The Claimant filed a lawsuit against a Chinese corporation, claiming that the agreement for a bank guarantee was invalid and any disputes arising out of the guarantee are to be settled under Ukrainian law at Ukrainian courts. However, such a position was contradicted by the fact that the bank had signed an arbitration agreement, which provided that English law applies and disputes should be resolved under ICC Arbitration Rules.

As a result, the first instant court remained the claim without consideration, because the parties had agreed to settle any disputes through arbitration instead of going to court.

Nevertheless, the appeal court overturned the previous court's decision, stating that one of the defendants was in bankruptcy proceedings, therefore the dispute is non-arbitrable and shall be considered by the Ukrainian court.

Disagreeing with this outcome, AGA Partners filed a cassation to the Supreme Court, drawing attention to the fact that the appeal court wrongly ignored the binding arbitration clause, under which arbitration proceedings had already been initiated. This violated the Law of Ukraine "On International Commercial Arbitration" and the Commercial Procedure Code of Ukraine (hereinafter referred to as the "CPCU"). The appeal court also made a mistake in concluding that the dispute under the guarantee in non-arbitrable.

The Supreme Court upheld our client's position and completely overturned the appeal court's decision, leaving the first-instance court's ruling in force. The Supreme Court noted that:

"...the appeal court erroneously prioritized individual provisions of national law over the provisions of valid international treaties of Ukraine in the disputed legal relations, and unjustifiably interpreted the absence of special provisions regarding the implementation of an arbitration agreement by the debtor in a bankruptcy case as a basis for applying analogies of law instead of applying the mandatory provision of Article 226, Part 1, Section 7 of the CPCU".

It is an important decision, demonstrating the court’s support for arbitration dispute resolution in Ukraine. The decision of the Supreme Court can be found at the following link.

The AGA Partners team was represented by partner Iryna Moroz and senior associate Olena Sibirtseva.