Interim measures in support of arbitration in Ukraine

When arbitration begins, the claimant often seeks interim measures to ensure that the respondent retains sufficient assets or is prevented from taking certain actions in order to satisfy a potential award and make its enforcement efficient. This article outlines key “good-to-know” points and practical considerations relating to interim measures in support of arbitration in Ukraine.

Availability of interim measures in support of arbitration

Since 2017, the Civil Procedural Code of Ukraine has allowed parties to arbitration proceedings to request interim measures from Ukrainian state courts. Granting interim measures is possible where failure to grant them may seriously hinder or even prevent enforcement of the award and the effective protection or restoration of the claimant’s infringed or disputed rights and interests.

Notably, in Ukraine, claimants can only request such measures once the arbitration proceedings have formally commenced. Along with the application for interim measures, a claimant must also submit:

• a copy of the statement of claim or another document that initiates the arbitration proceeding in accordance with the applicable arbitration rules or the law of the seat of arbitration;
• a document confirming the filing of that statement of claim or similar document in accordance with the applicable arbitration rules or law of the seat;
• a copy of the relevant arbitration agreement or agreement to submit the dispute to arbitration.

As follows from the above requirements, particular attention is given to the arbitration rules or the law of the seat of arbitration. Consequently, Ukrainian courts in practice usually expect a claimant to provide relevant extracts from the arbitration rules or the applicable law to confirm proper filing of the claim.

In a case referred to international commercial arbitration outside of Ukraine, an application for interim measures shall be filed with the court of appeal at either the location of the respondent or its property, at the applicant’s discretion.

Counter-interim security for respondent

Where interim measures are requested from a Ukrainian court, the court may require the claimant to provide counter-interim security to cover the respondent’s potential losses caused by the interim measures. The court is obliged to order counter-interim security, in particular, where the claimant (i) does not have a registered residence/place of stay in Ukraine and (ii) does not have sufficient assets in Ukraine. As a general rule, this means that the claimant must deposit cash in the court’s account in an amount set by the court. Importantly, in the event that the arbitral tribunal renders an award refusing the claim in full or in part, the respondent may seek compensation for losses (if any) caused by the interim measures from the claimant in full, even if they exceed the amount deposited as counter-interim security.

What interim measures may a claimant seek to obtain?

Ukrainian procedural law sets out a list of possible interim measures a court may apply. Among them, frequently sought measures include:

• Seizure of property and/or monetary funds belonging to the respondent, or due to be transferred or paid to the respondent and held either by the respondent or by third parties;
• Prohibition for the respondent to perform certain actions;
• Prohibition for third parties to take actions in respect of the subject matter of the dispute, to make payments, transfer property to the respondent or perform other obligations in its favour;
• Suspension of the sale of seized property where a claim has been filed for recognition of ownership of such property and for removal of the seizure;
• Suspension of customs clearance of goods or items;
• Seizure of a seagoing vessel to secure a maritime claim.

At the same time, Ukrainian courts are restricted from granting certain types of interim measures. Among other things, a court must not order measures that:

• Interfere with or distort the public procurement procedures of state entities;
• Impose seizure over the debtor’s property after bankruptcy proceedings have been launched against such debtor, except in cases expressly provided for by the Code of Ukraine on Bankruptcy Procedures;
• Are granted in respect of perishable items;
• Are essentially identical to satisfying the claim on the merits.

During the period of martial law, Ukrainian law temporarily prohibits interim measures where the respondent is a company that (i) operates critical infrastructure, (ii) had its shares/participation interests compulsorily alienated during martial law, and (iii) is more than 50% directly or indirectly state-owned.

How Ukrainian courts apply the proportionality test

The Supreme Court has clarified that, when considering a request for interim measures, the court must assess their proportionality. This involves balancing:

1. negative consequences that may result from granting the interim measures; against
2. potential negative consequences that may arise if the measures are not granted.

To this end, a court must take into account:

• the right or legitimate interest the claimant seeks to protect;
• the value of the property the claimant requests to seize;
• the potential financial or legal consequences for the respondent if it is prohibited from performing certain actions.

In certain cases, it may be insufficient for a claimant to rely solely on a hypothetical risk that the respondent might evade enforcement of the arbitral award. For example, in Agrostudio Group Limited v Eco Energy Ukraine case the Supreme Court upheld the decision of the court of first instance, which took into account, inter alia, the following factors when assessing the application for interim measures in support of arbitration: (i) that the respondent’s share capital was significantly lower than the amount of the contractual penalties claimed; (ii) the nature of the respondent’s business, including the ongoing sale of maize and the uncertainty as to future harvest volumes and availability of maize by the time of enforcement; and (iii) indications that the respondent is disposing or taking preparatory steps to dispose of maize which, under the contract, was to be delivered to the claimant.

Accordingly, in most cases claimants are expected to back their application by invoking specific circumstances that may reasonably demonstrate the risk of impediment of the arbitral award enforcement.

Is it possible to enforce interim measures granted by an arbitral tribunal?

In arbitration, claimants often seek interim measures directly from an arbitral tribunal, such as a partial arbitral award or a provisional order. If the respondent refuses to comply voluntarily, the claimant attempts to enforce these measures through the state courts. While the relief framed as a partial award may be enforced through the ordinary procedure for recognition and enforcement, practical difficulties may arise with a provisional order because the applicant must demonstrate that it qualifies as an ‘arbitral award’ capable of recognition and enforcement.

Where interim measures are framed as an award (including certain interim/partial awards), recognition and enforcement may be sought under the general arbitral-award regime. However, the enforceability of awards granting interim measures remains uncertain and fact-dependent, as illustrated by Ukrainian case law. For example, in VEB.RF v Ukraine, the Ukrainian courts refused to recognise or enforce an SCC Emergency Arbitrator award on the grounds of public policy (contradiction to an existing court ruling).

Accordingly, where assets are located in Ukraine, a more predictable way is to seek interim measures directly from Ukrainian courts empowered to grant such relief in support of arbitration.