"It is almost impossible to achieve international arbitration objectives without judicial support", —Vladimir Yaremko, counsel at Spenser & Kauffmann, sums up
— What are the tendencies in the area of International Commercial Arbitration (ICA)?
— The need has appeared on the market recently for the settlement of disputes beyond Ukrainian jurisdiction. The issue here is not only arbitration, but also about complicated cross-border disputes, which may involve both judicial and arbitration proceedings in various countries. Unfortunately, in practice, the parties to a transaction do not always pay due attention to settlement options. At the stage of transaction conclusion, the issue of possible dispute and procedure for its settlement does not seem as relevant as, for example, contract pricing and the payment terms. As a result, when a dispute occurs, the parties reap the fruits of the transaction's terms and conditions, which often provide for a complicated procedure of dispute settlement. For example, a transaction may include lots of contracts with various parties, disputes settlement options, governing law and the need to hold negotiations or mediation prior to the matter going before a court or arbitration. Thus, the number of cross-border disputes has significantly increased in recent years, but not all of them are arbitration, as at the stage of conclusion of a contract the parties have agreed another method of dispute settlement.
International arbitration cannot exist separately from judicial systems of the countries across the world. Customers set increasingly specific goals which they wish to attain in accordance with the results of arbitration. Frequently the achievement of these goals is impossible without judicial support. Thus, International Arbitration sees a rapid growth of the institution of interim measures, the efficient use of which is hard if not impossible without cooperation with the courts in the jurisdictions of the actual locations of assets.
— What factor predetermines the choice in favour of ICA and a specific arbitration institution? What are the advantages of hearings in one or another venue?
— The use of arbitration as a method of disputes settlement in international transactions has become a common practice. At the same time, the parties often opt not for arbitration, but for the courts of one or another national jurisdiction. Such choice is justified within small-scale transactions and in cases when it is necessary to obtain a prompt remedy in a corresponding jurisdiction. In other situations, the advantages of arbitration, first and foremost, are the flexibility of procedure and neutrality of arbitrators, confidentiality and possibility to enforce a judgment worldwide.
Nowadays, business is becoming increasingly global. All new jurisdictions are used to structure transactions and build corporate entity. We see very dynamic development of arbitration institutions located in Asia, such as the Hong Kong International Arbitration Centre (HKIAC) and Singapore International Arbitration Centre (SIAC). Sooner or later it will no longer be exotic for disputes relating to Ukrainian business to be considered according to regulations of these arbitration institutions.
As for the ICAC at the Ukrainian CCI, some progressive changes can be noted even in this rather conservative arbitration institution. For example, there was a review recently of the list of arbitrators.
— To what features of arbitration clauses should attention be paid so that the arbitrability of a dispute is not appealed against? Have Ukrainian courts changed their standpoint?
— In Ukraine, there is no clear list of disputes which are considered to be non-arbitrable. I cannot say this is bad. In fact, the parties can submit any international commercial dispute to arbitration. As before, in judicial practice there is no clear answer as to whether corporate disputes are arbitral.
So-called alternative arbitration clauses become increasingly popular in complicated transactions, especially within the cross-border loan relations. I am speaking about multi-stage structures providing for the possibility to apply both to courts in different jurisdictions and to arbitration (as a rule, at the discretion of one of the parties). It should be borne in mind that the courts of a number of countries (e.g. France, Netherlands, Russia) question such clauses as they can be considered as not clearly confirming the consent of the parties for arbitration, as well as discriminative ones, as they provide one of the parties with more choice. Ukrainian courts have not yet given their assessment of the feasibility of such clauses, but sooner or later this will happen.
— What are the existing algorithms for the selection of arbitrators?
— It is no accident that everyone says that the court of arbitration is as good as its composition. The parties often underestimate its potential influence on the process at the very stage of selection of arbitrator. Arbitration is often criticized as being too expensive. At the same time, it should be understood that the key benefit of arbitration is the independence of arbitrators, which comes at a price. I doubt whether an arbitration tribunal could work effectively if its fees were inappropriate. Selection of arbitrators is a skill, which comes only with practice. An arbitrator should be appropriate for the specific case. That is the key rule. Another important issue is to verify whether an arbitrator has any conflict of interests. As early as in 2004, the International Bar Association (IBA) developed, and two years ago reconsidered Guiding Principles regarding conflict of interests in international arbitration which, in practice, are very helpful in the verification of conflict of interests.
— Does ICA use external financing of disputes?
— Today, a dispute is, as a rule, not limited by one judicial or arbitration case. To achieve the desired result, the parties initiate parallel judicial or criminal proceedings, work on the assets search is carried out and experts of other practices are enlisted.
Indeed, in some cases there is a possibility to offer services of funds on financing of judicial proceedings to clients. Such services are new for the Ukrainian market. Here, it is important to submit the corresponding case to the fund correctly, with the involvement of local and foreign advisors. If the fund is interested in this case, it may undertake to finance it partially or in whole and the return of such financing will be carried out exclusively under the terms of a success fee, i.e. only in the case of actual recovery of the corresponding funds from the adverse party to the dispute. It is international arbitration cases that are particularly interesting objects of funds in terms of financing, as with the help of the “New York Convention”, an arbitrator's decision can be enforced in almost any country in the world.
— What place does Ukraine occupy on the world arbitration map?
— Our country increasingly generates international arbitration disputes. Such a situation is determined, inter alia, by the instability of the economy and distrust in the local judicial system. The popularity of arbitration has made it possible to create a professional environment of colleagues-arbitrators, who can defend a client's interests in arbitration not only in ICAC at the Ukrainian CCI, but in Paris, London, Stockholm or Vienna. It is worth noting that with every year the Ukrainian courts, especially general higher courts, are becoming more and more aware of the role of arbitration. I hope that the judicial reform that is being implemented in Ukraine will only promote the strengthening of the pro-arbitration of Ukrainian jurisdiction.