• Andrii Kubko

    Ph.D. (Law), Partner,


Address: 12 Khreschatyk Street, Kyiv, 01001, Ukraine

Tel.: +380 44 591 3100, 591 3101
Fax: +380 44 591 3115, 591 3107
E-mail: salkom@salkom.kiev.ua
Web-site: www.salkom.ua

The Salkom Law Firm was founded in 1990. Salkom quickly built a reputation for being an honest and efficient counsel, and is now recognized as one of the leading providers of legal services in Ukraine.

Year on year the firm is rated by Ukrainian and foreign rating experts as one of the leaders on the legal services market in Ukraine. Famous international publications and guidebooks like The Legal 500 (Europe, Middle East & Africa), PLC Which Lawyer?, Chambers Global recommend the Salkom Law Firm as one of Ukraine’s top law firms, which practices successfully in the fields of antitrust law, contract law, corporate and commercial, securities, bankruptcy and insolvency, international trade, privatisation, and litigation, including foreign courts and international commercial arbitration procedures.

The Salkom Law Firm has extensive intellectual and professional potential as it employs 39 highly-experienced lawyers. The firm’s employees speak English and other languages, which enable them to work efficiently with foreign clients.

The firm’s clientele are foreign and domestic companies, both private and state-owned, engaged in various industries such as automotive industry, banks, financial institutions and insurance companies, hotel business and leisure, publishing, investments, information technologies, shipbuilding, international trade, metallurgical industry, real estate, oil and gas, the food industry, natural and mineral resources, retail, agriculture, telecommunications and media, transport, chemical industry, power industry.

The Salkom Law Firm enjoys long-standing cooperative relationships with international law and consulting firms in the United Kingdom, the USA, Austria, France, Cyprus, Italy and Australia.

Salkom is a member of European Business Association (EBA), British-Ukrainian Chamber of Commerce (BUCC), and American Chamber of Commerce (ACC) in Ukraine. The firm’s Partners are members of the International Bar Association.

The Salkom Law Firm has a long-standing association with Squire Patton Boggs.

Jurisdiction in Commercial Procedure

The issue of jurisdiction in a commercial procedure presents special interest in the context of the arbitrability of commercial disputes. It relates to the possibility of submitting a dispute for con­sideration to international com­mercial arbitration rather than to a state court.

It’s a well-known fact that both the law and practice have been facing, for quite a long time, a problem relating to the division of jurisdiction between state courts and international arbitration. In many cases, bodies of the executive and courts apply different approaches to deciding whether international commercial arbitration has jurisdiction over one and the same disputes.

The matter of arbitrability of com­mercial disputes is not unfined to finding an answer to a question whether or not a given dispute is capable of being resolved by international arbitration, or rather falls within the exclusive jurisdiction of state courts. For example, arbitrability has a direct impact on the possibility of recognition and enforcement of awards made by foreign arbitral tribunals in Ukraine. This is due to the fact that an award made by a foreign arbitration tribunal in a case which is not arbitrable under Ukrainian law (cannot be resolved by arbitration), will not be recognised and enforced in Ukraine.

The practical importance of making a clear distinction between state courts and international arbitration has been growing against the background of a number of modern trends that are clearly visible in Ukraine.

One such trend is the development of certain sectors of the economy, the nature and legal framework of which possess special features. On the one hand, the state has its interests in these sectors that have to be protected by legal and administrative means, and, on the other hand, private relationships between parties governed by principles of civil law are in place as well. Such sectors include privatisation, corporate relationships, trade in the public sector, intellectual property rights, and foreign investments. The availability of an efficient dispute resolution mechanism capable of taking into account special characteristics of these areas of economic relationships makes up an important aspect of their functioning. This is why the matter of jurisdiction is extremely pertinent while being quite complex from the standpoint of its practical application.

The other trend began as a result of the Ukrainian economy’s integration into international economic processes. This integration is characterised by the increasing turnover of goods and services and foreign investments in Ukraine, including investments in real estate, production capacities, and capital. At the same time, operations conducted by Ukrainian companies are crossing borders as well. For instance, companies optimise the structure of their business by relocating some of its elements beyond the borders of Ukraine, or invest in foreign companies. Trans-nationalisation of commercial operations creates the need for trans-nationalisation of legal mechanisms for resolving disputes that arise within the scope of such operations. Due to this, there is a growing need to expand the application of international arbitration as a dispute-resolution tool. It is quite natural that a trans-national business operating in Ukraine requires efficient means for settling cross-border disputes. This is extremely important against the background of mistrust to­wards Ukraine’s domestic judicial system that has spread in recent decades. In this situation, an important role is played by the fact that the state is actively declaring its intentions to ensure proper conditions for foreign business operating in Ukraine and inflow of foreign investment to the state, including sectors where the state has specific interests. For instance, one such area of interest is privatisation.

At present, the legal framework governing the jurisdiction over com­mercial disputes in the part relating to the division of the remit of state commercial courts and international ar­bitration has been demonstrating certain strengthening of the position of ar­bit­ration. The legal framework has been transitioning towards becoming more arbitration-friendly. It means that parties to cross-border commercial relationships are provided with better opportunities for using arbitration as a dispute resolution mechanism.

Precisely Which Rules of Ukrainian Law Point to This?

First of all, legislators have taken considerable efforts to clarify the scope of arbitrable and non-arbitrable disputes. However, it does not mean that a list of disputes that cannot be submitted to international arbitration has merely just shortened. Rather legislators adopted a new approach to drawing a line between disputes capable of being resolved by arbitration and disputes that fall within the exclusive jurisdiction of commercial courts.

Under the Commercial Procedure Code of Ukraine (the “Code”) that remained in effect until the end of 2017, disputes regarding the invalidity of acts, disputes arising out of commercial agreements relating to the satisfaction of public needs, and also disputes between a legal entity and its members (shareholders, founders) were not arbitrable. Furthermore, the Code provided that other laws could recognise other categories of disputes non-arbitral.

In Ukraine, there are special laws in effect that govern, in particular, mat­ters of privatisation, protection of competition, bankruptcy, etc. Some of these laws expressly provide for exclusive jurisdiction of state courts, thereby excluding arbitration. However, there have been situations where there was no direct answer to a question on whether a special law made disputes non-arbit­rable. Privatisation law is one of the examples. In practice, various courts and other state authorities adopted different approaches to the possibility of referring disputes arising within the framework of privatisation to arbitration.

In the new Code, MPs have attempted to provide for an exhaustive list of disputes that are not arbitrable in one legal act (however, the Code still indicates that other laws may provide for further categories of non-arbitrable disputes). As compared to the previous version of the Code, the new Code extended the scope of non-arbitrable disputes. In addition to the disputes that were not capable of being resolved by arbitration under the earlier version of the Code, the new Code expressly provides for non-arbitrability of the following disputes: disputes related to the privatisation of state-owned property; disputes related to the protection of competition; disputes related to claims against a debtor against which bankruptcy proceedings were commenced; disputes related to intellectual property rights, including those arising in connection with unfair competition, etc.

However, the law now provides for an important reservation with regard to non-arbitrable disputes set out in the Code.

In particular, corporate disputes can be arbitrable if two conditions are met: first, a dispute arises out of an agreement, and, second, there is an arbitration agreement in place between a company and all its members.

Under the Code, Civil law aspects of dispu­tes related to privatisation, protection of competition, disputes related to intellectual property rights in connection with protection against unfair competition and disputes arising out of public pro­cure­ment agreements (which, in accor­dance with a general rule, are not ar­bitrable) can be submitted to international com­mercial arbitration.

It is true that the definition of the concept of the civil law aspects of a dispute used in the law is somewhat vague. Moreover, its application to the facts of a specific situation can face certain difficulties in practice. Nonetheless, such­ an approach taken by legislation to drawing a border between arbitrable and non-arbitrable disputes is in line with both modern trends in the field of commercial relationships with an international component and the nature of arbitration as a dispute resolution mechanism.

In addition, the law governing the use of arbitration in a commercial procedure is now aimed, to a larger extent, at supporting the parties in resorting to arbitration in cases that a priori are not excluded from its jurisdiction.

The Code expressly provides that in case of any uncertainties in the text of an arbitration agreement (an agreement between the parties to submit a dispute between them to arbitration) or doubts in the validity of such an agreement, the court should rely on the presumption that such an agreement is valid and enforceable. This legal rule will apparently promote the furtherance of the use of arbitration in commercial disputes as it creates grounds for sub­mitting to arbitration disputes where an arbitration agreement (arbitration clause) could be construed by a court as invalid or unenforceable under the law earlier in force.

Furthermore, the new law has introduced mechanisms that can ex­tend the jurisdiction of international arbitration over disputes where there was no arbitration agreement or clause in place at the outset. According to the new rules set out by the Code, one of the stages of commercial procedure in a state court is a preliminary court hearing. During a preliminary court hearing, a court should determine whether the parties to a dispute wish to submit it to international arbitration. This requirement applies regardless of the fact that the parties to the dispute did not make an arbitration agreement when they concluded an un­derlying agreement. As a matter of fact, the court informs the parties about the possibility of entering into such an agreement during a preliminary hearing. Although an arbitration agreement is not mandatory and the parties may act as they regard fit, this legal mechanism will also promote the submission of some of the disputes that initially fell within the jurisdiction of state courts to arbitration.

There is another mechanism aimed at limiting the jurisdiction of state courts over commercial disputes to the benefit of international arbitration: the new Code expressly prevents the consideration of a dispute by a state court in the event when a foreign arbitral award recognised in Ukraine was made in an identical case.

These trends clearly show that Ukrainian law governing matters of juris­diction in a commercial procedure is be­coming more “arbitration-friendly” and is gradually integrating itself into international and pan-European pro­cesses.