LAW FIRM DIRECTORY

Dispute Resolution

Pressure from the center

The law-enforcement practice of Ukrainian courts suffered "pressure" on the part of the legal positions of the Supreme Court in 2018, although in many cases not all the judges of the highest instance agreed with them

ANATOLII GVOZDETSKYI

The beginning of the procedural activities of the Supreme Court (SC), from which everyone expected new guidelines in law-enforcement or at least consolidation of legal findings defined by the Supreme Court of Ukraine (SCU), became the most significant factor that influenced the formation of judicial practice in 2018. The coming into force of  new versions of procedural codes, which, in the opinion of Vitaliy Pravdyuk, an advisor to Konnov & Sozanovsky Attorneys at Law, are based on a completely different ideology and philosophy of judicial process, was of no little importance.

Among the main trends in the judicial practice of the current year, Mr. Pravdyuk singles out the use of measures used by the courts against the abuse of process. For the first time in the practice of Ukrainian proceedings, mechanisms against the abuse of process by the parties are provided for in the new procedural codes. Today, such abuses are one of the main reasons for the drawn out consideration of cases, Vitaliy Pravdyuk emphasizes. According to him, there are already rulings adopted by the commercial courts, according to which the filing of certain documents shall be considered abuse of the process and fines shall be applied to business entities (rulings of the Commercial Court of Dnipropetrovsk Region, dated December 29, 2017, in case No. 904/10014/17, dated January 11, 2018, in case No. 28/12-09; rulings of the Supreme Court, dated April 11, 2018, in case No. 911/795/17, dated September 4, 2018, in case No. 910/10059/17; ruling of the Commercial Court of Kharkiv Region, dated August 20, 2018, in case No. 922/1199/18).

The parties to judicial dispute have begun to actively use a type of evidence which is new for Ukrainian judicial practice, namely electronic evidence. And the courts, at the request of the parties, are demanding and obtaining correspondence on instant messengers, videotapes, and letters sent by email (ruling of Obolon District Court of Kyiv, dated January 16, 2018, in case No. 756/11258/17-ц, ruling of Commercial Court of Zaporizhzhia Region, dated January 11, 2018, in case No. 5009/4881/12, ruling of Dolyna District Court of Ivano-Frankivsk region, dated April 24, 2018, in case No. 343/1410/17).

 

Area of judgment

According to Vitaliy Pravdyuk, a great job was done by the Grand Chamber of the Supreme Court, the exclusive competence of which, according to the procedural legislation, is to resolve issues related to the jurisdiction of disputes. "Since the beginning of the work of the Supreme Court, the Grand Chamber has adopted more than one thousand resolutions, in which it delimited jurisdiction in various disputes", Vitaliy Pravdyuk notes.

By the way, the ruling of the Grand Chamber of the Supreme Court, dated July 4, 2018, in case No. 819/353/16, was one of the most significant in this regard. The court concluded that the disputes related to the drawing up of a list of depositors of liquidated banks eligible for state-guaranteed reimbursement of funds held on deposits at the expense of the Deposit Guarantee Fund (DGF) and to the approval of the register of depositors to carry out guaranteed payments are of a public law nature and fall within the jurisdiction of administrative courts.

This position is based on the fact that, in accordance with Article 3 of the Law of Ukraine "On the System of Guaranteeing Deposits of Individuals", the DGF is not a state authority, it is an institution that performs special functions in the area of guaranteeing deposits of individuals and removing insolvent banks from the market. As noted in the ruling, the analysis of the DGF’s functions provides evidence of its participation in legal relations in different statuses: on the one hand, it adopts binding decisions for banks and other persons and, on the other hand, it serves as the governing body of a bank that is removed from the market, i.e., it represents the bank in private law relationships with third parties.

In the present case, the Grand Chamber of the Supreme Court backed out of the finding of the Supreme Court of Ukraine, set out in the ruling, dated June 15, 2016, in case No. 826/20410/14, indicating that such legal relations shall be governed by a special law on the Deposit Guarantee System and are not subject to general bankruptcy legislation.

At the same time, the Grand Chamber of the Supreme Court came to the opposite conclusion, considering case No. 826/5285/16 (ruling dated October 31, 2018), in which the issue was raised as to courts of which jurisdiction will consider claims against the DGF and its authorized person on the obligation to enter creditors' claims (under a deposit agreement funds for which were not paid in full) in the register of accepted creditors' claims. In this case, the Supreme Court indicated that since, according to the law, only the DGF shall be charged with the obligation to restore a bank’s solvency and prepare it for liquidation, and since controversial legal relations arise from agreements concluded between a bank and the individual, the Deposit Guarantee Fund and its authorized person shall act as representatives of the contractual relationship. Thus, a dispute on entry of a creditor's claims in the register of accepted claims is not of a public law nature and does not fall within the jurisdiction of administrative courts.

The Grand Chamber of the Supreme Court also put an end to the issue of jurisdiction of disputes regarding the enjoyment of title to land by territorial communities, which for a long time remained one of the most controversial issues in judicial practice. So, in particular, in the ruling of the Grand Chamber of the Supreme Court, dated April 24, 2018, in case No. 401/2400/16-ц, the following is noted: systematic analysis of the provisions of the Land Code of Ukraine indicates that the decision of the authority in the area of land relations can be challenged in terms of its legality, and the requirements for declaring a decision illegal shall be considered in civil or commercial proceedings, if, following the results of execution of a decision, an individual or a legal entity accrued the civil right and if controversial legal relations, on which the claim is based, is of a private law nature. In this case, the requirement to declare the decision illegal may be considered as a way of protecting the violated civil right under Article 16 of the Civil Code (CC) of Ukraine, and shall be brought to court for consideration in civil or commercial proceedings if, in practice, the basis and purpose of the claim on declaring the decision illegal challenges the civil property rights of a person (for example, title to land), which have arisen as a result of implementation of the decision adopted by an authority.

If a person files a motion to the relevant authority to obtain a permit for the development of a land management plan for allocation of a land plot, following the consideration of which such authority adopts an appropriate decision, then in these legal relations the defendant exercises its supervisory functions in the area of management activities related to the jurisdiction of the administrative court. Administrative courts shall consider disputes based on a public law nature, i.e., arising from regulatory and executive powers or executive activities of public agencies. If, as a result of a decision, a person acquires or loses the right to ownership of a plot of land, the dispute shall be considered to be of a private law nature and shall be subject to consideration in civil or commercial proceedings, depending on the parties involved in the dispute.

Despite the fact that procedural codes also provide for the same rule in the event of disputes as to the enforcement of court decisions (such cases shall be considered in the framework of the case hearing process), the question arose: what if at the enforcement stage, court decisions on claims against one debtor were consolidated into a single proceeding?­ Neither procedural laws, nor relevant legislation regarding the enforcement of court decisions provide recommendations. This gap was closed by the Grand Chamber of the Supreme Court, which set out its opinion in the ruling dated September 12, 2018 in case No. 906/530/17. The court emphasized that since current legislation does not regulate the procedure for judicial appeal against decisions, actions or omissions by the state enforcement officer or other officer of the State Enforcement Service or a private enforcement officer when carrying out consolidated enforcement proceedings, which combine the processes of enforcing court decisions adopted by courts according to the rules of various jurisdictions, in such case part 1 of Article 287 of the Administrative Procedure Code of Ukraine shall apply, and these cases shall be considered in accordance with the rules of administrative proceedings.

 

Mortgage can wait

As in previous years, disputes over loan and mortgage agreements remain one of the most common ones this year as well. So, analyzing the rulings of Kyiv Commercial Court of Appeal in cases No. 910/17686/17, No. 910/17685/17, and No. 910/15504/17, Andriy Pozhidayev, partner at Asters, concluded that the interpretation of the grounds for a significant change in circumstances set out in these rulings may lead to the loss of collateral by banks in the event of substitution of members of the legal entity which is the main debtor under the loan agreement.

"It should be noted that Article 652 of the Civil Code of Ukraine clearly establishes that only the existence of all four factors of a significant change in the circumstances by which the parties were guided in concluding the agreement shall be the reason for termination of an agreement. Due to the fact that the property guarantor enters into mortgage relations as an independent participant in the security contractual relationship, it assumes all the risks of default on the core obligation, regardless of the reasons for such default. At the same time, the substitution of members of a legal entity does not affect the distribution of rights and obligations of the parties under the loan agreement and does not entail a violation of the ratio of the financial interests of the parties, which excludes a significant change in the circumstances by which the parties were guided when concluding the mortgage agreement. The Commercial Court of Cassation, as part of the Supreme Court, adheres to this position, particularly in cases No. 910/15408/17, No. 910/15475/17, and No. 910/15504/17", Mr. Pozhidayev emphasizes.

The findings of the Grand Chamber of the Supreme Court made in the ruling dated March 28, 2018 in case No. 444/9519/12 should be mentioned. "In this case, the judges of the Grand Chamber, having studied the provisions of the loan agreement and established the existence in it of "a different agreement between the parties", which does not provide for the creditor’s right to charge interest on the loan before its actual repayment in full, came to the logical conclusion on the suspension of interest on the loan on the day of expiry of the loan period. To that end, the Supreme Court’s findings in this case shall not apply to disputes over loan agreements, the terms and conditions of which provide for the creditor’s right to charge interest on the loan until the moment of its actual repayment in full", Andriy Pozhidayev believes.

Obviously, the findings of the Grand Chamber of the Supreme Court regarding the provision in judicial proceedings of the possibility to satisfy the creditor’s demands at the expense of mortgaged property, including by acquiring a title to such property, is both important and positive for mortgage holders. In particular, the ruling dated March 21, 2018 in case No. 760/14438/15-ц, contains the following findings: first, the transfer of title to the mortgaged property to the mortgage holder in accordance with Articles 36, 37 of the Law of Ukraine "On Mortgage" is a method of extrajudicial settlement, which shall be carried out by the agreement of the parties without going to court. Second, the mortgage clause is an exclusively extrajudicial way of settling disputes, which the parties shall establish independently in the agreement. And third, taking into account the requirements of Articles 328, 335, 392 of the Civil Code of Ukraine in terms of Articles 36, 37 of the Law "On Mortgage", the courts shall not be empowered to foreclose on the mortgaged property by recognizing the title of the mortgage holder to it.

 

Land background

As Yuriy Chumak, the judge of the Commercial Court of Cassation as a part of the Supreme Court, notes, during 2018 the court developed many interesting legal positions in land disputes. In particular, issues regarding land lease in the event of alienation of a real estate item located on it were resolved. According to the judge, until recently the prevailing approach in court practice was that the buyer acquires the land holder's right not automatically from the moment of purchasing the property, but only after making changes to the land lease agreement regarding the substitution of the land holder. But in rulings dated February 6, 2018, in case No. 917/242/17, dated March 3, 2018, in case No. 904/6296/17, and dated May 4, 2018, in case No. 910/14212/17, the SC indicated that the provisions of Article 120 of the Land Code of Ukraine and part 3 of Article 7 of the Law of Ukraine "On Land Lease" should be understood in such a way that if another person has a title to residential house, building, or structure, the right of the previous owner or user shall be terminated automatically by law, without registering the termination rights through any certificates and documents. The court noted that this provision is imperative and going back on it on the basis of an agreement will not be allowed. Accordingly, the lease agreement shall not be terminated and the substitution of a party in the obligation shall take place.

Also, a line was drawn under one of the most common categories of disputes on the claims of land owners regarding recovery from owners of property located on such sites of non-received income in the form of rent for failure by the latter to conclude land lease agreements. "All this time, the SC has not had a unified approach to resolving disputes of this category. In some cases, the courts recognized the rent not received by the land owner as a damage (loss), which shall be recovered on the basis of Articles 22 and 1166 of the Civil Code of Ukraine, in other cases as monetary funds saved by the user without sufficient legal basis, which shall be recovered on the basis of Article 1212 of the Civil Code of Ukraine", the judge notes. But in the ruling dated May 23, 2018 in case No. 629/4628/16-ц, the Grand Chamber of the Supreme Court indicated that the actual user of the land plot, who had retained monetary funds without a sufficient legal basis at the expense of the land owner, shall pay for the use of the land plot and return these funds to the land owner on the basis of part 1 of Article 1212 of the Civil Code of Ukraine.

Yuriy Chumak also draws attention to the ruling of the Grand Chamber of the Supreme Court dated July 12, 2018 in case No. 905/1552/16, where the mechanism for placing temporary structures on land plots was established. The court arrived at the conclusion that for their placement, subject to an appropriate decision of the local government authorities, the land plots shall not be allotted and the obligation to indicate the area of the land plot, in accordance with the documents on land use, shall only apply to business entities which are land plot owners.

 

Antitrust provisions

One of the key issues that the legal community expected to be addressed was the possibility of signing and filing procedural documents by the representatives of the company who are not the attorneys, as well as the participation of such persons in the process, Leonid Bortnichuk, Director of Legal Affairs of PJSC Ukrposhta, notes.

The Supreme Court was adamant on this matter. The Grand Chamber of the Supreme Court indicated, in its ruling dated March 13, 2018 in case No. 910/23346/16, that even before the coming into force of amendments to the procedural codes (December 15, 2017), only representatives who have the status of attorney or a limited set of persons by way of self-nomination (within the authority provided by the articles of association or legislation) have the right to sign and submit documents, in particular, to appellate and cassation instances in virtue of priority and direct effect of the constitutional provisions regarding the provisions of other laws. "If, prior to the procedural codes coming into force, the situation remained very controversial, which is also confirmed by the dissenting opinion of the Supreme Court judges, after December 15, 2018, a line was drawn. That is the company’s representation in the courts shall be carried out either by an attorney, or by the head of the company, or a member of the executive board authorized to act on behalf of the enterprise according to the law and articles of association. Certainly, the law provides for the opportunity to participate in insignificant cases for a wider range of representatives, which "sweetened the pill a little", Mr. Bortniychuk noted.

He also noted that in the courts there were separate discussions as to whether the power of attorney issued by the company should indicate the status of a representative as an attorney, and on what terms can attorneys provide legal assistance to companies as their in-house lawyers.

During 2018, the trends of non-admission of such a representative to a trial or refusal to accept the procedural documents signed by him/her because of the absence of a power of attorney or reference to the status of attorney, continued. But, as Leonid Bortnichuk notes, in October 2018 this practice was recognized as erroneous, as stated in the ruling of the panel of judges of the joint chamber of the Court of Cassation of the Supreme Court dated October 12, 2018 in case No. 908/1101/17.­ In particular, the joint chamber backed out of the previously stated position of the same court in a decision dated April 24, 2018 in case No. 914/2414/17, indicating that neither the provisions of the Law of Ukraine "On the Bar and Practice of Law", nor the provisions of the Commercial Procedure Code of Ukraine and the Civil Procedure Code of Ukraine, regulating the issues of representation by proxy, establish the requirements to indicate in the power of attorney, issued in the name of the individual attorney, the information that such a representative is the attorney in question.

 

Criminal mathematics

The ruling of the Grand Chamber of the Supreme Court dated August 29, 2018 in case No. 663/537/17 is also indicative. It contains the court's position as to the operation in time of the Law of Ukraine "On Amending the Criminal Code of Ukraine Regarding Improvement of the Procedure for the Counting of the Period of Pre-Trial Detention by a Court as the Sentence Period" (the law providing for calculating every day spent in a pre-trial detention center as two days of sentence), which was abolished in Spring 2017.

In particular, the Supreme Court noted that when deciding what version of part 5 of Article 72 of the Criminal Code (CC) of Ukraine shall be used as a guidance in a particular case, it is necessary to take into account the time when a person committed the act, i.e., to apply the rules of operation in time of the law on criminal liability, and not the rules of operation in time of criminal procedural law.

According to the Supreme Court, if a person committed a crime in the period from December 24, 2015 to June 20, 2017 (inclusive), then during counting of the period of pre-trial detention as the sentence period, part 5 of Article 72 of the Criminal Code of Ukraine shall apply in the wording of the law providing for calculating every day spent in a pre-trial detention center as two days of his/her sentence (direct operation of the law). In the event of a crime committed before December 23, 2015 (inclusive), this provision also shall apply in the wording of the law providing for calculating every day spent in a pre-trial detention center as two days of sentence (retroactive effect of the law, which "otherwise improves the position of the person" within the meaning of part 1 of Article 5 of the Criminal Code of Ukraine).

If the crime was committed before June 20, 2017 (inclusive), but custodial arrest continued to be applied to the person after June 21, 2017, i.e., on the law coming into force abolishing the law providing for calculating every day spent in a pre-trial detention center as two days of sentence, then, when counting the period of pre-trial detention as the sentence period, the version of the law providing for calculating every day spent in a pre-trial detention center as two days of sentence, which, in this case, has a retroactive effect, shall apply. Application of the Law of Ukraine "On Amendments to the Criminal Code of Ukraine Regarding the Rule of Adding up Punishments and Counting the Period of Pre-Trial Detention" dated May 18, 2017 to these cases is erroneous, since its retroactive action as "otherwise worsening the situation of the person" shall not be allowed.

Counting the period of pre-trial detention as the sentence period (calculating every day spent in a pre-trial detention center as two days of a sentence) should be carried out, if the crime was committed from June 21, 2017 inclusive. In this case, part 5 of Article 72 of the Criminal Code of Ukraine shall be used in the wording of the Law of Ukraine "On Amendments to the Criminal Code of Ukraine Regarding the Rule of Adding up Punishments and Counting the Period of Pre-Trial Detention", dated May 18, 2017.

 

PRACTICE LEADERS. LITIGATION

LEADING FIRMS

1

 

Ilyashev & Partners

 

2

 

EQUITY

 

3

 

LCF Law Group

 

4

 

Vasil Kisil & Partners

 

5

 

Sayenko Kharenko

 

6

 

Arzinger

 

7

 

Integrites

 

8

 

Moris Group

 

9

 

Alekseev, Boyarchukov & Partners

 

10

 

EVERLEGAL

 

Ведущие юристы

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 ESTABLISHED PRACTICES

ADER HABER

 

Aequo

 

Asters

 

AVELLUM

 

AVER LEX

 

Baker McKenzie

 

ENGARDE

 

ESQUIRES

 

Eterna Law

 

Evris

 

GOLAW

 

ILF

 

Kinstellar

 

L.I. Group

 

Lexwell & Partners

 

Pavlenko Legal Group

 

Poberezhnyuk & Partners

 

VB Partners

 

Антика

 

Ario

 

Gramatskiy & Partners

 

Dynasty Law Firm

 

 

Другие известные юристы*

Viktor Barsuk (EQUITY)

Pavlo Byelousov (AEQUO)

 

Oleksiy Didkovskiy (Asters)

 

Andriy Guck (Ante Law Firm)

 

Valentyn Gvozdiy (GOLAW)

 

Oleg Kachmar (Vasil Kisil & Partners)

 

Igor Kalitventsev (KPD Consulting)

 

Olexiy Kharytonov (ILF Law Firm)

 

Andrey Kuznetsov (ANTIKA)

 

Mykola Kovalchuk (L.I. Group)

 

Vyacheslav Krahlevych (EQUITY)

 

Ihor Kravtsov (Evris Law Firm)

 

Denys Kytsenko (Dynasty Law Firm)

 

Kostiantyn Likarchuk (Kinstellar)

 

Tetiana Lysovets (Sokolovskyi & Partners)

 

Markian Malskyy (Arzinger)

 

Oleksandr Mamunya (AEQUO)

 

Dmytro Marchukov (AVELLUM)

 

Denys Myrgorodskiy (Law Firm Dynasty)

 

Artur Megerya (L.I. Group)

 

Maxim Oleksiyuk (KM Partners)

 

Oleksandra Pavlenko (Pavlenko Legal Group)

 

Volodymyr Pavlenko (INTEGRITES)

 

Olena Pertsova (Pavlenko Legal Group)

 

Yuriy Petrenko (ADER HABER)

 

Larysa Poberezhnyuk (Poberezhnyuk & Partners)

 

Sergey Pogrebnoy (Sayenko Kharenko)

 

Andriy Porayko (EVERLEGAL)

 

Olha Prosyanyuk (AVER LEX)

 

Vladislav Reznikov (Alekseev, Boyarchukov & Partners)

 

Tetiana Samsina (EUCON)

 

Andriy Savchuk (Moris Group)

 

Ihor Siusel (Baker McKenzie)

 

Stanislav Skrypnyck (Lavrynovych & Partners)

 

Oleksandr Shkelebey (ESQUIRES)

Artem Stoyanov (LCF Law Group)

 

Andrii Trembich (Gramatskiy & Partners)

 

Volodymyr Vashchenko (VB Partners)

 

Olga Vorozhbyt (DLA Piper Ukraine)