CJSC Belarusian oil company v. PJSC Ukrtransnafta

At a glance

Parties

CJSC Belarusian Oil Company (Belarus), applicant for enforcement, v. PJSC Ukrtransnafta (Ukraine)

Case no.

Supreme Court of Ukraine case No. 796/32/2018, proceedings No. 61-27101ав18

Court

Supreme Court of Ukraine, Civil Cassation Court, First Judicial Chamber (appellate review)

Underlying award(s)

Award of the International Arbitration Court at the Belarusian Chamber of Commerce and Industry, case No. 1546/08-16, final and binding from 1 September 2017

Forum and rules

Recognition and enforcement under the New York Convention (Article V), Article 36 of the Ukrainian Law on International Commercial Arbitration and Articles 474 and 478 of the Civil Procedure Code of Ukraine

Treaty

New York Convention 1958; arbitration clause in clause 5.3 of the oil transportation contract of 25 October 2010

Court

H. I. Usyk (judge-rapporteur), V. O. Kuznietsov, A. S. Oliinyk

Sector

Oil pipeline transportation

Outcome

Ukrtransnafta's appeal dismissed. The Kyiv Court of Appeal's ruling of 12 April 2018 recognising the award and granting leave to enforce it in Ukraine was upheld.

Amount

Enforced: USD 7,856,649.92, the net sum left after set-off of the award on the main claim and the award on the counterclaim.

The dispute

Ukrtransnafta agreed under a contract of 25 October 2010 (No. 01-14/505/10-10К) to transport oil for the Belarusian Oil Company through its trunk pipelines across Ukraine. Clause 5.3 sent disputes to the forum where the respondent is located. Claims by Ukrtransnafta were to go to the International Arbitration Court at the Belarusian Chamber of Commerce and Industry in Minsk. Claims by the Belarusian company were to go to the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry in Kyiv. In January 2016 Ukrtransnafta sued in Minsk for USD 56,207,618.50 in unpaid capacity-reservation fees for 2011–2012. The Belarusian company counterclaimed in Minsk for compensation for the change in oil quality and for unjust enrichment. The award granted both claims in part and, after set-off, ordered Ukrtransnafta to pay USD 7,856,649.92. When the Belarusian company sought enforcement in Ukraine, Ukrtransnafta objected under Article V(1)(d) of the New York Convention. It argued that, under clause 5.3, any claim by the Belarusian company could only be heard in Kyiv under Ukrainian law, so the Minsk tribunal had no competence over the counterclaim.

Key holdings

1. A counterclaim is a means of defence against the main claim and, as a general procedural rule, is heard together with it in the same forum. Clause 5.3 made the Minsk court and its Rules apply when Ukrtransnafta started proceedings, and it did not exclude a counterclaim being heard together with the main claim. p. 4
2. Under Article 25 of the Rules of the Minsk court of 17 March 2011, a respondent may bring a counterclaim. A joint hearing is mandatory where the counterclaim seeks set-off or would wholly or partly exclude the main claim. The Belarusian company was therefore entitled to counterclaim in Minsk. p. 4
3. The right to counterclaim in the same forum also follows from Article 4(5) of the Kyiv Agreement of 20 March 1992 on the settlement of disputes related to economic activity. Under that provision, counterclaims and set-off demands arising from the same legal relationship are heard by the court hearing the main claim. pp. 4–5
4. The composition of the arbitral tribunal and the arbitral procedure matched the parties' agreement. No ground for refusal under Article V of the New York Convention, Article 478 of the Civil Procedure Code or Article 36 of the Law on International Commercial Arbitration was established. The appeal was dismissed and the ruling of 12 April 2018 upheld. p. 5

Procedural history

1. 25 October 2010The parties sign the oil transportation services contract, which contains the arbitration clause in clause 5.3.
2. January 2016Ukrtransnafta files its claim with the International Arbitration Court at the Belarusian Chamber of Commerce and Industry. It clarifies the grounds of the claim on 25 July 2016. The Belarusian Oil Company counterclaims in June 2016.
3. 30 August 2016The tribunal's ruling on competence confirms that it can hear both the main claim and the counterclaim.
4. 14 November 2016The Presidium of the Minsk court confirms the tribunal's competence in a final ruling.
5. 1 September 2017The award becomes final and binding. After set-off, Ukrtransnafta is ordered to pay USD 7,856,649.92.
6. 12 April 2018The Kyiv Court of Appeal, sitting as the court of first instance, recognises the award and grants leave to enforce it in Ukraine.
7. 3 May 2018Ukrtransnafta appeals to the Supreme Court.
8. 4 October 2018The Supreme Court dismisses the appeal and upholds the enforcement ruling.

Tribunal, counsel and experts

Decided by

• H. I. Usyk Judge, Supreme Court of Ukraine (judge-rapporteur)
• V. O. Kuznietsov Judge, Supreme Court of Ukraine
• A. S. Oliinyk Judge, Supreme Court of Ukraine

For the claimant

S. Ya. Datsiv · L. P. Antoshchuk

For the respondent

N. V. Krynytska · D. F. Chaban · N. V. Kozak

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Keywords

• New York Convention Article V(1)(d)
• recognition and enforcement
• counterclaim
• scope of arbitration agreement
• asymmetric arbitration clause
• respondent's forum clause
• competence of arbitral tribunal
• set-off
• Kyiv Agreement 1992
• Ukrtransnafta
• oil transportation
• pipeline
• Ukraine
• Belarus
• oil quality compensation

Summary generated with AI from the published documents — refer to the award for the authoritative text.