Crux (#04 April 2017)

Legislative Update

This month was notable for a number of legislative initiatives concerning amendments to the ban by the Ministry of Justice to take some decisions in the sphere of appealing against registration activities, improving the procedure for state supervision and responsibility for violations of labor legislation, introduction of the institution of trial by jury. Our team did not forget to ask experts about suggested draft amendments to the Commercial Procedural Code, the Civil Procedure Code and the Code of Administrative Court Proceedings.

The term “people’s assessors” will disappear from the Civil Procedure Code. It is replaced by the term “jury”. These changes are stipulated by the Law On Amendments to the Civil Procedure Code of Ukraine on Consideration of Cases with the Participation of Jurors, which was adopted on 9 February. How do you evaluate this innovation? What changes should be expected in the civil process?

Oleksii Khrystoforov

Attorney, Ilyashev & Partners

As is known, on 30 September 2016 earlier adopted amendments to the Constitution of Ukraine (related to justice), as well as the new version of the Law of Ukraine On Court Organization and Status of Judges, came into force. According to the mentioned documents MPs exempted the institution of people’s assessors from the national court system.

In such a way, pursuant to the provisions of the Constitution of Ukraine (which are in force at present) the Ukrainian nation directly participates in the administration of justice via jurors.

The current version of the Civil Procedure Code of Ukraine stipulates for participation of people’s assessors in the process of consideration of a number of categories of cases, in particular those, which are related to adoption, limitation/renewal of the civil capacity of individual persons, recognition of a person to be missing or pronouncement of a person to be deceased, as well as in certain other cases. Starting from the moment of adoption and effectiveness of the aforementioned amendments there has been a certain judicial “paralysis” in the course of consideration by the courts of cases stipulating the participation of people’s assessors in connection with inconformity of the composition of the court (in the process of consideration of a certain case from the mentioned category) to the Constitution of Ukraine.

In view of the amendments introduced to the Constitution of Ukraine, which do not stipulate further participation of people’s assessors in administration of justice, adoption by the Law (on 9 February) of the amendments to Civil Procedure Code appears to be totally logical and expected.

I do not see any serious implications from such a legislative novelty, which would welcome discussions about certain changes in the civil process as soon as the legal status of a people’s assessors (in the previous version of the Code) and jurors (in the new version) has been neutralized – the Code directly states that in the course of consideration of cases with the participation of jurors the latter fully enjoy and exercise the powers of judges.

As a matter of fact, the legislator has brought the provisions of procedural law (on the basis of which justice in the civil cases is administered) into compliance with the legislative instrument of the highest legal force, the Constitution of Ukraine, which can only be welcomed.

According to NBU Resolution No. 15 of 28 February 2017, bank customers do not need to wait for an NBU permit to conduct operations to purchase foreign currency and transfer funds outside Ukraine to non-residents. Authorized banks will inform the NBU of such customers’ transactions after they have been conducted. How do you assess this innovation? Do these changes affect banking activities?

Nickolas Likhachov,

Counsel, Spenser & Kauffmann

Generally, these amendments will have a positive effect, since they considerably simplify the financial transactions procedures, which will boost development of business activities and mobilize investment. Bank clients will be able to carry out currency transactions much faster and effectively due to the fact that there will be no need to wait for the National Bank of Ukraine to examine the financial transaction. The Regulator will control and examine the legitimacy of such transactions post factum and be able to suspend future transactions in the event of any suspicions. In this case the NBU will issue a motion and send it to the respective bank. Banks will be released from much of the current paper work and be more flexible in the way they conduct financial transactions. All these things will enable a decrease in superfluous bureaucracy that exists within the Ukrainian banking system.

Consequently, the National Bank is gradually cancelling currency restrictions, which were adopted a few years ago to stabilize the economic situation in Ukraine. It should be noted that these steps by the NBU are testimony not only of the ongoing process of deregulation, but also about the gradual stabilization of the economic situation in the country.

Nonetheless, these amendments contain risks that bank clients would abuse these derogations. For example, clients would be able to conduct transactions related to money laundering and financing of terrorism if the NBU does not manage to examine these transactions in time.

Ukraine has joined the European Union’s COSME program for supporting small and medium-sized business. How can this agreement impact market access conditions?

Andrew Zablotskyi,

Counsel, Sayenko Kharenko

COSME (Competitiveness of Small and Medium-sized Enterprises) is an EU program established to create better business conditions for SME in the emerging and developing world. The program is implemented within the framework of the Small Businesses Act (of 25 June 2008) with a total budget of EUR 2.3 billion.

Access to market is one of the four main goals of the program.

Its aim is to assist SMEs in finding customers within the EU as well as beyond it. This initiative is implemented through the creation of the EEN (Enterprise Europe Network). There are more than 600 organizations in more than 50 countries assisting SMEs in obtaining access to financial resources of the EU, its markets and technology, etc. COSME funds special web tools being designed to support SMEs. They are “Your Europe Business Portal” and “the SME Internationalization Portal”. The first provides practical online information for entrepreneurs who want to enter the European market. The second puts the emphasis on supporting measures for companies to develop their business outside of Europe in third countries. It is important to note that COSME opens the possibility to use tools for more simplified access to the EU market, but doesn’t “guarantee the shelf.” Simplification consists of a greater amount of knowledge and financial resources that can be obtained by countries connected to COSME.

Ukraine is now a part of the COSME program and is eligible to apply for such initiatives and schemes of support. In addition, Ukraine is a part of EEN and companies can benefit from it by applying to members of the consortium in Ukraine.

Lawmakers suggest depriving the Ministry of Justice of the right to take some decisions in registration actions. Corresponding Draft Law No. 6121 On Amendments to the Law of Ukraine on State Registration of Rights to Real Estate and their Encumbrances regarding the improvement of appealing against decisions, actions or inaction in the sphere of state registration of rights has been registered in Parliament. How does this initiative appear against raiding?

Artur Avetyan,

Associate, Trusted Advisors

The Parliament registered Draft law No. 6121 on amendments to the Law of Ukraine On State Registration of Rights to Real Estate and Their Encumbrances. Under the proposed changes, the Ministry of Justice proposed to narrow powers in the field of state registration of rights to immovable property and to deprive the possibility of cancelling a decision on state registration of rights, to cancel the decision on refusal of state registration of rights and the state registration of rights to make changes to the records of the State Register of Rights and correct mistakes made by the state registrar and registrar of state on revoking access to the state registry.

The authors of the Draft consider that according to the authority that is accorded to the Ministry of Justice of Ukraine, delegation of its powers to any other body is unacceptable and an actual duplication of powers.

In fact, such changes deprive individuals and entities of an alternative selection method of protection, at the same time, from unlawful encroachments of intruders between an appeal to the Court and to the Commission for Complaints state registrars, leaving the filing of a claim to a court the only option to protect violated rights.

I would like to mention the possibility of depriving the state registrar to cancel access to the State Registry. Such a sanction is particularly relevant for civil registrars who systematically commit unlawful actions on registration of rights to immovable property.

Summing all the above, I would like to appeal to statistics. The commission considered nearly 1,500 complaints against state registrars for the period from 2016, including in the sphere of state registration of rights to real property, more than half of which were sustained and restored the violated rights of complainants.

Therefore, to answer a rhetorical question. What is the need to deprive the Ministry of Justice of rights and opportunities to counteract illegal encroachments on property, which contribute to protecting the rights and freedoms of individuals.

Draft Law No. 6087 On Amending Certain Legislative Acts of Ukraine on Improving the Procedure for State Supervision (Control) of Compliance with Labor Legislation and Responsibility for Violations in this Area was registred recently. How would you comment on this initiative?

Mariana Marchuk,

Counsel, Baker McKenzie

The recent Draft on the reduction of fines that could be imposed on companies by the State Labor Inspection, although pushed under the slogan of improvement of business climate will, in fact, be detrimental to the Ukrainian economy and to businesses if it becomes law. The current levels of fines are far from ruinous to business, because, in absolute figures, they are not very high.  Also,  Ukrainian Labor Inspectors are not particularly known for imposing fines on companies on made-up or entirely formal grounds. Therefore, in a fair proportion of cases, if such fines are imposed, this is done for real non-compliance with laws, including for payment of salaries under the table and for violation of work safety requirements. Therefore, lowering fines to negligible levels (as envisaged in the proposed Draft) will encourage non-compliance with Ukrainian legislation and  result in an unequal playing field: dishonest companies will pay their employees under the table and will evade payroll taxes and will not withhold personal income tax, which will put compliant employers at a significant disadvantage with regard to the cost of doing business. Furthermore, work safety violations resulting in injuries and deaths of employees put additional stress on the state’s social security system and finances, which prompts the state to increase (or at least not to lower) payroll taxes. Again, the burden is born by compliant businesses.

The working group for reforming the procedural legislation established by the Council for Judicial Reform under the President of Ukraine developed amendments to the Code of Commercial Procedure, the Civil Procedure Code and the Code of Administrative Court Proceedings of Ukraine. How could you comment on these initiatives from the perspectives of the effectiveness of judicial trial?

Maxim Salii

Associate, FCLEX

Any change, even a change for the better is always accompanied by drawbacks and discomforts” — Arnold Bennett.

No matter how good the ideas and innovations may be, as in any system, early at the stage of introduction, when a theory is transformed into practice, there is rejection on the part of the user. People do not easily escape their comfort zone or view long-established behavior patterns from a new angle.

Predictably, if new procedural codes are adopted, the legal community will need time to adapt to the change.

A large number of problems and errors may result from a change in the rules of court venue, as well as from a number of innovations that are fundamentally new to our system, which will entail the reduced effectiveness of the judiciary for a period of “trials and errors”.

Since the “updated” cassation instance has still not been formed, we anticipate problems during the provision of clarifications as to the procedure for application of new procedural rules. Potentially, this may temporarily reduce the efficiency of the courts.

Considering the past experience of implementation of the new Criminal Procedure Code, those changes could destabilize the judiciary for at least one year.

However, after passage of the adaptation period, the judicial system should work faster and more efficiently. Draft codes contain new, fresh ideas, which given proper implementation, can optimize the quality of our judicial system.

The working group on procedural legislation reform formed by the Council on Judicial Reform under the President of Ukraine, drafted amendments to the Economic Procedure Code, Civil Procedure Code, and Code of Administrative Court Proceedings of Ukraine. The aim of the project is to implement the practice of an electronic court.

The published draft laws prepared by the Judicial Reform Council envisage implementation of “e-court”. How could you comment on this initiative? What is your opinion on its impact on judicial trial?

Semen Kravtsov

Associate, LCF Law Group

 

The Ukrainian judicial system has been always extremely resistant to any innovations with any chance of catching emerging changes in the world of the XXI-century. Finally, having recognized an urgent necessity for the development of court proceedings, the Judicial Reform Council has prepared and already published drafts of new procedural codes, where so-called “e-Justice” is envisaged.

Pursuant to the provisions of the said draft laws, this system, which is scarily named the “Unified judicial information and telecommunication system”, intended to exchange e-documents (sending and receiving) between courts, courts and trial participants, trial participants, and to provide trial recording and participation in video conference mode. Registration in “e-Justice” is compulsory for attorneys-at-law.

There is no doubt it would be a huge step towards the future, but a lot of work remains to be done. Priory, the creation of user-friendly software, which allows all, professionals and ordinary people, manage it with ease. Such software should be stable as well to prevent “e-Justice” from various sorts of bugs, so everyone would be sure of its efficiency. But obviously nothing has yet been done. Another important thing is adequate legal rules which the system has to comply with.

The implementation of “e-Justice” is aimed not only for trial participants, and also provides benefits for the courts. For instance, to reject arguments based on inability to send any documents to the court on time and, of course, queue-free court buildings.

 

Andrey Poddymai,

Lawyer, ILF

I definitely approve. An e-court is needed to optimize paperwork and decrease pressure on court personnel. Moreover, the parties to a court process will know the status of their case and will be able to file required documents online. It will make the process faster and more transparent and bring down the price of legal services. Everybody wins – judges, court workers, lawyers as well as their clients.

Cases will take considerably less time to examine, which will affect the efficiency of defence for companies as well as individuals.

Trials often drag out due to the requirement that the parties must be present at hearings. E-court will make it possible to examine similar cases without summoning the parties (for instance, for uncontested debt recovery).

Electronic evidence will be admissible. Current legislation lacks the concept of electronic evidence, which is why judges often refuse to accept as evidence information in digital form, such as e-mail correspondence, images or text files). It helps defendants to dodge charges.

An e-court will solve this problem, I hope so, because new legislation does provide for the concept of electronic evidence.

In conclusion, adopting e-court and reconciling laws with real life will enable judges to work more efficiently and grant lawyers faster reaction time and more options to protect their clients.

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