Dollar equivalent – to be: Supreme Court sides with shareholder

During the war, many real estate projects in the process of construction were forced to pause, and this became a problem for shareholders. What to do: break the contract, risking not getting your contribution back in full, or wait for the construction to be completed? Ivan Topor, the head of the real estate and construction practice of DE-JURE, a lawyer and candidate of legal sciences, has dealt with the history of the issue and the latest changes in the legislation.

How was it before? Usually, when concluding a share participation agreement or the purchase and sale of property rights, developers prescribed an amount in dollar equivalent for payment in installments. At the same time, according to Ukrainian legislation, all payments must be made in the national currency – hryvnia. Thus, the shareholder paid the hryvnia equivalent of the dollar amount. And when it came to breaking the contract and a person went to court to collect the money paid, the position of the courts was that money could only be returned in hryvnia. The current exchange rate and the depreciation of the hryvnia were not taken into account in any way, so the unitholder suffered financial losses.

Later, the Supreme Court of Ukraine (SC) sided with the investors and emphasized that if the contract was tied to the dollar equivalent for the unitholder’s payments, then the returns should also be tied to the dollar at the time of collection in the event of termination of the contract. Developers reacted to this decision by starting to make changes to the contracts and stipulate that in the event of termination of the contract, the unitholder or other investor receives back the amount actually paid in hryvnia.

However, the latest decision of the Supreme Court recorded the following: the clause in the contract stating that only the amounts actually paid in hryvnia without the dollar equivalent are subject to return is not a sufficient argument not to apply such a tie to the dollar when returning funds. Thus, the Supreme Court recognized the legality of the decisions of the first and second instance, which charged the shareholder an amount with an equivalent tied to the dollar.

In this case, the Supreme Court sided with the shareholders and proved that contracts with the developer in the event of frozen long-term construction can be terminated and deposits can be demanded to be returned, taking into account the dollar equivalent.