International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry: A Sensible Alternative to Traditional Arbitral Forums

It is a known fact that in international business, it is an established practice to refer commercial disputes to international arbitrations such as GAFTA, FOSFA, LMAA, LCIA, SCC, and so on.

An undeniable advantage of commercial arbitration is its procedural flexibility and the overall speed of dispute resolution, which encourages market participants to provide for its exclusive jurisdiction in their commercial contracts.

However, not everyone is aware that Ukraine has its own commercial arbitration offering the same advantages as its foreign alternatives — the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry (hereinafter referred to as the ICAC). In certain respects, ICAC even provides these advantages to a greater extent. Let us discuss this in more detail.

What is the ICAC, and what does it do?

The ICAC is an independent, permanent arbitral institution based in Ukraine, operating in accordance with the Law of Ukraine “On International Commercial Arbitration” and its own Rules.

In essence, it is an independent commercial arbitration forum that hears a wide range of cases arising from disputes relating to international commercial contracts, corporate relations, investment and licensing transactions, contracts for works and services, and so on.

In practice, the ICAC often deals with cases related to:

• The supply of agricultural products;
• The carriage of goods by various transport;
• The storage of cargo in warehouses and terminal facilities;
• Trade relations (in particular, goods distribution);
• Corporate disputes;
• Intellectual property and copyright;
• Performance of IT contracts.

Why should you choose the ICAC?

Compared to more familiar (primarily English) arbitral forums, the ICAC offers a number of significant advantages that provide objective reasons to choose it as the forum for resolving disputes under your contract. Let us briefly review these advantages:

1. The cost of arbitration is lower than in traditional English arbitral forums;
2. Proceedings can be conducted in Russian or Ukrainian;
3. The parties may choose the applicable law (it does not have to be English law);
4. The time frame for resolving a case is six months, making the ICAC one of the most efficient arbitral forums;
5. The arbitral tribunal has the power to grant interim measures, such as freezing the respondent’s assets or accounts, which significantly increases the chances of swift enforcement of the arbitral award once it is issued.

How to refer a dispute to the ICAC

There are only two criteria that must be met for a dispute to be submitted to the ICAC:

• At least one party to the dispute must be a non-resident of Ukraine, or a Ukrainian-resident company with foreign investment (this requirement is expressly provided for in the Rules).
• The parties must conclude an “arbitration agreement,” meaning they must agree to refer any potential dispute to the ICAC for resolution.

As with other commercial arbitration forums, the arbitration agreement is typically a separate clause in the contract that expressly provides that all disputes arising from that contract will be referred to the ICAC.

This clause also usually specifies the number of arbitrators who will hear the case—either a panel of three arbitrators or, alternatively, a sole arbitrator.

If this matter is not expressly regulated in the contract, the dispute will, by default, be heard by a panel of three arbitrators.

The Process of Resolving a Case at the ICAC

Unlike most arbitral forums, the party wishing to initiate arbitration proceedings does not need to file a prior notice of arbitration.

Instead, the claimant submits a statement of claim straight away, setting out the substantive basis of the claim and nominating their arbitrator for the panel. When filing the statement of claim, the claimant must also pay a registration fee of USD 600. After this, the ICAC decides whether to open proceedings (if the dispute falls within its jurisdiction) and formally requests the claimant to pay the full arbitration fee, the final amount of which depends on the value of the claim (this issue will be examined in detail in a separate section below).

For their part, the respondent must nominate the second arbitrator and submit their statement of defence within 30 days of receiving the notice from the ICAC. If this is not done, the second arbitrator will be appointed by the President of the ICAC, meaning the respondent has no real opportunity to delay the proceedings in this regard. After that, the two nominated arbitrators must select the presiding arbitrator within the next 30 days.

During the proceedings, the arbitral panel has the discretion to schedule oral hearings. Either party to the proceedings also has the right to submit a request for an oral hearing.

The arbitral award must be rendered no later than 30 days after the conclusion of the hearings. As already noted, the overall time frame for resolving the case must not exceed six months from the date the arbitral panel is constituted.

With the parties’ consent, the dispute may also be resolved under an expedited procedure, which provides for a simplified process:

• A sole arbitrator considers the dispute.
• The arbitration fee must be paid within 15 days (instead of 30 days under the standard procedure).
• The statement of defence must be submitted within 10 days of receiving the claim (instead of 30 days).
• The parties submit only the statement of claim and the statement of defence (and, if necessary, a counterclaim and corresponding objections).
• No oral hearings are held.
• The award is rendered within 20 days after the conclusion of the proceedings.

It should be noted that at any stage of the proceedings, the claimant has the right to submit an application for interim measures. This will be discussed in more detail below.

Interim Measures

The ICAC Rules grant the parties the right to request interim measures at any stage of the arbitral proceedings.

This is a clear advantage of the ICAC over its competitors, as not all commercial arbitration forums have the authority to grant interim measures themselves. In such cases, the parties have no option but to apply to a state court at the seat of arbitration. As we can see, with the ICAC, this option is available.

The ICAC Rules do not impose any restrictions on the type or amount of interim measures. In practice, the most useful forms of security are asset and account freezes, which help ensure prompt and effective enforcement of the arbitral award once it is issued.

Cost of the Arbitration Process

As already mentioned, the cost of arbitration at the ICAC can be lower than that of comparable English commercial arbitral forums.

Thus, the claimant must pay a registration fee (USD 600) and an arbitration fee, which is calculated based on the amount of the claim.

The arbitration fee can be determined using the table set out in the ICAC Rules or with the help of a dedicated calculator.

For example, the cost of resolving a dispute with a claim value of USD 100,000 would be approximately USD 9,000.

For a case valued at, for example, USD 300,000, the cost would be around USD 15,000.

This is lower than the cost of English commercial arbitrations, whose average fees are often significantly higher. For instance, the average cost of an arbitration under LCIA rules exceeds USD 50,000, while under LMAA it is around USD 40,000.

Appeal of ICAC at the UCCI Awards

As a general rule, ICAC awards are final and binding on the parties and cannot be reviewed on the merits. However, Article 459 of the Civil Procedure Code of Ukraine sets out a number of grounds on which an award may nonetheless be challenged, namely:

1. A party to the arbitration agreement was legally incapable, rendering the agreement invalid;
2. The party against whom the award was made was not properly informed of the appointment of an arbitrator or of the arbitral proceedings, and for valid reasons was unable to present its case;
3. The award deals with a dispute not contemplated by, or not falling within, the terms of the arbitration agreement, or addresses matters beyond the scope of that agreement;
4. The composition of the arbitral tribunal or the arbitral procedure did not comply with the parties’ agreement or the law of the seat of arbitration;
5. The award is contrary to the public policy of Ukraine.

In accordance with Article 454 of the Civil Procedure Code of Ukraine, challenges to ICAC awards are filed with the Kyiv Court of Appeal within three months of the party receiving the award. Following its review, the court issues a ruling, which may then be appealed to the Supreme Court.

However, statistics show that only about 1% of ICAC awards are ultimately set aside by the courts.

Enforcement of ICAC Awards

ICAC awards are enforced under the same procedure as awards of other international commercial arbitration forums.

They may be recognised and enforced both in Ukraine and in any other state that is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Ukraine is a party to the New York Convention, which simplifies the process of recognising arbitral awards within its territory. Thus, under Article 475 of the Civil Procedure Code of Ukraine, an application for recognition and enforcement of an international commercial arbitral award must be filed with the Kyiv Court of Appeal within three years of the date the award was made.

Following its review of the application, the court issues the relevant ruling, which may subsequently be appealed by the opposing party only to the Supreme Court.

It is worth noting that with respect to countries that are not parties to the New York Convention, the principle of reciprocity applies — presuming that the state where the award was rendered and the state where enforcement is sought mutually recognise and enforce each other’s awards.

So why is the ICAC a reasonable choice?

In summary, in our view, choosing the ICAC as the arbitral forum truly offers a number of significant advantages — it enables disputes to be resolved more quickly and at lower cost than in the more familiar English commercial arbitration forums.

Moreover, the procedure allows for the use of interim measures without the need to apply to a state court, helping to avoid unnecessary bureaucratic hurdles.

In addition, the dispute may be resolved under Ukrainian law, which can be an important advantage for companies with close ties to Ukraine and those that prefer the Ukrainian legal framework for resolving disputes with their counterparties.

At the same time, the ICAC has no obvious disadvantages — cases are heard by professional, highly competent arbitrators in line with the best international practices.

If you wish to safeguard your international transactions and ensure the swift and effective resolution of potential disputes, we recommend that you provide in advance for the ICAC as the forum for dispute resolution.

The Fortior team has extensive experience both in representing clients before the ICAC at the UCCI and in enforcing its awards, not only in Ukraine but worldwide. We are always ready to engage quickly and professionally on such projects.

If you have any questions regarding arbitration at the ICAC, please do not hesitate to contact our team at [email protected].