Justice Needs and Satisfaction Survey mSMEs Ukraine

In 2020, Centre for Democracy and Human Rights (CEDEM), in cooperation with The Hague Institute for Innovation of Law (HiiL), conducted research among 815 Ukrainian micro, small and medium enterprises (mSMEs) to explore the legal challenges they experienced in the past two years, and how they expect Covid-19 to impact their legal problems. The data collection took place in May-June 2020 during the height of the Covid-19 crisis. This likely had an effect on the respondents (e.g. who was available, how they responded to the survey, what were their concerns, etc.).

view the report

mSMEs in Ukraine
mSMEs play a critical role in the Ukrainian economy. There are more than 1.5 million mSMEs in Ukraine, including micro-enterprises (0-9 employees), small enterprises (10-49 employees), and medium enterprises (50-250 employees). mSMEs employ 61% of the persons employed in business and constitute 99% of the country’s enterprises. Together, they contribute to 20% of the country’s GDP. mSMEs had to deal with 1.6 legal problems on average.

mSMEs most pressing legal problems
A relatively small proportion of the mSMEs from the Justice Need and Satisfaction (JNS) survey sample — 16% — say that in the past 2 years they had to deal with one or more impactful and difficult legal problems. But the reported legal problems are very serious, impactful, and costly. Findings suggest that the most common problems are related to disputes with suppliers and clients (23%), business premises (17%), or corporate fraud (15%).

Covid-19 pandemic
In Ukraine, mSMEs foresee primarily three types of problems to increase due to the pandemic: problems related to insolvency of clients or suppliers, compliance with health and safety requirements followed by their own insolvency.

Costs of legal disputes
On average, a dispute costs to the mSMEs 1.8 million Ukrainian hryvnia. Problems with regulatory compliance, trade disputes, and fraud are the most ‘expensive’ legal problems for mSMEs.

Resolving legal problems
Most of the problems – 42% – are in a process of resolution despite the relatively long period of 2 years. About a quarter of the problems are resolved and another quarter is not resolved despite the action taken. To resolve existing legal problems, mSMEs actively pursue negotiations: 31% contacted the other party. 21% Relied on a lawyer to resolve the problem. It is difficult to convince the other party to cooperate. This indicates the need for services that bring the parties together to meet, talk, negotiate, decide, and implement fair solutions.

Justice innovation needed for user-friendly justice
Most of the legal problems of mSMEs remaining unresolved is a challenge but also an opportunity for the justice innovators in Ukraine. Justice workers, policy-makers, and innovators need to listen to the voices of mSMEs and focus their efforts on improving providing better access to justice.

view the report