Shklyar: Ukraine looks for private sector help in enforcing court orders, judgements
Ukraine’s poor record in enforcing court orders is a major deterrent to investors, but the Justice Ministry says it has solutions.
Sergiy Shklyar was appointed deputy minister of justice on March 24 to overhaul Ukraine’s poorly functioning service for enforcing court rulings and judgements. Shklyar needs to make quick progress in order to improve the nation's low ranking in the World Bank’s Ease of Doing Business survey – in which Ukraine has set a goal of moving up 20 places next year.
Because of the ridiculously small salaries and the enormous caseload, the enforcement service isn't doing its job, meaning most court orders don't get enforced.
“Of course, it breeds corruption,” Shklyar told the Kyiv Post in an interview.
In 2014, Ukraine’s State Enforcement Service enforced only 1.3 million of execution writs, or 20.5 percent of the caseload. The amount of money recovered was a meager Hr 18.8 billion ($890 million), or just 4.3 percent of the amount that could be collected. In 2014, 42 percent of execution writs were returned to creditors because the debtors had no money to enforce collection.
Back in 2009, the European Court of Human Rights issued a judgement against Ukraine for systematic non-execution of final domestic court decisions, citing 1,400 applications that had been filed against Ukraine from individuals seeking enforcement of court orders.
The European court called upon Ukraine’s government to “introduce in its legal system, within one year ... an effective remedy, which secured adequate and sufficient redress for non-enforcement of domestic judgements.” That never happened. But Ukraine's Ministry of Justice has found a way to make progress by hiring private enforcement agents to supplement the public enforcement service.
Shklyar said Ukraine should have had such a system a long time ago.
Parliament needs to approve two laws to make this happen: one on enforcement proceedings and second – on enforcement agents with public and private status.
“If everything goes smoothly, Parliament will approve both bills before the summer holidays … and in four months, first private enforcement agents will get to work,” Shklyar said. “However, final estimates regarding the viability of a mixed enforcement system could be done only in two-three years, at the earliest.”
After the new laws come into effect, at least three months are needed for adoption of secondary legislation and training of private enforcement agents. Similar to notaries, future private enforcement agents will be obliged to insure their business and meet security requirements.
Lawyers, bankruptcy commissioners and state enforcement agents are expected to find this sideline attractive, although Shkylar said it is hard to estimate demand for this job.
The Justice Ministry plans to strengthen the collection process in other ways, including clear deadlines for each procedural step, legal responsibility for non-enforcement and a regulatory body to enforce standards.
Enforcement agents will also “be given access to all registers… They will get a right to seize or attach property… and send certain rulings by e-mail instead of post mail,” Shklyar said.
A public register of debtors will be created and published by the Justice Ministry as an incentive to pay debts. “It will contain information on the name of the debtor and the sum of the debt,” Shklyar said.
Shklyar is a former partner at Arzinger law firm where he was in charge of dispute resolution and antitrust & competition practices. In October, he was appointed a member of the council on judicial reform.
A court ruling that isn’t enforced is essentially worthless to the beneficiary.
I am a judge and issue rulings all the time. But nobody obeys them. Would you be so kind as
to enforce my orders? In 2014, public enforcement agents recovered only $866 million out of $20.1 billion in court judgements. The overworked staff makes only Hr 1,218, or $57 a month.
Statistics demonstrate how poor enforcement of court orders is costing the state and private businesses lots of money.