To enforce the writ
Oct 01, 2018 | Justice
Achieving inevitability of the court decisions enforcement should be the apex of the enforcement reform – III International Forum on Enforcement Proceedings
Original text: Yuridicheskaya Praktika
Kristina Posheliuzhnaia, Oleksii Nasadiuk
State and private enforcement officers should work for the sake of the sole purpose – effective enforcement of court decisions, the participants of the forum consider.
The day before Yuridicheskaya Praktika organized the first International Forum on Enforcement Proceedings, the law marked the beginning of the enforcement system reform was enacted. It was October, 2016. Then the lawyers just began to study international experience and enthusiastically exchanged expectations about the activities of private enforcement officers here, in Ukraine. Two years have passed, and representatives of the legal market can now not only discuss the prospects of Ukraine in the court enforcement decisions, but also discuss the achievements of "enforcement reform." It was the focus of the first Forum panel discussion on September 5-th. This time the event was held under the support of the EU PRAVO-Justice Project. Evris Law Company was the leading partner of the Forum.
"Enforcement of court decisions is an integral part of judicial proceedings and one of the guarantees for a person to protect their rights and legitimate interests. Not so long ago, significant changes have taken place in the system of enforcement of decisions, we will discuss the achievements and perspectives of these changes", said Ihor Kravtsov, a moderator and managing partner of Evris Law Firm, while opening a panel discussion.
“Judicial reform cannot be complete without the enforcement system reform”, said Deputy Minister of Justice of Ukraine on enforcement service Svitlana Hlushchenko. Among the achievements, she highlighted the following: a competitive environment appeared for the first time in Ukraine with the establishment of private enforcement officers institute, enforcement procedures were maximally accelerated, administrative pressure was minimized, and corruption risks were eliminated. It is also important that today public and private enforcement officers are motivated to work. Nevertheless, it is too early to stop. Enforcement should be carried out even more efficiently.
Speaking about the work of the Qualification Commission of Private Enforcement Officers, Ms. Glushchenko emphasized that 38% of candidates successfully passed the exams; regarding the work of the Disciplinary Commission of PEOs, the Ministry of Justice received 220 complaints, in 90% of cases these complaints were initiated by the debtors. Only ten submissions were forwarded to the Disciplinary Commission. Deputy Director of the Enforcement and Bankruptcy of the Ministry of Justice of Ukraine, Deputy Chairman of the Disciplinary Commission of PEOs Ihor Bahno shared the Commission’s work experience. According to him, the dynamics of disciplinary penalties application is positive for PEOs. The Commission's activity is open and transparent, the Commission does not object against livestreaming of meetings on the Internet, but disapproves of the possibility that these broadcasts be turned into a show.
“The Disciplinary Commission of PEOs is not a judicial body. However, in resolving the issue of bringing to disciplinary responsibility, the Commission exercises its discretionary powers. No one is forbidden to appeal this decision in court”, the speaker said.
Private enforcement officer from Serbia, international expert of the EU PRAVO-Justice Project Damir Site, said that the state should ensure the enforcement of judicial decisions so that they did not remain an illusion. The right to have one’s judicial decision enforced is one of inalienable human rights. He emphasized that most European countries are transitioning to a private system for enforcing judgments.
But let's proceed from general observations to specific topics. Security is one of the main problems of PEOs, according to the Deputy Chairman of the Council of Private Enforcement Officers of Ukraine Oleksandr Sivokozov. In the relevant legislation, the security of a private enforcement officer is documented in two phrases, and there are no effective mechanisms that could prevent interference. There were cases when the "enforcement file" was seized by an investigator on the request of the debtor, there are embarrassing facts of conducting searches, even in the homes of parents of private enforcement officers.
Chairman of the «Agency for Enforcement of Decisions» LLC Volodymyr Boeru is convinced that the enforcement reform was justified. The underlined the need to strengthen trust towards private enforcement officers and taking actions to popularize the reform.
Despite the fact that in the course of the reform many attempts were taken to hamper it, the stakeholders succeeded in defending it. Member of Parliament of Ukraine Ruslan Sydorovych reiterated on this fact. Nevertheless, many problems remain unresolved, and he does not know when they are expected to be tackled, especially in the context of the pre-election race start. For example, the question of access to accounts was raised at the stage of drafting legislation, but then this problem was put outside of the scope of reform, and there are also problems concerning consolidated enforcement proceedings. Mr Sydorovych believes that the inevitability of court decisions enforcement should become the apex of the reform, because the debtor would be then ready to pay the debt on his own, without waiting for the enforcement costs to accrue.
Business project
Yesterday, at a second session under the heading "Private enforcement officer as a business project", a lawmaker of the Center for Commercial Law, expert of the EU PRAVO-Justice Project Igor Nikolayev, supported the parliamentarian. He recalled that the work of private and state enforcement officers was pursuing the common goal - the effective enforcement of court decisions. Mr. Nikolayev expressed regret that the Association of Private Enforcement Officers is not self-sufficient enough, therefore, the Ministry of Justice cannot abandon the micro-management functions at the moment, but he expressed hope that the situation will change soon.
“The institute of private enforcement officer has been implemented in Ukraine a year ago, and this year we can share market issues with government officials. This bilateral dialogue is extremely important", the moderator of the session, Senior Partner of the L.I. GROUP Law Firm Mykola Kovalchuk said.
Patrick Safar, Vice President of the National Chamber of Judicial Officers (France), told about guarantees of financial and procedural independence in the work of private enforcement officers in France. The enforcement officers in France bear civil liability (for damages), criminal (for forgery of documents) and disciplinary (must follow certain ethical rules) responsibility. By the way, there is a certain tariff grid, which is envisaged by the law. According to the code of professional ethics, PEOs cannot raise tariffs.
PEO Dmytro Liapin focused on the interaction of private enforcement officers with representatives of the legal services market. The subjects of the legal market perceived private enforcement officers rather pragmatically and with restraint. As for banks, they start to collaborate with a PEO only after accreditation, but accredited PEOs must meet certain criteria, for example, have experience of work (one or two years) in the state enforcement service structures.
PEO Nazar Pavliuk told about taxation of private performers. PEOs have to pay 41% of taxes, but what amount is the taxation basis subject to this rate? Today there are several individual tax consultancy services that frustrate the PEOs. Mr. Pavlyuk predicts a number of lawsuits against tax authorities and encourages colleagues not to ignore problematic issues, while Mr. Kovalchuk is confident that private enforcement officers will be able to consolidate their efforts and solve problems, including at the legislative level. Closing the session, Ihor Sakhar, Deputy Chairman of the Board of Private JSC “Ridna Insurance Company”.
Enforcement novelties
In the course of the forum, the participants focused on the actual issues of the enforcement process. Konstantin Kolesnik, Director of the Kyiv office of JSC "Schrobets & Partners" moderated the specialized session.
Roman Klimenko, Deputy Director of the Department - the Head of the Court Decisions Enforcement Division of the State Enforcement Service Department at the Ministry of Justice of Ukraine, told about the novelties in the enforcement of the decisions of courts and other bodies in accordance with the passport of reforms approved by the Ministry of Justice. "The decisions are fulfilled voluntarily; enforcement actions are carried out in a timely, high quality and professional manner, the process of enforcement of decisions is socially oriented", the representative of the Ministry of Justice highlighted the main blocks of the passport of reform and told about their essence. He drew attention to an experiment with the establishment of service centers for the enforcement of judgments ‒ this initiative is aimed at accelerating the enforcement proceedings. And answering the question from the moderator about the differences between these centers, Mr. Klimenko noted that special advisers will be involved in their work, which will allow citizens to receive all necessary legal assistance within the framework of enforcement proceedings.
Viktor Vishnev, General Director of SETAM trading platform, reported on the peculiarities of sales of assets within the framework of enforcement proceedings. Briefly speaking about the history of the creation of SETAM, Mr. Vishnev analyzed the practical issues of organizing trading in various property. In particular, he introduced the peculiarities of mortgaged property sale and initiatives to improve the relevant law. Other interesting cases are the sale of derivative rights: emphyteusis (perpetual lease) and superficies. Mr. Vishnev also commented on the nuances of the sales of arrested land plots, the organization of jewelry and weapons trading.
Diana Kozlovska, Managing Partner of the Elite Consult Group, bankruptcy trustee, made a number of recommendations on how to obtain information on the availability of debtor’s assets abroad and how to efficiently manage the information received. Mrs. Kozlovskaya screened four popular jurisdictions that were used by unscrupulous debtors: Britain, Italy, France and the Czech Republic, telling about the possibilities of recovering information from the public registers of these states. She also shared the experience of using information from Ukrainian registries for the purpose of seeking assets abroad.
“The plurality of arrests in enforcement proceedings as an impediment to the enforcement" was the topic presented by Andrii Dzhura, Deputy Head of the Department – Head of the Non-Performing Assets Department of PJSC "PUMB". He emphasized that this question poses interest for every buyer of the arrested property, since it creates certain difficulties in the enforcement industry. The speaker also presented an overview of current practice on cases involving the sale of property which bears multiple arrests.
In his turn, Serhii Donkov, advisor to the Evris Law Firm, conducted a comparative analysis of two competing proceedings: enforcement and bankruptcy process. Noting that enforcement and receiver proceedings fulfill the same socioeconomic function - regulation of mutual settlements and stimulation of fulfillment of obligations by participants in contractual and public law relations, Mr. Donkov emphasized that they are rather poorly coordinated with each other, while the legislation contains a large number of collisions. Speaking about the peculiarities and colliding provisions of enforcement proceedings and the bankruptcy of the debtor, the speaker gave a number of recommendations on the harmonization of enforcement procedures. According to Mr. Donkov, the increase in the enforcement efficiency should also be facilitated by restricting debtors in making of property transactions after the opening of enforcement proceedings, the extension of the rights and powers of bankruptcy trustees, a clear definition of sources and guarantees of payment for their work and costs, automated imposition and lifting of arrests by enforcement officers and court in bankruptcy proceedings, coordination of actions for the recovery of current and property claims in bankruptcy proceedings, establishing the duty of the enforcement officer to close the enforcement proceedings after the opening of the bankruptcy case, the prohibition on opening of new enforcement proceedings after the moratorium on lender claims repayment has been imposed. According to the speaker, some of these proposals have already been taken into account in the draft Bankruptcy Code of Ukraine.
At the end of the session, a PEO Zorian Makovetskyi, took the floor. He briefed the participants on the peculiarities of foreclosure of corporate rights in the aspect of the new Law of Ukraine "On Companies with Limited and Additional Liability". After analyzing the novels of this law in relation to the collection of corporate rights, the speaker highlighted a number of problems that may arise in practice, commenting, in particular, on modern ways to search for relevant assets, the particularities of imposing arrests and the complexity of assessing corporate rights.
Case law summarizing
The current case law in the process of enforcing judgments was considered at the final session of the III International Forum on Enforcement Proceedings by the judge of the Kyiv Administrative Court of Appeals Oksana Epel, the Deputy Minister of Justice of Ukraine, the Government Commissioner for European Court of Human Rights Ivan Lyshchyna, the speaker judge of the Court of Cassation within the Supreme Court Serhii Zhukov, Member of the Board of the "BCHI Alternativa" JSC, Chairman of the Council of Private Enforcement Officers of Dnipropetrovsk oblast enforcement circuit under the Ministry of Justice Yurii Lysenko and the expert Andrii Avtorgov, attorney. The moderator was Andrii Kristenko, advisor to the ILF Law Firm.
Oksana Epel focused on the peculiarities of bringing the debtor to responsibility in enforcement proceedings, including taking into account the practice of the European Court. She recalled that the legislator regulated the updated instrument of encouraging debtors to properly perform their duties, but the effectiveness of its practical implementation depends on the enforcement officers (state and private). Holding the debtor liable for failure to fulfill a decision in the enforcement proceedings and imposing a fine on him, the enforcement officer (public or private) is obliged to thoroughly investigate all the circumstances of the case: in particular, to properly verify the fact that the debtor fails to perform his duties and establish the reasons for their default or improper performance. At the same time, according to Ms. Epel, the improper performance of this duty by state and private enforcement officers in most cases becomes the reason for court cancellation of their decisions on imposing penalties on the debtors the fines under Article 75 of the Law of Ukraine "On Enforcement Proceedings". She also commented on some issues of reimbursement of expenses incurred by the enforcement officers.
Ivan Lyshchyna spoke about problems and prospects of enforcement of judicial decisions against the state. "Ukraine was is championing in the number of complaints to the European Court of Human Rights, precisely because we had problems with non-enforcement of court decisions against the state. The European Court essentially became a hostage to its own success - when people realized that it was possible not only to receive money that the state initially failed to pay, but also another 12 thousand Euros of compensation, they, of course, began to massively lodge complaints. This, in fact, led to the decision on the case "Burmich and others v. Ukraine”, said Mr. Lyshchina. The speaker commented on this rather complicated matter, highlighting that Ukraine was given two years to solve the problem of non-enforcement of judgments (one year already passed). It is about both actual payments and the development of actions that should prevent further violations in this area. Mr. Lyshchina specifically focused on the problems associated with the introduction of various moratoriums, the adoption of certain "social" laws and a small-sized category of cases of impossibility to enforce decisions obligating to take certain actions.
Serhii Zhukov presented the report "Case as a methodological fundamentals of enforcement proceedings". Emphasizing the growing importance of the Supreme Court rulings in the case law consolidation, the speaker analyzed some individual conclusions of the Supreme Court in cases concerning appeals against decisions, actions or omissions of state executive agencies, state and private enforcement officers. Mr. Zhukov said that in the near future the consolidation of the Supreme Court case law in this category of cases is planned. "The jurisprudence of the Supreme Court is just beginning to take shape, and it is very important that it be understandable for the legal community, comply with the rule of law and promote the remediating of the violated rights of the complainants", the speaker judge of the Cassation Court within the Supreme Court drew a line.
Yurii Lysenko focused in his speech to the problematic issues of consolidated enforcement proceedings in a "mixed" enforcement system. He, in particular, described how several decisions against the same debtor are enforced in practice, and which case law on the claims of debtors to private enforcement officers is being formed.
At the end of the profile session and the whole forum, Andrii Avtorgov was speaking. At the beginning of his speech, he announced that the decision of Kyiv District Administrative Court abolished the decision of the Disciplinary Commission of PEOs of May 14, 2018 and the order of the Ministry of Justice of Ukraine of May 16, 2018 on his disbarment from the PEO register and termination of his activities; the audience broke into applause. The report by Mr. Avtorgov was focusing on the problematic aspects of collecting enforcement fees and the core remuneration of a PEO. The speaker cited examples of controversial case law of the Supreme Court in collecting enforcement fees and shared his thoughts on how to bring enforcement fees and core remuneration to a "common denominator."
Quotes
Positive transformations
Ihor NIKOLAIEV, Legal Advisor of the Center of Commercial Law, expert of the EU PRAVO-Justice Project
In general, the forum revealed the current state of affairs in the area of enforcement, and made it possible to formulate an idea of where to move in the future. First of all, it should be noted that the main positive event since the previous forum was the appearance of a new profession of private enforcement officers in Ukraine. The second undoubted advantage is that during this time, PEOs did not tarnish the "honor of the profession." It was reiterated during the event. There were no scandals related to the activities of private enforcement officers. As for cases of appeals against the actions of PEOs, these were, as a rule, complaints of debtors against the very fact that a PEO enforced a court decision. But this is their function. As regards the tasks for the future, it is necessary to continue to increase professional cohorts, attracting the best specialists. It is important to make efforts to increase the capacity of self-government bodies of private enforcement officers, but at the same time to understand that the key task of reform is to build such a model of the enforcement system functioning, which would ensure the inevitability of the liabilities fulfillment. The result will be the protection of the rights of citizens and legal entities, investment climate improvement, enhancement of the standard of living and ensuring economic growth in Ukraine. It is important to remember that in a country that is not capable of ensuring the fulfillment of contractual obligations is unlikely to attract investments, thus, positive economic transformations will not be possible.
Comments
A qualitative result
Serhii DONKOV, Evris Law Firm advisor
In such an area as enforcement, the implemented changes have yielded qualitative results. Of course, it is necessary to pay attention to the creation of the institution of PEOs, positive changes are also caused by the functioning of the "openmarket" electronic portal. Of course, there are many unresolved issues, in particular, the creation of a fair system for disciplinary liability of private and state enforcement officers, minimizing the risks of abuse during the sale of property in public tenders, and determining the taxation basis of the activities of PEOs, however, public authority and the legal community demonstrate readiness for open discussions and joint deliberation on reasonable solutions.
During the discussions, interim results of the enforcement proceedings were considered, which significantly improved the judicial decisions enforcement rate in our country. Despite a small number of private enforcement officers (129 people, 49 of them working in Kyiv), the PEOs’ collection rate is 58%, compared to 38% of decisions enforced by state enforcement officers. At the same time, the level of trust to the recovery specialists is still too low – the number of appeals to them is about 1% of all court decisions. In many regions of Ukraine there are simply no PEOs. This is due to the low popularization of the profession of private enforcement officer in our country, little experience and insufficient practice in this field.