1. **Subject of the dispute:** The prosecutor filed a lawsuit with the court to invalidate construction contracts concluded between a village council and a private company and to recover the funds received thereunder for the state’s benefit due to a conflict of interest on the part of the village head.
2. **Court arguments:**
– The Supreme Court emphasized that the existence of an administrative offense related to corruption (conflict of interest) is not an automatic ground for invalidating a contract in commercial proceedings.
– The court noted that the term “related person” has a different scope in the Law “On Public Procurement” and the Law “On Prevention of Corruption,” and the lower courts failed to prove that the parties were related specifically for the purposes of procurement.
– The key factor was the application of the legal position of the Joint Chamber of the Commercial Cassation Court regarding the confiscatory nature of Part 3 of Article 228 of the Civil Code of Ukraine.
– The court stressed that the application of such a severe sanction is possible only in exceptional cases where it is proven that significant damage was caused to the state or a criminal offense was committed, which must be confirmed by a verdict.
– In this case, the prosecutor did not prove that the works were performed poorly, at inflated prices, or that the state suffered actual property losses.
– The court indicated that anti-competitive behavior, by itself, does not transform a transaction into one that knowingly contradicts the interests of the state if there is no proven causal link to the deterioration of the state’s financial condition.
– The Supreme Court in this case took into account and clarified the position of the Joint Chamber regarding the limitation of the application of Part 3 of Article 228 of the Civil Code of Ukraine, effectively departing from previous practice that allowed for a broader interpretation of this provision as an instrument for invalidating contracts due to violations of commercial legislation.
3. **Court decision:** The Supreme Court set aside the decisions of the lower courts and rendered a new decision fully denying the prosecutor’s claim.
