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Ukraine: controversial new court guidance for corporate disputes

Ukraine
15/12/2008
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All commercial courts in Ukraine have been given new guidance on resolving corporate disputes.

The guidance is intended to ensure the courts take a more uniform approach but, if followed, is likely to deter foreign investment in Ukraine and also to result in Ukraine courts refusing to recognise arbitral awards issued by foreign arbitral tribunals.

The guidance comes in the form of a Supreme Court resolution which, in essence, supports recommendations for commercial courts issued by the High Court at the end of 2007. The most controversial parts of the Supreme Court resolution are that:

  • foreign law agreements about a Ukrainian company’s activities between a shareholder and either the company or other shareholder(s) are void as a matter of public policy
  • international arbitration should not be used by participants of Ukrainian companies to resolve disputes about the company’s activities, particularly its governance

Although the guidance is not binding, it may still influence court practice. If so, it appears to challenge fundamental principles of law and undermine the rights of foreign investors under Ukrainian law and international treaties.

Law: Resolution No. 13 of the Supreme Court of Ukraine Plenum On Practice in Consideration of Corporate Disputes, dated 24 October 2008; Recommendations by the Highest Commercial Court of Ukraine Presidium No. 04-5/14, On Practice of Application of the Legislation to Disputes Arising out of or in Connection with Corporate Relations, dated 28 December 2007.

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