Recently the higher courts of Ukraine, namely the Higher Commercial Court of Ukraine (the HCCU), the Higher Specialized Court for Civil and Criminal Cases (the HSCU) have issued a number of resolutions and guidance letters. Certain questions highlighted therein may be of special interest and are presented below.

The HCCU Resolution No. 9 "On Certain Practical Issues of Enforcement of Judgments, Resolutions, and Regulations Rendered by the Commercial Courts of Ukraine" dated 17 October 2012:

Enforcement of judgments and the role of settlement agreement in this procedure

Ukrainian law prescribes that parties may enter into a settlement agreement at the enforcement procedure stage. Such an agreement is subject to affirmation by a court. For this purpose, a court shall issue a ruling. By affirmation of the settlement agreement, the court imbues it with the power of a court order.

Under Ukrainian law, once an agreement has been affirmed, it cannot be amended in any way.

Monetary claims and property recovery order

In cases where a debtor lacks the funds to meet its liabilities, a commercial court may change the manner of enforcement of a judgment and issue a court order to recover the debtor's property.

According to the Enforcement Proceeding Law, the state enforcement agent shall determine the property to be recovered. Therefore, the court is not obliged to indicate the specific property and may state only its monetary equivalent.

However, the law does not prohibit the court from defining the property to be enforced in cases where it has obtained reliable information regarding the debtor's property.

Even if the subject of a filed claim is monetary, a court order may be issued for the recovery of a specific property. For example, if a party failed to perform its financial obligations, the court upholding the monetary claim could issue an injunction on recovery of indebtedness on the debtor's private collection of paintings. Ukrainian law deems such situations to be lawful.

The HSCU Letter No. 10-1393/0/4-12 "On Court Practice of Application of Legislation in Settlement of Disputes Arising from Loan Agreements":

Termination of guarantee agreements

According to the civil law of Ukraine the provisions of guarantee agreement establishing that the agreement remains effective until the debtor has fully performed its obligations towards the creditor under the loan agreement should not be understood as provisions determining the duration of a guarantee, because this would contradicts the civil law definition of 'terms of duration' and the means of its calculation. Consequently, courts shall consider such a guarantee agreement as lacking provisions regarding the term of its duration. Therefore the agreement may be deemed terminated in case the creditor fails to raise its demands with the guarantor within six months of the date on which the right of claim arises.

The moment of loan agreement conclusion

The loan agreement is deemed to be concluded after parties reach mutual consent about all essential terms of agreement and put it in writing. The transfer of money under a loan agreement should be understood as the performance of obligation under the agreement but not as a necessary condition for it to become effective.

Therefore if the debtor under loan agreement claims that he has failed to withdraw the loan money from the bank account opened for this purpose at the creditor bank and argues that the loan agreement has not therefore be concluded, the courts should find such debtor liable under the loan agreement as it should be deemed effective as of the of signing.

Amendments to the HCCU's Guidance Letter No. 01-06/249 of 9 October 2012 regarding new court practice established by the Supreme Court of Ukraine:

Insurer's remedies

Under Ukrainian law, in case an insured event occurs and the insurer pays the proceeds to the injured party, the insurer automatically obtains the right of claim against the party causing damage.

It should be noted that in such cases the insurer is not required to contact the person responsible or such person's insurers before filing a claim against them directly with the court.

Limitation period

The limitation period for insurer's actions based on this right of subrogation (regress) begins from the moment the insurance proceeds are paid not from the moment of insured event occurred.

Change of creditor and the guarantee agreement

Civil law of Ukraine provides that the guarantor by performing his obligations under the guarantee agreement becomes a new creditor. The change of the creditor in the obligation may take place without the consent of the debtor unless otherwise required by law or agreement.

Thus there are no legal grounds to invalidate the guarantee agreement if the guaranteed loan agreement does not explicitly prohibit the change of the creditor in the obligation without the consent of the debtor.

Given this position of the courts, to minimize the risks of adverse change of the creditor without prior consent the borrower would be well-advised to insist on including such prohibition clauses in the loan agreements.

Obligation to provide information to territorial offices of AMCU

The HCCU highlights the provisions of the Ukrainian law that entitles not only the Antimonopoly Committee of Ukraine (the AMCU) but also, within certain limits, its territorial offices to request and obtain from legal entities information necessary for certain market research. Legal entities are correspondingly required to provide such requested information.

The Court further notes that failure to comply with the requests of the AMCU or its territorial offices may entail liability of the legal entity concerned.

HSCU Guidance Letter No. 10-1386/0/4-12 "On Certain Issues Arising In the Course of Application of the Court Fee Law":

Joinder of parties and court fee

The Court Fee Law provides that in case of several plaintiffs file a joint claim against one or several defendants the court fee should be calculated from the total amount of claims and should be paid by each plaintiff in proportion to its claims by separate receipts.

Despite this provision the Law allows one plaintiff to pay the entire fee. The decisive fact for the courts should be that the full amount of court fee has been paid to the state treasury.

For further information please contact managing partner Oleksiy Didkovskiy
and senior associate Andriy Pozhidayev