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28Oct/100

Dear arbitration practitioners, be precise in specifying the name of an arbitral institution in a contract

With this post we continue the Ukraine – arbitration-friendly jurisdiction set of comments. In our previous posts we already warned arbitration practitioners, attorneys and solicitors who are dealing with drafting arbitration agreements so that they should be precise in specifying the name of an arbitral institution in a contract if the dispute somehow is connected to the Ukrainian jurisdiction. The reason why is that Ukrainian state courts are not trained in favor of arbitration and in many cases do not consider seriously the doctrine of competence-competence in international commercial arbitration.

On October 13, 2010 the Supreme Court of Ukraine ruled in case upon the petition of VKT ARDO LLC against the award of the International Commercial Arbitration Court at the Chamber of Commerce and Industry of Ukraine issued in favor of Аrсеlоrmittal Аmbalaj Сеligі Sanауі ve Тісаrеt Аnоnіm Sіrkеtі against VKT ARDO LLC for app. USD 3 mln. Since I have no interest in that case I believe that I can share my opinion.

The contract out of which the dispute arisen contained the arbitration clause according to which “disputes shall be settled by the International Commercial Arbitration Court at the Chamber of Commerce and Industry of Kyiv”. However, the thing is that there are only two institutional international arbitration courts in Ukraine, namely the ICAC and the Maritime Arbitration Commission at the CCI of Ukraine, but not Kyiv. Though both chambers are located in Kyiv, they are separate institutions.

We assume that the arbitral tribunal applied the doctrine of competence-competence and recognized itself competent in settling the case because in fact there is no other permanent international arbitration court in Kyiv except for the ICAC.

However, all three instances of the Ukrainian state court system (district court, court of appeal and the Supreme Court of Ukraine) ruled against that award. There were two major grounds ruling against. First of all, the courts reasoned that the parties to the contract specified an arbitral institution that does not exist. A very formal approach, in my opinion.

And the second reason is that the ICAC ruled out of its competence, because formally the tribunal interpreted the arbitration agreement by way of recognizing itself competent. The Supreme Court ruled that the dispute was around the fulfillment of the contract, not about its interpretation.

So, dear readers, let me caution you that you have to be careful in drafting arbitration agreements if you do not want to face formal arguments which are very popular among state judges.

Posted by Konstantin Pilkov, MCIArb

logo Dear arbitration practitioners, be precise in specifying the name of an arbitral institution in a contract

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