Vitalii Bulat, a partner at FEDOTOV & PARTNERS, participated in an Energy Club discussion on the challenges surrounding public procurement of electricity.

May 11 Vitalii Bulat, a partner at FEDOTOV & PARTNERS, participated in an Energy Club discussion regarding issues in public electricity procurement.

In his speech, he focused on three problematic areas: the courts' application of provisions of the Law "On the Prosecutor's Office" that the Constitutional Court of Ukraine has already declared unconstitutional; the double standards of the prosecutor's office, which enters into contracts with formula-based pricing itself while simultaneously challenging similar contracts of market participants; and the prosecutor's transformation of procurement monitoring in Prozorro into a tool for general oversight—a function the prosecutor's office was stripped of back in 2016.

Courts continue to support the prosecutors' position even in cases involving formula-based pricing, which is explicitly provided for by the current Special Rules for public procurement.

An unconstitutional provision that remains in effect

It is worth noting the Constitutional Court's decision regarding Article 23 of the Law "On the Prosecutor's Office." The Court declared unconstitutional the provisions that allowed prosecutors to appeal to the court due to "improper exercise" of powers by authorized bodies. At the same time, the expiration of this provision was deferred until January 1, 2027.

This has created a paradoxical situation where courts continue to apply a provision whose unconstitutionality has already been established. The validity of a provision and its constitutionality are different legal categories, and under procedural law, courts have a duty not to apply unconstitutional provisions. However, most courts continue to act formally, arguing that the provision remains in effect for now.

"Prosecutors are monitoring Prozorro just like in the days of general oversight"

The partner at FEDOTOV & PARTNERS also drew attention to the mechanism behind the emergence of most lawsuits from the prosecutor's office. In the vast majority of cases, they arise after procurement monitoring in the Prozorro system.

"When a prosecutor monitors something, they are effectively exercising the general oversight function that was abolished back in 2016," Vitalii Bulat emphasized.

The prosecutor's offices themselves enter into contracts with similar price adjustment mechanisms, yet simultaneously challenge identical contracts of other market participants.

Assessing current judicial practice, Vitalii Bulat suggested that it is partly shaped by the courts' heavy caseloads, a lack of understanding of energy-specific nuances, and the psychological pressure exerted by the prosecutor's office.

Consequently, suppliers cannot fully avoid risks in the current environment. At the same time, the FEDOTOV & PARTNERS team recommends that the market be as meticulous as possible when drafting contract terms and utilize the formula-based pricing mechanisms provided for by the Special Rules. Clearly defined price adjustment mechanisms remain one of the few tools today that can at least partially protect suppliers amidst unstable judicial practice and constant legal risks.

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