The Constitutional Court of Ukraine has recently abolished the requirement to make advance payments payable to initiate enforcement of court decisions. How can it affect the efficiency of enforcement proceedings? Is it possible that many private bailiffs will refuse to participate in enforcement proceedings, which are not secured with a guarantee that their work will be paid up eventually?
By its decision No. 2-р(II)/2019, dated 15/06/2019, the Constitutional Court found unconstitutional provisions of part 2 Article 26 of the Law "On Enforcement Proceedings", which envisaged that creditors were to pay a mandatory advance payment of 2% of the amount (but no more than 10 minimum salaries) to be recovered. No doubt, this is a benchmark decision given the discussion around feasibility of advance payments. Starting from 15/05/2019, creditors in enforcement proceedings have the right to refuse making an advance payment.
Provisions of Article 1291 of the Constitution stipulate that court decisions shall be binding and the state shall be obliged to ensure they are complied with. In its turn, enforcement proceedings are a final stage of the litigation process. In its judgment in the case of Hornsby v. Greece European Court of Human Rights emphasised that "the right to a fair trial would be illusory if a Contracting State's domestic legal system allowed a final, binding judicial decision to remain inoperative to the detriment of one party. Therefore, enforcement of a court decision is one of the most important trial stages, since the trial would have no sense, if court decisions would not be enforced."
Previous law "On Enforcement Proceedings" No. 606-XIV, dated 21/04/1999, had no definition of "advance payment". It was introduced in 2016 when the new version of the act was adopted. However, the explanatory note to the draft No. 2507a contains no substantiation towards repayment of the advance payment. Furthermore, the Central Scientific Experts Office of the Verkhovna Rada of Ukraine found it to be unreasonable and noted: "Although certain categories of citizens, including socially disadvantaged persons, are released from the obligation to make advance payment, we believe it does not overrule the fact that access to justice is made more complicated due to such approach, since enforcement proceedings, i.e. enforcement of a court decision, are a component of justice."
Clause 12 of Recommendation No. R (81) 7 of the Council of Europe Committee the Council of Europe Committee of Ministers of Ministers to Member States on Measures Facilitating Access to Justice, dated 14/05/1981, states that in so far as the court fees constitute a manifest impediment to justice they should be, if possible, reduced or abolished. The system of court fees should be examined in view of its simplification. However, the legislator failed to consider this recommendation iwhen adopting the new version of the Law "On Enforcement Proceedings".
Thus, introduction of advance payment made access to justice more complicated for certain categories of citizens, especially in non-pecuniary cases.
It is worth mentioning that the bailiffs' refusal to initiate enforcement proceedings because of failure to make advance payments has already been studied by national courts. For instance, in case No. 857/2052/18 the Eighth Administrative Court of Appeal upheld the decision of the first-instance court, which recognised as unlawful actions of the State Bailiff Service in respect of refusal to initiate enforcement proceedings and returning an enforcement document with reference to the absence of proof of the advance payment. Decision in the case is motivated by substantiation and proportionality principles as components of the general rule of law principle.
Therefore, even before decision of the Constitutional Court No. 2-р(II)/2019 was adopted, courts had already cast doubt on provisions of part 2 Article 26 of the Law "On Enforcement Proceedings".
Mitigation of risks
It is crucial to understand that the constitutional complaint related to unlawful actions of public bailiffs, not private. Moreover, it concerned failure of state authorities to enforce a decision in a non-pecuniary case, which is unacceptable given the provisions of national law and Convention for the Protection of Human Rights and Fundamental Freedoms.
According to para.1 part 3 Article 42 of the Law "On Enforcement Proceedings", costs incurred by the bodies of the State Bailiff Service in terms of enforcement proceedings shall be repaid at the expense of state budget. In its turn, costs incurred by private bailiffs in terms of enforcement proceedings are repaid at the expense of creditor's advance payment and moneys collected from a debtor. Thus, while the work of public bailiffs is funded by the state budget, private bailiffs depend entirely on their own funds, since they carry out independent professional activity.
The Grand Chamber of the Supreme Court also emphasises the differences between public and private bailiffs in its resolution in case No. 904/7326/17, dated 05/12/2018. It says that the public and private enforcement systems are not equivalent and interchangeable, since it does matter for a creditor to which authority to apply following the disposition principle — to the State Bailiff Service or a private bailiff, given that conditions of cooperating with them differ.
It is important to understand that enforcement proceedings in addition to advance payment envisage an enforcement fee, i.e. base remuneration of a private bailiff, as well as funds directly collected from a debtor to cover expenses of enforcement proceedings.
Amount of the base remuneration of a private bailiff is set by the Procedure in Respect of Repayment of Remuneration to Public Bailiffs and Amount Thereof and Amount of the Base Remuneration of a Private Bailiff. Clause 19 of the document provides that a private bailiff, who ensured full or partial enforcement of a non-pecuniary enforcement document, shall be paid the base remuneration of 10% of the amount collected by him/her, or of the property value to be transferred under an enforcement document. If a private bailiff ensures full enforcement of a non-pecuniary decision, he/she shall be paid up with the base remuneration of 4 minimum subsistence level for able-bodied persons if a debtor is an individual, or 8 minimum subsistence level if a debtor is a legal entity.
According to part 8 Article 31 of the Law "On Authorities and Persons Who Ensure Enforcement of Court Decisions and Decisions of Other Authorities", an agreement between a private bailiff and a creditor may envisage an additional advance payment to cover enforcement expenses, as well as additional remuneration of a private bailiff.
Thus, given that the provision related to making mandatory advance payment has been recognised unconstitutional, private bailiffs are advised to enter into agreement with a creditor with respect to making additional advance payments aimed at covering basic expenses on mailing, repayment of state duties and fees, etc. Entering into such agreements may ensure proper activities of private bailiffs and mitigate the risk of a creditor that commencement of enforcement "proceedings" is refused.
In addition, it is necessary to harmonise provisions of the law with the decision of the Constitutional Court No. 2-р(II)/2019 in order to avoid conflict of laws, which may arise in practice.
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