Enforcement of commercial (maritime) foreign arbitral awards in Ukraine

• Litigation & arbitration

Resolution of maritime disputes by reference to international commercial arbitration is a typical situation in a modern globalized world. Under the reference in Clause 1 of Article 1 of the UNCITRAL Model Law on International Commercial Arbitration (1985), with amendments as adopted in 2006 (United Nations documents А/40/17, Annex I, and А/61/17, Annex I), the term commercial arbitration should be given a wide interpretation and covers maritime arbitration.

International arbitration criteria, pursuant to Clause 3 Article 1 of the UNCITRAL Model Law, also provide quite a wide interpretation of international arbitration:

The first criterion, the most clear and widespread, provides that the parties to an arbitration agreement must have, at the time of the conclusion of that agreement, their places of business in different States. The second and the third criteria determine the following:

- The place of arbitration, the place of contract performance, or the place of the subject matter of the dispute is situated in a state other than where the parties have their place of business;

- The parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country.

The Maritime Arbitration Commission (MAC) as the institutional maritime arbitration

International commercial arbitration concerns quite a wide range of international private procedural relationships. The state may deem it as reasonable to apply the UNCITRAL Model Law to internal disputes. The Maritime Arbitration Commission set up at the Ukrainian Chamber of Commerce and Industry (UCCI) is entitled, pursuant to Article 1 of the Rules approved by the Order of the UCCI Presidium No. 18(1) dd. 17.04.2007, to consider and to settle disputes between subjects of Ukrainian or foreign law. This corresponds with the Law of Ukraine on International Commercial Arbitration dd. 24.02.1994 approved in view of the UNCITRAL Model Law dd. 1985.

The MAC shall deal with disputes arising from relationships concerning the following matters:

- Affreightment of vessels, the carriage of goods by sea, and the carriage of goods in mixed navigation (river-sea);

- Marine towage of vessels or other floating objects;

- Marine insurance;

- Sale and purchase, mortgage and repairs of seagoing vessels and other floating objects;

- Pilotage, escorting through ice, agency or other servicing of seagoing vessels, as well as vessels engaged in inland navigation insofar as the relevant operations are connected with the sailing of such vessels on sea routes;

- Use of vessels for scientific research, extraction of minerals, hydrotechnical or other work;

- Salvage of seagoing vessels or vessels involved in inland navigation;

- Raising of vessels and other property sunk in sea waters;

- Collision between seagoing vessels, etc.

These relationships definitely concern merchant shipping, but the MAC competence may also cover disputes outside commercial relationships, i.e. arising from proprietary relationships (synallagmatic relationships), as long as they don’t contradict international treaties of Ukraine.

Ukraine is a party to a number of bilateral treaties on legal assistance in civil and/or criminal cases, signed with such countries as Poland, Moldova, Bulgaria, Georgia, USA, China, Turkey, Italy, Greece, Lithuania, Latvia, Estonia, Cyprus and Panama.

Ukraine is also a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards signed in New York on June 10, 1958, which facilitates enforcement of arbitral awards in Ukraine not treated as domestic.

Firstly, they concern arbitral awards made in another state, different from the state where recognition and enforcement of arbitral award is requested.

Secondly, they concern arbitral awards made in the state where recognition and enforcement of the arbitral award is requested, however, such awards must be considered as foreign due to a certain foreign element of proceedings, i.e. if procedural law of another state has been applied.

Therefore a Ukrainian maritime arbitration award such as one issued by the MAC at the UCCI may be treated as a foreign arbitral award provided that was decided pursuant to the law of another country.

Enforcement of foreign arbitral awards and debtor’s property arrest

The cases on recognition and enforcement of foreign judgments and arbitral awards are being considered under civil procedure by the general jurisdiction courts of Ukraine. According to Articles 391, 392 of the Civil Procedural Code of Ukraine, the term for presentation of a foreign judgment or arbitral award for recognition and enforcement is 3 years from the date that the decision entered into force, and provided that it still remains valid as of the date of initiating the recognition and enforcement procedure at the territory of Ukraine. The nature of that term is identical to the time bar. Such claim may be filed both at the place of the debtor and at the place of the debtor's property situated inside the territory of Ukraine.

As shown by practice, such property may include real estate and transport vehicles, including sea-going vessels treated both as real estate and transport vehicles under the Ukrainian legislation. It requires presentation of evidence of vessel state registration which may prohibit the enforcement of arbitral award. So at the stage of enforcement proceedings sea-going vessels remain real estate objects and may be arrested under the general procedure of arresting any real estate objects belonging to the debtor.

The Ukrainian courts refer to the Resolution of the Plenum of the Supreme Court of Ukraine No.9 dd. 22 December 2006 "On the practice of courts’ implementation of civil procedural provisions in the consideration of applications for interim actions", under which, in the framework of the application on property arrest, in order to support the claim, the applicant shall provide to the court the evidence of a real threat of failure or difficulty in enforcement of the final arbitral award issued to settle the dispute, provide information about the debtor and confirm the proportionality of its claims collateral with security in the form of property arrest.

Within the framework of recognition and enforcement of foreign arbitral awards in Ukraine, the debtor's property arrest is used by creditors as the main tool influence on the defaulting debtor. Of course the court shall consider a full set of evidences, taking into account any other property including bank accounts located at the territory of Ukraine as well as interests of third persons whose rights may be violated due to the requested claim security measures. Enforcement of arbitral awards for maritime claims often result in a ship arrest. Although sea-going vessels do not lose their status at the stage of executive proceedings, since, pursuant to Article 1 (2) of the International Convention Relating to the Arrest of Sea-Going Ships, signed in Brussels on May 10, 1952, arrest does not include the seizure of a ship in execution or satisfaction of a judgment, they still remain real estate objects with certain specifications because they may be sold at public tenders (auctions) only, i.e. under competitive playing field.

Conclusion

Under the general procedure, the debtor’s property arrest at the stage of enforcement of court judgments or arbitral awards is an effective method to recover a claim in full. If the appropriate measures are taken as security of enforcement of foreign arbitral awards under the procedure of recognition and enforcement at the territory of Ukraine pursuant to the law, it shall not exclude the possibility of reaching an amicable settlement at the stage of executive proceedings. Property arrest may also persuade the debtor to hold negotiations to achieve an amicable settlement of dispute. Today Ukraine is becoming an arbitration-friendly jurisdiction.

Published in IBA newsletters.

Arthur Nitsevych

nitsevych@interlegal.com.ua