Pre-litigation settlement of commercial disputes

Pre-litigation settlement of commercial disputes involves resolving a conflict between business entities without recourse to the courts: through a claim, negotiations or mediation. Article 19 of the Commercial Procedure Code provides that the parties shall take steps to settle the dispute out of court by mutual agreement or in cases where such steps are mandatory under the law. The main tool here is the claim, the procedure and content of which are set out in Article 222 of the Commercial Code of Ukraine. For businesses, this is often the quickest and cheapest way to recover money or to compel a counterparty to fulfil their obligations, without wasting months on litigation and without damaging business relations.

A claim is not a mere formality, but a practical tool. Under Article 222 of the Commercial Code, it must contain the parties’ details, the circumstances and evidence, the claims with reference to the relevant legal provisions, the amount claimed and its calculation. A claim must be considered within one month of receipt, unless a different time limit is specified by law (for example, three months for contracts of carriage and six months for direct combined transport). Often, the mere fact of receiving a legally sound claim, including a calculation of penalties and damages, prompts the counterparty to settle the matter in order to avoid litigation and additional costs.

We draft the claim so that it serves both as an incentive to settle and as evidence in any future court proceedings; we negotiate with the counterparty and, if necessary, proceed to legal action without delay.

+38 095 554-54-24 — advice on the pre-litigation settlement of commercial disputes.

What a claim under Article 222 of the Civil Code must contain

For a claim to have legal weight, rather than being merely a letter, it must specify:

• the full name and postal details of the claimant and the addressee;
• the date and reference number of the claim;
• the circumstances on which it is based and the evidence supporting them;
• specific claims with reference to the relevant legislation and the terms of the contract;
• the amount of the claim and a full breakdown (debt, interest, penalty, damages, inflation adjustments, 3 per cent per annum);
• payment details and a list of attached documents.

It is precisely the calculation of penalties, inflation-related losses and 3 per cent per annum under Article 625 of the Civil Code that often makes a claim persuasive: the counterparty can see that any delay will only increase the amount.

When pre-litigation settlement is mandatory

As a general rule, the claims procedure in commercial disputes is at the discretion of the parties. However, it becomes mandatory if expressly provided for by law or by the contract itself. Very often, the parties include a clause in the contract along the lines of ‘disputes shall be resolved through negotiation, and if no agreement is reached, following the submission of a claim’: in such cases, failure to comply with the pre-litigation procedure may constitute grounds for the court to dismiss the claim. Therefore, the first thing we check is the dispute resolution provisions in your contract. These must not be ignored, otherwise you risk wasting time in court.

When to go to court straight away, and when to settle out of court

Let’s be honest: pre-litigation settlement is not always advisable. If the counterparty is transferring assets, the limitation period is about to expire, or there is a risk of the debtor’s insolvency, every month that passes without a claim works against you — in such cases, it is wiser to file a claim immediately, accompanied by an application for interim relief. However, when the counterparty is solvent, the relationship is worth preserving, and the dispute boils down to agreeing on the amount or the terms, a claim and negotiations are almost always more advantageous than going to court. We assess this objectively and do not recommend pre-litigation procedures where they would merely give the debtor more time. If, however, the dispute is not purely commercial but involves private individuals, different rules apply — we discuss these on the page on the pre-litigation settlement of civil disputes.

How we work

• we analyse the contract, source documents and the dispute resolution clauses;
• we assess the prospects of recovery and the counterparty’s solvency;
• we prepare a claim under Article 222 of the Civil Code, including a full calculation of the debt and penalties;
• we conduct negotiations and record the agreements (payment schedule, settlement agreement, supplementary agreement);
• if there is no response, we prepare a claim and an application for interim relief without delay;
• we verify the reliability of the agreements to ensure they are actually fulfilled.

What risks does a business face if it operates without a solicitor?

The first risk is sending a claim without proper calculation and references to the relevant legal provisions, and achieving no result. The second is ignoring the mandatory pre-litigation procedure stipulated in the contract and having the claim dismissed without consideration. The third is spending months in negotiations whilst the limitation period expires or the debtor divests assets. The fourth is failing to record the counterparty’s acknowledgement of the debt, even though such an acknowledgement significantly simplifies subsequent recovery. In commercial relations, the cost of such mistakes is measured by the contract value.

Cost of services (pre-litigation settlement of commercial disputes)

Pre-litigation settlement usually costs significantly less than litigation, and the preparatory work carried out is not wasted if the case does eventually go to court. Our practice specialises in conducting litigation in the courts commercial disputes</ a>, whilst pre-contract due diligence is carried out by our legal due diligence (Due Diligence) team.

Questions and Answers (pre-litigation settlement of commercial disputes)

Is it mandatory to send a claim before bringing a commercial action?

As a general rule, no; this is at the discretion of the parties. However, if a mandatory pre-litigation procedure is provided for by law or in your contract, failure to comply with it may result in the claim being dismissed without consideration.

How long do you have to respond to a claim?

Under Article 222 of the Civil Code, a claim must be considered within one month of receipt, unless a different time limit is specified by law. For transport claims, the time limit is longer – 3 or 6 months.

What must a claim contain for it to be valid?

The parties’ details, the circumstances and evidence, the claims with reference to the relevant provisions, the amount and its calculation, and payment details. The calculation of penalty interest, inflation-linked interest and 3 per cent per annum is particularly important — it demonstrates that the debt will only increase.

Can late payment interest and penalties be claimed in a claim?

Yes, if they are provided for in the contract or by law. Additionally, under Article 625 of the Civil Code, inflation-related losses and 3 per cent per annum are recoverable for the entire period of delay.

The counterparty has not responded to the claim. What next?

We prepare a claim. The lack of a response does not prevent you from taking the matter to court, and the claim itself serves as evidence of your good faith and of the acknowledgement (or non-acknowledgement) of the debt.

Can mediation be used in a commercial dispute?

Yes. Under Law No. 1875-IX, mediation is available to businesses; the procedural codes also allow the court to refer the parties to mediation. This is appropriate when it is important to preserve the business relationship.

What should be done if the counterparty is transferring assets?

Do not delay in making a claim; instead, file a claim immediately with an application for interim relief (seizure of accounts or assets). Otherwise, the court’s decision may prove unenforceable.

Is it possible to reach a settlement agreement whilst the case is already before the court?

Yes, at any stage of the proceedings. This is often more advantageous than continuing the dispute, particularly when the parties are prepared to compromise on the amount or payment schedule.

How does your claim differ from one drawn up independently?

Legally precise calculations, correct references to legal provisions and the contract, accurate timeframes and wording suitable as evidence. Such a claim is both more persuasive and safer in the event of future litigation.

How much do your services cost?

From 1,500 UAH per consultation. The cost depends on the complexity of the dispute and the amount claimed — we will provide a quote after reviewing the documents.

Contacting a solicitor at Svarog for pre-litigation settlement of commercial disputes

Send us the contract and supporting documents — we will assess the prospects, prepare a claim with a full calculation and take charge of negotiations with the other party. If an agreement cannot be reached, we will proceed directly to court without delay. Our practice specialises in commercial litigation</ a>, and if the matter concerns an undisputed monetary obligation, please also see debt recovery.

Telephone: +38 095 554-54-24, +38 096 554-54-25 (Telegram, Viber, WhatsApp). Address: 7 Khoriva Street, Office 2, Kyiv (Podil). Opening hours: Mon–Fri, 9.00–18.00.