They are not collectors, but they will eliminate debtors in the country: in which conditions can private enforcement officers improve the functioning of Ukrainian economy

Oct 21, 2019 | Judiciary, Justice, Property rights protection

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They can improve business climate in the country as they will recover lion’s share of debts.

They will improve the business climate in the state: they will recover lion's share of debts. There are only 200 of them, but they have already ensured enforcement of more than 80% of the court decisions entrusted to them. They started working two years ago, but today they are three times more efficient than state enforcement officers who have been working for decades. And, despite this, until recently, the state has been throwing spanners in their work. It is about private enforcement officers. This profession appeared in Ukraine as a result of legal system reform according to EU standards, as in the EU private enforcement officers have been working for a long time and successfully. Is there a chance for a new profession to help boost the economy of Ukraine – it is what Mr. Katilin Popov, international expert of EU Pravo-Justice Project told Novoye Vremya.

Why was it decided to introduce the system of private enforcement officers in Ukraine?

Since 2015, experts from the European Union have tried to improve the work of state enforcement officers system, but this resulted in nothing.

This is confirmed by yearslong history of the state enforcement service: in 2017, 5-6% of court decisions were enforced in Ukraine, while in the EU countries this figure was ten times higher. Meanwhile, if court decisions are not enforced, then very fact that law is applied is in question. This creates the illusion of impunity in the country.

Therefore, it was decided to introduce a system of private enforcement of penalties. Private enforcement officers do not get salaries from the state, they get profit for work performance. And they are personally interested in enforcing the law. For Ukraine, the profession was completely new.

Who came to this system and how successfully is it working?

First, state enforcement officers came to the system. And this is no coincidence, as they have experience. Then advocates became private enforcement officers, many of them are lawyers who worked in banks and enterprises. Those who came to the system are already successful: they ensured enforcement of 88% of court decisions.

However, in general, European experts are unhappy with the results of introducing a new profession: in Ukraine it is not easy to become a private enforcement officer, the legislative framework for their work is imperfect, that is, the rules of the game are often absent. In addition, before 2019, regulatory authorities, including the Ministry of Justice of Ukraine, blatantly impeded work of private enforcement officers.

Because of this, the introduction of a new profession has become a formality: private enforcement officers do not have the right to work effectively, and, hence, np right to do their own business.

What is required to improve the work of private enforcement officers?

First, it is needed to fully automate admission system to the profession. Now only the first two stages are automated, and the third involves evaluation of a candidate by the commission. At the same time, the risk of subjectivity and discrediting worthy candidates is high.

The next step is to remove administrative barriers. Now the candidate must take training that costs 6,000 hryvnias before exams. Then he must have an internship. And only then an exam. We offer to have training and internship after passing the exam. Then the person will be sure that he will work as a private enforcement officer, and he or she will be able to spend money and time without apprehensions.

How many private enforcement officers are there in Ukraine? We propose to have training and internship after exam. Then the person will be sure that he or she will work as private enforcement officer and he or she will be able to spend money and time without apprehensions

Currently, only 200 work. This is too small. After all, there are 22 times more state enforcement officers – total of 4,500. And the number of private enforcement officers is growing weakly. For there to be more people who want to join the profession, it is also necessary to expand the powers of private enforcement officers and reduce state control.

Today, the disciplinary commission that accepts people into the profession and regulates the activities of enforcement officers is under the Ministry of Justice. EU experts propose to take it out of the control of the Ministry of Justice and subordinate it to an independent body – the Private Enforcement Officers Association. At the same time, we do not propose to change the composition of the commission: there are half of the representatives from the Ministry of Justice and another 50% are private enforcement officers themselves.

The next step is to develop self-government and direct democracy in the association. Today, the management system is very cumbersome and provides that any decisions shall be adopted through regional representatives. For the association of 200 people, such a mechanism is useless.

We also want Ukraine to make equal the mandate of private and state enforcement officers. To do this, it is necessary to allow private enforcement officers to collect debts from the state and state-owned enterprises.

Another thing necessary is to allow private enforcement officers to carry out eviction. And to introduce a ban on going abroad for the debtor.

What prevents private enforcement officers from working as full-fledged businessmen?

In order to work more efficiently and make a profit, it is necessary to expand the powers of assistants of private enforcement officers as well. Assistants should have the right to sign documents, do property inventory, block accounts. So far, only private enforcement officers have such rights. And they just do not have enough time to process more requests and clients.

For more effective work, it is necessary to partially change the principles of taxation: to make it similar to the taxation of lawyers. So far, enforcement officers can work only on their own, but it is necessary that they can unite and form bureaus, like lawyers, and also work as associations.

But in order for the state to really feel an increase in the amount of debts repaid, it is necessary to put an end to "stop lists": a moratorium on collecting money from unspoken bans. And we are already working with the new government to change the system. Can private enforcement officers recover debts in salaries and child-support payments?

To work more effectively and get a profit, it is necessary to expand the powers of assistants of private enforcement officers So far, it is not profitable for private enforcement officers to work with such small requests: they receive 10% of the debt amount, which means that sometimes the fee from the salary or child support payments collected can amount to a maximum of 10 thousand hryvnias.

And the cost of recovering such a debt will be the same as the recovery of a much larger amount: it is necessary to carry out the same administrative actions – registration, search, arrest.

However, such work should be one of the foundations of the activities of private enforcement officers: it is many quickly recovered small debts that increase the attention of the society and the responsibility of debtors. Therefore, we propose to introduce a fixed amount to be paid for any work of private enforcement officers, and then, for larger debts, to add a percentage of the debt thereto.

When such changes can be enacted?

Now the central government is asking European experts what exactly needs to be improved in legal field. And for three months now we have been working on a package of laws together with Business Association, Council of Business Ombudsman, the National Association of Banks of Ukraine, the Office of the President of Ukraine. We want to prepare the final documents at the end of October.

At the beginning of November at the conference we plan to pass on a package of documents to the new authorities. All these changes should be adopted at the level of the Verkhovna Rada. Where in Europe is the enforcement of judgements system most successfully reformed?

The most successful examples are the Baltic states in the 1990s and the Balkans in the middle of the 2000s.

In the "old" Europe, there have been no problems with the enforcement of court decisions for a long time, but this is a rather expensive service. However, it is it that forms the model of behavior of both creditors and debtors, makes them more responsible in financial transactions.