Oleksiy Didkovskiy and Anna Tkachova of Asters in Kiev give an introduction to the Ukrainian court system
How is the court system structured?
The Ukrainian court system consists of (i) the Constitutional Court, the sole court of constitutional jurisdiction, as well as (ii) the general courts, which are divided into the following categories by specialisation:
(a) common courts that hear civil and criminal cases, as well as cases relating to certain administrative offences
(b) commercial courts that deal with disputes between legal entities and individual entrepreneurs; appeals from decisions of the Antimonopoly Committee of Ukraine relating to protection of economic competition; corporate disputes and bankruptcy cases; and
(c) administrative courts that adjudicate disputes with governmental agencies.
The general courts have a vertical structure comprising the following four levels: (i) local (trial) courts (courts of first instance), (ii) appellate courts, (iii) courts of cassation appeal (high specialized courts), and (iv) the Supreme Court of Ukraine.
Generally, all disputes should initially be submitted to trial courts. However, there are a few types of administrative cases (e.g., challenge of legislative acts, cases related to voting procedure, etc.), as well as civil cases against judges that are adjudicated by appellate or higher specialized courts as courts of first instance.
In total, there are 27 local commercial courts and 27 local administrative courts as these specialized courts are created in each region (oblast), the cities of Kyiv and Sevastopol, and in the Autonomous Republic of Crimea. Also, there are over 700 local common courts.
Common appellate courts are created in each region, Kyiv, Sevastopol, and Crimea. There are fewer commercial and administrative appellate courts, and their jurisdiction usually encompasses several regions.
The third level of general courts includes courts of cassation appeal (second appeal), i.e., the High Specialized Court for Civil and Criminal Cases, the High Administrative Court, and the High Commercial Court. The courts of cassation appeal review lower courts' decisions for their compliance with substantive and procedural law, rather than based on matters of fact or proof.
The Supreme Court of Ukraine is the highest judicial body in the general courts system. Its objective is to form unanimous and consistent court practice. The Supreme Court of Ukraine only hears cases in exceptional circumstances, such as if courts of cassation appeal have applied the same substantive legal rule inconsistently, resulting in different judgments regarding similar cases; if judgment of a court of cassation appeal is not in line with binding Supreme Court opinions; or if an international jurisdictional body recognized by Ukraine (such as the European Court of Human Rights) determines that Ukraine has breached its international obligations while adjudicating the case in its courts.
Ukraine has introduced special rules on administration of justice in (i) Crimea and Sevastopol that have the status of temporary occupied territories under Ukrainian law, as well as (ii) the rebel-held parts of eastern regions of Donetsk and Luhansk, i.e., the 'anti-terrorist' operation zone ("ATO zone").
Thus, the courts of Kyiv and Kyiv region adjudicate cases that should normally be within the purview of Crimea and Sevastopol courts.
As regards the ATO zone courts, their territorial jurisdiction has been transferred to the courts in neighboring regions. Also, efforts are made to physically relocate courts from Donetsk and Luhansk to other cities under the control of Ukrainian authorities.
What are the options available when resolving local law financial and corporate disputes?
The most common means of resolving corporate disputes is litigation in commercial courts. However, there are a few other alternatives. Thus, disputes can be solved by negotiations or mediation culminating in a settlement agreement between shareholders. Furthermore, certain disputes may be resolved via administrative procedure with a regulator. For instance, an aggrieved shareholder may apply to the National Securities and Stock Market Commission if a joint stock company fails to (i) provide information at such shareholder's request, as required by law, (ii) comply with the procedure for calling a shareholders meeting or appointing members to a company's governing body, or (iii) distribute dividends within the required term.
Notably, under Ukrainian law, corporate disputes may not be referred to arbitration. The legislative definition of corporate disputes purports to exclude disputes regarding sale and purchase of shares. Nevertheless, Ukrainian courts sometimes treat share purchase disputes as corporate ones, thus making it impossible to arbitrate them.
On April 7 2015, the Ukrainian Parliament adopted the Law on Amendment of Legislation regarding Protection of Investors' Rights, which strives to vest minority shareholders with the right to sue company management derivatively for damage caused to the company. These legislative amendments will take effect as of May 1 2016. Derivative claim is a novel concept for Ukrainian law. So far, Ukrainian courts throw out such claims by shareholders against company officers due to lack of standing.
As to disputes with financial institutions, these are most commonly settled through negotiations, litigated or arbitrated. Mediation is not that popular as a dispute resolution tool. This is partly due to the lack of any specific legal framework that would promote mediation, as well as assure that a settlement agreement entered into by the parties is in full and final settlement of a dispute. Importantly, under applicable Ukrainian law, mediation may result in a binding agreement consented to and signed by the parties; nevertheless, each party retains the right to bring a claim to a court or arbitration.
If you could make a change to the court infrastructure or processes, what would it be?
A judicial reform coupled with overhaul of related procedures and institutions (such as enforcement of judgments and the bar) is underway in Ukraine. To support this process, the Judicial Reform Council, a think tank comprised of prominent scholars and practicing lawyers, has been formed under the auspices of the Presidential Administration.
The recently enacted Law on Fair Trial has been one of the first tangible results of the Council's endeavors so far. This Law represents a pivotal step towards a reformed court system. The Law provides for greater independence of judges and their stricter liability, as well as adds transparency to litigation. The Law also vests more powers in the Supreme Court of Ukraine as regards supervising and ensuring streamlined practice of lower courts.
The Council is developing short, middle and long term reform strategy that appears to be comprehensive and progressive. If this strategy is implemented, court infrastructure and processes will improve significantly.
Ukrainian courts currently lack modern technologies and electronic operation systems. In an attempt to cure this shortcoming, the Ministry of Justice has launched a pilot project in several courts making it possible to shift from hardcopies to electronic documents exchange. If the new electronic documentation system starts operating at full fledge, this will make litigation less time- and effort-consuming.
Furthermore, Ukrainian courts should become more arbitration friendly. At the moment, no judicial assistance is possible in obtaining injunctive relief in arbitral proceedings or in arbitrator appointment procedure.