International Transit S.A.L. (Offshore) v. Dniprovskyi Metalurhiinyi Kombinat, Industrialna Spilka Donbasu

At a glance

Parties

International Transit S.A.L. (Offshore) (Lebanon) v. PJSC Dniprovskyi Metalurhiinyi Kombinat (DMK) and Corporation Industrialna Spilka Donbasu (Industrial Union of Donbass) (Ukraine)

Case no.

Kyiv Court of Appeal, Case No. 824/239/18; appellate proceeding No. 2-k/824/3/2019

Forum and rules

Application to recognise and enforce a foreign award under the New York Convention and the Civil Procedure Code of Ukraine (Articles 474–479)

Court

Kyiv Court of Appeal (Київський апеляційний суд), Judge I.V. Ivanova, sitting alone

Underlying award(s)

SCC Arbitration Institute award of 19 September 2018, as corrected on 8 November 2018, in Case No. V 2017/176 (arbitrators Nilsson (presiding), Baizeau and Kalnina)

Sector

Metallurgy; supply contract and suretyship

Outcome

Application granted on 14 June 2019: the award was recognised and enforcement permitted, and writs of execution were ordered.

Amount

Enforced: USD 43,644,115.09, owed jointly and severally; 3% annual interest on that sum from 1 September 2017, payable by Industrialna Spilka Donbasu; a penalty of USD 3,025,792.69 against Industrialna Spilka Donbasu; arbitration costs of USD 96,000 (DMK) and USD 64,000 (Industrialna Spilka Donbasu), each with interest at 8 percentage points above the Swedish central bank's rate; and the tribunal's and the SCC's fees and costs (EUR 398,611.38 in total), owed jointly and severally.

The dispute

International Transit S.A.L. (Offshore), a Lebanese company, won an SCC award in Stockholm against two Ukrainian companies. The claims arose under a supply contract and a suretyship agreement of 17 September 2014: DMK was the buyer under the supply contract and Industrialna Spilka Donbasu was its surety. The tribunal held both debtors jointly and severally liable for USD 43,644,115.09 and also awarded interest, a penalty and costs. In November 2018 the creditor applied to the Kyiv Court of Appeal for recognition and enforcement. DMK argued three things: (1) the arbitration agreement was invalid, because a Donetsk court had declared the supply contract invalid; (2) enforcement would violate Ukrainian public policy; and (3) after bankruptcy proceedings were opened against it, the claims belonged to the bankruptcy court. Industrialna Spilka Donbasu argued that the tribunal's composition did not match the parties' agreement, because it had opposed joining its claims to those against DMK and had challenged the arbitrators.

Key holdings

1. The New York Convention binds Ukraine and prevails over national law. Under it, Ukrainian courts recognise foreign awards without reviewing their merits. The party resisting enforcement bears the burden of proving a ground for refusal. pp. 3–5
2. The court rejected the objection that the arbitration agreement was invalid. The Donetsk Regional Commercial Court's decision of 10 November 2017 declaring the supply contract invalid had been reversed by the Eastern Appellate Commercial Court on 19 April 2019, and that court dismissed the invalidity claim. p. 6
3. The court rejected the objection to the tribunal's composition, because the SCC had dismissed the challenge to the arbitrators on 16 May 2018 (award ¶ 27). The parties' representatives attended the hearing of 11 July 2018 and confirmed that they had been able to present their case. pp. 5–6
4. Bankruptcy proceedings opened against DMK on 31 May 2019 do not bar enforcement. Recognition and enforcement of an international commercial award is a separate, non-contentious special procedure, governed by Section IX of the Civil Procedure Code and the New York Convention. p. 6
5. No ground for refusal was established. The court found that the award had been made by a competent tribunal, the time limit for enforcement had not expired, and enforcement did not conflict with Ukraine's interests. It therefore granted recognition and enforcement in the award's currencies, because the creditor had not asked for conversion into hryvnia. pp. 5–7

Procedural history

1. 17 September 2014Supply contract and suretyship agreement concluded.
2. 10 November 2017Donetsk Regional Commercial Court declares the supply contract invalid (Case No. 905/2247/17).
3. 16 May 2018The SCC rejects Industrialna Spilka Donbasu's challenge to the arbitrators.
4. 11 July 2018Arbitration hearing in Stockholm.
5. 19 September 2018SCC award in Case No. V 2017/176 in favour of International Transit; corrected on 8 November 2018.
6. November 2018Application for recognition and enforcement filed with the Kyiv Court of Appeal. DMK files objections in December 2018.
7. 19 April 2019Eastern Appellate Commercial Court reverses the 2017 invalidity decision.
8. 31 May 2019Dnipropetrovsk Regional Commercial Court opens bankruptcy proceedings against DMK (Case No. 904/2104/19).
9. 14 June 2019Kyiv Court of Appeal recognises the award and permits its enforcement. The ruling could be appealed to the Supreme Court within 30 days.

Tribunal, counsel and experts

Decided by

• I.V. Ivanova Judge, Kyiv Court of Appeal

For the claimant

Ye. M. Bidnyi

For the respondent

V. V. Komanov

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Keywords

• New York Convention
• recognition and enforcement
• Ukraine
• SCC award
• Stockholm
• Dniprovskyi Metalurhiinyi Kombinat
• Industrial Union of Donbass
• invalidity of arbitration agreement
• composition of tribunal
• challenge of arbitrators
• public policy
• bankruptcy
• joinder
• suretyship
• supply contract
• metallurgy

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