I Overview

Third party funding is not regulated in Ukraine. Accordingly, there are no limitations or prohibitions on funding the claims in the civil and commercial proceedings before the Ukrainian courts and in arbitration proceedings seated in Ukraine.

At the same time, third party funding is not known on the market and in practice it is not used in proceedings before the Ukrainian courts and in arbitration proceedings seated in Ukraine.

Some Ukrainian parties resort to third party funding from non-Ukrainian funders to pursue their claims in foreign jurisdictions, including the United Kingdom, and in arbitrations seated outside Ukraine.

In the event that a party nevertheless wishes to use third party funding in Ukraine, the Rules of Professional Conduct contain a requirement that an attorney practising in Ukraine, when representing a client, may not take into account instructions from other parties. Furthermore, an attorney intending to share any privileged documents or information with a third party (i.e., funder) shall obtain the client's consent.

Although strictly not third party funding, there is a rather common practice in Ukraine for lawyers to handle cases under conditional fee agreements. The Rules of Professional Conduct expressly allow such way of structuring the payment to an attorney.

However, recently the Supreme Court stated that a provision of a contract between a client and an attorney allowing a conditional fee is void. In the view of the Supreme Court, the outcome of a litigation may not be the subject of the legal services contract.2

Not all judges of the Supreme Court agreed with such position and there is a dissenting opinion that a conditional fee agreement does not in fact breach any mandatory rule of Ukraine.3 Therefore, further developments in Ukrainian court practice on conditional fee agreements may be expected.

Ukrainian procedural rules for civil and commercial litigation, as well as the Arbitration Rules of the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry, provide for the standard rule of 'costs follow the event', which can help reduce financial burden suffered by the party to the dispute.

There is also a market in Ukraine for acquisition of non-performing loans and distressed debt in general. Factoring companies, debt collection companies and other financial companies frequently purchase claims from corporates and banks and then enforce them in their own name. However, we do not consider this to constitute third party funding.

We continue to follow the development in Ukraine in this sphere.


Footnotes

1 Olexander Droug is a partner at Sayenko Kharenko.

2 Resolution of the Supreme Court dated 12 June 2018 in case No. 462/9002/14-ц.

3 Dissenting opinion of Vasyl Krat, judge of the Supreme Court, dated 12 June 2018 in case No. 462/9002/14-ц.