25.04.2025
One of the key problems in Ukraine’s energy market is the interpretation by the Grand Chamber of the Supreme Court of the norm of the Law of Ukraine “On Public Procurement” regarding changes in the contract price. This creates significant difficulties for suppliers and threatens the stability of supply, especially for participants in public procurement.
Understanding the importance of this issue, Energy Club is organizing an online meeting for joint discussion and finding solutions. Thus, on April 9th, a discussion on the aforementioned topic was initiated on the club’s platform by one of the Energy Club participants – Oleksandr Kudym, Director of Euro Trade Energy LLC. The topic is very important and relevant for many companies, as it creates problems in the electricity market.
The source of concern is the resolution of the Grand Chamber of the Supreme Court (GCh SC) dated January 24, 2024, in case No. 922/2321/22. According to the Court’s conclusions, amendments to a procurement contract regarding an increase in the unit price of goods (in our case – energy resources) due to market price fluctuations, as provided for in paragraph 2 of part 5 of Article 41 of the Law “On Public Procurement,” have a significant limitation. Specifically, the total amount of all price increases for goods during the term of the contract cannot exceed 10% of the initial price determined in the contract at the time of its conclusion.
At first glance, the 10% rule may seem like a standard safeguard. However, its interpretation as a cumulative limit for the entire duration of the contract, regardless of the number of justified market fluctuations and the contract’s term, creates significant problems specifically for the energy resource market.
Oleksandr Kudym mentioned that several solutions to the problem had been proposed earlier. The first was a review of the GCh SC’s position. The second was to amend the Law and exempt companies that acted in accordance with the clarifications of the Ministry of Economy from liability. The third was a decision by the GCh SC on the application of bilateral restitution. Unfortunately, none of these options worked, and for six months, all court cases concerning the substance of the consideration of these 10% are being lost.
The Director of Euro Trade Energy LLC emphasized the need for the energy market to unite in order to solve the existing problems through joint efforts. One way or another, the problem affects every market participant, and this year, law enforcement agencies have intensified their efforts, with many criminal proceedings opened and suspicions of criminal offenses served.
– Oleksandr, what does the statistics of lawsuits filed by the prosecutor’s offices indicate?
– Today, the number of lawsuits is increasing – practically every company that supplied electricity to budgetary institutions increased prices by more than 10% in 2021, precisely due to the overall market price increase of more than twofold. As a result, all electricity suppliers in the public sector of the economy have become the subject of lawsuits by the Prosecutor’s Office. Some companies already have dozens, if not hundreds, of cases, while others receive new lawsuits every month. All lawsuits without exception are of the same type, which indicates a general position and clear supervision of the relevant process by the leadership of the Prosecutor General’s Office of Ukraine.
Our company, Euro Trade Energy LLC, has currently received lawsuits for a total amount of almost UAH 8 million, which the prosecutor’s offices demand to be returned to budgets of various levels.
At the same time, there is selectivity in the decisions made by the Prosecutor’s Office regarding the choice of companies and contracts, based on the results of the execution of which the corresponding lawsuits are filed. In particular, additional agreements concluded by officials of territorial prosecutor’s offices, the Ministry of Internal Affairs, the Security Service of Ukraine, and other law enforcement agencies of the executive branch are not investigated, and lawsuits are not filed, which stimulates additional, already corruption-related, risks for market participants.
– Are other law enforcement agencies or consumers also suing on similar issues, besides the prosecutor’s offices?
– Yes, although the main wave is initiated by the prosecutor’s office. In some cases, lawsuits are initiated by the State Audit Service or its territorial departments, and in some cases, the public procurement customers themselves, after a change in their leadership, independently file lawsuits with the aim of obtaining additional sources of revenue.
– What arguments are used in the corresponding standard-form lawsuits? Are there any substantive decisions in favor of market participants?
– Predominantly, the lawsuits are based on the GCh SC’s decision in case No. 922/2321/22. The main argument is exceeding the 10% limit on the increase in the unit price of goods, regardless of the market situation or documentary evidence. In some cases, the thesis of “price dumping” during participation in the tender is added.
The prosecutor’s office takes a systemic position of assigning all risks to the business side, even in cases where market participants and the state have already borne joint liability. Even if the supplier discloses all primary accounting data in order to solidify the evidence base regarding the need to amend the terms of contracts to at least partially compensate for the market price increase, and not to obtain additional profit, the judges’ position remains unchanged.
Also, there is concern about the facts of incorrect calculation by the prosecutor’s offices of the amount of funds to be returned to the respective budgets, in particular, accounting periods not covered by the appealed contracts are taken into account, or simple arithmetic errors are made, which the judges ignore, thereby creating very dangerous precedents.
– What structural problems do market participants face during the consideration of the relevant court cases?
– Among the main challenges are:
– What is the reaction of law enforcement investigators to the corresponding position of judges and prosecutors?
– The most dangerous consequence of this crisis is criminal prosecution. In particular, heads, accountants, or tender procurement managers are summoned for questioning, investigative actions are ongoing, and suspicions are served. Even if the proceedings do not reach the court, the very fact of their initiation creates risks of blocking the company’s work and psychological pressure on personnel.
– What actions have you and other electricity market participants taken to protect your rights?
– Collective appeals to the Verkhovna Rada, the Cabinet of Ministers, the Ministry of Economy, and Verkhovna Rada Committees have been initiated; – Appeals to the Grand Chamber of the Supreme Court to review the approach; – An information campaign through industry associations: Energy Club, “Energy Union”; – Publications in the media, appeals to People’s Deputies.
– Do market participants have support from state authorities?
Some support exists, in particular:
Currently, participants in public procurement and authorized persons are in uncertainty regarding their future – given the possibility of the Grand Chamber of the Supreme Court making similar decisions on the application of other norms of the Law of Ukraine “On Public Procurement.”
– The Supreme Court, in a case with similar circumstances, referred it to the Grand Chamber of the Supreme Court for consideration (Ruling dated January 29, 2025, in case No. 920/19/24). What are your expectations from the review, is there hope that the judges of the Grand Chamber will change their position?
– This is a key case. We hope that the Grand Chamber will deviate from or clarify its own position, as stated in case No. 922/2321/22, and recognize the right to price changes exceeding 10% in case of market growth and documentary evidence. We expect the formation of a unified, balanced legal position that will not destroy the energy sector and will not discredit the very principle of public procurement.
– What will happen if the GCh SC, based on the results of the consideration of case No. 920/19/24, does not change its position?
– That’s a very pertinent question. If the Grand Chamber of the Supreme Court in case No. 920/19/24 does not change the position previously stated in case No. 922/2321/22, the consequences could be catastrophic not only for the energy market but also for the entire sphere of public procurement.
The main consequences already predicted by market participants and experts:
Mass invalidation of additional agreements. All additional agreements under contracts for the supply of goods where the unit price was increased by more than 10% – even if documented – may be declared invalid. This will lead to:
Opening of mass criminal proceedings. According to the logic of the prosecutor’s office, suppliers acted “knowingly illegally,” so:
Disruption of the public sector of the economy. Many suppliers will refuse to work with budgetary institutions. Reasons:
The result is a threat to the uninterrupted supply of electricity, especially in hospitals, schools, and military units.
Discrediting the public procurement system itself. Suppliers will simply not participate in tenders or will include a very high “safety margin” to avoid risk. This will mean: less competition; higher starting prices; a decrease in confidence in the public procurement system as a whole.
Possible international consequences. Ukraine has undertaken obligations to harmonize public procurement with EU directives. Judicial practice that contradicts the principles of proportionality, flexibility, and protection of market interests may cause:
A blow to the stability of the energy market. Suppliers, especially small and medium-sized ones, will not be able to withstand the obligation to return their own funds under court decisions. Possible consequences:
Conclusion: If the GCh SC does not review its position, we will face a legal trap – formally, all participants and customers of public procurement acted in accordance with the clarifications of the Ministry of Economy and the established position of the State Audit Service, but will be punished for this “retroactively.” This creates a precedent for legal instability and selective justice.
Therefore, the fate of hundreds of suppliers, and in fact the future of law enforcement in the field of public procurement, depends on this case.
– What real economic damage could the sector as a whole suffer if such lawsuits are satisfied en masse?
– According to information published in the Prozorro system by customers (in the understanding of the Law of Ukraine “On Public Procurement”), in 2021 alone, contracts for the supply of electricity were concluded for a total amount of over UAH 20.5 billion. Given that the weighted average prices of the day-ahead market and the intraday market for the corresponding calendar year increased by more than 100%, then according to the logic of the GCh SC and representatives of the prosecutor’s office, electricity suppliers would have to compensate for the corresponding price increase at their own expense for a total amount of over UAH 20 billion.
– How has the GCh SC’s resolution changed your participation in tenders?
– After January 2024, we significantly reduced our participation in open tenders with public sector customers. The risks became unpredictable, and profitability was threatened. This is not business – it’s a lottery. Even if you act honestly, it can be qualified as a violation – retroactively.
Comment from Energy Club:
Understanding that the problem affects the interests of a wide range of participants – from legislators and government officials to suppliers and end consumers in the budgetary sphere – Energy Club is initiating an online meeting on this topic.
We invite the participation of:
The goal of our meeting is to establish a direct and constructive dialogue between all interested parties.
We aim to jointly discuss in detail the practical consequences and risks arising from the interpretation of the norms of the Law by the GCh SC’s resolution in case No. 922/2321/22.
To consider possible ways to solve the problem – whether through legislative changes, official clarifications, or the formation of new judicial practice.
To promote the formation of a balanced approach and practice of applying public procurement legislation that would take into account the specifics of energy markets and ensure the stability of supply, especially in the current conditions.
We are convinced that only through open, professional, and constructive dialogue will we be able to find the optimal solution to this complex legal conflict. A solution that will protect the interests of the state, ensure stable energy supply to the budgetary sphere, and allow suppliers to operate in predictable conditions.
Energy Club invites all interested parties to join this important discussion.
We are confident that the Energy Club platform can and should serve as a place for effective communication between business and government, for jointly finding answers to the most complex challenges, and for protecting the interests of participants in Ukraine’s energy market.
