New Procedure on Taking Security Measures

• Litigation & arbitration

Taking security measures in support of international arbitration (hereinafter - interim measures) remains a pressing problem in Ukraine. To insure the claim in international arbitration, by nature, means to take temporary specific remedies, failure of which may impede or prevent the execution of future awards of international arbitration. One of urgent problems of Ukrainian legislation is the absence of virtual possibility of direct appeal to the state Court for interim measures from parties to arbitration.

It is worth to note that Art. 9 of the Law of Ukraine "On International Commercial Arbitration" as well as the UNCITRAL Model Law, which is the basis for legislation on arbitration in more than 30 countries, allows parties to arbitration to appeal to the state court for interim measures before or during arbitral proceedings to enforce an arbitral award in the future. The right of the parties to go to court with a request for interim measures is applied for arbitration, which occurs both in Ukraine and abroad. Arbitrators can independently make decisions on the use of interim measures, but from a practical point of view, very often one has difficulties with enforcement of these measures simply due to absence of corresponding mechanisms in Ukrainian procedural legislation. 

So, on October 7, 2013 a draft law "On amendments to some legislative acts concerning taking security measures in support of international arbitration"       was introduced to the Verkhovna Rada (Parliament) of Ukraine. The present bill proposes to make a number of amendments to the Civil Procedure Code of Ukraine (CPC) and the Law of Ukraine "On the court fee." In particular, CPC was added with Articles 420-423 and amendments to Articles 15, 114, 151 and 293 were proposed. The bill also determined the competence of the courts to hear cases on interim measures to secure the claim (Article 15 of CPC). Those cases are to be considered by the court at the location of the parties in respect of which steps to secure the claim are required, or at the location of the property or the main part of it, for which application for interim measures is filed. (Article 114 of CPC).  The bill determines the procedure for filing an application to take measures to secure the claim; specifies procedure of consideration of the application by the state court, grounds and subject to injunctive relief. Also reasons of changes and elimination of such measures are disclosed.

Furthermore, it is proposed to amend the Law of Ukraine "On the court fee" to determine the rates of court fee, which is subject to payment in the event of an application for interim measures, as well as when the appellate and cassation appeal to the court is filed on the matter.

The need for this bill is apparent. In arbitration the parties will be able to submit an application to the national court to take injunctive relief in order to ensure the possibility of the future arbitral award in accordance with the law and international treaties of Ukraine.      

However, according to parliamentary and legal experts the bill requires some amendments for legal completeness and future correct applicability. In particular, the experts noticed that the introduction of a court order to take measures to secure the claim should apply to both international arbitration procedures and internal international arbitration. Moreover Article 40 of the Law of Ukraine "On arbitration courts" provides for the right of the arbitral tribunal at the request of any party to take interim measures as to the issue subject to civil and commercial procedures. Thus the procedure in question must be of complex applicability - both for domestic and for international arbitration.

Also, it is advised that an appeal to the court for interim measures in support of international arbitration could be done as during the arbitration proceedings and as before it starts. Moreover, this provision is stipulated in the current legislation of Ukraine, namely in the Art. 9 of the Law of Ukraine "On International Commercial Arbitration". Similarly, the bill should further clarify what are "evidences of a valid arbitration agreement" and "evidences of early arbitration" to be attached to the application for interim measures.

Summarizing the analysis of the issue, it becomes clear that the enactment of the bill will contribute to bringing Ukraine into conformity with international legal practice. State courts will have a clearly defined procedure to rule on the rights and interests of those involved in arbitration. Guarantees for effective enforcement of arbitral awards should resonate with a positive attitude of foreign and domestic investors in Ukraine.

Published in Arbitration Watch.

Alexander Chebotarenko

chebotarenko@interlegal.com.ua