draft Law both broadens the scope of non-arbitrability of certain types of disputes and limits the scope of non-arbitrability of other ones. In particular, according to the Draft Law the following types of disputes are recognised as non-arbitrable:

  1. disputes on invalidation of public acts;
  2. disputes on state registration and recording of real estate, intellectual property rights, rights on securities;
  3. disputes arising out of the public procurement contracts, except for the civil law aspects of such disputes;
  4. disputes on the privatisation of state property (not including the state residential fund), except for the civil law aspects of such disputes;
  5. disputes arising out of the corporate relations, including between the company and its participants, including a former participant, as well as between the participants of the company and related to the establishment, activities, management and liquidation of the company, except for the labour disputes. However, such disputes arising out of the agreement may be referred to arbitration based on the arbitration agreement between a company and all its participants;
  6. certain disputes concerning unfair competition, except for the civil law aspects of such disputes;
  7. disputes arising out of bankruptcy proceedings, including the related disputes such as invalidation of the agreements with the debtor subject to the bankruptcy proceedings;
  8. disputes between the legal entity and its chief officer, including the former officer;
  9. other disputes as provided by law.

12.         Are there any restrictions in the appointment of arbitrators?

The Arbitration Act does not impose any restrictions as to the appointment of arbitrators. The only requirement is for arbitrators to be independent and impartial. Meanwhile, according to the ICAC Arbitration Rules (both the New Arbitration Rules and the ones currently in effect) only the arbitrators listed in the Recommendatory List of the ICAC Arbitrators may be appointed either by the parties or by the President of the Ukrainian Chamber of Commerce and Industry (the "UCC").

13.         Are there any default requirements as to the selection of a tribunal?

The Arbitration Act sets forth the default rules as to the selection of an arbitral tribunal and the ICAC Arbitration Rules correspond therewith. Thus, in case of default the parties shall jointly appoint the sole arbitrator within 30 days after receipt of a notice from the ICAC or, in an arbitration with three arbitrators, each party shall appoint one arbitrator, who, in turn appoint the presiding arbitrator within 30 days of their appointment. In case of any of the above default the President of the UCC 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 UCC shall take into account as well the advisability of appointing an arbitrator of a nationality other than those of the parties. There is no requirement to obtain a licence in order to practice as arbitrator in Ukraine.

14.         Can the local courts intervene in the selection of arbitrators? If so, how?

No, the local courts do not possess such powers.

15.         Can the appointment of an arbitrator be challenged? What is the procedure for such challenge? Has there been an increase in number of challenges in your jurisdiction?

Challenges to arbitrators are not popular in the ICAC practice.
An arbitrator may be challenged in the following scenarios:

  1. circumstances exist that give rise to justifiable doubts as to his impartiality or independence, or
  2. he/she does not possess qualifications agreed to by the parties.

A party may challenge an arbitrator appointed by a party itself, or in whose appointment a party has participated, only for reasons of which it becomes aware after the appointment has been made. Under the ICAC Arbitration Rules the procedure for such challenge is as follows:

  1. A party sends a written notice of challenge stating the reasons thereof to the ICAC within 15 days after being notified of the composition of the arbitral tribunal, or having become aware of circumstances that can serve as a reason for challenge.
  2. The ICAC Secretariat gives to the other party an opportunity to comment on the challenge.
  3. If the challenged arbitrator does not withdraw voluntarily or if the other party does not agree to the challenge, the ICAC Presidium makes the decision on the release of the arbitrator from his appointment.
  4. If a challenge is not successful, the challenging party may also request, within 30 days after having received a notice of the decision rejecting the challenge, the President of the UCC to decide on the challenge.
  5. The President of the UCC makes the decision which is subject to no appeal.

16.         What happens in the case of a truncated tribunal? Is the tribunal able to continue with the proceedings?

According to the ICAC Arbitration Rules the truncated tribunal is allowed to continue the arbitral proceedings, however, in a different way depending on the point of the arbitral proceedings when such issue arises. In particular, if it happens before the closure of the hearings of the case, a new arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. After the closure of the hearings, the ICAC Presidium may, taking into account the opinions of the remaining members of the arbitral tribunal and of the parties as well as the circumstances of the case, make the decision to continue the arbitration with the truncated tribunal.

17.         Are arbitrators immune from liability?

Ukrainian law does not establish expressly immunity for the members of arbitration tribunal. The Criminal Code of Ukraine provides for criminal liability for abuse of powers by the "treteiskyi" arbitrator, which is normally understood as an arbitrator in domestic arbitration. Nevertheless, the term "treteiskyi" may be used in relation not only to domestic arbitration but also to international arbitration. To our knowledge, there has not yet been a reported court decision involving this issue.

18.         Is the principle of competence-competence recognised? What is the approach of local courts towards a party commencing litigation in apparent breach of an arbitration agreement?

The Arbitration Act recognises the principle of competence-competence.

Under the Arbitration Act a court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests no later than when submitting its first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed. Ukrainian courts generally tend to comply with this provision, however, they also tend to scrutinize in detail the issue of validity of arbitration agreement on this stage.

19.         How are arbitral proceedings commenced? Are there any key provisions under the arbitration laws relating to limitation periods or time bars of which the parties should be aware?

Under the Arbitration Act the arbitral proceedings commence on the date on which a request for arbitration is received by the respondent provided that the parties did not agree otherwise. If the dispute is referred to arbitration under the ICAC Arbitral Rules, than the arbitral proceedings are deemed to be commenced upon receipt of the duly filed statement of claim and after the full payment by the claimant of the arbitration fee. Notably, the issues of initiation and commencement of arbitral proceedings are distinguished under the ICAC Arbitration Rules.

Under Ukrainian law the limitation periods in commercial matters are a matter of substantive law. The general limitation period is three years and it applies equally to the contractual and non-contractual claims as well as both to the companies and the natural persons. The extended or limited limitation periods are also applicable to certain types of disputes. Under the general rule the case is admitted for consideration but dismissed on the merits if the claim is filed outside the limitation period. So, it is advisable for the parties to be prudent about filing the claim timely if Ukrainian substantive law governs the dispute.

20.         What happens when a respondent fails to participate in the arbitration? Can the local courts compel parties to arbitrate? Can they order third parties to participate in arbitration proceedings?

In case of the default of the respondent under the Arbitration Act the arbitral proceedings may be continued provided that other requirements, particularly as to the due notification, were met. Additionally, such failure per se should not be treated as an admission of the claimant's allegations.

Ukrainian courts do not possess the powers to compel parties to arbitrate, including the third parties.

21.         In what circumstances is it possible for a state or state entity to invoke state immunity in connection with the commencement of arbitration proceedings?

Ukrainian law recognises State immunity in respect of court proceedings, but does not specifically address immunity in international arbitration. There is currently no court practice addressing this issue either.

22.         In what instances can third parties or non-signatories be bound by an arbitration agreement or award?

Ukrainian law and court practice generally recognise the possibility to extend effect of an arbitration agreement on the third party based inter alia on the rules of assignment. However, if the award in favour of the principal debtor was rendered, possibility of recognition and enforcement of the award in favour of its successor or assignee (instead of the creditor under the arbitral award) is highly problematic in practice. In particular, some courts have found that under the CPC it is possible to file an application for recognition and enforcement of arbitral award only by the creditor under the arbitration award.

23.         What interim measures are available? Will local courts issue interim measures pending the constitution of the tribunal?

An arbitral tribunal enjoys discretion in ordering the interim measures. As to the power of local courts, the Arbitration Act in its current wording provides for merely the general rule that it is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant such measure. Due to an inconsistency in the CPC local courts do not possess the power to grant any interim measure in support of arbitration. However, the Draft Law largely fills this gap providing for the rights of local courts to order interim measures in support of arbitration, including the freeze of assets and prohibition to exercise certain actions.

24.         Are there particular rules governing evidentiary matters in arbitration? Will the local courts in your jurisdiction play any role in the obtaining of evidence?

Under the Arbitration Act the arbitral tribunal is empowered to determine the admissibility, relevance, materiality and weight of any evidence, however, no specific rules of evidence are established. The Arbitration Act also generally provides for the right of arbitral tribunal or a party with the approval of the arbitral tribunal to request from local court assistance in taking evidence. It also provides that the court may execute the request within its competence and according to its rules on taking evidence. In practice, however, local courts do not exercise such powers. The Draft Law provides for the procedural right of local courts to support arbitration in the issue of obtaining of evidence by application of the party or arbitral tribunal, including witness examination and appointment of expert examination.

25.         What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings?

There are no national standards regulating the ethical issues specifically in the field of arbitration. The general ethical rules therefore apply.

26.         How are the costs of arbitration proceedings estimated and allocated?

The Arbitration Act does not address this issue and the parties are free to agree on the allocation of the costs. Under the ICAC Arbitration Rules the general rule is that the losing party bears the arbitration fee, including proportional allocation of the arbitration fee in case a claim is granted in part. The expenses of the parties are born by themselves unless the arbitral tribunal finds the amount of the costs incurred by the winning party reasonable to be borne by the losing one. Imposing the legal costs on the losing party is seen as a sanction and must be specifically pleaded.

27.         Can pre- and post-award interest be included on the principal claim and costs incurred?

The issue of pre- and post-award interest is regulated by rules of Ukrainian contract law as the Arbitration Act is silent on this issue. In general, 3 per cent interest rate is calculated on the amount of indebtedness annually unless specific rules apply or the parties agreed otherwise. As regards post-award interest, theoretically, the arbitral tribunal may award 3 per cent annual interest on the amount awarded until its full payment. However, in practice, this issue turned out to be problematic due to the absence of direct provision allowing the court or the bailiff to calculate the exact amount of the post-award interest. For instance, in Nibulon SA v Company Rise case this issue has become the central one. This case is now pending before the High Civil and Criminal Court of Ukraine and its outcome, not being obligatory, may nevertheless outline the practical possibility of recovering post-award interest in Ukraine. Furthermore, the Draft Law fills the above mentioned gap explicitly allowing the post-award interest and establishing the right of the bailiff to calculate the exact amount due on the date of enforcement of the arbitral award.

28.         What legal requirements are there for the recognition of an award?

An arbitral award may be refused in recognition only based on the grounds established in the Article V of the New York Convention. A party seeking enforcement of arbitral award shall be prudent to furnish to the court all documents required by the New York Convention as Ukrainian courts tend to be formalistic in this respect. Additionally, under the Arbitration Act an award shall be reasoned (unless the parties agreed otherwise or an award on agreed terms is at issue), “in writing” and signed by the arbitrator(s) as well as the award shall contain date and place of arbitration.

29.         Does the law impose limits on the available remedies? Are some remedies not enforceable by the local courts?

Ukrainian law does not impose specific limits on the remedies available before arbitral tribunal if they are in line with the applicable law. Practical enforcement of the remedies, which do not envisage payment of a specific sum, by the enforcement bodies is, however, very difficult in Ukraine. For instance, courts may find violation of public policy if the arbitral award imposes obligations in contradiction with the mandatory rules of law. In JKX v Ukraine case the court considered the application for recognition and enforcement of emergency arbitrator award in which the arbitrator ordered Ukraine not to impose royalties on gas production higher than 28 per cent, in contrast with then applicable 55 per cent. While the case was considered in several retrials, the court of appeal, for instance, refused to recognize and enforce the emergency award finding inter alia that such award changed the tax rates in violation of the Tax Code of Ukraine and such competence of judges violates the public policy in Ukraine. However, the issue of enforceability of remedies in local courts is to be decided on the case-by-case basis.

  1. 30.         Can arbitration proceedings and awards be appealed or challenged in local courts? What are the grounds and procedure?

An arbitral award may be challenged in local courts on the grounds similar to those established by the New York Convention for refusing recognition and enforcement of arbitral awards. The application for setting the award aside should be filed by the party to the local courts of general jurisdiction depending on the seat of arbitration and not later than three months after the receipt of the arbitral award by such party.

31.         Can the parties waive any rights of appeal or challenge to an award by agreement before the dispute arises (such as in the arbitration clause)?

This issue is not specifically established in Ukrainian law and by analogy the prevailing opinion is that the provisions entitling the parties to challenge the award based on certain grounds are mandatory and such waiver is not valid under Ukrainian law.

32.         To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?

As a general rule, Ukrainian law provides for absolute immunity of a foreign State from suit, enforcement and arrest of property, unless a different rule is established. The law does not distinguish between ordinary litigation proceedings and those pursuant to a request to recognize and enforce an arbitral award. Therefore it should be expected that a defense of State immunity will have high chances of success before Ukrainian courts. Nevertheless, to our knowledge has not yet been a reported court decision where this issue was directly analysed by the court.

33.         To what extent might a third party challenge the recognition of an award?

As a general rule, only parties to the case on recognition and enforcement of an arbitral award are allowed to challenge the court decision on this matter. However, where a third party believes that the decision affects its rights and obligations, it may also bring an appeal against such decision.

34.         Have there been any significant developments with regard to third party funding recently?

No, third party funding remains to be not regulated and not prohibited in Ukraine. Currently funding is not widespread either.

35.         Is emergency arbitrator relief available? Is this frequently used?

Neither the Arbitration Act nor the ICAC Arbitration Rules (including the 2018 ones) provide for the possibility of the emergency arbitrator relief.

36.         Are there arbitral laws or arbitration institutional rules providing for simplified or expedited procedures for claims under a certain value? Are they often used?

The ICAC New Arbitration Rules introduce the possibility of the expedited arbitration proceedings, under which the award may be rendered as soon as within two-three months. For instance, under the general rule the respondent shall submit the statement of defense within 10 days upon the date of the statement of claim receipt and the arbitral tribunal shall render the Arbitral Award within 20 days from the date of the case completion. Under the default rule an arbitral tribunal is composed of a sole arbitrator. There are no limits as to the amount of claim and the core issue is the consent of the parties. The parties’ agreement on expedited arbitral proceedings is admissible no later than filing a response to the statement of claim. Notably, the ICAC President before constitution of the arbitral tribunal or the arbitral tribunal may find the conduct of expedited proceedings inappropriate in view of the complexity and other specific circumstances of the case.

37.         Have measures been taken by arbitral institutions to promote transparency in arbitration?

Any notable shifts as regards transparency in arbitration have not been experienced. However, the ICAC continues to publish extracts from its awards (subject to confidentiality) on the official ICAC's website. The Recommendatory List of the ICAC Arbitrators is also publicly available.

38.         Is diversity in the choice of arbitrators and counsel (e.g. gender, age, origin) actively promoted? If so, how?

The ICAC has recently published statistics about women arbitrators involved in the consideration of the cases in 2016. The parties appointed women-arbitrators in slightly more than 50% of all cases, while the UCC's President did so in 40 per cent of the cases. Arbitrators appointed a woman as the third presiding arbitrator in about 20% cases. Meanwhile, men represent about 70 per cent of arbitrators shortlisted in the Recommendatory List of the ICAC Arbitrators. As for the structure of the ICAC per se, women represent more than 40 per cent of its Presidium and not less than 100 per cent of its Secretariat.

39.         Have there been any developments regarding mediation?

The institute of mediation is not legally regulated in Ukraine. The draft law introducing such regulation is registered at the Ukrainian Parliament. In 2016 this draft law was adopted in the first reading, however, there have not been any further significant developments so far.

40.         Have there been any recent court decisions considering the setting aside of an award that has been enforced in another jurisdiction or vice versa?

To our knowledge there have been no recent reported decisions involving these issues.

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