In this article we discuss recent negative case law on recognition of arbitral awards in Ukraine. Depending on the circumstances, a Ukrainian court may not accept an application for recognition or refuse to recognize the arbitral award. The difference is that if the court does not accept (return) the application, the applicant may correct mistakes and resubmit it. The refusal to accept may be appealed to the Supreme Court.
We discussed the general process of recognition of arbitral awards in Ukraine here.
When the court does not accept an application for recognition?
If the applicant has not complied with the requirements for the application for recognition or failed to attach necessary documents, the court leaves the application without motion and gives the applicant 10 days to correct mistakes. If the applicant fails to correct the mistakes, the court returns the application. Return of the application does not prevent the applicant from resubmitting for recognition of the arbitral award.
Common mistakes when applying for recognition:
Failure to comply with the requirements for the content of the application
The applicant shall specify the name of the court to which the application is submitted, the name of the arbitration, the members of the arbitral tribunal, the parties to the arbitration, their places of residence, the date and place of the arbitral award issuance, as well as the date of its receipt by the applicant, the enforcement request.
In case No. 824/222/20 the applicant did not specify the names of the parties to the arbitration proceedings and their places of residence in the application for recognition of the London Maritime Arbitrators Association (LMAA) arbitral award.
In case No. 824/91/22 the applicant did not request the court to issue a writ of execution to enforce the award of the International Commercial Arbitration Court at the Ukrainian CCI (the ICAC).
Failure to attach an arbitral award or arbitration agreement
The applicant must provide the court with the original or notarized copy of the arbitral award and the arbitration agreement. The foreign arbitral award must be apostilled or legalized.
In case No. 824/116/22 the applicant attached to the application scanned copies of the LMAA arbitral award and the arbitration agreement, rather than originals or notarized copies of these documents.
In case No. 824/108/22 the applicant stated that he did not have the original contract with the arbitration clause under which the case was considered by the ICAC at the Ukrainian CCI. The court returned the application for recognition, noting that the applicant could obtain the original contract from the other party.
Failure to attach Ukrainian translation of documents
The applicant shall provide Ukrainian translation of the documents in a foreign language (arbitral award, arbitration agreement, power of attorney, other document confirming the powers of the representative). The translation must be certified by a notary who knows the foreign language or by a translator. The translator's signature on the translation shall be certified by a notary who verifies the translator's legal capacity and qualification document.
In case No. 824/201/20 the applicant filed the arbitration agreement and the arbitral award of the ICAC at the Ukrainian CCI in Russian — the court requested to provide their Ukrainian translation.
Failure to attach copies of the application for recognition for other parties
The law obliges the applicant to attach copies of the application for all parties of the arbitration proceedings so that the court notifies them of the claimant's application for recognition of the arbitral award.
In case No. 824/208/21 the applicant did not provide a copy of the application for recognition of the arbitral award of the ICAC at the Ukrainian CCI for the participants in the case.
Failure to follow the procedure for payment of court fees or to confirm such payment
The applicant must pay a court fee for consideration of the application for recognition. In 2022, the court fee for the first instance is UAH 1240.50, and for an appeal to the Supreme Court — UAH 2481. The original receipt of payment of the court fee must be attached to the application.
In case No. 824/257/21 the applicant partially paid the court fee for filing an application for recognition of the award of the Eurasian Commercial Arbitration at the Association of Legal Entities "Association of Expert Societies", on the basis of which the court left the application without motion and requested to pay the full amount of the court fee.
In case No. 824/96/21 the applicant did not provide the original receipt of payment of the court fee for consideration of the application for recognition of the arbitral award of the ICAC at the Russian CCI.
Failure to confirm the representative's authority to sign the application
An application for recognition of an arbitral award may be signed by an authorized representative of the claimant or a Ukrainian advocate. The application for recognition shall be accompanied by a document authorizing the representative to sign documents on behalf of the claimant.
In case No. 824/108/22 the court did not accept the application for recognition of the award of the ICAC at the Ukrainian CCI, as it was signed by the representative whose powers were confirmed only by an extract from the company register formed 4 months before the application was submitted. The court noted that the claimant had to provide an order authorizing the representative to sign documents on its behalf.
In case No. 824/33/22 the application for recognition of the award of the ICAC at the Ukrainian CCI was signed by the advocate on the basis of the legal aid agreement and the order. The court returned the application, since the provisions of the agreement did not authorize the lawyer to sign applications, but only allowed him "...to represent the Client in the Kyiv Court of Appeal during the consideration of the application for recognition and permission to enforce the award...", that the court found insufficient to confirm his authority to sign.
When does the court refuse to satisfy the application for recognition of the arbitral award?
The Law establishes an exclusive list of circumstances that may be grounds for the refusal of an application for recognition of an arbitral award in Ukraine. The burden of proving the grounds for refusal of recognition is on the party opposing the claimant's application. The court's decision to refuse recognition may be appealed to the Supreme Court.
The court refuses to recognize the arbitral award on the following grounds:
Improper notification of the debtor about the appointment of arbitrators and the arbitration proceedings
The debtor may request the court to refuse to recognize the award if it was not notified of the appointment of arbitrators and the arbitration proceedings.
In case No. 824/253/21 the applicant failed to provide the court with evidence of the debtor's notification of the appointment of an arbitrator and further arbitration proceedings, hence the court refused to recognize the award of the Arbitration Service of the City of Portland, Oregon, USA. The court did not accept the applicant's arguments that there was no need to notify the respondents, since they refused to arbitrate.
The award was made in respect of a dispute not covered by the arbitration agreement
The parties to the arbitration agreement determine which disputes shall be submitted to arbitration. The court refuses to recognize an arbitral award if it is made on a matter not provided for by the arbitration agreement.
In case No. 824/191/21 the court refused to recognize the LCIA arbitral award since the party to the contract as to which the award was made did not give its consent to the arbitration clause under which the dispute was submitted to arbitration.
The composition of the tribunal or the arbitration procedure did not comply with the arbitration agreement or the law of the place of arbitration
In case No. 824/283/21 the application for recognition of the arbitral award of the ICAC at the Polish CCI was considered. The court found that the tribunal applied Polish law to resolve the issue of VAT payment, although the contract with the arbitration clause provided for the regulation of any relations and obligations arising from the contract under Ukrainian law.
The award is not yet binding on the parties, has not been canceled or its enforcement has been suspended
The applicant must provide evidence that the arbitral award has entered into force for the parties, the court has no evidence that the award has been set aside or suspended by the court of the state of arbitration.
In case No. 824/253/21 the court refused to recognize the arbitral award of the Arbitration Service of Portland, Oregon, USA, as the award did not specify the procedure and terms of its entry into force. The applicant also failed to provide the Arbitration Rules or other evidence to prove that the award had become binding on the parties.
Enforcement of the arbitral award would be contrary to the public policy of Ukraine
Public policy reservation aims to prevent the recognition of the arbitral award in Ukraine if, as a result of such enforcement, actions that are expressly prohibited by law or harm the security of the state are committed.
In case No. 824/183/19 the court refused to recognize the award of the Stockholm arbitration against the Odesa Port Plant, as this plant is a state-owned object of strategic importance for the economy and security of the state, and therefore the recognition of the arbitral award against it would violate public policy.
The dispute could not be resolved in arbitration due to its subject matter
The Ukrainian Law prohibits submitting to arbitration disputes on invalidation of acts, on state registration and accounting of rights to immovable property, on intellectual property rights, disputes on public procurement contracts (except for civil law aspects of the contract, such as payment for services rendered, which can be submitted to arbitration (case No. 824/15/22)).