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UKRAINE: An Introduction to Dispute Resolution: Domestic

Date of publication: 18 March 2021

Roman Marchenko, Attorney at Law, Senior Partner

Source: Chambers Europe 2021

Ukraine remains resilient despite the shocks of 2020 and continues to implement legislative reform.

First dispute under the EU-Ukraine Association Agreement

In 2020 Ukraine saw the first dispute relating to the framework of the EU-Ukraine Association Agreement. This is the second instance in the EU’s history of a case being reviewed by ad hoc arbitration provided for by the bilateral interstate trade agreement.

On 20 June 2019, the EU initiated arbitration against Ukraine under Article 306 of the EU-Ukraine Association Agreement regarding Ukraine’s prohibition of unprocessed timber exports. While the EU supports legitimate measures taken by states to preserve forests and combat illegal logging, it has frequently stated that Ukraine’s export prohibition cannot be considered an appropriate or effective measure for that purpose. The EU has repeatedly offered Ukraine assistance in the area of forest preservation and management. Since 2005, however, Ukraine has maintained a permanent ban on the export of timber and lumber of valuable and rare species. In 2015, a temporary ban of ten years was imposed on the export of unprocessed timber of any species with the exception of pine. A moratorium on the ban on pine wood export began on 1 January 2017.

Ilyashev & Partners Law Firm is defending Ukrainian trade and economic interests in this dispute between Ukraine and the EU. The Arbitration Panel’s hearings took place on 22-23 September 2020 via videoconferencing.

The final ruling on 11th December 2020, of a dispute settlement panel set up under the EU-Ukraine Association Agreement, found that the general Ukrainian export ban introduced in 2015 on all unprocessed wood is incompatible with Article 35 of the AA. The ruling also found that the export ban limited to ten specific wood species introduced in 2005 could be partially justified under plant life protection exceptions.

Legislative updates

The Parliament of Ukraine passed a number of amendments to the Economic Code, the Civil Procedure Code and the Code of Administrative Procedure of Ukraine in 2020.

New legislation now limits the possibility of appealing the lower courts’ judgments to the Supreme Court. Such amendments should protect parties’ rights to speedy consideration of cases and quick advancement of a judgment to its enforcement. It should also protect parties from the possibility of unjustified complaints. At the same time, the changes impose a greater responsibility on the courts of appeal, since their judgments become final and can be revised via cassation only in exceptional cases.

2020 marked a year since the Bankruptcy Proceedings Code of Ukraine came into force, establishing a bankruptcy procedure for individuals. By the end of the year, however, the number of such cases was insignificant, possibly due to the high cost of the procedure for ordinary debtors. Nevertheless, there remains a demand for personal bankruptcy proceedings.

On 6 October 2020, the President of Ukraine extended the Moratorium on Foreclosure of Ukrainian Citizens’ Property Provided as Collateral for Foreign Currency Loans until 21 April 2021. Thus, foreclosure on mortgaged property is not yet possible.

Development of the judicial system

Big legal news last year included the Constitutional Court’s ascertainment of a discrepancy between the provisions of Article 3661 of the Criminal Code of Ukraine (‘Declaration of false information’) with the provisions of the Constitution of Ukraine. This article provided the punishment for subjects deliberately filing false data in a declaration, or a deliberate failure to file a declaration. Furthermore, the Constitutional Court declared unconstitutional the powers of the National Agency on Corruption Prevention (NACP) to check the declarations of the officials. The judgment of the Constitutional Court, dated 27 October 2020, found the anti-corruption measures previously approved by the Parliament of Ukraine to be illegal. The NACP was forced to close proceedings in 62 corruption cases.

In 2020 the number of corruption-related criminal proceedings against top officials increased. However, due to the CCU’s judgment, the High Anti-Corruption Court of Ukraine (HACC) was forced to close proceedings in criminal cases started under Article 3661 of the Criminal Code of Ukraine after 27 October 2020. The HACC passed its first sentence on 30 October 2019.

On 13 February 2020, in accordance with article 147 of the Law of Ukraine ‘On the Judiciary and the Status of Judges’, the IP Court of Ukraine was registered as a legal entity. However, no set date has been given for when the court will start operating.

Domestic litigation

Due to the pandemic, local courts successfully conducted many cases via videoconferencing. The Unified Judicial Information and Telecommunication System in Ukraine is yet to be fully implemented. Nevertheless, the experience of the pandemic demonstrated the need for and the convenience of such a system.