Revisiting of the procedure codes was one of the important components of the Judicial Sector Reform Strategy 2015-2020 implementation; the Strategy is primarily aimed at practical implementation of the rule of law principle and ensuring that judiciary meets public demand for justice, as well as is compliant with European values and standards of human rights protection.
It was commonly accepted that the Economic Procedure Code of Ukraine required revisting in the first place. Despite the fact that the procedural issues of litigation in economic courts were clear and detailed, the vast majority of such details was provided by regulations of the plenums of the Supreme Court of Ukraine and the Supreme Economic Court of Ukraine rather than the Code itself.
The new version of the Economic Procedure Code of Ukraine (hereinafter – the EPC of Ukraine) has indeed been improved compared to its "predecessor": the Code is more structured and clearly defines actions which may be carried out by the parties at each stage of litigation; it also introduced brand new mechanisms thereto. At the same time, some deficiencies have been identified during the first 1,5 years of Code's application. Such deficiencies need to be removed, including through the amendments to the relevant legislation.
Based on the available case-law, we can note following major "pros" and "cons" of the revised EPC of Ukraine.
Achievements of the economic procedure
Clear procedural deadlines and limits for each stage of a case review have been determined.
First of all, introduction of clear procedural deadlines and limits of each stage of court proceedings is a great achievement, indeed. The previous version of the EPC of Ukraine did not provide for any "stages" of the court proceedings – there was no stage of preparatory proceedings (Article 63 of the previous version of the EPC of Ukraine determined possible actions of the judge aimed at preparation of the case for consideration, but they were not obligatory), the moment of commencement of a case review on the merits was not determined, etc. At the same time, according to the previous version of the EPC of Ukraine, the plaintiff had the right to submit an application to change the grounds or subject of the claim only before the commencement of a case review on the merits. The judicial practice addressed this issue to mitigate this gap.
Thus, Paragraph 3 Clause 3.12 of the Resolution of the Plenum of the Supreme Economic Court of Ukraine dated December 26, 2011, No. 18 "On Certain Issues Related to Application of the Economic Procedure Code of Ukraine by Courts of First Instance" provides that consideration of a case on the merits shall commence at the moment when the economic court starts consideration of claims following completion of case preparation for review, opening of a court session, clarification (if necessary) of rights and obligations of the parties' and other participants of the court proceedings, deciding on other petitions and applications (on adjourning the case, participation of other persons, requesting additional evidence, etc.); the court thereafter shall proceed directly with the establishment of the circumstances of the case and their legal assessment in the manner prescribed by the EPC, which shall be properly recorded in the minutes of the court session.
In addition, provisions of the amended EPC of Ukraine expressly determine the deadlines of consideration for each stage of the legal proceedings: 60 days for preparatory proceedings, 30 days for consideration of the case on the merits, 60 days for simplified proceedings, etc. This approach fully corresponds to the principle of reasonable timing for case consideration.
We find it a true benefit that currently each stage of legal proceedings with all procedural actions, undertaken (or not), is addressed in detail by a single legislative act. This approach confirms with the basic principle of legal certainty.
Deficiencies are not taken as a "disaster" any longer
Another particularly important and positive EPC amendment is the suspension of the statement of claim (statement of appeal and cassation claim) in case of any deficiencies which can be removed without dismissal. Any practicing lawyer will definitely agree that this amendment makes the life significantly easier for the case participants. The previous version of the EPC provided for returning or dismissal of the claim in the event of any deficiency (even if such was not meaningful). In practice it resulted in protraction of the case review, and sometimes even in procedural deadlines being missed by a respective party (for example, the deadline for filing a statement of appeal), which the court could refuse to prolong at the later stage.
Simplified and writ proceedings
Revised EPC of Ukraine provides for such types of proceedings as simplified and writ proceedings, which can also be deemed as a great achievement, since such proceedings are expected to be more time and cost efficient to the parties involved. According to the provisions of Article 247 of the EPC of Ukraine, simplified proceedings are intended for consideration of small claims, as well as any other cases under the jurisdiction of an economic court, save for certain exceptions listed by Part 4 of the above Article (for example, corporate disputes, disputes regarding protection of intellectual property rights). In its turn, writ proceedings may apply to consideration of cases for recovery of monetary debts under agreements executed in writing (including in e-form) provided the amount of the claim does not exceed one hundred living wages for able-bodied persons.
Development and introduction of simplified forms of legal proceedings has been on the agenda since 1981 and aimed at reducing the financial burden incurred by individuals, as well as reducing the timeframes of the proceedings. Thus, Clause 8 of the Recommendation R (81) 7 of the Committee of Ministers to Member States on Measures Facilitating Access to Justice dated 14 May 1981 provides that Member States of the Council of Europe should take all possible efforts to reduce the time for making a decision in the case. Therefore, it was recommended to cancel outdated procedures that had no practical value and to staff the courts with sufficient personnel that would contribute to facilitation of proceedings in a more efficient manner, as well as would develop mechanisms to monitor the progress of the proceedings from the start thereof. It is obvious that the core ideas of the above recommendation and the best practices of the EU countries were observed in terms of the new EPC drafting.
Introduction of the institute of witnesses in the economic proceedings
Another positive and progressive step towards improving the EPC of Ukraine was the introduction of the institute of witnesses in the economic proceedings. Traditionally, testimony of witnesses is associated with a civil or criminal litigation, but the parliament decided to supplement the list of sources of evidence in the economic proceedings, hence opening wider opportunities for a party to substantiate his/her legal position.
At the same time, revised Code reasonably limits the number of circumstances that can be established on the basis of witness's testimony. In particular, in accordance with Article 87 (2) of the EPC of Ukraine, circumstances (facts) that are recorded (laid down) in relevant documents as provided by law or business practices cannot be established on the basis of witness's testimony.
Rendering of an expert opinion requested by a party shall have the status equivalent to a conclusion of an expert examination appointed by the court
Also, we should note pros of Part 1 Article 101 of the EPC of Ukraine, according to which a party in the case shall have the right to file an expert opinion made on its request. Under Part 3 Article 98 of the EPC of Ukraine, an expert opinion made at the request of a party to the case and expert conclusion made as the result of an expert examination appointed by the court shall be treated as equivalent evidence.
The possibility of filing the conclusion of an expert examination issued at the request of a party to the case is appreciated by the legal community given that this instrument allows reduced timing of a case review.
Introduction of the concept of abuse of procedural rights and establishment of liability for such actions
Introduction of liability for the abuse of the procedural rights by the parties has been one of the most discussed topics within the legal community. "Procedural abusers" quite effectively used gaps in the previous EPC of Ukraine to delay proceedings and "influence" results thereof.
The list of abuses in the amended EPC of Ukraine includes the most common methods of proceeding protracting used by unscrupulous parties, such as filing appeals against a judgment that is not the subject to appeal, is not in force yet (already expired); filing motions (petitions) to resolve issues that have already been decided by the court in the absence of other grounds or newly-discovered circumstances; apparently unjustified challenging or other similar actions aimed at groundless delay or interruption of the case review or enforcement of court decisions.
We should separately note the following procedural abuses commonly used by unscrupulous parties in order to interfere the review and influence the outcome of the case: (1) filing several claims against the same respondent (respondents) with the same subject matter and on the same grounds, or filing several claims with a similar subject matter and on similar grounds, or carrying out other actions aimed at manipulating the automated allocation of cases; (2) filing an apparently unsubstantiated claim, or a claim not based on a dispute, or a claim resulting from apparently artificial dispute; (3) unreasonable or artificial consolidation of claims in order to change the jurisdiction of the case, or apparently unreasonable involvement of a person as the respondent (co-respondent) for the same purpose.
Now onward, if the court finds that the party or its representative abuses procedural rights, it may apply procedural restraints and even impose court fees upon such party, regardless of the outcome of the dispute.
We should separately note the novelty of the economic proceedings, which has both pros and cons for the parties – the small claims
According to the provisions of Clauses 1 and 2 Part 5 Article 12 of the EPC of Ukraine, small claims are: 1) cases, which amount does not exceed one hundred living wages for able-bodied persons; 2) not complicated cases recognized by the court as insignificant, except for the cases subject to consideration under the rules of regular proceedings only, and cases which amount exceeds five hundred living wages for able-bodied persons.
One of the specific features of small claims is that they cannot be revised in the court of cassation, except for cases mentioned in Sub-clauses (a) – (d) of Clause 2 Part 3 Article 287 of the EPC of Ukraine, namely: a) the cassation claim concerns a right that is crucial for the development of a uniform law enforcement practice; b) the person filing the cassation claim is deprived of the possibility to refute the circumstances established by the challenged decision in terms of another case; c) the case is publicly sensitive or is particularly important to the party filing the cassation claim; d) the court of first instance has mistakenly classified the case as "minor".
In this context, we believe that the limitation of the possibility to file a cassation against certain categories of cases may be demed as an achievement of the new EPC of Ukraine. First of all, this helped reducing the "workload" of cassations courts, and allowed them focusing on the most important legal issues. This novelty is fully in line with the international regulations and ECHR's case-law.
In accordance with the established practice of the European Court of Human Rights (for example, Ponomarov v. Ukraine, Riabykh v. Russia, Nieliubin v. Russia), revision by the supreme judicial bodies shall be aimed at correcting mistakes made by courts, as well as deficiencies of the judiciary rather then conducting yet another review; revision should not replace the appeal itself, and the mere fact of existence of two contradicting opinions shall not serve as the grounds for a new consideration.
Similar opinion was expressed by the Cassation Administrative Court within the Supreme Court of Ukraine in case No. П/811/1170/16 whereby the Court stated that revisiting a case in the cassation proceedings, the Supreme Court of Ukraine being the highest judicial body pursuant to Part 3 Article 125 of the Constitution of Ukraine, shall act as a "court of law" and shall consider disputes having the utmost importance for the public and the state. Thus, the Supreme Court within the law-enforcement activities is able to ensure individual benefit, taking into account the fact that a person, his/her life and health, honor and dignity, inviolability and security are recognized as the highest social value in Ukraine.
Despite the fact that the introduction of the institute of small claims was a significant step forward, many issues arising from this category of cases have been detected in practice.
As an example, we can refer to the uncertainty of the consequences of a court decision to review small claims under the rules of regular proceedings. Thus, in accordance with Part 6 Article 250 of the EPC of Ukraine, when the court decides to consider the case in the simplified procedure, and further at its own initiative or at the request of a party to the case, it subjects the review to the rules of the regular proceedings, the consideration of the case shall begin with the stage of the proceedings commencement.
At the same time, in accordance with Part 2 Article 12 of the EPC of Ukraine, regular proceedings are intended for consideration of cases which, due to their complexity or other circumstances, may not be considered within the simplified proceedings. Thus, a logical question arises on whether a claim ceases to be small once it changes the category from simplified to regular.
Unfortunately, the EPC of Ukraine is silent in this regard; the court practice is unable to give a straightforward answer, as well. We believe that if a minor case changes the type of proceedings from simplified to regular, the claim shall cease to be deemed small, since the appointment thereof for review under the rules of regular proceedings means that the case is not minor and is more complicated given the nature of the legal relations involved. In its turn, this undermines representation by any procedurally capable person, and requires the parties to engage attorneys.
Regardless of all the pros of the revised EPC, it has some cons as well.
Deficiencies detected over the 1.5 years following effectiveness of the new EPC of Ukraine
We should note that the court practice found that certain promising amendments may in practice have negative consequences for the parties.
Disqualification of a judge – exercising the right to impartial trial or abuse of procedural rights?
Mechanism of a judge disqualification aimed at removing judges whose impartiality is doubted is one of the procedural guarantees of the performance of the tasks envisaged by the economic proceedings and Article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms. Revised version of the EPC of Ukraine contains an improved disqualification mechanism as compared to the previous version of the Code. Even if a judge considering the case decides that the disqualification is groundless, respective motion must be considered by another judge (who is not a member of the panel of judges considering the case). Such mechanism of consideration should have resulted in genuinely unbiased decision under disqualification motion.
However, judges managed to find a countervailing mechanism aimed at overcoming the disqualifications. With reference to Article 43 of the EPC of Ukraine courts find a motion for disqualification of a judge to be an abuse of procedural rights and dismiss or return such motion to an applying party. This mechanism ensures the possibility of "avoiding" the motion review by another judge appointed by the system of automated allocation of cases.
Transfer of the case file to the court of appeal/cassation in case of challenging of certain court rulings
Another disadvantage of the amended EPC of Ukraine, which is used by many so-called "procedural abusers", is Clause 17.10 of the Transitional Provisions whereby filing of an appeal against decisions of the court of first instance envisaged by Clauses 1, 6-8, 10, 12-14, 17-21, 31-33 of the Part 1 Article 255 of this Code (for example, return of the statement of claim to the applicant (plaintiff), or filing a cassation claim against a ruling of the court of appeals (except for injunctive relief, change of interim remedies, counter injunctive relief, charging fines under procedural restraints, separate rulings) shall require transfer of the case file. Along with the transfer of the entire case file, the court makes a ruling to suspend the proceedings.
Unfortunately, the above clause of the Transitional Provisions of the Code opens a room for interpretations intended to delay a case consideration and is used by many unscrupulous parties. Even if the court of appeal/cassation refuses to commence proceedings under the claims against the above ruling, the transfer of the case file from one court to another (and returning it back) may take up to several months, which violates one of the principles of a fair trial, i.e. the reasonable timing of the case review.
Practical difficulties faced by the third parties regarding their right to appeal a court decision provided the rights and obligations of a respective third parties are affected by such decision.
Article 17 of the EPC of Ukraine stipulates that persons who did not take part in a case shall have the right to request its revisiting by the court of appeal and or cassation (in cases determined by law) provided the court decided on their rights, interests and/or obligations. However, revised Code, as well as its previous iteration, does not specify in which cases a judgement shall be deemed to concern rights and obligations of a person not being a party to the case. As a result, courts in practice tend to limit such list to the extent possible.
For example, the Supreme Court stated in the case No. 911/2635/17 that: "The decision shall be deemed to tackle the rights and obligations of a person who was not involved in the case review provided the reasoning part of the decision contains court conclusions in respect of the rights and the obligations of such person, or the court expressly indicated the rights and obligations of such persons in the operative part of the judgment". However, if the person whose rights and interests may be violated is not explicitly mentioned in the text of the judgment, it is considered that such person's rights were not violated.
Hence, if the judgment expressly mentions the impact made on the rights and obligations of any person who was not involved as a party to the case, such judgement shall be canceled. As a general rule, however, judgements do not expressly refer to the third parties' rights not involved in the case. It is even more so when it comes to inheritance disputes, as well as corporate legal relations.
In our opinion, such approach makes the institution of appeal of a judgment by a person that was not a party in the case only theoretical and illusory.
Summarizing above, we note that the revised version of the EPC of Ukraine has been significantly improved compared to the previous iteration thereof. The introduction of such novelties as writ and simplified proceedings, witness's testimony, and a clear determination of the limits and terms of each stage of the proceedings may be viewed as positive changes in the economic proceedings. At the same time, certain provisions the EPC of Ukraine were not thoroughly developed and effected, therefore we are looking forward to seeing the case-law, which would "clarify" certain provisions of the revised EPC; we also expect that the parliament will remove detected deficiencies.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.