International Commercial Arbitration

International Commercial Arbitration photo

Experienced lawyers in arbitration

International commercial arbitration is one of the most popular ways of resolving disputes out of international commercial contracts and investment projects. Ukrainian companies – both exporters and importers – widely use this form dispute settlement in their practice. Disputes involving Ukrainian companies are considered in various arbitration institutions in Ukraine and abroad, as well as in ad hoc arbitrations.

Dozens of permanent arbitration institutions operate successfully throughout the world. Among these arbitrations some leading institutions can be distinguished – world centers for dispute resolution. These include the London Court of International Arbitration (LCIA), the Arbitration Institute of the Stockholm Chamber of Commerce (SCC), ICC International Court of Arbitration, The International Centre for Dispute Resolution of the American Arbitration Association, China International Economic and Trade Arbitration Commission (CIETAC), The Hong Kong International Arbitration Centre (HKIAC) and others. Companies from all regions of the world – Europe, Asia, Americas – apply to these institutions. Together with these universally recognized international centers of international arbitration there are regional centers such as the Vienna International Arbitral Centre (VIAC), the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation, as well as dozens other national arbitration institutions, including the International Commercial Arbitration Court (ICAC) at the Ukrainian Chamber of Commerce and Industry (CCI).

The procedure of dispute resolution in arbitration is simpler, clearer, more logical and flexible than in state courts. Such a procedure is generally described in the Rules of arbitration institutions available in many languages ​​(particularly in Ukrainian and Russian).

The decision of arbitrators (arbitral award) is final and may not be appealed. An arbitral award may not be subject to a substantive review by state courts of any state.

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) known as the New York Convention that has more than 150 Parties, including Ukraine, firstly, obliges its Parties to recognize legal validity of arbitration agreements and, secondly, to recognize the binding force of arbitral awards and enforce them in their own territory, which greatly simplifies the process of recognition and enforcement of arbitral awards in practically any country in the world.

What shall companies entering into a foreign trade contract do to have possible disputes between them resolved in international commercial arbitration?

1. Enter into an arbitration agreement

If the parties in the event of a dispute (no one and nothing, even the most respectable businessman or company, can be insured 100% that no dispute will arise) want to resolve the dispute in arbitration, and not in the state court, they shall enter into an arbitration agreement. It may be contained in the contract itself (arbitration clause) and may exist in the form of a separate agreement – an arbitration agreement.

Absence of such an arbitration clause or arbitration agreement deprives the parties of the right to apply for arbitration!

Arbitration agreement shall contain complete and – that is extremely important! – a correct name of the arbitral institution, to which the parties agreed to pass their possible disputes. Incorrect or inaccurate name of such institution creates an opportunity to challenge the validity of an arbitration agreement or to declare it void that will deprive arbitration of the right to consider a dispute.

In addition, we recommend when entering into an arbitration agreement to agree on such aspects of the “future” arbitration: (a) the number of arbitrators (one or three); (b) the language of the arbitration proceedings; (c) choose the applicable law (the law of a particular state of a non-state law) that will regulate the contract and legal relationship established by this contract (validity of the contract, the size and grounds of liability, the amount of the penalty, the procedure for covering losses, limitation periods, etc.).

It is useful to know: while choosing an arbitration institution, find its page in the Internet, and find therein its Rules that usually contain the recommended arbitration clause. Take it as the basis of your arbitration agreement!

Remember that an arbitration agreement must be in a written form. This is a condition of its validity! You can enter into an arbitration agreement either by executing a single document (contract, agreement) or by exchange of letters, including electronic messages, with one condition that such an exchange fixes the fact of the conclusion by the parties of the arbitration agreement.

2. How to initiate arbitration proceedings?

To initiate arbitration proceedings an interested party shall deliver a written statement of claim (sometimes called also “a request for arbitration”) to the arbitration institute specified in the arbitration agreement, attach thereto an arbitration agreement and pay a registration fee ($600 – 5 000, depending on the arbitration institute).

During preparation of the statement of claim it is necessary to evaluate the essence of the dispute (legal qualification), assess all advantages and disadvantages of both your own position and position of another party, determine the evidence that can be presented, to substantiate your position by references to international conventions and national law, agreed in the arbitration agreement, and calculate the “real”, in terms of likelihood of satisfaction of the claim, the amount of claim.

Preparing a statement of claim is one of the most important stages of arbitration protection of the rights and interests of the claimant!

During preparation of the statement of claim the claimant shall take into account the following fact: after the claim is accepted, the institution will require the claimant to pay the arbitration fee or make an advance payment for future payment of fees to arbitrators and pay the administrative fee of the institute.

3. Payment of the arbitration fees

The size of the arbitration fees (advance payment of arbitrators’ fees and administrative fees) depends on (a) the amount of claim and (b) the number of arbitrators (more arbitrators, more, up to 3 times, the amount of the arbitration fees). The calculation of the amount of the arbitration fees is carried out by the secretary of the arbitration institute on the basis of special schedule contained in the Rules of the arbitration institution.

Since the amount of the arbitration fees is often quite significant, the claimant, when determining the amount of his claims, shall remember that compensation from the defendant will be subject only to that part of the arbitration fees that is proportional to the amount of satisfied claims.

4. Appointment of arbitrators – one of the most responsible procedures in arbitration

The size of the arbitration fees (advance payment of arbitrators’ fees and administrative fees) depends on (a) the amount of claim and (b) the number of arbitrators (more arbitrators, more, up to 3 times, the amount of the arbitration fees). The calculation of the amount of the arbitration fees is carried out by the secretary of the arbitration institute on the basis of special schedule contained in the Rules of the arbitration institution.

Since the amount of the arbitration fees is often quite significant, the claimant, when determining the amount of his claims, shall remember that compensation from the defendant will be subject only to that part of the arbitration fees that is proportional to the amount of satisfied claims.

The arbitrators are the persons who are trusted by the parties to resolve the dispute and render an arbitral award. These persons must be impartial, professional, not directly or indirectly related to another party (its founders, business partners, etc.). Arbitrators can be citizens of any country who are reputable experts in the law of international trade (attorneys, researchers, lawyers).

When choosing a person to be appointed as an arbitrator, it is necessary (a) to mark out a number of candidates, each of which would not be related to the states to which the parties belong; (b) send to each candidate a request concerning possible conflict of interest and the possible connection with the opposing party and subject of the dispute; (c) request information about their experience, special knowledge, knowledge of the language of the arbitral proceedings, and (d) request consent for appointment by the arbitrator. The information obtained on these issues will allow you to make a reasonable and a well-founded choice.

If the composition of the arbitral tribunal consists of three arbitrators, each party appoints one arbitrator, and the two appointed arbitrators agree among themselves on the candidacy of the third arbitrator – the chairman of the arbitral tribunal.

5. Choice of legal representatives or advisers

Since international commercial arbitration deals with foreign trade disputes, the parties belong to different states, the law of a foreign state if often applied to the resolution of a dispute, as well as the rules of international conventions, international trade laws, judicial and arbitration practice.

All this requires legal advisers and representatives of the parties to have knowledge of international private law, comparative law, the foundations of foreign law, and international treaties in various spheres of international economic cooperation, to know how to interpret them and to know the practice of their application. It is also important for legal advisers and representatives to speak foreign languages.

6. Interim measures

An important aspect of the correct strategy and tactics of protecting the claimant’s interests in international arbitration is the determination of interim measures (arrest of property that is a subject of a dispute, a prohibition to commit certain actions by the party, etc.). And that interim measures shall be enforced in the territory of the states where the defendant or his property is situated.

There are several ways to “effect” interim measures.

  • (a) To apply to the arbitration institution for the appointment of an emergency arbitrator who is competent to grant interim measures. The order of appointment and powers of such arbitrator vary depending on the institution. The terms and the cost of consideration of request for interim measures vary greatly. In some institutions an emergency arbitrator is not provided for at all.
  • (b) A request for interim measures may also be submitted to the arbitral tribunal that has the right to decide thereon. But the effectiveness of such interim measures will obviously be affected, since the arbitral tribunal is formed not earlier than in 1-2 months from the date of the initiation of proceedings in the case.

However one shall bear in mind that the decisions of both the emergency arbitrator and the arbitral tribunal regarding interim measures generally cannot be enforced compulsorily that may result in loss of the defendant’s assets and, consequently, the impossibility of enforcement of a subsequent arbitral award.

  • (c) The most effective way to have a provisional remedy enforced is to apply to the state court where the defendant or its assets are situated. A dispute can be considered in arbitration in one state whereby the interim measures may be granted in another state. As a rule, local lawyers are involved in such actions, and it is necessary to work closely with them.

7. Consideration of the dispute on the merits. Oral hearings, examination of witnesses, “questioning” of an expert in law

Prior to the oral hearings in the case the arbitral tribunal carries out thorough preparation, giving the parties the opportunity to present their arguments, evidence and explanations in the case, as well as to object to the position presented by another party. At this stage the arbitral tribunal forms its position on the merits of the dispute, which in future may be reflected in the arbitration award.

Therefore, this stage is the most important! To prove your position it is necessary to use all possible means: written evidence and their explanation, judicial and arbitration practice in similar cases, witnesses’ testimony where relevant, opinions (positions) of well-known lawyers on applicable law, and many others. It is especially important to overcome the position of the opposite party, to “discredit” it in the eyes of arbitrators!

At the final stage during the oral hearings it is necessary to “consolidate” the position in the case. The lawyer’s speech, the answers to the questions of the arbitrators, the emotional atmosphere and mood can both convince the discredit in their position and shake it and cause doubts. The emotional residue after the hearings may profoundly affect the arbitral award.

Jurvneshservice attorneys have extensive practice in international commercial arbitration, representing the interests of both claimants and defendants in various disputes in such arbitration institutions as the Arbitration Institute of the SCC, the Vienna International Arbitral Centre, the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation, the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry, arbitration in Zurich, arbitrations ad hoc.

A reasonably built position, our knowledge and experience, active and creative approach to each legal situation allow us, together with our clients, to achieve a successful resolution of a dispute.

Jurvneshservice attorneys represented the interests of the state enterprise of foreign economic activity Ukrinterenergo; Kryukiv carriage building factory that is a large and one of the oldest enterprises in Ukraine; Vinnytsia factory Crystal; Dniprospetsstal; Demos, a company that recycles scrap metal; a joint Ukrainian-Canadian oil company Kashtan Petroleum; foreign investors in a dispute against the Kaliningrad airport (Russia); American company Altum Air Inc. in a dispute against the Ukrainian airlines Windrose and many others.