Losses due to war: 7 reasons for Ukrainian businesses to file lawsuits against russia
And why it's important to start the process now
Ukrainian businesses are striving to survive amidst the war and are assessing the losses caused by the russian invasion of Ukrainian territory. Since the aggressor is obliged to compensate both Ukrainian citizens and businesses, it is crucial to promptly document such facts. Additionally, legal action can already be taken, such as filing lawsuits to recover these losses from russia. Moreover, one of the priorities of the Ukrainian government this year is the utilization of frozen russian assets. Lawyer Anton Yanchuk, from Mind, discussed the opportunities provided by court decisions in cases of recovering losses from russia and why initiating such processes is worthwhile.
Read also: russia will pay: what are reparations bonds and how Ukraine can receive compensation for war damages
According to statistics, as of the end of 2023, more than 400 cases are pending in Ukrainian courts to recover from the russian federation the damages caused by its military aggression in Ukraine. This is a significant figure and in itself indicates the expediency of filing such claims against russia in Ukrainian courts.
At the same time, I know from my own experience that Ukrainian businesses are still often hesitant to file such claims. That is why I would like to give a few arguments why businesses should file lawsuits against russia in Ukrainian courts to recover the damages caused by its military aggression.
1. Court decisions are a promising investment tool
First, the Ukrainian court's decision to recover damages from russia can be seen as a kind of promising investment instrument. Yes, it is. It all depends on how you treat it.
Often the issue of lawsuits in Ukrainian courts against russia is viewed with scepticism, saying that there is no point in it if such a decision is impossible to enforce.
Firstly, it is not impossible, but difficult. The issue of immunities of foreign states from the enforcement of court decisions is regulated by the domestic legislation of each state in its own way. Some of them do not have laws on sovereign immunities of foreign states, while in others such immunities are very functional or otherwise restricted.
If this decision is considered from the point of view of the possibility of quickly obtaining a recovery, then no, it is not capable of doing so, as well as any other practical and theoretically possible instruments of recovery of damage caused by russia's military aggression in Ukraine.
But this does not mean that there is no point in such a decision, as it has many other benefits.
A Ukrainian court decision is a kind of ticket to the next level. It will most likely get you into the Hague Register of Damage Caused by the Aggression of the russian federation against Ukraine (RD4U) and make it easier for you to prove your losses to the compensation commission. With such a decision, you can seek partnerships to finance the costs of its recognition and enforcement in foreign countries. Finally, we can talk about selling claims under such a decision, of course, at a significant discount, but this is already a way to exit in some money.
Bitcoins were also once used to pay for pizza. Just as no one has a roadmap for the enforcement of Ukrainian court judgments against russia now, in a year this roadmap may become clear and simple, and the winner will be the one who already has a Ukrainian court decision that has entered into force.
2. Proving russia's involvement in the inflicted losses
Secondly, the decision of the Ukrainian court to recover damages from the russian federation is the best proof that the damage was caused and was caused exactly by russia's aggression.
Any certificates, audits, expert opinions, or assessments will not provide a comprehensive picture: the fact of damage, who caused it, and its amount. It is obvious to you that the damage was caused by russia. But to convince others of this, especially abroad, you need to prove it. And here you will not find better evidence within the jurisdiction of Ukraine than a court decision.
3. Reduced costs for filing a lawsuit
The third reason is affordability. Firstly, in the event of damage caused by russia as a result of a violation of property rights, there is a zero court fee to file a lawsuit against rf to Ukrainian court. Second, legal support services and related costs will be relatively low.
Compared to the cost of investment arbitration in the amount of USD 7+ million, the cost of legal support in a Ukrainian court will be 500+ times lower.
4. Expedited processing of lawsuits
Fourth, it is relatively fast. 6-8 months is a realistic timeframe from the start of analysis and collection of evidence to the receipt of a court decision. This is obviously faster than 5+ years of investment arbitration.
5. Absence of opposition
Fifth, you will not have an opponent. With a 99% probability, the russian federation will not participate in the proceedings, will not object and will not submit its evidence in opposition to yours.
This is the general logic of the russia – it does not recognise the jurisdiction of Ukrainian courts to hear disputes against russia in Ukraine and knows that as soon as it files a substantive objection, it will mean that it recognises the jurisdiction of the Ukrainian court to hear the dispute.
In addition, the Ukrainian process is based on dispositivity. You have stated something – the opponent is entitled to object. If they do not, it means that your arguments are not hurt.
6. Simplifying the path to the Hague Registry of Losses
The sixth reason is that the Ukrainian court's decision to recover damages from russia will not affect your other efforts to recover such damages.
For filing an application with the Hague International Register of Damages, a Ukrainian court decision is more of a plus – it will make it easier to get into the register, according to the director of the register himself.
As for investment arbitration, if you ever decide to go there, and if it is possible in your case at all, the russians may use the Ukrainian court's decision as an objection to its jurisdiction, saying that you have used another form of legal protection and cannot be defended in arbitration in respect of the same circumstances.
In my opinion, it is unlikely that they will do so, as this would contradict their logic that the Ukrainian court lacks jurisdiction to hear claims against russia. In other words, either the russians say that the company is already protected and thereby acknowledge the validity of its defence against them, or they should say that this defence is groundless and then it cannot prejudice the arbitration.
If this confuses you, you can divide the claims – claim for something in the Ukrainian court, and leave something for the investment arbitration, for example, part of the lost profits.
7. First in line means higher chances of compensation
Finally, the seventh point is that the sooner you have a decision, the higher your chances of receiving compensation, and vice versa.
At the end of 2023, there were more than 400 proceedings in the courts of Ukraine in such cases. At the beginning of 2023, there were about 50. That is, the number of proceedings has increased 8 times in a year.
This means that the current plaintiffs will receive a decision sooner than those who are still considering whether to file a lawsuit, and then the former will start looking for sources of compensation, while the latter will still be in litigation. And russian assets are not endless. Thus, competition for the enforcement of judgments against the russian federation can be expected in the near future, and it is therefore better to obtain such a judgment as soon as possible.
Thus, obtaining a Ukrainian court decision on the recovery of damages from the russian federation is relatively quick, simple and affordable and opens up new opportunities that would be impossible or extremely difficult to achieve without it at equal costs.
That is why, in my opinion, if there are grounds to obtain a Ukrainian court decision on the recovery of damages from russia for the damage caused by its military aggression in Ukraine, it is worth obtaining it and then deciding how to proceed, since events are moving rapidly and no one knows what they will be like in 6-8, and moreover in 12 months.
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