LAW FIRM DIRECTORY

Dispute Resolution

Vector of changes

Legal representation became the main budgeting practice for many law firms this year. Although judicial reform is far from complete, lawyers note qual-itative changes in judicial practice due to legal conclusions by the Supreme Court of Ukraine on certain categories of cases. However, the unity of prac-tice or well-defined trend of its further development is out of the question in some disputes

ANATOLII GVOZDETSKYI

The Law of Ukraine “On ensuring the right to a fair trial” came into force on March 28 and must be admitted as one of the main events that influenced the formation of judicial practice in 2015. This Law, inter alia, transformed the powers of the Supreme Court of Ukraine (the SCU). Changing court procedure tools is aimed primarily at ensuring the unity of judicial practice, towards what Ukraine has been tending for a long time (or at least declaring).

 

The highest judicial authority has been delegated powers for admission to its proceedings cases previously related to superior specialized courts and for final disposition. In addition, the SCU has received the ability to control common approaches to the application of not only rules of substantive law, but also procedural rules. But the most important thing is that the status of the Supreme Court of Ukraine’s conclusions, set out in its resolutions regarding the application of rules of law, has undergone changes. Therefore, courts of all instances shall take them into account when applying the relevant rules. The courts are entitled to deviate from the legal position of the SCU with properly set out in writing reasons and justification for the uniqueness of circumstances of the case or erroneousness position held by the Supreme Court. It should be assumed that this can be considered as the trend towards movement to continuing application of judicial precedent.

 

Frequent disputes

As for judicial practice and the most popular categories of disputes in 2015, then, according to lawyer Vasyl Postulga, in the past year the most significant decisions were made in respect of real property items. “The thinning ranks of banks, as always, gave a large amount of work to courts. The courts especially paid a great deal of attention to ensuring the performance of credit obligations in the form of guarantee and mortgage”, the lawyer notes.

Demonstrative in this regard Mr. Postulga names the SCU Resolution on case No. 6-939цс15 in which the court concluded that termination of obligation is possible upon condition of its proper fulfillment, and termination of a credit agreement is not grounds for termination of a mortgage, which may ensure fulfillment of the obligation that arose prior to the court decision on termination of the agreement coming into legal force, and also Resolution on case No. 6-639цс15, where the SCU outlined the validity of mortgage encumbrances for the new owner of the real property alienated during the period of validity of the court decision on mortgage invalidation canceled thereafter.

“I look forward to the result of the consideration of case No. 6-84цс15 by the SCU. The High Specialized Court of Ukraine for Civil and Criminal Cases (HSCU), referring to this proceeding for several months, has been deferring consideration of the case on mortgage invalidation upon liquidation of a legal entity— debtor on primary obligation. Nevertheless, the legal position of the SCU on this issue has already been set out in resolution No. 6-52цс13 as early as in 2013, and it is directed for the benefit of the debtor. Therefore, one cannot exclude a change of practice, or the Court of Cassation found a way of delaying consideration of the case”, Vasyl Postulga noted, sharing his concerns.

“Due to the increased number of banks with temporary administration, this year the courts considered a significant number of disputes regarding the obligations of such banks to fulfill the terms of a bank account agreement”, Tetiana Vasylchenko, judge at the Economic Court of Kyiv notes. According to her, most plaintiffs demanded to oblige the bank to transfer funds on the basis of settlement documents submitted before the introduction of temporary administration in the bank. Thus, a controversial question appeared in practice, related to application of paragraph 1 of Part 5 of Article 36 of the Law of Ukraine “On the system of guaranteeing deposits of individuals”, providing that during the existence of temporary administration satisfaction of claims of depositors and other bank creditors is not performed, in particular, regarding property obligations, which are performed exclusively within the procedure of bank liquidation.

In some cases, the courts came to the conclusion that these claims to the bank are property claims, therefore the complainant cannot be considered as a bank creditor to which restrictions are applied, established by paragraph 1 of Part 5 of Article 36 of the Law of Ukraine “On the system of guaranteeing deposits of individuals”. In other cases the courts indicated, that since the complainant applied to the defendant demanding the implementation of the funds transfer under the bank account agreement, the execution of such operation by the bank is restricted by the provisions of the mentioned rule.

“The Supreme Court has finished this discussion. In its resolutions dated March 25 and June 10, 2015 on cases No. 3-24гс15 and No. 3-223гс15, respectively, the SCU set out that relationships of obligation with property and of a monetary nature arise between the parties under an agreement on a bank account agreement and, consequently, in this case, the plaintiff is the creditor in a property claim on disposal of funds owned by him, therefore, restrictions established by the Law on the system of guaranteeing deposits are applied to him”, Mrs. Vasylchenko notes.

The resolution issued by the SCU on case No.6-44цс15 is certainly significant for law-enforcement practice. The court formed a legal position therein regarding the application of provisions of the Law of Ukraine “On the moratorium on collection of property of the citizens of Ukraine, provided as collateral for loans in foreign currency”. Thus, referring to the said regulation, individuals who are a bank’s debtors  requested the court to terminate the mortgage. Eliminating the differences in judicial practice, the Supreme Court indicated that the moratorium does not provide for the loss by the creditor of the right to foreclose on the mortgaged property (pledge) in the event of nonfulfillment of obligations by the debtor under the agreement, but only temporarily prohibits enforced recovery of property. This position was reflected in a large number of court decisions.

 

Limitation of actions

No less interesting is the issue of judicial recourse of prosecution authorities in the interests of the state represented by state authorities or other persons concerning, in particular, application of action limitation periods to such recourses. Judicial practice in this matter was changing with the change of power in our country. At a certain period of time the courts came to the conclusion that the period of limitation of actions should begin from the moment when the Prosecutor's Office found out about violation of the right, namely, from the moment of the prosecutor's examination. However, in its resolutions in cases No.3-194гс14, 3-21гс15, 6-178цс15, the Supreme Court stated that, since according to legislation the prosecutor involved in a case is vested with the obligations and rights of the party, therefore, the law provisions on the beginning of the period of limitation of action are applicable to the recourse of the prosecutor for the protection of state interests.

It should be noted that after the new Law of Ukraine “On Prosecutor's Office” came into force on July 15 of this year, the prosecutors in the case of filing a claim in the interests of the state are obliged to agree it beforehand with the authority on behalf of which they apply to the court and to clearly justify violation of state interests. Otherwise, the statement of claim or petitions of appeal and cassation will be returned to the prosecutor without consideration.

Tetiana Vasylchenko also points to the different approaches of courts to the issue of application of limitation of actions to a claim on invalidating a decision adopted by the general meeting of an economic society  on the grounds of violation of the right to participate in the society.

She notes: in most cases, the courts came to the conclusion that limitation of actions is applicable to this claim, since, in fact, the complainant applied to the court for protection of his corporate right which has economic content and is not non-property within the meaning of Article 269 of the Civil Code (CC) of Ukraine. At the same time, there was another legal position, namely that the period of action limitation should not be applicable to legal relations of this kind, whereas Article 100 of the CC of Ukraine refers the right to participate in a society to personal non-property rights of the person to which limitation of actions is not applicable in accordance with the requirements of Article 268 of the CC of Ukraine.

“The resolution of the SCU dated February 4, 2015 on case No.3-216гс14 is very important both for judges and practicing lawyers. The SCU drew the conclusion therein that the rights of a participant of an economic society, arising from his right to participate in this society, are not personal non-property rights, since the right to participate in a society can be transferred only together with the other components of the participant’s rights — property rights. Thus, limitation of actions is applicable to a claim on invalidation of a decision of an economic society’s general meeting”,Tetiana Vasylchenko says.

As for the protection of corporate rights, in this regard, consideration of cases No. 3-171гс14 and 3-68гс15 by the Supreme Court of Ukraine should also be noted. The issue appeared therein on whether the economic society may not pay the cost of the property proportional to the share in the authorized capital, to a person that has withdrawn from society, as the participant stated the absence of any claims to the society in the statement of withdrawal. The practice in this issue is different, even in the SCU.

Thus, in the first case, the Supreme Court’s cancelling of the resolution of the Supreme Economic Court of Ukraine (SECU) and remanding the case for new cassational consideration, stated that, coming to the conclusion on violation of the right of the complainant to receive the cost of the property proportional to his share in the authorized capital and terms of its payment by the society, consequently, on the existence of grounds for the application to the defendant of liability for breach of a monetary obligation under Article 625 of the Civil Code of Ukraine, the Court of Cassation has not given proper legal assessment of the circumstance, that the complainant upon withdrawal from the society, taking into account his statement, for a long time before applying to a court with the claim against the defendant, did not state any material claims and never appealed to the society with the relevant requirements. Therefore, reference made by the court to the delay by the defendant in fulfillment of monetary obligation is premature. But in case No.3-68гс15 the SCU, when cancelling the resolution of the SECU noted that the content of a statement submitted by the participant of a society on the absence of any claims to the society upon withdrawal from the society does not state his refusal from receiving the cost of the part of property proportional to his share in the authorized capital. At the same time, current legislation does not provide for the possibility to waive property rights in the future and the possibility to waive the right to remedy of a violated right.

 

Change in positions

The Supreme Court was not the only one to set benchmarks in judicial practice. Thus, the head of legal support department at the Kyiv city branch of Ukrtelecom, Marina Kirichenko, notes that changes in judicial practice may occur in the issue of benefits indemnification to the fixed-line operator for rendered telecommunication services provided to Chernobyl victims, judges, prosecutors, participants of war and fighting, disabled people and veterans, pensioners, mothers with many children and other categories of citizens. According to her, economic courts earlier adopted  decisions for the benefit of a company providing services on preferential terms, exacting the debt from the social policy bodies of local state administrations whose remit includes issues on social protection of the population, based on the fact that such obligations are derived directly from legislation. Courts of Appeal adhered to the same position. But the SECU, via its resolution dated October 5, 2015, cancelled the decisions of previous court instances on the grounds of absence of a contractual relationship between the bodies of social policy and the communications company.

In the opinion of Mrs. Kirichenko, this decision is erroneous. “This may lead to a situation where the duty of the state to compensate the cost incurred by the company of providing benefits to disadvantaged social groups and persons with benefits in providing such services or works, is contingent upon the will of the parties to conclude an agreement contrary to the laws of Ukraine”, Marina Kirichenko argues.

 

Tax calm

This year judicial practice on tax disputes underwent no significant changes in comparison to the practice of previous years. Although lawyers note the trend to withdrawal from formalism: the courts are taking a more active position in helping taxpayers to claim their rights and in the application of the presumption of the legality of the taxpayer’s position.

The legal conclusion adopted by the Supreme Court of Ukraine in case No.21-18а15 should be mentioned, wherein it put an end to the issue of counting the deadline for payment of the agreed obligations by the taxpayer. The court indicated that if the last day of the date for tax filing, as provided by subparagraph 49.18.1 of paragraph 49.18 of Article 49 of the Tax Code of Ukraine, is on a non-working day, therefore the deadline for filing a tax return is the operating (banking) day that comes right after the day off. The counting of the ten-day period of payment of the agreed obligations by the payer in question begins on this date. In this case the SCU declared as illegitimate the conclusion of the Supreme Administrative Court of Ukraine on the correctness of actions of the tax authority on the application to the taxpayer of penalties for late payment of the self-assessed tax obligation.

The SCU also defended the taxpayer in case No.21-377а15. According to the circumstances of this case the company was penalized for late payment of a self-determined tax obligation, although the company carried out the payment on time, but a mistake was made in the indication of the treasury account upon transfer of the funds. When cancelling the resolution of the SACU, the Supreme Court noted that to confirm non-payment the agreed amount of monetary obligation it is necessary to establish that within the term provided for in paragraph 57.1 of Article 57 of the Tax Code of Ukraine the taxpayer did not perform any actions aimed at transferring of the agreed amount of monetary obligations to the state budget. While such amounts are credited to the single treasury account, erroneous determination of the budget classification code in the payment order at the time of payment of the sum of the tax obligation is not a sufficient legal basis for conclusion of non-payment of the required amount of monetary obligation within the term provided for in this rule and, therefore, for the application of punitive (financial) sanctions.

 

Labor duty

Lawyer Sergei Yaroshenko considers the resolution of the SCU in case No.6-40цс15 as significant for judicial practice. “The mentioned resolution provided Ukrainians with additional opportunity to take hold at work and not to be selected for redundancy. The SCU stated that when employees are being dismissed, employers should offer people an alternative”, the human rights defender notes.

In particular, upon consideration of that case, the court concluded that the employer is deemed to have fulfilled the obligation of employment of a dismissed employee when that employee was offered other vacant positions (other work), which appeared in the company during this period and existed at the date of dismissal.

In the opinion of the lawyer, the legal conclusion is important, according to which the employer taking action for the employee's employment in another company after the termination of employment agreement with the employee in accordance with the requirements of paragraph 2 of Article 40 and Part 3 of Article 492 of the Labor Code of Ukraine is not the responsibility of the employer.

 

Procedural consequences

As already mentioned, the Law of Ukraine “On ensuring the right to a fair trial” provided the Supreme Court with powers to review cases on the basis of distinct application of the same procedural rules by the court of cassation — appealing against court decision preventing further proceedings in a case or adopted in violation of the rules of jurisdiction and admissibility of cases. The effectiveness of such changes immediately became apparent — an interminable controversy on that, what courts have jurisdiction to consider cases involving bodies of the Antimonopoly Committee of Ukraine (AMC) shall fall into oblivion after adoption of the SCU resolution in case No. 21-688а15. The court’s conclusion is as follows: cases on disputes on appealing against the decisions (orders) of AMC bodies are under the jurisdiction of the economic courts and are subject to consideration under the rules of the Economic Procedural Code of Ukraine. This also applies to the consideration of cases on the claims of AMC bodies on recovery from economic entities fines and penalties for breaching competition law.

However, in accordance with the Code of Administrative Procedure of Ukraine, disposition of cases concerning appealing against decisions of the AMC on considering complaints on violation of legislation in the field of public procurement is an exception to this rule.

Furthermore, in case No.21-227а15 on appeal against a decision of the State Intellectual Property Service of Ukraine issuing the certificate on markings for goods and services, the Supreme Court, not considering the issue of the correct application by the courts of the Law of Ukraine “On protection of the rights to marks for goods and services”, concluded that in case of an authority’s decision on registration of a mark for goods and services and, thereafter, upon the applicant obtaining the certificate of Ukraine on marks for goods and services, subsequent contestation over the ownership to the mentioned mark should be decided under civil (economic) jurisdiction, as a dispute about civil right appears.

Disputes over compensation for harm caused to citizens during the ATO are of relevance in the context of events occurring in eastern Ukraine. The decision of the HSCU in case No.6-14000св15 is certainly important for law-enforcement practice. The Court of Cassation in that case agreed with the conclusions of Solomenskiy District Court of Kyiv and Court of Appeal of Kyiv that claims about compensation for damages caused to real property during the ATO should be submitted under the rules of exclusive jurisdiction, namely at the location of such a property.

 

 

European practice and national traditions

The negative trends emerging in judicial practice in the past year should not go without mention. Despite the fact that in solving disputes the courts increasingly refer to the practice of the European Court of Human Rights when justifying adopted decisions this is, according to lawyers, an undeniable advantage. However, academic lawyers and judges of high specialized courts and the Supreme Court say the following: mistakes are often made related to the fact that the quotation from the decision by the Strasbourg court was taken out of context or even distorted and used by national courts and the parties to the case as a dogma.

Positive changes emerging this year in judicial practice inspire hope for the continuation of positive transformations in the future for some categories of cases. However, the legal market, business, foreign experts, and the judges themselves acknowledge that it is too early to talk about the unity of judicial practice and national courts ensuring the principle of legal certainty. .

 

Litigation

ВЕДУЩИЕ ЮРИДИЧЕСКИЕ ФИРМЫ
1 Ilyashev & Partners
2 LCF Law Group
3 Vasil Kisil & Partners
4 Arzinger
5 FCLEX
Leading INDIVIDUALS
1 Mikhail ILYASHEV
(Ilyashev & Partners)
2 Anna OGRENCHUK
(LCF Law Group)
3 Roman MARCHENKO (Ilyashev & Partners)
4 Stanislav SKRYPNYCK
(Lavrynovych & Partners)
5 Andriy STELMASHCHUK
(Vasil Kisil & Partners)
OTHER NOTABLE PRACTITIONERS
Oleh BEKETOV
(AstapovLawyers International Law Group)
Sergey BOYARCHUKOV
(Alekseev, Boyarchukov and Partners)
Pavlo BYELOUSOV
(AEQUO)
Volodymyr VASHCHENKO
(VB PARTNERS)
Valentyn Gvozdiy
(Gvozdiy & Oberkovych)
Oleksandr ZAVADETSKYI
(Zavadetskyi Advocates Bureau)
Vyacheslav KORCHEV
(INTEGRITES)
Andrey KUZNETSOV
(ANTIKA )
Kostiantyn LIKARCHUK
(Avellum Partners)
Tetiana LYSOVETS
(Sokolovskyi and Partners)
Oleg MALINEVSKIY
(FCLEX)
Denys MYRGORODSKY
(Law Firm Dynasty)
Irina NAZAROVA
(ENGARDE)
Sergey POGREBNOY
(SAYENKO KHARENKO)
Olga PROSYANYUK
(AVER LEX Attorneys at law)
Tetiana SAMSINA
(International Legal Center EUCON)
Ihor SIUSEL
(BAKER & MCKENZIE)
Artem STOIANOV
(LCF Law Group)
Oleksiy FELIV
(Gide Loyrette Nouel)