International Arbitration

partner, head of the international arbitration practice at Eterna Law ILF

partner, head of international judicial practice at Eterna Law ILF

Controversial image

The arbitration dispute resolution practice is undergoing comprehensive change. Competition between arbitration institutes is intensifying, although, at the same time, we can see unification of their rules. Judicial reform in Ukraine has significantly benefited the users of arbitration, but there is still ample scope for improvement, and protection of state interests increases the importance of the arbitration practice


The "golden age" of international arbitration continues, as does competition between arbitration institutes. Today, we see that the "parade" of renewals of arbitration regulations launched in this decade continues and each arbitration institute tries to provide new tools and increase its value for the users of arbitration by introducing institutes of emergency arbitration, accelerated consideration of cases, optimized scales of arbitration expenses, inclusion of soft law practices for efficient consideration of disputes, etc. This makes arbitration rules more unified.


In the beat of trends

The key competitive advantages of arbitration institutes are as follows: availability of practical knowledge of its secretariat staff, capability of providing additional services (for example, escrow account services, provision of briefing notes, selection of recommended experts, rent of rooms for arbitration sessions), efficiency in processing cases and opportunities for optimizing arbitration costs and expenditure in proportion to the complexity and value of the claim. The following trends prevail among global ones:

1) cross-border cooperation between arbitration institutes (for example, the International Chamber of Commerce (ICC), the Singapore International Arbitration Center (SIAC) has actively developed partnerships with other arbitration institutes lately);

2) the growing role of soft law tools in arbitration (such as the Guidelines of the International Bar Association on Conflicts of Interest in International Arbitration, the Rules of the International Bar Association on Taking Evidence in International Commercial Arbitration);

3) settlement of disputes financing by a third party (for example, the new rules of the Hong Kong International Arbitration Center (HKIAC) presented this autumn provide for a mandatory disclosure of information on the third party that finances the dispute (if any).


Crusted habit

It can be said that consideration of disputes in courts of foreign jurisdictions and international arbitration is no longer something unusual for Ukrainian business. This factor, together with the difficult economic situation, in many cases motivates parties to reject such expensive arbitration institutes as the ICC or the London Court of International Arbitration (LCIA). However, the number of cases related to Ukraine submitted to these arbitration institutes do not diminish. This is particularly true for disputes regarding contracts with non-residents on issues of construction, investments in infrastructure or capital, loan tools, as well as the extensive use of English law in corporate and trade relations.  In unison, the demand for such regional arbitration centers as the Arbitration Institute of the Stockholm Chamber of Commerce (SCC), the Vienna International Arbitral Center (VIAC), the ICAC at the Ukrainian CCI keeps increasing primarily because of their relative cheapness.


We’LL be helped from abroad

The role of foreign advisors is among the interesting issues in this area.

If a future arbitration dispute concerns the substantive law of a foreign jurisdiction, the attraction of foreign colleagues from the relevant jurisdiction is mandatory. As for the success, of course, it largely depends on the level of a foreign advisor's expertise in the particular foreign law. At the same time, in our opinion, the ultimate success of a case also largely depends on the team work of Ukrainian lawyers and foreign colleagues. This is particularly true for those disputes where the main evidential base is located in Ukraine, but, nevertheless, foreign law is applied to the legal relations of disputing parties.


Ukrainian field

Certainly, there is ongoing debate on the efficiency of arbitration awards execution in Ukraine. In general, the percentage of arbitration awards duly recognized by Ukrainian courts is quite high. However, now and then, there are some unexpected court rulings that refuse to recognize an arbitration award. It should be noted that this practice exists in both American and Western European jurisdictions. Suffice to mention the recent ruling by an English court, in which it found that the parties did not choose a specific arbitration institution since the reference to it in the arbitration clause was made without the use of capital letters!

Since the new Civil Procedure Code of Ukraine has been in effect for less than one calendar year, the practice of recognizing and executing arbitration awards in Ukraine has not been formed yet. But it should be noted that the imposition of the burden of considering applications on recognition and execution of arbitration awards at Kyiv Court of Appeal is a positive change, which, in turn, will make it possible to form more unified practice in this area and the appropriate specialization in judges. The division of arbitration awards execution and foreign court rulings execution procedures, as well as application of court injunctive remedies in support of arbitration, seem like a positive step.


Iceberg and precedents

It is practice that in the main creates the rules in arbitration. Have landmark rulings been delivered this year that can significantly change practice in the area of arbitration? First of all, it should be noted that the majority of arbitration awards do not appear in the public spotlight due to confidentiality of the process. Therefore, in addition to the cases in which we were directly involved, we can only see the "tip of the iceberg". Certainly, in the past few years, it was possible to observe many interesting arbitration disputes in the area of electric power, in particular, investment claims against the Czech Republic and Spain, lawsuits in commercial arbitration such as Naftogaz of Ukraine vs Gazprom, Raga vs SCM, Ukrgasdobycha vs Karpatygaz. Investment claims made by Ukrainian entities to the Russian Federation are of particular interest.


Privacy vs transparency

The already mentioned confidentiality is among the advantages of arbitration. Confidentiality is one of the features of arbitration and, in many cases, the reason for choice of arbitration by the parties (after all, publicity of a case may affect the reputation of companies and their relations with counterparties). However, the world community declares the desire for greater transparency. It is correct to state that investment arbitration and disputes involving state/municipal companies will be fully open to the public in the foreseeable future. Even today, the disputes resolved by the ICSID Washington Arbitration (International Center for Settlement of Investment Disputes) and many disputes administered by the Permanent Court of Arbitration in the Hague (PCA) are widely open to the public. Written explanations and arbitration awards are published, the parties concerned may make applications for participation in the process as amicus curiae, broadcasts of some sessions are posted on the Internet. UNCITRAL Transparency Rules are increasingly supported, since in the past  such disputes were completely closed to the public in accordance with UNCITRAL regulations and often there was no information even on the very fact of the arbitration proceeding. Confidentiality is one of the foundations of international commercial arbitration. Since mainly private entities are parties to such disputes, their wish to maintain confidentiality with regard to transactions, assets and technologies should, in our opinion, be respected. Let's agree that in investment arbitrage transparency is important, since cases are often of public value and publicly important. In our opinion, it is necessary to strive for greater transparency in disputes that contain a public element (investment disputes under agreements on mutual protection of investments or multilateral ones under the Energy Charter) and try to maintain confidentiality as one of the key elements in international private law disputes.