The Ukrainian Parliament adopted long-expected amendments to the Civil Procedure Code of Ukraine regarding interim measures in foreign judgment and arbitral award enforcement proceedings. The new rules became binding on 19 October, 2011.
The new rules allow foreign creditors to apply for interim measures while recognition and enforcement proceedings are still pending. Thus they can ensure, or at least to increase the chances of, actual execution of respective foreign state court judgment, foreign arbitral award or an arbitral award rendered in Ukraine according to the Law of Ukraine “On International Commercial Arbitration”.
Historically, the competence to perform all key functions of assistance, support, supervision and control over international commercial arbitration in Ukraine has been granted to general courts. The legal framework for performing those functions by Ukrainian general courts has significantly changed within the latest decade, and most of all – with regard to enforcement of arbitral awards.
From the end of 2005 until the beginning of 2010 Ukrainian legislation contained no procedural rules for such category of cases. In practice, during that period Ukrainian general courts applied procedural rules for enforcement of foreign state court judgments by analogy. In 2010 the Civil Procedure Code of Ukraine was amended, and application of those rules was officially extended over enforcement of foreign arbitral awards. And after the reform carried out in February 2011 the same rules are now applicable to enforcement of domestic arbitral awards rendered under the Law of Ukraine “On International Commercial Arbitration”.
However, those rules did not allow foreign creditors to apply for interim measures during respective enforcement proceedings, as according to the Civil Procedure Code of Ukraine such measures were available only in case of bringing an action before a general court. Thus, it was impossible to ensure actual execution of respective arbitral award and to prevent bad faith debtors from evading payment of their debts.
On September 22, 2011, the Ukrainian Parliament adopted long-expected amendments to the Civil Procedure Code of Ukraine regarding interim measures in foreign arbitral award enforcement proceedings. The Law of Ukraine No.3776 -VI “On Amending the Civil Procedure Code of Ukraine regarding Interim Measures in Recognition and Enforcement of Foreign Court Judgments” (“Law No.3776”) became effective on October 19, 2011. The Law No. 3776 expressly confers upon a competent court the powers to grant interim measures during recognition and enforcement proceedings and sets out the applicable procedural rules.
Under Law No. 3776, the request for interim measures shall be submitted to the same court before which the recognition and enforcement of the foreign arbitral award is sought. The request for interim measures may be submitted by the party applying for recognition and enforcement of the foreign arbitral award and, if failure to order such interim measures may complicate or render the enforcement of the arbitral award impossible, such measures may be granted by the court at any stage of the respective enforcement proceedings.
The court may order any of the interim measures envisaged by civil procedure legislation (art.152 of the Civil Procedure Code of Ukraine), including: attachment of a debtor’s assets or money, injunction against certain debtor’s actions, order to the debtor to carry out certain actions, injunction against transfer of money or assets to the debtor by third parties, and order to transfer the object in dispute into the custody of third parties.
The request for interim measures shall be considered by the court in ex parte proceedings on the day of its submission. In order to prevent possible abuses, the court may, when granting interim measures, request from the applicant suitable security to be transferred to the deposit account of the court.
The court’s ruling on granting interim measures can be enforced immediately according to the procedures established for the court judgments. Interim measures can be changed or cancelled by the court at the request of any party to the proceedings.
Law No.3776 has filled a significant gap in the procedural legislation of Ukraine. It will undoubtedly facilitate the actual enforcement of foreign arbitral awards in Ukraine and decrease bad faith practices employed by some Ukrainian debtors to avoid paying their foreign creditors.
Olena Perepelynska, MCIArb
Senior Associate with Sayenko Kharenko