Arne Engels: Harmonisation of Ukrainian standards with European legislation to be welcomed
The following answers can only address the rough guidelines and ideas of the draft law and comparable European and German regulations. Nothing else is possible due to the lack of a legally verified translation of the present Ukrainian draft law.
After reviewing the proposed norms, the Ukrainian legislator is attempting with its proposal in particular to redesign the current developments in the banking sector from a regulatory perspective and to reduce the liability of the acting persons.
In Europe, banks have been subject to much stricter regulation since the financial crisis of 2008, and appropriate framework conditions for the winding up of institutions have also been created (in particular by Directive 2014/59/EU of May 15th, 2014, which was amended several times (last amended by Directive (EU) 2019/2162 of Nov. 27th, 2019)). In Germany, this Directive has been implemented by the Reorganisation and Winding-up Act of Dec. 10th, 2014 (SAG).
The regulations and protective barriers thus put in place are intended to prevent a collapse of the European banking system. At the same time, the liability of a bank's stakeholders is regulated. Thus, initially the shareholders (shareholders) have to assume liability with their shares; these become worthless. All other equity instruments as well as the bank’s quasi-equity financing instruments follow this. Finally, even the depositors are to be liable with their non-legally protected deposits. At the same time, the supervisory authorities have the possibility to replace the banks' management boards and appoint them by themselves. In Germany, the supervisory authorities have also often provided very constructive support for mergers of smaller banks.
The regulations planned by the Ukrainian legislator seem to go in this direction and thus support the adaptation of Ukrainian law to European law - as required by the Association Agreement. Whether this prescribed framework is also being adhered to in detail would have to be examined by means of a more precise and intensive analysis of the provisions and their effects.
In this context, the points of the apparent exclusion of liability of the acting persons and the difficulties in appealing against the decisions of the National Bank of Ukraine are noticeable. The former would in any case trigger the usual liabilities of the acting persons in German law - possibly secured by the state liability in case of erroneous decisions. This liability is, at any rate, particularly interesting in the present draft due to the limitation of the compensation norms to the cash component of the acting persons. It will have to be clarified where these funds are to come from and which restrictions will apply. The acting persons will regularly not be able to raise the amounts to be judged in this connection themselves.
However, it is precisely this - in my view - open point that can then also trigger the corruption issues raised by the questioners. If the persons involved do not bear any liability of their own, their own interest in the decisions can also be controlled on a regular basis. This means that the decisions themselves can then also follow other interests. However, without knowledge of the exact legal regulations outside the present draft, the specific consequences can only be conclusively assessed superficially.
The complication of legal remedies and the limitation of reachability, as provided for in the current draft, enables decisions to be implemented in a legally secure manner. In principle, this is very welcome, as the maintenance of the banking and payment systems in today's world is indispensable for the economic survival of a country. This is all the more true when a large number of transactions are already carried out digitally and no longer using cash. Nevertheless, such decisions must be justiciable for the people concerned in an acceptable time and with an acceptable outcome. Otherwise, such decisions of the National Bank could also be erroneous and (in theory) abusive. Since erroneous decisions can always happen, there must be an adequate possibility of appeal, which also leads to an economically acceptable result for the disadvantaged. For my part, it must be assumed that the above liability sums of the acting persons are sufficiently secured. If decisions have even been taken in an abusive manner, it must be possible for the persons acting to face criminal law consequences in addition to the civil law consequences.
In conclusion, it can be said that the harmonisation of the standards with European law is in principle very much to be welcomed. Even if this means that the rights of the affected stakeholders must be encroached upon from an overriding point of view. Whether or not this has been carried out in an appropriate and proportionate manner can only be assessed after a more detailed analysis of the standards to be amended and the effects on the legal system as a whole.