The Judicial and Legal Reform Strategy 2019-2023 envisages a number of changes in the field of bankruptcy, including amendments to the Law on Bankruptcy. It is also planned to review the requirements for the Bankruptcy Administrators and their appointment procedure.

Iravaban.net talked about the topic to Bankruptcy Administrator Artak Martirosyan.

– Mr. Martirosyan, the strategy states that it is necessary to develop and implement professional training programs for Administrators and to organize the training of candidates before passing the qualification. To what extent is this necessary, will it increase the professional skills of Administrators?

– The introduction of educational programs in any field is definitely welcome. However, I suggest not to be satisfied with the implementation of educational programs only before getting a qualification, but they should be of continuous nature for already qualified Administrators. It is also very important to pay attention to the qualities, experience and knowledge of educators, so that not only the formal requirement of time is met, but also the content-organized courses have a positive impact on improving the knowledge and skills of Administrators. I also mean the involvement of experienced Administrators in the educational process, mostly in order to transfer knowledge on the obstacles encountered during practical proceedings and the approaches and tools for their effective overcoming, which we will certainly not find in any theoretical literature.

I would also suggest including in educational programs not only narrow professional courses, but also general topics such as psychology, conflict management, etc., which are often more needed for the Bankruptcy Administrators than narrow professional knowledge.

– Today, the remuneration of administrators is very different due to the number of cases. To solve this problem, it is also proposed to review the system of appointment of bankruptcy administrators and introduce a new software for the selection of administrators, which should take into account a number of factors in selecting an administrator, such as for example, the complexity of the work, the professional skills and the professional area. Do you think the introduction of such software will contribute to a right, perhaps fairer distribution of bankruptcy cases among administrators?

– The scale of remuneration of managers is defined by the Law on Bankruptcy and is directly related to the amount of repayment of claims, and in cases where it is not possible to repay the claim, Administrators have to be satisfied with the minimum wage, regardless of administrative costs and workload. By the way, remuneration rates and approaches are fairly the same for all Administrators.

There is still a system for selecting Administrators, which is organized and supervised by the Ministry of Justice of the Republic of Armenia, but is based exclusively on the quantitative index of cases handled by Administrators and the area where the Administrator has expressed a desire to operate by Marzes. I unequivocally agree that in selecting of Administrators, it is very important to take into account the Administrator’s knowledge, experience, moreover, professional qualifications, personal qualities, especially honesty and impartiality, negotiation skills, why not, also the achievements and failures of previous proceedings.

Therefore, I think that both creditors and debtors should be given the opportunity to propose their preferred bankruptcy Administrator, especially when the law clearly defines the exceptions due to possible conflicts of interest. Otherwise, it is the same not to leave the patient to the surgeon of his choice, trusted by him, because the other surgeons do not have enough workload and we have to fill the employment of the latter with artificial mechanisms.

At the same time, of course, it is necessary to have a system for selecting Administrators, with proceedings in which the applicant has not proposed an Administrator. However, I will find it difficult to suggest a mechanism for selecting an Administrator that will allow me to combine the above requirements and professional skills in selecting a bankruptcy Administrators. However, I am convinced that whatever system is introduced, we must be based on the principle of fair distribution of bankruptcy proceedings, and in case of the adopted principle it will be possible to correct the current shortcomings in the most effective way. By fair distribution, I do not mean at all that all current Administrators should have received the same remuneration based on the average annual results.

– The Strategy proposes to make changes in the Constitutional Law “Judicial Code of the Republic of Armenia”, increasing the number of judges of the bankruptcy court. In your opinion, will this contribute to the reduction of the examination time of the cases? How often are court hearings with your participation scheduled?

– I think the addressee of this issue is mostly the RA Bankruptcy Court, as they know the existing and possible volumes in general. As for the proceedings that I have, I have not encountered such problems. However, taking into account the fact that bankruptcy is widely accepted in our society as a way to avoid debts, as it is aid in the vernacular “to get out dry of the water”, so I assume that either the number of judges should be increased or effective mechanisms should be introduced, in order to prevent such phenomena.

Court hearings with my participation are scheduled as needed. However, litigation can sometimes be unnecessarily burdened when the debtor or creditor’s representatives decide to present incomprehensible and unexplainable objections, forcing the judges to convene a hearing, but unfortunately in the end it becomes apparent that the debtor or creditor’s representatives are trying to do so to show workload to their customers.

– Mr. Martirosyan, it is mentioned that the introduction of an electronic bankruptcy system and the implementation of electronic document circulation will also have a positive impact on increasing the efficiency of the bankruptcy court. Will this arrangement be effective in practice? What possible problems or difficulties may arise?

– In any case, reducing personal interference as much as possible, I am sure, is an opportunity for additional confidence in the system. This is also evidenced by the introduction of an electronic public procurement system in our country. I think there will be difficulties if we organize the process exclusively electronically. In order to present what I have to say in a more vivid way, I have to turn to the help of doctors again, that is, we must give the doctor the opportunity to hear the patient’s complaints, otherwise it will not be possible to organize effective treatment solely on the results of the examination.

However, I think it is necessary to clearly define the availability of possible information to the users of the system, and it would be more perfect to have an electronic notification system, which we already have successful experience in our country, particularly in the case of CMTPL system. As a result, the costs of the postal service will be reduced, which in the end, in the form of administrative costs, is reimbursed at the expense of the debtor.

I think it is necessary to have the answers to the inquiries submitted by the state structures on the existence of property in the name of the debtor on one platform, otherwise we overburden the state structures when they have to provide both the court and the manager, and in some cases the parties the answers to such request. I also attach great importance to the organization of electronic auctions, which seems to be launched from 1 April this year.

– Within the framework of the Strategy, it is also envisaged to develop a draft Bankruptcy Code, which stipulates that, for example, it is necessary to reduce the terms of bankruptcy proceedings. How do you imagine this? In practice, how much is it possible to reduce that period and what are the ways to reduce the period and the expected result to achieve?

– I think it is possible to reduce the terms of the cases in which no property was found in the name of the debtor. In this case, it is necessary to establish a simple procedure by law, to make the request results quickly available to all parties electronically and to complete the process on the basis of lack of assets.

If there is no property in the name of the debtor, and no suspicious alienation transactions have been registered in the previous years, then despite the duration of the proceedings, the result is the same – unsatisfied claims.

I think in such cases it is in the interests of all parties to complete such cases quickly with a simple procedure.

– Mr. Martirosyan, how would you assess the level of public awareness about the bankruptcy system? If the level of awareness is low, then what steps should be taken in that direction?

– I think the level of awareness is quite high, but we have problems with the quality of awareness. For example, there was a case of voluntary bankruptcy in my practice, when the debtor’s representative was not sufficiently informed about the process, and the debtor filed for voluntary bankruptcy with the ownership of the property and was very surprised that the sale of the property partially satisfied the creditors’ claims. It is especially important to provide quality and literate information to avoid such problems, otherwise the lawyers of any creditworthy person, sometimes involving voluntary bankruptcy proceedings, consider us as potential clients and as a result we get what we have.

– What problem do you see in the sphere that may are not included in the judicial reform strategy, but you consider it a priority?

– I think it is necessary to invest and develop the financial recovery system, especially in the interests of the state, the establishment of the institution of bankruptcy risk. This may be provided by current legislation, but due to many issues, it has no practical application.

The launch of the systems mentioned I mentioned, will definitely contribute to the development of our country’s economy, financial stability and, ultimately, the reduction of bankruptcy proceedings, which is also a positive indicator for our country.

I also attach great importance to the presentation, research and provision of scientific-based bankruptcy issues. In other words, I consider it necessary to encourage specialists in the field to publish scientific articles, supervise master’s theses, defend dissertations and share their accumulated experience and knowledge with science, as a result of which we will have a better and more continuous generation change, which our country certainly needs.