New legislation governing the enforcement proceedings in Ukraine became effective on 9 March 2011. The Law of Ukraine No. 606-XIV “On enforcement proceedings” dated 24 April 1999 has been amended and restated by the Verkhovna Rada in its entirety in order to resolve various issues arising in the course of enforcement proceedings and to facilitate procedural actions of state enforcement authorities. The newly-adopted legislation is aimed at extending the scope of enforcement officers’ authority and reducing the time limits for completing enforcement proceedings.
The most important and notable changes introduced to the legal framework of enforcement proceedings can be summarized as follows:
- Enforcement authorities have been granted access to the databases and state registries that contain data with respect to debtors’ assets such as real estate and vehicles, access to which was previously unavailable to the enforcement officers;
- Cash proceeds contained in or being submitted to the cash register of the debtor, can be frozen by the enforcement authority;
- Freezing of funds on bank accounts of the debtor can henceforth be extended to bank accounts that will be open after the freezing order is issued;
- Bank accounts in foreign currencies can be frozen by the enforcement authority if the amount of debt is to be paid in foreign currency;
- An enforcement officer is entitled to request the court to restrict the debtor (either an individual or a head of the legal entity) from travelling abroad until his obligations pursuant to a court judgment, are performed. However, in the case where such obligations are not performed in full and the enforcement proceedings are terminated, the limits of such a restriction are unclear;
- A complaint resulting from an enforcement officer’s actions will not delay the enforcement proceedings as enforcement officers are no longer entitled to suspend the proceedings as a result of such a complaint. A debtor can now only challenge an enforcement officer’s actions in a state court;
- An enforcement officer is now entitled to obtain confidential information which is required for conducting enforcement actions, from state bodies, institutions, organizations and officials. Regrettably, the scope of the term “confidential information” has not been clarified;
- The property valuation procedure within enforcement proceedings has been improved to circumvent dilatory tactics and ensure impartial valuation;
- The prescription period for the enforcement of judgments has been reduced from three years to one year. Any judgments submitted for execution after the expiry of that period will not be enforced;
- The enforcement fee will now be 10% of the amount awarded. This is in contrast with the previous wording of the law, which provided for an enforcement fee in the amount of 10% of the proceeds actually collected;
- Administrative and criminal penalties for failure to comply with non-monetary court orders, including judgements ordering reinstatement of an employee at work, as well as with the requests of the enforcement officer have been made more severe.
Despite numerous provisions that will help to expedite the enforcement proceedings and make them more efficient, this restatement appears to contain certain ambiguities and gaps that may cause delays and obstruct enforcement proceedings. The provisions granting unqualified access to confidential information and allowing restriction of debtors’ right to travel abroad appear particularly disturbing and will require considerable interpretive efforts by courts and enforcement agencies. In any event, the true effect of the new legislation remains to be seen.