Sale and storage of goods in Ukraine: overview
Country Q&A | Law stated as at 01-Nov-2018 | Ukraine
A Q&A guide to the sale and storage of goods in Ukraine.
This Q&A covers key matters relating to sale of goods contracts, including legislative framework, rules on formation, price and payment, delivery, passing of title and risk, enforcement and remedies, exclusion of liability, choice of law and jurisdiction, and arbitration. It also provides an overview of the rules governing storage of goods.
This Q&A is part of the International Trade and Commercial Transactions Global Guide.
For more information on the regulation of international trade in goods and services in Ukraine, visit International trade in goods and services in Ukraine: overview.
For a full list of jurisdictional Q&As visit global.practicallaw.com/internationaltrade-guide.
Contracts for the sale of goods
What domestic legislation and international rules apply to a sale of goods contract in your jurisdiction? Are standard international contractual terms commonly used?
The following domestic laws apply to sale of goods contracts in Ukraine:
- Civil Code of Ukraine No 435-IV dated 16 January 2003 (Civil Code);
- Commercial Code of Ukraine No 436-IV dated 16 January 2003 (Commercial Code);
- Law of Ukraine On International Private Law No 2709-IV dated 23 June 2005 (PIL Law);
- Law of Ukraine On Foreign Economic Activity No 959-XII dated 16 April 1991 (FEA Law);
- Law of Ukraine On Settlements in Foreign Currency No 185/94-VR dated 23 September 1994 (Foreign Currency Settlements Law), ineffective as of 7 February 2019;
- Law of Ukraine On Currency and Operations Connected with Currency dated 21 June 2018, effective from 7 July 2018, applicable from 7 February 2019 (Currency Operations Law);
- Law of Ukraine On International Commercial Arbitration No 4002-XII dated 24 February 1994;
- Regulation on the Form of Foreign Economic Contracts, approved by Decree of the Ministry of Economy and for the European Integration of Ukraine No 201 dated 6 September 2001 (FEC Form Regulation).
Ukrainian law does not set out specific rules to protect small businesses against unfair terms or to resolve disputes between small businesses and their larger trading partners.
Ukraine is a party to a number of international treaties setting out rules relevant to sale of goods contracts. These include the:
- UN Convention on Contracts for the International Sale of Goods 1980 (CISG), which entered into force for Ukraine on 1 February 1991;
- UN Convention on the Limitation Period in the International Sale of Goods 1974, which entered into force for Ukraine on 1 April 1994;
- Customs Convention on the International Transport of Goods under Cover of TIR Carnets 1975 (TIR Convention), which entered into force for Ukraine on 11 October 1994;
- Convention for the Unification of Certain Rules for International Carriage by Air (Montreal Convention), which entered into force for Ukraine on 6 May 2009;
- UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention), which entered into force for Ukraine on 8 January 1961;
- European Convention on International Commercial Arbitration 1961 (Geneva Convention), which entered into force for Ukraine on 7 January 1964;
- Commonwealth of Independent States (CIS) Treaty on Settling of Disputes Related to Commercial Activity 1992, which entered into force for Ukraine on 19 December 1992;
- Minsk Convention on Legal Assistance and Legal Relations in Civil, Family and Criminal Matters 1993, which entered into force for Ukraine on 14 April 1995.
Standard contractual terms
Legal entities in Ukraine can use established international customs and international agencies’ recommendations when drawing up sales agreements (Article 6, FEA Law). The following standard contractual terms are used in Ukraine:
- International Chamber of Commerce (ICC) international commercial terms 2010 (Incoterms), which entered into force on 1 January 2011;
- Uniform Customs and Practice for Documentary Credits 2007, which entered into force on 1 July 2007;
- Uniform Rules for Demand Guarantees, which entered into force on 1 July 2010.
What are the essential requirements to create a legally enforceable contract for the sale of goods?
To create a legally enforceable contract, it is essential for the parties to agree on all future terms and conditions of co-operation on a fair and free basis to avoid the contract being considered invalid for reasons of mistake or fraud. Both the Civil Code and the Commercial Code regulate in detail how the offer and its acceptance must be performed by the counterparties to create legally binding relations.
Agreements governed by Ukrainian law must contain certain essential provisions for contracts of the relevant type. Under Article 180(2) of the Commercial Code and Article 638(2) of the Civil Code, the following essential conditions must be agreed on by the parties to a sales agreement:
- Subject matter (goods to be supplied, their range (nomenclature), quantity and quality);
- Term (period during which the parties perform their rights and obligations under the agreement);
- Contract price.
The FEC Form Regulation also contains recommendations on the content of international sale of goods agreements to facilitate customs clearance by the Ukrainian customs authorities, including:
- Contract title and number;
- Date and place of execution;
- Preamble (containing full registered names of the parties, their country of residence, defined shortened names of the parties (such as “the buyer” and “the seller”), and names of the persons responsible for contract execution);
- Subject matter (goods to be supplied and their range/nomenclature);
- Quality and quantity of goods;
- Basic delivery terms (transportation and delivery terms according to Incoterms);
- Price (price per goods unit) and total contract price;
- Payment terms (currency and method of payment, payment period and warranties for mutual financial obligations);
- Acceptance and delivery terms (delivery period and list of shipping documents);
- Packaging and labelling;
- Force majeure events;
- Sanctions and reclamations (terms and conditions of indemnification);
- Dispute resolution clause (including applicable law);
- Registered addresses, post and payment details of the parties (including bank account credentials).
Sale of goods contracts in Ukraine must normally be concluded in writing. This covers not only written contracts, but also exchanges of emails, letters and telegrams (Article 205, Civil Code). Under Article 639(2) of the Civil Code, if the parties agree to enter into an agreement using information and telecommunication systems, the agreement is considered to be executed in writing. Ukrainian law sets out several options for the signing of such contracts by the counterparties’ authorised representatives. Therefore, agreements concluded in electronic form are legally enforceable in Ukraine.
Notarisation is required for sales of land plots, property complexes, residential buildings (apartments) or other real estate, except for sales of property in a tax pledge (Article 657, Civil Code). The validity of these contracts is dependent on notarisation, without which the contract is null and void. Parties can agree to notarise agreements even if the law does not require notarisation, and such an agreement is then concluded from the moment of its notarisation (Article 639(2), Civil Code). Under Article 210 of the Civil Code, if state registration of the contract is legally required (such as for sales contracts in respect of certain immovable property), the contract is only effective after that registration.
International sales agreements (as well as all annexes to these agreements (if any)) used in relations with different Ukrainian state bodies must be translated into Ukrainian or be accompanied by a Ukrainian translation (Article 254, Customs Code). Therefore, from a practical standpoint, it is advisable to use a bilingual text in any agreement using English or any other foreign language and Ukrainian.
Price and payment
If price provisions are not agreed by the parties, does local law impose requirements in relation to price (for example, the time, method and place of payment)?
If the price is not agreed by the parties in the agreement and cannot be determined on the basis of the agreement, it will be defined on the basis of usual prices for similar goods at the time of conclusion of the contract. Ukrainian law does not impose special requirements in relation to the time, method and place of payment. This also applies to international sales contracts. However, from a practical viewpoint, if there may be payments in foreign currency, it is advisable to precisely define price and payment mechanisms. Otherwise, there is a risk that the Ukrainian counterparty will not be able to buy the foreign currency for payment under the contract.
Article 546 of the Civil Code allows for the following securities:
- Advance deposit.
This list is not exhaustive, and the parties can agree on other types of securities, such as retention of title to the products by the seller until the buyer performs its payment obligations.
Under Article 601 of Civil Code, parties can unilaterally set off claims if:
- The claims are counterclaims;
- The claims are of the same kind;
- The claims are due, or the date of performance is not established;
- The claims are uncontested.
If the claims fail to meet any of these conditions, set-off is not possible. In addition, Ukrainian law specifies a list of claims that cannot be set off:
- Recovery of damages for injury to health or death;
- Recovery of alimony;
- Perpetual maintenance;
- Where a limitation period has expired;
- Other cases set out under an agreement or the law.
It is also possible to exclude the right to set off claims in the agreement by setting out a direct procedure for setting off counterclaims and/or excluding the unilateral right of any party to set off claims (Article 602, Civil Code). The National Bank of Ukraine (NBU) imposes from time to time different restrictions and has even banned the setting off of claims in foreign currency. Therefore, applying a set-off in a case involving foreign currency must be analysed on a case-by-case basis.
Although Ukrainian law allows settlements between residents and non-residents in foreign currency, it sets out extensive restrictions on such payments. These foreign currency controls concern, among other things, terms for payment and the submission of documents confirming foreign economic transactions.
Under Article 1 of the Foreign Currency Settlements Law, payments in foreign currency must be credited to the bank accounts of Ukrainian residents within the term stipulated in the relevant contract, but within 180 calendar days from the date when the products were cleared for export (which must be confirmed by the relevant export declaration). For import operations, goods must be cleared under the import customs regime (to be confirmed by an import cargo customs declaration) within 180 days of advance payment. The NBU can amend the 180-day rules, and different restrictions may be applied from time to time (such as a 90-day or 120-day rule). Violation of these foreign currency control rules results in penalties and the application of special sanctions against both the buyer and seller (including temporary suspension of the foreign economic activity in Ukraine).
As of 7 February 2019, the Foreign Currency Settlements Law ceases to be in force, and the foreign currency payments will be regulated by the Currency Operations Law. The Currency Operations Law aims to liberalise and simplify the conduct of currency transactions, as follows:
- The principle of freedom in currency transactions will be introduced (both individuals and legal entities will be entitled to open accounts with foreign financial institutions and conduct transactions either in national or foreign currency. Residents will be entitled to purchase currency valuables and assets abroad and to transfer currency valuables across the customs border of Ukraine);
- No individual licences for investment abroad will be required;
- The 180-day deadline for making payments in foreign economic transactions will be cancelled (unless the NBU finds it necessary to apply this term in a resolution);
- The requirement to register a foreign loan with the NBU will be lifted;
- The special sanctions (currently applied to violations of foreign currency control rules violation) will be abolished;
- The foreign currency control of low-risk transactions (up to UAH150,000) will be removed. These transactions will only be subject to minimum oversight by the authorities, and only transactions subject to mandatory financial monitoring (up to UAH150,000) will be supervised by the authorised institutions.
The Currency Operations Law also envisages penalties for legal entities and administrative fines for individuals, officials and officials of legal entities in the case of violation of currency legislation. More specifically, the State Fiscal Service of Ukraine can impose on legal entities fines of up to 100% of the amount of the transaction carried out in violation of currency legislation.
If delivery provisions are not agreed by the parties, does local law impose requirements in relation to delivery (for example, the time, method and place of delivery)?
Under Article 662 of the Civil Code, the seller must transfer goods under a sales contract to the buyer along with all relevant documents (such as the conformity assessment certificate). Under Article 689 of the Civil Code, the buyer must accept the goods, unless they have a right to claim replacement of the goods or reject the contract.
Under Article 664 of the Civil Code, the seller fulfils their obligation to transfer the goods to buyer on:
- Delivery of the goods to the buyer (if the agreement stipulates the seller’s obligation to deliver the goods);
- Making the goods available to the buyer (if goods are to be transferred to the buyer at the goods’ location);
- Any other event specified by the sales contract.
If the sales contract does not require the seller to deliver the goods to the buyer’s location, the seller’s obligation to transfer the goods obligation is fulfilled on transfer of the goods to a carrier or delivery service for conveyance to the buyer.
If a time for delivery is not agreed by the parties, the buyer can claim delivery of the goods at any time. The seller must fulfil this obligation within seven days of a claim by the buyer (Article 530, Civil Code).
If a place for delivery is not agreed by the parties, the following rules apply:
- If the obligation to transfer the goods is based on a contract of carriage, the obligation is fulfilled at the place where the goods are handed over to the carrier;
- If the obligation to transfer the goods is not based on a contract of carriage, the obligation is fulfilled at the place of production or storage of goods, if this place was known to the buyer when the obligation arose (Article 532, Civil Code). Goods ready for transfer must be properly identified by appropriate marks for the purposes of the sales agreement (Article 664(1), Civil Code).
Under Article 685 of Civil Code, if the sales contract does not establish specific requirements for containers and packaging, goods must be delivered in containers and/or packaging in the usual manner. In the absence of an established or usual manner, the goods must be delivered in a manner that preserves that kind of goods under usual storage and transportation conditions, unless the goods naturally do not require containers/packaging.
If goods are delivered without or in inappropriate containers/packaging, the buyer can demand delivery of goods in appropriate containers/packaging or replacement of the goods. The buyer can also make claims connected with delivery of goods of improper quality, including:
- A pro rata price reduction;
- Removal of the defects free of charge within a reasonable period of time;
- Compensation for removal of the defects.
(Articles 686 and 678, Civil Code.)
Passing of title and risk
If not agreed by the parties, when does title to the goods pass to the buyer?
Under Article 334 of Civil Code, title to goods is transferred from the seller to the buyer from the moment the goods are transferred to the buyer. However, if the agreement under which the goods are sold is subject to mandatory notarisation or state registration, title to the goods only occurs after notarisation or state registration. In such cases, retention of title is not possible.
Under Article 668 of the Civil Code, if not otherwise determined by the agreement or law, risks pass from the seller to the buyer from the time of transfer to the buyer. If goods are sold during transportation, risks pass to the buyer on conclusion of the sales agreement, unless otherwise determined by the agreement or law (see Question 7).
Are retention of title clauses enforceable in your jurisdiction? If so, what are the requirements to create a legally enforceable retention of title clause?
Under Article 697 of Civil Code, the seller can reserve title to goods already supplied to the buyer until payment is made in full or the occurrence of other circumstances. If so, the buyer cannot dispose of the goods until title transfer, unless otherwise determined by the agreement or law, or if this arises from the purposes and characteristics of the goods. If the buyer violates the agreement’s payment terms and conditions, the seller can request return of the goods.
Retention of title to goods by the seller can be regarded as a security instrument that the parties directly agree on in the sales agreement. Unfortunately, neither Ukrainian law nor case law provides for any detailed requirements for making retention of title fully enforceable and operative in Ukraine. In practice, it can be quite difficult to apply this option in international sales contracts because the seller would require the buyer’s help to clear the goods through the re-export customs regime to return the goods. Buyers are usually reluctant to co-operate in these cases.
If not agreed by the parties, when does risk in relation to the goods pass to the buyer?
The parties usually rely on Incoterms when defining the transfer of risk in a contract.
If the contract is silent, Ukrainian law provides for the following general rules relating to the transfer of risk of accidental destruction or damage to goods:
- In general, risk passes from the seller to the buyer when the products are transferred to the buyer, unless otherwise specified by the agreement or law;
- If products are sold during transportation, the risk passes from the seller to the buyer when the sales agreement enters into force, unless otherwise specified by the agreement or customary business practices.
(Article 668, Civil Code.)
Enforcement and remedies
What are the seller’s obligations in relation to the description and quality of the goods?
The quality of supplied goods is regulated by the Civil and Commercial Codes as well as legislation applicable to specific products.
The quality of goods supplied under a sales agreement must meet any technical regulations and standards that specify quality requirements for the relevant products (Article 268(1), Commercial Code and Article 673(4), Civil Code). The quality of goods must be confirmed by proper shipping documents obtained in accordance with the procedure established by the relevant legislation for the specific type of product (Article 268(4), Commercial Code and Article 674, Civil Code). Parties can also specify higher quality standards in their agreement (Article 268(1), Commercial Code and Article 673(4), Civil Code).
If quality terms and conditions are not specified in the sales contract, the seller must transfer goods that are suitable for the usual purposes of such goods. If so, general quality criteria or regular quality standards are applied (Article 268(3), Commercial Code and Article 673(2), Civil Code).
If goods of improper quality are supplied, the buyer is entitled to:
- A proportional price reduction;
- Removal of the defects free of charge within a reasonable term;
- Compensation for removing defects.
(Article 678, Civil Code.)
If the defects cannot be remedied, the buyer can either:
- Terminate the agreement and claim money back;
- Claim replacement of goods.
If the seller of defective goods is not the manufacturer of the goods, the buyer can bring a claim against the seller or manufacturer.
Ukrainian law sets out requirements and provides for liability in the case of sale of dangerous products or products not complying with the relevant regulations to consumers (physical individuals), including under the:
- Law of Ukraine On Protection of Consumers’ Rights No 1023-XII dated 12 May 1991;
- Law of Ukraine On Liability for Damage Caused by a Defective Product No 3390-VI dated 19 May 2011 (Defective Products Law);
- Law of Ukraine On General Safety of Non-Food Products No 2736-VI dated 2 December 2010 (Safety Law);
- Law of Ukraine On State Market Surveillance and Control of Non-food Products No 2735-VI dated 2 December 2010 (Market Surveillance Law);
- Law of Ukraine On Ensuring the Sanitary and Epidemiological Well-Being of the Population No 4004-XII dated 24 February 1994;
- Law of Ukraine On Main Principles and Requirements for Safety and Quality of Food Products No 771/97- VR dated 23 December1997;
- Code of Administrative Offences of Ukraine No 8073-X dated 7 December 1984;
- Criminal Code of Ukraine No 2341-III dated 5 April 2001;
The Safety Law and the Market Surveillance Law apply to non-food products and stipulate that on identification of products that do not comply with the relevant requirements, producers must voluntarily:
- Take all necessary measures to inform consumers about the products’ risks;
- Implement any possible measures to prevent any risks to consumers (such as recalling products and notifying the relevant authorities).
Under Ukrainian law’s general approach to product liability issues, it is likely that both the producer and/or the importer would be liable for a supply of defective products.
The definition of defective products is quite broad. In particular, under the Defective Products Law, a product is regarded as defective when it does not provide the safety that a consumer or user is entitled to expect, taking all circumstances into account, including in relation to:
- Design and production;
- Circulation, transportation and storage;
- Technical maintenance;
- Consumption and usage;
- Destruction (reprocessing);
- Presentation of the product to the consumer or user, including its packaging, marking and other information on the product.
What are the main remedies and rules for losses and damages for breach of a sale of goods contract?
The remedies available for breach of a sales contract depend on the type of breach and are based on the following principles:
- An affected party is entitled to compensation for damages irrespective of whether the agreement contains a relevant provision stating this;
- The legal liability of the manufacturer or seller for the poor quality of goods applies irrespective of any quality specification in the agreement;
- Payment of penalties for breach of an obligation as well as compensation for damages does not discharge the offender’s liability to fulfil the assumed obligation, without consent to that by other party;
- Exemption clauses limiting or excluding a manufacturer’s or seller’s liability are prohibited.
(Article 216(3), Commercial Code.)
The following commercial sanctions can also be applied in the case of a contractual breach:
Compensation for damages, including:
- value of lost/damaged/destroyed property;
- lost profits;
- additional expenses arising from the contractual breach (for example, penalties paid to other entities,
- cost of additional works and so on);
- compensation for moral damage, when applicable.
Penalties (forfeits, fines, interest).
Other sanctions agreed by the parties for contractual breaches (for example, refusal to pay for negligently
fulfilled obligations, delay in supply of goods due to payment delay and so on).
(Article 217(2), Commercial Code.)
The amount of damages must be proven before the court. In particular, compensation for damages is reimbursed if:
The claimant proves the following elements:
- damage; and
- a causal link between them.
The defendant cannot prove that it was not at fault.
An agreement can be amended or terminated by court decision in the case of a fundamental breach, or in other situations stipulated by law or by the sales agreement. A breach is generally fundamental if the inflicted damages mean a party is deprived to a significant extent of the benefits that it could expect when entering the contract (Article 651(2), Civil Code).
What are the buyer’s remedies for breach of a sale of goods contract?
See Question 8 on the buyer’s remedies for supply of goods of improper quality by the seller.
A buyer can terminate the sales contract for non-delivery (Article 665, Civil Code). If goods with specific characteristics cannot be delivered, the buyer can claim supply of the specific goods pursuant to the sales agreement (Articles 620 and 665, Civil Code). This right is only lost if the specific goods are already assigned or delivered to a third person.
Late delivery can result in the right to claim penalties or the application of other sanctions envisaged by the law or sales contract.
What are the seller’s remedies for non-payment or late payment?
If payment is delayed, the seller can claim payment for the goods and interest for any credit it takes out as a result. The interest rate is determined by the contract or relevant statute (Articles 692(3) and 536(2), Civil Code). A buyer that delays payment must pay the debt amount plus the rate of inflation and 3% annual interest, unless another interest rate is established by the contract or statute (Article 625(2), Civil Code).
If a buyer refuses to accept and pay for goods, the seller can either claim payment or reject the sales contract (Article 692(4), Civil Code).
In addition, if goods are supplied with pre-payment conditions, failure to pay within a specified period enables the seller to suspend supply of the goods or terminate the contract (Articles 693(1) and 538(3), Civil Code). If the buyer delays payment for goods sold on credit terms, the seller can claim return of unpaid goods as well as interest on the delayed payment (Articles 694(5) and 536(2), Civil Code). If an instalment payment is not provided for goods already transferred to a buyer under contractual conditions for payment by instalments, the seller can terminate the agreement and claim return of the transferred goods (Article 695(2), Civil Code).
Exclusion of liability
Are exclusion clauses enforceable in your jurisdiction? If so, what are the requirements to create a legally enforceable exclusion clause?
Parties can normally limit liability through a contractual limitation clause. Article 22(3) of the Civil Code provides for compensation of damages in full, unless a larger or smaller amount is set out by the agreement or statute. However, a clause excluding or restricting responsibility for wilful misconduct is null and void (Article 614(3), Civil Code).
In addition, exemption clauses restricting or excluding a manufacturer’s or seller’s liability under a sales contract are prohibited (Article 216(3), Commercial Code). The Commercial Code (which is a lex specialis compared to the Civil Code) only allows liability to be limited for specific types of commercial relations (Article 225(2), Commercial Code) and does not allow parties to contractually limit their liability for failure to perform or improper performance of their obligations.
Choice of law
Will local courts recognise a choice of foreign law in a sale of goods contract? Are there any mandatory local rules that apply, despite a choice of foreign law?
Ukrainian law recognises the principles of freedom of contract and party autonomy (Articles 3 and 6, Civil Code and Articles 5 and 43, PIL Law). Therefore, when entering into an international sale of goods agreement, the parties are free to choose the law to be applied to their legal relationships under the contract (lex voluntatis). The parties can choose a law to govern their relations by introducing an applicable law clause, unless the parties’ choice of applicable law is:
- Intended to avoid the provisions of the PIL Law;
- Directly prohibited under Ukrainian laws or international treaties containing specific rules on applicable law that prevail over the choice of the parties.
If no governing law is chosen, the law of the state of the seller is applied to the sales contract (Article 44(1), PIL Law) (see Question 14).
However, under Article 8 of the PIL Law, a Ukrainian court can apply Ukrainian law to a foreign law-governed instrument or agreement or to the rights and obligations of the parties if it is not possible to establish, within a reasonable period of time, the rules of the foreign law governing the instrument or agreement using the procedures under the PIL Law. The parties to a dispute are expressly authorised to provide the court with documents on the rules of foreign law and to assist the court in establishing their content in any manner.
Under Article 14 of the PIL Law, mandatory provisions of Ukrainian legislation must be respected and be given effect by the courts and tribunals even where a foreign law is applicable (in relation to, for example, taxes, customs, currency regulation, consumer protection and so on). Therefore, to make the agreement fully enforceable and operative in Ukraine, all mandatory limitations and restrictions stipulated by Ukrainian laws must be duly complied with irrespective of a choice of applicable law.
In particular, to be fully enforceable and operative in Ukraine as well as to facilitate its performance, the agreement must comply with the following formal requirements:
The agreement and any annexes must be:
- concluded in writing;
- signed by duly authorised representatives of the parties acting on the basis of constituent documents, a power of attorney or otherwise permitted by law;
- (Article 207, Civil Code, Article 6(2), FEA Law and Article 31(3), PIL Law.);
- The agreement and any annexes must be translated into Ukrainian or accompanied by a Ukrainian translation.
(Article 254, Customs Code.)
To facilitate customs clearance, it is highly advisable to incorporate into the contract the conditions envisaged by the FEC Form Regulation (see Question 2).
If the parties do not make a choice of law, what rules determine the law applicable to a sale of goods contract?
If no choice of law is made by the parties, the closest connection test applies, under which a contract is governed by the law with which it has the closest connection (Article 32(2), PIL Law).
Ukrainian law bases the closest connection test on the identification of the characteristic performance of the contract, according to which a contract is most closely connected with the law of the country of the contract’s characteristic performer. Article 44(1) of the PIL Law sets out a list of detailed rules for the determination of the characteristic performers in the most common contracts. For sale contracts, when no choice of law is made by the parties, the law of the contract is the law of the seller.
Choice of jurisdiction
Will local courts recognise a choice of foreign jurisdiction in a sale of goods contract? Are there any mandatory local rules that apply, despite a choice of foreign jurisdiction?
In cases established by law or an international treaty ratified by the Ukrainian Parliament, a dispute falling within the jurisdiction of a commercial court can be transferred to a court of a foreign state if this is agreed by the parties (Article 23(1), Commercial Procedural Code).
Article 76 of the PIL Law sets out a list of cases with a foreign element (involving non-Ukrainian parties) that can be accepted for consideration by Ukrainian courts. These include, among others, cases where:
The defendant has in Ukraine:
- a place of residence/principal place of business;
- movable or immovable property that can be enforced against;
- a subsidiary or a representative office that is a defendant in the case.
The acts or facts occurred in Ukraine.
However, Ukrainian courts have exclusive jurisdiction over certain disputes involving non-Ukrainian parties, including, for example, disputes relating to:
- Real estate located in Ukraine;
- Intellectual property rights registered in Ukraine;
- The validity of records in one of the Ukrainian state registers (including the Company Register, Register of Immovable Property Owners and Land Register);
- The issue or liquidation of securities officially registered in Ukraine.
(Article 77, PIL Law.)
If one of the cases listed above is decided by a foreign court, it is likely that the decision would not be recognised or enforced in Ukraine (Article 468, Civil Procedure Code).
If the parties do not make a choice of jurisdiction, what rules determine the jurisdiction applicable to a sale of goods contract?
According to established court practice, in cases involving non-Ukrainian parties, the competent court must ascertain whether a bilateral treaty exists between Ukraine and the relevant foreign state and, if so, whether the dispute settlement procedure is regulated on the inter-state level. Ukraine has entered into a range of legal assistance treaties with different states.
Therefore, when a judgment is rendered by a court in a foreign state that has concluded a legal assistance treaty with Ukraine, those provisions apply to the process of recognition and enforcement of the judgment in Ukraine. The list of bilateral and multilateral legal assistance treaties in civil and criminal matters concluded by Ukraine is available in Ukrainian at: http://old.minjust.gov.ua/9599. The legal assistance treaties typically contain provisions on the courts’ jurisdiction.
Under Article 75 of the PIL Law, the jurisdiction of the Ukrainian courts in disputes with a foreign element is determined when proceedings are opened. The state court will refuse to open proceedings if there is a dispute between the same parties, on the same subject matter and on the same grounds under the consideration of a foreign court.
See also Question 15 on the application of Article 76 of the PIL Law.
If the provisions of bilateral treaties or international conventions do not provide any special rules, the provisions of the Civil Procedure Code apply.
Are arbitration clauses commonly included in sales of goods contracts in your jurisdiction?
Arbitration clauses are commonly used in international sale of goods agreements in Ukraine. Therefore, the parties to a sales agreement can agree on an arbitration clause providing for a particular foreign or international arbitral institution to resolve all and any disputes arising out of the agreement, as well as the procedure and seat of arbitration.
Enforcement takes place under the New York Convention, to which Ukraine is a party. Article III of the New York Convention does not set exhaustive procedures for recognition or enforcement, and expressly refers to the rules of procedure of the territory where the award is relied on. Therefore, the procedural norms of Ukrainian legislation under Chapters VIII and IX of the Civil Procedure Code apply to enforcement of both foreign and international arbitral awards in Ukraine.
Storage of goods
How is title to goods in storage protected and evidenced? Are warehouse receipts recognised as documents of title in your jurisdiction?
Although Ukrainian law does not have a concept of negotiable/non-negotiable instruments, it provides for the following two types of transferable warehouse documents evidencing title to goods in storage:
- Simple warehouse certificate. This is a document of title that can be transferred to another holder by way of endorsement, so that the new holder receives title to the goods in storage. A simple warehouse certificate can also be pledged to a pledgee, so that the pledgee can enforce against the certificate under the pledge agreement;
- Twofold warehouse certificate. This is a document of title that consists of two parts, a warehouse certificate and a pledge certificate. These can be separated to pledge the goods in storage. The twofold warehouse certificate or any of its parts can be transferred separately to another holder by way of endorsement. In case of transfer of the twofold warehouse certificate, the new holder receives the title to the goods in storage. If the twofold warehouse certificate is separated to pledge the goods in storage, a holder of the warehouse certificate cannot dispose of the goods without consent of the holder of the pledge certificate, and the holder of the pledge certificate can enforce against the goods under the pledge agreement.
Ukrainian law also allows warehouses to issue warehouse confirmations, which certify the conclusion of storage contracts as well as the quantity and nomenclature of goods accepted for storage. Such warehouse confirmations are used to confirm the obligations of a warehouse towards its counterparty under the storage contract. If the counterparty assigns its rights under the contract to another entity, the warehouse confirmation(s) must be delivered to the other entity. While warehouse certificates can only be issued by certificated warehouses, warehouse confirmations can be issued by any warehouse.
In addition to the Civil Code, warehouse documents are regulated by the Law of Ukraine On Certified Warehouses and Simple and Twofold Warehouse Certificates No 2286 dated 23 December 2004.
The following acts set out further requirements for warehouse documents and pledges in relation to grain:
- Law On Grain and Grain Market in Ukraine No 37-IV dated 04 July 2002;
- Resolution of the Cabinet of Ministers of Ukraine On Certification of Grain Warehouses and Introduction of Warehouse Certificates for Grain No 510 dated 11 April 2003;
- Order of the Ministry of Agrarian Policy of Ukraine On Circulation of Warehouse Documents on Grain No 198 dated 27 June 2003.
What conditions and formalities must warehouse receipts comply with?
A simple warehouse certificate must specify that it is issued to the bearer and contain the following information:
- Name and location of the warehouse that accepted goods for storage;
- Certificate number in the warehouse register;
- Description and quantity of goods accepted for storage;
- Date of certificate issuance;
- Signature of duly authorised person.
(Article 965(2), Civil Code.)
For a twofold warehouse certificate, in addition to the requirements listed above, each part (the warehouse certificate itself and the pledge certificate) must contain the following identical information:
- Name, legal address or place of residence of the legal or physical person from whom goods were accepted for storage;
- Period of storage or designation that goods are accepted for storage on demand;
- Storage fee and payment procedure.
(Article 962(2), Civil Code.)
Documents not meeting these requirements risk not being regarded as simple or twofold warehouse certificates.
The Civil Code does not specify requirements for warehouse receipts. However, it is advisable to specify the same information as required for twofold warehouse certificates.
Are other interests over goods in storage recognised?
Goods accepted for storage under a simple or twofold warehouse certificate can be pledged during the storage period (see Question 18).
Are there impending developments or proposals for reform of national legislation affecting sale of goods contracts and/or storage of goods in your jurisdiction?
There are no impending developments or proposals for reform of national legislation affecting sale of goods contracts and/or storage of goods in Ukraine.