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The most private rules

With the emergence in Ukraine of the institute of private executives, the sphere of enforcement of court decisions has become more competitive. As noted by lawyers, today, commercial structures in most cases turn to private performers. Judicial practice also confirms the effectiveness of “private traders” - new categories of disputes have appeared, when debtors seek to transfer executive proceedings from a private executor to the state executive service of Ukraine by appealing against actions or inaction of a private executor. And for this, nothing less is needed - the presence of production previously opened by the state executor in respect of this debtor.

The use of such a “transfer” scheme was facilitated by gaps in the core legislation, as well as the conclusion of the Grand Chamber of the Supreme Court (SC), according to which, when executing court decisions, there is a rule of one enforcement proceedings on enforcement in relation to one debtor, regardless of the number of court decisions and jurisdictions in which court decisions were taken, and on the number of claimants.

But in December 2018, the Great Chamber of the Supreme Court retreated from this conclusion, specifying it in the decision of December 5, 2018 in case No. 904/7326/17, and focused on the fact that the recoverer cannot be deprived of the right the executor and the state for the enforcement of the judgment in his favor.

Thus, according to the circumstances of the case, in December 2017 PJSC “D” appealed to the court with a complaint about the actions and inaction of the private executor - Mr. L., who conducted executive actions on the orders of the Economic Court of the Dnipropetrovsk region, issued for the execution of the decision of the same court which in favor of OOO "P" with PJSC "D" collected funds. The complainant, among other things, requested that the inaction of a private executor, expressed in non-transfer to the enforcement department of decisions of the Department of State Executive Service (GIS) of enforcement proceedings, be deemed unlawful to involve them in the consolidated enforcement proceedings, and also requested that the private contractor be obliged to transfer the production to the GIS. In support of the complaint, PJSC “D” indicated that the first enforcement proceedings for the collection of funds from PJSC “D” opened a GIS in May 2017, and in July of the same year, the decision of the state execution officer regarding the debtor was combined into a consolidated enforcement proceedings. In turn, the private executor of the resolution on the opening of enforcement proceedings for the collection of funds from PJSC "D" received in December 2017.

By the definition of the Economic Court of the Dnipropetrovsk region of January 2, 2018, the complaint against the actions of the private executor was partially satisfied. The court indicated that, by virtue of the provisions of the Law of Ukraine "On Enforcement Proceedings", the presence of two or more consolidated enforcement proceedings in respect of the same debtor is unacceptable, since the principle of priority of satisfying the requirements of recoveries is violated in case of insufficient collection amount to meet their requirements.

The Dnepropetrovsk Economic Court of Appeal agreed with this conclusion, leaving the definition of the local economic court unchanged.

In the cassation appeal filed on the determination and ruling of the local and appellate economic courts, the private executor asked them to cancel, on the grounds that the courts did not take into account the principle of optionality of the enforcement proceedings, which consists in granting the right to the collector to determine the authority service and system of private performers. It was also stated that neither the Law of Ukraine “On Enforcement Proceedings”, nor the Instruction on the organization of the enforcement of decisions (approved by order The Ministries of Justice of Ukraine of April 2, 2012 No. 512/5, in subsequent editions, do not oblige the private executor to transfer the enforcement proceedings to the state executive service body for inclusion in the consolidated enforcement proceedings.

Having considered the cassation appeal, the Grand Chamber of the Supreme Court (SC) recognized it to be satisfied on the following grounds.

In particular, the Supreme Court agreed with the arguments of the private executor regarding the necessity of observing the principle of optionality of the enforcement proceedings, which consists of giving the claimant the right to choose to present the executive document for enforcement to the GIS body or the private executor. At the same time, the court noted that the application of the rule of mandatory transfer of enforcement proceedings from a private executor to a state one and vice versa will lead to a violation of the fundamental principle of disposition, a violation of the right of the claimant to the choice of executor provided by law. In confirmation of this conclusion, the Grand Chamber of the Supreme Court additionally noted that the systems of public and private enforcement of court decisions are not equivalent and interchangeable. For the claimant, it matters who to contact, since the terms of cooperation with the public and private executors differ.

"The need to transfer the enforcement proceedings to another executor, who first opened the proceedings, may create significant difficulties for the claimant (for example, if the executor, who first opened the proceedings against the debtor, is located in a distant place from the claimant), and for a private executor who will be forced to execute the executive documents throughout Ukraine, without having the corresponding capabilities and resources for this. This may cause a significant increase in the cost of execution, which the recoverer will be forced to incur and which may not be covered by the debtor, ”emphasizes the VS.

The SC also agreed with the cassator’s arguments about the violation by the courts of first and appeal instances of the principle of discretionary enforcement proceedings, which indicated the obligation of the private executor to transfer the proceedings to the GIS body, and noted that the transfer of the executive document or production from the private executor to another private or public executor statement or consent of the claimant.

The conclusions of the courts about the order of satisfaction of the claimant’s requirements were recognized by the Grand Chamber of the Supreme Court of error. In particular, the court stressed that the rules for allocating the sums collected from the debtor and the priority of satisfying the requirements of the claimants provided for in Articles 45 and 46 of the Law of Ukraine “On Enforcement Proceedings” should be applied within one specific enforcement proceedings, and not in general to all enforcement proceedings in relation to the debtor. In addition, in the case of the debtor’s solvency and insufficient collection amount to meet the requirements of the claimants, the simultaneous presence of consolidated enforcement proceedings on the execution of the GIS and private executors does not violate the prescribed order of priority of the claimants ’claims.

Also in its ruling, the Grand Chamber departed from its own conclusion, set out in the ruling of March 14, 2018 on case No. 660/612/16-c, specifying it as follows: Article 30 of the Law of Ukraine "On Enforcement Proceedings" It envisages the obligation of only the state executor to transfer the open executive proceedings to another state executor, who first opened the executive proceedings, for them to execute several decisions in relation to one debtor as part of the consolidated executive proceedings. The private executor is not obliged to transfer the executive document or enforcement proceedings for execution to the state or private executor who first opened the enforcement proceedings against the debtor, to execute several decisions regarding one debtor within the framework of the consolidated enforcement proceedings.

By its decision, the Grand Chamber of the Supreme Court annulled the decisions of the courts of first and appeal instances and adopted a new decision on refusing to satisfy the complaint of PJSC “D” against the actions (inaction) of a private executive.

Source: Legal Practice

(translated using google translator)