The concept of declaring legal transactions invalid has always been a focus of attention for both scholars and practicing lawyers, as it is one of the most complex issues in civil law. Declaring a transaction invalid effectively changes its status, which can affect not only the parties but also the rights of third parties.

The recently registered bill No. 13399, “On Amendments to Article 215 of the Civil Code of Ukraine…,” is a logical development of a process that has been ongoing for more than a decade and a half. The bill does not aim to rewrite the rules of restitution but rather to clarify a fundamental question: who, and under what conditions, may seek to have a transaction declared invalid?

An analysis of the draft and its explanatory note indicates that the legislature has decided to enshrine the Supreme Court’s legal positions in law. To assess the significance of this change, it is worth examining the entire evolution of judicial thought: from identifying the problem to understanding it and enshrining it in law.

Article 215 of the Civil Code of Ukraine allows for a disputed transaction to be declared invalid upon a claim filed by one of the parties to the transaction or another interested party.

Ukrainian legislation lacks a single, universal provision that would provide an exhaustive definition of the term “interested party.” Instead, the meaning of this term is determined contextually, depending on the branch of law and the specific legal relationship.

The key criterion for recognizing a person as an interested party is the existence of a legal interest on their part—that is, when a court decision or the actions of others may directly affect their rights, freedoms, legitimate interests, or obligations.

A summary of the practice of the Supreme Court of Ukraine dated November 24, 2008, showed that these factors led to a significant increase in the number of such lawsuits (nearly 20,000 cases in 2007). Often, such lawsuits were filed by individuals whose rights and interests were affected by the contested agreements only indirectly. As a result, the invalidation of a transaction was used not to protect a violated right, but to influence the counterparties or for other purposes unrelated to the protection of rights.

In response to these issues, the Plenum of the Supreme Court of Ukraine adopted Resolution No. 9 on November 6, 2009, “On Judicial Practice in the Consideration of Civil Cases Concerning the Invalidation of Legal Transactions,” which marked the first attempt to provide courts with binding guidelines.

For the first time, the court of cassation clearly stated that an “other interested party” is one “whose rights and legitimate interests have been violated by the conclusion of the transaction.”

The resolution established key rules that shaped the approach to the effectiveness of this remedy. It was clarified that restitution applies only between the parties to the invalid transaction. If, however, the property has been transferred to a third party, claims by the owners to invalidate subsequent transactions are not subject to satisfaction. In such a case, the appropriate remedy is an action for recovery of property (Art. 388 of the Civil Code of Ukraine).

The Supreme Court of Ukraine clarified that a transaction lacking the necessary conditions (for example, state registration, if required) is not void but is deemed not to have been concluded.

Thus, the 2009 ruling laid the legal foundation for the further development of judicial practice.

Based on these clarifications, judicial practice has continued to evolve, as evidenced by both the summaries of appellate courts and the legal conclusions of the court of cassation, as well as training materials for judges—in particular, the guide for judges titled “Declaring Transactions Invalid: Theoretical Foundations and Judicial Practice” (2020), which systematizes the most important relevant legal positions.

The principle of effectiveness has compelled courts and lawyers to analyze more deeply the entire system of remedies for violated rights. Judicial practice has clearly distinguished three key mechanisms for the return of property:

- restitution (Art. 216 of the Civil Code of Ukraine). It applies only as a consequence of a void transaction and exclusively between the parties to that transaction. The purpose of restitution is to restore the parties to the transaction to their original state. At the same time, the court may order restitution on its own initiative;

- vindication (Art. 388 of the Civil Code of Ukraine). A claim by the owner to reclaim specifically identified property from a person who unlawfully possesses it and with whom the plaintiff has no contractual relationship;

- condiction (Art. 1212 of the Civil Code of Ukraine, unjust enrichment). A non-contractual remedy applied where restitution or vindication is not possible. For example, in the return of property transferred under an unformed contract.

The development of the principle of good faith and the criteria for “interest” can be seen in the fact that the Court of Cassation has begun to actively apply the doctrine of “venire contra factum proprium” (prohibition of contradictory conduct) as part of the principle of good faith. In addition, criteria have been developed to determine the “interest” of a plaintiff who is not a party to the transaction. Such a person must prove that: their rights and legitimate interests are directly infringed upon by the contract; as a result of the contract being declared invalid, their property interests will be restored; and they will receive something as a result of restitution.

A striking example is the invalidation of fraudulent transactions—agreements entered into by a debtor to the detriment of creditors. In this case, the “interested party” is the creditor whose right to collect the debt is being violated. Courts classify such transactions as fictitious (Art. 234 of the Civil Code of Ukraine), since their actual purpose is not the transfer of property but the avoidance of liability.

Given this development in judicial practice, Draft Law No. 13399 appears to be the logical conclusion of this evolutionary process. The proposed amendment to Part 4 of Article 215 of the Civil Code of Ukraine suggests adding a fourth part to Article 215 of the Civil Code of Ukraine with the following wording: “4. A person who files a lawsuit with the court seeking to have a transaction or its individual provisions declared invalid must prove that their rights and legitimate interests have been directly violated by the contested transaction and that, as a result of declaring it or its individual provisions invalid, the property rights of the interested party will be protected and restored.”

This provision does not introduce anything new but enshrines in law two key criteria that have been established by judicial practice:

1. Existence of a violated right: The plaintiff must prove that they are not a third party and that their rights have been genuinely and directly violated.

2. Effectiveness of the chosen remedy: It must be demonstrated that a court ruling declaring the provision invalid will actually—rather than merely theoretically—restore the claimant’s legal position. This, in turn, compels the plaintiff and the court to analyze, right at the outset of the proceedings, which specific mechanism (restitution, vindication, condiction, etc.) would be appropriate in the particular situation.

This step definitively shifts the focus from the formal illegality of a transaction to the actual effectiveness of judicial protection. It legitimizes advanced legal approaches and requires all participants in the proceedings to be guided by the principles of good faith and reasonableness. This is undoubtedly a positive step aimed at upholding the rule of law, according to which the court is not merely an instrument for making findings but a body that effectively protects and restores violated rights.

Despite the bill’s obvious positive objectives, it is important to analyze the potential risks and negative aspects that may arise as a result of its adoption. Any new provision that imposes stricter requirements on plaintiffs carries the risk of hindering access to justice.

The greatest risk is that a provision intended to combat abuse could become a barrier for well-intentioned but less-protected plaintiffs.

The new provision requires the plaintiff not merely to set forth the circumstances of the violation, but to provide a complex legal justification that combines substantive and procedural law. The plaintiff must, in effect, not only prove the fact of the violation but also predict and demonstrate that the course of action they have chosen (declaration of invalidity) is the only correct one and will lead to a specific outcome.

For example, elderly individuals who entered into gift agreements under the influence of a mistake, believing them to be lifetime support agreements, may face difficulties. It will be difficult for them to prove that declaring the gift agreement invalid will “restore” their right to support, since such a right did not formally exist. Although their right of ownership to the home will in fact be restored, the incorrect wording of the claims may have obvious negative procedural consequences.

The draft law provides courts with a formal basis for dismissing claims at early stages, which could lead to abuses by the judicial system.

A judge, facing a heavy caseload, may take a purely formal approach to evaluating a claim and refuse to open proceedings on the grounds that “the effectiveness of the remedy has not been proven,” without delving into the merits of the case. This could become a convenient tool for filtering out not only cases with little chance of success, but also simply complex, non-obvious cases.

In non-standard cases, where the connection between the invalidity of a transaction and the restoration of a right is complex and not obvious, the court may refuse to assume responsibility and interpret the law in favor of the plaintiff, using the new provision as a pretext.

There are a number of disputes where it is extremely difficult to prove the direct restoration of a property right as a result of a transaction being declared invalid:

- fraudulent transactions (to the detriment of creditors). A creditor challenging a gift agreement entered into by a debtor to transfer assets does not receive the property for themselves. Declaring the contract invalid merely returns the property to the debtor’s ownership, creating an opportunity for the creditor to enforce a judgment against the debtor. A bad-faith defendant or a court taking a formalistic approach may argue that the creditor’s right to receive money is not directly restored;

- Corporate disputes. A minority shareholder challenging a transaction entered into by management to the detriment of the company. The restoration of their rights is indirect—through an improvement in the company’s financial condition and an increase in the value of their shares. Proving such a connection as “direct restoration of a property right” can be problematic;

- Public-interest lawsuits. A civic organization challenging the unlawful transfer of a land plot in a protected area. Such an organization has no property right to be restored. Its interest is a public one. The new provision, which focuses on property rights, could completely block such lawsuits.

The revised provision shifts the burden of proof to the stage of initiating proceedings, as it requires the plaintiff to demonstrate the effectiveness of the remedy at the time the lawsuit is filed. At the same time, the full picture and the possibility of actually restoring the right often become clear only after all the evidence in the case has been examined, responses to inquiries have been received, and the parties have been heard. Shifting this burden to such an early stage may be premature.

Thus, Bill No. 13399 codifies judicial practice. Its adoption completes a long process of refining approaches to declaring transactions invalid. This step definitively shifts the focus from a formal review of legality to the actual effectiveness of judicial protection and requires all participants in the process to be guided by the principles of good faith and reasonableness. The success of this change will depend on how well the courts apply it; they must strike a balance between filtering out baseless claims and protecting the rights of persons acting in good faith.

It is important that courts apply this provision not merely formally but substantively, guided by the principle of the rule of law and ensuring effective access to justice, especially in complex and socially significant cases. Otherwise, the “filter” against bad-faith claims risks becoming a “barrier” for individuals acting in good faith.