On 5 October 2016, new legislation governing the compulsory enforcement of court decisions came into force in Ukraine. The process of enforcing court decisions, locally known as “enforcement proceedings”, has become notorious in recent years for its rigidness and low efficiency. It was reported in the media that, as of May 2016, there were UAH 560 billion (around EUR 20 billion) worth of non-performed court decisions. The new rules aim to create an efficient and more flexible mechanism for compulsory performance of court decisions.
We covered the news in our June alert immediately after the laws had been passed by the Parliament; now, after the full text of the laws became available, we offer you an updated comment on this new reform.
The main novelties include:
Introduction of private enforcement officers
The new laws introduce licensed private enforcement officers, who have the same powers as the state enforcement officers. State enforcement officers perform their functions within the system of the Ministry of Justice of Ukraine and in the past had an exclusive right to enforce court decisions.
The private enforcement officers are expected to be much more active in performing enforcement actions, as they will be driven by their private interest and initiative. The private enforcement officers' liability is to be insured; their actions will be supervised by the Ministry of Justice and it will be possible to appeal against their actions before a court.
The first licenses are expected to be issued in mid-2017, following a formal test procedure. Subsequently, a creditor or any other party wishing to enforce a court decision in Ukraine will be at liberty to choose between a state or a private enforcement officer. However, the state enforcement officers will retain a monopoly over certain categories of cases, such as those arising out of family disputes, enforcement of decisions against the state or municipal authorities, and eviction cases.
Public registry of debtors
Every debtor who fails to voluntarily perform a court decision will be listed in a public registry of debtors. The registry of debtors has been created in order to prevent the debtor alienating their assets after the court decision has been made. It may also help foreign parties to verify the good standing of their potential Ukrainian counterparties. The Registry will be filled out by the enforcement officers and will be available online at the website of the Ministry of Justice, starting from January 2017.
Obligatory declaration of assets by a debtor
The new law enables the enforcement officer to order the debtor, either an individual or a company, to provide a declaration of assets owned by them. Non-abiding debtors will be subject to a fine. It is believed that this measure will significantly cut the delays which were caused in previous years by the need to locate the debtor’s assets.
Access to the debtor's banking information
An enforcement officer has the right to obtain from the banks information on the debtor’s accounts and safety deposit boxes. Until recently, it was difficult to obtain such information, as the banks could refuse to disclose this information, referring to banking secrecy requirements.
Closer cooperation with the police
The police are obliged to assist enforcement officers in carrying out their duties when there is a threat to the enforcement officer’s safety or the debtor physically resists the officer. In the past, the police were quite reluctant to assist enforcement officers. Under the new law, the police may only refuse to provide assistance in cases where the police officers from the relevant territorial unit are engaged in fighting large-scale public disorder or other critical emergencies.
Streamlined foreclosure proceedings
The new law introduces a number of small amendments aimed at streamlining, simplifying or improving procedures for the foreclosure of the debtor’s real property or other possessions.
Automated system of enforcement proceedings
The new system will enable enforcement officers to quickly issue enforcement documents based on standard templates, exchange and coordinate information with other enforcement officers and also help increase the officers' transparency and accountability with regards the creditors who filed for enforcement of a court decision.
Extended period of submission for enforcement
Under the new enforcement laws, the creditor will have three years following the court decision to file for enforcement, as compared to only one year under the previous legislation.
Advance payment
The new law imposes an obligation on the creditor, with a few exceptions, to make an advance payment for enforcement actions of 2% of the total amount subject to recovery under a court decision, though not more than 10 monthly minimum wages (currently UAH 14,500.00 / around EUR 510.00). This advance will be returned to the creditor once the awarded amount is collected from the debtor.
Comment
The Ukrainian legal community has received the new laws with cautious optimism. The introduction of private enforcement officers, as well as other novelties listed above, have been highly praised and it is believed that they will provide increased protection to creditor’s rights and also improve the enforceability of contracts in Ukraine. In the meantime, a lot depends on the way in which the new law is implemented by the courts, the police and the Ministry of Justice, who shall supervise and/or assist private enforcement officers in their actions.
Legislation: Laws “On Enforcement Proceedings” and “On Agencies and Persons Performing Compulsory Enforcement of Court Decisions and Decisions of Other Authorities”, both dated 2 June 2016.
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