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Enforcement Bill or “New Form for Reform”

26 June 2020

At the end of May, the Cabinet of Ministers approved a bill prepared by the Ministry of Justice to amend the legislation on enforcement proceedings. The views of active participants in the decision-making system and its users on the content of the reform differ significantly, so we decided to put an end to the “and” and find out: what the proposed innovations, the urgent need and what it causes, the potential consequences of the bill and their (not ) compliance with the expectations of private performers. All questions were answered by Oleksiy Solomko, a member of the UBA Committee on Competition Law, Attorney, Counselof Ader Haber.

 

Oleksiy, let’s start our conversation by mentioning the main participant in the process – the regulator. What does the Ministry of Justice see as the content of the proposed reform of enforcement?

– The bill prepared by the Ministry of Justice can be divided into two essential blocks.

One concerns changes to the enforcement procedure, and the other concerns changes to the organization of the system of control over the work of private executors.

If the real reform is understood as the novelty and change of established processes, then the second block of changes has its features. In particular, the proposed procedure for reviewing complaints about the actions of private performers and bringing them to justice will differ significantly from the existing procedure and general legal notions of disciplinary liability.

Thus, if previously only the parties to the enforcement proceedings could appeal the actions of a private executor to the Ministry of Justice, the draft proposes to provide such an opportunity to appeal to any person who believes that the actions of the executor may violate his rights. Conventionally speaking, such persons may even be the debtor’s neighbors.

With regard to the acceptance of complaints against the actions of state executors, the Ministry of Justice decided to leave the permission to file such complaints only to the participants in the enforcement proceedings. That is, the debtor must apply exclusively to the court. It is unclear how to explain such discrimination in approaches to complaints.

In addition, the bill directly defines the grounds for bringing a private executor to justice – violation of the interests of third parties. They can be recognized as such only in court proceedings, as stated in the court decision. However, who such third parties are in the enforcement process remains a mystery, as such an entity simply does not exist in the enforcement proceedings.

Further more interesting – the term of bringing the private executor to disciplinary responsibility increases from two months to one year from the moment of detection of a disciplinary offense. That is, having found violations in the actions of the executor, the Ministry of Justice reserves the opportunity not to consider bringing him to justice during the year. Any criminological analysis of the proposal will unequivocally conclude that the norm contains signs of corruption.

“Why?”

– The executor can be easily manipulated, periodically reminding him of the threat of prosecution.

Moreover, the Ministry of Justice proposes to establish a discretionary possibility to submit a petition for disciplinary action against the executor.

Another proposal of the Ministry of Justice stipulates that the request to bring a private executor to justice is sent taking into account the circumstances of the misconduct and the degree of guilt of the executor. That is, if the Ministry of Justice believes that the guilt and circumstances of the misdemeanor deserve to be sent a motion to prosecute him, then the motion is sent. So, you can think for one year, and then come to the conclusion that the submission is simply not worth initiating.

As for the procedure of consideration of submissions, the Ministry of Justice has decided to keep it as secret as possible – the consideration will be held behind closed doors, the discussion will take place without the participation of the executor. A similar example can not be found even in criminal proceedings!

But that’s not all. During the voting at the meeting of the Disciplinary Commission of Private Performers, the Ministry of Justice decided to add an extra vote. In particular, the vote of the chairman, in case of equal distribution of votes, is proposed to be decisive. Let me remind you that only the Minister of Justice or one of his deputies can be the chairman of the Disciplinary Commission of Private Executors.

By the way, such an advantage in voting can be used for cases of justification of “their” performers. For example, at the last meeting of the Disciplinary Commission, the materials of the Ministry of Justice’s inspection of a private executor were considered, which indicated a possible violation of territorial jurisdiction during the opening of enforcement proceedings. However, the main violation – registration of documents by another private executor (several private executors work in one office) – the Ministry of Justice in its submission for some reason “did not notice”.

And in order to make the arguments of the Ministry look more convincing, the draft proposes to limit the possibility of judicial appeal against the decision to bring the executor to disciplinary responsibility. In fact, it is an attempt to limit the jurisdiction of the courts to hear appeals against decisions of the Ministry of Justice. Here I can only point out the clear contradiction of this proposal to the Basic Law.

– It seems that the essence of the changes proposed by the Ministry of Justice is only in the procedure of monitoring the work of a private contractor and bringing him to justice. But the Ministry announces a significant increase in the level of implementation of decisions. Are there any positive suggestions for the procedure itself?

– In fact, your impression is true. The changes to the procedural part concern more technical issues and purely procedural improvement of certain procedural ones.

– Identify “real” procedural short stories.

– First, the procedural possibility of restricting the debtor’s right to travel abroad by the executor is introduced if the amount of recovery exceeds 20 minimum wages (slightly more than 90 thousand UAH), or in case of non-compliance with the binding decision.

In other cases, the restriction is set by the court. There are also restrictions on the right to travel abroad for managers of debtor companies. However, such a restriction will be imposed by the court.

Personally, my opinion is that the proposal of the Ministry of Justice on the mentioned authority for executors may not gain the necessary support among deputies. Moreover, the proposed restriction procedure contains a lot of corruption risks – the decision of the executor on the restriction of the right to travel abroad must be approved by the local head of the executive service. The draft stipulates that private contractors must also apply to it for approval of their decisions. With such powers, the position of the head of the local executive service may become the second in its authority after the position of the head of the local court.

Secondly, the project proposes the liquidation of the institution of voluntary sale of property. These are cases when the debt collector and the debtor at the stage of execution can agree on the sale of property not through SETAM.

It is obvious to everyone that the existence of such an institution significantly undermines SETAM’s monopoly on the sale of property and affects its profits. Thus, by selling property outside SETAM, the participants in the enforcement proceedings save 5% of the value of the property and their precious time. As SETAM has now been returned to the Ministry of Justice, the emergence of such a proposal is not at all surprising.

However, the most significant change in the enforcement procedure concerns consolidated enforcement proceedings. Much has been said and written about this, so I will not repeat after my colleagues. I will only note that the implementation of the option proposed by the Ministry of Justice will simply block the implementation of 70% of decisions.

Mothers and children will also feel the changes in alimony decisions – the project proposes to abolish the concept of “malicious evasion of alimony”.

The following sentence can be accepted with humor:

Resolutions on collection of fines for administrative offenses, which are issued at the place of violation or without the participation of a person, may not indicate the registration number of the taxpayer’s account card (passport number). In fact, this means that the identity of the offender will not be established – you can call any name, date of birth and place of residence, and let the executor look for a mythical debtor.

And the real humor will begin when the offender, during the drawing up of the report, will be called by a surname of one of heads of the Ministry of Justice – developers of the bill. Especially since the date of birth of the leadership is known and available even in “Wikipedia”.

– In your opinion, what would private performers like to see in the bill?

– Last year, the UBA Committee on Competition Law has already presented a new version of the law “On enforcement proceedings”. This edition took into account the ideas developed by private executors on the development of the enforcement system.

The main idea is to simplify the documentary part of the enforcement procedure. It restored the balance in the status of private and public performer, as well as brought the model of organization of the performer to European standards.

In particular, this concerned the consolidation of the relevant status and the granting of special powers to the assistant private performer. Today, a private contractor’s assistant can only open the office door and answer calls. If in fact – he must prepare procedural documents and on behalf of the executor to participate in enforcement actions.

Yes, the format of the private contractor’s office is changing. Today, a private executor is limited in the ability to accept as many executive documents as he can physically process. Giving the appropriate authority to the assistant will significantly increase the number of decisions that can be executed by a specialist.

The Ministry of Justice’s bill has bypassed these issues in a tenth way – apparently, there is a feeling of fear of a competitor. Because the whole business has now gone to private performers.

– Business – what would he like to see in the bill? To what extent does his vision correlate with the proposed innovations?

– When we talk about business and enforcement proceedings, we mostly understand debt collectors who seek to quickly and effectively enforce court decisions. In fact, it is not a principal executor for business: they say it is a public or private executor. The main thing is to have a positive result.

So far, only private contractors meet business expectations. Therefore, the bill was expected to strengthen this institution and expand its powers. This was especially true of the issues of empowering private performers to implement decisions on state and municipal enterprises, expanding the operational capabilities of performers.

In addition, the part of the business represented by the debtors is also interested in ensuring efficient execution without significant losses for its own operating activities. The most painful issue in this area is the actual blocking of all accounts and property of the company in an amount well in excess of the penalty. And then everyone is frightened by the long procedure of lifting arrests after the actual execution of the decision.

This problem, for example, could be solved by electronic arrest (on the example of the Lithuanian system, which has been repeatedly mentioned by Andriy Avtorgov). However, the draft proposed by the Ministry contains only one phrase: “the automated system of enforcement proceedings will provide for the automated seizure of the debtor’s funds.” In what form – remains at the discretion of the Ministry of Justice. By the way, today there is already an automated arrest in cases of recovery of alimony. However, only virtually.

In short, the bill has already disappointed business representatives.

– In the end, do the proposed innovations satisfy anyone other than the Ministry of Justice, which is the developer of the bill?

– So far, only the debtor remains such a “beneficiary” of the ideas of the Ministry of Justice. After all, the forecast of the implementation of the project rules clearly indicates a decrease in opportunities for enforcement of court decisions by private executors. As for the work of state executors, it is likely that the level of performance will remain at the same level – there are simply no prerequisites for growth.

Although the status of the debtor in enforcement proceedings should be determined by a certain system of guarantees of his rights as a party to enforcement proceedings. The debtor in enforcement proceedings should not be an “exile” of society, as sometimes they want to present it. And it is not necessary to compare the enforcement proceedings with the criminal proceedings in which the debtor is physically prosecuted.

In fact, the law should create, first of all, economic preconditions for the “non-execution” of court decisions to be simply not profitable for the debtor. By the way, this is the goal that the APU Committee on Competition Law and I tried to achieve in the mentioned bill.

In conclusion, I will note that ensuring an effective and clear procedure for the execution of court decisions is fundamental to the economy and security of the state. For more than a year now, Ukrainian officials, representatives of European business, have been trying to bring this to the attention of Ukrainian officials.

As Ukraine is now more integrated into the European space, it is hoped that the development of the enforcement system in Ukraine will take place with the help and in accordance with European standards.

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