Arbitration clause might be a golden opportunity for foreign investor in Ukraine, but gold may rush on a gold – seeker…
Foreign investors use private arbitration to protect their interests at Trade Chamber of Ukraine as an alternative to courthouse. In fact, arbitration is supplement to litigation in Ukraine.
Under arbitration agreement in 2015 an individual successfully claimed from Ukrainian JSC “Rise Company” in total Euro 2 mln 384 thousand 498,79 cents. This sum included Euro 2 205 000,00 of main debt and Euro 163 918,73 of penalty of 3% annually on overdue sum, plus arbitration fee Euro 15 580,06 and this decision was delivered in International Ukrainian Arbitration at Trade Chamber of Ukraine.
There are number of cases when individuals on behalf of companies founded by foreign investors in Ukraine used arbitration agreement to protect their legitimate interests in Ukraine, for it is affordable simple alternative to solving disputes in courthouse. Ukrainian law implicitely allows International arbitration procedures for foreign investors in Ukrainian territory to be conducted at Trade Chamber of Ukraine.
Arbitration clause as golden opportunity for foreign investor
Meanwhile foreign investors are keen to apply arbitration agreements in Ukraine. So I learned recently during granting services of internal audit of in-house contracts ordered by one foreign investor operating in sphere of Ukrainian industry, over-regulated by state. So this investor must rely on lawyer – intensive services with much of sensitive commercial information on rights and funds transfer, as well as business know-how. Here, as it happens, investor pretended that employees are contractors, therefore signing with them civil contracts plus NDA (Non-Disclosure Agreement) with arbitration clause. This clause was exactly like that of employment agreement applicable in USA, with one difference only – the title of Ukrainian International Arbitration body – the Chamber of Commerce of Ukraine. May be investor thought of combining the best of 2 legal systems, taking to account Ukrainian employee-biased labour Law and USA employer-biased legislation. So at foreign investor disposal were copy-cat-ted USA arbitration clause implemented in NDA and combined with Ukrainian civil self-employed contract.
Perhaps arbitration clause looked as golden opportunity for foreign investor to protect commercial information, abstain from employee-initiated litigation and to hire qualified contractors by rates of employees-para-legals: for pea-nuts. For this same purpose served non-negotiable client-biased contract to be signed by local contractors (employees).Take it or leave it. For a client it is as good as nice gold mine during gold rush.
When gold may rush on gold – seeker: Ukrainian arbitration with a twist
In fact, private arbitration in Ukraine is more pretext or supplement to litigation, rather than its alternative. Furthemore, it is good opportunity for an individual to initiate an arbitration procedure under Ukrainian Law.
Thus, comparing to that of USA, Ukrainian private arbitration has a twist, or rather twists:
– Individual (natural person) must not be deprived of a (Civil) Court protection; any aforesaid clause or deed shall be void from the moment of its conclusion;
– Arbitrators are to offer written justification of a decision.
– Arbitrators’ decision is subject to judicial review (appealable in Ukrainian appelate civil courts);
– Arbitrators’ decision could be subject to judicial inforcement (in district Ukrainian civil court);
– Class-action suits are not prohibited.
Binary-bet: Guinei pig or professional “inside–the–tent” @Lyndon B. Johnson‘choice
So as a result of rigid application of copy-cat-ted arbitration clause a foreign investor risks wasting resources on rather useless guinea pig – employee/ contractor and having unprotected commercial information, or becoming dependent on smart professional – as in Lyndon B. Johnson‘choice (better having this lawyer inside the tent).
Direct extrapolation of USA-type arbitration clause in Ukraine produses a binary-bet-outcome, very much like random choice of direction on rail-roads’ intersection during tram-riding with un-known route. And nowadays gold-rush heroes behave more like ticketless tram passengers, for it is very unlikely they paid for ill-tailored advice on application of USA arbitration clause for NDA purposes in Ukraine.
Did I really write this?