Development of International Commercial Arbitration in Ukraine

Mykola Selivon, Professor, Academician of the National Academy of Legal Sciences of Ukraine, President of the International Commercial Arbitration Court (ICAC) and the Maritime Arbitration Commission at the Ukrainian Chamber of Commerce and Industry, Ukraine

As far back as in the early 60s of the last century, Ukraine as a UN member signed and ratified two fundamental international treaties in the area of the international commercial arbitration, specifically on August 22, 1960 - the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and on 25 January, 1963 the European Convention on International Commercial Arbitration. It was for more than 30 years that no international arbitration institutions had been constituted and, for certain reasons, could not even be set in Ukraine. The latter was because of a foreign trade monopoly existing in the USSR, when foreign trade was exercised only by special-purpose all-Union foreign trade associations and organizations. All this determined existence of arbitration institutions only at the all-Union level.

So, only after the adoption of the USSR Law “On Foreign Economic Activity” on  April 16, 1991, those obstacles were removed and prerequisites for establishing and functioning of the international arbitration in Ukraine were created. The Law set forth the principle of freedom of foreign economic activities, allowing all enterprises and entities engaged in economic activities to establish foreign economic relations in any forms which are not expressly prohibited by law. Therefore, enterprises and organizations of all forms of ownership and citizens were provided with an opportunity to be fully engaged in international economic co-operation that, as and when needed, could be followed by certain disputes between the parties to foreign economic contracts (agreements) to be resolved, among others, by arbitration. For this reason, no wonder that the Verkhovna Rada, the national Parliament, in its enactment of the mentioned Law suggested the Ukrainian Chamber of Commerce and Industry should establish an international commercial court of arbitration.

This recommendation points out, first, that Ukraine, through its legislative body, considers the international arbitration as a powerful method for international commercial dispute resolution and intends to support its activities worldwide, and second, the Ukrainian state under the situation of liberalization of foreign economic activities and access to a foreign market by tens of thousand of Ukrainian enterprises and organizations promotes a dispute resolution between residents and non-residents on parity basis.

To implement the foregoing recommendation of the Parliament, the Presidium of the Ukrainian Chamber of Commerce and Industry by its decision of   June 10, 1992 established the International Commercial Arbitration Court at the UCCI and approved its Rules. However, in practice, the work on organization of the ICAC started on August 11, 1992, when Prof. Igor Pobirchenko had been appointed as President of the Court. As appears from Prof. Pobirchenko’s report on the work performed for 4,5 months of 1992, the work on organization of the ICAC was focused on the following areas:

First, on the organizational, personnel and legal establishment of the Court activity. The Rules of the Court were finalized in the Ukrainian and Russian languages and translated into the English and German languages, a new Schedule of Arbitration Fees and Costs (Annex to the ICAC Rules) was elaborated and approved by the decision of the Presidium of the UCCI of August 31, 1992, the Recommendatory List of Arbitrators was expanded, a typical arbitration clause was developed in the Ukrainian, Russian, English and German languages, as well as samples of all the procedural documents of the Arbitration Court;

Second, on the preparation of legislative acts regulating arbitration. The question is the discussion of the draft Law of Ukraine On International Commercial Arbitration in the Commission on Legislation and Legitimacy of the Verhovna Rada of Ukraine, as well as the preparation of proposals to amend the Civil Procedure Code of Ukraine regarding the ICAC and the establishment of the Maritime Arbitration Commission at the UCCI in Odessa;

Third, on the creation of awareness among entities engaged in foreign economic activities and legal community of the peculiarities of the conclusion of foreign economic contracts and the procedure of resolution of disputes arising out of these contracts. The explanatory work was performed in different forms: speech in the mass media, at conferences and seminars, counseling.

Finally, in 1992, the foundation of international relations of our arbitration institutions was laid. On December 10-11, 1992, the President of the ICAC at the UCCI took part and made a report at the International Congress in Zurich held by the Swiss Arbitration Association, and on  December 9, 1992, the first cooperation agreement (Agreement between the ICAC and the Swiss Arbitration Association) was signed.

Two years later, the Presidium of the Ukrainian CCI by its decision of August 25, 1994,established the Maritime Arbitration Commission at the UCCI, headed by Igor Pobirchenko, and approved the Rules, Schedule of Arbitration Fees and Costs and also Recommendatory List of Arbitrators of the Commission.

In this regard, we should make a pointed reference to the outstanding role of the academician, Professor  Pobirchenko - founder and unchangeable President during 18 years from the date of establishment of arbitration institutions at the Ukrainian Chamber of Commerce and Industry. Thanks to his efforts, energy, courage, intelligence, the stage of formation of international arbitration in Ukraine and legislative regulation of its activity passed very quickly, and in a short period, the arbitration institutions headed by him became authoritative and recognizable in the world. Igor Pobirchenko made a significant contribution not only to the development of international arbitration in our country, but in the former Soviet Union area. On  August 3, 2010, the Presidium of the Ukrainian CCI, in recognition of his merits, awarded Prof. Pobirchenko the title of “Honorary President of the International Arbitration Court at the UCCI”, having granted the request of Prof. Pobirchenko for his retirement as President of the ICAC and MAC at the UCCI for health reasons. It can be said without exaggeration that he was has been the talisman of our arbitration, an absolute authority. Until his last day Prof. Pobirchenko took an active part in the activities of arbitration institutions, gave legal advice, considered the disputes as an arbitrator in arbitration institutions of 16 countries. Igor Pobirchenko was an ideologist of the holding of the international research and practice conference entitled  “International Commercial Arbitration in Ukraine and the World: yesterday, today, tomorrow”, dedicated to the 20^th anniversary of the ICAC at the UCCI, which took place in Kiev on May 24-25, 2012. Unfortunately, he did not see that day; he passed away on April 6, 2012. The best memory of Igor Pobirchenko will be the implementation of his principles which he followed all his life, such as professionalism, pure honesty, impartiality, objectivity, the fight for justice, to the activities of the international arbitration.

Finishing the excursion into the history of arbitration institutions at the Ukrainian CCI, it should be noted that due to the efforts of Igor Pobirchenko the Arbitration Court as early as in 1992 commenced the arbitral proceedings in the first five cases (the proceedings in the first case was commenced by order of the ICAC President of 23 October 1992), and the first award was rendered on January 22, 1993 by the arbitrator Igor Pobirchenko. Among the arbitrators who considered the first cases of the ICAC it is necessary to mention the names of such prominent scholars and practitioners as Igor Pobirchenko, Fiodor Burchak, Liudmila Vinokurova, Yelena Drizhchanaya, Ivan Yemets, Alexander Krupchan, Vladimir Luts, Valentin Mamutov, Yevdokia Pashchenko, Gratsiela Pronskaya.

The dynamics of the number of cases of the ICAC in the first five years (1992-1996) of its activities was as follows: in 1992 - 5 cases, 1993 – 56 cases, 1994 - 64 cases, 1995 – 140 cases, 1996 - 252 cases. These numbers point at active efforts to promote the Ukrainian arbitration, as well as to the growth of the prestige of the ICAC at the UCCI.

Generally over the history of independent Ukraine the state policy in this area has remained unaffected and assumed, adhering to the principle, that development of the international arbitration, domestic arbitration (third-party tribunals) and other alternative dispute resolution methods are treated in a broader context as an indicator of a civil society maturity, the state governed by the rule of law and democracy. From this point of view, Ukraine should be called a country favorable to arbitration.

Functioning of arbitration and other alternative dispute resolution methods in Ukraine rests, first and foremost, on the constitutional provision saying that everyone has the right to protect his or her rights and freedoms from violations and illegal encroachments by any means not prohibited by law (Article 55 of the Constitution of Ukraine). One of such generally accepted methods of dispute resolution is reference to arbitration whether institutional or ad hoc- the one set up by the parties specifically for a given case.

Developing constitutional basis for arbitration proceedings the Constitutional Court of Ukraine put a special emphasis in its decisions of 2004 and 2008 that reference to arbitration for protection of the rights and interests in the area of civil and economic legal relations may not be treated as breach of a constitutional right of every person to relief in court. Actually, the parties voluntarily enter into an arbitration agreement to have a dispute settled by arbitration being a legitimate body to act in accordance with the laws of Ukraine, and thus to execute publicly significant functions.

Currently, in accordance with the applicable legislation, two independent subsystems of arbitration successfully operate in Ukraine, namely, the international commercial arbitration to consider only foreign economic disputes and domestic arbitration (third-party tribunals) to settle domestic disputes. Though having much in common in their legal nature, these two subsystems of arbitration proceedings are regulated by two separate laws: the international arbitration is governed by the Law of Ukraine “On International Commercial Arbitration”, and domestic arbitration is subject to the Law of Ukraine “On Third-Party Tribunals”. Article 1 of the latter Law expressly states that the international commercial arbitration is beyond its scope of application.

Each of the above systems subject to the jurisdiction of the courts considers specific types of disputes, engaged arbitrators of appropriate qualification and posses certain experience. Therefore, we believe relying, among other things, on the current stage of Ukrainian social development and level of legal culture that functioning of such two separate subsystems is justified, and there are no reasons to change either legislation or practice. In fact, the competence of many international arbitration courts over domestic disputes could be explained mainly not by any theoretical justifications or other weighty arguments, but simply by practical reason connected with small quantity of international disputes in particular jurisdiction.

It is a well-known fact that the state policy in the area of the international arbitration is implemented under the following principal directions: а) legislative regulation of arbitration institutions’ status and activities, their legitimation; b) execution of assistance and supervision functions.

I would like to note with satisfaction that Ukraine was the first state from the former Soviet Union that formalized in its legislation the status and legal basis of international arbitration activities in its three basic organizational forms: International Commercial Arbitration Court (ICAC) and Maritime Arbitration Commission (MAC) at the UCCI as permanent arbitration institutions and possibility to set ad hoc arbitration for a given foreign economic dispute. It was on February 24, 1994 when the Verkhovna Rada of Ukraine adopted the Law of Ukraine “On International Commercial Arbitration” and the Statutes of ICAC and MAC as Annexes to the given Law.

According to the mentioned Statutes, ICAC and MAC are independent, permanently functioning arbitration institutions created at the UCCI, operating under the Law of Ukraine “On International Commercial Arbitration”. The Ukrainian Chamber of Commerce and Industry approves Rules of ICAC and MAC, procedure for charging arbitration fee, arbitrators’ fees and other costs of arbitration proceedings, and fosters their activities. The exercise of these functions established by law by no means indicates that the ICAC and MAC somehow depend on the Chamber. The Chamber in no way interferes with the activity of the ICAC and MAC, and they are independent arbitration institutions which are governed while disputes resolution is regulated only by the Law of Ukraine “On International Commercial Arbitration”, agreement of the parties on the procedure of formation of the Arbitral Tribunal and the rules of applicable law.

The ICAC at the UCCI may settle disputes arising out of contractual and other civil law relationships in the course of foreign trade and other forms of international economic relations, provided that the place of business of at least one of the parties is located abroad. It means that the ICAC considers only international disputes referred pursuant to the parties’ agreement. However, there exist two exceptions. The competence of ICAC also includes disputes between enterprises with foreign investments and international associations and organizations set up on the territory of Ukraine, disputes between their members, as well as disputes with other subjects of law of Ukraine. In addition, ICAC accepts for arbitration disputes subject to its jurisdiction by virtue of the international treaties of Ukraine.

When talking about the subject matter of the disputes, it comprises all areas of international economic co-operation, specifically sales (delivery) of goods, provision of services, exchange of goods and services, commercial agency, cargo and passenger transportation, lease (leasing), construction, scientific and technological exchange, financing and crediting operations, etc.

Unlike the ICAC, the MAC, as provided for in its Statute, settles disputes arising in the area of merchant shipping, irrespective of whether the parties to a relationship are Ukrainian or foreign legal entities, or whether the parties are only Ukrainian entities or only foreign entities.

The analysis of provisions of the Law of Ukraine “On International Commercial Arbitration”, the Law of Ukraine “On Third-Party Tribunals”, as well as the Civil Procedure Code of Ukraine and the Economic Procedure Code of Ukraine reveals that the legislation of Ukraine accepts a private-law arbitration concept with the restricted interference of the State into arbitral proceedings and making arbitral award. More specifically, an arbitral award may not be reconsidered by a state court on the merits, and the control over arbitral proceedings shifted substantially to the stage of setting aside and enforcement. Moreover, the Laws contain specific list of grounds for a court ruling on setting aside or denying enforcement of awards made by international arbitration.

The Law of Ukraine “On International Commercial Arbitration”, Statutes of ICAC and MAC at the UCCI, their Rules and Schedules on arbitration fees and costs are based on the international treaties, such as 1958 New York Convention on the Recognition of Enforcement of Foreign Arbitral Awards and 1961 European Convention on International Commercial Arbitration ratified by Ukraine, as well as UNCITRAL documents. At that, Ukraine accepted the recommendations of the UNCITRAL Secretariat, and the Law of Ukraine “On International Commercial Arbitration” reproduces faithfully the text of the UNCITRAL Model Law on International Commercial Arbitration. Such a legal framework of Ukraine allows arbitration institutions to operate in accordance with international standards, confirms democratic principles of the organization of arbitration and conduct of the arbitration proceedings, namely: the right of the parties to form the Arbitral Tribunal and determine the procedure of case consideration and applicable law, adversarial principle and equality of the parties, confidentiality as to the information about disputes. This allows attracting the attention of foreign and local entrepreneurs to the Ukrainian jurisdiction.

For this reason we face a major task not to rewrite the Ukrainian legislation, but rather to bring it up to date together with a case law and practice in this area pertaining to separate stages of arbitration procedure, enforcement of awards and interaction with state courts. We have a pretty well-developed legal framework conforming as a matter of principle to current requirements. The point at issue is about “fine adjustment” of existing legislative regulations along the lines of recent worldwide trends, as well as tackling certain challenges disclosed in  enforcement practice.

By way of example, we draw on developing of the Ukrainian legislation on the procedure for enforcement of awards made by ICAC and MAC at the UCCI within the territory of our state. Elsewhere around the world these awards are enforced in the context of 1958 New-York Convention and procedural legislation of the state where the award is enforced. Until 2005, awards by ICAC and MAC were treated in Ukraine as enforcement orders (writs for execution) placing on them the same footing as to state courts’ decisions. Foreign arbitral awards were recognized and enforced by regional courts of appeal, Kiev and Sevastopol city courts in accordance with the procedure provided for in the mentioned Convention. The same courts were competent to consider applications for setting aside an arbitral award. Thus, there was no uniform procedure for enforcement of ICAC and MAC awards and foreign arbitral awards that was inconsistent with the New-York Convention.

Adoption in 2004 of the Law of Ukraine “On Third-Party Tribunals” introduced amendments to the Law of Ukraine “On Enforcement Proceedings”. According to them, arbitral awards made in Ukraine were to be enforced like foreign arbitral awards on the basis of enforcement orders issued by state courts. The Civil Procedural Code of Ukraine entered into effect in 2005 contained Section VIII “On Recognition and Enforcement of Foreign Judgments”. However, since  court practice did not consider awards of ICAC and MAC at the UCCI among the concept of “a foreign judgment”, courts of general jurisdiction and economic courts both considered applications to enforce the said awards.

Laws of Ukraine dated February 3, 2011, amended substantively the Civil and Economic Procedural Codes of Ukraine that regulate the procedure for setting aside and enforcement of arbitral awards including the ones of the international arbitration. It should be noted, first and foremost, that these laws finally delimited the competence of economic courts and courts of general jurisdiction with respect to enforcement of ICAC and other international arbitral awards rendered in Ukraine. According to the amendments, economic courts consider only cases on recourse and issuing enforcement orders for enforcement of arbitral awards issued by domestic (by third-party) arbitrations. Recourse and enforcement of ICAC and MAC awards, being international arbitral awards, as well as enforcement of foreign arbitral awards fall within the competence of local courts of general jurisdiction under the procedure set forth in Chapter I Section VIII of the Civil Procedural Code of Ukraine.

Therefore, following a certain analysis, the legislator has provided for an optimum award enforcement procedure uniform for all international arbitration.

Talking about improvement of legislation, we would like to note with satisfaction that on 19 May, 2011, (Decree of the President of Ukraine No. 589/2011) rescinded the Decree of the President of Ukraine dated July 1, 1995, No. 505/95 according to which INCOTERMS were applied after their publication in the state language in an official printed edition. Until recently the given Decree produced some problems for application of INCOTERMS-2010.

Currently, two ways to improve legal regulation in the field of commercial arbitration could be clearly seen: on the international and national levels. With regard to the first way, recently the United Nations Commission on International Trade Law has performed a great work on generalization of experience of international trade and practice of disputes consideration arising thereat, on discussion of these issues and consultations on the formation of a harmonized legal framework for the fair and effective resolution of international commercial arbitration disputes. The result of this work was the adoption of amendments to the UNCITRAL Model Law on International Commercial Arbitration in 2006 and a new version of the UNCITRAL Arbitration Rules 2010. Therefore, the primary target is the implementation of the foresaid innovations of UNCITRAL into Ukrainian legislation and the Rules of the ICAC.

As it is known, the UNCITRAL Arbitration Rules concern the arbitration ad hoc, i.e., a tribunal set up specifically for a particular case. The ICAC as a permanent arbitration institution may act as an appointing authority and provide organizational assistance in arbitration ad hoc. Giving due consideration to the new 2010 UNCITRAL Arbitration Rules, on  October 27, 2011 the Presidium of the Ukrainian CCI approved a new version of the “Rules of Assistance Available from the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry in Arbitration Under the UNCITRAL Arbitration Rules”.

The innovations of the UNCITRAL Model Law concern two important issues: the extension of definition and form of arbitration agreement (Article 7), the granting of interim measures by the Arbitral Tribunal, the recognition and enforcement of such measures (Section IV A).

Currently, a working group on preparation of proposals on amendments to the Law “On International Commercial Arbitration” and other regulations was set up in our arbitration institutions. These amendments among other concern implementation into the national legislation of the aforesaid innovations. As available practice of ICAC and MAC evidences, there are plenty of cases when upon a party’s request the ICAC or MAC President or the Arbitral Tribunal, if already composed, issue a ruling (decision) on defining an amount and a form of interim measures. However, these rulings are binding only for the parties, and they are not secured by the enforcement possibility. Taking a state legal recourse to enforce arbitral awards on measures of interim protection does not always succeed. At this stage, the above matters are under active discussions and implementation into the current legislation. In particular, in September 2012, Articles 394, 395 of the Civil Procedure Code of Ukraine were amended. Those amendments, in particular, are as follows: “The court upon application of the party filing a petition for the permission to enforcement of the foreign court judgment may order interim measures provided for by this Code. The interim measures may be granted at any stage of the consideration of the petition, if failure to order such interim measures may complicate or make the enforcement of the court judgment impossible”.

It should be noted that a constant process of improvement of the organizational structure and procedure of the arbitral proceedings takes place in the ICAC and MAC, above all, by means of amendment to the Rules and Schedules of Arbitration Fees and Costs. Suffice it to say that within the 20-years’ activities of the ICAC, three versions of the ICAC Rules (of 1992, 1994 and 2007) were developed and approved. The current version of the ICAC Rules (of 2007) was approved by the decision of the Presidium of the Ukrainian CCI of April 17, 2007 No. 18 (1). The Presidium of the Ukrainian CCI by its decision of April 17, 2002 No. 23 (1) created the Collegium for consideration of foreign economic disputes related to intellectual property within the ICAC and approved the Recommendatory List of Arbitrators of the Collegium. The Collegium operates under the Rules and the Schedule of Arbitration Fees and Costs of the ICAC. Currently the above mentioned working group carefully analyzes the revised Rules of many arbitration institutions of the world in order to implement the international experience into our practice.

Legislative regulation of enforcement of arbitral awards as well as recourse against awards is important for maintaining the advantages of arbitration as dispute settlement mechanism. Not less important is the judicial practice established with regard to setting aside and enforcement of arbitral awards or assisting arbitration institution within the arbitration procedure. It is reasonable to recall a generally recognized finding that efficiency of the arbitration and arbitral proceedings directly depends on judiciary, namely, on its support and assistance to arbitration, i.e., establishing of pro-arbitration environment.

With respect to functions, as provided for in the Ukrainian legislation, state courts are to perform two kinds of functions related to the international arbitration: assistance functions and supervision functions (Articles 5, 6, 8, 9, 16, 27, 34, 35, 36 of the Law of Ukraine “On International Commercial Arbitration”).

The above functions are connected with the State’s interest in ensuring the efficient use of the international arbitration. By allowing consideration of the legal dispute by arbitration, that is a private form of dispute resolution, and consequently by allowing the latter to decide on the matters connected with protection of violated rights and interests of the parties to a dispute, the State, on the one part, delegates to the international commercial arbitration certain public functions and guarantees (legislative regulation of a status and activities of the international arbitration court, finality of an arbitral award, the limited list of grounds for refusing recognition and enforcement of an arbitral award, refusal by a state court to open the procedure if there is a duly arbitration agreement between the parties to a dispute, enforcement of an arbitral award by the State) that, though being questioned in literature, do not change a private-law character of this institution and show no dualism in a third-party tribunal’s legal nature. Exercise of justice is among exceptional functions of the State to be performed solely by courts. Delegating courts’ functions and assigning these functions to other bodies and officials are prohibited. This is an imperative provision stipulated in Article 124 of the Constitution of Ukraine.

On the other hand, the State may not and should not remain uninvolved when the international commercial arbitration within its jurisdiction affects rights and interests of national private persons and legal entities. Therefore the State vests some supervision functions with its competent bodies, i.e. state courts, regarding the activity of international arbitration and its result, i.e. an arbitral award.

The Ukrainian legislation provides for “double control” principle, that means the existence of a possibility to check the award rendered by the international commercial arbitration upon substantially the same reasons within two different procedures (within recourse against an award and within its enforcement – Articles 34 and 36 of the Law of Ukraine “On International Commercial Arbitration”), to be done as a rule by various state courts of, probably, different states. And despite to the fact that it is implemented in more than 30 states and recommended by the UNCITRAL Model Law, this concept is criticized in literature as the one that involves arbitral proceedings in difficulty and is likely to cause a conflict of judicial acts. However such double control as provided by state courts for awards of the international arbitration, is not treated in practice negatively as it can appear according to the scholars writings. Granting to a party a right to make a recourse against an arbitral award for the purpose of its setting aside immediately after its rendering enables a non-prevailing party to reduce uncertainty around issued arbitral award with the assistance of independent court. And as a result to refrain in the event of satisfaction of such appeal, from award enforcement. This right allows keeping balance of probabilities and equality of the parties in relation to proving the award when a non-prevailing party initiates recourse and a prevailing party seeks for enforcement.

We have analyzed practice of Ukrainian courts as to consideration of applications to set aside awards rendered by ICAC.

First, we would like to provide some statistics. The data available to us indicates that Shevchenkovsky District Court of Kiev (being competent to consider such application with regard to ICAC awards according to ICAC location) obtains annually 10-25 applications for setting aside arbitral awards. It should be borne in mind that the ICAC renders on average 300-370 awards per year, with 446 awards made in 2010. Therefore, only about 3 percent of rendered awards are under recourse. In 2009, only one application out of 11 received was satisfied. In 2010, only 2 ICAC awards were set aside, one in full and the other one partially. Such small quantity of awards under recourse by a non-prevailing party demonstrates the quality of the awards issued by the ICAC, fair consideration of disputes when even a non-prevailing party is satisfied, at least, morally, with arbitral proceedings and its result.

Second, this could be also explained by the fact that a judicial system of Ukraine gained an extensive practice on hearing such cases according to the principle of a state court’s restricted competence in review of such applications. Neither award on the merits, nor a dispute may be considered by a court, but only an award itself may be set aside solely upon grounds established in the Law of Ukraine “On International Commercial Arbitration” (Article 34).

In accordance with the report prepared by the law company “Cai & Lenard” (Ukraine. Arbitration-Friendly Jurisdiction: Statistical Report, 2011-2012. Pilkov, Кonstantin. Kiev: Cai & Lenard, 2012) the ratio of cases of setting aside of the arbitral awards of the ICAC and MAC at the UCCI by local courts (state courts) and granting permissions for their enforcement in 2011-2012 is 1 : 49, i.e., 1 award set aside: 49 awards left for enforcement. This is quite a good result. At that, as it is emphasized in the report, even if a local court sets aside an arbitral award the court of appeal carefully reviews the case and usually cancels the decision on setting aside the award.

Despite some positive judicial practice, a number of state courts’ legal views generate doubts. Thus, we should resist an opinion drawn in one of state court’s rulings stating that third-party tribunals including the international arbitration may settle only disputes that fall within their jurisdiction as legally provided. It seems that this issue does not rest on the legislation of Ukraine and enables substantial “cutting” of third-party tribunals’ competence. While determining the competence of third-party tribunals the laws of Ukraine assume another principle when any dispute arising out of civil and economic law relationships may be submitted to a third-party tribunal, including the international commercial arbitration, unless otherwise provided for in the law. This is stipulated expressly in Articles 1 and 6 of the Law of Ukraine “On Third-Party Tribunals”. On its turn, Article 1 of the Law of Ukraine “On International Commercial Arbitration” and Article 2 of the Statute of the International Commercial Arbitration Court at the UCCI (Annex No.1 to the said Law) states that contractual and other civil law relationships arising in the course of foreign trade and other forms of international economic relations can be referred to arbitration. Therefore, given no express prohibitions in law, any uncertainties around admissibility of particular commercial dispute to be referred to arbitration should be in favor of its arbitrability and not vice versa.

Analysis of the available case law would be incomplete save for description of the case on recognizing by an economic court of the invalidity of an arbitration clause because, in a court’s opinion, by its essence it constitutes an agreement on waiver of recourse to the courts. The state economic court considered that no person could be deprived of a benefit of trial in the state court, and a court may not dismiss justice if a claimant considers its rights violated. Though this case concerns domestic arbitration, such an opinion of the state court misrepresents Constitutional provisions and decisions of the Constitutional Court of Ukraine regarding the right to file dispute before the court. Besides it entails a disruptive negative response from juridical community which believes that such an approach would  probably cause complication or event lead to liquidation of arbitration in Ukraine since following it any arbitration agreement may be declared invalid by a state court. Finally, the Supreme Court of Ukraine corrected such courts’ error by setting aside its decision as contrary to the Constitution of Ukraine.

The Ukrainian legislation on international arbitration is receptive to doctrine of Competence-Competence which means that an arbitral tribunal is allowed to rule on its own jurisdiction, and given a positive ruling thereof, an arbitral tribunal can terminate the proceedings and makes a specific award on the merits. Such a right of an arbitral tribunal is provided for in Article 16 of the Law of Ukraine “On International Commercial Arbitration”. However, an arbitral award related to the competence is not final and is subject to review by a state court during recourse or enforcement of an award.

In deciding on its competence, an arbitral tribunal, as necessary, should analyze an arbitration agreement, clarify its content and intentions of the parties, i.e., exercise “interpretation of the legal norm”. An arbitral tribunal may not reasonably decide on its competence without such interpretation. Meanwhile, taking a formal standpoint that according to Articles 213 and 637 of the Civil Code of Ukraine only the parties may have an exclusive right to interpret content of contract, and a court may pass such interpretation award only on the basis of a party’s respective request, some local courts concluded that the arbitral tribunal in ruling on its competence has interpreted an arbitration clause contained in a disputable contract, that was beyond the scope of arbitration clause since it did not directly provide for authorization to interpret the clause. Such an approach is likely to be faulty taking no consideration of a provision of the special law – the Law of Ukraine “On International Commercial Arbitration” – on the right of the international commercial arbitration court to rule on its competence through interpretation of an arbitration clause (Article 16) and specific features of its legal nature involving, particularly, its severability from other contract terms.

In relation to scope of ICAC competence, there is no reason to speak about its legislative limitation. At the same time, upon adoption of the Economic Procedure Code of Ukraine (Articles 12, 16), the Law of Ukraine “On Restoring Debtor Solvency or Declaring a Debtor Bankrupt” there arose questions on arbitrability of separate categories of disputes. Without offering specifics we note about existing conflict in the legislation concerning arbitrability of corporate disputes, as well as peculiarities of arbitrations where one of parties is at stage of bankruptcy or liquidation.

However, notwithstanding all these specifics, an appropriate legal framework, political and organizational prerequisites for regular functioning of international arbitration institutions and Ukraine’s meeting international commitments are in place. This is proved by 20-year activities of ICAC at the UCCI. It became known among business and judicial community. And the most important thing is that the arbitrators of high qualification who gathered under one Court’s roof are capable to make an award decision on fair and just basis, pursuant to facts of the case and the applicable law owing to their professional and personal qualities. In particular, the Recommendatory List of Arbitrators includes 76 highly-skilled experts being researches, professors, experienced legal experts. The majority of arbitrators (40) are foreign arbitrators from 24 countries including Austria, Azerbaijan, Belarus, Bulgaria, Croatia, Czech Republic, Finland, France, Hungary, Germany, Kazakhstan, Latvia, Macedonia, Moldova, the Netherlands, Norway, Poland, the Russian Federation, Serbia, the Slovak Republic, Slovenia, Sweden, Switzerland and the USA.

The number of references is one of arbitration success criteria. Annually, the ICAC accepts 300-400 cases for consideration.

Within its 20-years’ activities more than 7,500 cases from 110 countries all over the world  have been  filed for consideration at ICAC. More specifically, the number of cases accepted for consideration of ICAC for 2000-2012 has the following dynamics:

Variation in the number of claims, among other reasons, can be explained by the state of the world economy and the economy of Ukraine, as well as market conditions.

In 2012, ICAC issued awards in 299 cases out of which 177 cases (59.20%) were heard by the arbitral tribunals consisted of three arbitrators and 122 cases (40.80%) by a sole arbitrator.

The arbitral proceedings in 56 cases were terminated without consideration (mainly for non-payment of the arbitration fee by the Claimant or upon the Claimant’s application) by the Orders of the ICAC President or by the Orders of the Arbitral Tribunal (if already composed).

Last year, the parties to disputes were from 53 countries, including 45 countries of the far abroad, 7 CIS countries and Ukraine. In particular, business entities from Germany were the party to 16 cases, the United Kingdom and Turkey – 11 each one, Belgium – 10, Poland – 9, the USA – 8, Switzerland – 7 cases. In relation to CIS countries, the representatives of the Russian Federation, in particular, participated in 49 cases, Belarus – 27, Kazakhstan – 25 cases, Moldova – 17 cases. Eight disputes were referred to the ICAC as to international arbitration of a neutral state. Besides, there were two cases, both parties to which were the Ukrainian residents with foreign investment.

The geography of the parties includes almost all the continents of the world, which is evidence of the range of foreign economic activity of entrepreneurs of our country as well as to the corresponding image of the ICAC at the UCCI.

Over recent years, the geography of the parties, in principle, is stable. In the majority of cases, disputes submitted to the ICAC in 2012, as well as in previous years, arose in the course of international purchase and sale (delivery) of goods, and concerned the breach of contractual obligations as to the opportune payment or delivery of goods. A lot of disputes relate to the quality of delivered goods and provision of services. The consideration of such disputes is complex enough and, as a rule, requires carrying out different kinds of expert examination. To a lesser extent, submitted disputes deal with construction contracts, transportation and carriage of goods, leasing and insurance. In comparison with the preceding years, the number of disputes concerning the bank services has increased.

It is worth mentioning such a recent trend clearly observed in arbitration as the increase of participation of competent and qualified professionals of leading Ukrainian and foreign law firms as representatives of the parties in the arbitral proceedings that allows the Arbitral Tribunal to consider the factual and legal circumstances of the dispute more thoroughly and make a reasoned and objective award decision.

Arbitrators from Belarus, Germany, Moldova, Norway, the Russian Federation and Sweden repeatedly participated in the ICAC hearings in 2012.

The Secretariat and arbitrators put  a special emphasis on ensuring efficient arbitral proceedings. In 2009, in around 80% out of 536 cases awards were issued within 6 months, in 14% – within 9 months, starting from the date of the acceptance of the dispute for consideration and issuing of the order on initiating arbitral proceedings. Similar figures appeared in 2011 and 2012. 25.75% of 299 cases heard by the Court in 2012 were considered within 4 months, 27.09% - within 5 months, 18.39% - within 6 months, and 20.07% – within 9 months.

This proves to be a pretty good result, especially in circumstances of a recent negative tendency when a defendant puts all possible efforts to delay consideration of the dispute, i.e., change its location, avoid receipt of documents, use to abuse its procedural rights, etc. The particularities of the model of the arbitral proceedings existing in the ICAC and MAC at the UCCI, a good organization of the arbitration institutions, determination by their Rules of rights and duties of participants of the arbitral proceedings at all stages, establishment of time frames and their observation by the Secretariat, parties to the dispute and arbitrators contribute to prompt and qualitative consideration of cases.

An active role of the Secretariats of the ICAC and MAC set in their Rules should also be emphasized. Without prejudice to the independence of arbitrators while  considering a dispute and making an award decision and not interfering with the arbitrators’ functions, the Secretariats mediate between arbitrators and parties, provide material and technical as well as organizational assistance in the preliminary preparation of the case for arbitration, including hearing and meeting facilities for the Arbitral Tribunal. Thus, the Arbitral Tribunal is not burdened with technical functions for the organization of the arbitral proceedings and is given an opportunity to focus on the merits of the dispute and its resolution.

Besides, the attention should be paid to another feature of the Ukrainian model of arbitration. This refers to certain procedural powers of the President of the ICAC and MAC at the UCCI. Thus, in accordance with the Statutes and Rules of the ICAC and MAC, the President apart from the functions on the organization of the arbitration institutions’ activities shall:

-      issue an order on commencement of the arbitral proceedings upon receipt of a duly Statement of Claim and payment of the arbitration fee subject to availability of legal grounds (arbitration agreement between the parties) for referring a dispute to the ICAC;

-      prior to the composition of the Arbitral Tribunal, at the request of a party, if he considers the request to be justified, issue an order for determination of the amount and the form of the security of the claim. Such an order is binding for the parties and shall be in force until a final arbitral award is made;

-      prior to the composition of the Arbitral Tribunal, issue an order for the termination of the arbitral proceedings on the grounds specified in the Rules.

Such powers allow to resolve promptly procedural issues prior to the composition of the Arbitral Tribunal, in particular, refuse the institute of emergency arbitrator, whose competence includes the consideration of the applications for interim measures. We are interested in the practice of those arbitration institutions that offer expedited arbitration procedures (Arbitration Institute of the Stockholm Chamber of Commerce, China International Economic and Trade Arbitration Commission etc.).

It should be emphasized that the Rules of our arbitration institutions provide the parties with the right to set any arbitration procedure, including expedited, provided that such a procedure does not contradict the provisions of the Law of Ukraine “On International Commercial Arbitration”.

Talking about expedited procedure, there is every reason to consider shortening of a three-month period when the party, upon receiving the award, has the  right to make recourse against it as provided for in part 3 Article 34 of the Law of Ukraine “On International Commercial Arbitration”. Currently, such cases are heard by a local court of general jurisdiction according to arbitration location. It would make sense to revert to the practice existing until 2005, when this issue was among the competence of the appellate courts, i.e., Kiev Appeal Court. This would be consistent with the worldwide practice (Germany, Sweden, Poland) and promote more high-quality and professional approach to settling this issue in the court.

In order to expedite the arbitral proceedings and their completion, the arbitration institutions at the Ukrainian CCI introduced the rule according to which the most important documents in the case (claim documents, notices of the oral hearing and rulings on postponement of the oral hearing) shall be sent to the parties by courier mail.

The ICAC has developed and is currently implementing an electronic document management system, which, in addition to ensuring the registration of incoming and outgoing documents, parties to a dispute, status of arbitral proceedings as of specific date and for a particular case, and control of the duration of such proceedings, will eventually enable putting into operation electronic version of an arbitral case, exchange of documents and other information between the ICAC Secretariat, the arbitrators and the parties.

The ICAC at the UCCI actively cooperates with the international arbitration community. It is a member of almost all international associations in this field such as the International Federation of Commercial Arbitration Institutions (New York), the European Arbitration Group (Paris), as well as the Advisory Board of Council of Heads of CCI of CIS Member States. The ICAC entered into agreements with 16 foreign arbitration institutions on a bilateral level. Representatives of Ukrainian arbitration institutions take an active part in all international forums. Generally speaking, the international arbitration may operate efficiently only subject to continuous communications, sharing experience and ideas. Such was a contribution of the International Research and Practice Conference entitled “International Commercial Arbitration in Ukraine and the World: yesterday, today, tomorrow”, dedicated to the 20^th anniversary of the ICAC at the UCCI and held on May 24-25, 2012. The anniversary conference brought together about 200 participants from 21 countries, including 14 heads of arbitration institutions of Europe and Asia, world-class experts in the field of international arbitration, prominent scientists from many countries, representatives of all branches of government of Ukraine and especially representatives of the judicial authorities of Ukraine (judges of the Supreme Court of Ukraine, the High Specialized Court of Ukraine for Civil and Criminal Cases and the Supreme Economic Court of Ukraine), attorneys and lawyers, representatives of business community.

Taking all the aforesaid into consideration it should be underlined that prospects for development of the international arbitration in Ukraine are seen in improvement of legal regulation of individual institutions and stages of arbitration proceedings, quality enhancement of  award decisions  made, efficiency of arbitration procedure and provisions of such conditions for users that would enable issuance of fair arbitral awards consistent with the applicable law and facts to be enforced in all member-countries of New-York Convention 1958.