The Ukrainian court system saw significant changes in 2016. The first, and probably the most important, was the initiation of judicial reform, which included changes to the Constitution of Ukraine and a truly significant amount of new laws (some of which have already passed through the Parliament, with others still under development). In addition, in 2016, Ukrainian legal community witnessed some unexpected decisions of the Supreme Court of Ukraine affecting the jurisdiction of Ukrainian courts, which contributed to uncertainty in the Ukrainian judiciary.
The 2016 judicial reform initiative should change all levels of the Ukrainian court and law enforcement systems significantly, starting from the prosecutor’s office and extending to the general courts and the Constitutional Court.
In particular, once it is fully implemented, individuals and companies will obtain a right to apply directly to the Constitutional Court if they believe that the law applicable to them is unconstitutional. Although the details of this procedure have not been established yet, the Constitutional court should become another important venue for individuals seeking the protection of their rights after all other local remedies have been exhausted.
The general courts will also undergo significant reform. They will now consist of three levels: local, appellate, and cassation courts. The existing three courts of cassation and the Supreme Court of Ukraine are to be replaced with a new Supreme Court by March or April 2017. Certain local courts are also to be re-organized. New specialized courts – the High Court on Intellectual Property Matters and the High Anticorruption Court – must be established. To implement all these changes in full, a significant number of legislative acts still must be adopted, creating additional uncertainty regarding the efficiency of the Ukrainian judiciary.
Another important aspect of this judicial reform is the change of the procedure for appointment and dismissal of judges, as well as of the procedure for holding them liable for misconduct. Although the aim is to make the Ukrainian judiciary more independent and professional, a short-term negative outcome of this change has been numerous resignations of judges and increasing the caseload for judges retaining their offices.
Finally, for the Ukrainian ADR community, it is important that the new version of the Constitution does not restrict the parties’ right to agree on mandatory pre-litigation dispute-settlement procedures such as negotiations or mediation. This potentially opens the door to further development of ADR in Ukraine. A specialized law on mediation and a separate bill on court support and control of arbitration is in Parliament now.
Once all these changes, including new procedural legislation, are implemented, the legal playground in Ukraine will be dramatically different. However, current uncertainties are not limited to the need for legislative change. This year has seen the Supreme Court of Ukraine make several unexpected rulings affecting the jurisdiction of courts over some important categories of disputes. The Supreme Court’s decisions have been criticized by many practitioners and even by judges who have publicly declared that they will continue to adhere to what they consider to be the correct understanding of law.
The divisive decisions relate to disputes involving real estate objects and the liquidation of insolvent banks. The importance of such disputes has increased significantly during recent years, as over 80 banks have been declared insolvent and are now being liquidated in Ukraine. Until recently, there was a well-established court practice that all such disputes fall within the jurisdiction of the Administrative Courts, as both real estate registrars and bank liquidators perform public functions. However, in February and June 2016, the Supreme Court ruled that they should instead be decided by the Commercial Courts. Such decisions put in question dozens of recent cases decided by the Administrative Courts and creates uncertainty for the parties facing such disputes in future. This is especially problematic, as opting for the Commercial Courts may lead to missing the procedural deadlines for lodging claims in the Administrative Courts.
We hope that this jurisdictional conundrum will be resolved with implementation of the new procedural laws planned for 2017. In the meantime, parties should be very careful to make sure that all their rights are duly protected until the case law is fully settled. In particular, there are still many occasions where parties are advised to file their claims before the Administrative Courts in order not to miss that Court’s deadline, despite the clear instruction of the Supreme Court that such cases should be heard before Commercial Courts.
By Dmytro Marchukov, Partner, and Serhii Uvarov, Senior Associate, Avellum, Ukraine
This article was originally published in Issue 3.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.