Draft

Stabilization of the financial condition of Naftogaz Ukraine

The Draft Act On Amendments to Certain Acts of Ukraine on Stabilization of the Financial Condition of the NJSC Naftogaz Ukraine, No.2214 has been submitted by the Cabinet of Ministers of Ukraine. The aim of the Draft is to stabilize the financial condition of NJSC  Naftogaz Ukraine, which can be achieved by granting the Company effective tools to collect debts for natural gas and effective mechanisms to influence indebted companies. In order to achieve this goal, the Draft suggests changes to:

— the On Restoration of Debtor’s Solvency or Bankruptcy Act of Ukraine (concerning claims by Naftogaz Ukraine and its gas supply subsidiary during bankruptcy procedure and the company’s participation in the process of appointing liquidators of debtors);

— the On Enforcement Proceedings Act of Ukraine (on improvement of collection procedures);

— the On Heat Supply Act of Ukraine (to improve the mechanism of settlements in the area of centralized heating and to establish the principle of technological safety of the central heating systems during the gas supply cut-off when terms of agreements and current legislation are violated in the part of payments and excess of the allocated limits of natural gas);

— the On Measures to Ensure Stable Operation of the Fuel and Energy Enterprises Act of Ukraine (on termination of the moratorium on enforcement and collection of debt to the energy companies starting from 1 July 2015);

— the On Principles of the Natural Gas Market Act of Ukraine (on agreements for the supply of natural gas and its supply to customers who have debts for consumed gas and/or who are under a bankruptcy procedure, on fulfillment of contractual obligations by such consumers, and also on a possibility to alienate claims regarding consumers’ debt for natural gas supplied through an auction in favor of third parties).

Application of bail improved

The Draft Act On Changes to the Code of Criminal Procedure of Ukraine Concerning the Bail in Corruption Offenses of 17 April 2015, No.2654 has been submitted by theCabinet of Ministers of Ukraine.

The Draft proposes to guarantee inevitability of punishment for those who have committed corruption crimes, avoid punishment and hide from investigation and trial by using the bail procedure.

Reduction of regulatory functions of government agencies

The Draft Act On Changes to Article 40 of the Act of Ukraine On Physical Culture and Sports (on reduction of regulatory functions of government agencies) of 17 April 2015, No.2658 has been submitted by the Cabinet of Ministers of Ukraine.

The Draft has been developed to reduce the regulatory functions of government and to ensure the constitutional principle of non-interference in the activities of public associations, including sports federations, and compliance with European requirements and international standards in the field of physical culture and sports.

Comments

Yaroslav Petrov, counsel, Asters

The Draft Act On Amendments to Certain Acts of Ukraine on Stabilization of the Financial Condition of the NJSC Naftogaz of Ukraine, No.2214 has been adopted in the first reading and awaits the second reading. The Draft was developed in order to remove existing barriers on collection of the gas consumers’ indebtedness, implementation of efficient mechanisms of influence on debtors’ enterprises and preventing the occurrence of repeat debt.  From our prospective the Draft may allow NJSC Naftogaz to abuse its powers. Many municipal heat generation and heat supply enterprises (heat enterprises) are loss-making. Based on the Draft Act a moratorium for enforcement proceedings and enforced collection concerning debts of fuel and power complex enterprises, introduced by the On Actions to Ensure the Stable Operation of Fuel and Power Complex Act (the moratorium), will be suspended on 1 July 2015. After suspension of the moratorium the only way to evade enforced debt collection is to begin the bankruptcy procedure. When it is started a court imposes a moratorium on discharging of creditors’ claims. Debtors are protected from the State Enforcement Service again, this time by a court decision. However, heat enterprises, as natural gas consumers, can gain natural gas only under a contract concluded with natural gas suppliers. When the heat enterprise is involved in the bankruptcy procedure the only option for concluding such a contract is to pledge its property. The most important thing is that if the debtor will not pay for consumed natural gas for 3 months a guaranteed natural gas supplier (i.e. NJSC Naftogaz) has the right to foreclose on the pledged property. For instance, it is possible to put it up for auction. In Article 590 of the Civil Code of Ukraine it is outlined that the subject of pledge shall be seized upon a court decision, unless otherwise specified in the agreement or the law. The Draft is not very precise regarding the court decision. Consequently, it can be interpreted in a way that there is no need for the court decision because it is not mentioned in the Draft Act. It is possible that the described procedure will be used in order to sell the property of lossmaking municipal heat enterprises to private owners. The only way to remove the above-mentioned jeopardy is to state that the pledged property shall be seized by the guaranteed natural gas supplier only upon a court ruling.