The Interference of the National Court in the ICAC Decision is an Excess of Its Powers - Nataliia Sakara

The judge of the Civil Cassation Court within the Supreme Court Nataliia Sakara said this at the II Ukrainian Arbitration Forum organized by the Yurydychna Praktyka newspaper and held on December 3, 2021.

Nataliia Sakara spoke at the International Commercial Arbitration session with the report "The Powers of National Courts in Resolving Issues Related to ICAC Decisions".

She noted the growing interest in international commercial arbitration in Ukraine in recent years and anticipated that the trend would continue in the future, owing in particular to the effective control of national courts in this area.

The speaker emphasized that national courts guaranteed everyone the right to a fair trial in accordance with paragraph 1, Article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms. The paragraph stipulates that everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. She also added that in the case law of the European Court of Human Rights, the relevant provision was interpreted in such a way that "tribunal established by law" was not only a court in the classical sense, but also an arbitration one. If it is mandatory, it is directly subject to Article 6 of the Convention. When arbitration is voluntary, the parties themselves choose such a remedy and agree that when considering the case, the standards provided for in the article might not be met. However, the national court continues to exercise judicial control, and at this stage it is obliged to ensure guarantees of a fair trial.

Nataliia Sakara cited the ECtHR judgment of July 20, 2006, in the case of Sokurenko and Strigun v. Ukraine (applications nos. 29458/04 and 29465/04), which drew attention to the fact that the court would not be a “tribunal established by law” if it exercised powers that were not inherent in it. “Therefore, in the context of ensuring the right to a fair trial, it is necessary to be aware of the powers of national courts in exercising judicial control over decisions of the International Commercial Arbitration Court,” said the speaker.

The powers of national courts to review arbitral awards can be divided according to the issues to which it is directed.

The first category of cases is the consideration of applications for revocation of the ICAC decision. Nataliia Sakara emphasized that the national court did not interfere in such a decision, did not check whether the arbitral tribunal had correctly applied the substantive law, but only ascertained whether there were grounds for revocation of the decision under Art. 459 of the Civil Procedure Code of Ukraine and Art. 34 of the Law of Ukraine On the International Commercial Arbitration. In addition, the list of these grounds is exhaustive and not subject to extended interpretation. The only exception is a violation of public order, said the judge of the Civil Cassation Court within the Supreme Court.

She also added that when it comes to a violation of public order, the responsibility to find out whether there was such a violation rested with the national court, and if the ICAC decision was appealed on other grounds, they must be proven directly by the person who filed the application for cancellation of the decision.

Nataliia Sakara noted that interference in the decision of the ICAC by the national court was an excess of its powers. "We proceed from the fact that since the parties have agreed to refer the case to arbitration, an appropriate arbitration agreement has been concluded, and the decision is in fact a part of this agreement. And if the ICAC did not go beyond the powers granted to it, then this decision is part of the agreement of the parties, and such a decision is subject to execution,” she explained.

The next category of cases is on the recognition and granting of permission to implement the ICAC decision. The national court here also does not interfere in the arbitral award for the above reasons, for the court it is correct in advance, unless a violation of procedural points is established: the person missed the deadline for filing an application for recognition and granting permission to execute the decision, submitted an application that did not meet the requirements regarding its form and content, or there are grounds for refusing to recognize and grant permission to enforce the decision of international commercial arbitration, set out in Article 478 of the Civil Procedure Code of Ukraine, the list of which is exhaustive and not subject to extended interpretation.

In addition, Nataliia Sakara drew attention to the fact that according to the results of considering the application for recognition and granting permission to enforce the arbitral award, the court issued a ruling that could be appealed, but the list of subjects of such appeal was limited. The point is that according to the CPC of Ukraine, any court decision can be appealed by the parties, other participants in the case, a person who did not participate in the case, but in respect of which the court decided on his rights, freedoms, interests and (or) obligations. At the same time, a specific feature of the ruling based on the results of consideration of an application for recognition and granting permission to enforce an arbitral award is that it can only be appealed by the parties.  

The lecturer also noted that sometimes lawyers tried to oppose the implementation of the ICAC decision by means of a court decision, applying various institutes of procedural law. “I want to emphasize that the list of powers used by the courts in such proceedings is determined by the CPC of Ukraine, it is exhaustive and cannot be interpreted extensively,” said Nataliia Sakara.

She added that the list of those powers was set out in the Supreme Court resolution of 8 April 2021 in case No. 824/53/19 (proceedings No. 61-15433ав20).

The most common solution is to provide security and counter-security for the claim. Nataliia Sakara noted that when dealing with considering cases in the ICAC, counter-security was more likely to be used, because in such disputes the plaintiff might not have a registered legal address on the territory of Ukraine and, accordingly, property.

The speaker also drew attention to the fact that the procedure for the execution of national courts' decisions determined by the CPC of Ukraine allowed for granting deferrals, installments, changing the method and procedure for execution of decisions. As for the implementation of the ICAC decision, the national court has no such power. Nataliia Sakara explained that the issue of foreclosure on the debtor's funds should be decided by the court which considered the case as a court of first instance. The national courts only give their consent to the execution of the arbitral award, and do not resolve the dispute on the merits, therefore they cannot consider the issues of deferral, installment plan of its execution, etc.

The judge of the Civil Cassation Court within the Supreme Court also answered the questions of the participants of the event.