On 2 June 2016, Ukrainian Parliament adopted a new Law “On Enforcement Proceedings” and a new Law “On Agencies and Persons Performing Compulsory Enforcement of Court Decisions and Decisions of Other Authorities” introducing major changes to the system and procedure of compulsory enforcement of court decisions, locally known and referred to as “enforcement proceedings”.
In the past years, Ukrainian system of enforcement proceedings has become notorious for its rigidness and low efficiency. According the Minister of Justice of Ukraine, only 20% of court decisions are enforced nowadays in the country. Therefore, reform in this area has been among the most awaited ones. Along with the major changes in the judicial system adopted by the Parliament on the same day, the new enforcement rules are aimed at creating an efficient mechanism for collecting what is awarded by the court.
Introduction of the institute of private enforcement officers
The new enforcement laws introduce a new institute of a licensed private enforcement officers, having the same powers as those of the state enforcement officers, who currently perform their functions within the system of the Ministry of Justice of Ukraine. However, the state enforcement officers will retain 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. In other instances, a party wishing to enforce a court decision will be at liberty to choose between a state or a private enforcement officer (from those licensed to operate in a particular region). The private enforcement officers are called to handle mainly enforcement of court decisions in civil and commercial disputes between private parties. For performance of their functions the private enforcement officers should be licensed and covered by a third party liability insurance.
The private enforcement officers will be supervised by the Ministry of Justice of Ukraine and a self-governing body to be formed by the private enforcement officers.
Unified registry of debtors
The Unified registry of debtors is created in order to prevent post-decision alienation of assets by the debtors. The enforcement officer upon opening of the enforcement proceeding would enter the relevant data into the public registry of debtors. This registry should also help foreign parties check good standing of their potential Ukrainian counterparties. The Registry will be open and available online at the website of the Ministry of Justice.
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 currently effective legislation.
Under the current rules, the creditor bears no cost in connection with enforcement proceedings. However, the new law imposes an obligation on the creditor, with only a few exceptions, to make an advance payment for enforcement actions in the amount of 2% of the total amount subject to recovery, though not more than 10 minimum wages (currently UAH 14,500.00 / around EUR 510.00). This advance would be returned to the creditor once the awarded amount is collected from the debtor.
The new laws also provide detailed regulation of various steps in the enforcement proceedings and contain comprehensive provisions on enforcement of decisions of non-pecuniary nature.
The legal community has received the new laws with cautious optimism. Among the most discussed setbacks and risks are: lack of independence of private enforcement officers from the Ministry of Justice; dependence on the courts, which have to authorize certain actions of the enforcement officer, such as forceful entrance into private premises; dependence of the enforcement officer on support from police, which has to assist the enforcement officer in entering premises and collecting assets and funds in case of the debtor’s disobedience.
The new enforcement laws are expected to come into force already in 2016, and first private enforcement officers are expected to begin their operations by the end of 2017.
Note: This overview is based on the draft laws prepared for the second hearing at the Ukrainian Parliament. The official version of the Laws will be available after being signed by the President of Ukraine.