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Реформа судової системи: добрі чи погані новини для інвесторів?

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Judicial overhaul - good news for investors or not?

It is easy to be suspicious of the motives behind the new Judiciary Act which became law on July 30. The speed with which the new governing coalition established control over the country’s judicial system is disturbing to many. This speed suggests that the prime motive behind the changes was politics rather than considered reform strategy. Perhaps understandably, Ukrainians are not used to giving their politicians the benefit of the doubt.

However, when one examines the changes introduced by the new Judiciary Act on their merits, one finds that many of them could be quite positive for ordinary Ukrainians. Greater certainty in the judicial system introduced by the new law could, in the long run, even be good for the country's investment environment.

Take, for example, one of the most discussed reforms introduced by the Judiciary Act: the reduction in the powers of the Supreme Court. The court will no longer be able to hear appeals without the go-ahead from the so-called “high specialized courts,” namely the High Commercial, High Administrative, High Civil and Criminal Cases Court. In other words, to appeal to the Supreme Court, one would have to receive permission from the court whose judgment one wants to challenge. Moreover, the Supreme Court will no longer be able to decide with finality even those few cases that reach it after passing this filter.

The Supreme Court will only have authority to send the case for review to the high specialized court. Previously, the Supreme Court was able to send cases for new trial to the court of first instance, forcing the litigants to go through the entire judicial system two and even more times. This meant that in some cases it took years to reach the final decision. The disputes surrounding the bankruptcy of thermoelectric generator Dniproenergo provide many examples of cases travelling through the judicial merry-go-round for years.

Such protracted procedures will be far less common under the new law. As a practical matter, removal of the Supreme Court from involvement in most specific cases may prove to be beneficial for the litigants who may now be able to obtain a definitive and final court judgment sooner. On balance, the limited powers of the Supreme Court will result in shorter time needed for the case to reach a final court decision. This promises a much greater certainty in corporate and other business disputes.

This certainty could be extended because the Judiciary Act for the first time in the Ukrainian legal history introduces the concept of judicial precedent. The act provides that those few decisions that the Supreme Court still has authority to issue will be a source of generally applicable law. The notion that decisions of high courts in specific cases should reflect generally applicable principles is a cornerstone of any functioning legal system, but before the Judiciary Act, this common sense notion was not recognized in Ukraine. Many of the other changes introduced by the new law are aimed at simplifying and streamlining court procedures.

For example, the law calls for the introduction of an automatic system of document circulation and distribution of cases between judges in all courts. The idea behind this project is that the automatic system is supposed to make it harder to manipulate and misplace documents in court files. If introduced properly, it is also supposed to eliminate or limit the discretion of chief judges in distribution of cases. Many previous governments announced their intention to introduce such a system in courts, but little changed in practice. Let's hope that the new government's good record for getting things done will translate in actually making this automatic system a reality.

Many changes the Judiciary Act introduces in the procedural codes are likely to result in shortened trial and appeal procedures. For example, under the new rules the maximum time allowed for the consideration of the case in the high specialized courts or in the Supreme Court is cut from two months to just one month.

These and other changes may result in substantially shorter times for the final resolution of many cases.

Finally, the Judiciary Act could make the procedure for the appointment of judges a little more selective and transparent. Some of the positive changes in this respect include an anonymous test which candidates for the first judicial appointment would have to take, and a publication of judicial vacancies on the Internet.

To be sure, it would be naïve to expect that the new system will rid the process of nepotism and corruption. However, it is hard to imagine a system which is worse than what we have today. A reform effort is welcome.

The greater certainty, speed of procedures and other reforms that the new Judiciary Law brings comes at a price of limiting the institutional independence of the country's judiciary. The Judiciary Act makes it much easier to dismiss judges, centralizing decision-making in such questions in the institutions (the High Council of Justice and the High Administrative Court) perceived as friendly to the current government. These changes expose judges to a much greater risk of political retaliation.

However, as Ukraine's experience amply demonstrates, independence must come with the ability to act responsibly. Unfortunately, Ukrainian judges have not formed anything resembling a culture of responsibility and self-regulation which their privileges call for.

More often than not they do not use the status they enjoy to uphold the rule of law, instead using the protection that the judicial office offers for personal gain.

The Ukrainian public lost all illusions about the true meaning of judicial independence long before the new government's reforms.

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