On 4 November 2010, the Ukrainian Parliament passed a restatement (the "Restatement") of the Enforcement Procedure Law (the "Law") that became effective on 9 March 2011. The Restatement aims at improvement of enforcement of court decisions and cures inconsistencies in the Law.
The Restatement is expected to establish a more efficient and less time-consuming collection procedure as well as limiting the evasive strategies of debtors.
The economic crisis of 2008 and 2009 sharply increased the amount of delinquent debt to be collected by the state enforcement authorities. This exacerbated existing problems in the legislation governing enforcement procedure.
Such legislation, adopted in the late 1990s, had become outdated. There were a number of inconsistencies giving the chance for debtors to misuse their rights, and delay or avoid payment completely. The Law contained inaccurate wording that delayed effective collection. Also, certain provisions of the Law did not comport with other applicable legislation.
Due to rather nominal liability for enforcement evasion, debt collection extensively relied on response of the debtor and his cooperation in collecting information about his assets. At the same time, the debtor could trigger a lengthy procedure of challenging actions of a state enforcer.
The Restatement limits the right to contest actions of the state enforcer. Under the Restatement, the debtor cannot challenge enforcement actions within the State Enforcement Service itself. If the debtor intends to challenge an enforcement action, he must bring a court action. The Restatement explicitly allows enforcers to attach funds in bank accounts opened during enforcement procedures, thus, limiting concealment of the debtor's assets. In addition, the Restatement allows attachment of bank accounts in foreign currencies if the debt should be paid in a foreign currency. Unlike before, upon collecting funds from such foreign currency accounts, the state enforcer will be able to wire them to the creditor's bank account without conversion of the funds into Ukrainian currency. It is expected that searching for the debtor's assets will take significantly less time. State enforcers will be authorized to have direct access to the state electronic registries containing information about the debtor's assets. According to the Restatement, state enforcers will be able to request confidential data about the debtor. The Restatement provides for inspection of the debtor's financial status if the enforcement is suspended, that may help control the debtor's assets. The Restatement improves procedure for pre-sale pricing of the debtor's assets and engages creditors and debtors into the valuation process. The Restatement extends powers of the state enforcer and increases administrative and criminal liability of debtors for failure to comply with court orders. Consequently, the Restatement comported the enforcement procedure to civil, criminal, commercial and administrative proceedings as well as amended the Banking Law and the Payment Systems Law.
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