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New & Exclusive!
New Civil and Economic Codes in English. These Codes were passed by the Verkhovna Rada on January 16, 2003 and signed into Law by the President on March 3, 2003. They will become effective January 1, 2004
This does not constitute an official translation and neither the translator, the Commercial Law Center, nor Emerging Markets Group can be held responsible for any inaccuracy or omission in the original text or the translation. The English text should be used for informational purposes only and should not necessarily be relied upon as an official version.
In addition Law of Ukraine "On Hypothecation" , and the Draft Law of Ukraine "On Organization of Formation and Circulation of Credit Histories", and Law of Ukraine “On Financial Lease” are available as well.
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On August 30, 2007 and on September 7, 2007 two roundtable meetings were held in Lviv and in Odesa respectively to discuss the draft law “On Joint Stock Companies”. Participants to discussions were governmental bodies, managers of joint stock companies and professional stakeholders of the stock market. Roundtable sessions were held in the framework of workshops on topical issues to improve corporate legislation. The workshops were held by the CLC jointly with the UNDP Blue Ribbon Analytical and Advisory Centre under support of the SSSMC territorial subdivisions and the State Committee fir Regulatory Policy and Entrepreneurship in Lviv and Odesa regions.
***** On May 23-25, 2007 a joint workshop was held by the CLC and the Judges’ Academy in Yalta. The workshop entitled “Problems of the Civil and Economic Codes Application” was aimed at upgrading commercial and appellate court judges.
Representatives of the Supreme Court of Ukraine, High Economic Court of Ukraine, Academy of Judges of Ukraine, Commercial Law Center, knowledgeable scholars from Ukrainian universities presented to the audience. The following application issues of the two Codes were discussed: Transactions, their invalidation and breach; Specific types of transactions; Property rights and other proprietary rights under the Civil Code; Securing obligation fulfillment; Protection of business entities’ rights; Practices of dispute resolution related to JSC operation; Prospect of corporate legislation development; Liability of subjects of commercial turnover.
***** At the end of April 2007 the second workshop was jointly held by the CLC and the Judges’ Academy in Kyiv. The workshop entitled “Problems of Economic Procedural Code Application” was aimed at upgrading commercial court judges. One of the CLC objectives is to assist judges in building a clear judicial practice system by way of workshop holding. The topics for such workshops are selected by the judges themselves, given the problematic issues of legal proceedings. The workshop “Problems of Economic Procedural Code Application” is one of them.
Participants to the workshop had the opportunity to hear representative of the Supreme Court, High Economic Court of Ukraine, Judges Academy, the CLC and the other lecturers. Among practical issues of the Economic Procedural Code application were also the prospects for procedural legislation development, institutional novelties of this Code and the others. All judges got an ample opportunity to share experience and discuss difficult cases of their routine practice.
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On April 25-27, 2007 the Commercial Law Center Project jointly with the High Economic Court of Ukraine and the Council of Europe/European Commission held a conference entitled “Model Economic Courts: Criteria for Arrangement of Activity, Financial, Personnel, Logistics and Informational Support”. “
The following issues were discussed: new model of court management: creation of institution for professional administrators (court managers) and the methodology of court administering, foreign practice of court administering; professionalism and judicial ethics: upgrading of judges’ skills, mechanisms to react to judge’s self-will or incompetence as well as issues of case management and automated case distribution in economic courts. David Greer, Chief of Party, USAID Commercial Law Project, made presentation entitled: “Openness and Transparency of Court Performance as the Method to Increase Confidence to Court and Secure Rule of Law”.
***** On March 21, 2007 CLC held the regular L-Club meeting in Kyiv. This time the topic for discussion was “Prospects of Corporate Legislation Development: Novelties in the JSC Law”.
***** On March 13-14, 2007 the workshop was jointly held by the CLC and the Judges’ Academy in Donetsk. The workshop entitled “Theoretical Fundamentals of Bankruptcy. Major Legal Categories of Bankruptcy” was aimed at upgrading commercial court judges. Bankruptcy – is one of the most efficient tools to withdraw unprofitable enterprises from the market and secure the possibility of restoring their solvency. Comprehension of theoretical fundamentals of bankruptcy and its major legal categories is of utmost importance for judicial regulation of economic relations in case of the enterprise being incapable to repay its debts to creditors. Given the topicality of this set of issues, Ukrainian judges showed great interest to the workshop and highly appreciated the possibility to obtain new knowledge on theoretical fundamentals of bankruptcy process. The attendees to the workshop learned such practical issues as regulation of the court proceedings opening, disposition of property, sanation, liquidation, concluding amicable agreement, etc.
***** On February 21, 2007 the International Conference entitled “Judicial Enforcement: Status and Future Prospects” was held in Kyiv. The Conference organizers were: the VRU Committee for Legal Policy, the Ministry of Justice of Ukraine and the Commercial Law Center. Major problematic issues of judicial enforcement including the drawbacks in legislative regulation and improvement of enforcement mechanisms of court decisions were discussed. Participants to the Conference were MPs, judges and representatives of the executive bodies, the NBU, prominent legal scholars and practitioners, mass media. Speakers stated that the goal of judiciary was not justified and did not meet the expected results, unless enforcement of court decision was secured. Detailed consideration was given to the issues of enforcement of court decisions under European standards that declared implementation of the right for fair legal proceedings being completed at the stage of enforcement and not by its ruling. Problems faced by the State Enforcement Service and coordination of efforts of various governmental bodies to secure quality of enforcement were also discussed. Joseph Lowther, an International expert and Technical Director of Emerging Markets Group, Ltd., presented Survey of Neighboring Country Enforcement Regimes. This article is available at the CLC website. ***** On January 9, 2007 the Verkhovna Rada passed the law “On Amending the Law of Ukraine ‘On Economic Companies’” (re reducing the quorum number to hold general meeting of the economic company), reg. # 1129 dtd, November 03, 2006. Pursuant to this law, in case of the general meeting of a joint stock company or a limited liability company fails to be held due to the low number of its shareholders/participants (beyond 60 per cent), the next general meeting shall be legally qualified, provided the shareholders/participants owing over 50 per cent of the votes attended it. The newly passed law is a compromising version, since the President vetoed the previous draft law (to establish the unified quorum of 50 per cent for the general meeting holding) on October 19, 2006 and the Parliament could not overcome the veto. ***** On December 18, 2006 Valentyna Danishevska, CLC Director, and Pavlo Mikhailidi, Chairperson of Ukrainian Association of crisis-managers, held a roundtable meeting to discuss interaction between governmental bodies in bankruptcy procedures, the bankruptcy situation and search of ways to reconcile actions of all stakeholders. The roundtable session was held at LIGA business Inform agency (˲ÃÀÁ³çíåñ²íôîðì).
Participants to the discussion were MPs, judges of the Constitutional Court of Ukraine, the Supreme and High economic Courts of Ukraine, representatives of the State Body for Bankruptcy Issues, respective ministries and institutions, the State Tax Administration, arbitration managers, experts in bankruptcy issues, leading lawyers and legal practitioners, journalists. Coordination between governmental bodies is an important precondition for the State to make effective decisions on bankruptcy procedures. It is not an easy process, as can be seen from the first glance, since bankruptcy is an extremely multi-vector, multifaceted process in which the interests and goals of its various stakeholders may sometimes be mutually exclusive. How can fiscal functions of the state be reconciled with the state function on increasing efficiency of various branches of economy and optimal use of the state property? How can clear bankruptcy mechanisms be secured and at the same time taxpayers and employment be preserved to develop the specific territory or region? Harmonization of different interests require taking into account various opinions of all stakeholders’, governmental bodies and local self-governments, scholars and experts.
The following issues were considered at the round table:
In his speech Pavlo Mikhailidi, Chairperson of Ukrainian Association of crisis-managers, said: "One of the key preconditions to implement rehabilitation procedures is creation of the unified state bankruptcy policy. The major term for it should be planning by the Ministry of Economy of short- and medium-term state bankruptcy goals on the ground of analytical data and suggestions of the authorized governmental bodies to secure implementation of the unified state policy in the respective field of economy”. He also underlined that the results of such planning may be specific decisions to protect state interests in bankruptcy cases, including by way of timely planning of budgetary funding for measures to restore solvency of crisis enterprises and organizations. Introducing of uniform behavioral orders for all concerned governmental bodies, participants to bankruptcy procedures, is critical. This will make possible to ensure uniform approaches to governmental actions, to systematize ideas of governmental officials about state interests in bankruptcy procedures.
***** On October 19, 2006 the Verkhovna Rada of Ukraine passed the Law “On Incorporation of Amendments to the Law of Ukraine “On Business Companies” (regarding reduction of the quorum number to hold general meeting of the company), Reg. # 1129, submitted by MP Yu.Voropaev. The Law amends the current law “On Business Companies” and reduces the quorum to hold general meeting of joint stock companies and limited liability companies from 60 to 50 per cent. The current 60 per cent quorum requirement creates problems in operation of the joint stock company. It does not allow for the principal shareholder (owing over 50 per cent of votes) to call and hold general meting. Reduction of the quorum number will help to resolve the problem of the general meeting blockage by minority shareholders and will also approximate the Ukrainian corporate legislation to international standard. For example, in some CIS countries the quorum constitutes 50 per cent, in Eastern European countries this figure is from 50 to 25 per cent, while in some countries the law does not establish at all the requirements to the quorum number and it is stipulated by the company’s charter. However, on November 3, 2006 President of Ukraine vetoed the draft law passed by the Parliament. On November 16, 2006 the Parliament considered again the draft law #1129 and the Presidential comments/proposals. By the results of voting the VRU failed either to pass the law or to overcome the veto. The Parliament decided to return the draft law for improvement. This decision is based on the Socialist faction proposal to reduce the quorum only in case the general meeting is called repeatedly. ***** On November 17, 2006 Yury Popov, the CLC senior legal expert, took part in the public hearing “Discussion of the Draft Green Book to Reform the Institution for Reimbursement of Damage Inflicted by the State, Governmental Bodies and Local Self-Governments”. The hearing was held by the Center for Political and Legal Reform under assistance of Coordinator for the OECD projects in Ukraine. Representatives from the State Treasury, Ministry of Justice, Finance Ministry and NGOs attended this venue. By the information of the State Treasury, within the last five years court decisions to reimburse for the losses inflicted by the governmental bodies to legal entities and individuals were not enforced. The amount of payment under non-enforced court decisions reaches UAH 34 mln. The said amount does not reflect the actual debt of the State under such payments, because most of the victims – legal and physical entities – did not address the court at all, since they knew of impossibility to seize funds from the State. The major obstacle resulting in complete non-enforcement of such court decisions lies in the fact that the Law on State Budget to be passed every year does not envisage funds for damage reimbursement at the expense of the State. A representative of the Finance Ministry informed that the draft Budget’07 passed in the first reading did not contain such provision. He assures the Ministry is currently working to implement the National Action Plan to secure duly enforcement of court decisions. Item 9 of this Action Plan obliges the Cabinet of Ministers to annually provide for such targeted funds in the State Budget. ***** On November 9, 2006 the CLC held the next L-Club session to discuss state registry, transparency and stability of civil circulation.
***** On September 28, 2006 the CLC held the third L-Club meeting to discuss problems in judicial enforcement in Ukraine. Peter Kahn, an international expert in judicial enforcement, was the L-Club guest. ***** On September 20, 2006 the CLC experts – Andriy Volkov, Director of Legislative Development Department, and Mykola Slyusarevsky, CLC legal adviser, took part in a session of the Crimean press club for market reform. They commented on the functioning of two electronic registries: 1) the Unified State Registry of legal entities and individual entrepreneurs, and 2) the Unified State Registry of court decisions, as well as on the CLC contribution into the launching of both registries. Among the press club topics were the following: How will businesspersons and public use these registry and what will be practical benefits of the Registries? How to reach transparency (glasnost) and keep commercial and state secrets? To what extent the are Registries accessible for public? What is the access mechanism? Has the state registration become really simplified? ***** At the Warsaw Summit of heads of the EC States and Governments a special attention was paid to the role of NGOs as an important component of civil society that impacts accountability and responsibility of a democratic government. In this context a decision was made to increase the NGO participation in the EU activities. Therefore the EU Committee of Ministers has decided to create a working group to develop Recommendations for establishing legal status of NGOs in Europe. The said Recommendations are supposed to be approved by the EU Committee of Ministers and will establish the rules for the national NGO legislation development regarding the NGOs’ acquiring the status of a legal entity and their registration as legal entities. The first draft Recommendations developed by the working group are proposed for discussion. Their Internet address is: http://www.coe.int/t/e/legal_affairs/legal_co-operation/civil_society/Meeting_documents/CJ-S-NG(2006)1%20Erev%20_website%20version.pdf. All experts wishing to take part in drafting this document are to send their comments/suggestions before September 1, 2006. On August 31, 2006 the CLC sent their proposals to draft Recommendations to the working group. They include the possibility for the NGO to perform the activity aimed at amending the national legislation, freedom for the NGO to define its own entity, create affiliates without governmental permission, cancel submission of location evidence to registration bodies, regulate operation of NGO’s associations. The CLC emphasized that automatic or forced acquiring of a legal entity status by any organization was inadmissible; this can be acquired by way of registration only. After all proposals are studied, draft Recommendations will be considered at the second meeting of the working group to be held on November 27-30, 2006. Then the draft document will be submitted to the EU Committee of Ministers for approval. International Investment Forum “Energy of Growth”
On August 22-23, 2006 the USAID BIZPRO Project and the National Complex Expo-Center of Ukraine held an International Investment Forum “Energy of Growth”. The Forum took place in Kyiv within a nation-wide exhibition campaign “Multicolored Ukraine” aiming to demonstrate the country’s economic, social and cultural progress. Ukrainian enterprises presented their accomplishments in research and development, best technological innovations and competitive production. Ukrainian manufacturers proved to have a large export capacity required for entering new markets.
The Forum allowed prospective investors, foreign and national venture funds and leasing companies, to learn more about promising Ukrainian companies, their production profiles, operating facilities and investment potential. CLC Chief of Party David Greer moderated the plenary session entitled “Efficiency of Strategic Partnership”. In his presentation, Mr Greer highlighted the new opportunities for getting reliable and timely information about future business partners that recently launched electronic registries (of legal entities and individual entrepreneurs, of court decisions and of bankrupt companies) open up for their users. The Forum participants discussed practical aspects of attracting investments into Ukrainian economy and shared experience of implementing successful investment projects.
LAUNCH OF REGISTRY OF JUDICIAL DECISIONS MAKES COURT SYSTEM MORE OPEN AND FAIR
***USAID supports competitive journalism in Ukraine June 13, 2006 The Commercial Law Center training programs for media have earned a good reputation with Ukrainian journalists. That is why the Ukrainian Association of Small and Medium Businesses contacted the Center in search of support to its annual national contest “Journalists for the Middle Class”. Another USAID Project – Access to Credit Initiative – that cooperated with this contest last year suggested that the two projects could co-sponsor the event, their Chiefs of Party - David C.M. Lucterhand and David A. Greer – sitting on the panel of judges and taking part in the award ceremony. The Ukrainian Association of Small and Middle Businesses is an active agent of change in the national economy. So far it has held six media contests “Journalists for the Middle Class.” This year’s topic was entitled “Affordable Business Loans and Mortgages for the Middle Class”. Representative award winners came from print media (Business, Contracts and Dilo), TV Channels (UT-1, STB, TONIS), radio broadcasters (Ukrainian Radio, ERA) and electronic media (UNIAN, Liga BusinessInform). Members of Parliament, bankers, successful entrepreneurs, and prominent reporters joined the USAID representatives in greeting the winners. As a panel member Arkadiy Raitsyn, General Manager of the National Contest “Person of the Year”, said at the ceremony, that “talent and professionalism would pave the way to a better, more dignified future; therefore it is critical to support people demonstrating these qualities in every avenue of social life.”
*** Press Service of the Ministry of Justice reported on August 19, 2005: USAID pledges to assist Ukraine in reforming its judiciary system and establishing a court decision registry It was one of the key points raised at the meeting between Minister of Justice Roman Zvarych and acting USAID Mission Director for Ukraine, Belarus and Moldova Karen R. Hilliard. USAID received relevant cooperation proposals from the Commercial Law Center, a USAID funded project. Valentyna Danishevska, Center Director also took part in the meeting at the Ministry of Justice. In particular, the Commercial Law Center offers its expertise and assistance in legal justification of the revocation of the Commercial Code of Ukraine, which was adopted together with the Civil Code of Ukraine on January 16, 2003 and took effect on January 1, 2004. The two Codes make conflicting provisions for a number of fundamental norms and notions of law, such as ownership, legal entities, obligations etc, which renders it impossible to reconcile them. Roman Zvarych articulated the Ministry’s vision of the need to incorporate some of the Commercial Code provisions into the Civil Code of Ukraine, after which the former document could be repealed. The Minister invited USAID and CLC experts to participate in the related legislative drafting as members of the Ministry’s working group headed by Deputy Minister of Justice Leonid Yefimenko. Karen R. Hilliard also announced the USAID commitment to providing Ukraine with expert advice on international best practices in the areas of judiciary, court procedures, criminal and procedural law, status of judges, as well as to inviting international experts and setting up joint task forces to develop and substantiate legislative proposals, etc. The action USAID Mission Director suggested that a training program for Ukrainian judges be launched in October as part of the implementation of the court decision registry project. Karen R. Hilliard also promised USAID support to the state executory officers’ (bailiffs’) training over the next 5 years. ***
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. - 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 May 18-20, 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.
***** 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. ***** 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. ***** 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. ***** 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. ***** 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. ***** 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. ***** 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. ***** 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. ***** On January 16, 2003 the Verkhovna Rada passed the Civil Code and the Economic Code and the President signed both Codes on March 3, 2003. Pursuant to Transitional Provisions the Codes entered into force on January 1, 2004. Modeled after similar European codes, the adoption of the Civil Code is a significant step towards the improvement of the commercial law framework for Ukraine and will improve the business climate, since the Civil Code regulates the most essential relationships between private parties including business relationships and is predicated upon the fundamental principle of freedom of contract. Unfortunately, the Economic Code regulates not only public legal relations, which is its proper purview, but it also deals with certain private legal relationships that are more properly dealt with by the Civil Code. The Economic Code harks back to principles of a command economy and unnecessarily regulates private relationships by applying restrictive administrative constraints on private property and contractual rights. This creates inconsistencies in the application of the two codes that result in irreconcilable conflicts. The uncertainty regarding how the Codes should be applied also creates a dilemma for the courts that will have to decide cases where both Codes might apply.
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On February 27, 2003 an Agreement on Cooperation and Coordination between the Commercial Law Center and the Association of Ukrainian Banks was signed in an official ceremony. The Agreement comes up as a continuation of a long collaboration between the two Parties geared to creating a favorable environment for the development of commercial law, entrepreneurship, a sound banking system and strong financial markets in Ukraine.
The Commercial Law Center and Association of Ukrainian Banks agreed to use resources and opportunities available to them to facilitate the establishment of a legal system in Ukraine that promotes economic and private property rights, ensures the freedom of contract and its binding character, guarantees the protection of fair competition and creates mechanisms for exercising these rights and freedoms.
In their brief speeches at the ceremony, CLC Director Valentyna Danishevska and AUB President Olexandr Suhoniako highlighted the prospects for their future cooperation. The journalists and those in attendance were also informed about the planned joint activities: conferences, workshops and roundtables.
Rick Gurley, USAID Financial Sector Adviser, said that, in view of the technical assistance aims in Ukraine and objectives of the Commercial Law Center Project, building and maintaining strong relations with local partners is most important and promising. Therefore, the signing of the Agreement between the CLC and Association of Ukrainian Banks is a milestone on the way to establishing legal framework of market reforms in Ukraine. ***** The Commercial Law Center has conducted a commercial law competition for law students, which provides the opportunity for law students from different higher educational establishments of Ukraine to prove their knowledge of legal practice in moot court sessions. On the 2nd of July the final round of the moot court competition took place in Kyiv where the strongest teams from Ivano-Frankivsk, Lviv, Kharkiv, Odessa and Kyiv participated.
Teams competed as parties in a case. The practical legal case was given to the teams in advance, and the choice between the plaintiff and the defendant was decided by drawing lots. It is interesting to note that the given dispute was heard by one of the economic courts of Ukraine, but competitors could not learn about the approved court ruling.
The high professionalism of the competition was supported by the judges of the Higher Economic Court of Ukraine Stanislav Stchotka, Olha Podolyak and the CLC Director Valentina Danishevska, who listened to the arguments and decided the winner of the competition, based upon argumentation of the position, knowledge of normative and legal acts, the form and manner of the presentation, and elocutionary skills.
In the tense competition the first place went to the students of the Lviv National University. But organizers, participants in the competition, and students – all understand that winning is not the most important thing. The main purpose of the moot court competition was to gain the experience of arguing a real case, and develop the skills, which experienced lawyers have.
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"The Registry of Judicial Decisions makes economic court practices transparent and accessible to the public through the wide publication of court decisions on the Internet," said U.S. Ambassador Taylor during his welcoming remarks. "The registry will increase the confidence that investors and business leaders have in the courts, and contribute to greater consistency in judicial practice." 