ILF sets new precedent for protection of depositors

The Supreme Court of Ukraine disturbed the legal practice on jurisdiction in bank liquidation disputes with the Deposit Guarantee Fund (or its representatives) with its ruling of 15 June 2016 in case No. 826/20410/14. It evoked a torrent of articles and debates from the professional community noting the lack of logic behind that decision.

Administrative courts adopted the verdict of the Supreme Court, and plaintiffs were directed from one court to the next with no progress in sight. As a result, current cases were closed with the reasoning that they should go through commercial courts. Plaintiffs seeking to initiate new actions encountered the same problem. Furthermore, commercial courts also denied compensation claims for the Deposit Guarantee Fund in accordance with the Law of Ukraine On guarantee system for deposits of individuals. Obviously, bank liquidation depends on the decision of the Board of the National Bank of Ukraine under the above-mentioned Law, which provides for bankruptcy proceedings in commercial courts. The new precedent makes it impossible to exercise the right of legal protection guaranteed by the Constitution of Ukraine.

One of ILF’s clients met a dead-end, being denied guaranteed compensation after the client’s bank went bankrupt. In addition, the District Administrative Court refused to review the lawsuit, claiming that it should be examined in commercial courts. Considering the impossibility of following that advice, ILF appealed this decision.

With the case under review of the appellate court, we prepared evidence that it is impossible to initiate proceedings in commercial courts, thus indicating the absurdity of the first instance court’s decision. Specifically, Kharkiv Appellate Administrative Court received a response from the Kyiv Region Commercial Court that no case on bank bankruptcy was under review there (with our clients being that bank’s depositor), which proves that depositors have no way to present their claims.

As a result, judges of Kharkiv Appellate Administrative Court stepped back from the position of the Supreme Court and acknowledged that such disputes lie within the jurisdiction of administrative courts.This ruling is a positive development that allows bringing bank bankruptcy cases before administrative courts. The client was represented by ILF litigation expert Boris Zamikula.

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