SC judges discussed with international experts the issues of consideration of cases on the recognition and implementation of decisions of the ICAC and arbitration courts

Should the arbitrability of disputes be expanded and which categories of cases should be referred to arbitration; what problems arise in courts when considering cases regarding decisions of arbitration courts and international commercial arbitration; what changes need to be made to the procedural law in this context – these and other issues were discussed by judges of the Supreme Court with international experts in commercial dispute resolution at an online meeting. The event was devoted to judicial review of appeals, granting permission for enforcement of decisions of arbitration courts, recognition and enforcement of the ICAC decisions.

The event was attended by judges of the Commercial Court of Cassation within the Supreme Court, which reviews in the appeal procedure cases on appeals against decisions of arbitration courts and on the issuance of an order for the enforcement of such decisions, and of the Civil Cassation Court within the Supreme Court, which is an appellate court for cases on challenging decisions of international commercial arbitration, as well as on the recognition and granting permission to implement the ICAC decisions.

At the beginning of the meeting, Larysa Rogach, the President of the Commercial Cassation Court of the Supreme Court, outlined the main issues that needed to be resolved in order to improve the administration of justice, which had been discussed at the meeting of judges of the SC Commercial Cassation Court. First of all, it is necessary to ensure a clear definition of the jurisdiction of disputes, so that the party immediately understands which court to apply to in the event of a particular dispute. In the conditions of war, it is important to ensure that the parties are properly notified of the time and place of the hearing, as well as the possibility of participating in the meeting via video conference. If one party does not appear at the hearing due to the failure to notify him/her, among other things, the rights of the other party are violated, as the terms of consideration of the case are extended. The speaker drew attention to the legislative changes that provide for the registration of an electronic office by business entities. This speeds up the consideration of cases. In general, Larysa Rogach noted, the average term of consideration of a case in the commercial jurisdiction from the moment of receipt of a claim to the rendering a judgment by the cassation court is eight months.

Also, the President of the SC Commercial Cassation Court noted that 90% of cases are considered in court hearings with the participation of the parties. It would be expedient to consider the issue of expanding the scope of application of written proceedings in the SC Commercial Cassation Court, since, in particular, due to air alarms, hearings have to be interrupted and postponed. This affects both the terms of consideration of cases and the costs of the parties who are obliged to come to the court additionally. Besides, according to Larysa Rogach, it is appropriate to continue the implementation of the e-justice system. 

The event participants discussed the feasibility of expanding the arbitrability of disputes. Larysa Rogach noted that the issue of arbitrability of disputes is regulated by the state, at the same time the trust in arbitration courts is very important. Also, according to her, it is necessary to find a balance between giving the parties the opportunity to independently settle their conflicts and ensuring that extrajudicial dispute resolution mechanisms are not used for what they were not established for.

Secretary of the Plenum of the Supreme Court, Secretary of the First Judicial Chamber of the Civil Cassation Court within the Supreme Court, Dmytro Luspenyk, noted that the SC Civil Cassation Court is an appellate court in cases concerning challenging decisions of the ICAC, recognition and granting the permission to enforce international commercial arbitration decisions. Several problematic issues arose in the court, the opinion concerning which the judges would like to hear from international experts.

In particular, the question arises as to the extent to which the application of Art. 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms, firstly, to the arbitration procedure and, secondly, to the procedure of consideration of cases challenging the ICAC decisions by national courts, recognition and granting the permission to implement ICAC decisions, is possible. The speaker also asked for the opinion of international experts on how the protective clause – public order clause – is applied in international private law. At the same time, Dmytro Luspenyk noted that after the amendments to the procedural law in 2017, it is completely pro-arbitrable and the procedural interaction of national courts in the ICAC is at the proper level.

Vasyl Krat, the SC judge in the Civil Cassation Court, noted that, in essence, an arbitration agreement (caution) is a procedural contract, although it can be contained in a private law contract; the grounds for the invalidity of the arbitration agreement (clause) are defined by the Law of Ukraine "On international commercial arbitration"; for an arbitration agreement (clause) due to the presence of the principle of autonomy, in contrast to individual cases of invalidity of a material contract (for example, Part 2 of Article 548, Part 4 of Article 1119 of the Civil Code of Ukraine), dependent invalidity is not peculiar.

The speaker drew attention to the intensive application of the principle of interpretation of favor contractus (interpretation of the contract in favour of validity) in the national legal order, that is, doubts about the validity and enforceability of the contract (deed) must be interpreted by the court in favour of its validity and enforceability. Therefore, Vasyl Krat noted the pro-arbitrability of the national legal order, which allows in numerous disputes to state the principle of interpretation of favor contractus regarding the validity and enforceability of certain arbitration clauses, and the state court – not to interfere in the arbitration decision.

In addition, the judge noted that the Supreme Court as the cassation court has mechanisms for overcoming differences: hearing cases in a chamber, a joint chamber, and the Grand Chamber of the Supreme Court. But in cases of recognition and enforcement of decisions of the ICAC, the SC Civil Cassation Court is an appellate court for which the mentioned mechanisms are not provided. Therefore, according to the speaker, this issue should be settled.

This opinion was supported by Dmytro Luspenyk. He told about the expediency of discussing this issue with international experts. But it is obvious that it is necessary to amend the procedural law and give the possibility to the Supreme Court as an appellate court to apply those procedures that are available to the cassation court in relation to the reconciliation of contradictions.

Vasyl Krat also spoke in favour of the idea of expanding the arbitrability of disputes, including in the field of intellectual property and corporate disputes. In his opinion, areas that are not critical for the state should be given to arbitration courts. For example, real estate cases cannot be given to them.

In addition, the judge spoke about the expediency of the specialization of judges who consider arbitration cases.

Dmytro Hudyma, the SC judge in the Civil Cassation Court, raised the issue concerning the terms of case consideration. He noted that these terms are too strictly regulated in Ukrainian procedural laws at all levels. There is no objective need to normatively establish a clear number of days for consideration of, for example, cassation appeals, knowing in advance that during that period a significant part of them cannot be considered (at least because the consideration is collegial, and the number of cases significantly exceeds the capabilities of the judicial corps). According to the judge, it would be absolutely normal for the legal system of Ukraine at the current stage of its development to establish "reasonable time limits" for the court to take certain procedural actions, taking into account the reasonableness criteria defined in the case-law of the ECtHR. Therefore, there is a need to make appropriate amendments to the procedural laws.

Dr. Patricia Shaughnessy, professor at Stockholm University, expert in international disputes and commercial law, member of the Court of Arbitration and the Commission of the International Chamber of Commerce and head of a team of specialized international experts, also raised the issue of judges' specialization. On the one hand, she noted, the rotation of judges is necessary so that there are no doubts about their independence and non-involvement. On the other hand, specialization is used in European countries. For example, in Sweden, a specialized court of appeal hears exclusively cases related to intellectual property and arbitration awards. Judges of this court have appropriate training, at the same time they consider only the specified categories of cases. The expert also raised the question of whether the specialization of judges and the lack of rotation would not lead to accusations of their lack of independence.

Oleh Vaskovskyi, the Secretary of the Judicial chamber on bankruptcy cases of the SC Commercial Cassation Court, noted that the commercial jurisdiction is characterized by quick consideration of cases, which is very important for commercial disputes. He noted that the specialization of judges contributes to the improvement of justice, ensuring the stability and unity of case-law.

The speaker noted that the SC Commercial Cassation Court examined cases related to decisions of arbitration courts only on formal grounds, although applicants often pay attention to the legality, material and legal aspect of taking such decisions.

Oleh Vaskovsky called complicated the issue of expanding arbitrability because commercial disputes are different. It is one thing when it is about an ordinary contract for the sale of agricultural products, another when it is about the issue of construction works or complex supply chain, which requires an analysis of a fairly wide range of circumstances, the legislation of other countries, etc. Therefore, it is necessary to understand the line between which categories of disputes can be considered by arbitration courts, and where the court system cannot be dispensed with. The judge proposed to continue the work of experts in this sphere, taking into account the issues of unloading the system, improving the administration of justice regarding the resolution of commercial disputes, including international ones.

Iryna Kolos, the judge of the Judicial chamber on cases on the protection of intellectual property rights, as well as those connected with antimonopoly and competition law of the SC Commercial Cassation Court, noted that the chamber also considers contractual disputes and other cases of general specialization. And cases related to the protection of intellectual property rights currently make up approximately 5% of the total number of disputes considered by the judges of the chamber. Therefore, the judge noted, the question of creating an exclusive specialization should be decided taking into account the demand for consideration of a certain category of cases and the workload of the court.

In addition, Iryna Kolos told about the impracticality of referring cases related to intellectual property to the competence of arbitration courts, given the protective nature of legal relations in the field of intellectual property and their subject composition.

Volodymyr Bilous, the judge of the Judicial chamber for consideration of bankruptcy cases of the SC Commercial Cassation Court, drew attention to the fact that the procedural law limits the powers of the court to review the decisions of the arbitration court on the merits, there are only legal grounds for not issuing an order to enforce the decision of the arbitration court in compulsory order. Therefore, according to the speaker, specialization of judges in this matter is not necessary. At the same time, he noted that judges constantly undergo appropriate training and improve their qualification.

The speaker also spoke about the need to improve procedural law. In particular, there is an issue as to how the SC Commercial Cassation Court as an appellate court should evaluate the arguments of the appeal regarding the violation of Art. 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms due to improper notification of arbitration participants, because such a basis for annulment of the arbitration court's decision is not defined by the procedural law.

In addition, Volodymyr Bilous noted that in Great Britain, most commercial disputes are resolved in arbitration, as the consideration of cases by state courts there is more expensive and takes more time. And business values its money and time. In Ukraine, arbitration courts are not so much in demand by commercial structures. Since the beginning of the operation of arbitration courts in Ukraine, they have considered more categories of disputes, in particular, regarding property rights. Then such disputes were excluded from the jurisdiction of arbitration courts. It is clear that there were some grounds for making such a decision. According to the judge, it is worth expanding the arbitrability of disputes, when there is be a certain trust in arbitration courts and the demand for their services increases.

Iryna Kondratova, the judge of the Judicial chamber on cases regarding corporate disputes, corporate rights and securities of the SC Commercial Cassation Court, supported the idea of expanding the arbitrability of disputes. In particular, she considers it expedient to give the parties the possibility to resolve corporate disputes in arbitration courts or the ICAC, if there is a foreign participant there. Since it will be an expedited case review, which is very important for enterprises that have corporate conflicts.

The judge also expressed an opinion regarding the transfer of a case on contesting a decision of international commercial arbitration, recognition and granting permission to execute a decision of international commercial arbitration to the jurisdiction of commercial courts, which have specialized knowledge and experience in resolving disputes arising in the field of commercial activity; have a lower workload, which will enable faster and better consideration of this category of cases.

Yurii Chumak, the judge of the Judicial chamber on cases related to land relations and property rights of the SC Commercial Cassation Court, noted that the category of commercial disputes with a foreign element in Ukraine is insignificant, since international investors, as a rule, register in our country legal entities operating under the national law, and disputes that arise in them are resolved by national courts. Therefore, today the function of consideration of commercial disputes is performed by commercial courts in most cases. In addition, the speaker noted, national court has advantages: a clear structure, three levels of appeal, procedural code, etc. The judge concluded that consideration of cases with a foreign element by commercial courts should be improved, and drew attention to the fact that during the existence of the Law of Ukraine "On Arbitration Courts" the practice of applying to such courts was not widely used, instead, in most cases, economic entities trust commercial courts.

Oleksandr Baranets, the Secretary of the Judicial chamber on cases regarning corporate disputes, corporate rights and securities of the SC Commercial Cassation Court, Tetyana Drobotova, the Secretary of the Judicial chamber on cases regarding land relations and property rights of the SC Commercial Cassation Court, and Viacheslav Pieskov, the judge of the Judicial chamber on bankruptcy cases of the SC Commercial Cassation Court, have also participated at the event.

The event was organized by the United States Agency for International Development (USAID) program "Justice for All", which works, in particular, to ensure access to alternative dispute resolution mechanisms and increase their quality for their wider use, and to strengthen and improve commercial dispute resolution mechanisms. During the performance of this work, it is envisaged to hold consultations with various parties concerned. Based on its results, it is expected to prepare appropriate recommendations taking into account the changes in the Ukrainian context caused by the war.