Business Protection in Court: Game with New Rules

30 05 2018

Six months have already passed since the new procedural codes came into effect and the new Supreme Court started operating. For this time, most legal practitioners have already experienced what is the procedural game under new rules: someone was successful to be reimbursed for its legal service fees, someone had a procedural diversity leading to the imposing of a fine and someone successfully went through the mediation procedure and ultimately got the refunding for a half of the court fee paid upon filing the claim.

The new codes give much more of such opportunities for procedural maneuvering, which are still in store for litigants and their attorneys. For example, the codes introduce an electronic court, i.e., the Unified Court Information and Telecommunication System, which purpose is to simplify and speed up communications between litigants and the court and between litigants themselves and between courts of various instance. This system’s technical development is still in progress and it is expected to be put in service in early 2019.

Moreover, the legislator has finally recognized in the new codes the digital evidence alongside with written and real evidence, witness testimonies and expert reports and enables litigants to make use of such evidence to establish certain factual background. The digital evidence comprises electronic documents (photos, video, sound, text); websites (web-pages); text, multimedia and voice messages, metadata, i.e., information about other data, databases; other data in an electronic format. The list is not exhaustive, so that the new procedural law has an ambition to keep pace with the time and technological progress. Therefore, the judicial practice with respect to the specifics of the electronic court operating and the use of digital evidence is yet to be built.

However, even now we see certain trends inherent to all codes, such as, setting up the process, facilitating procedural savings, encouraging litigants to reconcile and be disciplined.

The new codes make judicial proceedings more complicated by introducing new category of cases (based on such criterion as claimed amount and case hardship) and new litigation formats, intensifying requirements to litigants primarily with respect to the timing of presenting evidence and formal requirements to procedural documents, introducing new procedural institutes (dispute resolution with the participation of a judge, security for legal expenses, counter security, etc.), and restricting non-attorneys from acting in judicial proceedings. Unlike the previous 2010 judicial reform reducing procedural time limits, this time the legislator has decided to make the opposite thing – new procedural codes increase the most of procedural time limits. This is about the time limits for trying a case, preparing a full court decision, appealing, etc.

This trend of procedural savings specifically consists in the codes expressly listing applications on the merits, in which the litigants must set out in writing their claims, objections, arguments, explanations and considerations regarding the matter in dispute. Such applications on the merits are a statement of claim; statement of defense; response to the statement of defense; objection; third party explanations on the statement of claim or the statement of defense. Litigants must file them before the court starts trying the case on the merits and within the time limits clearly designated by the court. In view that litigants exchange such documents at the stage of preparatory proceedings, courts will be significantly less loaded, and this will prevent from dragging out court proceedings, so that such proceedings will be more efficient and fast-moving, sparing time for the litigants.

The next trend of the new codes is that the legislator encourages reconciliation and mediation. Notwithstanding the policy to increase litigation costs by raising court fee rates, the legislator provides for a new financial incentive for litigants: if they enter into a settlement, abandon their claims (appeal or cassation appeal), admit the claim, the state would refund to the plaintiff or appellant 50 % of the court fee paid by them. Moreover, new procedural codes set out a new procedure aiming at helping the parties to reach a reconciliation through the dispute resolution with the participation of a judge. As a matter of fact, this is a public mediation process with a judge acting as mediator to negotiate amicable settlement of the dispute.

Finally, the new codes authorize judges to ensure that court’s demands are met and to bring undisciplined litigants to liability, if they obstruct justice or drag out the trial. Procedural violations (providing no documents requested by the court, filing no statement of defense within the period designated by the court, giving no copy of procedural documents or written evidence to the other parties, etc.), which were previously considered as litigation tactics, now may give rise to a significant fine (up to UAH 88 thousand in a commercial litigation) being imposed on a litigant or its representative. Furthermore, a court is entitled to order that all legal expenses must be incurred by the party who committed so called “procedural misconduct,” i.e., abusing procedural rights and obstructing justice when the case was tried, notwithstanding the outcome of the trial.

As we have already seen so far, sometimes courts interpret substantive rules in different ways not alone but provisions of the new procedural codes as well. We understand that ideally we must strive for legal certainty, but keeping in mind that the judicial practice uniformity has a sense as long as it does not hinder development of the law. Thus, we see that the game under the new procedural rules is very interesting and dynamic to grab all of the opportunities this game offers. We stay tuned!

Published: European Business Association

Authors: Tetyana Berezhna, Yuriy Kolos