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Arbitration agreement: Ukrainian case law – 2020

Contents

  1. Positions of the Ukrainian courts on the arbitration agreement in 2020
  2. Conclusions

During the years of its independence Ukraine has become an active participant of the foreign economic activity, that is why the concept of “foreign economic contract” seems to be unknown only for schoolers. On the back of the foreign economic activity development in Ukraine, the domestic business has become more familiar with such alternative dispute resolution as the international commercial arbitration.

In turns, the international commercial arbitration has become especially popular among participants of the international commercial agreements in the recent years.

Regardless of the parties` choice of either institutional or ad hoc type of arbitration, such a will shall be executed by concluding an arbitration agreement. The Ukrainian legislator provided in Art. 7 of the Law of Ukraine “On International Commercial Arbitration” that an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. This also corresponds to Art. 2 of the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention).

The decision on the validity or invalidity of the arbitration agreement falls within the competence of the arbitral tribunal in accordance with the “Competence-Competence” doctrine, which is also consistent with the content of Art. 16 of the Law of Ukraine “On International Commercial Arbitration”. At the same time, there are plenty of cases when entities apply to the commercial courts even despite the existence of an arbitration agreement. Suchlike cases are considered in more details below.

Positions of the Ukrainian courts on the arbitration agreement in 2020

To begin with, the Resolution of the Commercial Court of Cassation of the Supreme Court dd. 7 October 2020 in case No. 911/1803/19 is an interesting one. In this decision the court stated that in the event of filing a claim in a case subject to the arbitration, the commercial court should establish the presence of a set of the conditions. These conditions include the existence of an arbitration agreement under which a claim in a matter raised in a state court falls within the jurisdiction of the arbitral tribunal; the respondent has filled the objection to the resolution of the dispute in the commercial court, however not later than the beginning of consideration of the case on merits, but before the submitting the first statement on the substance; the court`s establishment of the validity, legitimacy and enforceability of the arbitration agreement.

At the same time, there are cases when the Ukrainian court may recognise its authority to consider the case and continue to conduct the proceedings. The Grand Chamber of the Supreme Court commented on such issues in its Resolution dd. 28 August 2018 in case No. 906/493/16. Thus, it is stated that the commercial court may continue consideration of the case upon the condition of declaring the arbitration agreement null and void, inoperative or incapable of being performed, if this is established in the manner prescribed by law not later than the beginning of consideration of the case on merits.

The Grand Chamber stated that the commercial court should interpret any inaccuracies in the text of the arbitration agreement and consider doubts about its validity, legitimacy and enforceability in favour of its validity, legitimacy and enforceability, ensuring the principle of autonomy of the arbitration agreement.

It was also noted that the court may declare the agreement unenforceable due to the substantial error of the parties in the name of the arbitral tribunal to which the dispute is referred (reference to a non-existent arbitral institution), provided that the arbitration agreement does not specify the location of the arbitration or any other provisions that would establish the actual intentions of the parties to choose a specific arbitral institution or regulation under which the arbitration is to take place. In case no arbitral institution or regulation is determined, the party to the arbitration agreement is not obliged to apply to one or more arbitral tribunals before applying to the competent state court to resolve the issue of their competence over this dispute.

This position remains relevant today, which is confirmed by the content of the Resolution of the Commercial Court of Cassation of the Supreme Court dd. 3 March 2020 in case No. 920/241/19.

In the Resolution dd. 12 November 2020 in case No. 910/13366/18 the Commercial Court of Cassation of the Supreme Court clarified the principle of the autonomy of an arbitration agreement. In particular, the court pointed out that the principle of autonomy of the arbitration agreement (separability) shows, firstly, that the validity of the main agreement does not affect the validity of the arbitration agreement included in it and, secondly, the main agreement and the arbitration agreement may be subject to different laws. This ensures that exactly the arbitral tribunal will consider the dispute in any case, as the existence of an arbitration clause makes it impossible to apply to public courts.

The court also noted that the principle of autonomy of the arbitration agreement from the main agreement is that the arbitration agreement and the main agreement are considered as two separate agreements, so the invalidity of the main agreement cannot be grounds for automatic invalidity of the arbitration agreement.

Finally, it is also worth considering the position of the Commercial Court of Cassation of the Supreme Court, set out in the Resolution dd. 16 January 2020 in case No. 908/2743/18. The court noted that the content of paragraph 7 of Part 1 of Art. 226 of the Civil Procedural Code of Ukraine and Part 1 of Art. 8 of the Law of Ukraine “On International Commercial Arbitration” prescribes the imperative obligation of the court to leave the claim without consideration not simply because the parties entered into an agreement to refer the dispute to the international commercial arbitration, but if any party to this agreement, including the respondent, requests it not later than when submitting his first statement on the substance of the dispute.

Conclusions

From the analysis of the above, it can be concluded that in fact the legislator gives the parties the opportunity to enter into an arbitration agreement on the will of all parties, as well as on their joint will to change the jurisdiction of such dispute and consider the case in the relevant commercial court of Ukraine. Such will is expressed in the form, when one of the parties to the agreement submits the claim to the commercial court and none of the parties to the arbitration agreement before submitting its first statement on the substance and before the consideration of the case on merits objects to the consideration of the case in court.

However, despite the fact that the issue of determining the jurisdiction of the arbitration disputes still remains problematic, nowadays the courts actively adhere to the principle of autonomy of the arbitration agreement, recognise the right of the arbitral tribunal to determine its competence over the dispute, even though the person applied to the national court. It allows to say that the Ukrainian courts already have a pro-arbitration commitment.

Anastasiia Klian

Anastasiia Klian

Associate, Attorney at law

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