Judicial Oversight of the Impartiality and Independence of Arbitration in Ukraine: The Guiding Position of the Supreme Court

This publication provides an overview of the internationally recognized perception of arbitration as a method of dispute resolution, the nature and characteristics of the interaction between national courts and arbitration, and the supervisory role of courts in ensuring the impartiality and independence of arbitral proceedings. Through the lens of current legislative developments and judicial practice, the study examines the powers of courts to refuse recognition and enforcement of arbitral awards or to set them aside on grounds of non-compliance with these fundamental requirements. The article highlights the Supreme Court's current stance on contentious issues in this field and argues for the guiding role of the highest court in the country in the establishment and development of arbitration in Ukraine.

Also read: "Судовий контроль за неупередженістю та незалежністю арбітражу в Україні: орієнтуюча позиція Верховного Суду".

For the purposes of this publication, the term "arbitration" is used in a generalized manner and encompasses the concepts of "international arbitration," "international commercial arbitration," "domestic arbitration," "arbitral court," "arbitral tribunal," "arbitral proceedings," "arbitration process," "arbitration panel," and "arbitration review" — separately, interchangeably, and regardless of the level of regulation.

The Nature of Arbitration

Global trust in arbitration as an alternative dispute resolution mechanism continues to grow, particularly in light of the inability of national judicial systems to fully meet the practical needs of disputing parties in resolving dynamic disputes, primarily commercial ones. This trend is further reinforced by political instability, prolonged court proceedings, and the risks of judicial interference, all of which naturally drive the search for alternative dispute resolution methods.

Like courts, arbitration serves as a forum for dispute resolution; however, it operates with significant procedural and substantive differences, which are often regarded as its advantages. Arbitration is particularly attractive due to its procedural flexibility, allowing parties to design their own dispute resolution rules, select arbitrators, choose the seat of arbitration, and proactively address potential obstacles in the dispute resolution process. Key factors contributing to trust in arbitration include its efficiency, confidentiality, limited grounds for appeal (with certain exceptions), and, most importantly, the enforceability of arbitral awards both domestically and in most countries worldwide under the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards^[1]. Assessing the "cost" of arbitration is not straightforward; in some jurisdictions, litigation expenses may even exceed those of international arbitration, though arbitration is generally considered a more expensive alternative.

State courts undoubtedly have advantages over private arbitration that merit separate examination. However, this publication does not aim to present them in opposition. It would be a misconception to view arbitration and courts as engaged in aggressive competition. Arbitration, like courts, has existed for centuries^[2], and in modern legal systems with a high level of legal culture, these parallel mechanisms operate side by side, complementing each other and enriching the toolkit for resolving disputes and reaching compromises between conflicting parties.

Arbitration and Courts

From a functional perspective, the role of national courts in relation to arbitration is typically framed in terms of "assistance," "support," or "supervision." In other words, courts do not replace arbitration or interfere with an arbitrator’s discretion in resolving a dispute on the merits. Rather, their role is limited to facilitating the arbitrator in carrying out their mandate or taking actions aimed at achieving the objectives of the arbitral process as a whole.

Thus, relying on state enforcement mechanisms, courts may assist arbitral tribunals in securing evidence or granting interim relief^[3] (an auxiliary function). In the second instance, courts - if permitted by the applicable rules - may respond to requests from arbitration parties concerning the proper conduct of arbitral proceedings (a supervisory function). This includes the ability of national courts to intervene in cases of violations of impartiality and independence requirements in arbitration, as well as to influence the composition of the arbitral tribunal in situations where such matters cannot be resolved without judicial assistance.

This model of interaction between courts and arbitration, including judicial oversight of the composition of arbitral tribunals, has been steadily established worldwide over the past 100 years (at least since 1927^[4]) and is primarily implemented across various jurisdictions based on the UNCITRAL Model Law on International Commercial Arbitration. While Article 5 of this instrument stipulates that courts should not intervene in arbitral proceedings, it simultaneously provides exceptions to this rule (hereinafter, the "Model Law"^[5]) to ensure the objectives of arbitration. The same principles underpin the UNCITRAL Arbitration Rules^[6].

Given that UNCITRAL instruments are model laws with a recommendatory nature (soft law), they have either been replicated in the form of national legislation or, as in the case of the  Arbitration Act^[7], have inspired the adoption of separate legislative acts regulating arbitration. Nevertheless, even where arbitration is governed by formally distinct national legislation, states tend to incorporate the same fundamental concept and logic regarding the relationship between courts and arbitration in their regulatory frameworks.

With the restoration of statehood in 1991, Ukraine declared its commitment to adopting UNCITRAL recommendations, and soon thereafter adapted the classical arbitration model. This approach applies both to domestic arbitration (regulated by the Law of Ukraine "On Arbitration Courts"^[8]) and international arbitration (governed by the Law of Ukraine "On International Commercial Arbitration" (1994^[9]). Ukrainian legislation is infused with provisions ensuring that courts do not interfere in arbitral proceedings but instead perform an auxiliary or supervisory function with respect to arbitration.

It is also important to note that the current procedural codes, as a general rule, do not provide for the possibility of appealing arbitral (including domestic arbitration) awards before a court on the grounds of an arbitrator’s erroneous decision on the merits. Appeals are permitted only in specific cases, primarily related to procedural violations during the arbitration proceedings. With respect to international arbitration, courts in Ukraine - like those in most jurisdictions - have the authority to set aside an arbitral award if it is found to be in violation of public policy (Articles 459, 460 of the Civil Procedure Code^[10], Article 350 of the Commercial Procedure Code^[11]).

Impartiality and Independence of Arbitration

The principle of "impartiality" in arbitral proceedings (often complemented or used interchangeably in various legal instruments and rules with requirements for "independence" and "neutrality") is a fundamental cornerstone of arbitration. Without ensuring this principle in practice, the very concept of arbitration as an alternative dispute resolution mechanism would fail to achieve successful implementation.

Without delving into terminological distinctions, it is important for the purposes of this publication to highlight the following: the principle of impartiality essentially means the absence of subjective bias or favoritism by an arbitrator toward any party (a subjective criterion); the requirement of independence, on the other hand, refers to the absence of external influences, connections, or relationships that could affect an arbitrator’s judgment (an objective criterion).

The UNCITRAL Model Law mandates that arbitrators maintain both impartiality and independence not only during the tribunal's appointment process but also throughout the arbitration proceedings. This requirement underpins the rules governing the constitution of arbitral tribunals, the duty of arbitrators to disclose conflicts of interest, and the right of parties to challenge arbitrators.For instance, Article 12 of the Model Law explicitly states that an arbitrator shall disclose any circumstances that may give rise to justifiable doubts as to his or her impartiality or independence^[12].

These same principles are reflected in national laws and arbitral institutional rules worldwide. For example, in the United Kingdom, the requirement of arbitral impartiality is established as a fundamental principle governing arbitration-related legal relations^[13]. Ensuring impartiality is explicitly recognized as an arbitrator’s duty^[14], and national courts are vested with supervisory powers to remove an arbitrator upon a party’s application if there are circumstances giving rise to justifiable doubts about their impartiality^[15].

Similarly, the requirements for the composition of an impartial and independent arbitral tribunal are embedded in the rules of leading arbitral institutions, including the London Court of International Arbitration (LCIA)^[16], the Arbitration Court of the International Chamber of Commerce (ICC)^[17], and the Singapore International Arbitration Centre (SIAC)^[18], among others.

It is important to emphasize that all discussions regarding whether an arbitrator shall be impartial and independent for arbitration proceedings to be deemed consistent with the nature of arbitration, the law, and the public policy of states (and for an arbitral award to be enforceable) have been fully settled. Today, debates focus only on how to assess specific actions, events, circumstances, and personal or professional connections as potential grounds for challenging an arbitrator and triggering the disclosure obligation concerning possible conflicts of interest.

To address mentioned concerns, the international legal community has established guidelines that are followed both by arbitral tribunals and national courts in practice. In 2014, the International Bar Association (IBA) introduced a landmark document—the IBA Guidelines on Conflicts of Interest in International Arbitration^[19] —which provides a structured framework for determining whether certain factual situations could affect an arbitrator’s ability to act impartially. These guidelines classify circumstances into different categories. Some situations require disclosure, as they may give rise to justifiable doubts about the arbitrator's impartiality. Other situations do not require disclosure, as they do not pose a genuine risk of conflict of interest.

Judicial Oversight of Arbitral Impartiality

Different arbitral institutions establish varied procedural rules for challenging an arbitrator. Additionally, states adopt distinct regulatory approaches to defining the supervisory role of courts in arbitration matters.

As a general rule, when doubts arise regarding an arbitrator’s impartiality or independence, a party may submit a challenge directly to the arbitral tribunal. If the tribunal rejects the challenge, the next step is typically to escalate the request either to: a national court, which may have jurisdiction to review the arbitrator's impartiality, or other authority^[20] (usually the governing body of the arbitral institution), which can decide on the challenge in accordance with its institutional rules.

The question of whether a party may apply to a national court after an arbitral tribunal or institution rejects a challenge to an arbitrator is not uniformly resolved across jurisdictions. For example, under the rules of the London Court of International Arbitration (LCIA), arbitrator challenges are decided exclusively by the arbitral institution^[21]. However, this does not necessarily mean that a party is barred from seeking judicial review in the courts of the seat of arbitration, in accordance with the lex arbitri (the law of the seat). In jurisdictions such as the United Kingdom^[22] and France^[23], national arbitration laws explicitly allow courts to review the arbitral institution’s rejection of a challenge even while arbitration proceedings are ongoing. This mechanism ensures an additional safeguard against potential bias or procedural irregularities in the composition of the tribunal.

In Ukraine, these matters are regulated differently compared to many other jurisdictions. Instead of courts, the President of the Chamber of Commerce and Industry of Ukraine (CCIU) is vested with the authority to decide on challenges to arbitrators upon a party’s request, and such decisions are not subject to appeal (Articles 6 and 13 of the Law of Ukraine "On International Commercial Arbitration»^[24]). This approach is not necessarily inconsistent with international standards, as the UNCITRAL Model Law allows states to designate either a court or another competent authority^[25] to oversee arbitrator challenges. However, this raises a fundamental question: does this rule enhance trust in arbitration?

Thus, the supervisory function of Ukrainian courts over the impartiality and independence of arbitration is not implemented at the stage of arbitration proceedings. As a result, national courts do not apply preventive measures, which, in practice, could prove to be appropriate. Instead, such supervisory functions of the court in Ukraine are exercised only after the issuance of an arbitral award, at the stage of its recognition, enforcement, or challenge by an interested party.

Judicial Control at the Stage of Recognition and Enforcement of an Arbitral Award

According to Article 56 of the Law of Ukraine "On Arbitration Courts", the enforcement of an arbitral tribunal’s decision is carried out through the issuance of an enforcement document by a national court. One of the grounds for refusing issuance is the determination that the composition of the arbitral tribunal did not comply with legal requirements.

Furthermore, Articles 18 and 19 of the same law stipulate that an arbitrator cannot be appointed or elected if they are directly or indirectly interested in the outcome of the dispute. Additionally, an arbitrator must recuse themselves or may be challenged if: they have a direct or indirect interest in the case outcome; they are a relative of one of the parties or other persons involved in the case, or they have special relations with them; a party discovers circumstances that provide grounds to consider the arbitrator biased or lacking objectivity, provided such circumstances became known after their appointment.

Ultimately, recognition and enforcement of an arbitral award may be refused if the composition of the tribunal did not comply with the agreement between the parties, or, in the absence of such an agreement, did not conform to the law of the state where the arbitration took place (Article 36 of the Law of Ukraine "On International Commercial Arbitration," Article 478 of the Civil Procedure Code of Ukraine).

Judicial Control at the Stage of Challenging an Arbitral Award

One of the grounds for challenging and setting aside an arbitral (tribunal) award is a violation of the requirements concerning the composition of the arbitral tribunal (Article 34 of the Law of Ukraine "On International Commercial Arbitration," Article 51 of the Law of Ukraine "On Arbitration Courts," Article 350 of the Commercial Procedure Code, Article 459 of the Civil Procedure Code).

In summary, depending on the legal framework of a particular jurisdiction, judicial control over the impartiality and independence of arbitration may be exercised during the arbitration proceedings and/or after the issuance of an arbitral award. The grounds for post-arbitration judicial control are aligned with Article V(1)(d) of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards^[26] and conform to international standards.

The Guiding Position of the Supreme Court

A matter of particular interest in the context of this contentious issue arose from a recent review by the Supreme Court^[27] of a complaint seeking the annulment of an arbitral (tribunal) award due to violations of the requirements of arbitrator impartiality and independence in the case. For ease of understanding, the facts and conclusions are presented in a summarized and generalized form:

1. A dispute concerning the recovery of damages and penalties under loan agreements was considered within the jurisdiction of the Permanent Arbitration Court at the Association of Law Firms of Ukraine (Arbitration Court). Following the proceedings, an award was rendered in favor of the claimant.

2. The respondent filed an application with the Kyiv Court of Appeal (the competent court) seeking annulment of the award, but this attempt was unsuccessful. Subsequently, the same party lodged an appeal with the Supreme Court, arguing, among other things, that the arbitrator was an interested party in the case. The respondent supported this position with the following claims (summarized^[28]):

- The disputed agreements were signed by the Representative;

- The Representative is the Vice President of the Association;

- The Representative is a co-founder and senior partner of a Law Firm;

- The Law Firm is one of the founders of the Association;

- The Association is the founder of the Arbitration Court;

- The Arbitrator is one of the beneficial owners of the Association.

3. Thus, the respondent argued that the arbitrator, being one of the beneficial owners of the Association, had a conflict of interest due to their connection with the co-founder and Vice President of the Firm, who had signed the loan agreements. The opposing party, however, contended that the alleged conflict of interest was unsubstantiated and emphasized that the respondent had already exercised their right to challenge the arbitrator before the arbitration tribunal, but the challenge was rejected.

4. The significance of the Supreme Court’s ruling in this case lies not only in its thorough assessment of the arguments regarding the grounds for challenging the arbitrator but also in the fact that the Court based its conclusions on internationally recognized principles of arbitration, establishing the following key positions:

Limited Judicial Review of Arbitral Awards - The Supreme Court emphasized that in reviewing an application to set aside an arbitral award, courts do not assess the legality or merits of the decision. Instead, the court’s role is strictly limited to determining the presence or absence of statutory grounds for annulment. This approach aligns with the prevailing legal practice in leading market economies and reinforces the principle of judicial non-intervention in arbitration.

Recognition of the Kompetenz-Kompetenz Principle - The Court reaffirmed that an arbitral tribunal has the exclusive authority to determine its own jurisdiction over a particular dispute. This conclusion is consistent with prior rulings of the Supreme Court in similar cases, including decisions of February 8, 2024 (Case No. 824/138/23), October 19, 2023 (Case No. 824/30/23), September 7, 2023 (Case No. 824/7/23), and March 14, 2024 (Case No. 824/121/23). The Court’s position is noteworthy, as it affirms Ukraine’s commitment to the internationally recognized Kompetenz-Kompetenz principle, a fundamental doctrine in international arbitration law.

Endorsement of Party Autonomy - The Supreme Court agreed that submission of a dispute to arbitration, as well as the selection of arbitrators, is based on the contractual agreement between the parties. The Court stressed that when addressing issues related to the composition of an arbitral tribunal, careful examination of the relevant arbitral institution’s rules and the arbitration agreement between the parties is required. By doing so, the Supreme Court signaled its support for Ukraine’s judicial system to uphold Party Autonomy, a cornerstone principle in the architecture of international arbitration.

Integration of Constitutional Court Precedents - The Supreme Court applied the precedents of the Constitutional Court of Ukraine^[29] to the facts of the case. These rulings should be understood as establishing the principle that the functioning of arbitral tribunals in Ukraine and the ability to refer disputes in civil and commercial legal relations to arbitration are grounded not only in national legal principles but also in international law.

5. Recognizing that the impartiality and neutrality of an arbitrator during proceedings serve as a guarantee of an objective and, consequently, fair resolution of a dispute, as well as ensuring the equality of the parties, the Supreme Court primarily relied on the provisions of the 1950 European Convention on Human Rights (ECHR) and the case law of the European Court of Human Rights (ECtHR), further specifying the following:

An arbitral tribunal qualifies as a "court" within the meaning of the Convention and must therefore comply with the procedural guarantees established by this legal framework^[30];

The phrase "a court established by law" refers not only to the legal framework of the proceedings but also to the lawfulness of the tribunal's composition^[31];

A fair and impartial resolution of a dispute is impossible without adhering to the principle of objectivity in decision-making^[32];

Impartiality must be ensured both subjectively—by the arbitrator maintaining neutrality in forming their conviction during the case—and objectively, through the establishment of clear impartiality standards, including a prohibition on simultaneously acting as both a party and a judge in the same case^[33];

Although impartiality generally refers to the absence of bias or favoritism, its presence or absence can be assessed using various methods under Article 6(1) of the European Convention on Human Rights. In this context, a distinction is drawn between: the subjective approach, which reflects the personal convictions of a specific judge in a particular case; and the objective approach, which assesses whether sufficient safeguards were in place to eliminate any reasonable doubts about impartiality^[34];

Under the objective criterion, one of the key considerations is whether the court as an institution and its compositionensured the absence of any doubts regarding its impartiality^[35];

The objective criterion primarily concerns hierarchical or other connections between the judge and other participants in the proceedings^[36];

In each individual case, it must be determined whether the relationships in question have a nature and degree that indicate a lack of impartiality on the part of the tribunal^[37].

6. In assessing the arguments concerning the lack of impartiality and independence in the arbitral (tribunal) proceedings, the Supreme Court guided judicial practice by emphasizing that the fundamental principles of arbitration are established at the international level. In light of this approach, the Court noted that one of the key guarantees of fair dispute resolution is the internationally recognized obligation to implement disclosure mechanisms aimed at identifying conflicts of interest in arbitration. Such disclosure includes information on the existence of professional, official, personal, or other connections between the arbitrator and the parties to the dispute.

7. With reference to Article 9 of the UNCITRAL Arbitration Rules^[38], the Supreme Court noted that an arbitrator is required to disclose to any party considering their appointment any circumstances that may give rise to justifiable doubts regarding their impartiality or independence.

8. Referring to the IBA Guidelines on Conflicts of Interest in International Arbitrationі^[39], the Supreme Court highlightedthe existence of a disclosure framework concerning conflicts of interest in arbitration. Specifically, the Court noted that the Guidelines establish categorized lists of situations that may indicate a conflict of interest and should be considered when assessing grounds for challenging an arbitrator—namely: The Red List (situations that create a clear conflict of interest), The Orange List (situations that may require disclosure and further assessment), and The Green List (situations that do not raise concerns regarding an arbitrator’s impartiality).

9. Regarding the disclosure requirements for potential conflicts of interest, the Supreme Court clarified that the "Red List" in the IBA Guidelines on Conflicts of Interest in International Arbitration consists of two categories: Non-waivable Red List – This includes situations where waiver is not permitted in arbitration (General Standards 2(d) and 4(b)). Waivable Red List – This includes situations where waiver is allowed (General Standard 4(c)). In the latter case, an individual may act as an arbitrator only if they receive explicit and unconditional consent from the parties after disclosing the relevant conflict of interest.

10. The Non-Waivable Red List applies to certain factual circumstances that, if present during arbitration, cannot be waived, including: the arbitrator and a party are identical, or the arbitrator is an authorized representative or employee of a party to the arbitration (1.1); the arbitrator is a manager, director, or supervisory board member, or has controlling influence over one of the parties, or has a direct economic interest in the outcome of the arbitration (1.2); the arbitrator has a significant financial or personal interest in one of the parties or in the outcome of the proceedings (1.3); the arbitrator or their firm regularly advises a party or an affiliated entity that appointed them, and derives substantial financial income from it, among other situations.

11. Conversely, the Waivable Red List includes circumstances where a waiver is permitted, such as: the arbitrator represents or advises a lawyer or law firm acting as legal counsel for one of the parties (2.3.2); the arbitrator is a lawyer in the same law firm as the legal representative of one of the parties (2.3.3); the arbitrator regularly advises one of the parties or an affiliated entity, but neither the arbitrator nor their firm derives substantial financial income from it (2.3.7), among others.

12. Ultimately, the Supreme Court's decision can be interpreted as establishing that, to determine whether the arbitration proceedings were impartial and independent, it is necessary to assess whether sufficient safeguards were in place to eliminate doubts regarding the existence of circumstances affecting impartiality, considering the criteria and standards for identifying conflicts of interest.

13. In the case under review, the panel of judges found that, according to information from the Unified State Register of Legal Entities, Individual Entrepreneurs, and Public Organizations, the Firm was one of the founders of the Association, and the arbitrator was a beneficial owner of the Association, holding a 50% share. Additionally, publicly available data indicated that the claimant’s representative, who signed the disputed agreements, was a senior partner at the Firm.

14. In this case, it was established that the Chairman of the Permanent Arbitration Court at the Association of Law Firms of Ukraine had sent a letter regarding the appointment of the arbitrator; in this letter, the arbitrator was asked to confirm their compliance with the legal requirements and disclose any circumstances that could constitute grounds for challenge or self-disqualification by signing and submitting a declaration. In response, the arbitrator submitted a letter along with the declaration, stating that they met the legal requirementsand that no circumstances existed that, in the opinion of a reasonable and properly informed person, could raise justifiable doubts regarding their impartiality or independence.

15. Despite this, the Supreme Court concluded that the established facts of the case confirmed a violation of the standard of objectivity, which is based on a reasonable assessment of evidence. Evaluating the facts of the case, a neutral observer would have concluded that the relationships between the arbitrator, the party’s representative, and the Firm created a perception of bias. Therefore, given the nature of these professional and organizational links, the arbitrator was required to disclose them but failed to do so.

16. As for the arguments presented by the opposing party, claiming that the issue of challenging the arbitrator had already been reviewed by the arbitral tribunal, and that the head of the arbitral institution had dismissed the challenge, the Supreme Court rejected these arguments. It reasoned that the challenge was rejected prematurely and without a full and thorough examination of all relevant circumstances. Thus, in practical terms, the Court clarified that arguments before national courts claiming that an arbitrator challenge was "already reviewed" by the arbitral tribunal will not be effective. Moreover, as emphasized above, this ruling reinforces the judicial oversight function over arbitration, ensuring that challenges to arbitrators are properly examined rather than dismissed summarily.

17. Ultimately, the judicial panel concluded that during the proceedings, an arbitrator must not only be genuinely free from any improper connection, bias, or influence but must also appear free from such concerns in the eyes of a reasonable observer. Therefore, to prevent the perception of potential bias, the arbitrator was obligated to disclose to the parties any circumstances that could indicate a conflict of interest. If such a conflict could not be resolved through disclosure, and there was no explicit consent from the parties allowing the arbitrator to proceed despite the disclosed circumstances, the arbitrator was required to recuse themselves (declare self-disqualification).

Conclusions

1. Ukraine has implemented legislative norms governing the organization and functioning of arbitration. However, the establishment and promotion of this alternative dispute resolution mechanism at the national level depend not only on the quality of regulatory frameworks but also on the public’s trust in arbitration - including trust in arbitrators, arbitral institutions, and the arbitration process itself.

2. If arbitration fails to offer a higher level of trust than state institutions (courts) in terms of impartiality, neutrality, and independence, the prospects of persuading disputing parties to submit their cases to an arbitral tribunal will remain uncertain.

3. Without a sufficient degree of confidence in arbitration, the speed of dispute resolution, although an important factor, will not be the decisive element in solidifying arbitration’s role in Ukraine.

4. While national courts do not interfere in arbitration proceedings, they serve an auxiliary and supervisory function. Regarding the judicial oversight of arbitration in Ukraine, legislative amendments are needed to allow parties to challenge arbitrators directly before a court during the arbitration process and before an arbitral award is issued. Such a reform would enhance trust in arbitration in Ukraine.

5. The Supreme Court plays a crucial guiding role for both the national judiciary and participants in arbitration by providing legal direction on adherence to fundamental principles of arbitration, impartiality, and independence. This progressive approach underscores the cassation court’s role in ensuring uniformity in judicial practice, grounding it in international legal principles, and shaping Ukraine’s image as an “arbitration-friendly” jurisdiction.