Simplifying approaches to considering small claims: why is this important and what does Ukraine need to do on the path to effective procedures?

Aug 10, 2021 | Judiciary, Justice

Semen Kravtsov, National Expert at EU Project Pravo-Justice, Ph.D. in Law, Attorney-at-Law, Ukraine

Bert Maan, International Expert at EU Project Pravo-Justice, retired judge, the Netherlands

Any process needs to be simplified when it becomes clear that it takes up too much resources and eventually becomes a burden. In the lay of land in Ukrainian judiciary, the chain "timeframes for considering case – overloaded court" is so inseparable that it seems no longer to be perceived as a problem, but rather as an excuse or a warning: if you file a case with a court – you have to wait. Undoubtedly, time is not the only benchmark of the efficiency of the judiciary, but at the same time, it is, perhaps, the most important one. The well-known sentence "justice delayed is justice denied" is a superfluous confirmation that everything must happen timely.

The maturity of the judiciary is often determined by how effectively it handles small disputes. In Ukrainian law they are called "minor" ones, but we deliberately avoid using such wording as we believe that it somewhat distorts the true purpose for which these disputes are singled out and attaches them unnecessary evaluative nature. In our opinion, the most proper manner would be to use the term "small" disputes, which in the end will refer not to the significance of the case, but rather to a fairly objective characteristic – the amount of monetary claims.

Disputes in which claims do not exceed the maximum amount established by law (in Ukraine such amount is UAH 227,000) are considered small. Their share, according to the statistics of the State Judicial Administration for 2020, is about 80% of the total number of disputes. Proper work on these cases will potentially enable to have a controlled workload of the judiciary.

Recovery of, say, UAH 20,000 of debt confirmed by written documents can hardly be called a truly contentious situation. Usually, in this case, the court is a hostage to the strategy of the debtor, who by challenging the debt, gives rise to an artificial dispute because it seeks not to pay for as long as possible.

That is why in European countries, payment order is used to recover small amounts of debt, which enables creditors to satisfy their claims fairly quickly. In Ukraine, this instrument is considered weak, although statistics indicate that of all court payment, only about 5% are cast aside. But why don't creditors use it?

  • Since 2010, due to the legislative amendments of that time, collecting money via payment order from individuals (except for collecting debts for utility services, telecommunications services, alimony, etc.) has been made impossible.
  • The debtor finds it relatively easy to cast aside payment order: it is only necessary to declare that he/she does not acknowledge such claims (i.e., there is a dispute). As a result, the court just quashes the payment order.
  • When quashing the order, the court does not check the nature and does not analyse the creditor's claims, but rather explains to him/her that he/she can go to court again, but with a claim now. For the creditor, this means an unreasonably unnecessary step and the need to go through a classic court procedure.
  • The creditor, having an alternative to either go to court with a payment order or a lawsuit, chooses the latter because it provides a more stable result (court judgement) and eliminates the need to take objectively unnecessary actions.

With a view to setting straight the current situation, EU Project Pravo-Justice experts have held consultations and expert discussions with representatives of business and professional community over the last year, as a result of which, taking into account best European practices, they have developed the following recommendations (Full recommendations and options are available in Report Aspects of "Minor Cases" in the Practice of Civil and Commercial Proceedings in the First Instance and Appellate Courts of Ukraine):

  • Make possible recovering money from individuals via payment order again.
  • Introduce using a payment order as a mandatory stage for recovering purely monetary claims in the amount of up to UAH 1 million.
  • If the debtor appeals such a payment order, the creditor's application for a payment order is "instantly" transformed into a claim, which is considered immediately under a regular – but simplified – procedure.
  • However, if the debtor appeals a payment order for claims up to UAH 200,000, the claim into which it is converted is considered immediately under an extremely brief procedure.
  • If there is appeal against a payment order issued for the amount of more than UAH 1 million – the classic procedure (general claim procedure) is applied.

Implementation of the above recommendations is impossible without the cooperation of the Verkhovna Rada, the Ministry of Justice, the Supreme Court and other stakeholders.

Thus, improving the mechanism of the payment order is designed to qualitatively improve the situation associated with the difficulty, and in some cases the impossibility to recover money from the debtor. Small debts paid are the key to a stable economy and an effective procedure is a path to financial discipline. Moreover, promoting the widest possible use of debt collection under payment orders will significantly unburden the courts, enabling them to render timely judgements in really complex conflicts.