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Supreme Court Rules on the Competence of Ad Hoc Arbitration

News date: 15 March 2023

On 12 January 2023 the Supreme Court refused to set aside the arbitral award for collection of EUR 5 million from an individual person – a citizen of Ukraine – for breach of contract.

In May 2022, the Estonian company filed a Motion for the appointment of ad hoc arbitration tribunal to the Permanent Court of Arbitration at the Association of Law Firms of Ukraine. Mr. Eduard Shevchenko, a retired Ukrainian judge with 35+ years of professional experience in legal profession, was appointed as the sole arbitrator in the case.

As a result of the arbitration proceedings, the claim of the plaintiff for protection of its rights violated by the defendant’s non-fulfillment of aircraft sale and purchase contract was satisfied in full.

The defendant in the arbitration proceedings (i.e., buyer under the contract) disagreed with the arbitral award and appealed it to Kyiv Court of Appeal requesting to set aside the award on the grounds of absence of competence of the appointed arbitrator. Kyiv Court of Appeal refused to set aside the arbitral award, while the Supreme Court confirmed the correctness of such position, the competence of the appointed ad hoc arbitration to consider the case, as well as the overall validity of the arbitral award.

This is not the first arbitration decision that Ilyashev & Partners has successfully defended in the Supreme Court. For example, in 2020, the Supreme Court granted permission to one of the largest Chinese machinery manufacturers – J.S. Corrugating Machinery Co., Ltd – to enforce the arbitral award issued by the China International Economic and Trade Arbitration Commission (CIETAC, Shanghai) for the recovery of over USD 5 million from the Ukrainian debtor South Cardboard LLC.

Also in 2020, Ilyashev & Partners Law Firm successfully represented the State of Ukraine in the arbitration dispute between Ukraine and the EU in connection with the introduction by Ukraine of a moratorium onto the exports of unprocessed timber (rough logs). The arbitrators acknowledged that Ukraine has the right to restrict timber exports within the first dispute under the EU-Ukraine Association Agreement. This is the second settlement in the history of the EU through ad hoc arbitration, which is stipulated by a bilateral interstate trade agreement.