+ Word must be in search result. - Words must not be in search result. * Word start/end on characters before/after symbol. ""Words in quotes will be searched as phrase.

 

“One-way street” – the legislator has blocked the collection of debts from the state according to court decisions

22 May, 2020 Newsletters

1.

Starting from April 18, 2020 to January 01, 2021, the bodies of the Treasury of Ukraine do not carry out an indisputable write-off of funds of state and local budgets based on court decisions. Such changes were implemented by the Law of Ukraine “On Amendments to the Law of Ukraine “On the State Budget of Ukraine for 2020” as of April 13, 2020 No. 553-IX (hereinafter “the Law”).

So, para. 8 of Article 2 of the Final Provisions of the Law provides:

“2. To establish, that temporarily, from the date of entry into force of this Law until January 1, 2021, the following provisions of the Budget Code of Ukraine shall not be applied:
part one of Article 25;…”.

Part 1 of Article 25 of the Budget Code of Ukraine, the application of which in this manner is blocked, in turn provides:

“The Treasury of Ukraine carries out an indisputable write-off of funds from the state budget and local budgets based on a court decision.”

2.

On blocking of what kind of recoverables in particular we are talking about:

According to the Procedure of execution of decisions on recovery of funds of state and local budgets or debtors, approved by the Resolution of the Cabinet of Ministers of Ukraine as of August 03, 2011 No. 845 (hereinafter “the Order 845”), the Treasury bodies without the consent (submission) of bodies controlling budget revenues, debtors,  local governments and/or state bodies based on executive documents, carry out the following indisputable write-offs of funds of state and local budgets (para. 16 of the Order 845):

“1) to return overpaid and/or erroneously paid taxes and fees and other budget revenues;

2) received as a result of repayment of budget loans, financial assistance provided on a repayable basis, and loans, including those involved by the state or under state guarantees;

3) received from realization of confiscated property or property turned into the income of the state by the court, other property, including currency valuables, which become the property of the state, confiscated by the authorized state bodies;

4) received as a result of confiscation of national or foreign currency;

5) received in another manner established by law;

6)to ensure refund of VAT/or penalties accrued on the state budget debt for reimbursement of such tax.”

So now such indisputable write-offs will not be carried out by the Treasury bodies, at least until January 01, 2021 (we do not exclude that this period may be extended).

3.

We believe, that the introduced changes regarding the actual blocking of the execution of court decisions – the indisputable write-offs of funds contradict, in particular (i) the provisions of the Constitution of Ukraine as provisions of direct effect, (ii) the Law of Ukraine “On Guarantees of the State concerning the Execution of Court Decisions”, (iii)  the Law of Ukraine “On the Judiciary and the Status of Judges”, (iv) the Code of Administrative Procedure of Ukraine (hereinafter “the CAPU”), (v) the Convention for the Protection of Human Rights and Fundamental Freedoms (hereinafter “the Convention”) and practice of the European Court of Human Rights (hereinafter “the ECHR”) mandatory in Ukraine, and as such are simply immoral by criteria of  “Golden rule of morality” and the categorical imperative of Kant as one of the cornerstones of the philosophy of law.

This will be described hereinafter in more details:

4.

According to Article 129 of the Constitution of Ukraine one of the main principles of judicial proceedings is the binding nature of a court decision.

Article 1291 of the Constitution of Ukraine establishes:

“A court shall render the decision in the name of Ukraine. The court decision shall be legally binding and is to be enforced.

The state ensures the execution of a court decision in the manner prescribed by law.

The court shall supervise the enforcement of the court decision“.

Therefore, the Constitution entrusts the state with ensuring the execution of court decisions.

And now we have a situation where the state suspends the execution of certain court decisions.

However, the question is whether this can really be done simply by passing a relevant law, which we see right now?

Article 8 of the Constitution establishes that the Constitution of Ukraine has the highest legal force, and the provisions of the Constitution of Ukraine are the provisions of direct effect.

Para. 2 of Article 19 of the Constitution of Ukraine establishes that public authorities must act exclusively on the basis, within the authority and in the manner prescribed by the Constitution and laws of Ukraine.

Therefore, we believe that the Verkhovna Rada of Ukraine, which, as the only body of the legislative branch of state power, is obliged to be guided by this provision, has violated the Constitution by adopting the law that contradicts it (actually deprives the relevant court decisions of the ability to be enforced, which is guaranteed by the Constitution of Ukraine).

And the Treasury bodies still have to execute court decisions, despite the unconstitutional law, based on the requirements of the Constitution of Ukraine as provisions of direct effect, and the provisions of other laws, which are mentioned above.

We should note as well that certain letters from the Treasury bodies with a refusal of execution of court decisions contain a “hint” regarding possible approaches: the prohibition of enforcement does not mean the prohibition of voluntary payment by the “guilty” authority if it decides to make such payment. Actually, the arbitrariness of state bodies is institutionalized in this regard: you cannot collect funds from them forcibly, however, they can pay “voluntarily”, apparently if you “come to terms” with them.

5.

What should do others, who have a court decision in their favor, though, do not want to “come to terms” with the guilty state body “amicably”?

According to Article 1291 of the Constitution of Ukraine, the court shall supervise the enforcement of the court decision.

Therefore, it is important how the courts will behave, in particular, when taxpayers appeal against non-enforcement of court decisions in their favor. Will the courts consider such suspension as a violation of Article 1291 of the Constitution of Ukraine as  provisions of direct effect?

Para. 2 of Article 14 of the CAPU provides: Court decisions that have entered into force are binding for all public authorities, local authorities, their officials, individuals and legal entities and their associations throughout Ukraine”.

In accordance with para. 1 of Article 2 of the CAPU, the task of administrative proceedings is “fair, impartial and timely resolution by the court of disputes in the field of public relations aimed at the effective protection of the rights, freedoms, and interests of individuals, rights and interests of legal entities from violations by subjects of power”.

Thus, one of the main factors in the realization of the task assigned to administrative courts is to ensure the execution of court decisions. It is exactly the execution of court decisions that is a constituent element of the right to a fair trial, guaranteed by Article 6 of the Convention.

By the way, we would like to remind that according to para. 4 of Article 7 of the CAPU, the court has the right not to take into account the provisions of the law if it concludes that such law contradicts the Constitution of Ukraine:

“If a court concludes that a law or other legal act contradicts the Constitution of Ukraine, the court shall not apply such law or other legal act, but shall apply the provisions of the Constitution of Ukraine as provisions of direct effect.

In this case, the court, after passing a decision in the case, appeals to the Supreme Court to resolve the issue of submission to the Constitutional Court of Ukraine a petition on the constitutionality of a law or other legal act, which is under the jurisdiction of the Constitutional Court of Ukraine”.

Therefore, we await the position of the courts on these issues: will they really care about the efficiency of court decisions or will they agree to reduce their meaning to “paper”.

6.

According to the Law of Ukraine “On Guarantees of the State concerning the Execution of Court Decisions”, the state guaranteed the execution of court decisions on the recovery of funds, under which the debtor is a state body, state enterprise, and transfer of funds to the recoveror within 3 months from the date of receipt of necessary documents and information (para. 4 of Article 3), and by the Law currently adopted the state actually “took back” this guarantee.

7.

The discussed changes have been made by the legislator “on the background” of the fact that Ukraine still remains in the top three among the states “violators”1 of the ECHR and not so long ago tried to solve the systemic problem of prolonged non-enforcement of national court decisions and the lack of an effective domestic remedy to deal with it, which the ECHR pointed out in the pilot decisions in the cases of “Yuriy Nikolayevich Ivanov v. Ukraine” and “Burmych and Others v. Ukraine”.

According to these decisions, the impossibility for an applicant to obtain the execution of a judgment in his or her favour in due time constitutes an interference with the right to the peaceful enjoyment of possessions guaranteed by Article 1 of the First Protocol to the Convention and violation of the right to a court guaranteed by Article 6 of the Convention, because according to the ECHR case-law, the effective access to court includes, inter alia, the right to have a court decision enforced without undue delay.

The ECHR has repeatedly stated that the state cannot justify non-enforcement of court decisions against it or against state-owned or state-controlled institutions or enterprises by the lack of funds (judgment in the case of “Shmalko v. Ukraine”, § 44), and is responsible for the execution of final decisions if the factors that delay or impede their full and timely execution are within the control of the authorities (decisions in the cases of “Sokur v. Ukraine” and “Kryshchuk v. Ukraine”).

In the present situation, the amendments introduced by the Law per se constitute a violation of the rights of recoverors guaranteed by both the Convention and the Constitution of Ukraine. The amendments introduced by the Law do not formally deny the execution of court decisions, but only temporarily suspend them until January 01, 2021, but this suspension in itself constitute a violation of the rights of recoverors and lead to even longer enforcement of court decisions which under normal conditions have been enforced quite long.

In fact, the legislator by one provision of the Law transformed the right to a court, guaranteed by Article 6 of the Convention, into an illusory one, because, as the ECHR often likes to repeat, “the right to a court protected by Article 6 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. The effective access to court includes the right to have a court decision enforced without undue delay” (judgment in the case of “Yuriy Nikolayevich Ivanov v. Ukraine”, § 51).

As was noted by the Constitutional Court of Ukraine, “Non-enforcement of a court decision threatens the essence of the right to a fair trial” (para. 3 of the motivation part of the Decision of the Constitutional Court of Ukraine as of April 25, 2012 No. 11- рп/2012).

8.

In practice, the Treasury bodies have already informed taxpayers on the refusal to enforce current court decisions on recovery with reference to the introduced changes.

Thus, they are actually commit illegal actions for which they must be held responsible.

Non-enforcement of a court decision entails liability established by law (para. 3 of Article 14 of the CAPU and para. 4 of Article 13 of the Law of Ukraine “On the Judiciary and the Status of Judges”).

In particular, the responsibility for intentional non-execution of a court decision, which has entered into force, or obstruction of its execution, is established by Article 382 of the Criminal Code of Ukraine.

We believe that taxpayers, whose court decisions are not enforced with the reference to the suspension of the execution of court decisions under the discussed law, have grounds for appealing to law enforcement agencies on committing a criminal offense by the relevant officials of the Treasury bodies.

How law enforcement agencies will respond to such applications will be another test of the effectiveness of the legal system.

9.

In the context of the abovementioned, it is worth mentioning the “golden rule of morality” in its comparison with the categorical imperative of decency and law of Kant, namely: “Act only according to a rule that you would like to see as a universal imperative, that is equally applicable to others and yourself” or “do not do to others what you do not wish for yourself, and do to others as you would like them to do to with you.”

The experience of mankind accumulated in the golden rule testifies of huge moral potential of relations (in this case between the state and the individual) as an area of mutually responsible behavior. The golden rule deals with the individuals responsible for what they do.

In this case, we have a situation in which taxpayers, on the one hand, cannot receive from the state their own funds based on court decisions that have entered into force, and, on the other hand, the state has no restrictions on collection of debts from taxpayers.

However, if the behavior of the state is acceptable, which by its sole decision temporarily released itself from the obligation to enforce court decisions, so why cannot taxpayers do the same? After all, this is the only way to be fair and moral.

Thus, by the abovementioned actions, the state undermines the legitimacy, in particular, of the requirements for payment of taxes, because if the state can afford to “exempt” itself from the execution of what is mandatory under the Constitution of Ukraine, then why individuals cannot do the same concerning obligations to the state? At least such an approach shall not be considered immoral and unfair in the circumstances under discussion.

10.

The state, including at the level of the law, explicitly forbade public authorities and local governments, their officials to make decisions that overturn court decisions or suspend their implementation” (para. 7 of Article 13 of the Law of Ukraine “On the Judiciary and the Status of Judges”).

According to Article 19 of the Constitution of Ukraine, the Verkhovna Rada, as a state body, must act exclusively on the basis, within the powers and in the manner prescribed by the Constitution and laws of Ukraine. Therefore, the provisions of the Constitution and laws of Ukraine are mandatory for the state and its state bodies, including the Verkhovna Rada of Ukraine.

By adopting a law that actually blocks the execution of certain court decisions, the Verkhovna Rada of Ukraine demonstrates that neither the provisions of the Constitution of Ukraine, nor the provisions of other laws that provide for the enforcement of court decisions are binding.

The Treasury bodies officials, who “accept for execution” such provisions thereby committing this in violation of several other laws, Ukraine’s international obligations, including the ECHR’s practice of implementing the relevant provisions, the Constitution of Ukraine, and take actions that may be qualified in that regard as a crime under the Criminal Code of Ukraine.

If the officials do not understand this, then perhaps this material will help to understand.

11.

The situation considered in this review, unfortunately, shows that Ukraine does not correspond to the definition of a “state governed by the rule of law” according to Article 1 of the Constitution of Ukraine, as well as indicates a violation of key legal principles, such as equality, ensuring a balance of private and public interests and justice.

And these deviations are certainly must be corrected.

The above commentary presents the general statement for information purposes only and as such may not be practically used in specific cases without professional advice.

Footnotes:

1According to the ECHR statistics as of December 31, 2019, the most frequent violations of the Convention are continuously found by the Court in respect of the Russian Federation, Turkey, Ukraine.

Kind regards,

© WTS Consulting LLC, 2020

Views 3296

Comment