While being recognized in the Constitution of Ukraine, the rule of law has hardly ever been fully implemented in the country’s actual life. One of its few causes, apart from almost permanent unstable economic situation and poor state governance, is a rather ineffective and non-transparent judicial system.
In an effort to combat corruption and political dependence of judges as well as increasing quality and speed of administration of justice, on 02 June 2016, the Parliament of Ukraine adopted a number of laws giving start to a highly-anticipated judicial reform:
- On Judicial System and the Status of Judges, No. 4734 (“the Law on Judicial System”);
- On Amendments to Constitution of Ukraine (regarding justice), No. 3524 (“the Law on Amendments to Constitution”), and
- On Bodies and Individuals that Carry Out Enforcements of Judgements and Decisions of other Bodies, No. 2506a (“the Law on Enforcement of Judgements”).
Some of the changes introduced be the laws above most probably will have a significant impact on the way litigation is carried out in Ukraine. Hence, this article is aimed at addressing at the most crucial of them as well as analyzing most critical challenges the judicial reform might face.
The Law on Judicial System
Obviously, among all the improvements the Law on Judicial System is intended to introduce to the administration of justice in Ukraine, what stands out the most is the transformation of the judicial system and its structure. Before focusing on its overview, however, few words should be said about the judges and their new status. According to recent polls, the level of trust among Ukrainian people to courts and judiciary does not exceed 3-5 per cent, so one of the few aims of the judicial reform is to develop and establish such working conditions for judges that will eliminate any, or at least most of the risks of judges being involved in corrupt activities. Thus, the Law on Judicial System contains numerous provisions which increase professional standards for judges, considerably raise their compensation, introduce effective responsibility, improve the judicial self-governance, etc.
Currently, before the Law on Judicial System becomes effective in part regarding the new structure of the court system, Ukrainian judiciary consists of the courts of general jurisdiction and the court of constitutional jurisdiction (the Constitutional Court of Ukraine).
At a glance, the courts of general jurisdiction are so far composed of such a 4-pillar structure:
- Courts of the first instance, consisting of local general courts, local commercial courts, and circuit administrative courts;
- Courts of appeals, consisting of appellate courts, commercial appellate courts, and administrative appellate courts;
- Courts of cassation, consisting of the Superior Specialized Court on Civil and Criminal Cases, the Superior Commercial Court of Ukraine, the Superior Administrative Court of Ukraine;
- the Supreme Court of Ukraine.
The Law on Judicial System provides that the newly-formed system of the courts of general jurisdiction in Ukraine will have the following 3-pillar structure:
- Courts of the first instance, consisting of circuit courts (criminal and civil jurisdiction), circuit administrative courts, and circuit commercial courts;
- Courts of appeals, consisting of appellate courts (criminal and civil jurisdiction), appellate administrative courts, and commercial appellate courts;
- The Supreme Court.
Previously, local general courts and commercial courts as well as circuit administrative courts, subject to a number of exceptions, always acted as the courts of the first instance. The Law on Judicial System provides that these courts will be substituted by respective circuit courts. The decisions of the latter will be further appealed to the appellate courts, which will accordingly be established on a circuit base only.
One of the most unexpected changes to the judiciary structure is the establishment of two unique specialized courts: the Superior Court on Intellectual Property and the Superior Anti-Corruption Court. The necessity of their creation, however, is rather questionable. First of all, the jurisdiction of these courts itself has not been defined in the Law yet but is subject to amendments to Ukrainian procedural laws. Secondly, it is true that litigants may benefit from narrowly-specialized in IP judges. Nevertheless, the number of disputes related to intellectual property in Ukrainian courts is not that big, so that a new court with its supposedly significant budget allocations is needed to be established. Finally, the jurisdiction of the Superior Anti-Corruption Court should be linked to the investigative jurisdiction of the recently created National Anti-Corruption Bureau, which is expected to become the main governmental tool in fighting corruption in the highest echelons of authorities. Considering the possible number of cases submitted to such court on behalf of the National Anti-Corruption Bureau (such number should not be big), it seems uncertain whether it is actually reasonable to create a new court for such category of disputes.
Significant reformation of the Ukrainian highest judicial authority, Supreme Court, will take place as well. It primarily will carry out justice as the court of cassation and continue on sharpening court practice. Somewhat confusing linguistically, but the Supreme Court shall consist of 5 internal bodies: the Great Chambers of Supreme Court, the Administrative Court of Cassation, the Commercial Court of Cassation, the Criminal Court of Cassation, the Civil Court of Cassation. Such bodies will deal with the cases which fall within the scope of the respective court’s specialization.
The Law on Judicial System stipulates that the Administrative Court of Cassation shall necessarily have the separate chambers for the following cases: tax, social rights protection, and political rights protection. As to the Commercial Court of Cassation, it shall also have separate chambers for bankruptcy, intellectual property and antitrust, and corporate disputes.
Apparently, the new structure of the Supreme Court is quite compound, but the question remains whether such transformation will genuinely contribute to the unity of judicial practice, which is, in fact, one of its primary functions. The essence of the dissatisfaction of litigants with regard to the Supreme Court of Ukraine has always consisted in the lack of consistency of its judgements. For example, occasionally separate chambers of the Supreme Court of Ukraine (e.g. civil chamber and commercial chamber) interpreted homogeneous relationships differently, which amounted in the highest judicial body in the country causing legal instability instead of appropriately sharpening its case-law.
Considering that within the Supreme Court the new courts with its specialized chambers will be operating, we believe that such structure should contribute to the administration of justice in Ukraine. The cases will be heard by the newly-elected judges who are expected to be professionals of exceptional expertise without a requirement of having previous judging experience, though.
The Law on Amendments to Constitution
The Law on Amendments to Constitution together with the Law on Judicial System brings other notable changes to Ukrainian litigation. In our opinion, the most considerable reformations include the establishment of attorneys’ “monopoly” and introduction of the constitutional complaint procedure.
In order to understand the impact of implementation of attorneys’ “monopoly”, a little background information is needed. Currently, Ukrainian lawyers willing to represent the interests of clients in Ukrainian courts do not need to pass the analogy of the BAR exam so that they are allowed to argue the cases in courts. Moreover, even going to law school is not a requirement. The only limitation in this respect applies to practicing criminal law where in order to represent clients within criminal procedure during both pre-trial investigation and trial, Ukrainian lawyers are to have a legal education, 2 years of working experience with an attorney, pass the exam, and obtain an attorney’s license.
However, as soon as the Law on Amendments to Constitution comes into force, only attorneys will be entitled to represent clients in Ukrainian courts, subject to few limitations. Surely, such “monopoly” may and will not be introduced immediately. Only attorneys will be entitled to represent clients in the Supreme Court starting from 01 January 2017, whereas the date for the courts of appeals and the courts of the first instance is set for 01 January 2018 and 01 January 2019 respectively.
Ukrainian legal community is quite divided on the question whether the introduction of the “monopoly” is a positive notion. On one hand, it is argued that exclusive right of attorneys to represent clients in courts is not a privilege or additional opportunity, but rather it is about increasing their responsibility, which should be subsequently envisaged in procedural laws. On the other hand, the introduction of the monopoly is viewed as a limitation of the rights to access the courts, as there is a risk that attorneys’ fees may rise disproportionately. Additionally, it might be unreasonably costly for an individual to hire an attorney if he participates in the court proceedings as, for instance, a third party without a separate claim.
Another important notion introduced into Ukrainian litigation is the mechanism of constitutional complaint. In its essence, if an individual or a legal entity believes that the law applied in the final judgement in the dispute contradicts the Constitution of Ukraine and no other remedies are available, they will be entitled to file a constitutional complaint to the Constitutional Court of Ukraine which will be tasked with assessment of the constitutionality of such law. The question remains as to when should remedies be considered exhausted. Obviously, the decision of, for instance, the commercial appellate court that has not been appealed to the Superior Commercial Court of Ukraine due to failure to submit the cassation appeal in due time should not be viewed as such. We believe that under the old system, the remedies are to be considered exhausted when the courts of cassation or the Supreme Court of Ukraine delivers a judgment which subsequently becomes effective and final. Under the new system, it should be the Supreme Court which delivers such judgement.
Although we generally assess such mechanism as useful, what seems uncertain to us is whether the decision of the Constitutional Court of Ukraine, determining specific law or its provision to be invalid, will have retroactive effect. In other words, would it be possible for individuals and companies, who lost their cases in Ukrainian courts before such judgments of the Constitutional Court of Ukraine, to file claims to courts on the basis of the newly disclosed facts? The answer to such question may be given either by new amendments to the Constitution of Ukraine/procedural laws or after first such claim will actually be filed with a court.
The Law on Enforcement of Judgements
Effective enforcement of judgements has always been a longstanding concern for investors in Ukraine. The enforcement system currently faces substantial challenges since the percentage of actually enforced judgements is extremely low. Additionally, the officials responsible for the job are rather unmotivated (financially) and the cooperation between authorities in this area is problematic and complicated.
The main novelty of the Law on Enforcement of Judgements provides that, apart from the State Enforcement Service of Ukraine, now the decisions of the courts and other authorities may be enforced by private individuals or so-called “private enforcers”. Such individuals have to meet certain educational, age, and other requirements as well as pass the test to be allowed to enforce the decisions above. Another essential requirement is that such individuals are obliged to insure their professional liability. What is more, private enforcers are not allowed to enforce the judgments, the monetary value of which exceeds their insurance premium.
Importantly, private individuals and legal entities are free to choose individual enforcers from the Unified registry of private enforcers. The compensation of the private enforcers is set at a fixed amount (in case of enforcement of non-monetary decision), or percentage of the amount to be enforced, or the price of the property. Since the collector with private enforcer may agree on additional advance costs payments or compensation, it gives us good grounds to believe that one of the most problematic notions in Ukrainian litigation might be solved and the risk of not enforcing a successfully-won case will be at least decreased, if not eliminated.
Published by International Litigation News, IBA, September 2016