An extract from The Dispute Resolution Review, 12th Edition
Court procedure
i Overview of court procedure
In December 2017, the new procedural codes came into force. In particular, these are the Civil Procedure Code of Ukraine (the Civil Procedure Code), the Commercial Procedure Code of Ukraine (the Commercial Procedure Code) and the Administrative Procedure Code of Ukraine (the Administrative Procedure Code). The codes govern civil, commercial and administrative proceedings respectively.
These new sets of procedural law were aimed, in particular, at acceleration of the litigation process. In addition, more flexible rules on taking evidence were introduced.
Bankruptcy proceedings are governed by a separate piece of legislation. In particular, in October 2019, the Bankruptcy Code of Ukraine came into effect. It provides for more transparent rules on sale of the debtor’s assets, fair conditions for treatment of secured creditors and the possibility to initiate bankruptcy proceedings in respect of private individuals.
Each lawsuit should be filed with a proper court following the procedural rules of territorial and subject matter jurisdiction. Choice of court clauses are not yet enforceable in Ukraine.
The general courts have jurisdiction over civil cases. These usually concern disputes between private individuals or disputes between a company and a private individual. Commercial courts handle commercial cases – that is, disputes between companies arising out of business contracts, corporate disputes, bankruptcy proceedings, etc. In relation to administrative courts, their jurisdiction covers claims against state bodies and public officials.
The procedural legislation prescribes for the adversarial proceedings. However, in administrative cases the burden of proof is reversed and lies with the public authorities, whose actions or decisions are challenged. The courts resolve cases based on the evidence presented by the parties and have limited powers to gather evidence.
A party has a right to lodge an appeal with the competent appellate court against any court decision on merits if such a party believes that the decision is unlawful or unfounded. Further cassation appeal with the Supreme Court is limited to particular types of court decisions. In relation to the challenge of courts’ procedural rulings, procedural law limits the types of rulings that can be challenged.
There are certain categories of cases where the courts of appeal consider cases as the courts of the first instance, and the Supreme Court hears appeals against respective court decisions as a court of appeal. In particular, this concerns cases on recognition and enforcement of foreign arbitral awards, as well as proceedings regarding setting aside of arbitral awards.
Ukrainian procedural law also prescribes for the possibility to reconsider the case upon newly discovered or exceptional circumstances. For example, these may be significant facts, which neither parties to the dispute nor the court knew or could have been aware of at the moment of hearing the case by the court.
At the enforcement stage, the court may also become involved. For example, upon the request of an enforcement officer or judgment creditor, a court may change the method of enforcement of the court’s decision.
ii Procedures and time frames
There are three types of procedures for hearing cases under the Commercial Procedure Code: general, expedited (summary) and writ proceedings. The Code prescribes defined time limits for each of them.
Most of the cases are tried within the general procedure that should take 125 days for the first instance court. The expedited proceedings are generally applied to small-claim cases, and may not require parties’ participation in court hearings. In those circumstances, the first instance court shall consider the case within 65 days. However, certain types of cases cannot be considered in the expedited proceedings (for instance, corporate disputes and bankruptcy proceedings). In relation to writ proceedings, those are aimed at collection of minor debts and are possible only if no dispute on merits exists (i.e., debts arising out of written contracts). The first instance court has 25 days to issue the writ of execution.
The law also prescribes for time limits for the review of court decisions. The whole procedure in general proceedings, including appeal courts and the Supreme Court, should take no longer than 300 days.
In practice, due to case overloads, the courts often do not meet these time requirements. For example, it may take around six to 12 months for the first instance court to consider the case in general proceedings.
The general proceedings are commenced once the statement of claim is submitted with the court and the court issues procedural ruling on acceptance of the statement of claim and opening of the proceedings. Further, the court starts considering the case at the preparatory hearing. At that hearing, the court, in particular, identifies the facts of the case and the evidence the parties intend to present to prove their positions. Once the preparatory stage is over, the court moves to hearing the case on merits. Usually, it takes several court hearings for the court to hear the case and render a final decision.
The time frames in civil cases are slightly different. The Civil Procedure Code also prescribes for additional types of procedures such proceedings in absentia, and separate proceedings used to establish the existence of facts.
The courts, both commercial and general, may grant injunctive relief either prior to or after the commencement of the proceedings in a case. In particular, the courts may freeze the respondent’s assets, order the respondent to take certain actions or refrain from taking certain actions, order third parties to refrain from taking actions with regard to the property in dispute, or grant any other measures to provide effective protection of the claimant’s rights.
The party seeking injunctive relief shall apply to the court with the motion and provide the court with sufficient explanation why a certain interim measure is necessary. The motion shall be considered by the court within two days following its submission. Upon the request of the opposite party or in its own discretion, the court may also order the applicant to provide security to cover potential damages that might be caused by unjustified interim measures.
iii Class actions
Ukrainian law does not prescribe for either opt-in or opt-out models of class actions. The closest equivalent exists under the consumer protection laws. Public consumer associations have the right to file lawsuits in the interest of an unidentified number of consumers against the sellers or producers of the goods seeking to recognise their actions as unlawful. However, from a practical standpoint, decisions rendered against sellers or producers in such cases may not be an unconditional ground for granting each particular consumer’s claim. Hence, each consumer should further initiate litigation against the seller or the producer of certain goods in order to protect their infringed right.
In addition, although strictly not a class action, there is a special procedure for consideration of typical cases in administrative courts. Those are cases against the same public authority, based on the same grounds and claims regulated by the same legal rules. The Supreme Court is entitled to consider one of the typical cases and render a decision. That will constitute a model case being the ‘guidelines’ for the lower instance courts in the rest of the typical cases.
iv Representation in proceedings
Both private individuals and companies are entitled to represent themselves before the courts in civil and commercial cases. A company may participate in the case through its CEO, a member of the executive board or another employee authorised to act on behalf of such company in accordance with the law, employment agreement or constituent documents.
Alternatively, a party can engage legal counsel for representation in the case. Currently, only licensed attorneys may represent parties before Ukrainian courts. The only exceptions are small-claim and labour cases in which any person may act as a representative.
v Service out of the jurisdiction
Ukraine is a party to the 1965 Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the Hague Convention). In addition, certain issues of document service are regulated by the regional treaties, namely the 1993 Minsk Convention on Legal Assistance and Legal Relations in Civil, Family and Criminal Matters (the Minsk Convention) and the 1992 Kiev Treaty on Settlement of Disputes Related to Commercial Activity (the Kiev Treaty), as well as bilateral treaties with particular states. At the level of Ukrainian law, the rules of service out of jurisdiction are found in the Civil Procedure Code.
The Hague Convention applies to all cases in civil and commercial matters where there is an occasion to transmit a judicial or extrajudicial document for service abroad. The Ministry of Justice of Ukraine is the central authority responsible for dealing with requests for service coming from the contracting states. At the same time, if a Ukrainian court needs to serve the document abroad, it should forward the request for service of documents directly to the central authority of the respective foreign state.
Ukraine made several reservations under Article 10 of the Hague Convention. In particular, Ukraine does not accept the service of documents to judicial officers or other competent persons directly by mail or through interested persons.
The Minsk Convention and the Kiev Treaty, in which the issue of service of documents is regulated as well, are of regional character and apply only to post-Soviet states. Those Conventions contain rather limited rules on document service but formally prevail over the Hague Convention.
The Civil Procedure Code regulates the situation when it is necessary to serve documents or conduct other procedural action in a foreign state, which is not a party to the Hague Convention or other applicable treaty. In this event, the request should be communicated through diplomatic channels. The procedure is the same for both companies and private individuals.
vi Enforcement of foreign judgments
In Ukraine, enforcement of foreign judgments takes place either on the basis of (1) an international treaty with particular state(s), which is ratified by the Ukrainian parliament and provides for recognition and enforcement of court judgments; or (2) in the absence of such treaty, under the reciprocity principle.
If there is an international treaty in place, the conditions for the foreign judgments’ enforcement as well as the grounds for refusal of the enforcement are usually stated in such treaty. If there is no international treaty between Ukraine and the country where the respective judgment was rendered, the applicable legal framework is set out by the Civil Procedure Code.
In particular, under the Civil Procedure Code, the reciprocity between Ukraine and the respective country is deemed to exist, unless proven otherwise by the opposing party. However, the Civil Procedure Code does not provide for any clear rules on application of the principle of reciprocity. In practice, Ukrainian courts would enforce a foreign judgment if there is no evidence that national courts of the country where the respective foreign judgment was rendered refuse to recognise and enforce judgments of Ukrainian courts on similar legal matters.
The Civil Procedure Code also establishes an exhaustive list of grounds on which Ukrainian courts can refuse enforcement of a foreign judgment. Those are, for instance, if a judgment concerns matters that fall within the exclusive jurisdiction of Ukrainian courts or if a party against which a judgment was rendered had not been properly served with the proceedings.
Upon consideration of an application for enforcement of a foreign judgment, the competent Ukrainian court issues a writ of execution, which is a ground for initiating enforcement proceedings in competent enforcement authorities of Ukraine. The judgment of the Ukrainian court on recognition and enforcement of a foreign judgment is subject to the appellate and cassation review.
vii Assistance to foreign courts
In Ukraine, assistance to foreign courts is mainly regulated by the Hague Convention and the 1970 Hague Convention on Taking of Evidence Abroad in Civil or Commercial Matters (the Hague Evidence Convention). The regional treaties, namely the Minsk Convention and the Kiev Treaty, as well as bilateral treaties with particular states, also regulate certain aspects of assistance to foreign courts.
In particular, according to the Hague Evidence Convention, a foreign judicial authority is entitled to send the request to the Ministry of Justice of Ukraine, which is a designated body responsible for receiving requests from foreign competent authorities to obtain evidence and perform certain other judicial acts in Ukraine. The letter of request is then forwarded by the Ministry of Justice for execution to the Ukrainian court within jurisdiction of which the requested judicial act should be performed.
The Minsk Convention and the Kiev Treaty state that the contracting parties provide each other with assistance by performing procedural actions, namely, compiling and sending documents, conducting searches, sending and delivery of exhibits.
On the national level, the Civil Procedure Code establishes that Ukrainian courts may assist foreign courts with witness examination, conducting expert examination, etc. However, such assistance should be denied if it may cause the infringement of Ukraine’s sovereignty, threaten its national security or is outside the jurisdiction of the court.
viii Access to court files
Each party to the case has full access to court files. In particular, a party may file a motion with the court requesting the review and photocopying of court files.
Members of the public, who are not parties to the particular case, do not have a right to access the files of that case unless they prove that respective case directly relates to their rights, interests, freedoms or obligations. Basic information about the pending cases in various courts can be accessed online by the general public. Such information concerns identities of the parties to the dispute, subject matter of the dispute and court hearing dates. The court hearings are public, unless the court decides to hear case in camera to protect confidential or other sensitive information.
At the same time, final court decisions on merits as well as various procedural rulings are publicly accessible online in the Unified State Register for Court Decisions. This database contains electronic versions of all decisions renders by the Ukrainian courts of all levels starting from approximately mid-2006.
However, owing to the data protection rules, the mentioned electronic versions of court decisions hide names and another personal data of individuals, such as information on bank accounts, addresses and vehicle registration numbers. Persons seeking to obtain an undisclosed court decision must prove to the court that such decision directly relates to their rights, interests, freedoms or obligations.
ix Litigation funding
Third-party funding is not regulated in Ukraine. Accordingly, there are no limitations or prohibitions on funding the claims in the civil and commercial proceedings before the Ukrainian courts and in arbitration proceedings seated in Ukraine. However, in practice third-party funding is not actively used in Ukraine.
In the event that a party wishes to use third-party funding in Ukraine, the Rules of Professional Conduct contain a requirement that an attorney practising in Ukraine, when representing a client, may not take into account instructions from other parties. Furthermore, an attorney intending to share any privileged documents or information with a third party (i.e., funder) shall obtain the client’s consent.
Although strictly not third-party funding, there is a rather common practice in Ukraine for lawyers to handle cases under conditional fee agreements. The Rules of Professional Conduct expressly allow such way of structuring the payment to an attorney.
Recently, however, the Supreme Court stated that a provision of a contract between a client and an attorney allowing a conditional fee is void. In view of the Supreme Court, court decisions may not be the subject of a legal services contract.
Ukrainian procedural rules for civil and commercial litigation, as well as the Arbitration Rules of the ICAC, provide for the standard rule of ‘costs follow the event’, which can help reduce the financial burden suffered by the party to the dispute.
Sayenko Kharenko https://www.lexology.com/library/detail.aspx?g=6108fc83-1c4d-4231-9c58-494d45a45d44&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2021-04-14&utm_term=