Ukraine elaborates on legislation on choice of Court agreements
02. 11. 2022
On 15 October 2022, the Law of Ukraine “On Amending Certain Laws of Ukraine in Connection with the Ratification of the Convention on Choice of Court Agreements” (the “Law“) entered into force. Introducing this Law was a precondition for the Law of Ukraine “On ratification of the Convention on Choice of Court Agreements”, adopted on 15 June 2021, to come into effect. The Law creates legislative prerequisites for the application of the Hague Convention on Choice of Court Agreements of 30 June 2005 (the “Convention“) in Ukraine.
The Convention is an important instrument in cross-border litigation. It seeks to ensure the effectiveness of choice of court agreements, also known as “forum selection clauses” or “jurisdiction clauses”, in transnational disputes in civil or commercial matters. It does so by introducing uniform rules to ensure that parties’ choice of forum is upheld by courts, thereby enhancing access to justice and creating a more favourable climate for international trade and investment. The Convention also lays framework for recognising and enforcing judgments resulting from proceedings based on such agreements.
By acceding to the Convention Ukraine will not only join the countries which Ukraine has the closest economic ties with (as of 3 March 2021 Convention is applicable in 32 countries, including the United Kingdom, Poland, Spain, Italy, France, European Union; the Convention is also signed by the USA and China) but also enhance its national legislation aiming to ensure clear and predictable recognition of the choice of court agreements.
It should be noted that Ukrainian legislation was not unfamiliar with the concept of the choice of court agreements before the introduction of the Law and ratification of the Convention. However, certain provisions of Ukrainian law (Article 23 of the Commercial Procedural Code, Article 22 of the Civil Procedural Code, Article 76(1)(1) of the Law of Ukraine “On International Private Law”) are of a general nature and do not suggest any specific approach as to the application of such agreements. For instance, those provisions are silent as to the form of such agreement, its separability in cases where it forms a part of a contract, types of disputes that could be referred to a chosen court, powers of the Ukrainian courts in case an agreement on the choice of the foreign court is discovered during the national proceedings, and so on. Also, only recently Ukrainian Supreme Court ruled in favour of the impossibility to pursue parallel proceedings when the parties to the dispute have entered into the choice of the foreign court agreement (Ruling of 17 June 2021 in case No. 925/467/20). Just a few years ago the approach was the opposite (Ruling of the High Commercial Court of Ukraine of 17 February 2016 in case No. 907/598/15).
The adopted Law implementing the corresponding provisions of the Convention suggests the following to solve the abovementioned constraints:
- Article 366 of the Commercial Procedural Code of Ukraine and Article 497 of the Civil Procedural Code of Ukraine are supplemented with paragraphs of similar substance:
“In cases established by law or an international treaty ratified by the Verkhovna Rada of Ukraine, the jurisdiction of cases involving foreign persons may be determined by agreement of the parties.”
- The Law of Ukraine “On International Private Law” is supplemented by Article 4-1, pursuant to which
- the participants of private law relations with a foreign element are allowed to conclude an agreement on the choice of court;
- such an agreement determines the jurisdiction in disputes between the parties to courts of a certain state (i.e., choice of certain state as a venue) or certain court/courts of a certain state (i.e., choice of certain court/courts as a venue);
- the agreement on the choice of court shall be concluded in writing;
- the exclusive jurisdiction of Ukrainian courts over certain disputes with a foreign element cannot be changed under choice of court agreements;
- invalidity of a contract, an integral part of which is an agreement on choice of court, does not entail the invalidity of the agreement on choice of court (separability).
- Amendments were also introduced to Article 75 of the Law of Ukraine “On International Private Law”, according to which the jurisdiction of the courts of Ukraine over cases with a foreign element shall be determined at the time of commencing proceedings in the case. Ukrainian court may not consider a case if a court or other jurisdictional body of a foreign state is at that time resolving a dispute between the same parties, with the same subject-matter and on the same grounds, regardless of when the Ukrainian court learned of it.
The implementation of the Law should provide more certainty for parties choosing foreign courts as their dispute resolution fora that foreign proceedings will not be disrupted by “Italian torpedo” tactics of unscrupulous respondents and ultimate judgments will be enforced in Ukraine.
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