New Venue(s) for Considering Disputes Involving Foreign Investors in Ukraine: Public Discussion Has Begun
11. 04. 2023
Despite the brutality of war, Ukraine’s long-lasting reform of the judiciary is going on. In particular, Ruslan Stefanchuk, the Chairman of the Ukrainian Parliament, and HH Vsevolod Knyazev, the Supreme Court’s Chief Justice, have recently started a very interesting public debate on creating a court for foreign investment as another potential stage of this reform.
According to Chairman Stefanchuk, since Ukraine will have to attract a vast amount of both foreign and internal investment for its post-war reconstruction it will have to put in place a procedural and institutional framework for efficient and expeditious protection of the investments in Ukraine. Reportedly, Ukrainian authorities are now in search of the best ways to ensure such judicial protection. Generally, disputes involving investments come in all shapes and sizes ranging from commercial to administrative to civil disputes, which are all resolved by courts of three different jurisdictions in Ukraine now. According to HH Knyazev, the following basic models of institutionalising investment protections are now being discussed, namely:
- to introduce specialisation in investment disputes in existing commercial courts;
- to create a special chamber for investment disputes in the Higher Court on Intellectual Property which is currently in the process of formation;
- to create a new court for investment disputes;
- to foster the existing arbitration institution’s capability to settle such disputes.
A brief overview of each debated model is set out below.
Specialisation in investment disputes in existing commercial courts
It is not an easy task for the current judicial system, including commercial courts, to cope with a major number of disputes that will inevitably arise from investments due to, inter alia, an excessive caseload. Any additional significant caseload may further increase the duration of adjudication, although commercial courts seem to be the most time-efficient among the other courts. Even in 2022, when the Ukrainian legal system was largely paralysed by the russian aggression, resolving disputes in commercial courts remained rather prompt (the average period for a commercial case to be considered from the time of filing a statement of claim to the time of the cassation decision was 210 days).
Moreover, it will likely take time to fill the vacancies with newly trained judges, investigate corrupt judges and fine-tune the judiciary to protect the investors in line with the world’s best practices. Thus, prospects that investors will be willing to entrust their disputes to now existing commercial courts without significant refreshment of the sitting judges are rather vague.
Special chamber for investment disputes in the High Court on Intellectual Property
Although the High Court on Intellectual Property was formally established in 2017, the judges have not been appointed yet, and the prospects of its starting to operate in the nearest future are rather vague. Besides, disputes involving investments are usually inter-jurisdictional ones, they may go far beyond commercial legal relations and are much broader than intellectual property issues.
Thus, the jurisdiction of the High Court on Intellectual Property, once up and running, may not cover all investment issues and there may be a need to commence a new selection of judges to this special chamber which may take at least 1.5 years.
Creation of a brand-new court
The practice of establishing state international commercial courts is nowadays not uncommon. It has been widely discussed in European countries, and Brexit fostered the process of creation of such courts. Several countries have introduced specialized commercial courts to deal with international disputes:
- on 1 January 2018 a Chamber for International Commercial Disputes was established by the Frankfurt am Main District Court;
- on 7 February 2018 a new Chamber was created within the Paris Court of Appeals, dedicated to international commercial disputes;
- on 1 January 2019 the Netherlands Commercial Court was created, aimed at resolving international business disputes.
In our view, for Ukraine establishing a court aimed at settling international commercial disputes may be a rather challenging task. It is difficult to foresee how long it may take to create such a court given the previous experience of the High Anti-Corruption Court (which took about three years to be formed) or the High Court on Intellectual Property (the judges to which remain unappointed yet after six years). Given serious staff shortages and delays in the judges’ selection and appointment process, creation of a brand-new court instead of filling numerous long-term vacancies in the existing courts doesn’t seem feasible from the public policy perspective.
Expanding capabilities of international arbitration institutions
The International Commercial Arbitration Court at the Ukrainian Chamber of Commerce (“ICAC“) is an internationally recognised arbitration institution which has been administering international arbitrations since 1992. In 2022, the ICAC registered 373 new cases; 202 of them were determined by arbitral tribunals that same year. The ICAC arbitration is fast: 86.1% of cases were considered within six months from the date of formation of the Arbitral Tribunal (with 46.5% cases being considered in up to three months; 38.6% – within three to six months; and 1% cases considered in expedited proceedings).
We think the ICAC possesses ample capabilities to settle a wide range of disputes involving both foreign and national investors, is neutral and reputable enough to gain the trust of future investors and the State alike.
However, there may be arbitrability issues. Thus, to expand the ICAC’s capabilities into the field of investment disputes the list of disputes capable of being resolved by arbitration in Article 1(2) of the current Law of Ukraine on international commercial arbitration will need to be expanded to add disputes arising from any contracts with the State as well as to investor-State disputes under treaties.
While the debates are going on, it is still unclear what Chairman Stefanchuk/HH Knyazev mean under “investment disputes”, as well as what scope of powers and jurisdiction whichever of discussed models will provide for. Ukraine is now and will remain a party to a significant number of the BITs and multilateral agreements, and none of the initiatives seek to replace the existing network of investment protection treaties.
As we can assume now, the suggestions aim at promoting a speedy and reliable way of protecting and enforcing investors’ rights at the domestic level.
The discussion on the protection of investors’ rights launched by Chairman Stefanchuk and HH Knyazev has far-reaching implications for the future of the Ukrainian economy and the rule of law in Ukraine. It is still at its early stages but will inevitably involve a lot of research and public debate. It remains to be seen which model will be ultimately chosen by Ukraine and its partners.