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A court is not obliged to read an arbitration clause

This is another post in the Ukraine – arbitration-friendly jurisdiction set of comments. The Highest Economic Court of Ukraine being a body that is responsible for elaboration of the unified court practice of resolution of commercial disputes in Ukraine, adopted the ruling that answers the question: “Is a court obliged to terminate proceedings if a dispute is based on a contract that contains valid arbitration clause?”

As follows from the decisions of the court of first instance in case No 3/180, which were supported by the court of appeal and the Highest Economic Court of Ukraine as the court of cassation the answer was “No”. The court of cassation stated that the court of first instance should terminate the case and propose the parties to go to arbitration only if the contract contained a valid arbitration clause (or the separate arbitration agreement existed) and if any of the parties challenged the competence of the court because of that arbitration agreement before any objections or clarifications related to the essence of the case were submitted to the court. Probably, this may seem logically and evident, but in several cases economic courts expressed the opinion the court should terminate the case even if both parties agreed to resolve it the court regardless of the arbitration clause.

Thus, the reasonable position of a respondent in a similar case is to object against the competence of the court as soon as possible and not wait for the decision in essence of the case. Of course the recommendation is worth to apply only if the respondent feels that he will have better position in arbitration than in the court.

Posted by Konstantin Pilkov, MCIArb, Cai & Lenard Law firm