In this article we will discuss how to recover debts from debtors under arbitral awards and foreign judgments in Ukraine. In brief, the procedure consists of two stages: a judicial stage, where a Ukrainian court verifies whether the decision meets the conditions stipulated by law, and an enforcement stage. Before commencing enforcement proceedings, we recommend checking whether your debtor has any assets in Ukraine that can be enforced.
What is recognition and enforcement of arbitral awards or foreign judgments?
This is a procedure for extending the legal force of the decision to the territory of Ukraine and enforcing the recovery of money from the debtor awarded to the claimant by the arbitral tribunal or foreign court.
How to check whether the debtor owns property in Ukraine?
Good if you know of the specific property of your debtor in Ukraine, at the expense of which you can collect your debt. If not, try to identify the debtor's property as follows:
- In the company register, you can check what is the debtor's share capital, its founders, UBOs.
- In the state registers, you can find out whether the debtor owns the movable and immovable property, whether such property is encumbered.
- In the court register, you can determine whether there are pending cases or decisions on debt recovery against the debtor, whether the debtor is in the process of liquidation or bankruptcy.
- In the register of debtors, you can check whether there are initiated enforcement proceedings against the debtor.
- General Google search of the debtor may help determine his reputation, what its production turnover is, whether it owns some property, whether the debtor or its associated persons are involved in fraudulent schemes.
Recognition of arbitral awards
What arbitral award can be enforced?
Before applying to the court for recognition of the arbitral award, check whether such award can be recognized in Ukraine. Recognition is allowed if:
- The award is made in one of the state parties to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958. The Convention is in force for 170 states (here is the list). To the other states, the principle of reciprocity applies — the award is enforceable unless the contrary is proven.
- The award is final and entered into force.
- The award was made less than three years ago.
- The debtor resides / is registered in Ukraine or owns property in Ukraine.
What documents are required for recognition of the award?
First, the original or a notarized copy of the arbitral award. It must be apostilled or legalized in the territory of the state of arbitration.
Secondly, the original or a notarized copy of the arbitration agreement. This may be a contract with an arbitration clause or a separate agreement under which the dispute was referred to arbitration.
A notarized translation of the arbitral award and arbitration agreement into Ukrainian is also required if they are made in a foreign language.
What authority handles the application for recognition and what is the procedure?
All cases on recognition of arbitral awards in Ukraine are heard by the Kyiv Court of Appeal. The decisions of this court can be appealed to the Supreme Court.
The court notifies the debtor of the claimant`s application and invites it to submit its objections within a month.
After that, the court considers the application on the basis of the submitted documents or at a hearing with the parties.
The court may stay the proceedings if the competent authority in the state of arbitration is considering an application to set aside the award. For example, the High Court may review an LCIA arbitral award if the tribunal has violated the arbitration procedure agreed upon by the parties.
The court decision upon hearing the application may be appealed to the Supreme Court within thirty days from the date of its issuance.
At any stage of the proceedings, the claimant may request the court to secure its claim (e.g. to seize the debtor's property or funds).
How long does it take to recognize the award?
According to the law, the court considers the case on recognition within two months. However, due to the war and a large volume of cases, this period can be longer, and in some cases takes up to a year.
When can the court refuse to recognise the award?
Recognition may be refused by the court if:
- The party was incapacitated when concluding the arbitration agreement, the arbitration agreement is invalid.
- The debtor was not notified of the appointment of the arbitrator or the arbitration proceedings, or was otherwise unable to present his case.
- The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration.
- The composition of the tribunal or the arbitral procedure violated the parties' agreement or the law of the state of arbitration.
- The award has not yet become binding on the parties, or has been set aside, or suspended by a competent authority of the country in which the award was made.
- The law prohibits the submission of a dispute to arbitration (for example, a dispute regarding the state registration and accounting of rights to real estate, a dispute over a public procurement contract).
- Such recognition and enforcement would be contrary to the public policy of Ukraine (for example, the court prohibited the enforcement of the award of the Stockholm arbitration against the Odesa Port Plant, as it is a state-owned object of strategic importance for the economy and security of the state (Resolution of the Supreme Court of 25 November 2021 in case No. 824/183/19).
Granting permission to enforce foreign judgments
What foreign judgment can be enforced?
Before applying to the court for permission to enforce a foreign judgment, make sure that your judgment meets the following conditions:
- There is a treaty on mutual recognition and enforcement between Ukraine and the foreign court state. For example, here you can view bilateral international treaties of Ukraine with other states that provide for mutual recognition and enforcement of judgments. The Convention of the CIS on Legal Assistance is an example of a multilateral treaty.
- If there is no such international treaty between Ukraine and the foreign court state, the principle of reciprocity is applied — the judgment can be enforced unless the contrary is proved. For example, the judgment of the District Court of Amsterdam was recognized by the Ukrainian court, although there is no treaty on mutual legal assistance between Ukraine and the Netherlands (Ruling of the Kyiv District Court of Odesa in case No. 947/6677/22 of 26.05.2022).
- The judgment was made less than three years ago, except for judgments on debt collection which can be enforced during the whole period of debt collection for the last three years.
- If the judgment was partially executed, it is subject to execution in the unexecuted part.
What authority handles the application for permission to grant enforcement and what is the procedure?
A civil court at the place of residence / registration of the debtor in Ukraine, or the location of the debtor's property in Ukraine.
An application for permission to enforce shall be submitted by the creditor or through the competent state authorities if so provided for by the international treaty.
The court notifies the debtor of the filed application and invites him to submit his objections within a month.
After that, the court considers the application on the basis of the submitted documents or with the participation of the parties.
The court decision on the results of consideration of the application within thirty days from the date of its issuance may be appealed to the relevant court of appeal.
What documents are required for recognition of the foreign judgment?
A duly certified copy of the foreign judgment stating that such judgment has entered into force. If not specified — an official document of the foreign court on the judgment has entered into force. These documents must be apostilled or legalized in the territory of the foreign court.
It is also necessary to provide evidence of the debtor's notification of the foreign court's consideration of the case if he did not participate in the trial.
If these documents are made in a foreign language, one must attach their notarized translation into Ukrainian.
When can the court refuse to grant enforcement?
The court checks whether the foreign decision and the procedure under which it was issued comply with the law. The court may refuse to grant permission to enforce the judgment if:
- This judgment has not entered into force.
- The debtor was not duly notified of the proceedings.
- The judgment was made in the case, consideration of which is exclusively within the competence of the court or other authorized body of Ukraine.
- If a decision of a Ukrainian court has been previously made in a dispute between the same parties, on the same subject matter and on the same grounds, or such a dispute is currently being considered.
- If the subject of the dispute does not have to be litigated under Ukrainian law.
- If the implementation of the foreign judgment threatens the interests of Ukraine.
- Other grounds as specified in the treaty.
How are arbitral awards and foreign judgments enforced?
After receiving the decision on recognition / granting permission to enforce the decision, the creditor can apply to the executor. There are state and private executors in Ukraine.
The executor has broad powers: to send requests to banks about the availability of accounts, seize accounts, forcibly transfer money, seize and sell property, etc.
Execution takes from several months to several years, depending on the debtor's participation and the availability of its property in Ukraine.
The execution procedure is free of charge for the creditor (however, private executors may request to cover their basic expenses). Payment for the services of the executor is charged from the debtor in the amount of 10 percent of the debt.
What to do if the debtor has no assets in Ukraine?
If the debtor has disposed of its assets in order not to comply with the award, you can initiate bankruptcy proceedings. During such proceedings, owners and directors can be held liable for the debts of the company if it is proven that they are responsible for the bankruptcy of the company.
The creditor can seek a court order to invalidate transactions based on which assets have been withdrawn from the debtor's company. As a rule, such transactions are fictitious, e.g. they stipulate the transfer of property for nothing, property being transferred to relatives or associated persons, no payment by the buyer being made.
Can the arbitral award or foreign judgment be recognized and enforced during the war?
Yes. Ukrainian authorities work as usual, except for those in the temporarily occupied territories.