Private Entity vs. State: Competitors or Partners? Problems of interaction and experience of working together

Recently, a year and a half ago, the Institute of Private Executors in the System of Forced Enforcement of Decisions in Ukraine began to celebrate. In the general perception, such a term is still insignificant, even less than medium-term business projects. However, during this time, the institution of private performers has already taken its place in the minds of the Ukrainian inhabitants. Therefore, when it comes to the system of enforcement of decisions in Ukraine, mandatory clarification is required - public or private.

Unusual status, or Taken Experiment

Unlike most European countries, where judgments are executed by state or only private executives, Ukraine has chosen a mixed model for enforcing enforcement decisions. However, such a choice should be of fundamental importance, since the country is conceptually defined by the strategy of public administration - is it necessary to have a certain sphere of public administration (together with the necessity of functioning of the corresponding state apparatus) or only rules of work in a particular sphere are established, the operation of which can be provided directly by the participants in such relations. In the latter case, the management function is limited to monitoring compliance with established rules and correction of necessary behavior by refining them.

If we try to generalize it to the system of enforcement of decisions, then the state system of enforcement of decisions is prevalent in Ukraine. The total number of employees of state executive service bodies is almost 8,000 (the resolution of the CMU dated September 8, 2016, No. 620). It is clear that the simple coordination of the work of such a number of workers requires the presence of a ramified state administration apparatus. Therefore, the control system has a built-in subordination vertical, which ensures (must ensure) the effective implementation of tasks assigned to the system.

In parallel, a system of enforced execution of solutions was created by private performers. It has no limit (at least at the present time), has no control apparatus and, accordingly, vertical subordination. At the same time, this system ensures the fulfillment of the tasks assigned to it for the organization of enforcement of decisions. And, as experience shows, these tasks are carried out quite effectively.

However, against the backdrop of the size of the state system of enforcement authorities, the number of private executives in Ukraine so far is slightly over 160 people (less than 2% of the number of government executives). Such disproportionation proves that the institution of private performers did not actually go through the experimental stage, and therefore the definition of the final version of the model of compulsory execution of decisions in Ukraine will remain for the future (we hope that the closest one).

Differences in the powers of state and private performers

If we analyze the content of the law on enforcement, we can conclusively conclude that public and private executives have almost the same amount of authority in executing court decisions. The word "almost" refers only to the presence of certain powers in the government agencies to impose sanctions on the debtor in the event of enforcement of alimony decisions. In other procedural powers, public and private actors are fully equal.

A private executor, along with the state, has the right to arrest and describe assets, seize and sell assets and property. The requirements of a private performer are equally binding on all individuals and legal entities, including the authorities and their officials.

On the other hand, with regard to certain procedural issues, the state executor must coordinate his actions with the head of the department to which he is subordinated. In addition to the issues of current control, the head of the department agrees on the issue of the disposal of the proceeds of execution and the assignment of instructions to other state executors to verify the debtor's property status. Also, the head of the department is empowered to cancel any procedural document issued by the state executor in the enforcement proceedings.

At the same time, it is not necessary to forget about the necessity of the verification of many procedural documents of executive proceedings, determined by the legislation, by sealing them. But unlike a private performer who has his own stamp, the state executor does not have such a seal, and therefore has to use the seal of the department in which he works. The seal is managed by the head of the department, therefore, in fact, placing on the procedural documents of the seal, the state executor agrees with his boss.

This difference in procedural powers of private and public executives is over.

The difference in performance reporting

If one does not take into account the individual procedural nuances that make up the difference in the procedural powers of public and private performers, one can also observe the existence of different jurisdictions for the enforcement of decisions. For example, private executives, unlike the state, can not enforce their decisions with regard to state and municipal property debtors, decisions on children, as well as settlements and evictions. In addition, private executives are not entitled to enforce decisions on which the state is claiming, as well as decisions of administrative courts.

Probably, it is precisely the difference in the jurisdiction of implementation that can be explained by the established need for direct management of the activities of state executives. However, in this case, it is quite logical to ask whether there are procedural differences with the procedure of compulsory collection from the debtor of state ownership from the procedure of collection from the non-state-owned debtor. Or is there a difference in the enforcement procedure for recovery in favor of the state and in favor of the individual?

As the legal norms show, the very procedure for collecting for all entities is unanimous, with no exceptions.

About interaction and counteraction

The system of enforcement bodies in the theory is always perceived as a single institution, all of which act in concert to achieve a single goal - the enforcement of decisions of courts and other bodies. However, this is in theory, and in practice, there are permanent conflicts of interest between public and private performers.

The first conflicts concerned the correct approach in applying Article 30 of the Law of Ukraine "On Enforcement Proceedings" - the peculiarities of implementation of several decisions in case of receipt of several executive documents per one debtor. In particular, during 2017-2018 there was a resonant dispute over the possibility of executing decisions on recovering funds from one debtor at the same time by state and private executors.

In the end, on December 5, 2018, the Grand Chamber of the Supreme Court in its ruling in the case No. 904/7326/17 determined: "The private executor is not obliged to transfer the executive document or enforcement proceedings to a public or private executor who first opened the enforcement proceedings against the debtor, for execution of several decisions on one debtor in the framework of the consolidated enforcement proceedings ".In fact, the Supreme Court recognized the possibility of concurrent execution of executive actions against one debtor, both public and private. And, as practice has proven, private executives began to overtake the state at the speed of foreclosure on the debtor's property.

Consequently, the current legislation does not restrict the transfer of property that was arrested by another executor. For example, if a debtor finds immovable property arrested by a state executor in 2015 under one executive document, the private executor under another executive document also seizes the property, but in 2019. Subsequently, the private executor transfers this property to the sale, the funds from which will be directed to meet the requirements of the collector of the private performer.

It is clear that in such a situation the problem of satisfying the requirements of the taxpayer remaining in the state executor is not solved, which is not to blame for the fact that the state executor failed to timely resort to actions for the recovery of the detected property of the debtor. The only option for protecting the interests of such a taxpayer would be the transfer of an enforcement order to a private executor who is already enforcing the debtor's detected property.

However, at this stage, there is a problem of transferring the executive document, since it can only be accomplished through the completion of enforcement proceedings in the state executor, having previously applied to him to return the executive document without execution. It would be easier to determine the possibility of transferring the materials of the proceedings. Such a provision is provided for in the Law of Ukraine "On Enforcement Proceedings", but it will come into force only after the introduction of the Single Judicial Information and Telecommunication System. Although why, according to the legislator, there is a logical link between the introduction of the system and the ability to transfer material enforcement proceedings - is difficult to understand.

A further option negotiation laid the problem is the introduction of so-called "Lithuanian model" in which recovered from the debtor's funds could be automatically distributed to ASVP (automated enforcement system) among all the Creditor (no matter who the musician is execution, and regardless the desire of other artists conduct penalty). It is in this and could reflect the unity of the work of all parts of the system of forced execution of decisions - each performer makes a contribution to the execution of decisions in relation to one debtor. However, the Ministry of Justice, in charge of which is the AHPP, has not shown interest in the implementation of such a model at this time.

Executive fee vs reward

Despite the fundamental purpose of enforcement proceedings - enforcement of court decisions, most state executives pose the collection of executive fees in the first place. Similarly, for economic reasons, and private executives often see the main priority of their activities in collecting the basic remuneration. Perhaps this approach, together with other legislative restrictions, can stimulate the debtor to independently execute the decision.

However, in cases where the collector, in order to further stimulate the lawful conduct of the debtor, decides to transfer the executing document from the state executor to the private, the law does not exclude the possibility of simultaneous collection from the debtor under one executive document and executive fee, and the main remuneration.

Why this? Because, despite the unified legal nature of both concepts (this is in effect a sanction for the debtor for non-enforcement of the decision voluntarily), the legislator defined the executive fee as a compulsory payment, and the remuneration of the private executor - as the economic purpose of its activities. At the same time, the non-allocation of executive fees is not identical to cases of non-assignment of the basic remuneration of a private executor.

The only rule that determines that the main remuneration of a private executor is levied in the manner prescribed for the collection of executive fees relates only to the stage of distribution of the debts from the debtor (Article 45 of the Law of Ukraine "On Enforcement Proceedings"). And in practice, there are not unusual cases when the debtor pays the executive fee for one decision and the basic remuneration of the private performer.

The law is one - the interpretation is different

Both state and private executors, having the same amount of procedural powers, are guided by the same normative acts in their activity. However, as practice shows, approaches to understanding these acts from public and private performers are completely different. In particular, state executives have a stable legal tradition, supported by the authority of a single team, and so the violation of it can be regarded as a challenge for the entire professional community.

Instead, a private executor is bound by a single external authority in applying the rules of the law - judicial practice. In this case, often established legal tradition of bodies of state executive service differs from judicial practice.

For example, you can take a long-standing dispute about the possibility of describing the real estate of the debtor only according to the technical documentation without actually entering the premises. The previous tradition, which has developed in the work of public executives, clearly requires the need for such a penetration. Awareness of the debtors with this tradition is one way to prevent the execution of a court decision by creating barriers to admission to the premises. However, the decision of 6/13/2018 in case number 636/620/18 Supreme Court confirmed the legality of the actions of the performer to conduct a description of the premises without penetration into it.

Although this is one example, but in practice they are numerous. And the only criterion for determining the correctness of one or another methodological approach in the implementation of the decision must be the effectiveness and efficiency of execution.

From competition to partnership

As noted in the beginning, the small number of private performers can not yet compete with the state. Although certain categories of collectors (primarily banking and other financial institutions) have unanimously decided to cooperate exclusively with private performers. The key role in this choice was played by the successful experience of operational efficiency and the economic incentive for private performers to achieve a positive result, which is the basis for remuneration.

However, such a situation can not last long, because at a certain stage the state will have to analyze the result of the work of private executives and finally decide on the final model of the system of enforcement bodies - public or private. Even if a mixed model is selected, then at least the proportional number of both types of actors should comply with the principle of "50% to 50%." And only in this case, it is possible to establish a partnership system in work. Such a partnership will necessarily include joint execution of executive actions in relation to one debtor, application of a unified methodology in the procedure for implementation and implementation of the principle of equality in the status of actors.

But all this is a matter of the near future, and now the experiment with the introduction of the Institute of Private Performers in Ukraine continues.

Posted by Aleksey Solomko, Attorney, Advisor, ADER HABER