Is Ukraine becoming friendly jurisdiction?
8 February, 2013
26
Lately the problem of enforcement of foreign court decisions in Ukraine is becoming more and more topical. For the last several years the relevant Ukrainian laws have been significantly changed to allow admitting that there are solid procedural basis for recognition and enforcement of foreign court decisions and international arbitration awards in Ukraine.
Thus, according to the Ukrainian legislation the foreign court decisions (foreign state courts, other competent bodies of the foreign states authorised to consider civil or commercial cases; foreign and international arbitrations) are recognized and enforced in Ukraine if their recognition and enforcement is provided by the international agreement ratified by the Verkhovna Rada (the Parliament of Ukraine) or under the reciprocity principle which is presumed (unless the Parties prove to the contrary).
But if the practice of recognition and enforcement of arbitration awards in Ukraine has been rather developed, the cases of recognition of the foreign courts decisions are still rare enough and attract heightened interest in the legal community.
For example, on July 01, 2012 the Golosiivskii District Court of Kyiv city satisfied the application of JSC BTA Bank on recognition of the Order of the High Court of Justice Queen Bench Division Commercial Court, and allowed attachment of the debtor’s assets located in Ukraine.
The reciprocity principle was indicated by the court as grounds for satisfaction of the application. However the interest to this case was caused not so much by the fact of recognition of the foreign court decision as by the non-standard court’s approach to application of the Ukrainian law regulations in the proceedings.
Recognition of the foreign court’s procedural decision
Based on the Ukrainian law regulations the court practice has developed the common approach under which the Ukrainian courts considered the cases on recognition of only the final court decisions by which the dispute are resolved on merits.
The Ruling of the Golosiivskii District Court has become the first precedent in Ukraine when the court recognized not the final court decision made on the merits of the dispute but thecourt order, i.e. the intermediate procedural document issued by the foreign court in order to provide security for the claim.
Having analyzed the court decision some experts mentioned in their comments that the Ukrainian law did not contain special regulations on the procedure of recognition and enforcement of procedural court documents.
The procedural law regulations in Ukraine indeed state only general rules for recognition and enforcement of foreign court decisions. And there are no any special explanations in the Ukrainian law to the effect which acts of foreign court refer to the definition of the decision.
Having examined the application on recognition of the order of the foreign court the Golosiivskii District Court has applied the wide interpretation of the term – foreign court decision. And to our opinion such approach of the court has the procedural grounds.
According to the Ukrainian law regulation the term “the court decision” means any acts of the court related to settlement of any particular case. And the general definition of the court decision includes both the final decisions made by the court upon the dispute resolution (court decisions) and the intermediate acts of the court issued for settlement of the procedural questions related to the case (court rulings).
In particular the Ukrainian law states that resolution of such procedural question as attachment of the respondent’s assets is carried out by means of delivery of the court’s ruling.
So both the final court decisions under which the dispute is resolved and the procedural documents adopted by the court in the course of the proceedings belong to the general definition of the court decision.
Now It is obvious that the Golosiivskii District Court used this wide approach while considering the abovementioned application.
Application of the reciprocity principle
We should pay special attention to using the reciprocity principle in this case which is quite rare for the Ukrainian practice.
As we have stated above according to the Ukrainian law regulations the foreign court decision is recognized in Ukraine if it is provided by the international agreement or under the reciprocity principle.
The practice of recognition of the foreign court decision used to be based only on the regulations of the international agreements on mutual recognition and enforcement of court decisions between Ukraine and the state where the decision was issued.
The reciprocity principle as grounds for recognition of the foreign court decisions has not been used by the court until recently.
It was related mainly to absence of an official interpretation with regard to the application of the reciprocity principle in the Ukrainian law. In particular it was unclear under which criteria the court should determine presence or absence of such a principle. But few years ago the regulation was added to the Ukrainian law under which the presence of the reciprocity principlewas presumed. So the Ukrainian law has fixed the presumption of the reciprocity principle unless the Parties prove to the contrary.
Having examined the abovementioned application on recognition of the foreign court order the Golosiivskii District Court has indicated that in that case the reciprocity principle should be applied because the Ukrainian court decisions are also recognized in the United Kingdom.
As the evidence of the reciprocity principle between Ukraine and the United Kingdom the Golosiivskii District Court has indicated the judgment of the High Court of Justice Queen\’s Bench Division Commercial Court which recognized the ruling of the High Commercial Court of Ukraine No.14/142-14/615 dd.29.06.2006 under the claim of the Merchant International Company Ltd against NAK Naftogaz Ukrayiny.
It worth mentioning that almost at the same time the application on recognition and enforcement of the FOSFA arbitration awards has been proceeded by another Ukrainian court (the Illichivskii City Court of Odessa Region). On examination of the application the Ilichivskii City Court has also referred to the abovementioned decision the UK court. But in that case the court has made such decision as grounds for absence of the reciprocity principle (!).
Thus the Illichivskii District Court has recognized and enforced the FOSFA arbitration award being cancelled by the decision of High Court of Justice.
The position of the Illichivskii District Court was grounded on the absence of the reciprocity principle between Ukraine and the United Kingdom, so the decision of High Court on cancellation of the FOSFA arbitration award had no importance for Ukraine.
How strange in may sound but the claimants’ interests in both cases were represented by one and the same legal company.
Court’s competence on considering the application
According to the Ukrainian law the issues on giving permission on enforcement of the foreign court decisions are considered by the court according to the debtor’s location. If the debtor is not registered/ domiciled in Ukraine the issue on giving permission on enforcement of the foreign court decision is considered by the court in place where the debtor’s property is located.
Having examined the application the Golosiivskii District Court has indicated that one of the case respondents has the property in Ukraine: namely he is a beneficiary owner of the corporate rights of the Ukrainian company.
According to the Civil Code of Ukraine the property means a separate thing, a set of things and the proprietary rights and obligations.
According to the definition given by the Law of Ukraine on Joint-Stock Companies the corporate rights mean a set of property and non-property rights of the shareholders. So the corporate rights can be recognized even partially as the property of the Company’s shareholder.
We should mention that the question on belonging of the corporate rights to the category of property has been discussed many times but the Ukrainian court practice has not developed the unanimous position on such issue. So the approach of the Golosiivskii District Court is innovative enough.
In general the non-standard approach of the Golosiivskii District Court evidences the positive trends of law-enforcement practice development in Ukraine. It is still unknown what will be the attitude of the courts of higher instances to such position. But if such practice is further developed in Ukraine it may cause new prospects for recognition and enforcement of the foreign court decisions in Ukraine.
