Enforcement of ICAC awards in foreign jurisdictions: challenges for Ukrainian companies, article by Volodymyr Misechko for Yurydychna Praktyka

Ukraine positions itself as a pro-arbitration jurisdiction and expects similar positions from its partners abroad. The International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry has been and remains an important tool for business in resolving disputes. However, the enforcement of its awards in foreign jurisdictions is often limited on the grounds of violation of public policy, procedural inconsistencies in arbitration, and the political-sanctions context after February 24, 2022.

Moreover, until recently even the currency restrictions of the National Bank of Ukraine were an obstacle, which caused difficulties with the payment of court fees abroad. Only from May 10 of this year the Resolution No. 53 of the Board of the National Bank of Ukraine entered into force, which provided the possibility for all resident legal entities to make payments of registration, arbitration and court fees, that is, business received wider opportunities to protect its rights in foreign jurisdictions. Let us analyse what is happening now with the enforcement of ICAC awards abroad.

Legislative basis and the procedure of enforcement of ICAC awards abroad
If a foreign debtor company does not voluntarily comply with an ICAC award, a Ukrainian creditor company has to apply to the court in the country of the debtor in order to initiate compulsory enforcement. A petition for recognition of the ICAC award and for permission to its enforcement is filed with the court.

The court of a foreign state does not reconsider the ICAC award on the merits and checks only formal criteria: the validity of the arbitration agreement, compliance with the arbitration procedure, and consistency of the award with the public policy of the state of enforcement. If the foreign court makes the necessary ruling, the procedure of compulsory enforcement is opened, i.e., arrest of accounts, inventory and sale of property, and other measures are carried out.

International practice treats the awards made by ICAC as “foreign arbitral awards,” i.e. those that do not require separate consideration by the court on the merits. Such simplification applies due to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958. 172 states have acceded to this international treaty, which created a unified legal regime for the recognition of arbitral awards rendered in the territory of other contracting states.

Article III of the New York Convention states that «Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon».

Main challenges for Ukrainian companies after February 24, 2022

On the way of companies that seek to enforce ICAC awards abroad there are obstacles of both purely legal and practical nature, significantly complicating the process of debt recovery from foreign counterparties. Such obstacles can be conventionally combined into three groups.

Procedural and administrative barriers:

Public policy exception

One of the key grounds for refusal to enforce an arbitral award is its contradiction to the public policy of the country of enforcement. Each jurisdiction has its own, often rather broad, interpretation of the concept of public policy, which creates legal uncertainty. Foreign courts may consider that the enforcement of an ICAC award will violate their national legal order, especially in cases with sanctions aspects or regarding temporarily occupied territories.

Violation of national procedural rules

In the conditions after February 24, 2022, this primarily concerns improper notification about arbitration hearings.

Apostille and consular legalization of documents

The procedure of confirming the validity of official documents necessary for submission to a foreign court (ICAC awards, powers of attorney, incorporation documents) under martial law may be significantly delayed, which leads to disruption of procedural deadlines.

Requirements for translations

Most foreign jurisdictions require that all documents submitted to the court be translated into the language of the enforcing country by a sworn translator accredited in that country. It is often not easy to find such a specialist who would work qualitatively and promptly with Ukrainian legal documents.

Factors directly related to the war:

Force majeure argument

A common challenge has become the reference of foreign debtors to the war as to force majeure circumstances, which allegedly make it impossible for them to fulfill obligations. For example, it may concern difficulties with delivery of goods, destruction of goods during transportation/storage as a result of Russian attacks, blocking of ports, impossibility to perform works due to long power outages, etc. Foreign counterparties often abuse references to force majeure.

Sanctions restrictions and compliance

The sanctioned status of beneficial owners of foreign counterparties may complicate or make impossible the enforcement of awards, especially if the counterparty’s assets are frozen or restricted in circulation. Sectoral sanctions or criminal proceedings against certain persons or companies may sharply limit the possibilities for recovery even in the presence of an arbitral award. Foreign banks and state authorities carefully check ownership chains, and any connection with sanctioned persons may block enforcement.

Financial and currency difficulties:

Lack of free working capital

The destruction of production facilities, disruption of supply chains, and general economic decline have led to an acute shortage of working capital for Ukrainian business. Expenses for lawyers, sworn translators, court and arbitration fees abroad have become an unbearable financial burden for many companies.

Currency control and difficulties with payments

The National Bank has only recently liberalized part of the restrictions. Until recently, strict currency control significantly complicated or made impossible the payment for legal services and court fees abroad in foreign currency. Although even today cross-border payments require careful documentary justification and may be delayed due to enhanced financial monitoring.

Examples of enforcement of ICAC awards in certain countries

According to ICAC data, in 2024 the largest number of cases involved business from Switzerland, Poland, Turkey, UAE, Romania, United Kingdom, Lithuania, and Germany. In the EU, the most common ground for refusal of enforcement of ICAC awards remains violation of public policy. This is far from always a clearly formalized category in the arbitration laws of EU member states, which leads to contradictory practice. Concerning the same ICAC award, courts in different countries make decisions of opposite nature.

Poland and Germany

These jurisdictions are examples of an effective but at the same time formalistic approach. Courts, as a rule, consider applications for recognition of ICAC awards quite quickly, without reviewing the case on the merits. However, they set very strict requirements for the formal side of the process.

Special attention is paid to the quality and certification of translations of all documents. The translation must be done by a sworn translator accredited in the respective country. Any inaccuracies or mistakes in the translation of procedural documents may become grounds for delaying the case or even for refusal of recognition of the award.

In addition, German courts pay strict attention to proper notification of the respondent about arbitration proceedings. Any doubts regarding procedural guarantees may lead to refusal.

United Arab Emirates

Here a unique mechanism is offered for enforcement of foreign arbitral awards through free economic zones operating on the basis of English common law. For enforcement against debtor’s assets located in the mainland of UAE, a Ukrainian company may initiate enforcement of an ICAC award in so-called conduit jurisdictions – in particular, in Dubai International Financial Centre (DIFC) or Ras Al Khaimah Investment Authority (RAK), which have their own independent courts.

The procedure looks as follows:

First, the ICAC award is recognized by the DIFC or RAK court;
After that, the ruling of the free zone court is submitted for enforcement to the mainland courts of UAE, which treat it as a local court ruling, which significantly simplifies and speeds up the process.

Cyprus and Luxembourg

Some countries, although popular for business structuring, have their specifics in enforcement of arbitral awards. Cyprus and Luxembourg are examples. Here the need to enforce ICAC awards often arises. The process generally corresponds to the provisions of the New York Convention, but there are nuances with the application of the public policy exception.

Given the large number of companies related to sanctioned persons, local courts may more carefully check the origin of the parties and the substance of the dispute, which can potentially complicate the recognition procedure.

Effectiveness of English courts

Due to the long history of development of commercial law, the United Kingdom is considered one of the most arbitration-friendly jurisdictions in the world. English courts demonstrate a high level of respect for the autonomy of arbitration. Court intervention in the recognition and enforcement process is minimized and allowed only in exceptional cases.

English courts very rarely and extremely carefully apply the public policy exception to refuse enforcement. This makes the jurisdiction extremely attractive for Ukrainian companies seeking to quickly and effectively enforce ICAC awards against debtor’s assets located in this jurisdiction or in other Commonwealth countries, where English judgments are often highly recognized.

In addition, English law provides the creditor with powerful tools for securing claims, in particular, a worldwide freezing order of debtor’s assets, which makes enforcement maximally effective.

How Ukrainian companies can increase their chances of enforcement of ICAC awards abroad: advice

In the conditions of martial law and global economic turbulence, successful enforcement of ICAC awards abroad requires strategic planning already at the stage of contract conclusion. A proactive approach can significantly increase the chances of real recovery from a foreign debtor.

Firstly, before signing a contract, it is worth conducting basic due diligence of the counterparty. It is necessary to determine in which jurisdictions its main assets (bank accounts, real estate, subsidiaries), financial institutions it uses, and affiliated structures are located. This will allow assessing where exactly the potential arbitral award will have to be enforced.

Already at the negotiation stage, one can propose a jurisdiction that is the friendliest to arbitral awards and where the enforcement procedure is the most transparent and effective. Such choice of alternative jurisdictions and careful analysis of enforcement risks (in particular, sanctions) should become an integral part of contractual work.

Secondly, it is necessary to correctly draft the arbitration clause. Template formulations should not be used. The arbitration clause must be clear, unambiguous, and legally flawless. It is necessary to indicate not only ICAC at the UCCI as the institution for dispute resolution, but also the seat of arbitration, the language, and the governing law. Mistakes in the arbitration clause are the first and most common argument debtors use to challenge both the competence of arbitration and the award itself.

An example of a successful formulation: «Any dispute arising out of or in connection with this contract, including regarding its interpretation, non-performance, termination or invalidity, shall be finally resolved by the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry in accordance with its Rules. The number of arbitrators shall be three. The seat of arbitration shall be Kyiv. The language of arbitration proceedings shall be English. The substantive law applicable to the contract shall be the law of Ukraine».

Thirdly, at the enforcement stage it is impossible to proceed without involving local lawyers. No Ukrainian lawyer knows the procedural details of, for example, German or Cypriot courts better than a local specialist. At the stage of compulsory enforcement, the involvement of local lawyers is critically important. In particular, they will help correctly apply local mechanisms for asset tracing and seizure. Moreover, asset tracing may require cooperation with specialized companies.

Conclusion
The global arbitration community continues to recognize the authority of ICAC, as evidenced by the positive enforcement practice in EU countries and worldwide. However, in today’s realities Ukrainian business must regard international arbitration not as a separate judicial process, but as a complex project of possible debt recovery, which begins with risk analysis already at the stage of contract conclusion with a counterparty and ends with cooperation with local lawyers and investigators for asset tracing after recognition of an ICAC award by a local court.