The Judgment of the European Court of Human Rights (hereinafter – "the ECHR") in the case "Regent Company v. Ukraine" (Application No. 773/03) was rendered on 3 April 2008. Since that time it was often mentioned in various commentaries of national scholars and practitioners. However, its significance for international commercial arbitration in Ukraine, particularly in context of enforcement of international arbitral awards in Ukraine, as well as additional instruments which the said judgment provides to foreign investors have not been defined yet. The authors will try to fill this gap and to analyze the prospects of further development of the ECHR's practice in cases related to international commercial arbitration.
In the above judgment, the ECHR not only confirmed principles and concepts previously established in its practice, but also arrived at some new conclusions, which seem to be of high importance for ECHR's future practice in this area. Except for a strictly theoretical meaning, this judgment has also clearly demonstrated which additional remedies are provided by the Convention for the Protection of Human Rights and Fundamental Freedoms dated 1950 (hereinafter - "the Convention") in the context of recognition and enforcement of arbitral awards in Ukraine.
One of the key objectives of the Convention is to secure availability of fair and efficient judicial mechanism of rights protection for citizens and legal entities in all signatory states. In the case "Regent Company v. Ukraine", the ECHR once again held that an arbitration court (tribunal) is "a court established by law" in terms of paragraph 1, Article 6 of the Convention, and the absence of efficient device to enforce arbitral awards or hindering such enforcement by a government shall constitute a breach of obligations undertaken by such government under paragraph 1, Article 6 of the Convention.
Assessing preliminary objections of Ukrainian government, the ECHR stated that Article 6 of the Convention did not preclude the setting up of arbitration tribunals in order to settle disputes between private entities, and the word "tribunal" in Clause 1, Article 6 of the Convention is not to be understood as a court of law of the classic kind, integrated within the standard judicial machinery of the country. Taking into account the above, the ECHR pointed out that the ICAC at the Chamber of Commerce and Industry of Ukraine (UCCI) remains a single international arbitration institution in Ukraine – "the court established by the Law" of Ukraine "On International Commercial Arbitration" and duly authorized to settle "commercial disputes with a foreign element"; its procedural rules are similar to those available at state civil or commercial courts. Moreover, an award of the ICAC at the UCCI may be appealed on the grounds specified in the Law of Ukraine "On International Commercial Arbitration"; finally, it shall be treated as a court decision for the purposes of Article 3 (1) of the Law of Ukraine "On Execution Proceedings".
Thus, pursuant to the ECHR's judgment in the case "Regent Company v. Ukraine", all the guarantees provided for by Article 6 of the Convention with respect to a court judgment shall also extend to respective awards rendered by the ICAC at the UCCI.
In its judgment (Clause 60), the ECHR expressly stated that "continued non-enforcement of the judgment debt [...] constitute[s] a violation of Article 6, paragraph 1 of the Convention". In this regard, in its previous practice (see the case "Derkach and Palek v. Ukraine" (Applications No. 34297/02 and No. 39574/02), Clause 34; "Burdov v. Russia" (No. 2)", Application No. 33509/04, Clauses 65-66), the ECHR repeatedly emphasized that "the right of judicial recourse" protected by Article 6 of the Convention would be delusive, if the national system of law of a state –party to the European Convention for the Protection of Human Rights and Fundamental Freedoms allowed for a final and binding court decision to remain unexecuted in prejudice of one of the parties.
Therefore, execution of a court decision shall be regarded as an integral part of "judicial proceedings" for the purposes of Article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms dated 1950 (see also the case "Hornsby v. Greece", 19/04/1997, S:40). The government represented by its execution (bailiffs') service shall secure the enforcement of the court decision within a reasonable time. The unreasonably longstanding delay of the enforcement of a final and binding court decision, including an award rendered by an international arbitration court, shall be considered as direct violation of Clause 1, Article 6 of the Convention.
Such stand of the ECHR is particularly important for international commercial arbitration. Obviously, one of the key advantages of arbitration, as compared to other instruments for dispute resolution, is swiftness of the proceedings and finality of arbitral awards. It is the stated criteria that are decisive for choosing international commercial arbitration as a means of dispute resolution when concluding foreign economic agreements. It is quite evident that if there were no efficient instruments to enforce international arbitral awards, which includes, inter alia, proper legal regime and compliance by public execution services with legally established procedures and terms, there would be no sense in resorting to such means of resolving foreign economic disputes.
It should be also mentioned that in the present case, violation of paragraph 1, Article 6 of the Convention took place on the execution proceedings stage. Consequently, the ECHR did not consider whether the requirement as to the availability of an efficient instrument to enforce arbitral awards applies to the judicial proceedings for their recognition and enforcement. However, in any event, such proceedings for granting an exequatur should at least comply with general procedural guarantees provided for in Article 6 of the Convention.
Another important conclusion of the ECHR refers to the fact that the claim under the arbitral award shall constitute "possession" in terms of Article 1 of Protocol No. 1 to the Convention. Hence, the protection of the above article also extends to it. Thus, the government's failure to enforce the arbitral award may be qualified as expropriation and cause its obligation to pay a just satisfaction.
Such conclusion is in line with the ECHR's previous practice. In particular, in its judgment in the case "Stran Greek Refineries and Stratis Andreadis v. Greece" dated 9 December 1994 (Application No. 13427/87), where the government had established legislative bar to enforcement of an arbitral award rendered against it, the ECHR came to a similar conclusion and established that thereby the government had infringed the claimant's right to property. Quite recently, such approach has also been confirmed in the judgment in the case "Kin-Stib аnd Majkić v. Serbia" dated 20 April 2010 (Application No. 12312/05). In this case, the ECHR also arrived at the conclusion that the government's failure to take sufficient and efficient measures to enforce the arbitral award rendered against a state-owned company violates Article 1 of Protocol No. 1.
Finally, it is crucial that in the case "Regent Company v. Ukraine" the ECHR ordered the government to pay out the total amount provided for by the respective arbitral award as a compensation. Such position is completely in conformity with the principle of just satisfaction for the violation of obligations set forth in the Convention. However, the ECHR's practice in this matter varies. For instance, in the case "Stran Greek Refineries and Stratis Andreadis v. Greece", the ECHR arrived at similar conclusions and ordered the government to pay out the amount specified in the arbitral award. However, in the recently delivered judgment in the case "Kin-Stib аnd Majkić v. Serbia", notwithstanding that the ECHR admitted the violation by the government, it did not adjudge directly any compensation to the claimant, but only ordered the government to comply with the compensation-related, domestic judgments of Serbian courts.
Taking into account the existing situation in the sphere of execution of court judgments in Ukraine, and, in particular, foreign judgments and arbitral awards, we believe that decision of the ECHR in the case "Regent Company v. Ukraine", confirming the principle of the compulsory execution of court judgments, including international arbitral awards, is critically important for future practices of Ukrainian courts in the above matter. Pursuant to Article 17 of the Law of Ukraine "On Enforcing Judgments and Applying Case-Law of the European Court of Human Rights" No. 3477-IV dated 23 February 2006, the courts while considering cases before them shall apply the Convention for the Protection of Human Rights and Fundamental Freedoms dated 1950 and protocols thereto ratified by the Verkhovna Rada of Ukraine, as well as the ECHR's case-law as a source of law.
The Highest Commercial Court of Ukraine in its Information Letter "On the Convention for the Protection of Human Rights and Fundamental Freedoms dated 1950 and Jurisdiction of the European Court of Human Rights" dated 18 November 2003 No. 01-8/1427 (as amended) has also drawn attention to the obligation of commercial courts to apply judgments and decisions of the ECHR in any case before them.
ECHR's practice is also important as it provides the possibility to reopen the court proceedings after all national mechanisms have been exhausted and guarantees respect for the right to efficient and fair judicial proceedings. In particular, according to Article 355 of the Civil Procedural Code of Ukraine, an application for the revision of court decisions in civil matters may be filed with the Supreme Court of Ukraine, in particular, if "an international judicial body whose jurisdiction is recognized by Ukraine has established violation by Ukraine of its international obligations in respective court proceedings".
Thus, even if consideration of the case before the ECHR does not lead directly to compensation from the government, the ECHR's Judgment establishing violation of the rights protected by the Convention will serve as an efficient instrument to remedy respective violation within the framework of national judicial system.
We hope that the ECHR's judgment commented herein will become a landmark case not only for foreign investors, who cannot execute court judgments, including foreign judgments and arbitral awards, in Ukraine for years, but also for Ukrainian state in terms of (a) applying ECHR's judgments when considering applications for the recognition and enforcement of foreign judgments and arbitral awards as a source of law, and (b) meeting reasonable terms and observing creditors' legitimate rights and interests (first of all) by respective execution (bailiffs') service in execution proceedings.
The ECHR's judgment in the case "Regent Company v. Ukraine" (Application No. 773/03) clearly demonstrated that pursuant to its international commitments under the Convention it is the government which shall be responsible for companies' failure to perform their obligations under foreign economic contracts with non-residents and respective court decisions (including international arbitral awards), as well as for a continuous failure by public authorities (departments of the State Execution (Enforcement) Service) to enforce such decisions.
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