Foreign judicial awards: towards enforcement via recognition

• Litigation & arbitration

Long ago business spread beyond the particular country. Transnational corporations engaged in almost all the countries worldwide are not a surprise. Economic reality mediates legal regulation of economic relations, as shown by emergence of international conventions, the parties whereto are many countries. National legislation of the countries – parties to the conventions implements provisions of the respective conventions, facilitating step-by-step unification of legislation in various countries. In the above case, it is logical to presume the need for countries both in governing legal status of non-resident business entities and in recognition of foreign judicial awards under disputes with resident business entities engaged.

The Ukrainian legislation, governing the procedure for considering applications on recognition of foreign judicial awards, includes the Civil Procedure Code of Ukraine, the Law of Ukraine “On International Private Law”, as well as treaties upon this issue between Ukraine and other countries – by the way, there are quite few of them. However, today there is no international convention which governs the procedure for recognition of foreign judicial awards, as compared to 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which, in turn, governs the issues upon recognition of foreign arbitral awards.

Recognition of foreign judicial awards: national specifications

Practice shows that foreigners are reluctantly forced to apply to the Ukrainian courts for recognition of foreign judicial awards, in order to recover the awarded amount from the defendant as the debtor. Usually their fears get justified immediately after filing application to the Ukrainian court on recognition of foreign judicial award. One matter is that the defendant as the debtor is registered in Ukraine but has no property in Ukraine to be foreclosed. Another matter is that the defendant as the debtor is not registered in Ukraine but has property in Ukraine to be foreclosed. In the first case the courts usually initiate case proceedings; while in the second case the judicial award (either on initiating case proceedings or on returning the application on recognition of foreign judicial award) depends on whether the property is movable or immovable. Although none of the above legislative acts of Ukraine provides any grounds for such an approach, the courts follow it relentlessly, rejecting to accept applications on case consideration, whereunder jurisdiction of the Ukrainian courts is based on the fact that movable property owned by the debtor is located in Ukraine (it usually includes commercial vehicles : sea/river vessels, aircraft, cars).

Complexity of proof

The lucky ones who managed to overcome first stage of the justice system, further may face the necessity to justify not only the foreign court decision by means of appropriate evidence, its entry into force and notification of the defendant about case consideration against the latter by the foreign court, but also the foreign court’s competence to consider a dispute with the defendant engaged (including on the grounds of procedural law in the country where the court is located), as well as other correlated procedural issues.

Both the aforesaid and similar questions arising at the court’s are based on active position of the defendants, who, by using all the methods, both allowed and not allowed by law (the latter ones include procedural sabotage), try to delay court proceedings or take it aside, namely in the form of dispute reconsideration by the Ukrainian court on the merits. Each abovementioned case entails risks for the claimant, both in the form of cost withdrawal from the debtor’s business and in the form of rejecting to satisfy the application on recognition of foreign judicial award.

Successful case study

Interlegal team has successful case studies upon recognition of foreign judicial awards in Ukraine. One of such cases has been completed recently, whereunder the client as the creditor received the whole awarder amount. An alleged simple formal process of recognizing foreign judicial award almost resulted in dispute reconsideration on the merits, lasting for several months of judicial battles. Just due to Interlegal lawyers’ efforts, the Ukrainian court refrained from the temptation to reconsider the dispute on the merits. Such case clearly shows the insufficient understanding by the Ukrainian courts the format of case proceedings on recognition of foreign judicial awards, whereby unfair defendants often try to make use in their own favour, by initiating case reconsideration by the Ukrainian court or, at least, by delaying the last proceedings.

Conclusions

Based on the aforesaid, we understand that recognition of foreign judicial awards in Ukraine should not be treated as a formal process of ascertaining by the Ukrainian court a verdict issued by the foreign court. The Ukrainian courts quite often, while considering applications on recognition of foreign judicial awards, deal with issues related to dispute consideration on the merits, which is naturally used by opponents, at least in order to delay proceedings.

With regards to increasing foreign economic turnover, it is quite logical to expect an increase in applications to the Ukrainian courts on recognition of foreign judicial awards. In such case, formation of adequate judicial practice gets vitals, so that such proceedings could not result in case reconsideration with Ukrainian business entities engaged as the debtors, who usually ignore dispute consideration by the foreign courts. The above circumstance requires for a professional approach to such issues, in order to prevent opponents from sticking at trifles which may result in negative effects.