Ensuring uniformity of case law, optimising the court network and filling judicial vacancies: President of the Supreme Court outlines judicial priorities

The preceding week witnessed a significant development - Ukraine was granted the opportunity to commence the process of joining the European Union. At the same time, our country is facing certain conditions, one of which is the reform of the judicial system.

Stanislav Kravchenko, President of the Supreme Court, spoke about this during the XII Judicial Forum "Judiciary: How to Overcome the Crisis?".

In his speech, the Chief Justice outlined the most acute problems facing the courts, the most important of which is the lack of staff in the courts of first instance and appeal. There has also been a significant reduction in the number of cassation judges - around 25% of the judges' posts at the Supreme Court are currently vacant. However, even under these conditions, judges and court staff continue to carry out their professional duties in the administration of justice.

Furthermore, it is necessary to optimise and enhance the court system to comply with modern requirements.

The President of the Supreme Court further stated that an issue within the judicial system is the inconsistent application of the law, primarily caused by deficiencies and instability in the legislative regulation of particular legal relations. Similarly, departures from the legal positions previously established by the court are frequently linked to modifications in legislation.

Stanislav Kravchenko noted that since the Supreme Court cannot go beyond the requirements of the cassation appeal, the Court sometimes has to consider several different proceedings in order to form a coherent position on a particular issue.

At the same time, the President of the Supreme Court emphasised the lack of a mechanism to ensure the unity of jurisprudence on issues considered by investigative judges and arising in cases of administrative offences - in accordance with the provisions of the Criminal Procedure Code of Ukraine, decisions of investigative judges and court decisions in this category of cases are not subject to cassation appeal.

Against this background, there is currently an active debate on the possibility of solving this problem in an extra-procedural way, in particular by generalising case law in order to establish uniform, established approaches to the consideration of proceedings where cassation review is not provided for by law.

Stanislav Kravchenko also drew attention to the role of the Court in the legislative process, noting that a number of amendments to procedural legislation introduced since the beginning of the full-scale Russian invasion were the result of constructive cooperation between the judiciary and parliament. In recent months, the Plenum of the SC has also adopted three opinions on draft laws relating to the organisation of the work of the judiciary.

In addition, the Criminal Code of Ukraine was also amended: in particular, the legislator added new articles to the Special Part of the Code, which provide for criminal liability for crimes against the foundations of Ukraine's national security. Moreover, since the beginning of the large-scale war, the courts have been considering a new category of criminal proceedings - war crimes. In light of this, starting from April 2022, judges commenced actively scrutinising international practices related to these matters, and undergoing training on relevant case considerations.

Olena Kibenko, Judge of the Commercial Cassation Court of the Supreme Court, demonstrated how the Court develops new legal positions and how court practice evolves, using the example of cases considered by the Judicial Chamber on Cases on Corporative Disputes, Corporative Rights and Securities of the Commercial Cassation Court of the Supreme Court.

The judge highlighted the problematic issues that arise in cases involving the determination of the amount of charter capital and shareholders' shares. In particular, case No. 924/700/21 raised the question of whether the court's determination of the amount of the charter capital and the shareholder's shares could result in the loss of the shareholder's right to a share. The court held that the loss of this right is only possible in cases where a share is recovered from someone else's unlawful possession or where the rights and obligations of the purchaser of the share are transferred to the plaintiff. Such a way of protecting the plaintiff's rights as determining the amount of the charter capital and shares of the shareholders cannot lead to the loss of ownership of their shares and the status of shareholders (corporate rights) by other shareholders, i.e. to the actual expulsion of shareholders from the company. However, another case (No. 907/922/21) was referred to the Judicial Chamber for consideration in order to deviate from this position.

The judge also analysed the case law on the transfer of the purchaser's rights under a fictitious share gift agreement. The Supreme Court concluded that where the law provides for the pre-emptive right of others to acquire certain property, the owner of the property who has made the gift transaction must prove the reasonable motives for such a transaction. In the absence of such motives (in particular, in the case of a gift of property of significant value to a third party), the court may declare the transaction fictitious (resolutions of the Supreme Court of 13 October 2021 and 3 November 2022 in case No. 912/3747/20, 23 February 2023 in case No. 922/2182/21, resolution of the Supreme Court of Ukraine of 7 September 2016 in case No. 6-1026цс16).

In this category of cases, it is important to determine the value of shares to be paid by the party establishing the gift agreement as fictitious and requesting the transfer of the purchaser's rights and obligations. In its Resolution of 23 February 2023 in case No. 922/2182/21, the Supreme Court stated that this should be the nominal value, unless the defendants proved otherwise. However, case No. 910/1338/21 was referred to the Judicial Chamber for consideration of a departure from this position. The court concluded that the plaintiff is entitled to demand the transfer of the purchaser's rights at the market value of the share, i.e. it is the plaintiff, not the defendant, who must provide the court with an independent expert's opinion on the market value of the share and pay the relevant amount into the deposit account.

Olena Kibenko paid particular attention to the issue of protecting the rights of a company's shareholder when the company makes a decision in breach of procedure. She noted that the Supreme Court had previously upheld a more formal approach, requiring the plaintiff to prove a breach of the decision-making process by the general meeting or other body in order to invalidate the decision. In accordance with the latest legal positions, it is also necessary to find out whether there was a violation of the procedure, how this decision violates the rights of the shareholders, whether they can be restored, what are the possible consequences for the company and other shareholders if the decision is invalidated in order to maintain the balance of interests (resolutions of 15 June 2022 and 13 September 2023 in case No. 910/6685/21, as well as in case No. 910/3882/21, and of 1 September 2023 in case No. 909/1154/21).

Olena Kibenko also drew attention to the specifics of invalidating the decisions of the general meeting of the Association of Condominium Owners (resolution of 16 August 2023 in case No. 904/1711/222) and LLCs established as a family business (resolution of 29 September 2021 in case No. 914/1912/19).

The judge also analysed the decision of the Grand Chamber of the Supreme Court of 6 September 2023 in case No. 127/27466/20, which resolved a number of issues related to the termination of corporate and labour relations with the director of the company by court decision (when the shareholders of the company evade resolving this issue). At the same time, a number of questions remain unanswered, in particular: from when does a director's authority end in the event of his or her dismissal by court order; which person is entered in the Unified State Register as a director of the company if the court complies with the request to terminate the employment relationship with the director.

Olena Kibenko's presentation is available here: https://is.gd/jYdRKl.

The event was organised by the Ukrainian Bar Association jointly with the USAID Justice for All Program.