The Ukrainian legal framework governing international arbitration generally follows the international standards set by UNCITRAL.
Ukrainian law explicitly prohibits review of arbitral awards on the merits. Also, such essential provisions as grounds for setting aside and for refusing recognition and enforcement of an arbitral award replicate the UNCITRAL Model Law and the New York Convention, respectively. That said, Ukraine has not implemented the 2006 amendments to the UNCITRAL Model Law designed, among other things, to improve the regulation of interim measures in arbitration. Furthermore, there are certain distinctions in Ukrainian arbitration-related legislation that favor international arbitration – or that may have the opposite effect.
One of the principal pro-arbitration features of Ukrainian law is that it extends the application of the international arbitral dispute-resolution mechanism to the parties incorporated and having places of business within Ukraine, provided that at least one of the parties qualifies as an entity with foreign investments. Such a provision appears to give a valuable tool to foreign investors setting up business in Ukraine to opt out of the jurisdiction of Ukrainian courts – which is often a preference.
It is worth noting, though, that Ukrainian arbitration law places considerable emphasis on the written form of the arbitration agreement. In this respect, Ukrainian arbitration law does not reflect the 2006 revisions to the UNCITRAL Model Law that permit an arbitration agreement to be concluded orally, provided that the parties’ consent to arbitration is recorded in any form.
Moreover, Ukrainian law qualifies a rather broad range of disputes as non-arbitrable. Notably, disputes relating to challenge of acts (whether of regulatory nature or not), disputes arising out of state procurement contracts, and corporate disputes fall under the category of disputes not capable of settlement by arbitration. The Ukrainian law position with respect to the list of non-arbitrable disputes has been a subject of ongoing debate. There are proposals to narrow down this list and carve out corporate disputes or, to the contrary, to declare disputes related to transactions with securities or equity interests in a Ukrainian entity and a number of other matters as non-arbitrable.
Recent and Prospective Legislative Developments
The Ukrainian parliament has recently passed two laws that will take effect in October 2016 related to the enforcement procedure. The new laws introduce the concept of private bailiffs to the Ukrainian legal system. That is expected to increase the efficiency of the enforcement procedure. While the laws target enforcement proceedings generally, the anticipated positive effect will also extend to arbitral awards that have been recognized and allowed for enforcement by a Ukrainian court.
Furthermore, a bill concerning judicial supervision and support for arbitration is currently pending before the Ukrainian parliament. If enacted into law, the bill would introduce long-awaited changes to the Ukrainian arbitration-related legal framework. The bill limits the judicial proceedings on challenge, as well as on recognition and enforcement of arbitral awards, to two court instances (currently, up to four court instances may be involved in such proceedings, with a possibility of a higher court sending the case for repeat review by a lower court). Further, the bill proposes to empower Ukrainian courts to issue orders on provisional measures in support of arbitration and to enable parties to seek court assistance in obtaining evidence for the purposes of arbitration.
Recent Developments in Enforcement of Arbitral Awards
One of the most notable recent cases is the enforcement of an emergency arbitrator award rendered against the State of Ukraine in favor of JKX Oil in an Energy Charter Treaty arbitration under the emergency arbitrator procedure contemplated by the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce. A Ukrainian first-instance court initially ruled that the award be recognized and enforced, rejecting all government objections. Notably, the court dismissed the argument that the award was rendered beyond the scope of the submission to arbitration – observing, in this regard, that the emergency procedure was provided for under the applicable arbitration rules. This decision was later reversed by the appellate court, based on the public policy objection because the award concerned hydrocarbon exploration royalties. Although overruled on appeal and still awaiting a final court decision, this case offers useful guidance on enforcement of a somewhat unconventional arbitral award for the Ukrainian legal system and generally demonstrates the trend of pro-arbitration decision-making by Ukrainian courts.
