In with the new

Andriy Kostin, attorney at Odessa-based PRAVO Law Office, explains the new law for the enforcement of foreign judgements and arbitral awards in the Ukraine

IN the past, the procedure for the recognition and execution of judgments of foreign courts and arbitration in the Ukraine was regulated by the 1988 decree of the USSR parliament. However, applying a document that was based on the legislation of a non-existent state created considerable difficulties when it came to protecting the interests of foreign clients.
On November 29, 2001, the Ukraine parliament adopted a new law addressing this issue, which came into force on January 15, 2002.

The new law covers all decisions of foreign courts, arbitration and other bodies including those concerned with civil, commercial, labour and family law cases. There are two main conditions under which this new law applies. Firstly, the decision of the foreign court must become operative. Secondly, the recognition and execution of foreign judgment can be provided only according to international treaties that have been signed and ratified by the Ukraine.

Should a petition be filed regarding the recognition and execution of the judgment of a court or arbitration body of a state which is not party to an international treaty signed by the Ukraine, the Ukrainian court will refuse to start proceedings. It is the appeal courts that are responsible for considering petitions of this nature, and these courts are in every region of the Ukraine. The criteria for choosing an appropriate court is the place of constant or temporary residence of the debtor or, if that is unknown, the place where the debtors have their property in the Ukraine.

The procedure for addressing a petition is usually stipulated in the applicable international treaty. If the treaty contains no such procedure, the petition can usually be addressed directly to the appeal court of the appropriate region. The new law, which came into force in January this year, contains special requirements for the petition and other documents which need to be submitted.

For example, the petition must contain the name of the applicants and their representative, the place of constant or temporary residence, the name of the debtor, the place of constant or temporary residence of the debtor, and the motives of the representation of the petition. The list of necessary documents which should be submitted with the petition is also usually stipulated in the international treaty. If not, the following should be submitted:

• A duly certified copy of the decision of the foreign court about enforcement of which the petition is moved;
• The official document that certifies that the decision of the court became operative (if it is not specified in the decision);
• The document certifying that the party about which the decision is made and which hasn't participated in the proceedings, was properly informed about the time and place of the proceedings;
• The document that determines in what part the decision was executed, if it was executed partially;
• The power of attorney, if the petition is moved by the representative.

Along with these documents, a written translation of them, duly certified, must also be submitted. Copies of these documents must therefore be certified by the court or arbitration body which decided the case, and authorised in the consulate/embassy of the Ukraine in the country where the court decision took place.

The time limit of the procedure is relatively short. Within five days of receiving and considering the petition, the judge sends a copy to the debtor, who then has one month to present written objections. Once these objections have been presented, or if the one-month deadline has passed, the judge sets the date of the hearing. The court then has the right to reset the date of the hearing upon application by the parties.

The judge considers the petition in open judicial session. He considers the documents, hears the parties and then decides whether to uphold the petition or not. There are a number of reasons upon which refusal to uphold the petition are based, including;

• The decision of the foreign court has not become operative;
• The debtor was deprived of the opportunity to participate in the proceedings of the foreign court because he was not duly and properly informed of the time and place;
• If the execution of the decision would threaten the interests of the Ukraine;
• If the content of the dispute is not subject to proceedings under the laws of the Ukraine.

The decision of the Ukrainian court is subject to appeal to the Supreme Court of the Ukraine. This concludes the procedure for the recognition and execution of foreign judgments and arbitral awards in the Ukraine.

But the new law has introduced a number of legal innovations that are worthy of mention. For example, the new law has widened the reasons which can be advanced for refusing to uphold the petition. It has also neatly determined the time-frame for the court procedure in these cases. It has given the debtor one month to present his/her objections and it contains a very important new clause prohibiting the power of the applicant to demand documents other than those stipulated in an international treaty signed by the Ukraine. These last three innovations, in particular, offer new levels of protection for both parties. The applicant is now protected from unreasonable demands to present other documents, while the debtor has been given a reasonable period of time within which to present his/her written objections.

In general, the existing system of recognition and execution of foreign judgements has not changed much but, most importantly, it is now regulated by the law of the Ukraine as opposed to a sub-legislative act of the Soviet Union.

There are, however, some practical difficulties when it comes to applying the new law. One such difficulty is that the arbitration clause must be stipulated in writing. In some cases, Ukrainian courts have refused to uphold a petition where the arbitration clause has been signed and submitted by fax. The usual rules for submitting written evidence in the Ukraine is that it must be presented before the court as an original or as a duly certified copy. If the debtor claims that he/she hasn't signed the arbitration clause, the judge will ask the applicant to present the original. If the applicant has no arbitration clause in writing authenticated by the 'real' signature of the debtor and with the corporate seal of the debtor, the court may refuse to uphold the petition.

All legal entities in the Ukraine are obliged to have a corporate seal with its own unique identification code. Sometimes the Ukrainian courts pay more attention to the stamping of the corporate seal than to whether the document is signed correctly. It is, therefore, highly recommended to have a contract, or arbitration clause if it is not part of the contract, with the original signature and corporate seal of your Ukrainian partner. It is even better to sign every page of the contract.

It is also highly recommended that all notifications from the foreign court to the Ukrainian debtor are sent by registered mail, with return-mail notification. This way, you have written evidence that the debtor received the notification. As the majority of countries require an entry visa for Ukrainian citizens, it is important to check how long it will take to get a visa and how long it will last when setting the date of the hearing in a foreign court.

Another difficulty with the new law is that the debtor now has sufficient time to try and avoid liability. Having received the petition from the Ukrainian court, the debtor sometimes starts the procedure in another Ukrainian court. This makes it impossible to enforce the foreign judgement until this procedure has ended. The wording of the arbitration clause, therefore, is vital.

Under the new law, it is also impossible to arrest the assets of the debtor once the petition has been addressed. This is possibly the weakest area of the new law. The debtor now has one month to prepare objections, which is enough time to 'hide' its assets. Lack of assets can make the decision unenforceable.

It is clear that, although the existing system for the recognition and execution of foreign judgements and arbitral awards in the Ukraine is relatively simple, it is necessary to make some routine preparations.

This article is an edited version of a speech given by Andriy Kostin at the IBA's International Maritime Law conference in Russia in June, 2002.