The Commercial Cassation Court Within the Supreme Court Acknowledged the Possibility to Review Judgments in Exceptional Circumstances on Grounds of the Constitutional Court of Ukraine's Establishing the Unconstitutionality of the Provision of Law

The city council appealed to the Commercial Court of the Khmelnytskyi region with a lawsuit against a company on the obligation of the defendant to take actions to transfer the rooms in the hostel to the ownership of the territorial community of  Khmelnytskyi city by signing the acceptance-transfer act with reference to the provisions of Articles 1, 3, 5, 14, 18 of the Law Ukraine "On Realization of Housing Rights of the Residents of Hostels".

By the judgment of the Commercial Court of the Khmelnytskyi Region dated May 28, 2019, the lawsuit was dismissed on the grounds of unreasonable claims.

By its decision dated September 26, 2019, which was left unchanged by the resolution of the Commercial Cassation Court within the Supreme Court dated December 14, 2021, the North-Western Commercial Court of Appeal cancelled the decision of the Commercial Court of the Khmelnytskyi Region dated May 28, 2019 and issued a new decision. With this decision, the lawsuit was satisfied, the company was obliged to take action to transfer rooms in the hostel of Khmelnytskyi city into the ownership of the territorial community by signing the acceptance-transfer act.

The company filed an application to review the judgment of the North-Western Commercial Court of Appeal dated September 26, 2019 in case No. 924/57/19 due to exceptional circumstances and asked the court to cancel the specified judgment in full and to make a new decision on the refusal to satisfy the appeal of the Khmelnytskyi City Council against the decision of the Commercial Court of the Khmelnytskyi Region dated May 28, 2019. The company referred to the fact that in the understanding of paragraph 1 of part 3 of Art. 320 of the Commercial Procedure Code of Ukraine, an exceptional circumstance is the unconstitutionality of the norm of subparagraph “b” of paragraph 1 of part 3 of Art. 14 of the Law of Ukraine "On Realization of Housing Rights of the Residents of Hostels" (as amended), which was established by the Decision of the Constitutional Court of Ukraine dated October 20, 2021 No. 7-r(II)/2021 in case No. 3-181/2020(440/20) and which (the norm) was applied by the court of appeal when resolving this dispute. Therefore, the city council’s claims in this case cannot be satisfied. At the same time, the defendant said that as follows from the Automated System of Executive Proceedings the executive proceedings for the execution of the order of the Commercial Court of the Khmelnitskyi Region dated October 16, 2019 No. 924/57/19 had not been fulfilled yet, that is, the decision of the North-Western Commercial Court of Appeal of September 26, 2019 had not been executed.

According to the ruling of the North-Western Commercial Court of Appeal of December 23, 2021, the application for review of the decision of the North-Western Commercial Court of Appeal of September 26, 2019, due to exceptional circumstances, was rejected.

The Commercial Cassation Court within the Supreme Court did not agree with the specified ruling of the Commercial Court of Appeal and drew attention to the following.

From the content of the provisions of paragraph 1 of part 3 of Art. 320 of the Commercial Procedure Code of Ukraine, it is clear that its application requires a combination of the following conditions:

1) the Constitutional Court of Ukraine established the (un)constitutionality of a law, another legal act or their separate provision, (not) applied by the court when resolving the case;

2) the exclusive nature of the case which consists in the fact that the judgment has not been executed yet, that is, when the consequences provided for by it have not finally occurred.

The resolution of the Supreme Court Grand Chamber of November 18, 2020, in case No. 4819/49/19 formulated a legal conclusion, the point of which was that the analysis of the provisions of Section XII of the Constitution of Ukraine («the Constitutional Court of Ukraine») and the Law of Ukraine «On the Constitutional Court of Ukraine» give grounds to conclude that the decision of the Constitutional Court has a direct (prospective) action in time and is applicable to those legal relationships that continue or arose after its adoption. If the legal relationship continued and arose before the adoption of the decision of the Constitutional Court of Ukraine (CCU), but continue to exist after its adoption, then they are subject to such a decision of the CCU. It means that the decision of the Constitutional Court of Ukraine applies to legal relations that arose after its adoption, as well as to legal relations that arose before its adoption, but continue to exist (go on) after that. The effect of the CCU decision may not apply to legal relationships that arose and ended (terminated) prior to its adoption.

The stipulation regarding the possibility of judicial review due to exceptional circumstances, if it has not yet been fulfilled, is based on the principle of legal certainty, which requires respect for the principle of res judicata - respect for the final decision of the court. The point of this principle is that the decision of the court, which has entered into legal force, is mandatory, cannot be questioned and is subject to execution, that is, the decision of the court of the disputed issue is accepted as the truth.

The principle of res judicata requires that a state of legal certainty must be established between the parties to a dispute, as determined by a final and binding judgment. When resolving a commercial dispute, the court applies a legal act. If the court concludes that a legal act is contrary to the Constitution of Ukraine, then it does not apply it in compliance with the procedure established by part 6 of Art. 11 of the Commercial Procedure Code of Ukraine and, having thus resolved the dispute, establishes a state of legal certainty in relations between the parties. According to a court decision that does not require execution, such a state and the consequences provided for by the court decision are established immediately upon its entry into force. At the same time, according to Art. 1 of the Law of Ukraine "On Executive Proceedings", executive proceedings are the final stage of judicial proceedings and enforcement, in particular, of court decisions. The consequences of a judgment requiring execution are definitive once the judgment has been executed. It is with the execution of the court decision that the rights of the person who filed the corresponding claim with the court are really renewed and, based on the results of the execution of this court decision, the person receives certainty in the legal status on which he can rely, exercising his rights and obligations.

The Commercial Cassation Court within the Supreme Court stated that, when applying for a review due to exceptional circumstances of the decision of the North-Western Commercial Court of Appeal of September 26, 2019, the defendant quite reasonably noted that in this case the exceptional circumstance was established by the Decision of the Constitutional Court of Ukraine of October 20, 2021 No. 7-р(ІІ)/2021 in case No. 3-181/2020(440/20) which found the unconstitutionality of that particular provision of the law (subparagraph “b” of paragraph 1 of part 3 of Art. 14 of the Law of Ukraine "On Realization of Housing Rights of the Residents of Hostels" (as amended)), which was applied by the appellate court in the resolution of this commercial dispute, and the fact of failure to comply with the decision of the North-Western Commercial Court of Appeal of September 26, 2019, due to the non-completion of the executive proceedings at the present time, indicated that the applicant complied with the requirements of paragraph 1, part 3 of Art. 320 of the Commercial Procedure Code of Ukraine.

In violation of the requirements of Articles 86, 320 of the Commercial Procedure Code of Ukraine, the appellate court, limiting itself to the reference to the impossibility of the influence of the Decision of the CCU of October 20, 2021 No. 7-р(ІІ)/2021 in case No. 3-181/2020(440/20) on disputed legal relations as those that arose before the adoption of such Decision by the CCU, as well as the assumption of a probable violation by the company of the residential rights of a person due to the fact that the provision of subparagraph "b" of paragraph 1 of part 3 of Art. 14 of the Law of Ukraine "On Realization of Housing Rights of the Residents of Hostels" (as amended) was found unconstitutional, in general avoided investigating the circumstances of non-compliance as of October 20, 2021 of the decision of the North-Western Commercial Court of Appeal of September 26, 2019 in case No. 924/57/19. Such a circumstance in the wording of paragraph 1 of part 3 of Art. 320 of the Commercial Procedure Code of Ukraine is one of the mandatory prerequisites for reviewing a court decision due to exceptional circumstances. Similarly, this court avoided examining an essential circumstance, that, in view of the likely failure to execute the decision of the North-Western Commercial Court of Appeal of September 26, 2019, the disputed legal relations in this case continued to exist (went on) after the adoption of the said decision of the CCU, and therefore could not be considered terminated.

The Commercial Cassation Court within the Supreme Court came to the conclusion that it was necessary to cancel the decision of the appellate court as a result of incorrect application of the provisions of paragraph 1 of part 3 of Art. 320 of the Commercial Procedure Code of Ukraine and to refer the case for a new trial to the court of appellate instance.

Resolution of the Supreme Court of September 27, 2022 in case No. 924/57/19 - https://reyestr.court.gov.ua/Review/106506730.

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