1. LEGAL SYSTEM

The Ukrainian legal system is based on codified principles of civil law. In Ukraine disputes may be resolved 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 and anticorruption 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 of Ukraine: the Civil Procedure Code of Ukraine No. 1618-IV, dated 18 March 2004, the Commercial Procedure Code of Ukraine No. 1798-XII, dated 6 November 1991, the Code of Administrative Proceedings of Ukraine No. 2747-IV, dated 6 July 2005, and the Criminal Procedure Code of Ukraine No. 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 the compliance with the Constitution of Ukraine of statutes and regulations issued/passed by Ukrainian official bodies (the Parliament, the President, the Cabinet of Ministers), etc.

The courts of general jurisdiction are authorized to consider civil, commercial, administrative, and criminal cases as well as cases on administrative offences. The system of courts of general jurisdiction consists of:

-first instance courts, being the local common courts and specialized courts (i.e., local commercial and administrative 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 courts responsible for adjudicating these specific type of cases as the first instance court (both courts have been 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. These courts have territorial jurisdiction over comparatively small administrative territories. They are the courts of first instance and their decisions are subject to appeal to common courts of appeal. The decisions of courts of appeal are subject to appeal (so-called cassation appeal) to the Supreme Court (namely, its chambers called the Civil Cassation Court and the Criminal Cassation Court).

Disputes with respect to commercial matters involving companies and other legal entities as well as individual entrepreneurs are considered by commercial courts. Local commercial courts have territorial jurisdiction over disputes in the oblasts (the Ukrainian provinces). There is a separate commercial court in the city of Kyiv.

Usually, the jurisdiction of the commercial courts of appeal covers the first instance commercial courts located in several adjacent oblasts. The decision of local commercial courts can be appealed to the designated commercial court of appeal. The Supreme Court (its chamber called the Commercial Cassation Court) is the final level of appeal (cassation) of the commercial courts.

The jurisdiction of administrative courts covers public administrative disputes with respect to different legal acts of state authorities and/or related to their power and authority (save for administrative offences, 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, and then to the Supreme Court (its chamber called the Administrative Cassation Court), which is the final appeal (cassation) court level for administrative disputes.

The Supreme Court is the highest judicial body within the system of courts of general jurisdiction. The Supreme Court acts as a final cassation body for Ukrainian courts of general jurisdiction and consists of the following chambers: (i) the Great Chamber of the Supreme Court (in certain cases this acts as appeal/cassation instance for other chambers of the Supreme Court, analyses and summarizes legal positions of the Supreme Court); (ii) the Administrative Cassation Court; (iii) the Commercial Cassation Court; (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 conflicting applications by lower courts of the same legal provisions have binding effect on state bodies and state officials and must be followed by the Ukrainian courts of lower instances. Furthermore, the Supreme Court, as well as lower specialized courts, regularly issue their interpretations and recommendations on court practice for the purpose of ensuring uniformity in the application and interpretation of the law by Ukrainian courts. As a matter of practice, these interpretations and recommendations are usually taken into 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 submitted claim meets all formal requirements and, provided it does meet the requirements, issues a court ruling accepting the claim into consideration (i.e. initiates proceedings in the case) and sets the first hearing date. Usually, a court requires a defendant to provide a statement of defence stipulating whether the defendant admits the claim and, if not, to provide its objections; the claimant may in its turn respond to the defendant's objections, etc. Such statement of defence may or may not be provided subject to the defendant's discretion. Obviously, a defendant that is interested in presenting its position to the court will provide 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 shall be scheduled. The purpose of the preliminary proceedings is to initially consider the scope and details of the claim and the relief sought, to obtain all written pleadings from the parties, to file counterclaims (if any), to identify individuals and/or legal entities that should participate in the trial, to identify relevant facts 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 the hearing at which the merits of the case will be considered. There is no preliminary stage in certain types of cases (such as labour law cases or "insignificant cases") - proceedings there start with the consideration of the merits of the case.

Upon completion of the preliminary proceedings the court will decide to either (i) close the proceedings in the case; (ii) leave the claim without consideration; or (iii) close the preliminary proceedings and set the 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 the initiation of proceedings in the case and should last no more than 30 (thirty) days. The courts, especially in commercial proceedings (unless the case at hand is complicated or involves multiple parties), do tend to meet this requirement. When it comes to other proceedings, a court case consideration can sometimes be a lengthy process. Several months to up to several years may elapse before a final decision is issued.

At the first hearing, after addressing certain procedural/technical issues (i.e., the verification of the parties involved and the powers of their representatives as well as an announcement of the panel of judges or sole 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 and the parties may present their legal positions and statements. The claimant (plaintiff) is the first to present its position and claims; with the respondent following with its position and objection. The parties also have the right to pose questions to one another. At court hearings the court examines the evidence presented by 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 for another date. Subsequent failures to attend court hearings may have the following consequences: (a) if the plaintiff fails to attend (and the court is not notified that the case may be heard without the claimant attending), the court may dismiss the statement of claim without consideration; and, (b) if the defendant is absent, the court renders a decision based solely on the evidence and arguments already contained in the 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 court opens the proceedings in accordance with the procedure provided by the relevant procedural code of Ukraine.

Litigation costs include court fees, parties' legal fees, expenditures of witnesses, experts, etc. The court fees depend on the subject of the claim (whether it is a monetary or a non-monetary claim, etc.), the type of 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 of claim 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 any other procedural document to which a fee applies. In certain cases, when the amount of fees may not be known prior to filing the above documents, the fees (or the balance of the fees) may be paid at a later stage. 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 is awarded court fees pro rata to the extent the court decision is rendered in its favour); however, courts do have 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 with particular fraud hotspots likely to be Ukraine's governmental agencies as well as banks, other financial institutions, 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 business related crimes. Developments and progress in this regard have also been significantly affected by international pressure on Ukraine.

Ukraine is a member of the Group of States against Corruption (GRECO), which is the Council of Europe’s anti-corruption monitoring body. Further, as a member of the Council of Europe, Ukraine and its law 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 (including companies). The criminal liability for legal entities was introduced only recently (in 2014) in the course of the implementation of the recommendations of GRECO and MONEYVAL, as well as the implementation of a number of international treaties to which Ukraine is a party. Under Ukrainian criminal law, legal entities may be liable, inter alia, for crimes of money laundering, acts of terrorism and illegal warfare, war propaganda, genocide, various illegal actions with weapons, violent seizure of state power, bribery and improper influence on officials of companies and state bodies, abuse of power, kidnapping or hostage taking committed by authorized representatives of such legal entities on their behalf or in the interest of such legal entities.

The current Criminal Procedure Code of Ukraine ("CPC") came into effect on 20 November 2012 and replaced the prior law which had been in effect since the 1960’s. Criminal proceedings include the following stages:

Pre-trial investigation

In general, criminal proceedings are initiated by (a) the reporting of a criminal offence to an investigator or 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 discovery of 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 as the 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 (in case the above actions haven’t caused any aggravating consequences) are matters of private accusation 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 all elements of the crime. After a pre-trial investigation is finalized and subject to sufficient evidence of crime, the case is handed over to a prosecutor for the prosecutor to verify and approve the conclusion of a formal criminal charge, and to send the case to court.

Judicial proceedings

During the course of judicial proceedings and court hearings, courts directly examine all the evidence in the case, question the accused persons and witnesses, analyse the conclusions of experts, review and analyse protocols and other documents, and consider other evidence relevant to the case. Such direct evidence examination by courts, rather than by investigation authorities at the pre-trial investigation stage, was introduced by the CPC and aims to overcome the possibly inappropriate influence on investigation authorities during the pre-trial investigation.

Both the accusing side (prosecutor, victim or civil claimant and their legal representatives) and the defence side (the accused, defence attorney or civil defendant and legal representative) enjoy equal procedural rights under the law, including the right to file objections, submit evidence and to appeal procedural decisions and the final court verdict. A trial by jury was introduced by the CPC and is now available for an accused (at his/her discretion) facing a potential life sentence. However, most crimes punishable by a life sentence are not business crimes, though such crimes may accompany business crimes in certain situations.

In addition, the CPC introduced a significant new concept in Ukrainian criminal procedure which is the opportunity to conclude (a) a reconciliation agreement between the suspect (or accused) and the victim in which the parties agree upon certain compensation; and (b) a plea bargain, i.e. an agreement between the prosecutor and a suspect (or an accused) on the admission of guilt in return for the prosecution arguing for a more lenient sentence. Either of these agreements can be entered into at the pre-trial stage or during the judicial proceeding, but in any case before the court begins to deliberate its verdict.

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 of appeal is limited by the issues raised in the appeal and can only review the case beyond these limits in exceptional 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 period to the court of cassation. The court of cassation examines the case within the limits of the cassation appeal, does not have the right to examine evidence and consider certain circumstances of the case which were decided by the lower courts. Instead, the court of cassation verifies whether the lower courts applied 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 new circumstances important for the case were subsequently discovered that may warrant overturning it.

The key authorities involved in criminal proceedings are the investigation authorities, prosecutor offices and courts.

Investigator

As mentioned above, an investigator has the right to initiate criminal proceedings in cases of public accusation. An investigator is a key authority at the pre-trial investigation stage, during which he or she undertakes 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 investigation measures that can prove the innocence of the suspect and other measures requested by the defence side.

Pre-trial investigation is generally handled by police investigators, although certain types of crimes may be 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 tax authorities which conduct investigations of tax-related crimes.

Prosecutor

Similar to an investigator, a prosecutor also has the right to initiate criminal proceedings in cases of public accusation. At the pre-trial investigation stage, a prosecutor generally controls the investigation process 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 the state prosecutor decides not to proceed with the prosecution of the alleged perpetrator the victim may assume prosecution in the case.

Court

Although control over the investigation process is carried out by a prosecutor, with the effect of the new CPC certain control functions at this stage were transferred to courts. In particular, specially appointed investigative judges in the courts of general jurisdiction consider complaints filed against any illegal actions or omissions committed by investigators or prosecutors.

In addition, a prior approval by the investigative judge is required for certain investigation actions and restraint measures, including the arrest of a suspect, seizure of property, imposition of monetary penalties, bringing a person to court, suspension of an accused person from his or her job, granting to an investigator temporary access to certain objects or documents, temporary suspension of an accused person from using a special right (e.g., right to conduct entrepreneurial activity, driver's license, etc.), and temporary retrieval of property.

When the investigation is finalized and provided there is sufficient evidence of crime, the case is sent for judicial 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 person has the right to compensation for damage suffered as a consequence of a crime. For this, a filing of a civil lawsuit within the same criminal proceedings or a separate lawsuit within separate civil proceedings should be conducted by the victim.

Criminal courts may issue preliminary injunctions against defendants. A civil claimant has the right to request an imposition of a property seizure in order to secure a civil claim within a criminal case or within separate civil proceedings.

If a victim opts for separate civil law proceedings (rather than bringing a civil lawsuit within the same criminal proceedings), the guilt of the person that committed a crime, if established by a verdict in the criminal 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 be extended in certain circumstances up to a maximum of 12 (twelve) months. There is no precise term during which the trial proceedings should be finished, but the CPC requires that such term should be reasonable. 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, except where 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 those parties 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 a suspect/accused or their defence attorney is borne by the suspect/accused. Such costs incurred by legal representatives of other participants in the criminal proceeding are borne by the persons whom they represent; and

-costs related to the involvement of witnesses, experts, translators and specialists are generally borne by the party that requested their involvement in the criminal case. In certain cases such cost may be borne by the state, in particular when an expert examination was undertaken at the order of the investigative judge or of the court.

In the case of a conviction verdict, the court charges the convicted person for all the procedural expenses incurred by the victim.

Insolvency proceedings in Ukraine are mainly regulated by the Law "On Restoring a Debtor's Solvency or 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 its solvency by means of financial rehabilitation or by way of conclusion of a settlement agreement and to satisfy creditors’ claims through means other than the liquidation of a debtor.

Insolvency matters involving debtors incorporated in Ukraine are handled by commercial courts, which consider filings solely against corporate entities and individuals who are registered as private entrepreneurs. In order to initiate a procedure, a creditor or a debtor must submit an application with a set 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 the debtor is equal to or exceeds 300 minimal salaries (i.e., around EUR 31,000) and these claims are at least 3 (three) months overdue.

The Insolvency Law provides for the following types of procedures which may be initiated by a court against 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 accepted or 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 insolvency application). At the preparatory hearing the court examines whether there are indeed sufficient grounds for an insolvency proceeding, and, if the court is satisfied with the sufficiency of the grounds, opens the insolvency procedure. If a court comes to the conclusion that there are insufficient grounds for the opening of the insolvency proceeding, it rejects the application.

At the preparatory hearing a court can also take a decision on introducing asset management over the debtor, 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 initiation of the insolvency proceeding.

During the asset management procedure, the troubled company and its activities are first scrutinised and thereafter a likelihood of its salvaging is evaluated. It is an important phase of an insolvency procedure since, depending on its results, the debtor is further subject to either rehabilitation or liquidation procedures. If rehabilitation is unsuccessful, the debtor will face insolvency liquidation resulting in the seizure of the debtor-company and the collection of all its assets in order to satisfy the claims of as many creditors as possible.

The Insolvency Law requires that during the asset management procedure an asset manager examines the 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 the preliminary 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 are approved by the court are included into the creditors' claims register. The register will serve as the basis for 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 the possibility for a court to grant one extension for up to 2 (two) months. Upon the expiration of this term, a court, depending on the particular case, can make one of the following decisions: (a) a decision on opening rehabilitation proceedings (which may last no longer than 6 (six) months with a possibility for the court to extend such period in exceptional circumstances for another 12 (twelve) months); (b) a decision on opening liquidation proceedings (which may last no longer than 12 (twelve) months with no possibility for 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 amicable settlement 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 and may act in one of three capacities: as an asset manager (during the asset management procedure), as a rehabilitation manager (at the stage of the debtor’s rehabilitation), or as a liquidator (at the stage of the debtor’s liquidation). The insolvency administrator's key responsibilities are specified by the Insolvency Law and generally include supervising the actions of the management of the debtor and the debtor's assets during the insolvency proceedings.

In order to locate all creditors, an announcement about the insolvency proceeding should be made on the official website of the High Commercial Court of Ukraine. Careful monitoring of official announcements is of significant importance for the creditors whose claims matured before the opening of the insolvency procedure (i.e., so-called pre-insolvency creditors). Claims of such competitive creditors must be filed with a commercial court within 30 (thirty) days after the public announcement is made. Failure to timely file a claim will result in changing the ranking of the claim to the lowest priority claim. Such creditors will not be treated as competitive creditors and, therefore, will not be allowed to vote at the creditors' meetings and be elected to the creditors' committee.

Cross-border insolvency

Under the Insolvency Law, foreign creditors have the same rights as Ukrainian creditors and participate in 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 parties may apply to Ukrainian courts for freezing orders and for the recognition of foreign insolvency proceedings in Ukraine. Ukrainian courts are obliged to cooperate with foreign insolvency courts and provide relevant legal assistance in relation to any such foreign insolvency proceedings. However, for these 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 international arbitration proceedings. The primary law regulating domestic arbitration covering disputes between Ukrainian parties is the Law of Ukraine "On Courts of Arbitration" No. 1701-IV dated 11 May 2004. The Law 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 based on the UNCITRAL Model Law on International Commercial Arbitration.

According to the ICA Law, the following disputes can be submitted to an international arbitration in Ukraine: disputes arising out of cross-border contracts in the course of foreign trade and other forms of international economic relations, provided that the place of business of at least one of the parties to the dispute is situated outside of Ukraine; disputes involving enterprises with foreign investments or international associations or organizations established in Ukraine. The ICA Law may be interpreted as stating that disputes between two Ukrainian legal entities, provided that at least one of such entities has a foreign shareholder, may be subject to international arbitration.

The ICA Law provides that an international arbitration proceeding in Ukraine may be conducted either by a tribunal set up specifically for a given case (ad hoc arbitration), or by an arbitral institution. The ICA Law provided for the establishment of the following two permanent Ukrainian arbitral institutions: the International 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 civil or commercial international dispute, except for the following disputes which fall within the exclusive competence of Ukrainian courts: disputes on the validity of state acts and acts of legal entities; disputes arising 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 disputes between shareholders of a legal entity and disputes between a legal entity and its shareholder (except for cases when such disputes arise out of an agreement and all shareholders have concluded an arbitration 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; disputes between a legal entity and its manager(s) on compensation for damages caused to the legal entity; as well 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 between a legal entity and its shareholder could not be submitted to arbitration in the past (i.e. prior to December 2017) has affected the corporate structures for investing in Ukraine, especially those involving a shareholders agreement. As a result, many joint venture projects are structured using non-Ukrainian holding entities at the level at which shareholders agreements are signed. This allows the parties to provide for arbitration in the shareholders agreements or other documents among shareholders and the companies.

However, in view of the recent legislative changes that took effect in December 2017 and which now allow arbitration with respect to corporate disputes when there is an arbitration agreement in place between a legal entity and all of its shareholders, it is expected that more parties will be encouraged to opt for settling / deciding their corporate disputes in Ukraine rather than on an off-shore level using foreign corporate structures.

Arbitration agreements must be made in writing and may be either in the form of an arbitration clause in the contract between the parties or in the form of a separate arbitration agreement. An arbitration agreement is also deemed to be made in writing if it is contained in documents signed by the parties or in an exchange of letters, telex, telegrams or other means of electronic communication which provide for a record of an agreement, or in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and is not denied by the other. A reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement provided that the contract is executed in writing and the reference may be interpreted as making the arbitration clause an integral part of the contract.

An arbitration agreement must expressly indicate the full name of the arbitral institution and the disputes that the parties have agreed to submit to arbitration. However, any deficiencies of the arbitration agreement's wording, any doubts as to its validity and enforceability should be interpreted in favour of the validity and enforceability of the arbitration agreement. The parties are free to agree on the substantive law, the procedural rules, the seat and language of arbitration, the number of arbitrators and the method for their appointment. If the parties do not agree on the applicable procedural rules in the arbitration 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 to the arbitration agreement. If the parties fail to choose the applicable law, the arbitral tribunal will determine the applicable law in accordance with the conflicts of law rules as provided for by the Law of Ukraine “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 exceed 6 (six) months; however, this term may be extended in certain cases when an extension is required and can be justified.

The ICAC and MAC arbitration rules allow a party to obtain injunctive relief at its request. An arbitral tribunal may demand that a party should provide security deemed to be appropriate in connection with such measures. Such injunctive relief may be granted at any stage of an arbitral proceeding, as well as before the proceedings commence. An arbitral order for injunctive relief is binding on the parties and remains in force until a final arbitral award is made. However, the enforcement of such an arbitral order for 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 of evidence 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 to perform it voluntarily, an award can be enforced according to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

The ICA Law does not provide for the possibility to appeal awards on their merits. An award may be challenged only by initiating proceedings to set aside the award before a state court and only on the following grounds:

-invalidity of the arbitration agreement due to the incapacity of one of the parties to conclude an arbitration 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 an international 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 and awards may be recognized and enforced based on the reciprocity principle, which is presumed (unless proven otherwise).

Ukraine has entered into a number of conventions, treaties, and agreements on legal assistance in civil matters (mainly with former members of the USSR or post-socialist countries) providing for recognition and enforcement of foreign court judgments. Further, Ukraine is a party to the Commonwealth of Independent States (CIS) 1992 Treaty "On Procedure of Settling Disputes with Regard to Carrying out of Commercial 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 and enforcement 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 Foreign Arbitral Awards and the 1961 European Convention on International Commercial Arbitration, the provisions of which were implemented into Ukrainian procedural laws. When it comes to awards rendered in non-contracting states (i.e. states which are not parties to the above-mentioned conventions), 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 be submitted 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 jurisdiction over the territory where a debtor is located, or if that debtor’s location is unknown or it is located outside of Ukraine, over the territory where the property is located) in order to obtain a relevant enforcement order. An application for enforcement must contain details of the debtor and the person seeking enforcement, 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 of appeals having jurisdiction over the city of Kyiv. An application for enforcement must contain details of the 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 of attorney, 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 detailing the procedure and stages for enforcement of the judgment. Documents in a foreign language must be accompanied by a translation into Ukrainian.

With respect to the enforcement of a foreign arbitral award, an application for recognition and enforcement should be supported by the following documents: (a) an original or a certified copy of the arbitral award; (b) an original or a certified copy of the arbitration agreement; (c) evidence of payment of the filing fee; (d) a document confirming the powers/authority of the applicant (if the application for enforcement is submitted by its representative), and (e) a certified translation into Ukrainian of all documents listed above. Failure to observe the formal requirements as to the documents that must be submitted to the court will result in returning the application for enforcement of the arbitral award to the applicant without the application's consideration.

According to Article 468 of the Civil Procedure Code, a state court must reject the application for enforcement of a foreign judgment on the basis provided in the applicable international treaty ratified by Ukraine. If the applicable international treaty does not list such basis, the application is subject to rejection 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 between the same parties or there is a similar court proceeding pending in Ukraine as of the time that proceedings were initiated in the foreign court;

-if the time period for enforcement of the foreign judgment provided for by an effective international treaty 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 subject matter 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 for recognition 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 arbitration agreement 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 out in 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. The debtor may file a complaint with the relevant court against officers of the enforcement service responsible for enforcement of the foreign judgment / arbitral award.

2. LITIGATION

3. BUSINESS CRIME

4. INSOLVENCY

5. ARBITRATION

6. ENFORCEMENT OF FOREIGN JUDGMENTS AND ARBITRAL AWARDS

7. PRACTICE TIPS

PRACTICE TIPS

TYPE OF PROCEEDINGS

PROCEDURE AND ASSUMPTIONS

Limited.

-As a matter of practice, litigation, especially civil proceedings, may last much longer than the statutory designated terms.

-Courts must justify extensions of procedural terms.

There is no formal discovery in Ukraine.

jury trials

Approximate Duration

-A party may participate in proceedings either personally or via its representative.

-In criminal proceedings representation by counsel is mandatory in a number of cases.

Mandatory Representation

by Counsel

STANDARD CIVIL PROCEEDINGS AND COMMERCIAL PROCEEDINGS

Approximate Costs

COURT FEES

ATTORNEYS’

FEES (NET)

Limited.

Standard Civil Proceedings Court Fees constitute 1.5% of the amount in dispute (for monetary claims of companies), but not less than 1 living wage (approx. EUR 50) and not more than 350 living wages (approx. EUR 18,000).

Commercial Proceedings Court Fees constitute 1.5% of the amount in dispute (for monetary claims) 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 a lawsuit, four court hearings, preparation for the hearings, preparation of procedural documents

(e.g., position papers), correspondence with the client: In total EUR 10,000 to EUR 25,000;

second instance: preparation of the appeal and procedural documents, participation in up to 2 court hearings: EUR 10,000 to EUR 20,000;

Third instance: preparation of the appeal and procedural documents, participation in up to 2 court hearings: EUR 8,000 to EUR 20,000.

class actions

Both Standard Civil Proceedings Court Fees and Commercial Proceedings Court Fees are based on the Law of Ukraine "On Court Duty".

-The Ukrainian Civil and Commercial Procedure Codes do not provide for a special proceeding for collective redress.

-Traditional tools of multiparty practice as consolidation of proceedings are applied.

-Parties may also opt for filing a collective lawsuit with several plaintiffs.

Standard Civil and Commercial Proceedings: First instance: 3 months; second and third instances: 2 months if a final decision is appealed, and 30 days if an interim court ruling on procedural issues is appealed.

Yes. There is legal aid for people who cannot afford the costs of legal proceedings.

Document Production

A trial by jury is available for the accused (upon his/her request) facing a potential life sentence.

Limited.

The practice of jury trials is still developing as the jury trial option was introduced into the Criminal Procedure Code of Ukraine only in late 2012.

Pro Bono System

A trial by jury was introduced by the new Criminal Procedure Code of Ukraine and is now available for the accused (upon his/her request) facing a potential life sentence.

class actions

Approximate Duration

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 criminal proceedings.

The services of a defense attorney provided to the suspect by the state in cases prescribed by law are free of charge. The fees for a defense attorney in other cases may vary significantly depending on a lot of things. A rough estimate for a simple case would be from EUR 2,000 to EUR 10,000 for representation at pretrial investigation and from EUR 5,000 to EUR 20,000 for representation at court hearings in the first instance court.

In the case of a conviction verdict, the court will charge the accused for all of the procedural expenses incurred by the victim.

Criminal proceedings may be initiated with respect to several suspects. There can also be several victims of the crime. However, if several victims seek to bring civil claims, each victim needs to bring his/her own separate civil claim.

Legal representation of the suspect and by a defence attorney is obligatory in specific cases envisaged by the Criminal Procedure Code of Ukraine or if requested by the investigator, prosecutor or investigative judge.

-If the accused opts for a jury trial, he or she must file a motion during the preliminary court hearing requiring a trial by jury.

-Although a life sentence is generally not envisaged for business crimes, it may apply in certain cases if a business crime is committed simultaneously with a more serious crime, such as murder.

Investigation case files with respect to several persons suspected of committing the same crime as well as investigation case files on several crimes suspected of being committed by one person can be united into one case either at the pre-trial stage or at the judicial proceedings stage.

The investigator must undertake investigation measures that he/she deems appropriate as well as measures requested by the defence side.

Limited.

-If the state prosecutor declines to prosecute, the victim may assume prosecution.

-The plaintiff's side is represented by the state prosecutor.

jury trials

General rules of criminal proceedings apply to business crimes and include the pre-trial stage and the stage of judicial proceedings.

Pro Bono System

Criminal proceedings for a business crime may be initiated either by reporting the criminal offence to investigators of competent authorities or by a prosecutor, or by the discovery of a crime by an investigator or a prosecutor, depending on whether the crime is subject to public, private or public-private accusation.

Document Production

Business Crime

APPROXIMATE COSTS

PROCEDURAL COSTS

ATTORNEYS’

FEES (NET)

Mandatory Representation

by Counsel

Yes. A defence attorney must be provided to the suspect free of charge when, e.g., the participation of a defence attorney is obligatory or is requested by the investigator, prosecutor or investigative judge and the 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 a certified attorney (advocate) should act as defence counsel in criminal proceedings.

The court may require the applicant to provide a pledge as security of the relevant request (counter-injunction) which should be commensurate to the injunctive relief awarded. Such counter-injunctive measures are usually implemented through the claimant depositing a certain amount of funds (bank guarantee, surety, etc.) with the court.

In order to request a preliminary injunction, the applicant must pay a court duty amounting to 0.5 of the minimum wage, i.e., approx. EUR 25.

Assumption: The request for a preliminary injunction is filed and the court renders its decision ex parte (which, as a matter of practice, often happens): EUR 2,500 to EUR 6,000.

A preliminary injunction may be requested in civil and in commercial proceedings. The Civil and Commercial Procedure Codes of Ukraine provide that a preliminary injunction may be requested by the applicant in order to secure the provision of evidence to the court during the proceedings and enforcement of the final decision in the case. The court must consider the request within 2 days after the submission of the relevant application. Such preliminary injunction may be obtained either before commencement or at any stage of the court proceedings.

Preliminary Injunction Proceedings

-Together with a request for a preliminary injunction, the applicant must provide evidence that the preliminary injunction is necessary and prove that non-application of the preliminary injunction may result in the violation of the claimant's rights and interests and may complicate enforcement of the decision in the relevant court case or make it impossible.

-The court may request additional explanations or documents.

Approximate Duration

APPROXIMATE COSTS

COURT FEES

ATTORNEYS’

FEES

-The arbitration fee payable for non-monetary claims amounts to USD 1,800.

-Arbitration proceedings may also involve additional expenses.

APPROXIMATE COSTS

Procedural Costs

ATTORNEYS’

FEES (NET)

Simple Case

Complex Case

Limited.

Procedural costs at the ICAC include primarily the registration fee and the arbitration fee:

The registration fee is USD 600.

The amount of the arbitration fee varies depending on the amount in dispute, number of arbitrators involved, complexity of the case and administrative charges.

Examples: If the amount in dispute is

-USD 200,001 to USD 500,000 - the arbitration fee is USD 9,200 + 2% of the amount above USD 200,000;

-USD 500,001 to USD 1,000,000 - the arbitration fee is USD 15,200 + 1% of the amount above USD 500,000;

-USD 5,000,001 to USD 10,000,000 - the arbitration fee is USD 38,700 + 0.3% of the amount above USD 5,000,000;

-above USD 50,000,000 - the arbitration fee is USD 118,700 + 0.1% of the amount above USD 50,000,000.

If the case is considered by a sole arbitrator, the arbitration fees are subject to a 20% decrease.

Assumptions based on the amount in dispute of EUR 1,000,000: Review of 100 pages of documents; no challenge to the jurisdiction of the arbitral tribunal; two exchanges of submissions; review of correspondence with arbitral tribunal; no experts; preparation for an oral hearing and participation; preparation and review of one post- hearing brief. Approx. total cost: EUR 40,000 to EUR 50,000.

Assumptions based on the amount in dispute of EUR 1,000,000: Review of 500-1,000 pages of documents; challenge to the jurisdiction of the arbitral tribunal; up to four exchanges of submissions; review of correspondence with arbitral tribunal; experts are involved; preparation for multiple oral hearings and participation in them; preparation and review of post-hearing briefs. Approx. total cost: EUR 80,000 to EUR 100,000 or more depending on the specifics of the case.

Arbitration Proceedings

Document Production

Duration may be longer or shorter depending on the case.

The expected duration of arbitration proceedings at the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry (ICAC) is 6 months.

There is no formal discovery in Ukraine.

Approximate Duration

Ukrainian law provides for the following stages of enforcement procedure:

-submission of application on recognition and enforcement of a foreign judgment or arbitral award to the local court; and,

-enforcement proceedings.

The duration of court proceedings is not clearly specified by Ukrainian law. In general, such proceedings should not last more than two months. But usually it may take longer to complete the proceedings as the judge has discretion to extend the time frame of the proceedings.

The duration of enforcement proceedings depends mainly on whether the debtor has enforceable assets and whether the enforcement measures are opposed by the debtor.

-In order to recognize and enforce a foreign judgment or arbitral award, the applicant should submit a list of documents provided for under the relevant provisions of an international treaty to which Ukraine is a party or under Articles 468 and 476 of the Civil Procedure Code of Ukraine.

-All documents must be translated into Ukrainian.

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.

Approximate Duration

APPROXIMATE COSTS

COURT FEES

ATTORNEYS’

FEES (NET)

Enforcement of Foreign Judgments and Arbitral Awards

APPROXIMATE COSTS

COURT FEES

ATTORNEYS’

FEES (NET)

In order to locate all creditors, an announcement must be placed on the official web page of the High Commercial Court of Ukraine.

Approximate Duration

Insolvency Proceedings

The court duty for the submission of the application regarding the initiation of insolvency proceedings to the local commercial court amounts to 10 living wages (approx. EUR 500).

The attorneys' fees for filing an insolvency claim and representation in court may range from EUR 12,000 to EUR 30,000.

Ukrainian law also establishes a court duty for other procedural actions/applications submitted within the insolvency proceedings. The amounts of such duties are relatively small.

Filing of Insolvency Claims by Creditors

The approximate duration of the insolvency proceedings is from one to several years. Particular time limits with respect to each procedural stage of insolvency proceedings are provided for by the Insolvency Law.

A court must open an insolvency proceeding once the total amount of undisputed claims against the debtor is equal to or exceeds 300 minimal salaries (i.e., approx. EUR 30,000) and these claims are overdue for at least a three-month term.

CONTACT

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