COMPETENCE TO RECOGNIZE AND ENFORCE INTERNATIONAL
ARBITRAL AWARDS IN RUSSIA AND UKRAINE
By Irina Paliashvili,
Russian-Ukrainian Legal
Group, P.A.
May 14, 2001
Therefore,
general courts and arbitrazh courts have their own separate substantive
jurisdiction, or “competence”, i.e. each is competent to hear
different kinds of disputes. Thus, the
broader term "jurisdiction" encompasses two different matters: first
“competence” (substantive jurisdiction), and second “territorial jurisdiction”. Once competence is determined, the relevant
court inside the particular system must determine its territorial jurisdiction
over the case. Indeed, in order for
any court, either general, or arbitrazh, to accept a case, it must have
competence, as well as jurisdiction over the case, with competence being the
primary concern and jurisdiction being the secondary concern. If the answer to the competence question is
negative, the court cannot accept the case and the question of jurisdiction
becomes irrelevant. If the answer to
the competence question is positive, but the answer to the jurisdiction
question is negative, the court still cannot accept the case.
2. COMPETENCE
According
to the Civil Procedural Codes of both Russia and Ukraine (Articles 25 and 24
respectively), the following general criteria, consisting of three elements
applied simultaneously, must be present for a general court to have competence
over a matter
(there
are also exceptions to these general criteria, or “special criteria”, which are
not reviewed in this paper):
(1) Existence
of a dispute.
(2) Participation
in the case of an individual (natural person), i.e. at least one party in the
case must be an individual.
(3)
Substance of the dispute, i.e. the disputes must be
on civil law matters.
(1) Existence of a dispute.
(2) Participation
in the case of legal entities and/or individuals engaged in entrepreneurial
activity (registered as individual entrepreneurs), which means that an
individual, who is not registered as an individual entrepreneur, generally may
not participate in an arbitrazh case.
(3) Substance
of the dispute, i.e. the disputes must be economic.
The competence of general courts and of arbitrazh
courts is separated and a case cannot be heard by both, i.e. theoretically there
should be no possibility for “double competence”. Usually, in cases when competence is unclear under the law,
element (2) of the general criteria in both Civil Procedural Code and Arbitrazh
Procedural Code, i.e. the composition of the participants in the dispute,
decides the question of competence.
This was confirmed, for example, by the joint official clarification
letter of Supreme Court of Ukraine (which oversees general courts) and the
Supreme Arbitrazh Court of Ukraine (which oversees arbitrazh courts) dated July
20, 1995. It stated that if the parties to the dispute are legal entities,
the dispute is subject to resolution by arbitrazh court, with the exception
of cases specified by law.
Despite these clarifications, in practice there are a
number of examples when competence remains unclear, with one such example being
recognition and enforcement of international arbitral awards, as reviewed
below.
The
question of which system’s courts - general or arbitrazh - are competent to
hear claims on recognition and enforcement of international arbitral awards is
an example of unclear competence. Both
Russia’s and Ukraine’s Laws “On International Commercial Arbitration” (Article
35 in both Laws), for example, establish that international arbitral awards are
recognised and enforced by a “competent court”. At the same time, the claims on recognition and enforcement of
international arbitral awards do not clearly fall under general or specific criteria
established by the Civil Procedural Code and Arbitrazh Procedural Code and,
therefore, it is not possible to clearly understand which court is the
“competent court”. In practice, the
claims are filed with both, which creates unacceptable confusion and the risk
that a recognition and enforcement claim could be either rejected by any court,
or if it was accepted and decided, the respective decision could be challenged
based on the lack of competence.
At
present Russia’s State Duma is considering new Civil Procedural Code and
amendments to the Arbitrazh Procedural Code, which presents an excellent
opportunity to clarify the issue of competence to hear claims on recognition
and enforcement of international arbitral awards. However, although all sides agree that the issue of competence
must be clarified as soon as possible, the issue of which courts, general or
arbitrazh, should be awarded competence is quite controversial, with two basic
alternative solutions being offered.
(A)
General Courts Solution
Under
this solution it is proposed that all claims on recognition and
enforcement of international arbitral awards be subject to the exclusive
competence of general courts. The main
argument in favour of this solution is that, since general courts do not
specialize in commercial matters, they will be less inclined to attempt to
review cases on the merits and will be more reserved in using the “public
order” criteria in rejecting recognition and enforcement claims. There are a number of legal arguments
offered to support this solution. This
solution and supporting arguments were summarized in the draft Letter to the
State Duma, prepared by Vladimir Khvalei of Baker & McKenzie and
distributed to the members of the Working Group on March 19, 2001.
(B)
Arbitrazh Court Solution
[1] The term “arbitrazh” is used instead of “arbitration” in order to distinguish the arbitrazh courts, which are state commercial courts, from “arbitration” which is understood in most countries as being part of the system of alternative dispute resolution.