The Ukrainian legal system is based on codified principles of civil law. In Ukraine disputes may beresolved through four types of court proceedings: (a) civil; (b) commercial; (c) administrative; and (d)criminal. Recent legislative changes also introduce separate proceedings for adjudication of IP andanticorruption cases, but no procedural acts governing such proceedings have been enacted yet.
The procedural rules for conducting the relevant proceedings are established by the relevant codes ofUkraine: the Civil Procedure Code of Ukraine No. 1618-IV, dated 18 March 2004, the CommercialProcedure Code of Ukraine No. 1798-XII, dated 6 November 1991, the Code of AdministrativeProceedings of Ukraine No. 2747-IV, dated 6 July 2005, and the Criminal Procedure Code of UkraineNo. 4651-VI, dated 13 April 2012.
The Ukrainian court system is composed of courts of constitutional jurisdiction and general jurisdiction.
Constitutional jurisdiction in Ukraine is exercised exclusively by the Constitutional Court of Ukraine,which is authorized to consider cases inter alia on the interpretation of the Constitution of Ukraine, on thecompliance with the Constitution of Ukraine of statutes and regulations issued/passed by Ukrainianofficial bodies (the Parliament, the President, the Cabinet of Ministers), etc.
The courts of general jurisdiction are authorized to consider civil, commercial, administrative, andcriminal cases as well as cases on administrative offences. The system of courts of general jurisdictionconsists of:
-first instance courts, being the local common courts and specialized courts (i.e., local commercial andadministrative courts);
-second instance courts, being the appellate common courts and appellate specialized courts;
-the Higher IP Court and the Higher Anticorruption Court - being the high specialized courtsresponsible for adjudicating these specific type of cases as the first instance court (both courts havebeen recently introduced and are not yet functional); and
-the highest instance court, being the Supreme Court.
Generally, cases on civil matters (including labour, alimony and child custody), administrative offences(i.e. minor, non-criminal offences) and criminal matters are first heard by local common courts. Thesecourts have territorial jurisdiction over comparatively small administrative territories. They are the courtsof first instance and their decisions are subject to appeal to common courts of appeal. The decisions ofcourts of appeal are subject to appeal (so-called cassation appeal) to the Supreme Court (namely, itschambers called the Civil Cassation Court and the Criminal Cassation Court).
Disputes with respect to commercial matters involving companies and other legal entities as well asindividual entrepreneurs are considered by commercial courts. Local commercial courts have territorialjurisdiction over disputes in the oblasts (the Ukrainian provinces). There is a separate commercial courtin the city of Kyiv.
Usually, the jurisdiction of the commercial courts of appeal covers the first instance commercial courtslocated in several adjacent oblasts. The decision of local commercial courts can be appealed to thedesignated commercial court of appeal. The Supreme Court (its chamber called the CommercialCassation Court) is the final level of appeal (cassation) of the commercial courts.
The jurisdiction of administrative courts covers public administrative disputes with respect to differentlegal acts of state authorities and/or related to their power and authority (save for administrativeoffences, as provided for by the Code on Administrative Offences of Ukraine, and criminal cases).Decisions of the local administrative courts may first be appealed to appellate administrative courts, andthen to the Supreme Court (its chamber called the Administrative Cassation Court), which is the finalappeal (cassation) court level for administrative disputes.
The Supreme Court is the highest judicial body within the system of courts of general jurisdiction. TheSupreme Court acts as a final cassation body for Ukrainian courts of general jurisdiction and consists ofthe following chambers: (i) the Great Chamber of the Supreme Court (in certain cases this acts asappeal/cassation instance for other chambers of the Supreme Court, analyses and summarizes legalpositions of the Supreme Court); (ii) the Administrative Cassation Court; (iii) the Commercial CassationCourt; (iv) the Criminal Cassation Court; and (v) the Civil Cassation Court.
Although judicial precedents are not officially binding on Ukrainian courts and are not the source of law,starting from July 2010, decisions of the Supreme Court of Ukraine rendered upon conflictingapplications by lower courts of the same legal provisions have binding effect on state bodies and stateofficials and must be followed by the Ukrainian courts of lower instances. Furthermore, the SupremeCourt, as well as lower specialized courts, regularly issue their interpretations and recommendations oncourt practice for the purpose of ensuring uniformity in the application and interpretation of the law byUkrainian courts. As a matter of practice, these interpretations and recommendations are usually takeninto account and followed by lower courts in Ukraine.
A lawsuit is initiated by filing a claim. The court at which a claim is filed verifies whether the submittedclaim meets all formal requirements and, provided it does meet the requirements, issues a court rulingaccepting the claim into consideration (i.e. initiates proceedings in the case) and sets the first hearingdate. Usually, a court requires a defendant to provide a statement of defence stipulating whether thedefendant admits the claim and, if not, to provide its objections; the claimant may in its turn respond tothe defendant's objections, etc. Such statement of defence may or may not be provided subject to thedefendant's discretion. Obviously, a defendant that is interested in presenting its position to the court willprovide a statement of defence. The defendant may also file a counterclaim.
Following the filing of the claim and the statement of defence, preliminary proceedings lasting up to 60(sixty) days (in certain cases up to 90 (ninety) days) shall commence and the preliminary hearing shallbe scheduled. The purpose of the preliminary proceedings is to initially consider the scope and details ofthe claim and the relief sought, to obtain all written pleadings from the parties, to file counterclaims (ifany), to identify individuals and/or legal entities that should participate in the trial, to identify relevantfacts that need to be established, to specify the list of evidence, and, if needed, to obtain such evidence,to secure the evidence and/or the claim. At a preliminary court hearing the court also sets the date of thehearing at which the merits of the case will be considered. There is no preliminary stage in certain typesof cases (such as labour law cases or "insignificant cases") - proceedings there start with theconsideration of the merits of the case.
Upon completion of the preliminary proceedings the court will decide to either (i) close the proceedingsin the case; (ii) leave the claim without consideration; or (iii) close the preliminary proceedings and setthe date for the first hearing on the merits.
The consideration of the merits of the claim should commence no later than 60 (sixty) days following theinitiation of proceedings in the case and should last no more than 30 (thirty) days. The courts, especiallyin commercial proceedings (unless the case at hand is complicated or involves multiple parties), do tendto meet this requirement. When it comes to other proceedings, a court case consideration cansometimes be a lengthy process. Several months to up to several years may elapse before a finaldecision is issued.
At the first hearing, after addressing certain procedural/technical issues (i.e., the verification of the partiesinvolved and the powers of their representatives as well as an announcement of the panel of judges orsole judge and an explanation of the procedural rights of the parties), the court considers the parties'applications and motions. A procedural ruling will be made in respect to each application and/or motion.
After considering the parties' motions, the court begins with its consideration of the merits of the case andthe parties may present their legal positions and statements. The claimant (plaintiff) is the first to presentits position and claims; with the respondent following with its position and objection. The parties also havethe right to pose questions to one another. At court hearings the court examines the evidence presentedby the parties and the parties may comment upon the evidence presented.
A court case may involve several court hearings depending on the complexity and nature of the lawsuit.The hearing of the case is concluded by the court issuing a court decision (judgment).
If one of the parties fails to attend a court hearing, the court has discretion to reschedule the hearing foranother date. Subsequent failures to attend court hearings may have the following consequences: (a) ifthe plaintiff fails to attend (and the court is not notified that the case may be heard without the claimantattending), the court may dismiss the statement of claim without consideration; and, (b) if the defendantis absent, the court renders a decision based solely on the evidence and arguments already contained inthe case. A party has the right to ask a court to conduct hearings in its absence.
A court may issue an order for injunctive relief either prior to the submission of a claim or after the courtopens the proceedings in accordance with the procedure provided by the relevant procedural code ofUkraine.
Litigation costs include court fees, parties' legal fees, expenditures of witnesses, experts, etc. The courtfees depend on the subject of the claim (whether it is a monetary or a non-monetary claim, etc.), the typeof application (a statement of claim or a motion), and on the type of court (civil, administrative,commercial and instance level).
For example, in a commercial proceeding, the court fee for the submission of a monetary statement ofclaim equals 1.5% of the amount of the claim, but may not be less than 1 subsistence level(approximately EUR 50) and more than 350 subsistence levels (approximately EUR 18,000).
Court fees are to be paid prior to the filing of a statement of claim, an appeal, a cassation claim, or anyother procedural document to which a fee applies. In certain cases, when the amount of fees may not beknown prior to filing the above documents, the fees (or the balance of the fees) may be paid at a laterstage. Security for costs is available for the respondent.
Court fees are awarded according to the general principle that the losing party pays (i.e. a party isawarded court fees pro rata to the extent the court decision is rendered in its favour); however, courts dohave and may apply a certain discretion in this respect.
As is the situation in most countries, business crime is a matter of increasing concern in Ukraine.Considering the growth of the digital business environment, cybercrime will continue to increase withparticular fraud hotspots likely to be Ukraine's governmental agencies as well as banks, other financialinstitutions, insurers, and retailers. Other frequently committed business crimes include corruption,accounting fraud, tax evasion, money laundering, copyright related crimes and smuggling of goods.
Ukraine has stepped up its attempts to develop its criminal legislation to prevent and to fight businessrelated crimes. Developments and progress in this regard have also been significantly affected byinternational pressure on Ukraine.
Ukraine is a member of the Group of States against Corruption (GRECO), which is the Council ofEurope’s anti-corruption monitoring body. Further, as a member of the Council of Europe, Ukraine and itslaw and practice are subject to the influence of the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL).
Ukraine currently recognizes criminal liability both for individuals and legal entities (includingcompanies). The criminal liability for legal entities was introduced only recently (in 2014) in the course ofthe implementation of the recommendations of GRECO and MONEYVAL, as well as the implementationof a number of international treaties to which Ukraine is a party. Under Ukrainian criminal law, legalentities may be liable, inter alia, for crimes of money laundering, acts of terrorism and illegal warfare, warpropaganda, genocide, various illegal actions with weapons, violent seizure of state power, bribery andimproper influence on officials of companies and state bodies, abuse of power, kidnapping or hostagetaking committed by authorized representatives of such legal entities on their behalf or in the interest ofsuch legal entities.
The current Criminal Procedure Code of Ukraine ("CPC") came into effect on 20 November 2012 andreplaced the prior law which had been in effect since the 1960’s. Criminal proceedings include thefollowing stages:
In general, criminal proceedings are initiated by (a) the reporting of a criminal offence to an investigatoror a prosecutor; or (b) an investigator or a prosecutor discovers the fact of crime commission.Investigation shall be officially commenced within 24 (twenty-four) hours upon the report of or discoveryof a crime.
The way of initiation of criminal proceeding depends on whether a particular crime is subject to public,private or public-private accusation. For example, bringing criminal charges on business crimes such asthe illegal use of trademarks and commercial names, interference with lawful commercial activity,causing bankruptcy, unlawful collection, use or disclosure of commercial or banking secret information,unlawful use of insider information, unlawful actions with electronic data, abuse of official authority (incase the above actions haven’t caused any aggravating consequences) are matters of privateaccusation and can be initiated exclusively upon a complaint by an injured party.
During the pre-trial investigation an investigator undertakes all the measures necessary to discover allelements of the crime. After a pre-trial investigation is finalized and subject to sufficient evidence ofcrime, the case is handed over to a prosecutor for the prosecutor to verify and approve the conclusion ofa formal criminal charge, and to send the case to court.
During the course of judicial proceedings and court hearings, courts directly examine all the evidence inthe case, question the accused persons and witnesses, analyse the conclusions of experts, review andanalyse protocols and other documents, and consider other evidence relevant to the case. Such directevidence examination by courts, rather than by investigation authorities at the pre-trial investigationstage, was introduced by the CPC and aims to overcome the possibly inappropriate influence oninvestigation authorities during the pre-trial investigation.
Both the accusing side (prosecutor, victim or civil claimant and their legal representatives) and thedefence side (the accused, defence attorney or civil defendant and legal representative) enjoy equalprocedural rights under the law, including the right to file objections, submit evidence and to appealprocedural decisions and the final court verdict. A trial by jury was introduced by the CPC and is nowavailable for an accused (at his/her discretion) facing a potential life sentence. However, most crimespunishable by a life sentence are not business crimes, though such crimes may accompany businesscrimes in certain situations.
In addition, the CPC introduced a significant new concept in Ukrainian criminal procedure which is theopportunity to conclude (a) a reconciliation agreement between the suspect (or accused) and the victimin which the parties agree upon certain compensation; and (b) a plea bargain, i.e. an agreementbetween the prosecutor and a suspect (or an accused) on the admission of guilt in return for theprosecution arguing for a more lenient sentence. Either of these agreements can be entered into at thepre-trial stage or during the judicial proceeding, but in any case before the court begins to deliberate itsverdict.
Challenging a verdict of a court
A verdict of a court of first instance can be appealed within 30 (thirty) days after being passed. A court ofappeal is limited by the issues raised in the appeal and can only review the case beyond these limits inexceptional circumstances and provided that this does not worsen the situation for the accused.
Verdicts and other decisions of courts of appeal may be appealed further within a 3 (three) month periodto the court of cassation. The court of cassation examines the case within the limits of the cassationappeal, does not have the right to examine evidence and consider certain circumstances of the casewhich were decided by the lower courts. Instead, the court of cassation verifies whether the lower courtsapplied procedural and substantial legal provisions in a correct way.
In addition, a court verdict that has already entered into legal force may be reviewed if newcircumstances important for the case were subsequently discovered that may warrant overturning it.
The key authorities involved in criminal proceedings are the investigation authorities, prosecutor officesand courts.
As mentioned above, an investigator has the right to initiate criminal proceedings in cases of publicaccusation. An investigator is a key authority at the pre-trial investigation stage, during which he or sheundertakes all the measures necessary to discover all elements of the crime, including finding evidence,verifying existing evidence (including that provided by the victim), verifying the grounds for the crime,identifying a person(s) who committed the crime, etc. An investigator must also undertake investigationmeasures that can prove the innocence of the suspect and other measures requested by the defenceside.
Pre-trial investigation is generally handled by police investigators, although certain types of crimes maybe investigated by other, more specialized agencies, such as, inter alia, the Security Service of Ukraine,which conducts investigations into acts of terrorism and crimes against state security, and the taxauthorities which conduct investigations of tax-related crimes.
Similar to an investigator, a prosecutor also has the right to initiate criminal proceedings in cases ofpublic accusation. At the pre-trial investigation stage, a prosecutor generally controls the investigationprocess and approves the conclusion of a formal criminal charge before sending the case to court.
At the judicial proceedings stage, a prosecutor generally represents state interests during a trial. If thestate prosecutor decides not to proceed with the prosecution of the alleged perpetrator the victim mayassume prosecution in the case.
Although control over the investigation process is carried out by a prosecutor, with the effect of the newCPC certain control functions at this stage were transferred to courts. In particular, specially appointedinvestigative judges in the courts of general jurisdiction consider complaints filed against any illegalactions or omissions committed by investigators or prosecutors.
In addition, a prior approval by the investigative judge is required for certain investigation actions andrestraint measures, including the arrest of a suspect, seizure of property, imposition of monetarypenalties, bringing a person to court, suspension of an accused person from his or her job, granting toan investigator temporary access to certain objects or documents, temporary suspension of an accusedperson from using a special right (e.g., right to conduct entrepreneurial activity, driver's license, etc.), andtemporary retrieval of property.
When the investigation is finalized and provided there is sufficient evidence of crime, the case is sent forjudicial proceedings. Criminal cases in Ukraine are considered by courts of general jurisdiction.
Business crimes frequently entail not only criminal but also civil liability. A victim or a suffering personhas the right to compensation for damage suffered as a consequence of a crime. For this, a filing of acivil lawsuit within the same criminal proceedings or a separate lawsuit within separate civil proceedingsshould be conducted by the victim.
Criminal courts may issue preliminary injunctions against defendants. A civil claimant has the right torequest an imposition of a property seizure in order to secure a civil claim within a criminal case or withinseparate civil proceedings.
If a victim opts for separate civil law proceedings (rather than bringing a civil lawsuit within the samecriminal proceedings), the guilt of the person that committed a crime, if established by a verdict in thecriminal proceedings, does not have to be proven again in the civil proceeding.
Pre-trial investigation against an individual normally should not exceed 2 (two) months but may beextended in certain circumstances up to a maximum of 12 (twelve) months. There is no precise termduring which the trial proceedings should be finished, but the CPC requires that such term should bereasonable. Depending on the complexity of the case, the trial may take from 1 (one) month to 1 (one)year or even longer.
There are no fees for reporting criminal offenses or initiating criminal proceedings. There are, however,the following procedural expenses:
-the cost of legal services; a suspect/accused bears the cost for his/her defence attorney, exceptwhere a defence attorney is appointed to represent the suspect/accused at the state's expense as:
-this is obligatory but the suspect/accused failed to retain a defence attorney;
-this is requested by the investigator, prosecutor or investigative judge at their discretion; or
-the suspect/accused is unable to pay for a counsel.
-the cost of legal representation of the victim, civil claimant and civil defendant is borne by thoseparties individually;
-costs related to transportation to the place of pre-trial investigation or court proceedings (e.g.transportation, accommodation costs, daily allowances and earnings lost) incurred by asuspect/accused or their defence attorney is borne by the suspect/accused. Such costs incurred bylegal representatives of other participants in the criminal proceeding are borne by the persons whomthey represent; and
-costs related to the involvement of witnesses, experts, translators and specialists are generally borneby the party that requested their involvement in the criminal case. In certain cases such cost may beborne by the state, in particular when an expert examination was undertaken at the order of theinvestigative judge or of the court.
In the case of a conviction verdict, the court charges the convicted person for all the proceduralexpenses incurred by the victim.
Insolvency proceedings in Ukraine are mainly regulated by the Law "On Restoring a Debtor's Solvencyor Declaring It Bankrupt" No. 2343-XII dated 14 May 1992, as amended (the "Insolvency Law").
Under the Insolvency Law, bankruptcy is defined as a court-recognized failure of a debtor to restore itssolvency by means of financial rehabilitation or by way of conclusion of a settlement agreement and tosatisfy creditors’ claims through means other than the liquidation of a debtor.
Insolvency matters involving debtors incorporated in Ukraine are handled by commercial courts, whichconsider filings solely against corporate entities and individuals who are registered as privateentrepreneurs. In order to initiate a procedure, a creditor or a debtor must submit an application with aset of supporting documents to the commercial court that has territorial jurisdiction over the debtor.
A court must open an insolvency proceeding once the total amount of undisputed claims against thedebtor is equal to or exceeds 300 minimal salaries (i.e., around EUR 31,000) and these claims are atleast 3 (three) months overdue.
The Insolvency Law provides for the following types of procedures which may be initiated by a courtagainst a debtor: asset management proceedings; conclusion of an amicable settlement agreement;financial rehabilitation (sanitation) proceedings, and bankruptcy (liquidation).
A court must consider an insolvency application and pass a ruling in which such application is acceptedor reject the application and return it to the applicant. Such a ruling must be made not later than 5 (five)days from the date of receipt of an application by the court.
In case of acceptance of an application, the court must determine the date for the preparatory hearing(which should be held not later than 14 (fourteen) days after the date of the acceptance of the insolvencyapplication). At the preparatory hearing the court examines whether there are indeed sufficient groundsfor an insolvency proceeding, and, if the court is satisfied with the sufficiency of the grounds, opens theinsolvency procedure. If a court comes to the conclusion that there are insufficient grounds for theopening of the insolvency proceeding, it rejects the application.
At the preparatory hearing a court can also take a decision on introducing asset management over thedebtor, moratorium on settlement of other creditors' claims, appointment of an insolvency administrator,etc. The court should also make the necessary arrangements to make an announcement on the initiationof the insolvency proceeding.
During the asset management procedure, the troubled company and its activities are first scrutinised andthereafter a likelihood of its salvaging is evaluated. It is an important phase of an insolvency proceduresince, depending on its results, the debtor is further subject to either rehabilitation or liquidationprocedures. If rehabilitation is unsuccessful, the debtor will face insolvency liquidation resulting in theseizure of the debtor-company and the collection of all its assets in order to satisfy the claims of as manycreditors as possible.
The Insolvency Law requires that during the asset management procedure an asset manager examinesthe submitted creditors’ claims and recognizes or rejects them. Further, all claims submitted by creditors,including those which are rejected by the debtor or other creditors, are considered by the court in thepreliminary hearing. A preliminary hearing should be held within 2 (two) months and 10 (ten) days (or 3(three) months in exceptional cases) of the preparatory hearing. Those creditors' claims that areapproved by the court are included into the creditors' claims register. The register will serve as the basisfor the calculation of the votes at the creditors' meeting/committee as well as for claims settlement(restructuring) in the insolvency procedure.
The asset management procedure may last no longer than 115 (one hundred and fifteen) days with thepossibility for a court to grant one extension for up to 2 (two) months. Upon the expiration of this term, acourt, depending on the particular case, can make one of the following decisions: (a) a decision onopening rehabilitation proceedings (which may last no longer than 6 (six) months with a possibility for thecourt to extend such period in exceptional circumstances for another 12 (twelve) months); (b) a decisionon opening liquidation proceedings (which may last no longer than 12 (twelve) months with no possibilityfor the court to extend such period); or (c) a decision on termination of the insolvency proceedings.Additionally, during the insolvency proceedings the parties may negotiate the terms of the amicablesettlement of the insolvency related claims (at any stage of the insolvency proceedings).
An insolvency administrator is one of the central figures participating in the insolvency proceeding andmay act in one of three capacities: as an asset manager (during the asset management procedure), as arehabilitation manager (at the stage of the debtor’s rehabilitation), or as a liquidator (at the stage of thedebtor’s liquidation). The insolvency administrator's key responsibilities are specified by the InsolvencyLaw and generally include supervising the actions of the management of the debtor and the debtor'sassets during the insolvency proceedings.
In order to locate all creditors, an announcement about the insolvency proceeding should be made onthe official website of the High Commercial Court of Ukraine. Careful monitoring of officialannouncements is of significant importance for the creditors whose claims matured before the openingof the insolvency procedure (i.e., so-called pre-insolvency creditors). Claims of such competitivecreditors must be filed with a commercial court within 30 (thirty) days after the public announcement ismade. Failure to timely file a claim will result in changing the ranking of the claim to the lowest priorityclaim. Such creditors will not be treated as competitive creditors and, therefore, will not be allowed tovote at the creditors' meetings and be elected to the creditors' committee.
Under the Insolvency Law, foreign creditors have the same rights as Ukrainian creditors and participatein Ukrainian insolvency proceedings based on the general rules and provisions of the Insolvency Law.
Subject to the existence of a relevant treaty between Ukraine and a particular country, foreign partiesmay apply to Ukrainian courts for freezing orders and for the recognition of foreign insolvencyproceedings in Ukraine. Ukrainian courts are obliged to cooperate with foreign insolvency courts andprovide relevant legal assistance in relation to any such foreign insolvency proceedings. However, forthese rules to become fully operational, the further development of legislative framework will be required.
Ukrainian law provides for separate legal regimes with respect to domestic and foreign or internationalarbitration proceedings. The primary law regulating domestic arbitration covering disputes betweenUkrainian parties is the Law of Ukraine "On Courts of Arbitration" No. 1701-IV dated 11 May 2004. TheLaw of Ukraine "On International Commercial Arbitration" No. 4002-XII dated 24 February 1994 (the"ICA Law") regulates international arbitration proceedings conducted in Ukraine. The ICA Law is basedon the UNCITRAL Model Law on International Commercial Arbitration.
According to the ICA Law, the following disputes can be submitted to an international arbitration inUkraine: disputes arising out of cross-border contracts in the course of foreign trade and other forms ofinternational economic relations, provided that the place of business of at least one of the parties to thedispute is situated outside of Ukraine; disputes involving enterprises with foreign investments orinternational associations or organizations established in Ukraine. The ICA Law may be interpreted asstating that disputes between two Ukrainian legal entities, provided that at least one of such entities hasa foreign shareholder, may be subject to international arbitration.
The ICA Law provides that an international arbitration proceeding in Ukraine may be conducted either bya tribunal set up specifically for a given case (ad hoc arbitration), or by an arbitral institution. The ICALaw provided for the establishment of the following two permanent Ukrainian arbitral institutions: theInternational Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry("ICAC") and the Maritime Arbitration Commission at the Ukrainian Chamber of Commerce and Industry("MAC").
Pursuant to the Ukrainian law, the parties to an arbitration agreement can submit to arbitration any civilor commercial international dispute, except for the following disputes which fall within the exclusivecompetence of Ukrainian courts: disputes on the validity of state acts and acts of legal entities; disputesarising out of the conclusion, amendment, termination and performance of public procurement contracts;disputes regarding privatization of state property; disputes regarding registration of rights to real estate(including land plots) located in Ukraine; intellectual property rights and securities; corporate disputesbetween shareholders of a legal entity and disputes between a legal entity and its shareholder (exceptfor cases when such disputes arise out of an agreement and all shareholders have concluded anarbitration agreement with the legal entity); disputes concerning the protection of economic competition(except for civil law aspects of disputes arising out of agreements); insolvency disputes; disputesbetween a legal entity and its manager(s) on compensation for damages caused to the legal entity; aswell as other disputes the jurisdiction over which is expressly granted to Ukrainian courts. However,there is no exhaustive list of disputes that fall within the exclusive competence of Ukrainian courts.
Importantly, the fact that corporate disputes between shareholders of a legal entity and disputes betweena legal entity and its shareholder could not be submitted to arbitration in the past (i.e. prior to December2017) has affected the corporate structures for investing in Ukraine, especially those involving ashareholders agreement. As a result, many joint venture projects are structured using non-Ukrainianholding entities at the level at which shareholders agreements are signed. This allows the parties toprovide for arbitration in the shareholders agreements or other documents among shareholders and thecompanies.
However, in view of the recent legislative changes that took effect in December 2017 and which nowallow arbitration with respect to corporate disputes when there is an arbitration agreement in placebetween a legal entity and all of its shareholders, it is expected that more parties will be encouraged toopt for settling / deciding their corporate disputes in Ukraine rather than on an off-shore level usingforeign corporate structures.
Arbitration agreements must be made in writing and may be either in the form of an arbitration clause inthe contract between the parties or in the form of a separate arbitration agreement. An arbitrationagreement is also deemed to be made in writing if it is contained in documents signed by the parties orin an exchange of letters, telex, telegrams or other means of electronic communication which provide fora record of an agreement, or in an exchange of statements of claim and defence in which the existenceof an agreement is alleged by one party and is not denied by the other. A reference in a contract to adocument containing an arbitration clause constitutes an arbitration agreement provided that the contractis executed in writing and the reference may be interpreted as making the arbitration clause an integralpart of the contract.
An arbitration agreement must expressly indicate the full name of the arbitral institution and the disputesthat the parties have agreed to submit to arbitration. However, any deficiencies of the arbitrationagreement's wording, any doubts as to its validity and enforceability should be interpreted in favour ofthe validity and enforceability of the arbitration agreement. The parties are free to agree on thesubstantive law, the procedural rules, the seat and language of arbitration, the number of arbitrators andthe method for their appointment. If the parties do not agree on the applicable procedural rules in thearbitration agreement the tribunal applies the rules that it finds most suitable in the circumstances.
An arbitral tribunal shall resolve a dispute in accordance with the applicable law agreed by the parties tothe arbitration agreement. If the parties fail to choose the applicable law, the arbitral tribunal willdetermine the applicable law in accordance with the conflicts of law rules as provided for by the Law ofUkraine “On Private International Law” No. 2709-IV dated 23 June 2005.
According to the procedural rules of the ICAC, the duration of arbitration proceedings should not exceed6 (six) months; however, this term may be extended in certain cases when an extension is required andcan be justified.
The ICAC and MAC arbitration rules allow a party to obtain injunctive relief at its request. An arbitraltribunal may demand that a party should provide security deemed to be appropriate in connection withsuch measures. Such injunctive relief may be granted at any stage of an arbitral proceeding, as well asbefore the proceedings commence. An arbitral order for injunctive relief is binding on the parties andremains in force until a final arbitral award is made. However, the enforcement of such an arbitral orderfor injunctive relief in the Ukrainian courts may be practically difficult.
According to the ICA Law, a party may apply with an application for assistance in the collection ofevidence directly to the state court.
An arbitral award made under the ICA Law is final and binding for the parties. If a losing party refuses toperform it voluntarily, an award can be enforced according to the New York Convention on theRecognition and Enforcement of Foreign Arbitral Awards.
The ICA Law does not provide for the possibility to appeal awards on their merits. An award may bechallenged only by initiating proceedings to set aside the award before a state court and only on thefollowing grounds:
-invalidity of the arbitration agreement due to the incapacity of one of the parties to conclude anarbitration agreement or due to other grounds envisaged in the applicable law;
-absence of proper notification of arbitration proceedings;
-lack of arbitrability according to the arbitration agreement;
-incorrect composition of the arbitral tribunal or incorrect arbitration procedure;
-the award has not yet become binding on the parties or has been set aside or suspended by a court;
-the recognition or enforcement of the award would be contrary to the public policy of Ukraine; or
-the subject-matter of the dispute may not be subject to arbitration under Ukrainian law.
Foreign court judgments and arbitral awards are recognized and enforced in Ukraine based on aninternational treaty between Ukraine and the relevant foreign state or based on the reciprocity principle.In case of the absence of a treaty providing for recognition and enforcement, foreign judgments andawards may be recognized and enforced based on the reciprocity principle, which is presumed (unlessproven otherwise).
Ukraine has entered into a number of conventions, treaties, and agreements on legal assistance in civilmatters (mainly with former members of the USSR or post-socialist countries) providing for recognitionand enforcement of foreign court judgments. Further, Ukraine is a party to the Commonwealth ofIndependent States (CIS) 1992 Treaty "On Procedure of Settling Disputes with Regard to Carrying out ofCommercial Activities" and the 1993 CIS Convention "On Legal Assistance and Legal Relations in Civil,Family and Criminal Matters", providing for the procedure and assistance in the recognition andenforcement of judgments in CIS countries.
With respect to the recognition and enforcement of awards of international arbitration proceedings,Ukraine is a party to the 1958 New York Convention on the Recognition and Enforcement of ForeignArbitral Awards and the 1961 European Convention on International Commercial Arbitration, theprovisions of which were implemented into Ukrainian procedural laws. When it comes to awardsrendered in non-contracting states (i.e. states which are not parties to the above-mentionedconventions), Ukraine will apply the New York Convention only under the reciprocity principle.
According to the Civil Procedure Code of Ukraine, generally, applications for enforcement should besubmitted within 3 (three) years of the foreign judgment taking effect / adoption of the arbitral award.
In order to enforce a foreign judgment, a claimant has to apply to a Ukrainian court (having jurisdictionover the territory where a debtor is located, or if that debtor’s location is unknown or it is located outsideof Ukraine, over the territory where the property is located) in order to obtain a relevant enforcementorder. An application for enforcement must contain details of the debtor and the person seekingenforcement, and reasons for seeking the enforcement.
In order to obtain recognition of and enforce an arbitral award, a claimant has to apply to the court ofappeals having jurisdiction over the city of Kyiv. An application for enforcement must contain details ofthe parties to the arbitral proceedings, the composition of the arbitral tribunal that rendered the award,the date the award was rendered and the date it was received by the person seeking enforcement, etc.
An application for enforcement of a foreign judgment must be accompanied by a duly certified power ofattorney, the text of the foreign judgment, a document certifying that the judgment became effective,evidence of due notification of the debtor about the relevant court proceedings, and a document detailingthe procedure and stages for enforcement of the judgment. Documents in a foreign language must beaccompanied by a translation into Ukrainian.
With respect to the enforcement of a foreign arbitral award, an application for recognition andenforcement should be supported by the following documents: (a) an original or a certified copy of thearbitral award; (b) an original or a certified copy of the arbitration agreement; (c) evidence of payment ofthe filing fee; (d) a document confirming the powers/authority of the applicant (if the application forenforcement is submitted by its representative), and (e) a certified translation into Ukrainian of alldocuments listed above. Failure to observe the formal requirements as to the documents that must besubmitted to the court will result in returning the application for enforcement of the arbitral award to theapplicant without the application's consideration.
According to Article 468 of the Civil Procedure Code, a state court must reject the application forenforcement of a foreign judgment on the basis provided in the applicable international treaty ratified byUkraine. If the applicable international treaty does not list such basis, the application is subject torejection in the following cases:
-if the foreign judgment has not yet become binding;
-if a party against which the judgment is ruled was not duly notified of the case in consideration;
-the judgment was rendered in a case which falls within the exclusive competence of Ukrainian courts;
-if there is a judgment rendered by Ukrainian courts with respect to the same subject matter betweenthe same parties or there is a similar court proceeding pending in Ukraine as of the time thatproceedings were initiated in the foreign court;
-if the time period for enforcement of the foreign judgment provided for by an effective internationaltreaty has expired;
-if the dispute may not be subject to court consideration;
-if the enforcement of the judgment may threaten the national interests of Ukraine;
-if the foreign judgement in the case between the same parties and concerning the same subjectmatter has already been recognized in Ukraine and its enforcement was authorized; or
-in other cases as provided by law.
According to Article 478 of the Civil Procedure Code, a state court must reject the application forrecognition and enforcement of an arbitral award if:
-the party against whom enforcement is sought provides evidence that
-no due notification to that party about the arbitral proceedings took place;
-the arbitration agreement is invalid;
-the arbitral award goes beyond the scope of the arbitration agreement;
-the composition of the arbitral tribunal or arbitral proceedings were not in line with the arbitrationagreement or applicable law; or
-the arbitral award did not become binding or was set aside; or
-if the court finds that:
-the dispute may not be referred to arbitration according to the law; or
-recognition and enforcement of the award would contradict Ukrainian public policy.
Specific grounds for refusing the recognition and enforcement of foreign arbitral awards are also set outin the ICA Law and they are the same as those for setting aside a domestic award.
Once the Ukrainian court issues an enforcement letter, it can be submitted to the state or private(depending on the subject matter of the case) enforcement service for compulsory enforcement. Thedebtor may file a complaint with the relevant court against officers of the enforcement serviceresponsible for enforcement of the foreign judgment / arbitral award.
-As a matter of practice, litigation, especially civilproceedings, may last much longer than thestatutory designated terms.
-Courts must justify extensions of proceduralterms.
There is no formal discovery in Ukraine.
-A party may participate in proceedings eitherpersonally or via its representative.
-In criminal proceedings representation bycounsel is mandatory in a number of cases.
STANDARD CIVIL PROCEEDINGS AND COMMERCIAL PROCEEDINGS
Standard Civil Proceedings Court Feesconstitute 1.5% of the amount in dispute (formonetary claims of companies), but not less than1 living wage (approx. EUR 50) and not morethan 350 living wages (approx. EUR 18,000).
Commercial Proceedings Court Fees constitute1.5% of the amount in dispute (for monetaryclaims) but not less than 1 living wage (approx.EUR 50) and not more than 350 living wages(approx. EUR 18,000).
Attorneys' Fees: First instance: preparation of alawsuit, four court hearings, preparation for thehearings, preparation of procedural documents
(e.g., position papers), correspondence with theclient: In total EUR 10,000 to EUR 25,000;
second instance: preparation of the appeal andprocedural documents, participation in up to 2court hearings: EUR 10,000 to EUR 20,000;
Third instance: preparation of the appeal andprocedural documents, participation in up to 2court hearings: EUR 8,000 to EUR 20,000.
Both Standard Civil Proceedings Court Fees andCommercial Proceedings Court Fees are basedon the Law of Ukraine "On Court Duty".
-The Ukrainian Civil and Commercial ProcedureCodes do not provide for a special proceedingfor collective redress.
-Traditional tools of multiparty practice asconsolidation of proceedings are applied.
-Parties may also opt for filing a collective lawsuitwith several plaintiffs.
Standard Civil and Commercial Proceedings:First instance: 3 months; second and thirdinstances: 2 months if a final decision is appealed,and 30 days if an interim court ruling on proceduralissues is appealed.
Yes. There is legal aid for people who cannot afford the costs of legal proceedings.
A trial by jury is available for the accused (uponhis/her request) facing a potential life sentence.
The practice of jury trials is still developing as thejury trial option was introduced into the CriminalProcedure Code of Ukraine only in late 2012.
Pro Bono System
A trial by jury was introduced by the new CriminalProcedure Code of Ukraine and is now availablefor the accused (upon his/her request) facing apotential life sentence.
There are no fees for reporting criminal offenses or initiating criminal proceedings.
The following procedural expenses are recognized as related to criminal proceedings:
-legal services costs;
-costs related to transportation to the place of pre-trial investigation or court proceedings;
-costs related to the involvement of witnesses, experts, translators and specialists; and
-costs related to the delivery and storage of various objects and documents necessary for criminalproceedings.
The services of a defense attorney provided to the suspect by the state in cases prescribed by law are freeof charge. The fees for a defense attorney in other cases may vary significantly depending on a lot ofthings. A rough estimate for a simple case would be from EUR 2,000 to EUR 10,000 for representation atpretrial investigation and from EUR 5,000 to EUR 20,000 for representation at court hearings in the firstinstance court.
In the case of a conviction verdict, the court will charge the accused for all of the procedural expensesincurred by the victim.
Criminal proceedings may be initiated with respectto several suspects. There can also be severalvictims of the crime. However, if several victimsseek to bring civil claims, each victim needs tobring his/her own separate civil claim.
Legal representation of the suspect and by adefence attorney is obligatory in specific casesenvisaged by the Criminal Procedure Code ofUkraine or if requested by the investigator,prosecutor or investigative judge.
-If the accused opts for a jury trial, he or shemust file a motion during the preliminary courthearing requiring a trial by jury.
-Although a life sentence is generally notenvisaged for business crimes, it may apply incertain cases if a business crime is committedsimultaneously with a more serious crime, suchas murder.
Investigation case files with respect to severalpersons suspected of committing the same crimeas well as investigation case files on severalcrimes suspected of being committed by oneperson can be united into one case either at thepre-trial stage or at the judicial proceedings stage.
The investigator must undertake investigationmeasures that he/she deems appropriate as well asmeasures requested by the defence side.
-If the state prosecutor declines to prosecute, thevictim may assume prosecution.
-The plaintiff's side is represented by the stateprosecutor.
General rules of criminal proceedings apply tobusiness crimes and include the pre-trial stageand the stage of judicial proceedings.
Pro Bono System
Criminal proceedings for a business crime maybe initiated either by reporting the criminaloffence to investigators of competent authoritiesor by a prosecutor, or by the discovery of a crimeby an investigator or a prosecutor, depending onwhether the crime is subject to public, private orpublic-private accusation.
Yes. A defence attorney must be provided to the suspect free of charge when, e.g., the participation of adefence attorney is obligatory or is requested by the investigator, prosecutor or investigative judge andthe suspect failed to involve one, or when the suspect cannot afford a defence attorney.
It should be noted that unlike the previous code, the new Criminal Procedure Code requires that only acertified attorney (advocate) should act as defence counsel in criminal proceedings.
The court may require the applicant to provide apledge as security of the relevant request(counter-injunction) which should becommensurate to the injunctive relief awarded.Such counter-injunctive measures are usuallyimplemented through the claimant depositing acertain amount of funds (bank guarantee, surety,etc.) with the court.
In order to request a preliminary injunction, theapplicant must pay a court duty amounting to 0.5of the minimum wage, i.e., approx. EUR 25.
Assumption: The request for a preliminaryinjunction is filed and the court renders itsdecision ex parte (which, as a matter of practice,often happens): EUR 2,500 to EUR 6,000.
A preliminary injunction may be requested in civiland in commercial proceedings. The Civil andCommercial Procedure Codes of Ukraine providethat a preliminary injunction may be requested bythe applicant in order to secure the provision ofevidence to the court during the proceedings andenforcement of the final decision in the case. Thecourt must consider the request within 2 daysafter the submission of the relevant application.Such preliminary injunction may be obtainedeither before commencement or at any stage ofthe court proceedings.
Preliminary Injunction Proceedings
-Together with a request for a preliminaryinjunction, the applicant must provide evidencethat the preliminary injunction is necessary andprove that non-application of the preliminaryinjunction may result in the violation of theclaimant's rights and interests and maycomplicate enforcement of the decision in therelevant court case or make it impossible.
-The court may request additional explanationsor documents.
-The arbitration fee payable for non-monetaryclaims amounts to USD 1,800.
-Arbitration proceedings may also involveadditional expenses.
Procedural costs at the ICAC include primarily theregistration fee and the arbitration fee:
The registration fee is USD 600.
The amount of the arbitration fee varies dependingon the amount in dispute, number of arbitratorsinvolved, complexity of the case and administrativecharges.
Examples: If the amount in dispute is
-USD 200,001 to USD 500,000 - the arbitrationfee is USD 9,200 + 2% of the amount aboveUSD 200,000;
-USD 500,001 to USD 1,000,000 - the arbitrationfee is USD 15,200 + 1% of the amount aboveUSD 500,000;
-USD 5,000,001 to USD 10,000,000 - thearbitration fee is USD 38,700 + 0.3% of theamount above USD 5,000,000;
-above USD 50,000,000 - the arbitration fee isUSD 118,700 + 0.1% of the amount above USD50,000,000.
If the case is considered by a sole arbitrator, thearbitration fees are subject to a 20% decrease.
Assumptions based on the amount in disputeof EUR 1,000,000: Review of 100 pages ofdocuments; no challenge to the jurisdiction of thearbitral tribunal; two exchanges of submissions;review of correspondence with arbitral tribunal; noexperts; preparation for an oral hearing andparticipation; preparation and review of one post-hearing brief. Approx. total cost: EUR 40,000 toEUR 50,000.
Assumptions based on the amount in disputeof EUR 1,000,000: Review of 500-1,000 pages ofdocuments; challenge to the jurisdiction of thearbitral tribunal; up to four exchanges ofsubmissions; review of correspondence witharbitral tribunal; experts are involved; preparationfor multiple oral hearings and participation in them;preparation and review of post-hearing briefs.Approx. total cost: EUR 80,000 to EUR 100,000 ormore depending on the specifics of the case.
Duration may be longer or shorter depending onthe case.
The expected duration of arbitration proceedingsat the International Commercial Arbitration Courtat the Ukrainian Chamber of Commerce andIndustry (ICAC) is 6 months.
There is no formal discovery in Ukraine.
Ukrainian law provides for the following stages ofenforcement procedure:
-submission of application on recognition andenforcement of a foreign judgment or arbitralaward to the local court; and,
The duration of court proceedings is not clearlyspecified by Ukrainian law. In general, suchproceedings should not last more than twomonths. But usually it may take longer tocomplete the proceedings as the judge hasdiscretion to extend the time frame of theproceedings.
The duration of enforcement proceedingsdepends mainly on whether the debtor hasenforceable assets and whether the enforcementmeasures are opposed by the debtor.
-In order to recognize and enforce a foreignjudgment or arbitral award, the applicantshould submit a list of documents provided forunder the relevant provisions of aninternational treaty to which Ukraine is a partyor under Articles 468 and 476 of the CivilProcedure Code of Ukraine.
-All documents must be translated intoUkrainian.
The court fee for filing the application on recognition and enforcement amounts to 0.5 living wage, i.e.,approx. EUR 25.
The submission of an application for recognition/enforcement and representation in court:
EUR 6,000 to EUR 12,000.
Enforcement of Foreign Judgments and Arbitral Awards
In order to locate all creditors, an announcementmust be placed on the official web page of theHigh Commercial Court of Ukraine.
The court duty for the submission of theapplication regarding the initiation of insolvencyproceedings to the local commercial courtamounts to 10 living wages (approx. EUR 500).
The attorneys' fees for filing an insolvency claimand representation in court may range from EUR12,000 to EUR 30,000.
Ukrainian law also establishes a court duty forother procedural actions/applications submittedwithin the insolvency proceedings. The amountsof such duties are relatively small.
Filing ofInsolvency Claimsby Creditors
The approximate duration of the insolvency proceedings is from one to several years. Particular timelimits with respect to each procedural stage of insolvency proceedings are provided for by theInsolvency Law.
A court must open an insolvency proceeding oncethe total amount of undisputed claims against thedebtor is equal to or exceeds 300 minimalsalaries (i.e., approx. EUR 30,000) and theseclaims are overdue for at least a three-month term.