Advisory Bodies: How the UBA Influences Government Decision-Making

2021-02-25

KYIV - February 25, 2021. One of the key priorities of the Ukrainian Bar Association is legislative activity. With the constant work of the UBA members, major changes in national legislation are born, and key state bodies operate under their control. We interviewed lawyers who represent Association in working groups and community councils and learned more about their activities.

Published by Yurydychna Gazeta.

Olga Lopushanska, Deputy Executive Director for Government Relations of the Ukrainian Bar Association, Member of the Commission for Legal Reform under the President of Ukraine, Ph.D.

- Activities in public councils and working groups are among the available tools for public participation in management decisions.

International organizations constantly emphasize the need for the authorities to conduct a transparent and inclusive dialogue with stakeholders, even in the face of the need for urgent changes in legislation.

By investing effort and time in the work of advisory bodies to the authorities, civil society representatives seek to engage in constructive dialogue and see the results of such involvement.

I will keep repeating: the real involvement of members of advisory bodies in the preparation and decision-making process, consultations with stakeholders should become the norm of the authorities, not an exception.

Ruslan Sydorovych, member of the working group on bankruptcy reform in Ukraine, partner of Ario Law Firm.

- During 2020, due to quarantine, we were forced to change the format of working group meetings. The lion's share of meetings was held online, which certainly had an impact on the results of the work. At the same time, the main achievement of the members of the working group was the development of a large comprehensive bill № 4409.

It eliminates inconsistencies in the current laws on bankruptcy, improves the conceptual framework, brings in line with a number of provisions of the Bankruptcy Code and other laws in accordance with the development of legislation that has occurred since the adoption of the Bankruptcy Code (18/10/2018, ed.)

The draft law is currently awaiting consideration in the first reading and discussion at the parliament regarding amendments, which are unlikely to be lacking.

In addition to the above, there are a number of smaller, but no less important draft laws that deal with the institution of bankruptcy of both legal entities and individuals.

Draft law No 4220 submitted by the President of Ukraine deserves special attention. It aims to remedy the shortcomings caused by the long-standing adoption of the well-known draft law №3322, concerning the support of business during the quarantine period. It was prepared and served during the hard lockdown in the spring of 2020, and by the time of its adoption, a number of its provisions were outdated and no longer in the interests of business or society.

Among the important, in my opinion, necessary further directions of activity of working group, I would name the following:

1. Strengthening the joint and several liability of the debtor's owners and its management to creditors and the disclosure of the “corporate veil”.

2. Relief of tax consequences for debtors (both legal entities and individuals) in terms of written off (forgiven) creditors' claims.

3. Development of the reorganization section for legal entities in order to provide additional opportunities for business recovery and maintaining economic activity.

 

4. Improving the institution of insolvency of an individual, which should be understood as:

a) facilitating the access of individuals to such an institution;

b) elimination of conflicts within the 4th Book of the Labor Code;

c) resolving issues of access to the institution of insolvency in the case where the joint and several debtors are husband and wife.

Yulian Khorunzhiy, member of the working group on bankruptcy reform in Ukraine, member of the UBA Board.

- In 2020, the members of the working group analyzed in detail both the practice of applying the Code of Bankruptcy Procedures and its controversial norms.

Given the large number of members of the group, there were many proposals to amend the Code: from technical amendments to the return to the previous Law “On restoring the debtor's solvency or declaring bankrupt”, for example, in cases of reorganization managed by the debtor or liquidation proceedings.

Finally, the working group still managed to reach a compromise version of the draft law without “reactionary” or very controversial changes. Due to such in-depth elaboration, draft № 4409 has become perhaps of the highest quality compared to others registered in parliament proposing amendments to the Code.

At the same time, in my opinion, the document does not pay enough attention to the necessary changes in the insolvency procedure of individuals. Although this has its reasons, because at the time of preparation of the text the relevant practice was very poor.

In any case, I predict that in the case of the adoption of the draft law in the first reading, the relevant Committee of the Verkhovna Rada of Ukraine, the discussion will be no less heated. It will concern not only the already proposed changes to the Code, but also new proposals, especially in terms of issues that were not taken into account by the working group.

Regarding the further functioning of the working group, we would like to get even more constructive and involved participants in the processes.

Tetyana Lysovets, member of the working group on tax and customs policy, Chair of the UBA Committee on Tax and Customs Law, Senior Partner of Sokolovsky & Partners Law Firm

During 2020, my efforts were directed at the draft law No1210. Among the main achievements - a significant number of fiscal norms we managed to soften.

In particular, I drew attention to the issue of tax administration - the original version contained clear violations of the rights of taxpayers. Lawmakers finally heard our remarks. In particular, regarding the statute of limitations. Tax authorities have the right to inspect the activities of the enterprise for three years. In the first edition of the draft law, this term was removed becoming virtully unlimited.

In addition, regarding the new concept of liability in tax relations, we helped to develop, expand and improve the list of grounds for bringing taxpayers to justice.

There are actually many such nuances, because "the Devil in the details”. We found such details, explored them and helped to eliminate. Finally, the law is much more aimed at protecting the rights of the taxpayers.

Key Challenges for 2021

First. This year, a law on a zero declaration should be adopted to ensure the capital amnesty process. We see in its content a significant number of dangers for the taxpayer.

As for the amnesty, we want to help implement it in the least problematic way for the taxpayer. The law should be written in such a way as to prevent abuse and corruption risks.

Second. The government's initiative on “signs of performance of labor functions” is a matter of concern. The Cabinet of Ministers recently approved a draft law on labor relations to protect employees from violations. Due to certain shortcomings, the damage can be brought directly to sole proprietors and other persons working under a civil law agreement. For example, they will be forced to work exclusively under an employment contract.

Third. The draft law on the Bureau of Economic Security was adopted in the first reading. It was followed by a draft that defines their jurisdiction and plans to amend the Criminal Code of Ukraine on tax fraud. The punishment provided is unacceptably severe - we will try to ease the sanctions.

There is a lot of work ahead.

Andriy Avtorgov, member of the working group on drafting laws to improve the enforcement of court decisions and decisions of other bodies, member of the Board of the UBA Committee on Competition Law, private enforcement officer, Ph.D.

- The working group faces a number of important issues, including the legislative regulation of Ukraine’s international obligations regarding the reform of enforcement proceedings, and, in particular, the introduction of automated seizure of debtors’ funds.

Ukraine promised the IMF to introduce a system of automated seizure of funds in 2015. The Memorandum on EU Macro-Financial Assistance, ratified in 2020, also states that public authorities should facilitate the blocking of funds in bank accounts by allowing electronic communication between contractors and banks.

It will be recalled, that thanks to the introduction of an automated system for the seizure of debtors' funds, Croatia rose from 52nd to 7th place in 2017, just a few years after its introduction, according to estimates made for the World Bank's Doing Business report.

What will be the percentage of enforcement of court decisions in our country and how will the enforcement system work? All this largely depends on the desire of legislators to carry out a real, not "cosmetic" reform.

Natalia Shvets, member of the public council at the State Tax Service, counsel to Ario Law Firm.

- Unfortunately, last “quarantine” year made its adjustments to the work of the public council. Accordingly, the implementation of some work plans of the council was postponed. In particular, some council meetings and meetings with representatives of other public councils have been postponed. I have to admit that the number of working meetings with the leadership of the State Tax Service has decreased; the participation of council representatives in information events has been significantly reduced, and so on.

At the same time, we managed to elect the leadership of the Council, members of the committees, and set up several working groups. It should be noted that the work in the committees continued, there was a constant monitoring of problematic tax issues, analysis of legislation. Taxpayers' appeals were also considered. We submitted our proposals to the State Tax Service.

I hope that this year will be more productive and we will finally return to offline meetings, intensify work in the sphere of communications. In particular, we will hold more events: round tables, conferences, forums, as well as deepen cooperation with the public council at the Ministry of Finance in the field of taxpayer protection.

Ruslana Pivovarova, member of the public council at the Main Department of the State Traffic Police in Kharkiv region, Associate at “Krolevetsky & Partners”.

- In December 2019, I was elected to the public council at the Main Department of the State Tax Service in Kharkiv region. Given that this is my first experience working as a public representative in a public authority, even as socially sensitive as the State Tax Service, I can share the following reflections on this:

In the tax authorities, everything is exactly as it seems from a lawyer practicing in this area - officials have little room for independent decisions and at the same time a low level of personal responsibility for such decisions.

Many aspects of the work in the council are too formalistic. The same is true for the state tax service bodies. For example, drawing up minutes of committee meetings, too formal work plans, and so on.

However, there are positive changes that promise to become a springboard to overcome the above problems, in particular:

  1. Quarantine has opened many opportunities for online communication between taxpayers and officials of the tax service, which brought it to a qualitatively new level.

The interaction between the tax and other public authorities has become more effective.

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