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Senior Partner, LCF Law Group
Artem leads the banking and finance, bankruptcy and restructuring practices at LCF. He has more than 15 years of practice in commercial litigation and banking & financial disputes. His clients include TOP 25 international and domestic banks in Ukraine. The Litigator of the Year according to Legal Award, 2018.
Senior Associate, LCF Law Group
Denys Sperov focuses on litigation, enforcement proceedings, debt recovery and asset discovery.
Execution of Court Judgments as a Highlight of Judicial Reform
In February 2019 Justice Minister Pavlo Petrenko told Interfax-Ukraine in an interview that actual execution of all court decisions stands now at a level of 30-40%. In the meantime, according to the Justice Ministry this figure did not exceed 20% in 2016.
This increase in efficiency indices has become possible due to reform of the system of enforcement of court decisions that actually began in 2016.
The lack of alternatives in reforming the enforcement system was obvious.
Negative statistics on the failure to comply with court decisions in Ukraine were provided by international expert organizations and by domestic agencies.
Unfortunately, Ukraine remains one of the leaders in the number of claims lodged against it with the European Court of Human Rights. The vast majority of claims are supported by facts of non-execution or late execution of decisions adopted by national courts.
Back in 2009 after a pilot decision in the Yuriy Nikolayevich Ivanov v. Ukraine case (Decision of 15 October 2009), the ECHR recognized failure to comply with court decisions in Ukraine a systemic problem. In this decision, the ECHR held that the right to a fair trial is deemed illusory if the court decision remains not executed.
On 12 October 2017 the Grand Chamber of the European Court of Human Rights passed a judgment in the Burmich & Ors v. Ukraine case by which 12,143 applications against Ukraine were excluded from the list of applications to be considered. All those applications were passed to the Committee of Ministers of the Council of Europe to be processed within the framework of general activities determined in the pilot decision whereas all subsequent applications filed against non-compliance with the decisions of national courts would be excluded by the ECHR from the list of cases to be considered.
The decision of the ECHR in the Burmich & Ors v. Ukraine case is the key one in solving the systemic problem of non-execution of court decisions in Ukraine, which has acquired a grand scale and is already a real threat to the supremacy of law in Ukraine.
Reform of court enforcement proceedings was initiated so as to improve things in the area of execution of judgments and to boost the efficiency of enforcement procedures. Reforming the institution of court decisions enforcement is one of the main areas of implementation of the Strategy for Restructuring Judicial System, Judicial Procedure and Related Legal Institutions 2015-2020 approved by Decree of the President of Ukraine No. 276/2015 of 20 May 2015.
Notably, the Ukrainian Parliament adopted a number of regulatory legal acts in this area in 2016. Notably: it amended Law of Ukraine On Enforcement Proceedings, (No. 1404-VIII), the Law of Ukraine On the Bodies and Persons Implementing Enforcement of Court Decisions and Other Bodies’ Decisions (No. 1403-VIII), while the Government developed a number of delegated pieces of legislation. The main novelty within the legislative acts adopted has become the introduction of private enforcement officers.
A private enforcement officer is an independent professional, authorized by the state to carry out activities aimed at enforcement of decisions determined by law, and in the manner and procedure established by legislation.
Remarkably, positive experience from the system of enforcement of court decisions can be seen in EU countries where such a system works effectively. For example, in the Netherlands, Serbia, Bulgaria, and Poland.
In Ukraine today a mixed system of enforcement of court decisions is applied, which now incorporates more than 160 private and about 4,500 state enforcement officers. According to the Ministry of Justice of Ukraine, for the purposes of effective execution of court judgments the number of private enforcements officers should total at least 3,000 persons.
Claimants will have an option to choose a state officer or a private enforcement agent.
For lenders, the main advantage of private enforcement officers over state ones lies in the speed of carrying out enforcement actions. Thus, in particular cases, a private officer can enforce a court judgment within a few days.
Statistics provided by the Justice Ministry show that in the first years of work of private enforcement officers positive dynamics can be seen and the credibility of the institution of private enforcement agencies is on the rise. Notably, in 2017 in private executors proceedings there were 3,400 enforcement documents, while in the first half of 2018 the number was almost 12,000, and their value exceeded UAH 57 billion.
However, Law No. 1404-VIII calls for a number of restrictions on court decisions that may not be handled by private enforcement agents, including cases where a claimant and a debtor are the state itself and state bodies respectively, as well as a number of ‘social’ decisions (for example, removal of a child from custody, eviction from housing, and the like).
Apart from introducing private enforcement officers, reform of the enforcement system contains a number of other highly important novelties. The following are worth noting: prepayment of cost of enforcement proceedings, development of automated system of enforcement proceedings and debtors register, no time provided to debtor for voluntary execution of a decision within property disputes, enforcement officer’s obligation to arrest the debtor’s property alongside opening the enforcement proceedings, debtor’s obligation to file an asset and income declaration and others.
In the first instance the said changes are primarily aimed at blocking illegal actions by debtors to evade execution of decisions, they provide quick and efficient execution of a court decision and to the satisfaction of claimants.
Given the positive statistics provided by the Justice Ministry, it can be said without prejudice that the reform of enforcement of court judgments is a success.
However, problems in the field of enforcement still remain, primarily due to inadequate legal regulation. Specifically, there are major challenges with the activities of private enforcement officers. For one, private performers are not authorized to form enforcement groups or give instructions to other private agents to carry out enforcement actions. For example, private enforcement officers have to spend a fair amount of time if the need arises for them to distrain and seize a debtor’s property located in different regions of Ukraine, while the State Enforcement Officer can order the relevant State Enforcement Service to carry out the distrain and seizure of such property at the location of the property that is subject to distrain and seizure.
Moreover, the law does not regulate the procedure for the transfer of open enforcement proceedings from a state enforcement officer to a private enforcement officer. Thus, in the event that a claimant at his/her own discretion decides to transfer the enforcement document to a private officer, then such person must first file an application with the State Enforcement Service on returning the document to the claimant, and again produce it for the private enforcement officer. In such event the private enforcement officer starts the enforcement actions from the very beginning whilst all the actions performed by the state officer will, in fact, lose their legal significance.
Naturally, these problems are not the only ones as long as they remain within the court judgment enforcement system. However, given tangible positive changes already made, it can be said that such problems will be solved by further improving the industry and adopting new changes to legislation.
Confirmation of continued reform of enforcement proceedings is the establishing in October 2018, under the Justice Ministry, of the Directorate of Legal Policy in the field of Judicial Administration, Judicial Proceedings and Related Legal Institutions whose tasks, amongst others, are formation of state policy in this field, building a statutory concept, monitoring implementation of legislation, coordination of attracting financial support.
As we can see, reform of enforcement of court judgments is under way, and it is hoped that in the near future Ukraine will reach actual execution of court decisions to the level of 70-80%. Achieving such indices will contribute to the development of the national economy and attract foreign investors since creditors will be assured that, if necessary, their financial interests will be well protected.