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On 21th May, an online session was held as part of the ITU Legal Talks series, organised by the IT Ukraine Association with the participation of ITU Partner LCF Law Group. The session focused on the topic: ‘How Not to Lose a Dispute with a Foreign Counterparty Even at the Contract Conclusion Stage’.
The speakers Olga Kostyshyna, Counsel, Head of International Arbitration рractice at ITU Partner LCF Law Group and Anastasiia Didenko, Counsel, Head of Anti-Corruption and compliance рractice at ITU Partner LCF Law Group, outlined the key considerations when entering into agreements with foreign counterparties. They addressed force majeure, sanctions, and contractual liability, and helped attendees identify the most appropriate dispute resolution mechanism.
The first provision to set out clearly in any contract is the dispute resolution clause. There are two principal options: state courts or arbitration — and the distinction is significant.
State courts offer lower filing fees, but require the engagement of local counsel, conduct proceedings exclusively in the language of the jurisdiction, and carry the risk that any judgment may not be recognised or enforced abroad — no unified international mechanism for enforcing foreign court judgments currently exists.
Arbitration, by contrast, offers:
Arbitration may be constituted on an ad hoc basis (established for a specific dispute — flexible, but requiring proactive engagement from both parties) or administered under the auspices of a permanent institution such as the ICC, LCIA, VIAC, SCC, or ICAC. Specialist forums also exist for IT-related disputes, including the Silicon Valley Arbitration & Mediation Centre and WIPO.
Since 24 February 2022, invoking the war as a force majeure event has become widespread. The Ukrainian Chamber of Commerce and Industry has confirmed the war as a force majeure circumstance, and CCI certificates are routinely relied upon as evidence in disputes.
However, the legal position of courts is clear: force majeure does not operate automatically. A CCI certificate alone is insufficient. To be relieved of liability, a party must establish a direct causal link between the force majeure event and the specific failure to perform. Each contract requires individual analysis.
When selecting the governing law, it is important to understand that it determines not only the rules applicable in the event of a dispute, but also how the contract will be interpreted, whether a court may fill gaps in the agreement, and what weight will be given to penalty clauses.
This is arguably the most pressing issue for businesses. The Ukrainian Criminal Code does not currently contain a standalone offence for sanctions evasion; however, liability may arise under related provisions: financing of terrorism (Article 258-5), assistance to an aggressor state (Articles 111-1, 111-2), and money laundering (Article 209), among others. Draft Law No. 12406, currently awaiting its second reading in the Verkhovna Rada, proposes to criminalise sanctions violations under a dedicated provision — Article 114-3.
Legal entities found to be in breach face fines, asset confiscation, and liquidation. Banks are obliged to suspend transactions, freeze accounts, and notify the State Financial Monitoring Service — irrespective of the transaction amount — where there are reasonable grounds to suspect links to sanctioned persons.
The speakers’ conclusion: the most effective protection is a thorough due diligence check on your counterparty before signing, combined with rigorous document management throughout the course of the relationship.
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