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Section 9. Science of law
https://doi.org/10.29013/ESR-20-11.12-79-81
Samoilova Karyna Andriivna, Master's student, the Faculty of International Private Law The Institute of International Relations of Taras Shevchenko National University of Kyiv, Ukraine E-mail: karyna.samoilova@gmail.com
THE PROBLEM OF APPLICATION OF AN AMICABLE AGREEMENT IN BANKRUPTCY PROCEEDINGS
Abstract. The article explores the possibility of conclusion of an amicable agreement in bankruptcy proceedings after the repeal of the Law of Ukraine "On Restoration of the Debtor's Solvency or Recognition of the Debtor's Bankruptcy" and the entry into force of the Bankruptcy Code of Ukraine. A comparative analysis of a settlement agreement in commercial litigation and bankruptcy proceedings is also examined in the article.
Keywords: an amicable agreement; bankruptcy proceedings; commercial proceedings; court procedures; a creditor; a debtor; a conflict of laws; a legal gap.
The Law of Ukraine "On Restoration ofthe Debt- The definition of an amicable agreement was pro-or's Solvency or Recognition of the Debtor's Bank- vided only by previous legislation, which is invalid now. ruptcy", which is invalid now, provided in Article 7 Part 1 ofArticle 77 of the Law of Ukraine "On Resto-that the court procedures applied to the debtor were ration of the Debtor's Solvency or Recognition of the disposition of the debtor's property; the settlement Debtor's Bankruptcy" stated that a settlement agree-agreement; reorganization (restoration of solvency) ment in a bankruptcy case is an agreement between of the debtor; liquidation of bankruptcy. In accor- the debtor and creditor regarding deferral and/or indance with Article 6 of the valid Bankruptcy Code stallment, as well as forgiveness (write-off) by creditors of Ukraine, the following court procedures, which of the debtor's debts, which is executed by concluding are applied to the debtor (the legal entity), consist of an agreement between the parties. The scientiest Pop-currently disposition ofthe debtor's property; reorga- kov P. O. proposes to define the concept of an amica-nization of the debtor; liquidation of bankrupt. The ble agreement as a bilateral or multilateral procedural following court procedures, which are applied to the agreement concluded by the parties to the commercial debtor (the natural individual), include debt restruc- judicial proceedings and approved by a judge/judges turing and debt repayment. So the Bankruptcy Code of the commercial court, the Supreme Court, aimed of Ukraine did not indicate an amicable settlement in at terminating the commercial dispute and closing the the list of court procedures. There is currently no con- proceedings for the purpose ofoperative settlement of cept of an amicable agreement at the legislative level. material economic legal relations [4, P. 3].
Section 9. Science of law
The issue of this article is whether it is possible to apply an amicable agreement in bankruptcy proceedings after the adoption of the Bankruptcy Code of Ukraine. This Code does not explicitly prohibit, but does not explicitly provide the application of an amicable agreement. On the one hand, the legal norm can be interpreted as Article 6 of the Code provides only an exhaustive list of court proceedings, because Article 6 of the Code of Civil Procedure does not contain the words "etc." or "and other court proceedings". On the other hand, in accordance with Article 2 of the Bankruptcy Code of Ukraine, bankruptcy proceedings are regulated by the Bankruptcy Code of Ukraine, the Commercial Procedure Code ofUkraine and other laws of Ukraine. So the Bankruptcy Code of Ukraine has a reference norm to the Commercial Procedure Code of Ukraine regarding legal regulation in bankruptcy proceedings. The Commercial Procedure Code of Ukraine provides the right to conclude an amicable agreement. According to Article 192 of the Commercial Procedure Code of Ukraine, the parties may conclude an amicable agreement and notify the court by making a joint written statement at any stage of the proceedings. The court refuses to approve an amicable agreement and continues the trial if the terms of an amicable agreement contradict the law or violate the rights or legally protected interests of other legal entities or natural individuals; or ifone ofthe parties to an amicable agreement is represented by its legal representative, whose actions are contrary to the interests ofthe represented legal entity or natural individual.
Regarding the case law on the regulation of this issue, the Commercial Court ofCassation ofthe Supreme Court considered the cassation appeal ofthe Main Department of the State Tax Service in Kyiv against the decision of the Northern Commercial Court ofAppeal dated 11 March 2020 and the decision of the Commercial Court ofKyiv dated 02 December 2019 in case № 910/26972/14 on the bankruptcy ofthe Public Joint Stock Company "Hydromechanization". The Supreme Court ruled not to approve the settlement agreement. The decision of the creditors' committee to conclude
an amicable agreement at the stage of liquidation after entering into force ofthe Bankruptcy Code ofUkraine contradicted the provisions ofthis Code, because mentioned Code excluded the possibility of concluding an amicable agreement at the stage of liquidation.
The Bankruptcy Code of Ukraine currently recognizes an amicable agreement only as a tool to restore the debtor's solvency. In contrast to the provisions of the Law of Ukraine "On Restoration of the Debtor's Solvency or Recognition of the Debtor's Bankruptcy", an amicable settlement and reorganization are combined into a single unseparated procedure in the Bankruptcy Code of Ukraine. This can be explained by the fact that the settlement agreement and the debtor's rehabilitation provide generally the same mechanisms of debt restructuring and restoration of the debtor's solvency (deferral, installment, debt write-off, other possible repayment mechanisms).
Section III "Rehabilitation of the debtor" of the Bankruptcy Code of Ukraine provides the application of the debtor's rehabilitation procedure with the approval of the rehabilitation plan, the implementation of which may allow the debtor to restore its solvency. Article 51 of the Code of Civil Procedure of Ukraine defines a number of measures to restore the debtor's solvency, the list ofwhich is not limited. So the conclusion of an amicable agreement between the debtor and an individual creditor at the stage of rehabilitation is possible. However, the conclusion of transactions on forgiveness, installment, deferral of debt should be made in accordance with Chapter 50 "Termination of Obligations" of the Civil Code of Ukraine (Articles 604-609) and according to the peculiarities of bankruptcy proceedings, which exclude certain types of transactions at certain stages of bankruptcy proceedings (in particular, due to the moratorium under Article 41 of the Bankruptcy Code of Ukraine). It is required in order to avoid satisfaction of creditors' claims individually, providing all creditors with equal legal opportunities in meeting their claims, realization of their rights and legitimate interests, ensuring the constitutional principle equality of
all before the law, including when the debtor's property is insufficient to fully satisfy all creditors' claims.
The ambiguity of a legal norm can lead to contradictory case law. In my opinion, the Bankruptcy Code of Ukraine should explicitly prohibit the possibility of concluding an amicable agreement in bankruptcy proceedings at all stages, including the rehabilitation stage. According to Article 192 of the Commercial Procedural Code of Ukraine, an amicable agreement is concluded by the parties for the purpose of resolving a dispute on the basis of mutual concessions and should concern only the rights and obligations of the parties. However, bankruptcy proceedings are indisputable. This is evidenced by Article 39 of the Bankruptcy Code of Ukraine, which stipulates that the
commercial court refuses to open proceedings if the creditor's claims indicate a law dispute, since it must be resolved by way of action proceedings. Insolvency is characterized by the fact that they are not a tool for resolving a separate dispute between the debtor and his creditor, but must provide a collective mechanism to protect the interests ofvarious creditors (bankruptcy, mortgage, current), other participants in bankruptcy proceedings and fair distribution of debtor's assets between creditors, fair conditions for the sale of the debtor's property in order to proportionally protect the property interests of the debtor and creditors. Therefore, it is not advisable to use an amicable agreement in bankruptcy proceedings which are deprived
of any dispute, because an amicable settlement is a means of settling a dispute between the parties to the proceedings.
In order to avoid confusion and conflicts, I think it is necessary to explicitly provide the impossibility of concluding an amicable agreement in Article 6 of the Bankruptcy Code of Ukraine and it is needed to set out Article 6 as follows:
"1. According to this Code, only the following court procedures are applied to the debtor - a legal entity:
disposal of the debtor's property;
reorganization of the debtor;
liquidation of the bankrupt.
2. In accordance with this Code, only the following court procedures are applied to the debtor - an individual:
debt restructuring of the debtor;
repayment of the debtor's debts.
The procedure of repayment of the debtor's debts is introduced in the case of insolvency together with the recognition of the debtor bankrupt.
4. An amicable settlement cannot be applied in bankruptcy proceedings at any stage of legal proceedings.
3. Procedures of reorganization of the debtor or liquidation of the bankrupt shall be carried out in compliance with the requirements of the legislation on protection of economic competition."
References:
1. Law of Ukraine. "On Restoration of the Debtor's Solvency or Recognition of the Debtor's Bankruptcy": document № 2343-XII of May 14, 1992. Expiration from 21 October, 2019. URL: https://zakon.rada. gov.ua/laws/show/1798-12#Text
2. Commercial Procedure Code of Ukraine: document № 1798-XII dated 16 August, 2020. URL: https://zakon.rada.gov.Ua/laws/show/1798-12#Text
3. Bankruptcy Code of Ukraine: document № 2597-VIII dated 17 October, 2020. URL: https://zakon. rada.gov.ua/laws/show/2597-19#Text
4. Popkov P. O. An amicable settlement in the commercial proceedings: author's abstract of the dissertation of the candidate of legal sciences: 12.00.04. Kryvyi Rih, 2019.- 17 p.
5. Order of the Commercial Court of Cassation of the Supreme Court in the case № 910/26972/14 dated 9 July, 2020. URL: https://reyestr.court.gov.ua/Review/90349380
