Draft law №3640

On July 16, 2020, Verkhovna Rada adopted draft law No. 3640, the law “On amendments to certain legislative acts regarding the moratorium on the recovery of property of citizens of Ukraine provided as security for loans in foreign currency.” Back in 2014, there was a moratorium on the alienation of residential property for overdue foreign currency loans, including mortgages, but the adoption of this bill led to some legal conflicts.

The problem of the adopted Law is quite clearly indicated by the President of Ukraine in the proposals sent to the Verkhovna Rada to it. In addition to the fact that some of its provisions are not consistent with the Constitution of Ukraine and other Laws of Ukraine, “The Law actually changes the conditions under which it becomes impossible under a loan agreement to forcibly alienate property without owner’s consent”. Moreover, at the same time, the range of loans that are subject to the moratorium is expanding, because, according to the adopted amendments, we are talking not only about consumer loans.

It is extremely important that in fact the provisions of the Code of Ukraine on bankruptcy procedures, adopted in 2018, concerning these legal relations, are being leveled (by postponing their validity for an indefinite period). In particular, according to this Code, from October 21, 2020, the norms of the law that introduced the moratorium became invalid, but at the same time the rules began to operate that determine a sufficiently clear and balanced mechanism for restructuring mortgage loans in foreign currency for both debtors and creditors.

Based on this, it should be recognized that the adopted Law, in our opinion, creates the preconditions that further legal settlement of such an urgent and extremely sensitive social issue of securing foreign currency loans, taking into account the interests of both borrowers and credit institutions, is actually not only suspended in its development, but the current legal field is also introduced with the uncertainty and ambiguity of legal norms, including from the point of view of maintaining the parity of the parties to these legal relations and ensuring the obligation to enforce court decisions.

Moreover, the entry into force of this law has led to certain consequences. Since the adopted Law assumes the settlement of legal relations arising in connection with the receipt of bank loans in foreign currency and their security, then when assessing the consequences of its implementation, both the legal and economic components should be singled out.

In particular, for debtors, especially those who are unscrupulous, the extension of the moratorium is just another carte blanche to justify not only not paying debts further, but also not looking for acceptable ways to solve this problem. In turn, creditors, even if they have all the legal grounds, including court decisions, are deprived of legal mechanisms for real satisfaction of their interests.

Under such circumstances, it is hardly worth counting on the successful restoration of the mortgage lending program and its reduction in price.

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