IMPLEMENTING OF CROSS-BORDER INSOLVENCY RULES IN UKRAINE: LEGISLATION AND PRACTICAL ISSUES  Alexander BIRYUKOV Doctor of Law, Professor (Kyiv Taras Shevchenko National University), Counsel, LCF Law Group

UKRAINIAN BANKRUPTCY SYSTEM Main Elements: - Economic courts. - Debtors: Legal Economic Entities & Sole Entrepreneurs. - Commencement: minimum of 960 000 UAH (about 33 000 euro) debts. - Main procedures: Reorganization (sanation – restoration of solvency) & Liquidation. - Moratorium (stay). - Arbitration Manager (insolvency representative). Profession self-regulation is under development.

BANKRUPTCY LEGISLATION Civil Code, Economic Code: general norms on liquidation of an insolvent person. Special Law: The Law “On Restoring Debtor's Solvency or Declaring It Bankrupt” (latest version of 2013) – Bankruptcy Law. Economic Procedural Code: specific norms on the court bankruptcy proceedings. The Law “On Banks and Banking Activity”: putting the banks into the category of insolvent banks (Chapter V).

CROSS-BORDER INSOLVENCY LEGISLATION The Law “On Restoring Debtor's Solvency or Declaring It Bankrupt” (Chapter IX). No specific rules in Economic Procedural Code. Civil Procedural Code: Recognition and Execution of Foreign Judgments (Chapter VIII). The Law On Private International: 1) exclusive jurisdiction of Ukrainian courts in cases when registered in Ukraine company is subject to bankruptcy; 2) Ukrainian courts may commence a bankruptcy proceeding where a foreign element exists towards a debtor if it has a center of main interests or does its business on the territory of Ukraine.

CROSS-BORDER INSOLVENCY REGULATION Reciprocity. Ordre Public. Procedures: - recognition of foreign bankruptcy proceeding; - recognition of foreign insolvency representative; - cooperation.

CROSS-BORDER INSOLVENCY RULES: PRINCIPLE OF RECIPROCITY 1. The Bankruptcy Law: - allows application of Ukrainian Bankruptcy Law (cross- border insolvency rules); - reciprocity exists if cooperation between the countries is set forth in an international treaty. 2. The Law On Private International Law: - allows application of foreign law; - reciprocity exists unless other is set forth in an international treaty.

CROSS-BORDER INSOLVENCY RULES: ORDRE PUBLIC 1. Bankruptcy Law: - rejects application of Ukrainian Bankruptcy Law if it contradicts public policy, sovereignty and main principles of legislation of Ukraine. 2. The Law On Private International Law: - the norm of foreign state shall not be applied when its application drives to contradiction with the fundamental principles of legal system (public policy) of Ukraine.

COURT PRACTICE: petition on recognition of foreign proceeding Case 914/207/15, Local Economic Court of Lviv Oblast (2015): - initiated by Tomas Jonsson, Foreign bankruptcy procedure manager for SPB hf (Reykjavik, Iceland) on January 22, 2015; - petition on recognition of a foreign bankruptcy proceeding and bankruptcy manager; - the interested person: Public Joint-Stock Company “Commercial Bank Lviv”.

COURT PRACTICE: Rulings and Arguments Economic Court ruled to refuse filing a court proceeding and to apply the cross-border insolvency provisions because of: 1) absence of international treaty between Ukraine and Iceland on cooperation in bankruptcy cases; 2) The bankruptcy proceedings cannot be applied toward the banks and other financial institutions – the court has found that the SPB hf is a bank according to Iceland law; 3) Ukrainian Bankruptcy Law definitely sets forth that the petition on recognition of a foreign proceeding can be allowed to proceed if the bankruptcy case is commenced and administered by the relevant court.

COURT PRACTICE: Final Decision Cassation Economic Court decided that commencement of a proceeding on recognition of foreign bankruptcy proceedings will contradict public policy and main principles of legislation of Ukraine set forth in arts 1, 6, 8, 9 and 19 of the Constitution of Ukraine and arts. 119-124 of Ukrainian Bankruptcy Law.

CROSS-BORDER INSOLVENCY RULES APPLICATION Consequences of recognition of a foreign bankruptcy proceeding? Procedural status of a foreign insolvency representative? Mechanisms of cooperation and coordination? Imperative rules for COMI when a debtor is a Ukrainian registered company. Terminology and wording should be in line with the UNCITRAL Model Law and EU Regulation 848/2015.

Thank you! Questions & comments: alexbir@ukr.net