Ukraine: Ukrainian Approach To Recognition And Enforcement Of Interim Measures Granted By The Arbitral Tribunals

Last Updated: 7 September 2017
Article by Olexander Droug and Olesia Gontar

Most Read Contributor in Ukraine, August 2017

The main purpose of the international arbitration proceedings is to deliver an enforceable arbitral award. To achieve this in practice, it is not enough that the arbitral award meets all formal and substantive requirements established by the lex arbitri. There should also exist sufficient assets out of which the arbitral award could be satisfied.

Traditionally, the risk of dissipation of assets in the course of arbitration has been dealt with through the mechanism of interim measures, which are sought either from the local courts at the place of arbitration or at the place where the respondent holds its assets or from the arbitral tribunals.

The above traditional mechanism for obtaining interim measures has recently become complemented by emergency arbitration.

Legal nature of the decision on interim measures granted by the arbitral tribunals and emergency arbitrators

A decision on interim measures issued by the arbitral tribunal, even in a form of an arbitral award, has several distinctive features in comparison with a final arbitral award on the merits of the dispute.

Most importantly, a decision on interim measures is effective only for a certain limited period of time. This is inherent in the nature of interim measures.

Emergency measures, which are interim measures granted by an emergency arbitrator, are also effective only for a limited period of time.

In essence, emergency arbitrator mechanism provides a party with a possibility to swiftly obtain an interim measure in support of the arbitration proceedings, which have not yet been formally initiated. The main reason for seeking such measures before initiation of the arbitration proceedings is that the time might be of the essence and the claimant cannot wait for the constitution of the arbitral tribunal. In fact, waiting for the constitution of the arbitral tribunal, which usually takes more than a month and may be delayed by the respondent, and dealing by the newly constituted arbitral tribunal with the request for granting the interim measures may be too long to prevent a respondent that has already become aware of the claim filed in the arbitration proceedings from dissipating its assets or taking other steps that would complicate enforcement of a future arbitral award.

According to the widely used arbitration rules, such as the ICC Rules, SCC Rules and LCIA Rules, interim measures granted by an emergency arbitrator may be varied, discharged or revoked, in whole or in part, by the arbitral tribunal which is finally constituted to hear the dispute.

The general approach to the period of effectiveness of the interim measures granted by the arbitral tribunals and by the emergency arbitrators is that the interim measures cease to be effective once the final arbitral award is rendered by the arbitral tribunal. The claimant is therefore required to seek further interim measures in the course of the recognition and enforcement of the final arbitral award.

Application of the New York Convention to the awards on interim measures

The principal international instrument that governs the recognition and enforcement of the foreign arbitral awards is the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). In Ukraine, the detailed procedure for recognition and enforcement of the foreign arbitral awards is additionally set out in Section VIII of the Civil Procedure Code of Ukraine.

The New York Convention does not directly refer to arbitral awards (decisions, orders) on granting interim measures. This has led to the extensive debate in the legal community on whether or not the awards on interim measures shall be recognised and enforced pursuant to the regime established by the New York Convention.

One of the main grounds for disputing application of the New York Convention to the awards on interim measures is the nature of such awards, i.e. that they are effective only for a limited period of time and, therefore, may not be regarded as "final" in a way that the arbitral awards on the merits of the dispute are. Although some of the language versions the New York Convention do not even contain an express requirement that arbitral award shall be "final" or "effective" instead requiring that the arbitral award shall be "binding", the position that the New York Convention shall not apply to the awards granting interim measures and that the New York Convention shall be amended to extend its regime to the awards granting interim measures is widely supported.

However, since the New York Convention does not provide a definite answer to this question, the issue of enforcement of arbitral awards on interim measures is a matter of interpretation of the New York Convention by local courts in each particular jurisdiction.

Approach of the Ukrainian courts to the recognition and enforcement of awards on interim measures under the New York Convention

The Ukrainian courts have not finally formed their approach to the recognition and enforcement of the awards on interim measures under the New York Convention. There have been several cases considered by the Ukrainian courts where the issue of recognition and enforcement of interim measures granted by the arbitral tribunals and the emergency arbitrators was raised. However, such cases are either still pending or do not expressly resolve the matter of application of the New York Convention to the awards on interim measures.

JKX case

One of the most reported cases deals with the recognition and enforcement in Ukraine of the emergency award rendered by an emergency arbitrator on 14 January 2015 in the investment case JKX Oil & Gas plc, Poltava Gas B.V. and Poltava Petroleum Company JV v. Ukraine. The emergency arbitrator acting under the SCC Rules ordered Ukraine to refrain from applying rates of the gas extraction royalties from Poltava Petroleum Company JV exceeding the 28 per cent fee applicable prior to 31 July 2014.

This emergency award was initially recognised in Ukraine by the first instance court on 8 June 2015 but then, after several rounds of review, the court of appeal on 21 December 2016 refused recognition and enforcement of this award. The court proceedings in this case are still pending.

Decisions of the Ukrainian courts to refuse recognition and enforcement of the JKX emergency arbitrator's award were primarily based on the grounds of public policy (Article V(2)(b) of the New York Convention) but the courts did not directly address the applicability of the New York Convention.

At the same time, given that the Ukrainian courts refused recognition and enforcement in this case, inter alia, on the grounds provided in the New York Convention, this may be construed as an indirect confirmation that the Ukrainian courts in general support application of the New York Convention to the awards on interim measures.

Mriya case

In a different case initiated by PJSC "Bank National Credit" against Mriya Agro Holding Public Limited, the Ukrainian courts expressly examined the issue of finality in respect of the injunctions granted by the Cypriot courts in support of the LCIA arbitration proceedings in London. But that case was decided pursuant to the Agreement on Mutual Legal Assistance in Civil and Commercial Matters between Ukraine and the Republic of Cyprus (the Agreement) and not the New York Convention.

The Ukrainian courts in this case came to the conclusion that injunctions issued by the Cypriot court were not "final" as required by the Treaty and, therefore, they were not subject to recognition and enforcement under the terms of the Treaty. However, the Treaty, unlike the New York Convention in some of the versions, contains an express requirement of finality of court judgments.

Bruma case

There is one additional case, which although does not explicitly confirm the application of the New York Convention to the recognition and enforcement of the awards on interim measures in Ukraine, still demonstrates a very favourable approach accorded by the Ukrainian courts to such type of awards.

The case concerned recognition and enforcement of interim measures granted by the Arbitration Court of the Chamber of Commerce and Industry of Heilbronn-Franken and DIS against a Ukrainian company, LLC "Bruma". While the recognition and enforcement was eventually refused on the ground that the parties did not enter into a valid arbitration agreement, the Ukrainian courts granted to the applicant their own interim measures in support of the request for recognition and enforcement of the tribunal-granted interim measures.

The courts used their general powers to grant interim measures in support of the requests for recognition and enforcement of the foreign arbitral awards and court judgments under Article 394(1) of the Civil Procedure Code of Ukraine. Such own interim measures are typically granted by the Ukrainian courts to secure future enforcement of the final foreign arbitral awards and court judgments.

In Bruma case, the Ukrainian courts used these powers in support of the request for recognition and enforcement of the award on interim measures granted by the arbitral tribunal and mirrored the interim measures whose recognition and enforcement was sought in Ukraine.

Instead of conclusions

The analysed court cases show that Ukrainian courts still remain in the process of establishing their final position on the matter of recognition and enforcement of arbitral awards on interim measures, which entails risks for prospective claimants seeking to obtain interim measures from the arbitral tribunals and emergency arbitrators and then recognise and enforce them in Ukraine.

In this connection, the power of the Ukrainian courts to directly grant interim measures in support of the pending arbitration proceedings, which is contemplated in the draft of the new Civil Procedure Code of Ukraine and the Draft Law on Introduction of Amendments to Certain Legislative Acts of Ukraine on the Matter of Court Supervision and Assistance to International Commercial Arbitration, could provide much more certainty and yield more effective results for the parties to arbitration.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.