One recent court case highlights the current confusion surrounding Ukraine’s legal system and the fears that it is unable to arbitrate effectively. An investor from Scotland won a tender and was awarded the right to a 25-year lease on a 10-hectare plot of land in Kyiv. He carefully followed all of Ukraine’s land regulations and procedures, and finally the Kyiv Council gave him the required permission.
It turned out that on this plot of land there was a 100 square-metre private house. The house was built dozens of years ago.
The house’s owner claimed that the Kyiv Council decision was wrong and took the case to court.
As a result of this wrangle there were two court hearings in two courts – the High Commercial Court and the Administrative Court. Two weeks ago, the High Commercial Court ruled that the Kyiv Council’s decision to give the plot of land to the investor was illegal. But a month earlier the Administrative Court had ruled that the decision was legal.
In other words, two Ukrainian courts ruled in opposite ways on one and the same case.
“These two contradictory decisions from two different courts on the same case have been the talk of the town for ages. This is a huge problem. We clutch our heads. We have no idea what to do, and it is also not clear who should solve this problem. Even (Head of Ukraine’s Supreme Court Vasyl) Onopenko does not know what to do,” comments Dmitry Kreynin, Head of the Board at the Kyiv-based Guaranty Law Firm. “The situation is paradoxical. But It makes you laugh for only the first five minutes - then you realize you’re trapped in a deadlock,” he adds.
Complete nightmare
“Ukraine’s judiciary system is very far from perfect. It is the country’s most corrupt branch of power, while the courts are perhaps its most corrupt institutions. This is what any investor in Ukraine should clearly realise,” states Kreynin.
Ukraine first reformed its Soviet judicial system over ten years following 1991 independence. For ten years the country lived in judicial chaos. As a result, Ukraine has a new court system based on the archaic 1981 law on the judicial system.
The current court system was created in 2002. It consists of four levels of courts of general jurisdiction: local courts of general jurisdiction (courts of first instance); then appeals courts and military courts; then the so-called specialised courts including commercial courts and administrative courts; and the Supreme Courts as the highest legal authority in the land charged with covering all legal cases. The Constitutional Court of Ukraine is an additional, special body with the authority to assess whether legislative acts are in line with Ukraine’s constitution.
In practice there are three courts of general jurisdiction - general, commercial and administrative - whose jurisdictions inadmissibly overlap each other, causing chaos in the court system. Moreover, there are four court instances in Ukraine. This is the most awkward feature of the local court system. Three main functions of justice are hearing, appeal and cassation. In Ukraine, there are two cassations, which creates an insolvable conflict inside the system, explains Kreynin. “Apart from all the specialised courts, including the commercial court, your case is also considered by the Supreme Court. Two cassations is a complete nightmare,” says the lawyer.
Judges considered above the law
A regulatory body does exist which has the unique authority to rule upon a judge’s alleged violation, to withdraw a judge, and to exercise disciplinary procedures against the judges of the Supreme Court and the High Specialised Courts. The body is the High Council of Justice. The High Council of Justice consists of former and current judges. However, it remains idle because the Supreme Court has not nominated its representatives.
“Those judges will never rule against themselves, never exercise disciplinary procedures against themselves – they are all friends. The High Council’s idleness lets the judges feel invulnerable,” argues Kreynin.
Vladimir Lukovych, a lawyer with another Kyiv-based law firm, Frishberg & Partners, explains that the judges are elected for a life term – unlike a five-year term in Soviet times. “This is how they usurp power,” says Lukovych. He points out that the life term policy was actually recommended by the European Community. “But in Europe they have traditions of following the rule of law. Ukraine does not,” he adds.
It may at first glance appear paradoxical, but the 2004 Orange Revolution appears to have plunged Ukraine’s court system into a new wave of severe corruption. “The judges have realised their impunity. Political leaders took advantage of keeping the court system under control. Chaos – manual control – the wanted results,” Lukovych says.
“Don’t expect the judges to follow the law. Considering the frequent elections and the ongoing parliament crises, nobody cares about what judges are doing – and they are working on a ‘commercial basis’. Where a monopoly exists, corruption exists, too. The world’s court systems have always been built on a doctrine, logic, and legislation. In Ukraine, the judges interpret laws as the paying client desires instead of strictly following them. Doctrine does not work here,” he adds. “We, the lawyers, are in shock - our knowledge means nothing now,” complains Lukovych, who has worked as a lawyer since 1993.
To illustrate his point Lukovych describes a recent incident where a group of heavily drunken Ukrainian citizens were ejected from an international carrier’s plane by local police as they were due to leave the Dominican Republic. The Ukrainians filled a suit against the carrier in a Ukrainian court, claiming that the carrier committed its obligations malevolently. The court ruled against the carrier, prescribing that it compensate the travellers for their return tickets and the few days they spent in a local hotel waiting for the next flight. “That was not the carrier’s fault, and they shouldn’t have had to compensate those whose outrageous conduct aboard upset other passengers,” offers Lukovych. “I won’t be surprised if a Ukrainian court rules that cannibalism is permissible because human meat is a dietetic foodstuff,” he jokes.
A permanent state of reform
As Ukraine contemplates EU integration, NATO membership, WTO accession and an improving international business investment climate, analysts both inside the country and internationally agree that the first priority should be to clean up the country’s notoriously corrupt court system. However, there are little evidence as yet that the government possesses the necessary political will to force through effective reforms.
“Ukraine’s court system is in a process of permanent reform”, states Roman Kuybida, Deputy Head of the Board of the Kyiv-based Centre for Political and Legal Reforms. He is one of many professionals who have heard politicians sloganeering about court reform without managing to implement their far-reaching plans. In 2006 President Yushchenko approved a strategic plan for improving Ukraine’s judiciary to create a fair court system aimed at the fixing of the county’s legal corruption woes and replace them with a European standard judiciary.
Lawmakers gave preliminary approval to two draft laws focused on the removal of subjective factors in court practices in order to prevent fraud through a better mechanism of selecting judges, their higher transparency and responsibility, the expert explains. Since then, the draft laws have never been discussed in parliament due to various crises.
Oleksandr Pasenyuk, Head of Ukraine’s High Administrative Court, has even said that complete court reform will prove possible only after respective changes are made in the country’s constitution and stresses that a review is desperately needed of the control over the country’s court system, which is divided between the President, Verkhovna Rada and the High Council of Justice.
“The main players – the Supreme Court, the President, the government, the parliament, and higher courts – will necessarily fight to preserve their control,” echoes Kuybida, adding that the current crisis has postponed reform by one year at least.
Kreynin questions the ability and will of the authorities to reform the court system properly. “Everybody talks about the need for reforms but too little is being done – it is a very long and painful process, and nobody wants to lose control.”
Ignorance is bliss
Last month, Ukraine’s Prime Minister Yulia Tymoshenko caused an uproar when she appeared to instruct tax and customs services employees, as well as “other agencies involved in the process of levying taxes” not to fulfil what she termed as “evidently illegal court rulings.”
“I hope she said it as a joke,” comments Kreynin. “The Premier herself stated something beyond the law! How can an investor protect his investments other than through the court?” Kreynin argues. “I am sure that if investors could properly protect their investments, those investments would have been much higher,” he adds.
The Head the Supreme Court Onopenko has defended his colleagues from the political onslaught, commenting recently: “Today’s impertinent interference in the work of the country’s courts is unprecedented.” However, his brother has been appointed deputy head of the country’s customs service to head the customs’ legal department, and Onopenko’s son-in-law is deputy justice minister. “Is that purely coincidental?” asks Guaranty’s Kreynin wryly.
