For the first time, the issue of compensation for damages to individuals and legal entities arose back in 2014, after the annexation of the Crimean Autonomous Republic of Crimea and parts of the Donetsk and Luhansk regions by the Russian Federation.
Today, the topic of receiving compensation or compensation for individuals or legal entities as a result of the full-scale invasion of the Russian Federation on the territory of Ukraine is the most urgent.
Only after the full-scale invasion of the Russian Federation on the territory of Ukraine on February 24, 2022, the state adopted a number of legal acts that provide a mechanism for compensation and compensation.
In turn, the Supreme Court gave the green light to Ukrainian courts to consider cases of compensation for property (moral) damage in which the Russian Federation is the defendant (the Supreme Court stated that the aggressor state cannot be covered by judicial immunity in view of the damage caused).
Also, let’s talk further about the procedure for recording and compensating damages caused to legal entities by the Russian Federation.
Algorithm for recording damages caused to legal entities:
1) In the event of an active fire or accident, the State Emergency Service (Emergency Service) should be called. As a result, the State Emergency Service issues an act, which the legal entity should keep. The act from the State Emergency Service is plus one documentary evidence, as a record of the damage caused.
2) Submit a statement to law enforcement agencies about the commission of a criminal offense, in accordance with Article 438 of the Criminal Code of Ukraine.
3) Fixation of the damage caused by the legal entity’s own forces:
- For this, it is necessary to prepare and approve at the enterprise the order “On conducting an inventory in connection with the conduct of hostilities by the armed forces of the Russian Federation” and conduct the corresponding inventory.
- Record the facts of the lack of goods, the absence of property, equipment and other tangible assets in the act of write-off of goods, the reconciliation statement of the results of the inventory, the accounting certificate on the write-off of goods and material values based on the inventory, prepare the working balance sheet for the accounting account with a list of the missing goods and materials values and amount of damages.
- Get an expert’s opinion on conducting a forensic economic examination regarding documentary confirmation of the amount of property damage (damages), the amount of material damage caused to a legal entity.
So, the evidence base has been collected, what’s next? Then we turn to the court with a lawsuit. In this case, there will be economic proceedings, and the subject of the lawsuit is the recovery from the Russian Federation, represented by the Ministry of Justice of the Russian Federation, of the amount of the damages.
According to Art. 79 of the ZU “On International Private Law” filing a lawsuit against a foreign state, involving a foreign state in participating in the case as a defendant or a third party, imposing a seizure on property belonging to a foreign state and located on the territory of Ukraine, applying other means to such property enforcement of a claim and enforcement of such property may be allowed only with the consent of the competent authorities of the relevant state, unless otherwise provided by an international treaty of Ukraine or the law of Ukraine.
Therefore, the Law of Ukraine “On Private International Law” establishes judicial immunity against a foreign state in the absence of the consent of the competent authorities of the relevant state to involve it in a case in a national court of another state.
The Supreme Court, in its decision dated 06/08/2022 in case No. 490/9551/19, noted: “The Russian Federation has been taking the above actions since 2014 and continues as of the time of this decision. Therefore, after the beginning of the war in Ukraine in 2014, the court of Ukraine, considering a case where the Russian Federation is identified as the defendant, has the right to ignore the immunity of this country and to consider cases of compensation for damage caused to an individual as a result of armed aggression of the Russian Federation, based on a lawsuit filed specifically against this of a foreign country.“
That is, Ukrainian courts have the right to ignore the immunity of the Russian Federation in court cases where the latter acts as a defendant.
We have received a court decision to recover from the Russian Federation, represented by the Ministry of Justice of the Russian Federation, the amount of the damages, where should we go next? Next, we have the execution of the court decision, and this is where the most interesting begins.
Execution of a court decision in Ukraine.
In Ukraine, the Law “On Enforcement Proceedings” is in force, in order to enforce a court decision on the recovery of damages, it is necessary to apply to the enforcement service with a writ of execution at the place of residence, stay, work of the debtor or at the location of his property. The debtor in this case is the Russian Federation represented by the Ministry of Justice of the Russian Federation.
Difficulties in executing a court decision in Ukraine:
- The place of execution of the court decision. During the execution of a court decision, a person is faced with a situation where it is first necessary to conduct a search and analysis of property belonging to the Russian Federation on the territory of Ukraine.
In the application for the initiation of enforcement proceedings, it is necessary to indicate that the property of the debtor is located in the territory covered by the authority of the enforcement agency (otherwise, the document presented outside the place of execution is returned to the debt collector in accordance with Clause 10, Part 4 of Article 4 of the Law “On Executive Proceedings”).
- The assets of the Russian Federation are not sufficient to satisfy the monetary demands of persons who suffered as a result of armed aggression.
Therefore, the presence of a positive decision in your favor does not guarantee its successful implementation.
Execution of a court decision abroad.
In general, decisions of Ukrainian courts are enforced in foreign countries on the basis of international agreements (bilateral, multilateral) between Ukraine and foreign countries, and in the absence of relevant agreements – on the principle of reciprocity. In addition, the procedural legislation of the state of the court to which the person applies for enforcement of the court decision will be applied.
Persons wishing to receive compensation from the Russian Federation abroad must apply to a foreign court for permission to enforce a Ukrainian court decision/recognize such a decision (the name and form of the document may differ depending on the court and country of legislation).
According to the Ukrainian legislation, the court can consider the issue of applying for the enforcement of court decisions depending on the location of the debtor’s property in Ukraine (Article 464 Part 2 of the Criminal Procedure Code of Ukraine). Foreign procedural law may contain similar rules, so a person who wins a case against the Russian Federation will likely have to look for assets in a foreign territory again and go to court for the location of property belonging to the Russian Federation.
At the same time, there are high chances that the decision of the Ukrainian court on the territory of a foreign state will not be executed, taking into account the legislation of such foreign states. The main reason for such a high chance of possible non-execution of the decision of the Ukrainian court is that, according to most foreign laws, countries enjoy judicial immunity and cannot be defendants in the courts of other countries. The procedural legislation of these countries usually establishes a rule according to which the recognition of a court decision is contrary to public order (in other words, contrary to the law of the country where the court is located). International treaties on legal aid in civil and criminal cases also provide for similar rules. Therefore, if the Russian Federation can be a defendant in Ukrainian courts in Ukraine, but not in foreign countries, then such decisions of Ukrainian courts cannot be enforced, since judicial immunity in relation to the Russian Federation operates on the territory of foreign countries. Even if it is assumed that a foreign state violated the judicial immunity of the Russian Federation, such a state may face corresponding consequences in the future. An example of such consequences is the case of Germany v. Italy (Germany v. Italy: Greece intervening), considered by the International Court of Justice of the United Nations. According to the plot of the case, between 2004 and 2008, the Italian courts issued a number of decisions in which the plaintiffs, victims of war crimes and crimes against humanity committed by the German Reich during the Second World War, were awarded monetary compensation (the defendant in the Italian courts was Germany) . Finally, in 2008, Germany filed a lawsuit against Italy, alleging that the latter had encroached on Germany’s immunity as a sovereign state, and therefore violated international law. In this case, the International Court of Justice of the United Nations concluded that neither in the history of treaty law nor in international customs is there an exception to the rule under which the judicial immunity of a state may not be applied in the case of acts that caused death, bodily injury or damage to property and which were committed on the territory of the court state by the armed forces of another state in the context of an armed conflict.Regarding the practice of the European Court of Human Rights. In the majority of court cases (for example, “McElginny v. Ireland”, “Al-Adsani v. United Kingdom”, etc.), which raised the question of whether one state can bear responsibility in the court of another state, the court indicated: “in international right, there is a tendency to limit the immunity of the state, but this practice is not widespread and does not apply to the actions of military personnel of one state on the territory of another state.“
So, it turns out that after receiving a positive court decision on compensation for damage and recovery of funds from the Russian Federation, it is not so easy to execute it either in Ukraine or abroad.
Therefore, there is a need to have a mechanism for compensation for damages at the expense of seized objects or assets owned by the Russian Federation and its citizens, in particular, on the territory of foreign countries, which would enable the enforcement of decisions of Ukrainian courts.
A similar mechanism at the legislative level has been implemented in Canada. The Seized Property Management Act resolves the issue of confiscation of assets of the Russian Federation and its citizens and the transfer of these assets to Ukraine.
Thus, as of now, it remains for legal entities to collect the evidence base regarding compensation for damage caused by the armed aggression of the Russian Federation, to obtain court decisions in order to receive real compensation in the future.