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A company’s charter may not contain an arbitration clause

Some years ago Ukrainian courts established the approach that the transfer of funds as a contribution of a participant to the statutory capital had to be considered as a kind of agreement, and the company’s charter reflected that agreement. Later that approach was changed.

 Recently the Economic Court of Kyiv Region ruled that a company’s may not be treated as an arbitration agreement. In the case Hurst Overseas Limited v. Aircompany “Aerosvit” CJSC the court revealed that the dispute had corporate nature (Hurst Overseas Limited, a resident of British Virgin Islands was a shareholder of Aircompany “Aerosvit” CJSC). Without analyzing the details of the claim we have to mention that the charter of Aircompany “Aerosvit” CJSC contained the clause about settlement of claims in connection or out of the charter in the International Commercial Arbitration Court at the Chamber of Commerce and Industry of Ukraine. The responded claimed to that clause and asked the court to terminate the proceedings because, as he specified in the motion, the parties agreed on arbitration in the charter which should be treated as the arbitration agreement.

 The court did not approve that argument and resolved the case in favor of the respondent. The decision of the Economic Court of Kyiv Region of January 10, 2011 is not a landmark decision, but nevertheless is interesting because the court clearly stated that the provisions of the charter on settlement of disputes could not be considered as an arbitration clause. Actually, the Ukrainian domestic procedural law specifies corporate disputes among those in which solving the Ukrainian economic courts have jurisdictions. Thus, they may not be submitted to arbitration courts for settlement. As we can imagine the Economic Court of Kyiv Region grounded its decision with two independent arguments.

Posted by International Arbitration Team

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  1. Does the national legislation expressly require all corporate disputes to be settled by the domestic courts only?

  2. Exactly! Regardless the party who is the shareholder (legal entity or individual) the corporate disputes to be considered only by Ukrainian domestic economic courts.

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