Despite the war in Ukraine, the withdrawal process has not stopped. Thus, since February 24, 2022
the liquidation process was launched for 8 banks. This year, for the first time in Ukraine, not only
liquidation and revocation of licenses were not only bankrupt banks, but also
profitable institutions. And this whole process is taking place without a court. Of course, the owners,
shareholders of banks can appeal against the decision of the regulator, the NBU, but in general
the process of withdrawing a banking institution from the market, if it is launched, is
This practice has been criticized for years. Lawyers
claim arbitrariness and impunity, and that regulatory authorities are vested with extraordinary
powers that go beyond their jurisdiction and turn the National
Bank and the Deposit Guarantee Fund into institutions that can act as both
both as a court and an enforcement agency.
UNN decided to find out whether this practice complies with the European Convention on Human Rights.
practice complies with the European Convention on Human Rights, which, in particular, protects the right to
which becomes significantly limited with the start of the bank liquidation procedure. And
whether there is a compromise between the desire to preserve the stability of the Ukrainian banking sector
sector and the right of owners (both individuals and legal entities) to judicial protection.
To begin with, we turned to Hanna Yudkivska, Partner at EQUITY Law Firm, Judge of the
of the European Court of Human Rights (2010-2022), Vice-Chair of the UN Working Group on Arbitrary
on Arbitrary Detention, Vice President of the European Community of International
of the European Community of International Law.
What does the practice of the European Court of Justice say about the liquidation procedure adopted in Ukraine?
of the European Court of Justice says about the procedure of bank liquidation adopted in Ukraine. Have the owners of liquidated banks ever applied to the ECHR?
liquidated banks to the ECHR and whether they can count on justice and
protection of their rights - we talked to Anna Yudkivska.
- You have represented Ukraine in the ECHR for many years. What were the most common complaints from our citizens?
complaints from our citizens.
I was a judge from Ukraine at the ECHR for 12
years. Complaints from our citizens were received under virtually all articles of the
of the European Convention, but of course there were such champions among the articles of the Convention,
such as Article 5 - unlawful detention - which, unfortunately, is abused by the
investigative bodies are abusing it. And the courts, accordingly, abuse the choice of preventive
in the form of detention. The European Court has a so-called
procedure of well established case law - these are the cases that are communicated in groups,
because these are the same violations that the European Court has spoken about in the context of
Ukraine many times.
There are a lot of complaints about violations of the right to a
fair trial, both in criminal and civil proceedings, a lot of
complaints about violations of Article 1 of the Protocol on the Right to Property... Article 8 of the Convention - the
the right to respect for private life.
The number of complaints has decreased - this is very positive
- As for Article 3, torture and ill-treatment, we cannot say that there are none at all.
there are none at all, but it is great that their number has significantly decreased. This also applies to
torture as such - by the investigating authorities, there are almost no such complaints, and the conditions of
conditions of detention. The number of complaints about the length of the trial has decreased
But what seems to be on the surface today
surface - well, if we take out the situation related to the war, the situation that has been going on
which has been going on since 2014, if we do not talk about it, about the consequences of hostilities, then
the champion is the situation with arbitrary detention and illegal
The European Convention on Human Rights
However, as we understand it, it protects not only individuals but also legal entities.
legal entities as well. Do legal entities often complain about violations of their rights to the ECHR?
Article 34 of the European Convention directly
states that the court may receive applications from any individual, non-governmental organization or group of individuals
organization or group of individuals who consider themselves to be victims of one of the rights set out in the Convention.
rights established by the Convention. It is clear that the number of complaints received from legal entities
from legal entities to the court is lower compared to complaints from individuals, however
there are such complaints. Complaints about both violations of property rights and violations of the right to a
fair trial, complaints, for example, under Article 10 regarding violations of freedom of speech,
if we are talking about a legal entity that is, for example, the owner of a media outlet, and so on. That is.
just as legal entities are parties to litigation in national courts, so
they can and do lodge complaints to the ECHR regarding violations of the Convention
Ukraine has a procedure for
for liquidation of banks and revocation of their licenses, which is initiated by the
by the sole decision of the regulator, the NBU. Does this procedure comply with the requirements of the
Convention. What does the case law of the European Court of Justice say on this issue?
This was the issue in the case considered by the
Feldman and Bank Slavyansky v. Ukraine, where the only
resolution of the NBU, which could not be appealed, revoked the license of the applicant bank
and liquidated the bank. And here, the court considered the bank's complaint about the violation of Article 1
of Article 1 of the Protocol, i.e. the right of ownership, and the court said that although there was no
of judicial control over the decision of an administrative body such as the NBU would not in itself
in itself would not be a violation of this provision, it nevertheless implies that
any interference with the right to peaceful enjoyment of one's property must be
be accompanied by procedural guarantees.
In the present case, since the resolution of the NBU, which is not
is an independent body that enjoys a very wide margin of appreciation, which
made this decision without involving the bank itself to provide its
explanations, this procedure cannot be considered protected from arbitrariness.
Moreover, there were no retrospective
remedies, that is, it was not possible to go to court with
appeal against this decision, respectively, interference with the bank's right to own its
property, as it was not accompanied by sufficient guarantees against arbitrariness, was unlawful
from the point of view of the Convention.
- In your opinion, should the procedure of liquidation of banks
In your opinion, should the bank liquidation procedure begin with a court proceeding in which it is proved that the bank
bankrupt or has violated the rules of financial monitoring and only then proceed to the
liquidation procedure and license revocation.
This is a matter that is, in principle, at the discretion of the national authorities.
to the discretion of national authorities. So, of course, a full judicial review of an
of an administrative decision, such as a decision of the NBU, it should... such a
decision should be reviewed by a court that has full jurisdiction, including
jurisdiction to determine the issues that you have mentioned. That is, whether the bank was
bankrupt, whether it violated the rules of financial monitoring, etc.
But how this will be done, before or after,
these are questions that the European Court leaves to the discretion of the state. The main thing is that there should be
there were guarantees against arbitrariness, and if such a decision is made arbitrarily, it should be possible to
it is possible to reverse it, return the license and make sure that the legal entity
the bank, which has already fallen victim to such arbitrariness, is compensated and
restored to its rights.
- If banking activity is actually a type of economic activity of a joint stock company
type of economic activity of a joint-stock company, is not the procedure of
deprivation of the bank's license and its liquidation by the regulator's decision and without
court procedures is not a violation of shareholders' rights. How shareholders should act. Is there enough
Ukrainian legislation has enough tools to protect shareholders' rights in this case.
in this case.
The general principle is that shareholders of a
of a company cannot be considered as victims of actions and measures that affect the
the company. That is, one question is if a certain action affects the company, the bank,
such as, for example, revocation of a license, interference with the bank's ownership.
Shareholders are not victims here. Shareholders are victims of actions that are directly
aimed at affecting the shareholders' rights and their ability to influence
on the actions of the company. If we are talking about the rights of a bank or a company, we have
legal personality of the company, it remains untouched
Yes, there are exceptions to this principle, when
shareholders can complain on behalf of the company. This is if, for example, the company and
shareholders are very closely related, which happens when you have, say, a family business,
a family enterprise - it's impossible to separate. Or in a situation where shareholders
can file a complaint if, for example, the body that is currently managing the
the company, as a result of liquidation, for example, such as the liquidation commission, is not interested in
itself is not interested in challenging the actions that led to the appointment of this
liquidation body was appointed.
But again, we need to distinguish between the rights of the company and the rights of
of the company and the rights of the company's shareholders.