- Kyiv Commercial Court of Appeal
LONG-TERM CONTRACTS - EASEMENT CONTRACT - BETWEEN TWO UKRAINIAN COMPANIES - REFERENCE TO UNIDROIT PRINCIPLES TO INTERPRET APPLICABLE DOMESTIC LAW (UKRAINIAN LAW).
HARDSHIP - FUNDAMENTAL CHANGE OF CIRCUMSTANCES - REFERENCE TO ARTICLE 406 AND 652 OF THE UKRAINIAN CIVIL CODE AND TO ARTICLE 6.2.2. OF THE UNIDROPIT PRINCIPLES
Claimant, a Ukrainian utility company, sued Respondent, a Ukrainian broadcasting company, asking for the termination of an easement Agreement for access to perform technical utility services of telecommunication lines(the “Agreement”)they had previously entered into. According to Claimant due to the decisions of the Kyiv City Council, it was denied right to grant Respondent the right to carry out the technical services in question, as another company had been designated responsible for providing these services. Claimant argued that this constituted a substantial change of circumstances which according to 406 article of the Ukrainian Civil Code, warranted the early termination of the Agreement.
The Court decided in favour of Respondent. It held that the aforementioned Kyiv City Council decisions did not touch upon the already existing easement agreements, and therefore did not deprive the right of any of the utility companies to carry out their activity.
In its reasoning the Court referred to article 652 of the Civil Code of Ukraine, which lays down the general rule on substantial change of circumstances and requires the change to be of such nature that if the parties have forseen it, they would have not entered into the Agreement or entered into it on other terms.
Moreover, the Court found that the concept of “substantial change of circumstances” as referred to in article 652 of the Code is a flexible concept and in this context it relied on article 6.2.2 of the UNIDROIT Principles which likewise defines hardship as the occurrence of events which fundamentally alter the equilibrium of the contract either because the cost of party's performance has increased or because the value of the performance a party receives has diminished.
According to the Court, although on the basis of the decisions of Kyiv City Council another company was appointed as a main municipal enterprise in this area, this did not cancel the already existing easement agreements, nor limit the conclusion of such agreements in the future. Consequently, the Court decided that Claimant was not entitled to terminate the existing contracts, including the Agreement in question.
The Court of Second Instance also denied the claim. In its reasoning it again referred to article 652 of the Civil Code of Ukraine and article 6.2.2 of the UNIDROIT Principles, reiterating the preceding court's arguments.
Original in Ukrainian available at the Unified State Register of Court Decisions: http://www.reyestr.court.gov.ua/}}