LAW FIRM DIRECTORY

Dispute Resolution

Move at a Tangent

For many lawyers monitoring development of the judicial practice the main question is not exactly what position was taken by the highest specialized courts or Supreme Court in a certain dispute, but will the new court of cassation will adhere to it? In this context, the risks regarding the predictability and stability of judicial practice are high

ANATOLII GVOZDETSKYI

The attention of the entire legal community was riveted on the formation of the new Supreme Court in 2017. According to the observations of international experts, there are no equivalents in the whole world to such a mechanism for selecting judges of the state’s main judicial body. But for lawyers guided by the legal code, one of the key questions today is will the new Supreme Court be guided by the legal conclusions of the Supreme Court of Ukraine (SCU), set out in its judgments, or will the new cassation instance begin to form judicial practice from scratch? The predictability of judgments and stability of judicial practice are of fundamental importance not only for legal community, but also for business, including for foreign investors. Therefore, it was so important to provide mechanisms for ensuring the stability and unity of judicial practice within the current procedural stage of judicial reform. Another thing is how the appropriate tools will be used. For example, if the Grand Chamber of the Supreme Court decides an issue of the expediency of exemption from legal positions of SCU, it all depends on what principle it is guided by: formal, i.e. a desire to correct some shortcomings or mistakes in SCU judgments, or conceptual, i.e. an aspiration to direct judicial practice to a new course, proceeding from development of legal doctrines.

 

GAME ON A GRAND SCALE

But it is all about the future. According to Yuriy Petrenko, managing partner at Spenser & Kauffmann JSC, almost the entire legal market (with rare exception) was involved in lawsuits connected with repayment of loan funds and enforcement on security interest agreements in the two previous years. "The largest disputes of the year include the debt collection from Azovmash Group of Companies in favor of Alfa-Bank PJSC, as well as disputes between Industrial Construction LLC and Finance and Credit Bank PJSC, represented by the Deposit Guarantee Fund", notes Mr. Petrenko. According to him, the reformatting of the Ukrainian market of financial and industrial groups also played a role in forming the year’s judicial practice. The largest dispute of the year was litigation amounted to 2 bln USD between Viktor Pinchuk and Igor Kolomoysky and Gennadiy Bogolyubov regarding the Kryvyi Rih Iron Ore Integrated Plant.

"Last year also gives a job for attorneys specializing in criminal proceedings. The results of the activities of law-enforcement agencies came into the gaze of the mass media many times, and these results were widely discussed in professional circles. We should note the resonant case here, within which all property belonging to the Odesa Oil Refinery was seized as state income. Resolution of this case will define the fate of one of the most strategically important entities of the state’s economy, and put an end to certain procedural discrepancies of legislation", — Yuriy Petrenko believes.

 

DIFFERENCE IN VISION

In the conditions of an unbearable loan burden for a significant part of business, interest in blocking of penalties or carrying out restructuring is still high taking into account the interests of borrowers. Whereas the banks seek with increasing frequency to either establish control over a business (whose assets have high investment attractiveness), or to foreclose on a mortgage (when the financial condition is deplorable), as Denis Kytsenko, partner at Dynasty Law Firm notes.

In this light, the contradiction between the positions held by the supreme courts gain significant importance for practice as a whole. The argument of the possibility of enforcement by judicial recognition of property right is rather linear and is both in the resolution of the Supreme Economic Court of Ukraine (SECU) dated 19 September, 2017 in case No. 908/1395/16, and in the resolution of the SCU dated 27 April, 2017 in case No. 6-679цс17, in which the courts note that the failure to fulfill monetary obligations secured by a mortgage creates the basis for such protection of the violated right. The opposite position is also set out in judgments of the same courts — dated 6 June, 2017 with regard to case No. 912/3429/15 and dated 30 March, 2016 with regard to case No. 6-1851цс15, respectively. In particular, it is noted that the possibility of the property right under a court decision is provided by Articles 335 and 376 of the Civil Code of Ukraine regulating the status of ownerless property and objects of unauthorized construction, in other cases it arises in "other grounds not prohibited by law" (Article 328 of the Civil Code of Ukraine). Article 392 of the Civil Code of Ukraine does not generate, but confirms the existence of a previously arisen property right.

According to Mr. Kiysenko, neither is there any unity in the issue of the possibility of simultaneous processes of debt collection and enforcement regarding a mortgage in the positions held by the supreme courts. Some resolutions of the SCU (for example, dated 3 February, 2016 with regard to case No. 6-1080цс15) confirmed the legality of such actions directly and on an unrestricted basis. At the same time, the resolution of the Supreme Court of Ukraine dated 13 March, 2017 with regard to case No. 6-224цс17 reversed the decision of the previous courts on collecting funds, since the courts have not established (and if yes, to what extent) whether the earlier decisions on enforcement of a mortgage were executed.

"One should also note a change in position regarding evaluation of property to be mortgaged for its sale. While earlier the basis for determining the price was the evaluation carried out in enforcement proceedings, the courts formed the opposite practice based on the resolution of the Supreme Court of Ukraine dated 21 December, 2016 with regard to case No. 6-2839цс16 in 2017: the court should establish the property’s value in the decision with regard to the case", the expert notes.

Regarding settlement of disputes under security interest agreements, one should certainly pay attention to the finding of the SCU, set out  in the resolution dated 11 October, 2017 with regard to case No. 6-981цс17, in which the issue of a possible debt recovery under correspondent account agreements, concluded between banks and the individual guarantor, was resolved. The SCU paid attention to the fact that, in such cases, it is necessary to proceed from the contents of the surety contract signed by the parties, providing that the guarantor should be responsible for violation of such contracts by payment of the debt in monetary form, but should not perform all duties of the bank where the correspondent account was opened.

 

CONSUMER DUMPING

Both for banks and guarantors that are responsible for performance of obligations of debtors under consumer credit agreements, the resolutions of the SCU dated 27 April, 2017 and 24 May, 2017 with regard to cases No. 6-1153цс16 and No. 6-580цс17, respectively, were significant, in which the court set out the following legal position: the surety contract is not a contract aimed at acquiring, ordering, using products for personal needs, not connected with business activities, fulfillment of the employee's duties, or a contract on intention to perform such actions. Thus, the guarantor may not be considered in the surety contract as the consumer of the bank's services and, therefore, the Law of Ukraine On Protection of Consumer Rights does not apply to him in such legal relations. Thus, the arbitration court can consider a dispute on debt collection if there is an arbitration clause in the contract.

But it was not only the SCU that made targets in judicial practice in 2017. Thus, the Supreme Specialized Court of Ukraine for Civil and Criminal Cases (SSCU) receded from a legal position of SCU in terms of exemption of consumers from payment of court fees for commencement of action for defense of violated rights, as well as in further appeal of court decisions. In resolutions dated 6 September, 2017 (case No. 6-185цс17) and 11 October, 2017 (case No. 6-916цс17), the Supreme Court of Ukraine came to the conclusions that consumers are exempted from payment of the court fee only for filing of a complaint in the court of first instance. At the same time, they are not exempt from payment for filing other documents as separate objects of collection of court fees, in particular, appeals, cassation complaints and petitions for review of a SCU judgment. Moving back from such a position, the SSCU noted in its resolution dated 1 November, 2017 with regard to case No. 161/7323/16-ц that the Law of Ukraine On Protection of Consumer Rights, having exempted consumers from payment of court fees, indicated that they were exempted for protection of their violated rights. And such protection can be both in the court of first instance and at subsequent stages of a civil process, including in appeal proceedings. These stages of judicial protection are the single civil process aimed at fair resolution of civil cases to protect a violated right.

 

DEVIATION FROM FORMALISM

According to Valery Kartere, a judge of the SECU, the practice of economic courts on consideration of corporate disputes in 2016 — 2017 was characterized primarily by bigger predictability of judgments in the context of the legal positions set out in the plenum resolution of the SECU On Some Issues of Practice of Settlement of Disputes Arising from Corporate Legal Relationship No. 4 dated 25 February, 2016.

Commercial courts, resolving disputes on invalidation of decisions of LLC general meetings in connection with violation of an order of a convocation, paid more attention to clarification of whether the plaintiff's corporate rights were violated as a result of adoption of challenged decisions. As a result, having established the absence of a violated right, courts dismissed such claims.

"Courts began to be guided more resolutely by the principles of conscientiousness, rationality and justice as grounds for civil obligations. Application of these principles was reflected in the resolution adopted following the results of consideration of a dispute on the exception of a LLC participant in connection with non-contribution of a share to the authorized capital of the company", Mr. Kartere emphasizes.

Thus, when considering case No. 916/2238/16, the commercial courts concluded that, if within the first year from the date of registration of an LLC, a new participant joins the company and the authorized capital increases by the amount, which such participant should pay, the procedure and terms of performance of this obligation should be defined by either the decision of the LLC’s general meeting, or the Articles of Association. If the new participant does not contribute his share before the passing of one year from the date of the LLC’s registration, legal consequences stipulated by Article 144 of the Civil Code of Ukraine and Article 52 of the Law of Ukraine On Business Associations may arise.

"I want to pay attention to the fact that last year there was a certain change in judicial practice in the application of interim relief in corporate disputes. In particular, taking into account the specific circumstances of the case, economic courts have found it possible to apply such measure as prohibiting the commission of certain registration actions. The findings of the courts were based on the fact that provisions of the Law of Ukraine ‘On State Registration of Legal Entities, Individual Entrepreneurs and Public Associations” provide for the existence of appropriate court decisions and, therefore, such interim relief does not contradict provisions of part 4 of Article 67 of the Commercial Procedural Code (EPC) of Ukraine", the SECU judge notes.

 

OUT-OF-COURT DISORDER

It is interesting that some judicial disputes arose from legal relations, which are supposed to prevent transfer of a case to court. Thus, attorney Vasyl Postulga pays attention to the fact that applications for appealing against the decisions of the Commission at the Ministry of Justice of Ukraine regarding consideration of complaints in state registration may be submitted to district administrative court in the location of the complainant, not in Kyiv, since such decisions belong to acts of individual action. "I will remember the year of 2017 by opposition of the so-called Anti-Raiding Commission of the Ministry of Justice. The client — the agricultural enterprise — faced a tandem work of previously bankrupt Mriya Agricultural Holding and the Commission: new management of holding blew off dust from the old land lease agreements, not being implemented for more than three years, and appealed to the Commission to cancel registration of lease agreements, signed with new tenants", — Mr. Postulga says. At the same time, he pays attention to the following: the notification of interested persons, according to the Regulations on the Commission for Consideration of Complaints in State Registration, approved by the Cabinet of Ministers of Ukraine, is carried out very formally, as the announcement on the web page of this body appears less than one day before a hearing. The attorney believes that the main problem is that the Commission assigns to itself judicial functions but, at the same time, is not burdened with legal procedures. "Indeed, officials of the Ministry of Justice, under the cover of the collegiality of the Commission, take work of the persons, carrying out state registration functions, under control. And even if there are existing judicial disputes between the competing applicants for real estate, they can turn a situation on a dime in an instant. At the same time, the Commission does not take measures to collect information, as the courts do, but mainly looks at a situation from the complainant's point of view. And this is absolutely wrong! Employees of the Ministry of Justice make decisions with confidence, understanding that judicial protection is an overly long and expensive procedure", Mr. Postulga comments.

However, six orders of the Ministry of Justice, adopted on the basis of the conclusions of the Commission within the dispute, were repealed by the Khmelnytskyi District Administrative Court, where they had been appealed on the basis of part 3 of Article 18 of the Code of Administrative Legal Proceedings (CALP) of Ukraine. The Court of Appeal upheld the adopted resolutions. "The Commission was surprised and indignant to learn that a claim was submitted not to the District Administrative Court of Kyiv (at the Commission's location). Everyone believes mistakenly that if the dispute arises with public authority, it should be considered in Kyiv. Such territorial jurisdiction is established only for appealing against the regulations. And when it comes to acts of individual action, the dispute can be brought to court at the plaintiff's choice, therefore, can be considered on site. Not everyone pays attention to part 3 of Article 18 of the Code of Administrative Legal Proceedings of Ukraine", the lawyer emphasizes. However, while execution of court decisions on such issues faces technical limitation of the Register of the Rights to Real Estate and Their Encumbrances, as a result, two tenants have one land plot.

 

ARBITRATION DOUBTS

Change of "rules of the game" figures prominently in the agenda of arbitration community. In particular, a number of arbitration institutions, including the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry (ICAC at CCI of Ukraine), adopted new regulations. Regulation of state support and assistance to the international arbitration in new Ukrainian procedural legislation has significantly changed. There are still a lot of ambiguous situations in practice of interaction of the state courts and arbitration. Antonina Selivanova, a partner at Dynasty Law Firm, pays attention to "potentially case" decision, by which the courts of appeal and cassation recognized the right of a debtor to challenge the validity of the arbitration clause.

"One of the first stages of arbitration is establishment of competence and validity of an arbitration agreement. For this reason, the validity of the arbitration clause after consideration of a dispute by arbitration ipso facto cannot be a subject matter in a court. However, recognition of the competence by the ICAC at the CCI of Ukraine and the provision of the CCP of Ukraine turned out to be not a reason for a number of representatives of the judiciary. As a result, despite the validity of decision of ICAC on rather large collections in favor of a bank in a European capital, with regard to case No. 917/735/17, the judgment of an obvious case nature was delivered that could become critical for arbitration proceedings in Ukraine", Mrs. Selivanova said.

She calls this situation absurd: the ICAC delivered an arbitration decision on collection, it is obligatory for the parties, but after its delivery, the debtor initiates a concurrent process on recognition of the arbitration agreement as invalid. "This approach of the debtor (with all its "creativity") absolutely contradicts provisions of current legislation of Ukraine and its international legal obligations", the partner at Dynasty Law Firm believes, adding that "groundless support by the courts of outright abuse of the debtor of his procedural rights led to the gross violation of the principle of legal certainty. Creation of such precedent can create a tool for dishonest defendants to evade execution of arbitration judgments."

In general, the development of judicial practice this past year determined general economic trends: instability of the banking sector, issues of execution of debt obligations and their securing, development of corporate legal relationships, bankruptcy and business development, and state control over the economic-legal relationship. The future changes, especially in the procedures for implementing justice, might become the keynotes for this year. In this regard, Yuriy Petrenko noted: "Judicial reform, changes in the procedural legislation, problems in the banking sector, tax innovations — all these will define the subject of judicial proceedings and the plane in which they will occur. We should not forget about introduction of the institution of private bailiffs, which promises to open new horizons: the idea of supporting a client from preparing the claim to the actual execution of the judgment finds tangible borders and could become a serious breakthrough in the settlement of disputes. Vectors on which the market and practice of resolving disputes will develop in the future are already set today."

Practice Leaders. Litigation

Authorities

Oleg Makarov (Vasil Kisil & Partners)

Leading Individuals

1

Mikhail Ilyashev (Ilyashev & Partners)

2

Oleg Malinevskiy (EQUITY)

3

Anna Ogrenchuk (LCF Law Group)

4

Roman Marchenko (Ilyashev & Partners)

5

Andriy Stelmashchuk (Vasil Kisil & Partners)

Other notable Practitioners

Listed in alphabetical order

Viktor Barsuk (EQUITY)

Gleb Bialyi (Egorov Puginsky Afanasiev & Partners Ukraine)

Volodymyr Bogatyr (BOGATYR & PARTNERS)

Sergey Boyarchukov (Alekseev Boyarchukov & Partners)

Pavlo Byelousov (AEQUO)

Oleksiy Didkovskiy (Asters)

Valentyn Gvozdiy (GOLAW)

Oleg Kachmar (Vasil Kisil & Partners)

Alexey Kharitonov (ILF (Inyurpolis Law Firm)

Mykola Kovalchuk (L.I. Group)

Andrey Kuznetsov (ANTIKA)

Kostiantyn Likarchuk (Kinstellar)

Tetiana Lysovets (Sokolovskyi & Partners)

Markian Malskyy (Arzinger)

Oleksandr Mamunya (AEQUO)

Dmytro Marchukov (AVELLUM)

Artur Megerya (L.I. Group)

Ivan Mishchenko (Trusted Advisors)

Denys Myrgorodskiy (Law Firm Dynasty)

Maxim Oleksiyuk (KM Partners)

Oleksandr Onishchenko (Pravochyn)

Oleksandra Pavlenko (Pavlenko Legal Group)

Olena Pertsova (Pavlenko Legal Group)

Yuriy Petrenko (Spenser & Kauffmann)

Larysa Poberezhnyuk (Poberezhnyuk & Partners)

Sergey Pogrebnoy (Sayenko Kharenko)

Andriy Porayko (EVERLEGAL)

Olga Prosyanyuk (AVER LEX)

Tetiana Samsina (EUCON)

Andriy Savchuk (Moris Group)

Ihor Siusel (Baker McKenzie)

Stanislav Skrypnyck (Lavrynovych & Partners)

Oleksiy Sluch (Integrites)

Artem Stoyanov (LCF Law Group)

Olga Vorozhbyt (DLA Piper Ukraine)

Andriy Vyshnevsky (ENGARDE)

Leading Firms

1

Ilyashev & Partners

2

EQUITY

3

LCF Law Group

4

Vasil Kisil & Partners

5

Integrites

6

Arzinger

7

Egorov Puginsky Afanasiev & Partners Ukraine

8

Sayenko Kharenko

9

Trusted Advisors

10

AEQUO

Other Established Practices

Listed in alphabetical order

Alekseev Boyarchukov & Partners

ANTIKA

Asters

AVELLUM

Baker McKenzie

Everlegal

GOLAW

Gramatskiy & Partners

ILF (Inyurpolis Law Firm)

Kinstellar

Law Firm Dynasty

L.I. Group

Moris Group

Pavlenko Legal Group

Spenser & Kauffmann

VB Partners

Alekseev Boyarchukov & Partners

ANTIKA

Practice Leaders. International Arbitration

Authorities

    Sergei Voitovich (Grischenko & Partners)

    Serhii Sviriba (Egorov Puginsky Afanasiev & Partners Ukraine)

Leading Individuals

1

Tatyana Slipachuk (Sayenko Kharenko)

2

Olena Perepelynska (Integrites)

3

Markian Malskyy (Arzinger)

4

Irina Nazarova (ENGARDE)

5

Eugene Blinov (Eterna Law)

Other notable Practitioners

Listed in alphabetical order

Oleg Alyoshin (Vasil Kisil & Partners)

Oleh Beketov (Eterna Law)

Pavlo Byelousov (AEQUO)

Yulia Chernykh (ARBITRADE)

Markiyan Kliuchkovskyi (Egorov Puginsky Afanasiev & Partners Ukraine)

Sergiy Gryshko (Redcliffe Partners)

Ivan Kasynyuk (AGA Partners)

Kostiantyn Likarchuk (Kinstellar)

Roman Marchenko (Ilyashev & Partners)

Dmytro Marchukov (AVELLUM)

Olexander Martinenko (CMS Cameron McKenna)

Yaroslav Petrov (Asters)

Dmytro Shemelin (Asters)

Ihor Siusel (Baker McKenzie)

Anton Sotir (GoldenGate Law Firm)

Aminat Suleymanova (AGA Partners)

Vsevolod Volkov (Integrites)

Leading Firms

 

1

Sayenko Kharenko

2

Arzinger

3

Integrites

4

AEQUO

5

Vasil Kisil & Partners

Other Established Practices

Listed in alphabetical order

AGA Partners

ARBITRADE

Asters

AVELLUM

CMS Cameron McKenna

Egorov Puginsky Afanasiev & Partners Ukraine

ENGARDE

Ilyashev & Partners

Kinstellar

Practice Leaders. Cross-border litigation

Arzinger

AVELLUM

Egorov Puginsky Afanasiev & Partners Ukraine

Ilyashev & Partners

Integrites

Kinstellar

Sayenko Kharenko

Vasil Kisil & Partners