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LCIA is banned by the Ukrainian court

Recently, Ukrainian economic courts have established a new practice, which hardly contributes to the attempts of Ukraine to become more friendly to arbitration. In the case Signus LLC vs SLAV Handel, Vertretung und Beteiligung AG and others the court of first instance forbade the defendants to apply to the London Court of International Arbitration.

There was an agreement between defendants that contained an arbitration clause. The plaintiff, who claimed that particular provisions of that agreement violated his rights, filed a claim for recognition of those provisions as void with the economic court.

What is surprising is that the court took the arguments of the plaintiff and the defendants were forbidden to submit any statements or petitions to the LCIA, to pay fees in favor of the LCIA and perform any other actions connected with the settlement of dispute, which arose from the agreement, in the LCIA. The logic of the ban was that if the arbitration tribunal settles the case, an award may be contrary to the public order of Ukraine. That means, reasoned the court, that after the LCIA issues an award, it will become impossible to execute the court’s decision on recognition of the agreement as void.

Incredible reasoning or rather incredible invention. Ukrainian court presumed contradiction award public policy of Ukraine. I think readers agree that a violation of the public order may be considered as a reason for refusal to enforce an arbitral award in Ukraine. This mechanism is foreseen by the New York Convention of 1958.

Interesting is the fact that the defendant's lawyers had to substantiate a cassation against the court’s ruling, stating that there was a violation of their right to conduct business as they were deprived of the opportunity to provide legal assistance to their client, that is to carry on business. The cassation court stopped the proceedings on formal grounds. Thus, the court  implicitly agreed that such restrictions may apply.

It is known that the LCIA is skeptical to such kind of actions applied by state courts in some CIS countries.

Posted by Konstantin Pilkov, MCIArb

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