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On June 23, 2005 the Verkhovna Rada of Ukraine passed in the second reading and as a whole the draft law “On Organization of Formation and Circulation of Credit Histories” (Reg. #4196). 331 MPs voted for the draft. The draft law was elaborated by the working group, which was created and had been working at the Commercial Law Centre. The objective of the present Law is to increase the access to lending resources by the citizens and subjects of businesses. In many cases the creditor’s lack of information about a credit history of a potential borrower is curbed by the growing scopes of lending , results in complicated procedure of filing a loan, more expensive credit payment and accordingly impacts negatively on the development of economy.

The basic principles of formation and access to information contained in a credit history stipulated by the Law are: 

-     voluntary formation of credit history;

-     guarantee of constitutional rights and freedoms for the subjects of credit histories;

-     compliance of the scope of information with the objectives of its collection;

-     completeness, comprehensiveness, objectivity and reliability of information;

-     limited term of information storage;

-     confidentiality of information and its disclosure exclusively upon the consent of the subject of credit history;

-     independence of the credit information company.

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Furthermore, this Law determines other principles of activity of credit information companies, which will collect and store the respective information.

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On June 10, 2005 public hearings of the draft Economic Procedural Code of Ukraine were held by the Verkhovna Rada Committee on legal policy jointly with the Higher Economic Court of Ukraine and the Commercial Law Centre. As is known, three versions of the Economic Procedural Code of Ukraine were submitted to the Parliament for approval. The Verkhovna Rada took as basic the bill submitted by the Cabinet of Ministers of Ukraine and entrusted the VRU Committee on legal policy to improve this bill taking into consideration the provisions of other two drafts of the Code and also the proposals of the subjects of legislative initiative. In order to fulfill this instruction, a working group was created composed of the MPs, representatives of judicial authority, the Ministry of Justice of Ukraine and the Commercial Law Centre. Within six months the working group has examined over thousand proposals and prepared the draft law for the Parliament’s consideration in the second reading. Prior to the draft law submission to the Verkhovna Rada, it was decided to hold public hearings under participation of the MPs, judges of the Supreme Court of Ukraine, the Higher Economic Court of Ukraine, local and appellate economic courts, the working group, representatives of the Verkhovna Rada machinery, prominent scientists and legal practitioners. Among others the hearings discussed the issue of reconciliation of the Civil, Administrative and Economic Procedural Codes’ provisions and the improvement of the main draft of the Economic Procedural Code passed in the first reading with the help of some aspects of the alternative draft laws.

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On May18-20, 2005 the Commercial Law Centre jointly with the Higher Economic Court of Ukraine held a scientific-practical conference “The Civil and the Economic Codes: Results of Application”. The conference discussed the application practice of the Civil and the Economic Codes of Ukraine and possible ways of overcoming inconsistencies in their application. Judges of local and appellate economic courts, the Higher Economic Court of Ukraine and the Supreme Court of Ukraine and also prominent experts and scientists were invited to the Conference. The MPs of the Verkhovna Rada of Ukraine took part in the Conference. The objective of this venue was to promote unification of the application practice of both Codes and to elaborate methods that will prevent ambiguous decisions in economic cases.

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On April 14-15, 2005 the Commercial Law Centre together with the Association of employers of Lviv region held a training seminar for businesspersons “Legal Regulation of Some Aspects for Doing Businesses”. The agenda of this seminar was formed by the results of a survey held at the previous CLC seminars.

Reps of small and medium size businesses from Lviv city and Lviv region took place in this seminar. The training speakers were Mykola M. Slusarevsky – the CLC legal adviser, lawyers-practitioners Vyacheslav M. Matsyevsky and Andriy O. Kolisnyk and the President of the law company Ruslan M. Sydorovych. The participants to the seminar wished the similar seminars to be held in the future to promote effective entrepreneurship in Ukraine.

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On March 16, 2005 MP Mykola Onyshchuk deputy chairperson of the Verkhovna Rada Committee for Legal Policy, registered the proposals to the draft law #5616 dated 06/072004 “On Amendments to the Civil Code of Ukraine” (about circulation of bills of exchange). This draft law suggested amendments to Civil Code of Ukraine which would ruin the bill circulation and Ukraine would break the Geneva Convention of 1930. The CLC prepared negative comments to this draft law, which were delivered to the Verkhovna Rada by the Committee on European integration.  But in spite of the drat law negative treatment and harsh statements made by the Association of Ukrainian Banks, the VRU Committees on economic policy and on finances and banking activity, representatives of the public, the draft law was passed in first reading. The VRU Committee on legal policy is responsible for this draft law. The CLC has elaborated the proposals to this draft law, which would remove its negative impact and alter the draft law substance to the opposite. It is proposed to amend the Civil Code of Ukraine so that to remove fatal legal errors from the Code, namely, withdraw the provisions on liability of the entity under the security whose signature is faked-up. Furthermore, it is suggested to amend the Law of Ukraine “On Circulation of the Bills of Exchange in Ukraine”, which would ban issuance of bills without any grounds (without any obligations), empower the banks to draw bills for their monetary obligations and also guarantee legal protection to bill payers in case the bills are issued unlawfully.

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On February 17-18, 2005 the State Committee of Ukraine for regulatory policy and entrepreneurship together with the Commercial Law Centre Project (a USAID funded activity) held the last training workshop from the series of workshops for state registrars on implementation of the Law of Ukraine “On State Registration of Legal Entities and Individuals – Entrepreneurs”. All six training workshops planed by the State Committee of Ukraine for Entrepreneurship have been held jointly by the CLC and the Committee in different regions of Ukraine to train and upgrade the state registrars.

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On February 10-13, 2005 the Union of crisis managers of Ukraine jointly with the Commercial Law Centre and the Agency on Bankruptcy Issues held the conference entitled “Five Years of Application of the Law of Ukraine “On Restoring of the Debtor’s Solvency or Declaring It Bankrupt” – the Results and Prospects. Financial Sanation of Enterprises in the frames of Bankruptcy Procedures”. The objective of the Conference was to elaborate an action plan to improve the Law, methods of its implementation and coordination of all concerned institutions.

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On January 27-28, 2005 the Higher Economic Court of Ukraine jointly with the Commercial Law Centre Project held the workshop for the economic court judges “Discussion of Draft Recommendations of the Presidium of the Higher Economic Court of Ukraine ”On Some Issues of the Practice to Assign Court Expertise in Disputes on IPR Protection”.

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On December 22-23, 2004 the State Committee of Ukraine on Regulatory Policy and Entrepreneurship and the Commercial Law Center Project held the regular training workshop for state registrars of Ivano-Frankivsk, Ternopil, Khmelnitsky and Chernivtsi regions on implementation of the Law of Ukraine “On State Registration of Legal Entities and Individuals – Entrepreneurs”. This workshop was the fifth from the series of similar ones held in different regions of Ukraine since July 2004, after the law introducing a new system of state registration of legal entities and individuals - entrepreneurs has taken effect.

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On November 9, 2004 the National Conference on the legislation for NPOs was held at the Crystal Hall of the hotel “Kyiv”. The Conference was held by the Commercial Law Centre and Institute of Civil Society together with the representatives of the VRU Committee on state development and local self-government, The Centre of Political and Legal Reforms, The Centre of Political and Legal Consultations, the International Centre of Non-commercial Law, the Academy of Municipal Management.

The Commercial Law Centre together with the Institute of Civil Society has been elaborating the draft law “On Non-profit Organizations”. Given great social impact of this draft law and the willingness of the authors to discuss its main provisions and problematic aspects with the experts and concerned parties, it was decided to hold a scientific conference on the legislation for non-profit organizations (NPOs).

The conference proposed the following: to present the improved draft law “On Non-profit Organizations”; to discuss issues of the legislative system of Ukraine on the NPOs, relations of the NPOs with the state, classification of the organizational forms for the NPOs creation, and also the legislation of the European countries and the EU on NPOs. The topic for wide discussion is also the opportunity to NPOs to enter into different legal relations, including commercial, on equal terms with profit-making legal entities. The CLC representatives insist on the necessity of such changes, since per the Ukrainian law a special law has the priority over the general law, hence the presence of relevant provisions in the Civil and the Economic Codes is blocked by the ban on commercial operations by the NPO in special legislation.

Representatives of the executive government, scientists, members of public organizations, the VRU special committees and the MPs took part in the Conference.

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On October 14, 2004 the scientific discussion entitled “Draft Economic Procedural Code of Ukraine: Pro and Contra” was held by the faculty of legal sciences of the National University “Kyiv-Mohyla Academy” and the Commercial Law Centre. Leading scientists, MPs, lawyers-practitioners were invited to take part in the venue. The major speaker on the draft Economic Procedural Code was MP Mykola Onyshchuk, the head of the working group, member of the VRU Committee on legal policy. Reconciliation of the provisions of the Civil, Administrative and Economic Procedural Codes, improvement of the main draft of the Economic Procedural Code passed in the first reading with the help of some aspects of the alternative draft laws – these and the other questions to reform the process as such – were discussed at this important venue.

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On September 16-17, 2004 the State Committee of Ukraine on regulatory policy and entrepreneurship together with the Commercial Law Centre held the second training workshop from the series of workshops for state registrars on implementation of the Law of Ukraine “On State Registration of Legal Entities and Individuals - Entrepreneurs”. The workshop was held in Kharkiv for the representatives of Kharkiv, Sumy and Poltava regions. Altogether, over 100 state registrars took part in upgrading their skills, all of them were trained to work with basically new system of the state registration of legal entities and individuals - entrepreneurs, which took effect on July 1, 2004 and is supposed to facilitate doing business in Ukraine.

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On September 16, 2004 in the Ministry of Justice of Ukraine the Commercial Law Center presented a new desk manual for judicial enforcement officers (bailiffs) entitled “Judicial Enforcement in Ukraine. Topical Issues”. Directors of regional departments of the State Executive Service (SES), Mrs. Victoria Tisnoguz, Director of the SES Department of the Ministry of Justice, and also Mr. Mykola Shpenya, Deputy Minister of Justice, attended the meeting at the Ministry and emphasized the priority and necessity of professional training for the SES officers, upgrading their skills to improve the system of judicial enforcement. Mr. Shpenya highly appreciated the CLC assistance in this direction (2-years program for bailiffs, publication of the desk manual) and expressed hopes that the CLC would further assist to the SES development in Ukraine.

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On September 9-10, 2004 the CLC jointly with the Union of Crisis Managers of Ukraine held the International Forum on Financial Recovery and Bankruptcy.

Nearly seventy persons attended the Forum; among them were arbitration managers, judges, lawyers and other specialists in the area of bankruptcy practicing in Ukraine, Russia and Czech Republic.

By the results of the Forum operation the Recommendations were developed aimed at reforming bankruptcy legislation. They will be sent to the Verkhovna Rada, the Cabinet of Ministers of Ukraine, and local governmental bodies. The Recommendations establish the trends of the legislation development and propose a number of measures, which would provide participation of professional community in the lawmaking process.

In particular, the VRU Committee on Economic Policy is proposed to create a council of experts of leading specialists and scientists who would trace legislative initiatives and provide expert judgments/comments to them. Besides, the Committee is proposed to create a working group on the development of a complex draft law aimed at reforming of bankruptcy legislation per the directions agreed upon by the Forum participants. This includes transfer from licensing of the arbitration managers by the Ministry of Economy to their self-regulation, development of the standards of professional operation, creation of the system of disciplinary liability of the arbitration managers and material liability for damages, which may be inflicted by them to the creditors and to the debtor. Improvement of separate provisions of the law is suggested to prevent law abuse by unfair participants of bankruptcy process.

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The Presidium of the Higher Economic Court of Ukraine approved the recommendations “On Some Practical Application Issues of the Law of Ukraine “On Restoring of the Debtor’s Solvency or Declaring It Bankrupt”. The draft recommendations were developed under the CLC participation.

The document is approved to ensure correct and uniform application of bankruptcy legislation by the economic courts and also to resolve the issues not regulated by the legislation due to the gaps in the law. In particular, ways to resolve the most problematic issues connected with inconsistencies between different laws are proposed (on taxation, judicial enforcement, pensions, budgetary legislation etc.), bringing a bankruptcy procedure, appointment of arbitration managers, effect of moratorium, satisfaction of the current creditors’ claims, procedural status of the creditors whose claims are secured by property collateral etc.

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On July 7, 2004 the Verkhovna Rada Committee on Legal Policy held a working group meeting to prepare a new edition of the Economic Procedural Code for second reading.  On June 29, 2004 the Verkhovna Rada passed at the first reading the draft Economic Procedural Code, drafted jointly by the Ministry of Justice, the Higher Economic Code and the CLC.  These same constituents are members of the present working group and it is led by MP Mykola Onyshchuk.

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The Verkhovna Rada Committee on Legal Policy has established a working group to systematically reconcile the Civil and Economic Codes by appropriate amendments.  The working group is headed by MPs Mykola Onyshchuk and Victor Musiaka and consists of representatives from the Ministry of Justice, the Supreme Court, the Higher Economic Court, the National Bank of Ukraine and the CLC.  The draft amendments are expected to be completed by September 1, 2004.

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On July 1, 2004 the Verkhovna Rada passed a corporate tax law, which did not incorporate suggestions by the National Bank of Ukraine, based upon the USAID funded assistance by Steven Gilyeart, allowing accelerated depreciation for financial leasing transactions.  MP Sergey Teryokhin had opposed the accelerated depreciation stating that it was introduced to favor the drafters own businesses.

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The working group, including the CLC, met on June 29, 2004 to work on registration procedures for enterprises existing prior to the adoption of this law, taxation issues, and fees for registration.

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On June 30, 2004 the Verkhovna Rada voted on several draft amendments to the law “On Restoring a Debtor’s Solvency or Declaring it Bankrupt.  The Cabinet of Ministers’ draft #3586, which prohibits financial institutions from issuing bonds to use in debt for equity swaps was passed at the first reading with 300 votes in favor.  Draft amendment #4032 calling for mandatory approval of amicable settlements where the creditors’ claims will be exchanged for property or corporate rights where the debtor is a State enterprise or 25% of its statutory fund is owned by the State failed to pass in the first reading as recommended by the CLC.  Draft amendment #4432.  The Verkhovna Rada, as recommended by the CLC, did not pass in the first reading an amendment that would give claims of employees and expenses of the bankruptcy case priority over creditors’ claims.  The Verkhovna Rada also did not adopt an amendment imposing the moratorium from the time of publication of intent to file bankruptcy rather than from the time of the filing of the case.

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On June 29, 2004 the Verkhovna Rada passed in the first reading the draft Economic Procedural Code, drafted jointly by the Ministry of Justice, the Higher Economic Code and the CLC.  The CLC had contributed important provisions defining the evidentiary procedure for the enforcement of intellectual property and preserving evidence.

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On June 24, 2004 lawyers from the CLC met with Pavlo Mikhailidi, President of the Pan-Ukrainian public organization “Union of Ukraine Crisis-managers” to continue to develop plans to hold a bankruptcy forum in September 2004.

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On June 23, 2004 the CLC and the Institute for Civil Society continued to develop the draft law “On Non-Profit Organizations” in anticipation of the second reading before the Verkhovna Rada.  The primary issues that were discussed were  the supervision of non-profit organizations and the distribution of property during liquidation.

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