EU Project Pravo-Justice Supported Forum on Insolvency Law

On 17 October, the IX Forum on Insolvency Law organised by the Ukrainian Bar Association with the support of EU Project Pravo-Justice took place in Kyiv. Representatives of the Ministry of Justice, the banking community, bankruptcy trustees, judges, private enforcement officers, executives of leading law firms and bar associations gathered to discuss current challenges and trends in bankruptcy and insolvency law.

‘We have achieved a lot since the first Insolvency Law Forum. Together, we reformed the sphere of insolvency law, the Code of Ukraine on Bankruptcy Procedures was introduced in the throes of discussions. Moreover, we have a whole new profession - private enforcement officers. Some bankruptcy trustees combine these two professions. We have moved from gavel auctions to electronic bidding and put our trust in Prozorro.Sale. We have professional self-governing organisations for private enforcement officers and bankruptcy trustees. Despite the war, we continue to develop, address challenges together, and offer effective solutions,’ said Iryna Serbin, Deputy Director of the Sanctions Policy Department of the Ministry of Justice of Ukraine.

Iryna Zharonkina, Enforcement and Protection of Property Rights Component Lead of EU Project Pravo-Justice noted that discussing issues related to insolvency law is becoming increasingly important in the legal and economic context in Ukraine, especially in the light of European integration. According to her, one of the important steps for Ukraine to take in insolvency reform is to introduce preventive restructuring. On 19 September, the Verkhovna Rada of Ukraine voted in favour of a draft law implementing EU Preventive Restructuring Directive into national law. The draft law is now to be signed by the President.

‘Preventive restructuring is an important mechanism functioning in the European Union. It gives businesses an opportunity to solve financial troubles at an early stage, preventing bankruptcy. Since Ukraine is further aligning its legislation with the EU, it is important to implement best practices that will not only help solve crises, but also prevent them. This will allow companies to seek restructuring instead of liquidation, preserving jobs and maintaining economic stability,’ said Iryna Zharonkina.

Arne Engels, international expert of EU Project Pravo-Justice, spoke about the development of insolvency legislation in the EU countries, as well as the draft Directive 2022/0408/COD on harmonisation in the field of insolvency.

‘The EU is focusing on harmonising insolvency legislation to ensure the functioning of a single market. In particular, the focus is placed on cross-border bankruptcies, access to assets, especially in view of new developments, such as cryptocurrency,’ said Arne Engels. The expert also stressed that Ukraine should have better integration between insolvency law and other areas of law. He stated that insolvency requirements should be prioritised in everyday business life.

Vladyslav Filatov, Director of the Bankruptcy Department of the Ministry of Justice of Ukraine, elaborated on the department’s plans regarding further legislative and regulatory changes.

‘It is now essential to improve the governance of cross-border bankruptcy. Implementing Regulation (EU) 2015/848 of the European Parliament and of the Council on Insolvency Procedures is urgent. Another pressing issue is settling bankruptcy costs, including the remuneration of the bankruptcy trustee,’ said Vladyslav Filatov.

A whole event session was dedicated to how insolvency and enforcement proceedings correlate and coexist. According to Oksana Rusetska, President of the Board of the Association of Private Enforcement Officers of Ukraine, insolvency and enforcement proceedings have been competing for years, and it is incredibly challenging to decide which procedure is more beneficial for the debtor and the creditor. ‘Wherever bankruptcy proceedings commence, enforcement proceedings gradually cease and moratoriums are imposed. They are not absolute, but they significantly complicate the enforcement process,’ said Oksana Rusetska.

‘The adoption of the Draft Law on the Preventive Restructuring Procedure will also impact enforcement proceedings as the law amends the Law of Ukraine ‘On Enforcement Proceedings’ as to suspending enforcement actions as a measure to protect the debtor,’ she emphasised.