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Ievgeniia Makarenko: Law No. 2147 Addresses Important Issues of Interaction between the International Commercial Arbitration and Public Courts

01.02.2018

Ievgeniia Makarenko, lawyer at Ilyashev & Partners Law Firm

Source: Ukrainian News

Ievgeniia Makarenko, the Lawyer at Ilyashev & Partners Law Firm, believes that the Law of Ukraine No. 2147 on Amendments to the Commercial Procedure Code, Civil Procedure Code, Code of Administrative Court Procedure and Other Legislative Acts, which entered into force on December 15, solves important issues of interaction between the international commercial arbitration and public courts, which makes Ukraine a more attractive place for arbitration and entails additional revenues to the budget.

Pro-Arbitration Focus of the New Procedural Legislation: The Arbitration-Related Problems of Procedural Changes

On December 15 this year the Law of Ukraine on Amendments to the Commercial Procedure Code, Civil Procedure Code, Code of Administrative Court Procedure and Other Legislative Acts No. 2147-VIII of 03.10.2017 (hereinafter – the Law No. 2147) entered into force. In fact, each of the above-listed codes has been revised and amended, and now significantly differs from the previous procedural norms. Among the global changes in the commercial and civil procedures, the law drafters draw attention to the public courts’ support of the international commercial arbitration and the arbitral tribunal.

Indeed, among the key problematic issues of the international commercial arbitration is the problem of interaction between the public courts and international commercial arbitration, as well as its support. The question of which new provisions appeared in the procedural legislation of Ukraine as related to the interaction between the international commercial arbitration and public courts in the context of arbitrability of disputes, provisional measures, as well as reversal, recognition and enforcement of arbitral awards will be discussed in details below.

Arbitrability of Disputes

For instance, Article 22 of the new revised version of the Civil Procedure Code provides for the right of the parties to submit a dispute for consideration by a foreign court – a dispute falling within the jurisdiction of the general court can be transferred by agreement of the parties for consideration by a court of another state.

At the same time, Article 22 of the Law No. 2147 envisages the right of the parties to transfer the dispute for consideration by the arbitral tribunal, the international commercial arbitration, and provides for the list of disputes that are subject to jurisdiction of commercial courts, thereby limiting the jurisdiction of arbitration courts.

The conclusion of the arbitration agreement entails two procedural and legal consequences, namely, the obligation of the interested party to apply to the relevant international commercial arbitration to resolve the dispute, as well as the exclusion of the public courts’ jurisdiction over resolution of the dispute. Where the party to arbitration agreement, despite the concluded arbitration agreement, applies to the public court, the latter shall – at it own initiative or at the request of the party to the dispute – declare itself incompetent to consider such case.

The consolidation in the national procedural legislation of provisions, defining the competence of the arbitration courts, reflects the pro-arbitration approach of the new legislation.

Judicial Control of the Arbitration Agreement Validity

The new procedural rules of the Commercial Procedure Code undoubtedly provide for the possibility of Ukrainian courts to recognize the validity of the arbitration agreement – any inaccuracies in the text of the agreement for the submission of dispute to an arbitral tribunal, the international commercial arbitration, and (or) any doubts about the validity, effectiveness and feasibility should be interpreted by the court in favor of its authenticity, effect and feasibility.

All issues related to the existence and validity of the arbitration agreement fall within the notion of arbitrability in its broad sense. The absence of this rule of law in the previous version of the Code has actually led to the impossibility to resolve the dispute in international commercial arbitration.

For instance, there are examples in the judicial practice where the arbitration agreement contained incorrect information about the place of arbitration, its award, the name of the arbitration institution, the number of arbitrators etc. Such defects, affecting the validity of the arbitration agreement, usually lead directly to the failure of the arbitration procedure as such, since in this case the arbitral awards may be canceled.

Interim Measures of the Public Court in Support of Arbitration

At the request of international commercial arbitration or following the petition filed by the participant and upheld by the arbitration court, the national court may facilitate arbitration by taking measures to secure evidence, including commissioning the expert evidence, by taking measures to secure the claim, including seizure of property and money, imposition of obligation or prohibition to act etc.

Article 27 of the Law of Ukraine on International Commercial Arbitration, which regulates the court’s assistance in taking evidence, provides for the following: the arbitral tribunal or a party with the approval of the arbitral tribunal may apply to the general court of appeal at the location of evidence (residence of witness) with a request to assist in the interrogation of a witness, taking evidence or examination of the evidence at its location. The court may uphold this request within its competence and in accordance with its rules for taking evidence.

Such norms are sufficiently progressive and facilitate the arbitration procedure. Perhaps, their implementation will help in promotion of the national arbitration among the foreign investors as a rather effective way to resolve disputes. At the same time, in spite of its legislative consolidation, this norm was not yet practically implemented.

Recognition and Execution of Arbitral Awards. Reversal of Arbitral Awards by National Courts

The number of arbitral awards reversed by national courts, as well as the possibility of recognition and effective execution of the arbitral awards, may be one of the main criteria for determining the pro-arbitration climate within the country, where the execution of an arbitral award is sought, as well as for a foreign investor when deciding whether to submit the dispute to commercial arbitration, since in practice obtaining an arbitral award is not enough, one should also receive the compensation from the debtor.

In accordance with the new targeted rules, the appeals against awards of international commercial arbitration, as well as cases on their recognition and execution, will be considered by the courts of appeal and reviewed by the Supreme Court. The aforementioned change is quite effective, since the reduction in the number of courts considering such disputes will deprive the dishonest debtor of a possibility to delay the process of receiving compensation by the plaintiff.

Conclusion

Hence, Law No. 2147 solves important issues of interaction between international commercial arbitration and public courts. The public courts and international commercial arbitration are independent of each other at the institutional level. However, there are certain issues related to arbitration at the procedural level, which are decided by the public courts in its support. The amendments already introduced into the Ukrainian arbitration legislation will make Ukraine more attractive place of arbitration and create prerequisites for generating additional revenues to the budget.

 
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