Article V1(b) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, better known as the New York Convention,(1) provides that recognition and enforcement of a foreign arbitral award may be refused, at the request of the party against which it is invoked, only if that party furnishes proof to the competent authority where the recognition and enforcement is sought that it was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings. However simple at first glance, the question of what constitutes ‘proper notice’ turns out to be less than clear in practice.
In Ukrainian court practice, the absence of proper notice of the appointment of the arbitrator or of the arbitration proceedings remains a prevailing ground for refusal of recognition and enforcement of arbitral awards. Many cases in the statistics have involved claimants that either did not pay sufficient attention to notification requirements or intentionally misused their procedural obligations in order to prevent their opponents from presenting their case before the arbitral tribunal. However, occasionally the courts go too far in their conclusions on what constitutes proper arbitration notice.
On August 16 2012 the Primorskyi District Court of Odessa City,(2) upheld by the Court of Appeal of Odessa Oblast(3) and the High Specialised Court of Ukraine for Civil and Criminal Cases,(4) dismissed the application of Rangedale Limited for recognition and enforcement of the arbitral award against Southern Airlines, LLC.(5) Among other reasons, the court found that notices sent by the arbitral tribunal to the legal address of the respondent did not comply with the Rules on the Provision of Postal Services,(6) because they did not specify, in two instances, the position and name of the respondent’s officer receiving the notices or, in another two instances, the name of the representative authorised by the respondent to receive the notices.
In another case, the claimant submitted to the court as proof of proper service of the arbitration notice on the respondent the DHL tracking and tracing reports printed out from the corresponding web pages. The Court of Appeal of Dnepropetrovsk Oblast found(7) that such reports, containing neither seals nor signatures, could not be considered written evidence, since they were not electronic documents within the meaning of the Law on Electronic Documents and Electronic Document Circulation.(8) Articles 5 and 6 of the law state that an electronic document must contain a number of requisite features and an electronic signature. Such features were absent from the copies of the tracking and tracing reports submitted by the claimant. Therefore, on March 28 2011 the court reversed the decision of the lower court and dismissed the claimant’s application for recognition and enforcement of the arbitral award against the respondent.(9)
In the above cases, the courts took an unnecessarily restrictive view of the notification requirements related to arbitration proceedings. Such an approach, especially in the case involving DHL courier services, obviously does not correspond with the way in which business is done today – there is a great demand for fast and easy communication, while signatures and seals have long since lost their relevance.
However, these cases fortunately represent an exception and not the rule. In particular, in a recent case before the Sribnyanskyi District Court of Chernihivska Oblast,(10) the court found that the notice of arbitration and the claim submissions served on the respondent by means of electronic communication (under Gafta Arbitration Rule 125, applicable in that case) perfectly met the notification requirements. The court dismissed improper notification objections raised by the respondent and granted recognition and enforcement in Ukraine of the arbitral award delivered by the Gafta tribunal.(11)
This latter approach should be favoured by the courts, rather than one that is too formalistic. At the same time, while the case law remains uncertain on the issue, parties are recommended to use all available means to ensure that their opponents are properly notified of upcoming arbitration proceedings and their course. Otherwise, even the most straightforward case can be lost at the enforcement stage.
(1) Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10 1958; effective June 7 1959, 330 UNTS 38 (1959).
(2) Judgment of the Primorskyi District Court of Odessa City, August 16 2012, Case 1522/16182/12.
(3) Judgment of the Court of Appeal of Odessa Oblast, October 24 2012.
(4) Judgment of the High Specialised Court of Ukraine for Civil and Criminal Cases, February 11 2013, Case 6-47559cв12.
(5) Arbitral award of the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry, May 22 2012, Case AC 397y/2011.
(6) Rules on the Provision of Postal Services, approved by the Cabinet of Ministers of Ukraine, Regulation 270, March 5 2009.
(7) Judgment of the Court of Appeal of Dnepropetrovsk Oblast, March 28 2011, Case 22ц-4091/11.
(8) Law 851-IV, May 22 2003.
(9) Arbitral award of the International Arbitral Centre of the Austrian Federal Economic Chamber, March 28 2011, Case SCH-5100.
(10) Judgment of the Sribnyanskyi District Court of Chernihivska Oblast, January 24 2013, Case 2521/930/2012 (2-r/746/1/2013).
(11) Arbitral award, December 23 2011, Gafta Case 14-283A, Nibulon SA v Nasynnya-Agrokhim, LLC.