Arbitration or a commercial court in the ZED contract?
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Foreign economic agreement (contract) (hereinafter referred to as the foreign economic agreement) - an agreement between two or more subjects of foreign economic activity and their foreign counterparties, aimed at establishing, changing or terminating their mutual rights and obligations in foreign economic activity ( Article 1 of the Law "On Foreign Economic Activity ").
ZED contracts have their own peculiarity. Taking into account the subject structure of the FEZ contract, one of the first questions that should arise is which country's law will be applied to this contract, including which law will be applied when resolving disputes under the FEZ contract, as well as what will be the jurisdiction of such disputes. It should be noted in advance that this article will analyze the specifics of transferring such disputes only to commercial courts or the International Commercial Arbitration Court at the Chamber of Commerce and Industry of Ukraine (hereinafter - ICAC), as the two most popular institutions that are used in modern practice. Also, we will be talking about those ZED contracts where the parties are legal entities.
At the same time, disputes arising between subjects of foreign economic activity, foreign subjects of economic activity in the course of such activity may be considered by the courts of Ukraine, as well as, with the consent of the parties to the dispute, by the International Commercial Arbitration Court and the Maritime Arbitration Commission at the Chamber of Commerce and Industry of Ukraine and others by dispute resolution bodies, if it does not contradict the current laws of Ukraine or is provided for by international treaties of Ukraine ( Article 38 of the Law on Foreign Economic Activity ) .
According to Art. 39 of the Law "On Foreign Economic Activity " , any disputes regarding the application of the provisions of this Law and the laws adopted to implement this Law may be the subject of consideration:
- in the court of Ukraine, if one of the parties in the case is an individual and/or the state;
- in commercial courts, if the parties in the case are legal entities.
Interstate disputes that may arise as a result of Ukraine's actions in the application of this Law shall be resolved in a manner agreed upon by the parties in accordance with the norms of international law.
First, let's pay attention to the wording in the article of Art. 38 of the Law "On foreign economic activity " and Art. 39 of the specified law If we analyze these articles, we can come to the conclusion that, as a general rule, disputes between legal entities of the FEZ contract are resolved in commercial courts, and under the wording "by agreement of the parties" in Art. 38 of the Law "On Foreign Economic Activity " refers to a certain reservation made, as a rule, in the foreign trade contract itself (sometimes in a separate document) about the jurisdiction of the dispute before the ICAC. So, if, after reading this article, your decision is to choose ICAC jurisdiction in your EZ contract, then you should think about the wording of a certain clause in the contract.
An example of the agreement of the parties, or as it is also called an arbitration clause , is set out on the official website of the ICAC at the link .
At the same time, it should be noted disputes that cannot be submitted by the parties to the ICAC. Yes, according to Art. 22 of the Economic Procedural Code of Ukraine, a dispute that falls under the jurisdiction of an economic court may be referred by the parties to an arbitration court or international commercial arbitration, except for:
1) disputes about invalidity of acts, disputes about state registration or accounting of rights to immovable property, intellectual property rights, rights to financial instruments, as well as disputes arising from the conclusion, change, termination and execution of public procurement contracts, taking into account part two of this article;
2) disputes provided for in clauses 2 , 3 , 7-13 of the first part , clauses 2 , 3 , 6 of the second part of article 20 of this Code , taking into account the second part of this article;
3) other disputes that, according to the law, cannot be referred to an arbitration court or international commercial arbitration.
The term "financial instruments" is used in this Code in the sense given in the Law of Ukraine "On Capital Markets and Organized Commodity Markets" .
Disputes provided for by Clause 3 of Part One of Article 20 of this Code arising from the contract may be referred to international commercial arbitration only on the basis of an arbitration agreement concluded between a legal entity and all its participants.
Civil law aspects of disputes specified in clauses 2 , 7 of the first part , clause 6 of the second part of Article 20 of this Code , disputes that arise during the conclusion, change, termination and execution of public procurement contracts, may be referred to international commercial arbitration.
Any inaccuracies in the text of the agreement on the transfer of the dispute for resolution to an arbitration court, international commercial arbitration and (or) doubts regarding its validity, validity and enforceability must be interpreted by the court in favor of its validity, validity and enforceability.
The decision of the arbitration court, international commercial arbitration may be appealed (challenged) in the manner determined by law.
So, in order to resolve the issue of which of the two proposed dispute resolution procedures to choose in contact with the Federal Trade Commission, we offer the following comparative table, which contains the most important nuances necessary for making such a decision.
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Main aspects |
ICAC |
Commercial Court |
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Legal Status |
independent permanent arbitration institution (arbitration court) non-state commercial institution, non-judicial institution |
a specialized judicial body in the system of courts of general jurisdiction that administers justice in economic relations state body, judicial institution |
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Legal regulation |
The Law of Ukraine "On International Commercial Arbitration " and the Regulations on the International Commercial Arbitration Court at the Chamber of Commerce and Industry of Ukraine ( Appendix 1 to the Law "On International Commercial Arbitration") |
The Law of Ukraine "On the Judiciary and the Status of Judges" |
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Legal regulation of the dispute resolution process |
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location |
Kyiv, Ukraine |
The location of commercial courts can be found on the official website of the judiciary by clicking on the link with the name of the relevant court here |
| General rule of referral to court |
by agreement of the parties (arbitration clause, agreement on transfer of the dispute for resolution by the ICAC), except for the cases specified in Art. 22 of the Economic Procedure Code of Ukraine |
according to the general rule (if there is no relevant agreement of the parties) |
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Matters related to jurisdiction, specialization (competence) |
By agreement of the parties, the following may be referred to the International Commercial Arbitration Court for resolution: - disputes related to contractual and other civil law relations that arise during the implementation of foreign trade and other types of international economic relations, if the commercial enterprise of at least one of the parties to the dispute is located abroad, as well as: - disputes between enterprises with foreign investments and international associations and organizations created on the territory of Ukraine, among themselves, disputes between their participants, as well as their disputes with other subjects of Ukrainian law. Foreign economic relations, the disputes of which can be referred to the International Commercial Arbitration Court, relate, in particular, to relations of purchase and sale (supply) of goods, performance of works, provision of services, exchange of goods and/or services, transportation of goods and passengers, trade representation and mediation, rental (leasing), scientific and technical exchange, exchange of other consequences of creative activity, construction of industrial and other facilities, licensing operations, investments, credit and settlement operations, insurance, joint ventures and other forms of industrial and business cooperation. The International Commercial Arbitration Court also hears disputes referred to its jurisdiction by virtue of international treaties of Ukraine ( paragraphs 2, 3 of the Regulations on the International Commercial Arbitration Court at the Chamber of Commerce and Industry of Ukraine ( Appendix 1 to the Law on International Commercial Arbitration) . By agreement of the parties, the following may be transferred to the ICAC: - disputes related to contractual and other civil law relations that arise during the implementation of foreign trade and other types of international economic relations between legal entities, including public law entities, and/or natural persons, if the location is located abroad at the time of the conclusion of the arbitration agreement/ the permanent place of residence of at least one of the parties or the place of performance of a significant part of the obligation, or the place with which the subject of the dispute is most closely connected; whether the place of arbitration is located outside the state of the location/ permanent residence of at least one of the parties; - disputes between enterprises with foreign investments and international associations and organizations created on the territory of Ukraine, disputes between their participants, as well as their disputes with other subjects of Ukrainian law. The ICAC's competence includes, in particular: - disputes arising from commercial relations, including the following agreements and not limited to them: purchase and sale (delivery) of goods, performance of works, provision of services, exchange of goods and/or services, transportation of goods and passengers, commercial representation and mediation, lease (leasing), scientific and technical exchange, exchange of other results of creative activity, construction of industrial and other objects, licensing operations, investments, credit and settlement operations, insurance, joint ventures and other forms of industrial and entrepreneurial cooperation, concessions; including from relations regarding the exercise and protection of property rights or other property rights, including property rights of intellectual property; from corporate relations, including disputes between participants (founders, shareholders, members) of a legal entity or between a legal entity and its participant (founder, shareholder, member), as well as agreements regarding shares, shares, other corporate rights or securities. ICAC also accepts disputes that are subject to its jurisdiction by virtue of international treaties of Ukraine. |
Commercial courts consider cases in disputes arising in connection with the implementation of economic activity (except cases provided for in the second part of this article), and other cases in cases determined by law, in particular, provided for in Art. 20 of the Economic Procedure Code of Ukraine |
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The cost of filing a lawsuit |
governed by the Regulations on Arbitration Fees and Expenses 2020 , which is an Appendix to the Rules of the ICAC. Rates are in US dollars. Consists of the " Registration Fee " - this is the fee paid by the claimant when submitting a statement of claim to the ICAC to cover the costs associated with the initiation of arbitration proceedings, and is a component of the arbitration fee and the " Arbitration Fee " - this is the fee paid by the claimant for to each claim accepted for consideration in the ICAC to cover the costs associated with the arbitration proceedings. The arbitration fee includes the arbitrators' fees for consideration and resolution of the dispute and an administrative fee to cover the costs of organizing and conducting the arbitration, including general economic costs related to the activities of the ICAC. The registration fee is $600.00 The arbitration fee ranges from $1,800.00 to $350,000.00. The arbitration fee depends on the price of the claim, defined in paragraph 1 of Chapter III of the Regulation on Arbitration Fees and Expenses and on the number of arbitrators considering the case. To determine the amount of the arbitration fee in the case, the price of the claim, if it is not expressed in US dollars, is converted into US dollars at the rate of the National Bank of Ukraine established on the date of filing the claim. Residents of Ukraine pay the arbitration fee (without VAT) in hryvnias at the rate of the National Bank of Ukraine on the day of payment, and non-residents - in freely convertible currency. The ICAC website contains an arbitration fee calculator. |
for filing a corresponding lawsuit in court, a court fee is provided, the rates of which are determined in paragraph 2, part 2 of Article 4 of the Law of Ukraine "On Court Fees" . The rates are determined in hryvnia. Thus, for filing a claim of a property nature with the court, a court fee of 1.5 percent of the price of the claim is paid, but not less than 1 amount of the subsistence minimum for able-bodied persons up to 350 sizes (as of 2022, the court fee is from UAH 2,481.00 to UAH 868,350 UAH 0.00 ) For submitting a non-property claim to the court, the amount of the court fee is 1 amount of the subsistence minimum for able-bodied persons (as of 2022, the court fee is UAH 2,481.00 ). The rates are determined in hryvnia. The court fee calculator is located on the official website of the judiciary on the page of the relevant commercial court in the Court fee tab. |
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composition of the court considering the case |
an odd number of arbitrators, including one arbitrator. If the parties do not agree on the number of arbitrators, three arbitrators are appointed |
As a general rule, cases in courts of first instance are considered by a judge alone , except for the cases specified by this Code ( Article 33 of the Economic Procedural Code of Ukraine ). The prescribed procedure for collegial consideration of the case (composed of three judges). The issue of collegial consideration of the case can be decided by a single judge in a preliminary hearing, depending on the category and complexity of the case. The determination of the judge, and in the case of a collegial review, the judge-rapporteur for consideration of a specific case is carried out by the Unified Judicial Information and Telecommunication System during the registration of documents ( Part 1, Article 32 of the Economic Procedural Code of Ukraine ). The determination of the judge, and in the case of a collegial review, the judge-rapporteur for consideration of a specific case is carried out by the Unified Judicial Information and Telecommunication System during the registration of documents ( Article 32 of the Economic Procedural Code of Ukraine ). |
| the language of the judiciary | The parties may, at their discretion, agree on the language or languages that will be used in the arbitration ( Article 40 of the ICAC Regulations ) |
Ukrainian Commercial proceedings in courts are carried out in the state language ( Article 10 of the Commercial Procedural Code of Ukraine ) |
|
the term of consideration of the case |
The term of consideration of the case should not exceed 6 months from the day when the composition of the Arbitration Court was formed ( Article 38 of the Regulations of the ICAC ). |
General legal proceedings. The court must start consideration of the merits of the case no later than sixty days from the day of the opening of the proceedings in the case, and in the case of an extension of the period of preparatory proceedings - no later than the next day from the day of the end of such a period. The court considers the case on its merits within thirty days from the day of the start of the consideration of the case on its merits ( Article 195 of the Economic Procedural Code of Ukraine ). The court considers cases in the order of simplified legal proceedings within a reasonable period of time, but not more than sixty days from the day of the opening of the proceedings in the case ( Article 248 of the Economic Procedural Code of Ukraine ). |
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entry into force of the decision |
The arbitral award is final and binding from the date of its rendering ( Article 66 of the ICAC Regulations ). |
The decision of the commercial court takes legal effect after the expiry of the period for filing an appeal, if no appeal has been filed. In case of filing an appeal, the decision, if it has not been canceled, becomes legally binding after the return of the appeal, refusal to open or close the appeal proceedings, or adoption of the decision of the court of appeal instance as a result of the appellate review. ( Article 241 of the Economic Procedural Code of Ukraine ). |
| appeal of the decision/revocation of the decision |
The parties, third parties, as well as persons who did not take part in the case, in the event that the arbitration court decided the issue of their rights and (or) obligations, have the right to apply to the court for annulment of the arbitration court's decision. The application for annulment of the decision of the arbitration court is submitted to the appellate commercial court at the place of consideration of the case by the arbitration court ( Article 346 of the Economic Procedural Code of Ukraine ) The procedure for appealing the decision of the arbitration court is provided for by Chapter 1 of Section VII of the Economic Procedural Code of Ukraine ) |
Participants in the case, as well as persons who did not take part in the case, if the court decided the issue of their rights, interests and (or) obligations, have the right to an appellate review of the case and, in cases specified by law, to a cassation appeal of the court decision ( art. 17 of the Economic Procedural Code of Ukraine ). The appellate review of the case is regulated by Chapter 1 of Section IV of the Economic Procedural Code of Ukraine . In some cases, it is possible to review decisions in cassation proceedings, the procedure is regulated by Chapter 2 of Section IV of the Economic Procedure Code of Ukraine.
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| implementation of the decision |
The arbitration decision is implemented voluntarily by the parties within the time limit established in the decision. If the term of execution of the decision has not been established, it is subject to immediate execution. In case of refusal of voluntary execution of the decision, it is enforced compulsorily in accordance with the procedural legislation and international treaties of the country where the request for its execution is violated. ( Article 66 of ICAC Regulations ).
Issuance of an order for enforcement of an arbitration court decision is regulated by Chapter 2 of Chapter VII of the Economic Procedural Code of Ukraine
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Court decisions that have entered into force are binding on the entire territory of Ukraine, and in cases established by international treaties, the binding consent of which has been given by the Verkhovna Rada of Ukraine, - and beyond its borders ( Article 326 of the Economic Procedural Code of Ukraine ) . The execution of the court decision is carried out on the basis of the order issued by the court that considered the case as a court of first instance ( Article 327 of the Economic Procedural Code of Ukraine ).
The institution of judicial control over the execution of court decisions is envisaged ( Chapter VI of the Economic Procedural Code of Ukraine ).
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You can create an Arbitration Clause (in Ukrainian and English) in the Instaco constructor by following the link . To create, you only need to enter the necessary data in the designer.
Date of publication: 18.10.2022