A first glance at Ukrainian legislation concerning recognition and enforcement of foreign arbitral awards will make you believe that Ukraine is a quite arbitration friendly jurisdiction. Although Ukraine is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) providing for an obligation to recognize and enforce foreign arbitral awards, the New York Convention does not set any exhaustive procedure for recognition and enforcement and expressly refers to the "rules of procedure of the territory where the award is relied upon"1. Therefore, in order to understand how foreign arbitral awards may be enforced in Ukraine, one needs to first look to the Ukrainian procedural legislation.
Unfortunately, when a case goes to Ukrainian court, the impression from the above first glance will prove to be a false one. The absence of specific rules governing enforcement of arbitral awards as well as lack of judge's expertise and excessive formalism of Ukrainian courts is not even a complete list of obstacles for enforcement of arbitral awards in Ukraine. In this review the authors will focus on the main problem issues which may arise during the enforcement of foreign arbitral awards in Ukraine.
In 2004 the new regulation of recognition and enforcement of foreign judgments came into force in Ukraine due to the adoption of the Civil Procedure Code of Ukraine (CPC)2, replacing the provisions of the On Recognition and Enforcement of Foreign Court Decisions in Ukraine Act of Ukraine.3
Among other acts governing recognition and enforcement of foreign arbitral awards in Ukraine the following instruments should be mentioned: the On International Commercial Arbitration Act of Ukraine (ICA Act), which is based on the UNCITRAL Model Law and follows its wording almost completely, the Decree of the Supreme Court of Ukraine On Courts Practice Regarding Recognition and Enforcement of the Decisions of Foreign Courts and Arbitral Tribunals and Setting Aside Arbitral Awards Rendered within the Territory of Ukraine of 24 December 1999, No. 12 (Decree No. 12), etc.
Though Chapter VIII of the CPC expressly deals only with the recognition and enforcement of decisions adopted by foreign courts, the scope of the CPC is not limited to its precise wording and applies also to the enforcement of foreign arbitral awards by virtue of the law analogy and since Article 81 of the On Private International Law Act of Ukraine interprets the term "decisions of foreign courts" as not only court decisions, but also as "decisions of foreign arbitral tribunals".
Pursuant to Article 390 of the CPC, Ukrainian courts shall grant enforcement of court decisions provided that: (i) recognition and enforcement are permitted under an international treaty ratified by the Verkhovna Rada of Ukraine (Parliament); or (ii) on the basis of reciprocity principle under an ad hoc agreement with a foreign country, whose court decision shall be enforced in Ukraine.
Apart from the New York Convention mentioned above, Ukraine concluded a number of bilateral and multilateral agreements on legal assistance in civil, criminal and matrimonial cases providing for the recognition and enforcement of foreign judgments. While some of them (namely, treaties with Iraq, Yemen, Czech Republic and the CIS (Kyiv) Convention on Settlement of the Commercial Disputes (1992)) deal expressly with recognition and enforcement of arbitral awards, the majority of the said agreements govern only recognition and enforcement of foreign court decisions. However, due regard should be given to determining the scope of respective international treaties.
As regards the countries with which Ukraine does not have either multilateral or bilateral agreements providing for recognition and enforcement of foreign arbitral awards, such recognition and enforcement of arbitral awards rendered therein is quite problematic. Although Article 390 of the CPC provides for enforcement of court decisions under the reciprocity principle, this approach is not, in fact, widely used by Ukrainian courts due to the lack of court practice and official clarifications thereon.
Where: Competent Courts
It is worth noting that prior to the coming into force of the new CPC the court's jurisdiction to consider motions for granting enforcement of foreign arbitral awards ("motion for enforcement") was governed by the On Recognition and Enforcement of Foreign Judgments Act of Ukraine providing for the competence to consider the said issues to the Appellate Court of the Autonomous Republic of Crimea, regional appellate and Kiev and Sevastopol city courts of general jurisdiction. The new regulation4 provides for jurisdiction over a foreign judgments enforcement to courts of first instance (i.e., district, city district, town and town/ district courts of general jurisdiction) at the place of a debtor's residence or location, or if the debtor does not have place of residence or location in Ukraine, with the court at the location of the debtor's property.
Thus, the foreign judgments enforcement issues considered by the judges of appellate instance courts from the Soviet Union time until 2004 were transferred to judges working in courts of first instance with limited experience and knowledge of arbitration institutions and their procedure as well as of international instruments and regulations in this respect that certainly caused problems in their understanding the specifics of enforcement of foreign judgments.
Currently, taking into account the insufficient experience of judges of courts of first instance in the sphere of enforcement of foreign arbitral awards, they often prove to be unaware of the relevant provisions of Ukrainian legislation and applicable international treaties and sometimes even declare the absence of jurisdiction over the foreign arbitral awards enforcement in Ukraine referring to the jurisdiction of commercial courts of Ukraine. Such decisions on absence of jurisdiction, though subject to appeal to appellate courts, may substantially delay the enforcement of foreign arbitral award.
Unfortunately, being aware of the above, Ukrainian debtors used to have the advantage of such a situation in courts of first instance to delay the enforcement procedure.
When: Enforcement Time Limits
The CPC provides that a foreign arbitral award may be submitted for enforcement in Ukraine only within three years from the time it came into effect unless it provides for payment by installments. The decisions awarding payment by installments can be enforced within the entire term for collecting debts with their extinguishment for the last three years.
How: Procedure of Enforcement
Pursuant to Article 394 of the CPC, the motion for enforcement shall be accompanied with the documents as provided for by the respective international treaty. In particular, Article IV (1) of the New York Convention provides that the motion for enforcement shall be accompanied by the following documents: (a) the duly authenticated original award or a duly certified copy thereof; (b) the original agreement referred to in Article II or a duly certified copy thereof. Similar requirements are set out in Article 35 (2) of the ICA Act.
Due regard should be given to formal requirements to the documents submitted to the court, as under Article 394 (4) of the CPC, if the court finds that the motion for enforcement does not meet the above-mentioned requirements or lacks the required documents to be enclosed thereto, such motion will be returned to the applicant without consideration.
According to Article 394 of the CPC and Article 35 of the ICA Act, all the documents submitted together with the motion for enforcement should be accompanied with a translation thereof into Ukrainian or Russian or another language as set out in the applicable international treaty.
Upon receipt of the said motion, the competent court shall send a written notification to the opposing party within five days providing a period of one month to present its objections. After the debtor submits written objections or refuses to do so, the court delivers a ruling setting the time and date of the hearing.
Having considered the motion for enforcement and heard the arguments of the parties, the judge renders a ruling on granting or denying recognition and enforcement of foreign arbitral award. The said ruling serves as the basis for issuing the writ of execution triggering the executive procedure.
Stay of Enforcement and Interim Injunctions
Within the enforcement civil proceedings the Ukrainian court where enforcement is sought may, at the request of the debtor, suspend consideration of the case if the motion to set aside the arbitral award has been submitted to the competent court. As recent court practice demonstrates, the party opposing enforcement needs only to furnish evidence that motion to set aside that the arbitral award was in fact forwarded to the court proceeding, while the court rendering the stay of enforcement does not touch upon the issues as to whether such a challenge is weak or unfounded.
In such a situation the party seeking enforcement of the arbitral award is entitled to apply to the court to order the debtor to provide appropriate security. However, as proceeds from the plain text of Article 36 (2) of the ICA Act, granting interim injunctions is a power rather than the obligation of the court. Furthermore, the above-mentioned provision of the ICA Act is not reflected in the procedural norms of the CPC and. thus, it is highly likely that the court will refuse to grant interim injunctions proceeding from the procedural legislation and lack of clarifications and court practice on this issue.
It may be also a crucial issue that if the original judgment provides for recovery in foreign currency, the court granting enforcement shall state in its final ruling the sum to be recovered in Ukrainian national currency according to the exchange rate set by the National Bank of Ukraine as of the date when the respective ruling is rendered under Article 395 (8) of the CPC. In case the court fails to meet the above requirement, the further initiation of execution proceedings with the state execution authority will not be possible without introducing respective amendments to the initial court ruling and re-issuance of the writ of execution.
Furthermore, this exchange requirement causes further problems while transferring the debts collected by the State Enforcement Service to a non-hryvnyas bank account of the creditor.
Considering all the aforesaid, it is practically impossible to estimate the time limits of proceedings to enforce a foreign arbitral award in Ukraine, since it depends in the main on the internal schedules of courts and no defined final deadline is provided by the CPC and court procedure instructions.
Why Not: Grounds for Refusal
The motion for enforcement may only be considered within the specific limits set by the New York Convention and the ICA Act providing that the competent courts may not examine the correctness of the said judgment, nor may they introduce any changes therein.
Article 36 of the ICA Act, which is almost identical to the provisions of Article V of the New York Convention, provides that recognition or enforcement of an arbitral award, irrespective of the country in which it was made, may be refused only: if the party opposing enforcement furnishes evidence that (i) a party to arbitration agreement was under some incapacity or arbitration agreement was invalid, (ii) that the party was unable to present its case during arbitration, (iii) that the award falls beyond the scope of the arbitration agreement, (iv) that the composition of the arbitral tribunal was undue or (v) that the award has not become binding upon the parties or has been set aside. The recognition and enforcement can also be refused if the court itself finds that (vi) the award contradicts public policy or (vii) the subject matter of the dispute is not abitrable under the laws of Ukraine.
The above list of grounds for refusal of foreign arbitral award enforcement is an exhaustive one. Therefore, the court may not invoke any other provision of Ukrainian legislation for refusal to enforce an arbitral award. However, interpretation of the arbitrability of the dispute as well of the notion of public policy still gives Ukrainian courts rather wide discretion.
As regards public policy, Decree No. 12 provides for certain indication as to how public order (public policy) should be understood by referring to the legal order of state, the determining principles and basis being fundamentals of the existing state order and connected with its independence, integrity, inviolability, main constitutional rights, freedoms, guarantees, etc. However, the scope of public policy is not absolutely clear and Ukrainian courts may invoke this provision in quite unexpected cases.
Instead of an Epilogue
Taking into account the above routes and obstacles for foreign arbitral award enforcement in Ukraine, the party seeking successful enforcement should consider the following details:
- all the formal requirements must be strictly complied with: should any of the required documents be missing or not duly authenticated or translated, the court is likely to return the motion to the applicant;
- the possibilities to obtain interim injunctions are extremely limited;
- the time-frames for obtaining permission to enforce foreign arbitral award are not defined;
- even when a ruling granting enforcement is rendered, the deal is not done, as such a ruling still needs to be enforced by the State Enforcement Service on the basis of a writ of execution within the separate procedure.
Having considered that one will be right to conclude that in spite of adoption of the major international standards in the sphere of international arbitration, such as the New York Convention and UNCITRAL Model Law, numerous flaws of Ukrainian procedural legislation offer a lot of possibilities to delay or significantly trouble the recognition and enforcement of foreign arbitral award in Ukraine.
The only way to overcome the said obstacles is (a) to know the details of Ukrainian procedural legislation and (b) to mind the respective court practice and clarifications on enforcement of foreign arbitral award in Ukraine.
We hope that the situation with enforcement of foreign arbitral awards can be improved if the Ukrainian Parliament considers current legislative proposals and adopts respective amendments to current procedural legislation in Ukraine providing a clear mechanism for the enforcement procedure and mitigating the formalism of Ukrainian courts and the State Enforcement Service.
1. Article III of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards
2. Civil Procedure Code of Ukraine of 3 March 2004, No.1618-IV
3. On Recognition and Enforcement of Foreign Court Decisions in Ukraine Act of Ukraine of 29 November 2001, No. 2860-14 — became ineffective upon entry into force of the Civil Procedure Code.
4. Articles 107 and 392 of the Civil Procedure Code of Ukraine.
Pavlo I. Byelousov is an associate with Vasil Kisil &
Sergiy O. Uvarov is a junior associate with Vasil Kisil & Partners
Vasil Kisil & Partners
Through relentless focus on client success, the Vasil Kisil & Partners team delivers integrated legal solutions to complex business issues. In Ukraine, the Vasil Kisil & Partners brand is synonymous with great depth and breadth of legal expertise and experience, which has created superior value for our clients since 1992.
Vasil Kisil & Partners is a Ukrainian law firm that delivers integrated business law, dispute resolution services, tax law, energy and natural resources law, intellectual property law, international trade law, labour and employment law, real estate and construction law, as well as public private partnership, concessions & infrastructure law.
The firm serves international and domestic companies, as well as private individuals, dealing in agriculture, banking, chemical, construction, financial, energy, high-tech, general commodities, insurance, IT, media, metallurgy, pharmaceutical, real estate, shipbuilding, telecommunication, trading, transport, and other industries and economy sectors.
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.