Foreign economic activity contract: how to choose a court in case of a dispute with a foreign counterparty

Choice of court and law in foreign economic contracts

Option 1 – the court and law of one of the parties to the contract are chosen. That is, either a commercial court in Ukraine and Ukrainian law, or a court abroad, in the country where the foreign counterparty is located.

Choosing a foreign court may require the involvement of local lawyers and payment for their services, additional costs for translation services and document delivery.

Therefore, before choosing a foreign court and the law of another country, it is worth familiarizing yourself with the specifics of dispute resolution in that country, the procedure for enforcing decisions, and calculating the approximate costs, including court fees and other payments.

The procedure for considering a dispute in a Ukrainian court is more predictable and foreseeable. In addition, if you win, you can recover the costs incurred (for lawyers’ fees, expert examinations, etc.) from the counterparty.

An example from court practice: in case No. 902/1171/24, a dispute between Plasma Tek LLC and the foreign company Inter-Trade (Azerbaijan) was considered by the Commercial Court of Vinnytsia Region. This is because this particular court and Ukrainian legislation were chosen and specified in the contract.

The claim was upheld, and the court decided to recover USD 44,691.74 in debt under the contract and UAH 27,791.25 in court fees from the foreign company Inter-Trade.

Arbitration as an alternative to court: what to consider when choosing

Option 2 – choose arbitration in a specific country, the number of arbitrators, the language of the arbitration proceedings, and the applicable law. These conditions should be set out in an arbitration clause or arbitration agreement.

For example, choose the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry, or an arbitration court in another country. As in the first option, it is necessary to understand the terms of the proceedings and possible costs.

An example from court practice: in case No. 903/580/25, the foreign company Platonia GmbH filed a lawsuit with the Commercial Court of Volyn Region. The court refused to open proceedings because the contract provided for the jurisdiction of disputes to be heard by the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry.

Compromise option: dispute – at the plaintiff’s place

Option 3 – is an alternative if the parties to the contract have not agreed on how to settle disputes, or if each party insists on choosing the court or arbitration of its own country. In this case, it is better to stipulate that the dispute shall be referred to the commercial court at the location of the plaintiff, and that the legislation (substantive and procedural law) of the plaintiff’s country shall be used when considering disputes. Thus, if the initiator of the legal proceedings is a party from Ukraine, the dispute shall be considered in Ukraine, and if it is a foreign counterparty, it shall be considered in its country.

An example from judicial practice: in case No. 910/10247/24, the dispute between VKF Fibrostal UA LLC (Ukraine) and the foreign company Palete I Logistika d.o.o. za trgovinu s usluge (Croatia) was considered by the Commercial Court of Kyiv. Since the parties to the contract provided for the transfer of the dispute to the commercial court at the location (registration) of the plaintiff and the law of the plaintiff’s country.

The claim was upheld, and the court decided to recover a debt of €18,744 and a fine of €1,874 from the foreign company, as well as court fees in the amount of UAH 13,845.54.

Application of law without direct agreement between the parties

Option 4 – if, for certain reasons, the parties have not chosen a court and law, or it is impossible to determine, the law that has a closer connection with the contractual relationship shall apply. In determining such a connection, the place of conclusion of the contract, the place of performance of the delivery and obligations under the contract shall be taken into account.

Example from court practice: Case No. 925/1567/23 was considered by the Commercial Court of Cherkasy Region, taking into account the place of conclusion of the contract between the parties (Khristinivka, Cherkasy Region) and the registration in Ukraine of the plaintiff as the injured party in the disputed contractual relations with a foreign element.

Conclusions

We recommend that you agree on all the terms of the contract in detail at the stage of establishing contractual relations with a potential foreign counterparty. In particular, pay special attention to the sections on liability (sanctions and complaints) and the procedure for resolving disputes. This will enable you to immediately understand the possibilities for protecting your rights and the approximate plan of action in the event of a dispute.