Pavlo Kuftyryev for Ukrainian Journal of Business Law: Relevant Mechanism

In the Western world large corporations and businesses often face multi-million exposure of class action issues. In Ukraine there are many events that can give rise to such lawsuits, but the first precedent has been set only recently.

We talked to the ideologist behind the use of the class action mechanism in Ukraine, Pavlo Kuftyryev, managing partner of Greco Law Company. Its scope is relevant not only for the environmental field but is worth precise consideration in consumer protection, financial services, antitrust, employment.

Greco Law Company was the first in Ukraine to file a class action in the environmental area. Are there specific features in the preparation of class actions?

Pavlo Kuftyryev: The greening trend continues in view of both Ukrainian legislation and also obligations under the EU — Ukraine Association Agreement.

We were the first to draw the attention of the legal community to the issue of class actions in the environmental area. The first action represented aggrieved persons in the Vasylkiv catastrophe. It resulted in an amicable settlement and a payout of UAH 22 million. Currently, another class action is being considered in court against the Mykolaiv Alumina Refinery with the compensation sum reaching over UAH 9.2 billion as granted by the first court of instance. In our view, class actions are the tool that enables a large number of aggrieved persons to protect their environmental rights in an effective manner. This is the most relevant, adequate and right mechanism.

 And we are facing a fundamental issue that goes beyond the protection of environmental rights only. It also concerns compensation for damage to health, which is also known as environmental health.

In my opinion, environmental health belongs to the top league of jurisprudence. And our law firm’s experience covers not only protection of abstract environmental rights, but it relates directly to compensation for damage to health. In Ukraine, anyone can be affected in this regard. Statistics on cancer morbidity and its correlation with pollutants have been identified by experts for each region.

We became the first in Ukraine to tackle this issue in courts, and we will certainly continue to do so. Human health is one of the global goals of sustainable development, and our experience in judicial protection of environmental health can be helpful for the general public. Our main client is an ordinary individual whose interests we represent by procuring compensation for damages caused by enterprises, as this is the only way to protect rights that have already been violated and the incentive for polluters to mitigate their negative impact on environment, health and the lives of people.

How common is this practice in the world?

P.K.: The answer would not be especially ingenious: we have studied and translated the laws of the United States, Australia and Sweden. These countries have extensive experience in using class actions.

In one of your interviews you mentioned an interesting experience from the Netherlands. What is it, and how can it be used in Ukraine?

P.K.: The experience of the Netherlands is very interesting, and our Supreme Court has, in fact, already endorsed the so-called Dutch model of filing a class action by a public organization. I spend a lot of time in the Netherlands and meet lawyers there. In particular, we cooperate with representatives of the University of Leiden, the University of Utrecht and other leading institutions. In my opinion, the Netherlands has a tremendous legal system that is very inclusive, in the broadest sense of the word. That is a system of Romano-Germanic law and it is, therefore, close to Ukraine. The institution of class actions was introduced relatively recently there, and in my opinion their experience can be useful for Ukraine.

Your team has set a crucial precedent in the 2015 Vasylkiv catastrophe that took place near Kyiv. What special aspects of that court proceeding did you encounter, since the codes of procedure do not contain rules for class actions?

P.K.: First of all, those were procedural deadlines. Special deadlines for class actions in the world exist elsewhere. Such lawsuits are quite complex in terms of both substantive and procedural law. This case was constantly transferred between courts of all instances, even at the stage of taking provisional remedies, even though this contradicts our procedural legislation. In my opinion, such situations are unacceptable as delays in similar cases and in some instances may lead to irreversible consequences. Accordingly, this undermines the idea of prompt and proper consideration of a claim on its merits.

Another important issue is the attitude towards class actions per se. We need to change not only the legislation, but also the attitude in general to the issues of ordinary people, and to remind the government that human life and health are, according to the Constitution of Ukraine, the highest values.

How do courts treat class actions?

P.K.: Last year, the Grand Chamber of the Supreme Court issued a legal opinion stating that environmental organizations have the power to protect the environmental rights of their members in courts, including by recovering damages, and it also clarified the issues of admissible parties and jurisdictions in class actions that are initiated by public organizations. The existence of such positive judicial practice already confirms Ukraine’s commitment to implementing judicial mechanisms of environmental rights protection that exist in European countries.

With regard to further protection of citizens’ rights, the main thing is that a precedent has already been set.

I believe that the situation with the Vasylkiv catastrophe will provide the impetus for this area to become a living law, i.e. one that can be applied by courts. No norms are efficient only by virtue of their existence. They will become efficient when citizens, their associations or lawyers begin to defend legitimate interests and make the system to apply them as intended.

The Vasylkiv catastrophe case was finalized by the conclusion of an amicable settlement. Is this the best solution in such cases? What is normal practice in Western countries?

P.K.: Like in any such publicly controversial issues, an amicable settlement would be one of the best options. For aggrieved citizens, it means a guarantee of compensation and the shortest possible period of proceedings. Given the lengthy proceedings in this case, if we had to wait for a court decision, then its appeal, and enforcement, it could take years. And for respondents, it is an opportunity to preserve their reputation and to demonstrate their social responsibility.

Taking into account the peculiarities of litigation and enforcement proceedings in Ukraine, an amicable settlement is, indeed, currently the best option for both parties.

The second class action against the Mykolaiv Alumina Refinery resonated quite widely in the media. What are the developments in this case?

P.K.: The proceedings continue and I cannot comment on all aspects of this case. The Supreme Court is currently considering an appeal against an adverse decision of the appellate court, which denied the class action. I should mention that the GRECO team of lawyers have been on this case from the very beginning, and the court of first instance ruled to collect compensation of UAH 9.2 billion from the polluting plant in favor of local residents (almost UAH 7 million for each of the 1,200 people who united to defend their rights). In order to protect the rights of plaintiffs and to ensure compensation, assets of the property of the refinery have been distrained within the claim’s amount.

Unfortunately, we have faced so-called “justice to order by telephone” in the Mykolaiv Court of Appeal. The court sided with the polluter. Personally, I felt it was strange. Being aware of all the examinations and the damage caused to the health of people in Mykolaiv, judges “somehow” failed to be convinced.

I believe that the Supreme Court, as a court of law and a body that ensures the unity of judicial practice by issuing legal opinions (positions) that meet global standards, will adopt a fair decision and protect the aggrieved from Mykolaiv.

Apart from the significant amount of compensation, this case has also a political dimension to it since the refinery is a part of the Russian RUSAL group. Have your lawyers and the NGO in this case felt any pressure?

P.K.: Class actions are a totally civilized and consistent legal instrument to resolve disputes. It is a global trend at present. As a striking example of recent years, I would mention Dieselgate.

There is a certain lobby in Ukraine, whose representatives claim that this is “environmental raiding” or “environmental blackmail”, which is completely untrue. A class action is a legally envisaged way to protect the collective rights of citizens, and nothing else.

After the Mykolaiv Alumina Refinery received the adverse decision, the enterprise initiated an active campaign to punish those who decided to legally defend their rights via a class action. On the day, when the court of first instance made its decision, the polluter arranged criminal proceedings — large-scale fraud, which according to the Mykolaiv Alumina Refinery, was the fact of filing a class action. Instead of protecting public order, police officers intimidated aggrieved persons, requesting them to leave the NGO and to drop their claims against the alumina refinery. In exchange, the harassment and pressure would stop. There was also a criminal case against the judge who ruled to collect damages from the alumina refinery, forensic experts, and our team’s lawyers working on the case.

In other words, the polluter took extrajudicial measures and exerted pressure on all the persons involved in the class action. Unfortunately, this method of pressure on opponents is quite common in Ukrainian realities. But the pressure failed to reach its intended goal. The citizens did not drop their monetary claims, and the lawyers continued to perform their professional duties by representing the interests of their clients.

Also, during the proceedings, opponents ordered articles in a number of media publications so as to discredit public activists and their lawyers.

How close is Ukraine to passing a separate legislative act on class actions? Are there relevant initiatives in Parliament? Who proposes this legislative initiative?

P.K.: The existing legal environment provides all opportunities to file class actions but legislative changes are necessary to raise them to a totally new level. Currently, only two Laws of Ukraine — On Environmental Protection and On Consumer Protection — provide for the possibility of filing class actions.

Also, since Ukraine has positive court practice of such actions filed by public organizations in the interests of members regarding violation of their environmental rights, I believe that legislators need to take this into account and pass a separate act on class actions. I would call it a “small procedural reform.” I am sure that the highly respected judges of the Supreme Court, the legal community, and politicians are all aware of the necessity. We initiated a relevant draft law in the previous convocation of Parliament (to synchronize provisions of these acts with the Code of Civil Procedure of Ukraine). In view of newly acquired experience, we are currently working on a comprehensive draft law on class actions.

I hope that due to the joint efforts of the legal community, the general public and Parliament this work will be completed, and that the act will be passed in the near future.

In your opinion, how should the funding of class actions be regulated? In Western countries, there is a common practice for third parties to finance litigations. To what extent can such a model be applied in Ukraine?

P.K.: World practice knows several models of financing class actions, including: crowd funding, when aggrieved persons raise funds independently for a case; pro bono; a “contingency fee” model, when a law firm expects to receive a certain amount after the successful outcome of a class action. In Ukraine, this issue is not regulated by law, which enables a choice to exist between different approaches.

Class action seems to be a fairly versatile tool. Do you expect class actions to be used in other areas

P.K.: There may be many areas for the application of this tool, but I consider them to be derivatives from consumer protection and environmental protection. The areas may, among others, include company law, antitrust law, consumer protection pertaining to financial services (including legal relations in micro-lending, which is known for its onerous and unfair loan terms for citizens who are already in a difficult situation in life; prosecution of former banks’ shareholders who made their financial institutions insolvent and left millions of depositors without their funds), and many others.

Human rights are the foundation of our civilization and, therefore, the public seeking judicial protection via non-governmental organizations is a promising direction and an efficient mechanism for restoring environmental and consumer rights that have been affected.

Another area may include the activities of public authorities that ensure constitutional human rights to a clean environment and health security. For example, we consider the situation of inadequate response to the COVID-19 pandemic from the standpoint of both doctors (non-payment of promised benefits) as well as ordinary citizens who don’t receive adequate protection from the pandemic. I am not inclined to excessively criticize the national government, but in this case all the signs of inaction on the part of certain authorities and officials are there and this creates the preconditions for plaintiffs to unite and claim material and moral damages.

Ukrainian Journal of Business Law