Agrarian Receipts: Nature and Novelties

Публикация посвящена аграрным распискам. Автор приходит к заключению, что аграрная расписка представляет собой товарную ценную бумагу, в которой сочетаются признаки простого векселя и складского свидетельства. Кроме того, в условиях недоступности кредитных ресурсов для сельскохозяйственных производителей аграрная расписка служит средством привлечения денежных средств в сектор сельского хозяйства и способом обеспечения обязательств.

Тhe recent implementa­tion of the concept of agrarian receipts into the legal system of Ukraine deserves spe­cial attention from the business community as it introduces, to a certain extent, striking novel­ties to Ukrainian law. Therefore, in this article we are aiming to contribute to professional discus­sion on the subject matter which, may be of interest to practical lawyers and the agricultural business community.

First of all, let us analyse the essence of agrarian receipts un­der Ukrainian law.

The On Agrarian Receipts Act of Ukraine No.54-79 VI of 6 November 2012, which came into effect on 19 March 2013 (the Agrarian Receipts Act) defines an agrarian receipt as a document of title to commodity (“tovaro-rozporyadchy document”) fixing an unconditional undertaking of an obligor, which is secured by pledge, to deliver agricultural goods or to pay monetary funds under the terms and conditions provided for therein¹.

1 See Article 1 of the Agrarian Receipts Act. 2 See Article 3 of the On Securities and Stock Market Act No. 3480-/V of 23 February 2006 as amended

It is notable that an agrar­ian receipt is defined precisely as a document of title, but not as a security, which is not inherent to commonly used commercial rela­tions regulation under Ukrainian law, although an agrarian re­ceipt, in its essence, is quite simi­lar to, or, as one may say, even a mixture of, such securities as a promissory note and a warehouse certificate². Moreover, it appears that the term “document of title to commodity” is quite poor from the standpoint of legal logic, as verbally it means disposition of a commodity, which, in effect, has not been created (future harvest) as of the day when an agrarian receipt is issued and it goes rather about disposition of right to a certain commodity in future. To a certain extent, the same can also be said with respect to monetary funds (monetary funds from the sale of future harvest are not received as of the date when an agrarian receipt is issued) which, in addition, can hardly be consid­ered to be a commodity.

3 See Article 1 and Article 2 of the Agrarian Receipts Act. 4 See Article 1 of the Agrarian Receipts Act

According to the Agrarian Receipts Act an agrarian receipt can be issued by a person (evi­dently, both an individual and a legal entity) who has the own­ership right to the agricultural land plot or the right of use of such a land plot for production of agricultural goods³. In its turn, the holder of an agrarian receipt (creditor under agrarian receipt) can be an individual or a legal en­tity which (i) provides monetary funds, services, goods or performs works as a cross obligation under an agreement pursuant to which the producer of agricultural goods (the obligor) issues an agrarian receipt to the creditor or (ii) re­ceived the creditor’s rights under the agrarian receipt in a manner provided for by the law⁴.

Respectively, the Agrarian Receipts Act divides agrarian re­ceipts into commodity agrarian receipts, issuance of which cre­ates an unconditional obligation of the producer of agricultural goods to effect the delivery of contracted agricultural goods, and financial agrarian receipts, issuance of which creates an un­conditional obligation of the pro­ducer of agricultural goods to pay monetary funds in the amount to be denned based on a formula which takes into account prices for agricultural goods.

5 See Article 9 and 10 of the Agrarian Receipts Act. 6 See Article 7 of the Agrarian Receipts Act

Thus, agrarian receipts en­able the producer of agricultural goods to attract financing or to receive goods (seeds, fertilizers etc) for its production needs in

Another ASPECT to be SINGLED OUT Is DISPUTE RESOLUTION BETWEEN the AGRARIAN PRODUCER and the HOLDER of an AGRARIAN RECEIPT

exchange for its undertaking to pay the receipt or to provide the holder of the agrarian receipt with agrarian goods.

According to the Agrarian Receipts Act an agrarian receipt is subject to notarization and registration in a special register to be maintained by the Ministry of Agrarian Policy and Food of Ukraine — Registrar of Agrarian Receipts,⁵ by a notary certifying an agrarian receipt.

The above gives grounds to conclude that an agrarian receipt constitutes a commodity-based instrument subject to notariza­tion and registration, which com­bines features of a promissory note and a warehouse certificate, and is used to attract the financ­ing or receipt of goods by the pro­ducer of agricultural goods.

Another aspect worthy of consideration is an agrarian re­ceipt as a secured instrument.

As it arises from the definition of an agrarian receipt and special provisions of the Agrarian Receipts Act⁶, both commodity agrarian receipts and financial agrarian receipts establish a pledge over future harvest of the agricultural producer securing — in the case of a commodity agrarian receipt — the producer’s obligation to de­liver agricultural goods, and the producer’s obligation to pay mon­etary funds — in case of a finan­cial agrarian receipt. Thus, legally speaking, the issuance of agrarian receipts creates a pledge over the future harvest of the agricultural producer by virtue of law.

Moreover, the Agrarian Receipts Act requires manda­tory registration of information about a future harvest as col­lateral with the State Register of Encumbrances over Movable Property⁷ creating public encum­brance over the future harvest of the agrarian producer.

It is also interesting to note that a pledge over future harvest along with traditional means of enforcement of pledge by way of taking ownership provides the holder of an agrarian receipt with specific means of enforcement, in particular, by means of entitle­ment the holder of an agrarian receipt to finish growing of har­vest by its own or its authorized person and to discharge indebted­ness under the agrarian receipt by way of taking ownership over the grown harvest or sale of the grown harvest to a third person⁸. Such means of enforcement cor­relates with another right of the agrarian receipt’s holder to moni­tor performance by the agrarian producer of technological process­es of growing with access to the respective land plot and to request that the agrarian producer elimi­nates breaches if there are any⁹.

_________________________________________

7 See Article 9 of the Agrarian Receipts Act.

⁸ See Article 7 of the Agrarian Receipts Act.

9 See Article 8 of the Agrarian Receipts Act.

Taking ownership over the grown harvest, however, does not terminate a pledge in case when the grown harvest turns out to be insufficient to discharge indebtedness of the agrarian producer under an agrarian re­ceipt¹⁰, which happens in case of enforcement against the col­lateral under contractual pledge under Ukrainian law¹¹. In such a case, according to the Agrarian Receipts Act, a new harvest of any agricultural goods, grown by the agricultural producer on the same land plot, becomes col­lateral under an agrarian receipt except as otherwise provided for therein¹². Therefore, in the case of finishing of growing harvest by the holder of an agrarian re­ceipt all the risks inherent there­to are borne by the agricultural producer.

________________________________

¹⁰ See Article 7 of the Agrarian Receipts Act.

¹¹ See Article 28 of the On Pledge Act of
Ukraine No. 2654-XII of 2 October 1992, as
amended.

¹² See Article 7 of the Agrarian Receipts Act.

Another aspect to be singled out is dispute resolution between the agrarian producer and the holder of an agrarian receipt.

According to the Agrarian Receipts Act disputes between the agrarian producer and the holder of an agrarian receipt, which arises from requests by the holder of an agrarian receipt to the agrarian producer to elimi­nate breaches of technological processes of growing, should be referred to an organization specifically authorized by the Ministry of Agrarian Policy and Food of Ukraine, which has to consider such a dispute within 2 business days after receipt of the respective claim. And only dis­putes related to disagreements with the decision by the men­tioned organization fall within the competence of courts.

Thus, the above disputes be­tween the agrarian producer and the holder of an agrarian receipt as such are actually removed from the competence of courts.

Instead of resume

Summarizing the above, it ap­pears that the introduction of agrar­ian receipts is required to create an alternative to forward contracts which turned out to be ineffective within Ukrainian realities due to non-perfomance by Ukrainian ag­ricultural producers of their con­tractual obligations and the general level of law-enforcement.

Simplification of agricultural producers’ access to financing and goods needed for its produc­tion together with additional protection for creditors should make agrarian receipt in demand among, first of all, small and medium Ukrainian agricultural producers limited in their access to bank loans. Instead, the at­tractiveness of agrarian receipts for big agricultural producers will depend upon the value of funding under this instrument in comparison with bank loans.

The above questionable le­gal techniques used for imple­mentation of agrarian receipts into Ukrainian law may impact the practical usage of agrarian receipt; however this should not undermine the attractiveness of this instrument as such.

Автор: Vitaliy E. Yurkiv

Источник: Ukrainian Journal of Business Law. – 2013. – № 9. – Р. 23 – 24.