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In 2023, despite the ongoing military aggression of the russian federation against Ukraine, martial law and numerous air alerts, the Commercial Cassation Court of the Supreme Court continued to administer justice and issue important judicial decisions for the state, as even in such circumstances it is necessary to ensure proper judicial protection of the rights and interests of participants in economic legal relations. In the resolutions adopted during this period, the Commercial Cassation Court of the Supreme Court set out current legal positions on the application of insolvency law, in the field of protection of intellectual property rights, as well as in credit, corporate, land and property relations.
The Commercial Cassation Court of the Supreme Court formulated a number of new legal positions, in particular, regarding: jurisdiction over disputes arising from a decision on compulsory alienation or seizure of property under the legal regime of martial law; the possibility of recognising monetary claims of a creditor established and registered in accordance with the laws of the russian federation against a debtor in a bankruptcy case; the irreversibility of the Law of Ukraine "On Protection of the Interests of Persons in the Field of Intellectual Property during the Period of Martial Law Imposed in Connection with the Armed Aggression of the Russian Federation against Ukraine"; the absence of a violation of the plaintiff's right as a guarantor or pledger as a result of the conclusion of disputed credit agreements; the possibility of applying the provisions of part 12 of Article 137 of the Commercial Procedural Code of Ukraine to legal relations related to interim relief by suspending the sale (realisation) of property in this category of disputes (invalidation of the results of an electronic auction (bidding) for the sale of property).
Other important conclusions of the Commercial Cassation Court of the Supreme Court included: the consequences of creditors simultaneously filing applications to open bankruptcy proceedings against the same debtor before different commercial courts; the determination of the jurisdiction of a dispute over the debtor's real estate in which the central executive body is the defendant; compensation to the patentee for the part of the effective term of the patent during which the invention covered by the patent could not actually be used; a method of protecting the rights of the company, which consists in determining the amount of the company's authorised capital and the size of its shareholding; payment of an additional contribution to implement the decision of the general meeting of shareholders to increase the company's authorised capital; a method of protecting rights in the event that the privatisation authority bypasses the statutory procedure for privatising property by way of redemption; the lessor's right to terminate the land lease agreement unilaterally on the grounds that the lessee is using the land for other purposes than its intended purpose; the lessee's right to enter into a new land lease agreement for a new term in the manner of exercising the pre-emptive right after the entry into force of the Law of Ukraine no. 340-IX "On Amendments to Certain Legislative Acts of Ukraine on Countering Raiding" of 5 December 2019.
Special attention should also be paid to the conclusions of the Commercial Cassation Court of the Supreme Court on procedural issues, such as the Court's position on the determination of the defendant in disputes over compensation for damage caused by the aggressor state.
Case no. 904/868/22 addressed the jurisdiction of a dispute over the invalidation and cancellation of an order and acts of expropriation of property belonging to the plaintiffs (limited liability companies) in favour of military units drawn up and signed by the defendant (military unit).
The courts of first and appellate instances, referring to para. 8, part 1, Article 8 of the Law of Ukraine "On the Legal Regime of Martial Law", according to which the military command, within the powers defined by this Law and the Decree of the President of Ukraine on the introduction of martial law in Ukraine or its separate localities approved by the Verkhovna Rada of Ukraine, issues binding orders and directives on ensuring defence, public security and order, and the implementation of measures of the legal regime of martial law, came to the following conclusions: since the commander of the military unit that had issued the order challenged by the plaintiffs acted as a public authority in the legal regime of martial law, which in this case is not covered by the provisions of Article 20 of the Commercial Procedural Code of Ukraine, the dispute is not subject to the jurisdiction of the commercial court and is a public law dispute. Therefore, the decision on the legality or illegality of the actions of the commander of a military unit under martial law falls within the jurisdiction of administrative courts on the basis of paragraph 2, part 1, Article 5 of the Code of Administrative Proceedings of Ukraine.
In resolving the dispute, the Commercial Cassation Court of the Supreme Court stated that although the involvement of a public authority is a mandatory feature for a dispute to be classified as public law, such involvement alone does not constitute grounds for classifying the dispute as public law and referring it to administrative jurisdiction. Recognition of decisions, actions or omissions of state authorities, authorities of the Autonomous Republic of Crimea or local self-government bodies, their officials and employees as unlawful in accordance with para. 10, part 2, Article 16 of the Civil Code of Ukraine may be a way to protect civil rights and interests.
As the courts of first and appellate instances noted, the subject of the dispute in the action filed with the court is the recognition of the order as unlawful and its annulment, the invalidation of the acts of expropriation, and therefore this dispute does not fall under the exception provided for in Article 20 of the Commercial Procedural Code of Ukraine (disputes concerning the seizure of property for public needs or reasons of public necessity).
Taking into account the normative provisions of part 1 of Article 21 of the Civil Code of Ukraine, parts 1, 2 of Article 267 of the Code of Administrative Proceedings of Ukraine, the Commercial Cassation Court of the Supreme Court stated that a dispute between a public authority and a private law entity - a legal entity, in which the actions of the public authority are aimed at the emergence, change or termination of civil rights of a legal entity, is not a public law dispute. In this case, it is a civil law dispute, although a public law entity is involved in the dispute.
The Commercial Cassation Court of the Supreme Court concluded that the disputed legal relations between the parties to the case arose as a result of the decision to expropriate property, which the plaintiffs considered to be in violation of their rights, and that the plaintiffs therefore needed to protect their civil rights and therefore filed a lawsuit in this case. Since the dispute in the present case concerns the exercise of the plaintiffs' civil rights, the commercial court is the competent court to resolve the dispute.
The courts of previous instances did not take this into account and, when deciding on the jurisdiction of the dispute, limited themselves to examining the composition of the parties to the legal relationship, without taking into account the subject matter of the dispute and the nature of the legal relationship in dispute, and therefore came to the erroneous conclusion that this dispute should be considered in administrative proceedings.
The Resolution of the Commercial Cassation Court of the Supreme Court of 14 February 2023 in case no. 904/868/22: https://reyestr.court.gov.ua/Review/109046101.
²². Legal Positions on the Bankruptcy Law Application
In bankruptcy case no. 925/1248/21, a creditor established and registered in accordance with the laws of the russian federation filed an application for recognition of monetary claims against the debtor.
The courts of the previous instances, when dismissing the claim without consideration, were guided by the lack of grounds for considering it on the merits (satisfaction/rejection) due to the moratorium on the fulfilment of monetary obligations to this creditor, established and registered in accordance with the laws of the russian federation, with the possibility of considering such claims on the merits after the lifting of the said moratorium.
The Commercial Cassation Court of the Supreme Court disagreed with such conclusions and found that the moratorium (ban) on the fulfilment of monetary and other obligations, the creditors (recoverers) of which are legal entities established and registered in accordance with the laws of the russian federation, as set out in subpara. 1, para. 1 of the Resolution of the Cabinet of Ministers of Ukraine no. 187 of 3 March 2022 "On Ensuring the Protection of National Interests in Future Claims of the State of Ukraine in Connection with the Military Aggression of the Russian Federation" (Resolution no. 187), in conjunction with the provisions of the Code of Ukraine on Bankruptcy Procedures regarding the rules and consequences of the application and recognition of monetary claims of a creditor to a debtor in a bankruptcy case, excludes the possibility of recognising under the rules of this Code the monetary claims of those creditors who are persons specified in Resolution No. 187, in particular legal entities established and registered in accordance with the laws of the russian federation, which the creditor is.
Thus, taking into account the circumstances of the creditor's registration in moscow (russian federation), i.e. the establishment and registration of the creditor's legal entity in accordance with the laws of the russian federation, the Commercial Cassation Court of the Supreme Court concluded that these circumstances exclude the possibility of recognising the monetary claims of the relevant entity (entities) against the debtor in the bankruptcy case under the rules of national law - the Code of Ukraine on Bankruptcy Procedures.
The Resolution of the Commercial Cassation Court of the Supreme Court of May 30, 2023 in case no. 925/1248/21 - https://reyestr.court.gov.ua/Review/111709194.
The case no. 904/2154/22 concerned a debtor who had changed his domicile, and another initiating creditor requested the opening of bankruptcy proceedings against the same debtor at the commercial court of the new domicile.
The Commercial Court of Appeal held that the court of first instance had lawfully opened bankruptcy proceedings on the basis of a petition filed at the debtor's new domicile.
The Supreme Court, composed of the Judicial Chamber for Bankruptcy Cases of the Commercial Cassation Court, disagreed with the above and stated that the territorial jurisdiction of a legal entity bankruptcy case should be determined on the basis of the debtor's domicile as of the date on which the creditor files a petition to commence bankruptcy proceedings in accordance with the information contained in the Unified State Register.
If a bankruptcy petition is accepted by a commercial court at the place indicated in the Unified State Register and the debtor changes his domicile and the bankruptcy petition is filed with the commercial court at the new domicile, the court must return the petition without consideration.
If after the commencement of the proceedings, taking into account the arguments and evidence submitted by the parties to the case, the court determines that the commencement of bankruptcy proceedings against the debtor in respect of whom the petition for the commencement of bankruptcy proceedings has been filed, but in another commercial court, then, based on a systematic analysis of the provisions of Articles 35, 37, 38, 39 of the Code of Ukraine on Bankruptcy Procedure, which provide for the possible consequences of considering the petition to open bankruptcy proceedings, and taking into account the provisions of Article 226 of the Commercial Procedural Code of Ukraine, the court shall not consider such a petition to open bankruptcy proceedings.
Thus, the Commercial Cassation Court of the Supreme Court concluded that in this case the petition to open bankruptcy proceedings filed after the debtor's domicile had changed should have been disregarded.
The Resolution of the Commercial Cassation Court of the Supreme Court of 26 April 2023 in case no. 904/2154/22: https://reyestr.court.gov.ua/Review/111121955.
Case no. 911/4706/15 (911/1626/21) raised the issue of the application of the exclusive jurisdiction rules under parts 5 and 13 of Article 30 of the Commercial Procedural Code of Ukraine, as the Ministry of Justice of Ukraine was identified as the defendant in the lawsuit filed by the debtor represented by the liquidator.
The Supreme Court within the Judicial Chamber for Bankruptcy Cases of the Commercial Cassation Court noted that part 2 of Article 7 of the Code of Ukraine on Bankruptcy Procedure contains a special rule that resolves the issue of territorial (exclusive) jurisdiction of disputes in bankruptcy cases. Unlike the Commercial Procedural Code of Ukraine, which uses the location of a court or a person as a criterion for considering a case, the Code of Ukraine on Bankruptcy Procedure establishes an independent universal criterion for jurisdiction over cases in which the debtor is a party - within the framework of a bankruptcy case.
In this case, the disputed legal relationship arose from the (bankrupt) plaintiff's disagreement with the legitimacy of the acquisition by another person, in respect of whom the disputed registration actions were taken, of the ownership of the property which the plaintiff considered to be his.
In view of the fact that the action brought by the liquidator is directly related to the protection of the debtor's property and that the debtor, in respect of whom bankruptcy proceedings have been initiated, is a party to such a dispute, the Commercial Cassation Court of the Supreme Court concluded that in order to determine the exclusive jurisdiction of this dispute, it is not Article 30 of the Commercial Procedural Code of Ukraine, as a general procedural rule, but Article 7 of the Code of Ukraine on Bankruptcy Procedure, which in this case is special, that is to be applied. Therefore, as the court of appeal rightly stated in its judgment, the liquidator's action is subject to review by the commercial court hearing the debtor's bankruptcy case.
In view of this, the Commercial Cassation Court of the Supreme Court decided to derogate from the opposite legal position of the Supreme Court on the application of part 5 of Article 30 of the Commercial Procedural Code of Ukraine in determining the jurisdiction of cases involving a person in respect of whom bankruptcy proceedings have been opened or in respect of the property of such a person, set out in the resolutions of 21 April 2021 in case no. 910/12641/19, of 12 January 2021 in case no. 918/572/19, of 4 February 2020 in case no. 914/240/18.
The Resolution of the Commercial Cassation Court of the Supreme Court of 27 June 2023 in case no. 911/4706/15 (911/1626/21): https://reyestr.court.gov.ua/Review/111888150.
²²². Legal Positions in the Disputes on Protection of Intellectual Property Rights
In case no. 910/9215/21, the plaintiff filed a claim for protection of its infringed intellectual property rights, as the defendant filed an application for state registration of the medicinal product Caspofungin-Teva, the active ingredient of which is the compound caspofungin, which, according to the plaintiff, is identical to the composition protected by the plaintiff's patent for invention and infringes its intellectual property rights.
The courts of previous instances found that the expected expiry date of the patent was 15 April 2022, and none of the parties to the dispute challenged this fact. The courts concluded that the medicinal product submitted for registration by the defendant contained every feature of the invention under the plaintiff's Ukrainian patent or a feature equivalent to the formula of the invention. The plaintiff filed a lawsuit in June 2021. Consequently, the law in force at the time of the disputed legal relationship is to be applied.
In resolving the dispute, the Commercial Cassation Court of the Supreme Court was guided by the fact that the Law of Ukraine "On Protection of Rights to Inventions and Utility Models" does not provide for the possibility of filing an application for registration of a medicinal product and obtaining a state registration certificate before the expiration of the patent. Not only the direct use of an invention without the patent holder's consent, but also any interference with the rights of the patent holder is considered an infringement of the patent holder rights. State registration is a mandatory prerequisite for putting a medicinal product on the market in Ukraine. Accordingly, filing an application for registration of a medicinal product that uses an invention, the rights to which belong to another person and are valid, is essentially a preparation for the introduction of such a medicinal product into civil turnover, and therefore constitutes an infringement of the rights of the patent holder.
The Commercial Cassation Court noted that the Law of Ukraine "On Protection of Intellectual Property Interests of Persons during Martial Law Imposed in Connection with the Armed Aggression of the Russian Federation against Ukraine" (the Law) entered into force on 13 April 2022, and therefore is not applicable to the disputed legal relations that arose in February 2021 and are directly related to the defendant's application for state registration of a medicinal product and the legal consequences of this action.
The Commercial Cassation Court of the Supreme Court stated that neither the adoption of the Law, the provisions of which are not retroactive, nor any other legislative acts provide for the "legalisation" of acts of submitting an application for state registration of a medicinal product without the consent of the right holder, the active substance of which is a compound identical to the composition protected by a patent of Ukraine for an invention (the rights to which are valid at the time of submitting such an application), i.e, there is no retroactive legality of an act of a person committed in the past in violation of the rights of another person.
The mere expiry of a patent in the future does not affect the legal consequences of an offence that occurred (was committed) in the past.
Thus, taking into account the above, the Commercial Cassation Court of the Supreme Court found the conclusions of the courts of previous instances regarding the application of the Law to the disputed legal relations in this case to be erroneous and excluded them from the reasoning parts of the contested court decisions.
The Resolution of the Commercial Cassation Court within the Supreme Court of 27 April, 2023 in case No. 910/9215/21 - https://reyestr.court.gov.ua/Review/110536260.
Case no. 910/8295/21 concerned a foreign company's claim for invalidation and cancellation of Ukrpatent's refusal to extend the patent term and issue a certificate of additional protection and its obligation to take these actions.
Resolving the issue of correct application of the law in disputed legal relations, the Commercial Cassation Court of the Supreme Court noted that pursuant to the Law of Ukraine of 21 July 2020 no. 816-IX "On Amendments to Certain Legislative Acts of Ukraine on Reform of Patent Law" (Law no. 816-IX), the Law of Ukraine "On Protection of Rights to Inventions and Utility Models" (Law no. 3687-XII) was amended on 16 August 2020, in particular, Article 27-1 was added.
The review of the existing legislation of Ukraine in the field of protection of rights to inventions and utility models was necessitated by the need to ensure the effective implementation by Ukraine of its obligations under the Association Agreement between Ukraine, on the one hand, and the European Union, the European Atomic Energy Community and their Member States, on the other hand (Association Agreement).
The right to extend the term of a patent for an invention has the same purpose both in the version of Law no. 3687-XII before 16 August 2020 and after 16 August 2020, namely to compensate the patent holder for the part of the effective term of the patent during which the invention under the patent could not be actually used, since its use requires state registration of a medicinal product, which takes a certain amount of time.
Article 27-1 of Law no. 3687-XII establishes a specific time limit for filing a request for additional protection - 6 months from the date of publication of the information on the state registration of the invention or from the date of issuance of the first permit by the relevant competent authority (whichever is later). Previously (before the entry into force of Law of Ukraine no. 816-IX), this period was actually 19.5 years - the application had to be filed 6 months before the expiry of the patent.
The Law does not provide for any provisions on establishing a transitional period for the application of Article 27-1. The provisions of the Association Agreement also do not contain a specific mechanism for exercising these rights.
According to the conclusions of the Commercial Cassation Court of the Supreme Court, it follows that the right holders who received the relevant permit from the competent authority before 16 August 2020 but did not file a request for extension of the patent term are deprived of the opportunity to obtain additional protection, although such a right is provided for both in the current version of Law no. 3687-XII and its previous version.
The plaintiff's patent and the medicinal product were registered in accordance with the procedure established by Ukrainian law before Law no. 816-IX came into force.
Having analysed the legal relations between the parties, examined the case file, the provisions of Ukrainian national legislation and the provisions of international treaties ratified by the Verkhovna Rada of Ukraine, the courts of the previous instances concluded that the claims should be granted, as the deprivation of the right to additional protection is contrary to Ukraine's obligations under the Association Agreement.
The Commercial Cassation Court of the Supreme Court agreed with the above and noted that in this particular case, under the circumstances established in it, the decisive event is not the filing of the petition, but the moment when the plaintiff acquired the right to extend the term of validity of the rights to inventions under the patent.
The Resolution of the Commercial Cassation Court within the Supreme Court of 14 December, 2023 in case no. 910/8295/21: https://reyestr.court.gov.ua/Review/115821573.
²V. Legal Positions in Corporate Disputes
In case no. 907/922/21, the Supreme Court composed of the Judicial Chamber for Corporate Disputes, Corporate Rights and Securities of the Commercial Cassation Court, in particular, addressed the following issues: 1) whether recognition of the composition of the former shareholders and the authorised capital in the amount that existed before the alleged violation of rights is an appropriate way to protect the violated right of a shareholder who was expelled from the company; 2) how the exclusive competence of the general meeting of the company to expel a shareholder (redistribution of shares among shareholders) and the right of the court to protect the rights and interests of the company's shareholders in the manner prescribed by law are interrelated.
With regard to the first question, the Commercial Cassation Court of the Supreme Court held that a shareholder who has been unlawfully expelled from the company has no other effective means of judicial protection of the right infringed, other than to apply to the court with a request to determine the amount of the company's authorised capital and the size of the shares held by the company's shareholders, within the framework of which the court shall establish and verify the circumstances relating to the legality of the expulsion of the shareholder and shall assess the good faith of the defendants, who, if the claims are satisfied, shall be deprived of their shares or parts thereof in cash or in percentage terms.
Addressing the following issue, the Commercial Cassation Court of the Supreme Court concluded that a court's decision to determine the amount of the authorised capital and shares of the members of a limited liability company does not interfere with the exclusive competence of the general meeting of the company's members. In such a case, the commercial court does not replace the general meeting of the company's shareholders and does not decide on the expulsion of a shareholder from the company, but rather considers a dispute between the former and current shareholders regarding the legality of the plaintiff's expulsion and the entry of new shareholders into the company, i.e. protects the rights and interests of individuals and legal entities (company shareholders) in the manner prescribed by law, which is the main task of commercial proceedings, which prevails over any other considerations in the court process (part 2 of Article 2 of the Commercial Procedural Code of Ukraine). Following the consideration of such a dispute, the court may decide to terminate the right to participate in the company by satisfying the claim to determine the amount of the authorised capital and shares of the company's members, which is consistent with such remedies as recognition of the right; termination of the action that violates the right; restoration of the situation that existed before the violation (paragraphs 1, 3 and 4 of part 2 of Article 16 of the Civil Code of Ukraine).
In view of the above, the Commercial Cassation Court of the Supreme Court decided to derogate from the conclusions set out in paras. 95, 96 of the Resolution of the Commercial Cassation Court of the Supreme Court of 31 August 2022 in case no. 924/700/21.
The Resolution of the Commercial Cassation Court within the Supreme Court of 11 December, 2023 in case no. 907/922/21: https://reyestr.court.gov.ua/Review/115859002.
In case no. 925/200/22, the court considered a dispute between a private company and its shareholder over the payment of an additional contribution in accordance with the decision of the general meeting of shareholders on the increase of the authorised capital, adopted before the entry into force of the Law of Ukraine "On Limited Liability Companies and Additional Liability Companies".
The Supreme Court composed of the Judicial Chamber for Corporate Disputes, Corporate Rights and Securities of the Commercial Cassation Court concluded that the decision to increase the authorised capital, which had been made before the Law of Ukraine "On Limited Liability Companies and Additional Liability Companies" came into force, was not considered to be a ground for claims for its compulsory enforcement, since the participant's obligation to make an additional contribution to the authorised capital is a voluntary obligation of a property nature, the claim to which cannot be protected in court (by enforcement).
If a participant has not (fully) paid an additional contribution to comply with such a decision, he cannot be ordered to do so by the court. However, he is jointly and severally liable for the company's obligations to creditors up to the value of the unpaid portion of the contribution and has restrictions on the payment of dividends. This obligation arises because the decision to increase the authorised capital was approved and the amendments to the company's charter were registered without taking into account the additional contributions actually made by the shareholders and were not subsequently agreed upon, which affects the rights and interests of other persons (the company's creditors, other shareholders and the company).
In addition, the Commercial Cassation Court of the Supreme Court emphasised that Article 18 of the current Law of Ukraine "On Limited Liability Companies and Additional Liability Companies" is not applicable to the decisions of the general meeting on increasing the authorised capital adopted before the entry into force of this Law.
The Resolution of the Commercial Cassation Court within the Supreme Court of 11 December, 2023 in case no. 925/200/22: https://reyestr.court.gov.ua/Review/115746216.
The case no. 910/2490/23 concerned the plaintiff's claims for recognition of its right to privatise the disputed property by way of redemption and for an order requiring the State Property Fund of Ukraine to amend its decision to include a clause on the privatisation of this property.
The Commercial Cassation Court of the Supreme Court cancelled the decisions of the previous courts to grant the lawsuit and issued a new one to dismiss it, concluding that the satisfaction of the claims in this case does not preclude the need to comply with the requirements of the Law of Ukraine "On Privatisation of State and Communal Property" regarding the procedure and method of making a decision on the inclusion of property in the list of small-scale privatisation objects subject to privatisation, and will not lead to the plaintiff's acquisition of ownership of the relevant premises. There is a high risk that the enforceability of such a judgment will depend on the subjective actions or negligence of the defendant, making this method of defence inadequate and ineffective. At the same time, the plaintiff's choice of an improper way to protect his rights, according to the established practice of the Grand Chamber of the Supreme Court, is an independent ground for dismissing the claim.
Instead, if the plaintiff believes that he or she is entitled to privatisation by way of redemption, but the relevant privatisation authority evades the procedure prescribed by law, the appropriate way to protect the plaintiff's rights is to file a claim to compel the conclusion of a sale and purchase agreement.
At the same time, the claim of the plaintiff for the obligation to conclude a certain wording of the agreement in cases where the court can resolve such disputes should be interpreted as a claim for the recognition of such an agreement as concluded in court in the wording proposed by the plaintiff, which corresponds to the remedies provided for in para. 6, part 2, Article 16 of the Civil Code of Ukraine.
The Resolution of the Commercial Cassation Court within the Supreme Court of 19 December, 2023 in case no. 910/2490/23: https://reyestr.court.gov.ua/Review/115859293.
V². Legal Positions in Land Relations Disputes
In case no. 910/20745/20, the commercial courts considered a dispute over invalidation of the city council's decision to terminate a land lease agreement between a religious organisation and the council on the grounds that the plaintiff had breached his obligations under the agreement, namely, violation of the intended purpose of the land plot and the terms of the planned reconstruction.
The Commercial Cassation Court of the Supreme Court held that the construction of a residential building, planned by a religious organisation, on a leased communal plot of land which, according to its intended purpose, belongs to public development land (for the construction and maintenance of buildings of public and religious organisations), is a violation of the intended purpose of the land.
The references of the courts of previous instances to the provisions of the State Building Standards of Ukraine B.2.2-9:2018 and B.2.2-12:2019 are erroneous, since in their understanding multifunctional buildings are buildings and complexes formed from premises, their groups, for various public, residential and other purposes, the combination of which is determined by economic feasibility and urban planning requirements.
At the same time, the materials of this case do not contain any evidence of the need to combine a religious temple (spiritual centre) with a residential apartment building, which would be conditioned by urban planning requirements. In addition, it is obvious to any reasonable observer that there can be no economic feasibility of such a combination.
The Commercial Cassation Court of the Supreme Court also held that since the parties to the disputed land lease agreement provided for the lessee's obligation to use the leased land for its intended purpose, and the lessee had materially breached such an obligation, the city council had every right to unilaterally terminate the transaction, as the parties had also provided for the lessor's right to do so in the lease agreement.
Moreover, as the Commercial Cassation Court of the Supreme Court noted, despite the validity of the actions of the city council in unilaterally terminating the lease, the religious organisation still has the right to register the land use of its property in accordance with the procedure established by the current Land Code of Ukraine, and therefore has the opportunity to complete the construction of the spiritual centre, use its property for its intended purpose and continue to own it peacefully.
The Resolution of the Commercial Cassation Court of the Supreme Court of 18 October 2023 in case No. 910/20745/20: https://reyestr.court.gov.ua/Review/114291950
In case no. 906/1314/21, the Supreme Court composed of the Judicial Chamber for Land Relations and Property Rights of the Commercial Cassation Court reached the following conclusions while resolving upon the wording of the Law of Ukraine "On Land Lease" to be applied to legal relations regarding the procedure for concluding a land lease agreement for a new term as part of the exercise of the lessee's pre-emptive right to conclude a lease agreement for a new term by way of judicial consideration of such a claim.
The scope of the concept of "renewal of a lease agreement" referred to in para. 4 of Section IX "Transitional Provisions" of the Law of Ukraine "On Land Lease" is based on the provisions of Article 126-1 of the Land Code of Ukraine, which links the possibility of extending an existing agreement to the inclusion in the agreement of a mandatory clause for its extension. If there is such a clause, the agreement will be renewed for the same term and on the same terms.
In contrast, the conclusion of a land lease agreement for a new term (renewal of the land lease agreement), as provided for in part 1 of Article 33 of the Law of Ukraine "On Land Lease" in the version in force before the amendments by the Law of Ukraine no. 340-IX "On Amendments to Certain Legislative Acts of Ukraine on Countering Raiding" of 5 December 2019, is based on the statutory pre-emptive right of a bona fide lessee and provides the parties with an opportunity to change the essential terms of the agreement when applying this procedure.
Therefore, the concept of "renewal of a lease agreement" referred to in para. 4 of Section IX "Transitional Provisions" of the Law of Ukraine "On Land Lease", and the concept of "renewal of the lease agreement", which was contained in the previous version of the Law of Ukraine "On Land Lease", are substantively different.
In accordance with the legal relations regarding the procedure for concluding a land lease agreement for a new term within the framework of exercising the lessee's pre-emptive right to conclude a lease agreement for a new term by way of judicial review of such a claim, the provisions of para. 4 of Sec. IX "Transitional Provisions" of the Law of Ukraine "On Land Lease" shall not apply. Instead, according to the general rule of operation of laws in time, it is Article 33 of the Law of Ukraine "On Land Lease" in the version effective at the time of filing such a claim that applies, since the provisions of the law do not contain any instructions to the contrary.
At the same time, with respect to the protection of the lessee's right to prolong the lease of state and municipally owned land plots, the Commercial Cassation Court of the Supreme Court stated that if a state or local government body fails to fulfill its obligation to negotiate in good faith (for example, by clearly refusing to conclude an agreement without any reason), such body should be considered to have abused its right and thereby violated the lessee's legal rights.
In such cases, judicial protection is granted only to a person who has duly fulfilled his contractual obligations and exercised his rights in good faith, so that the lessor cannot defend himself by relying on circumstances indicating that he has evaded negotiations and on his own unfair conduct, contrasting it with the legitimate aspirations and proper conduct of the lessee; at the same time, the lessee who has acted properly cannot be deprived of the opportunity to exercise his right to continue the lease relationship, provided by law, including judicial protection. Otherwise, the right of the lessee to appeal against the refusal, as well as the existing delay in concluding a new land lease agreement, provided for in part 9, Article 33 of the Law of Ukraine "On Land Lease" will be only declarative and will not lead to the restoration of the violated right.
The Resolution of the Commercial Cassation Court of the Supreme Court of 23 November 2023 in case no. 906/1314/21: https://reyestr.court.gov.ua/Review/115746281.
VII. Legal Positions in Disputes Arising from Credit Relationships
In case no. 910/5172/19, the guarantor filed a claim for invalidation of loan and surety agreements, substantiating the claims by the lender's officials exceeding the limits of their authority and invalidity of the surety due to invalidity of the principal obligation.
In resolving the dispute, the Joint Chamber of the Commercial Cassation Court of the Supreme Court held that the disputed loan agreements established only the rights and obligations of the parties to these agreements and did not establish the rights and obligations of the guarantor. Therefore, the conclusion of these agreements, even in the absence, as the guarantor claims, of a resolution of the National Bank of Ukraine (the lender) authorizing the bank's officials to enter into them, cannot violate the guarantor's rights, which is an independent ground for dismissing the claim filed by the guarantor to invalidate the loan agreements.
The plaintiff's rights as a guarantor or pledgor could have been violated by entering into surety or pledge agreements rather than by entering into loan agreements. At the same time, the adoption or non-adoption of the relevant resolution of the National Bank of Ukraine does not oblige either the bank to enter into loan agreements or the guarantor (pledgor) to enter into surety (pledge) agreements.
With regard to the invalidity of the surety agreements, the Joint Chamber of the Commercial Cassation Court of the Supreme Court noted that the plaintiff's arguments in this part amounted to the fact that the surety agreements were invalid due to the invalidity of the principal obligation. At the same time, since the guarantor's arguments regarding the existence of grounds for invalidity of the loan agreements also relate to the existence of grounds for invalidity of the surety agreements, the Joint Chamber decided to consider these arguments and came to the following conclusions.
If the body or person acting on behalf of the legal entity did not have the authority to do so, this may indicate a violation of the rights and interests of the legal entity itself, and not the rights and interests of a third party.
Part 3 of Art. 92 of the Civil Code of Ukraine should be understood as follows: first, the question of the legal effect of restrictions on the powers of a body or person acting on behalf of a legal entity should be decided depending on the third party's awareness of this at the time of the conclusion of the contract (or other legally significant actions); second, only a legal entity, not a third party, may refer to such a restriction of powers, since the actions of a body or person beyond their powers may violate the rights of only a legal entity. In this case, the lack of powers of a body or person acting on behalf of a legal entity is a type (borderline case) of limitation of powers.
Therefore, the guarantor's claim that the officials of the National Bank of Ukraine exceeded the limits of their authority, including when concluding the disputed surety agreements, could only violate the rights of the National Bank of Ukraine, not the guarantor, which is an independent ground for dismissing the claim in this part.
The Resolution of the Joint Chamber of the Commercial Cassation Court within the Supreme Court of 7 April, 2023 in case no. 910/5172/19: https://reyestr.court.gov.ua/Review/111443260.
V²II. Legal Positions on Procedural Issues
Case no. 910/5361/22 dealt with the following issues: the application of such interim measures as suspension of the sale (realization) of property in case the applicant files claims (for example, to invalidate the results of an electronic auction (bidding) for the sale of the seized property) other than those clearly defined in para. 6, part 1, Article 137 of the Commercial Procedural Code of Ukraine, i.e. claims for recognition of ownership of such property or for its exclusion from the inventory and for cancellation of the seizure; application of part 12 of Article 137 of the Commercial Procedural Code of Ukraine to this category of disputes (invalidation of the results of an electronic auction (bidding) for the sale of seized property), in particular, with respect to the possibility of taking measures to secure a claim, which consist in (or result in) termination, postponement, suspension or other interference with the competition, auction, bidding, tender or other public competitive procedures conducted by the state executive authority and/or a state appointed body - State Enterprise "Setam", which, according to the order of the Ministry of Justice of Ukraine, is entrusted with the functions of organizing electronic auctions.
The courts of first and appellate instances concluded that the interim measure proposed by the plaintiff (suspension of the sale of the seized property) does not fall under the prohibition provided for in part 12 of Article 137 of the Commercial Procedural Code of Ukraine, since in the disputed legal relations SE "Setam" is an entity that only carries out activities to support and maintain the software and hardware of the central database of the electronic auction system, and the parties to the case did not provide evidence confirming that the disputed auction was held on behalf of the state (state body) or territorial community (local self-government body).
The Joint Chamber of the Commercial Cassation Court of the Supreme Court pointed out that the current Commercial Procedural Code of Ukraine allows the application of such an interim measure as suspension of sale (realization) of property only in case the applicant files a claim for recognition of ownership of this property or for its exclusion from the inventory and for lifting of its seizure, as clearly defined by para. 6, part 1, Article 137 of this Code, and not in the case of filing any other claims, including a claim for invalidation of the results of an electronic auction (bidding) for the sale of seized property, the intention of which is substantiated by the company's application for interim measures in this case.
The court noted that the mandatory provision of part 12 of Article 137 of the Commercial Procedural Code of Ukraine clearly defines the participants of public tender procedures, in respect of which interim measures aimed at terminating, postponing, suspending or otherwise interfering with such procedures are not allowed. In particular, the list of relevant participants includes the entity appointed by the government body as part of the commission that conducts the competition, auction, bidding, tender or other public tender procedure, but not a specific person or official appointed by the government body.
In such circumstances, in the context of the disputed legal relations, the Joint Chamber of the Commercial Cassation Court of the Supreme Court found that the relevant state body or entity within the meaning of part 12 of Article 137 of the Commercial Procedural Code of Ukraine is not SE "Setam", which, although it has the status of an organizer of electronic auctions in accordance with the order of the Ministry of Justice of Ukraine, is generally an independent business entity in terms of its organizational and legal form.
For the same reasons, a public or private enforcement officer cannot be considered a relevant state body or entity, since in accordance with Articles 7 and 16 of the Law of Ukraine "On Bodies and Persons Enforcing Court Decisions and Decisions of Other Bodies" these officers are authorized by the state to carry out enforcement activities individually, not as part of a commission, in accordance with the procedure. At the same time, the legislator in part 2 of Article 16 of the said Law of Ukraine even clarified that a private enforcement officer is an independent professional entity, which excludes his status as a member of the commission that conducts a competition, auction, bidding, tender or other public tender procedure.
The Joint Chamber of the Commercial Cassation Court of the Supreme Court derogated from the conclusion of the Commercial Cassation Court of the Supreme Court on the application of the provisions of part 12 of Article 137 of the Commercial Procedural Code of Ukraine in similar procedural legal relations, set forth in the resolution of 1 February 2023 in case no. 910/1539/21 (910/8758/21), since if such an interim measure as suspension of sale (realization) of property is applied by the court in the course of proceedings on recognition of ownership of this property or its exclusion from the inventory and removal of its seizure and is accompanied by termination, postponement, suspension or other interference with the electronic auction (bidding) conducted by the state executive service / private enforcement officer and/or SE "SETAM", which are entrusted with the functions of organizing electronic auctions, as part of the enforcement of a court decision, then the legal relations concerning the application of the said interim measure during the preparation and conduct of electronic auctions are not subject to the provisions of part 12 of Article 137 of the Commercial Procedural Code of Ukraine, which prohibits the application of interim measures aimed at any interference with public tender procedures (their termination, postponement, suspension, etc.), since neither the public or private enforcement officer nor SE Setam are included in the list of participants in public tender procedures clearly defined by the legislator (state body, local self-government body, state-appointed body in the commission).
The Resolution of the Joint Chamber of the Commercial Cassation Court within the Supreme Court of 22 June, 2023 in case no. 910/5361/22: https://reyestr.court.gov.ua/Review/111739159.
In case no. 910/5699/23, the local commercial court, upheld by the court of appeal, dismissed the claim without consideration, because the plaintiff failed to remedy the deficiencies in the claim within the time limit set by the court, namely, in the new version of the claim, the plaintiff sought to recover property damages from the russian federation (representative bodies: the Ministry of Justice of the russian federation and the Ministry of Defense of the russian federation), which cannot be a party to commercial proceedings, and did not specify the claims against each of the defendants.
Contrary to the previous instances, the Commercial Cassation Court of the Supreme Court concluded that in disputes over compensation for damages caused by the state / foreign state (state authority, its official or employee / state authority, its official or employee of a foreign state), the defendant is the relevant state as a party to civil relations, usually represented by the body that the plaintiff considers to be the violator of his rights. The state of Ukraine, as well as a foreign state, participates in disputes over compensation for damage caused by the state (foreign state) as a defendant through the relevant state authorities, usually the body whose actions caused the damage.
Therefore, in disputes on compensation for damage caused by a state (foreign state), the plaintiff, in accordance with the requirements of paras. 2, 4 of part 3 of Art. 162 of the Commercial Procedural Code of Ukraine, the plaintiff, in addition to the state which, according to the plaintiff, caused the damage, is obliged to name the body (bodies) of the state which the plaintiff considers to be the violator of the plaintiff's rights. At the same time, the law does not require the specification of claims (determination of amounts to be recovered, etc.) to each of the defendants - representative bodies of the state, if the plaintiff has named more than one.
In view of the above, the Commercial Cassation Court of the Supreme Court found that the courts of previous instances had erroneously concluded that the russian federation could not be a party (defendant) in commercial proceedings, and that the plaintiff's failure to specify the claims against each of the defendants named in the statement of claim was a reason for dismissing the claim without consideration for failure to remedy these deficiencies within the time limit set by the court.
The Resolution of the Commercial Cassation Court within the Supreme Court of 6 November, 2023 in case no. 910/5699/23: https://reyestr.court.gov.ua/Review/115272587.
Author's column: https://so.supreme.court.gov.ua/authors/307/kliuchovi-rishennia-kasatsiinoho-hospodarskoho-sudu-u-skladi-verkhovnoho-sudu-za-2023-rik-.
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