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International Civil Procedure (Cross-Border Litigation)
Cross-Border Disputes Resolution
The most relevant and significant issues traditionally referred to in international civil procedure are:
(a) The jurisdiction of an appropriate (Ukrainian or foreign) court regarding commercial and civil matters where Ukrainian parties are involved (namely, foreign-related cases);
(b) equal access for persons, including foreigners, to justice (national regime), equal treatment of parties and a fair trial;
(c) judicial cooperation and international legal assistance to serve judicial documents and take evidence abroad;
(d) execution of judicial orders of foreign courts to deliver judicial documents in Ukraine and receive evidence at the request of foreign courts;
(e) recognition and enforcement of foreign judgments and arbitral awards in Ukraine.
The jurisdiction of Ukrainian courts in cross-border disputes in commercial and civil matters is provided by the Law on Private International Law (PIL) if the defendant in the case has a place of residence or location, or movable or immovable property, which can be levied, or there is a branch or representative office of a foreign legal entity in Ukraine.
Ukrainian courts consider foreign-related disputes if they were determined by bilateral treaties on legal assistance in civil and commercial matters, entered into by Ukraine with 30 countries, and many regional conventions, including CIS Conventions (1993 Minsk Convention and the 1992 Kyiv Agreement) and Bilateral investment treaties (BIT)) (around 50 agreements).
In the event of parallel proceedings, the Ukrainian court applies the rule lis alibi pendens, which is enshrined in PIL. That is, it refuses to open proceedings if there is a dispute between the same parties, on the same subject matter and grounds in a court or other body of jurisdiction of a foreign country.
Choice of Court in Cross-Border Litigation in Commercial and Civil Matters
Ukrainian court practice shows broad use of choice of court agreements by Ukrainian companies and their foreign partners in their commercial contracts (Art.75 of PIL).
While Articles 75 and 76 of PIL provide the possibility of choice of merely Ukrainian courts, and adoption of new procedural codes resulted in the broadening of application of choice of court agreements in civil and commercial disputes as Article 22 of the Civil Procedure Code and Article 23 of the Commercial Procedure Code directly grant the parties the right to refer consideration of disputes to foreign courts.
These changes reflected a new Ukrainian approach to the choice of court agreements in the sphere of cross-border litigation since the time of Ukraine’s accession to the Hague Convention of 30 June 2005 on Choice of Court Agreements in 2016.
Judicial Cooperation in Cross-Border Litigation
Issues of judicial cooperation are regulated by international conventions, bilateral agreements on legal assistance in civil and commercial matters and local rules. Ukrainian courts choose to use this or that international instrument depending on the state from which the order was received, or in whose territory the service or evidence is to be served.
Ukraine is a party to the Hague Conventions, including of 1 March 1954 on Civil Procedure, of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, of 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters. These Conventions provide that the central body in Ukraine is the Ministry of Justice of Ukraine through which the serving is made and cooperation takes place. Every year the Ministry of Justice of Ukraine receives hundreds of requests for the service of judicial documents to Ukrainian companies and individuals as defenders as well as letters of request for legal proceedings (on obtaining evidence, interviewing witnesses, acquiring information on foreign legislation, etc.). A lot of letters of request come from Germany, Italy, Portugal and many other countries.
The jurisdiction of courts and procedure for execution by Ukrainian courts of foreign court orders for service of court documents and obtaining evidence on the territory of Ukraine are regulated by procedural codes: they establish competent courts, the procedure for carrying out appropriate procedural actions and procedure for cooperation with the Ministry of Justice of Ukraine. A similar procedure is envisaged for Ukrainian courts to apply for legal assistance to foreign states in resolving disputes involving foreign citizens and companies.
Recognition and Enforcement of Foreign Judgment
A foreign judgment may be enforced in Ukraine if its recognition and enforcement is stipulated by an international treaty, including a bilateral one on legal assistance, the CIS and Hague conventions on various family and related issues or is based upon the principle of reciprocity where the existence of reciprocity is presumed.
Foreign judgments in civil and commercial matters are enforced after the procedure of recognition and obtaining a permit for enforcement (exequatur). These cases are considered by local general courts at the place of residence (stay) or the location of the debtor or its property as courts of first instance and, accordingly, may be subject to appeal and cassation.
If the debtor does not have a place of residence (stay) or location on the territory of Ukraine, or his place of residence (stay) or location is unknown, the issue of granting permission to enforce the decision of a foreign court is considered by the court at the location of the debtor’s property in Ukraine.
Courts have the right to refuse to grant permission to enforce a foreign judgment if there is at least one of the grounds present, as provided for by the international treaties and agreements or by Ukrainian law.
It should be noted that different international treaties contain different grounds for refusal to recognize and enforce foreign judgments and, therefore, it is important that the rules of a treaty should be applied by a court in recognizing and granting the procedure.
The main grounds for refusal to recognize and grant permission to execute a foreign court judgment in Ukraine are: (а) if the foreign court judgement did not come into force under the law of the state in whose territory it was issued; (2) if the party to whom the foreign court judgement has been ruled has been deprived of the opportunity to take part in the trial due to the fact that he was not properly informed of the case in a timely manner; (3) if the decision is made in a case, whose consideration falls exclusively within the competence of a court of Ukraine; (4) if there is a decision of the court of Ukraine in a dispute between the same parties, on the same subject matter and on the same grounds, which has already come into force, or if there is a dispute between the same parties, on the same subject and on the same grounds that has been instituted in Ukraine before the opening of the proceedings in a foreign court; (5) if the enforcement term is omitted; (6) if the subject matter of the dispute under the laws of Ukraine is not subject to judicial review; (7) if implementation of the decision would threaten the interests of Ukraine; (8) if another foreign court judgment between the same parties, on the same subject matter and on the same grounds as the decision sought for enforcement was recognized and granted permission for execution earlier in Ukraine.
Irrespective of the numerosity of listed grounds the practice of Ukrainian courts proves that the majority of foreign judgments are enforced in Ukraine.
Functions of Ukrainian Courts of Assistance and Judicial Control over International Commercial Arbitration
The Setting Aside of Arbitral Awards
The foundation of interplay between state courts and international commercial arbitration is a pro-arbitration approach on the part of state courts. The purpose of such pro-arbitration approach is to create conditions for the widespread use of international commercial arbitration as a means of resolving commercial disputes by eliminating the possibility of parallel judicial and arbitration proceedings, and granting to arbitration a primary right to resolve issues of its own competence. This purpose is ensured by the use of the institute of inadmissibility (the protest against the jurisdiction of a state court to consider the case if there is an arbitration clause; no jurisdiction of the state court to consider a case on invalidity of the arbitration clause, etc.).
The functions of judicial control over international commercial arbitration are governed by the Law of Ukraine On international commercial arbitration (ICA Law) and the Civil Procedure Code. These include the procedures for setting aside arbitral awards and procedures for granting of permission to enforce arbitral awards.
Applications for setting aside arbitral awards are considered by the appellate general court at the place of arbitration as a court of first instance only in respect of arbitral awards if the place of arbitration is located in Ukraine, in particular the awards of the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry or ad hoc arbitration. The exhaustive list of grounds for setting aside an arbitral award is established in ICA law (Art. 34) and CPC (Art. 454-460). The Supreme Court is an appellate instance for the setting aside of cases of awards.
Recognition and Enforcement of Arbitral Awards
One of the tasks set to accomplish in order to create a pro-arbitration approach in Ukraine was introduction into Ukrainian judicial practice of generally-recognized world approaches to the application of the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards and the Model Law of UNCITRAL on International Commercial Arbitration with regard to the application of grounds for refusal to recognize and enforce arbitration awards.
The New York Convention regulates specific issues of recognition and enforcement of foreign arbitral awards, particularly the list of documents to be submitted to a competent court, and a comprehensive list of grounds for refusing to recognize and enforce the arbitral award and on whom the burden of proving such grounds lies. Issues of procedure, competent courts, time limits, etc., are governed by CPC (Art. 474-482).
Arbitral awards that are not considered foreign. That is, decisions made by arbitration held on the territory of Ukraine for enforcement purposes are subject to the same judicial procedure as foreign arbitral awards.
Requests to recognize and grant a permission to execute arbitral awards are considered by the Court of Appeal of Kyiv as the court of first instance regardless of the location of the debtor or his property. The Supreme Court acts as an appellate instance in such cases.
Notably, the most common reason for refusing enforcement is absence of due notification of the defendant of arbitration proceedings, or flawed (improper) notification of the defendant, and, consequently, non-participation of the latter in arbitration proceedings, or the existence of a competing judgment made by a Ukrainian court rendered prior to, or even after, the judgment that enforcement is being sought for (e. g. when there is a judgment by a state court regarding the invalidity of an arbitral award).