war crimes in Ukraine

The Tribunal for Putin (T4P) global initiative was set up in response to the all-out war launched by Russia against Ukraine in February 2022.

Human rights in Ukraine 2009 – 2010. 14. Property rights



1. Overview

The right to peaceful possession of one’s own property is defined in the Convention for the Protection of Human Rights and Fundamental Freedoms is of extreme importance creating backgrounds for authentic economic freedom of every person and is also important for the development of the nation aiming at building European state.

The right is of vital importance for the state protection of rights in a period, when every accession to power of a new political force is accompanied with a redistribution of property in the state. Under deficient system of property rights registration and weak legal protection for property rights it results in legal ambiguity and uncertainty concerning the state capability to ensure stable property rights. Consequently it may lead to social tension in the state and undermine the system of state management.

Unfortunately again it is needed to stress that the condition of respecting these rights in Ukraine remains on a low level. Last two years did not become a breakthrough in the area, and the measures taken by the state were unable to considerably improve the situation.

Also need mentioning problems caused by the absence of unique and effective system of property right registration in Ukraine. In fact today none of owners may be sure of stability of his rights. Existing system does not provide sufficient property rights guarantee yet.

The reliable system of property rights protection is not created as well. Court rulings concerning property collection are not fulfilled in many cases and the problem of long-lasting court rulings non-fulfillment and lacking the means of legal protection from its non fulfillment is widely spread and complex. To date certain reforms in legislation and administrative practice to solve the problem remain not carried out.

Also there are considerable difficulties in corporate rights protection and property rights in construction segment, making barriers for business development in Ukraine favoring to decrease of country competitiveness. Also it happens because of valid moratorium on redemption of lands for agricultural use and absence of the required legislation for operation on the market. As a result on one hand there is the impossibility for the peasants to enjoy their property right, on the other hand – various shadow schemes exist and develop to buy the required land for a song.

Within the context of provision by the state of a right for peaceful possession of one’s property the adoption of the Law of Ukraine “Law on Alienation of Land Plots and Other Objects of Immovable Property for the Social Needs and on the Grounds of Social Necessity” should be mentioned. The law includes considerable drawbacks both regarding the definitions and legal regulation of the relations and, taking into consideration these drawbacks, may become a substantial threat to rights of owners.

Provided these and many other problems it is necessary to emphasize the general need for reforms in area of securing property rights. These measures require time fast decision making and high quality decisions at the same. It is, in turn, impossible without the systemic approach to the issue by all branches of power, the necessity for certain consensus in the society in order to elaborate and implement reforms in the field.


2. Safeguards of property rights

State registration of the right to real estate.

An important guarantee to secure right for peaceful possession of one’s property is the establishment of such a system for real estate rights registration that would become a reliable and efficient mechanism to protect property rights.

In spite of actions by the state for these two years Ukraine is still far enough from reaching the aim.

According to the evaluation by the Minister of Economy only 5 to 10 % of property in Ukraine (depending on calculation methods), is formalized by duly legal documents.

As the Minister says, the rest of property may be fully considered as “sub-property”. As far as the amount of rights and economic opportunities for those, whose property is not formalized or under-formalized is considerably reduced, and the certainty of property inviolability is absent per se.2

Precisely the “phenomenon of sub-property” determines unique peculiarities of political and economic landscape in our state. Business brutally interferes in politics aiming at control over state law enforcement bodies to have opportunity to protect its own “sub-property” and to seize the “sub-property” of the competitors.

This problem is the biggest obstacle for growth of Ukrainian economy. Acquiring property in Ukraine is a complicated and risky process resulting at the best in a right for person to use the acquired asset for only a certain time, unless somebody stronger and more influential keeps his eye onto it. Honest owners are under constant threat of becoming victims of corporate raids and in reality their right for property is a mere illusion.

Numerous cases of legal documents theft from state bodies confirm the complicated situation. It is necessary to remind of robbery of Obukhiv District Division of the Center of State Land Register (DZK) near Kyiv. Also we remember disappearance in January 2008 of land documents from the archive of Brovary District State Administration. And, at the end of March, 2010 in the center of Kyiv an SUV was stolen containing the privatization documents in the capital for 2006-2010.

Thefts of land documentation made nervous the owners of land lots. There are backgrounds for disturbance – there had been cases when different people were issued two or even three state property right acts for the same land lot. Or it could happen, that land borders passed through already build-up territory of the neighbors. Nevertheless the risk to lose property as a result of documents theft or fraud is only a top of iceberg of problems existing in Ukraine in area of property rights registration.

It is needed to mention that in real estate an absurd situation is observed. In Ukraine multiple bodies are involved in real estate registration. Acts on land property rights are issued by the Center of the State Land Register (DZK), subject to the State Committee of Land Resources.

And the registration of property rights for houses and flats located on that land is issued by Technical Inventory Bureaus (BTI), - municipal enterprises subject to local powers.

An important part of the information is possessed also by the Ministry of Justice holding the register of real estate property rights (part of the BTI contribute to the registry) and the mortgage register. Access to information regarding to property owners is limited and the information itself may be incomplete and non precise.

Limits of the land plots are not defined even on the level of local government units, not mentioning agricultural lands or near-house territories in cities. Often the land belongs to one person and buildings on that land – to another. As far as legally that issue is not regulated, the first are in conflict for years with the second and vice versa, either in courts or by means of physical confrontation.

Another “sub-property” phenomenon is connected to flats in multi-apartment buildings. A person may use a flat or even dispose of it but he/she is not a full co-owner of his/her multi-apartment building because proper mechanisms of interaction and resolution of conflicts between the neighbors are absent.

Problems in state system of real estate property rights registration are confirmed with the fact that in the rating “Doing Business 2010” concerning convenience of property rights registration Ukraine is on 141st place (among 182 states). Thus in Ukraine to re-register real estate property rights 10 procedures should be passed, spending 93 days and 2, 6% of property value. Instead for example in neighboring Belarus there are only 3 procedures, five times less time is spent to complete them and the cost of the agreement preparation is 0%.3

To date in the state the old-fashioned and non efficient Act System is valid. That is the state is only involved in the registration of the juristic act. During the registration the state registration body does not take a decision on legality and/or validity of the juristic act and, in fact, does not hold any responsibility in front of honest acquirers that remain unprotected from the swindlers.

As a result in Ukraine approximately a third part of references to the courts and law enforcement bodies works on conflicts concerning legality or validity of juristic acts.

Thus all this state machinery operates in vain – to solve conflicts that a priori should not emerge.

In this context it is very important to work in order to create real estate property rights registration system based upon “one stop principle”. The subject of the system registration should become the right of property, or rather all rights, pledges and limitations related to determined object. The record on all possible rights and duties concerning the object in public register certifies its availability and guarantees them.

It is needed to stress here that the publicity of the register is crucial. If you have property rights for certain object, these rights are guaranteed by the state and acknowledged by the society.

In order to achieve transparence in the process it is necessary to introduce the unified and automatic system of title state rights registration. Besides, it is necessary to create the mechanism of electronic data exchange between the bodies involved in rights registration, organs (organizations), carrying out state account and technical inventory of real estate objects, tax authorities.

Also it is important that the state would become a guarantee of accuracy for rights and pledges registration and in case of inflicting losses resulting from incorrect title records would compensate them from the special fund.

Certain activity in this direction is carried out by the state. According to experts related to the Ministry of Economy of Ukraine, the Law on Creation of Open Public Register and Property Rights Register should be implemented already in IV quarter of 2010.4

Ideas of reforms in area of property rights registration were available in acting legislation too. In particular, in May, 2009 the law № 1066-VI “On Making Amendments to Certain Legislative Acts of Ukraine Concerning Documents Certifying the Right to the Land Plot and the Order of Sharing and Joining the Land Plots” came into force simplifying the land title transfer.

In February, 2010 the Verkhovna Rada of Ukraine adopted the Law of Ukraine “On Making Amendments to the Law of Ukraine “On State Registration of Property Rights for Real Estate and Their Limitations”, in accordance with which the Ministry of Justice of Ukraine must create unified Ukrainian register of real estate property rights – both to land and to houses.

But the law coming into force was postponed by people’s deputes. It should come into force only on January 1, 2012.

Also, according to the Resolution of the Cabinet of Ministers of Ukraine # 646, dated July 28, 2010 interagency task force on coordination of measures for creation of state system of real estate property rights registration was created.

Already in 2003 the World Bank granted to Ukraine a loan of $195, 13 million for issuing state land acts and unified register creation. But work in this direction is very slow. To the end of 2009 the state used only $ 25 million out of the credit. And half of the amount issued was rejected by Ukraine. As far back as in 2008 the Cabinet of Ministers of Ukraine did not manage to decide what state body would take care of the creation of such united land register. There was a struggle for this task between State Committee for the Land Resources and Ministry of Justice of Ukraine. It is necessary to stress that in the end of 2009 the World Bank representative Gavin Aldington stated that under existing rhythm finishing of work will be postponed to 2014 – 2015.

Proceeding from the aforesaid it is possible to state that the problems existing in real estate property rights registration also remained in 2009-2010. Although it is necessary to mention attempts by the state to improve the situation in the field, but for some improvement it is required to apply all the effort in order to overcome the resistance of numerous clerks and create transparent system of real estate property rights registration. Many businessmen and other people not willing to loose their assets are interested in property protection. At the same time there are those for whom it is beneficial to preserve further semi-legal redistribution of property.


Safeguarding ownership of corporate rights

As in previous years it is needed to mention serious problems in state guarantees for proper property rights protection both for physical bodies and juridical persons, producing direct influence on competitive strength of the entire nation. In particular, international economic organizations define this serious problem in Ukraine every year. As an example it is possible to cite data of Global Competitiveness Report prepared by World Economic Forum for 2010-2011 again providing Ukraine with the worst positions among 139 countries included to the document.

Thus Ukraine occupied 135th place in the rating of protection of property rights, 134th place concerning courts independence and 138th in legislation effectiveness.5

An important role in improvement of corporate property right protection was given to the adopted in 2008 Law of Ukraine “On Joint-Stock Companies”, changing considerably “rules of the game” in joint-stock field. By many experts the changes were related to more reliable legal protection of stock-holders and joint-stock companies against corporate raids.

The law determined that two years from its adoption date were in fact the period of transition, when the joint-stock companies had to bring in correspondence with it their organization structures and make the required amendments to statutory documents. The end of April, 2011 is a certain moment of truth for the market participants.

At the same time the transition period showed rather considerable problems in law application. In particular it turned out that it did not provide full protection from unlawful joint-stock companies and/or stock holders property seizures, known as “corporate raids”.

The law contains many positive regulations that could provide additional protection for joint stock companies and/or stockholders, but due to its imperfection these regulations do not provide such protection to the full.

One of the new and key regulations of the Law should have become regulations on the order of important juristic act conclusion6 and also of the juristic act, where there are interests involved.

Respective regulations are aimed at protection of joint stock companies from the removal of assets to men of a straw and protecting stockholders from their shares depreciation resulting from such activities. Thus, according to Article 70 of the Law, a decision on important juristic act conclusion is taken by the supervisory board if the market value of the assets or services being its subject (according to the last yearly joint stock company financial report) consists of 10 to 25% of the assets value.

If the market value of the assets or services is more than 25% of the joint stock company assets value, the decision on conclusion of such a juristic act is taken on a general meeting of stockholders, registered for the participation in the meeting and possessing shares voting on the issue.

If the market value of the assets or services being subject of the juristic act consist of 50 and more per cent of the joint stock company asset value, the decision is taken by three fourth of votes of stockholders out of their general amount. It is forbidden to divide the subject of the juristic act with the aim of avoiding the order of decision making on important juristic act conclusion provided by the Law.7

At the same time the Law of Ukraine “On Joint Stock Companies” does not determine how should the stockholders act if an important juristic act is concluded in general without its discussion on the meeting of stockholders. Most probably such juristic act should be (and must be) acknowledged as invalid, as one concluded against the Law requirements. But the issue is who would lodge the respective suit.

Ukrainian legislation, in particular the Law of Ukraine “On Joint Stock Companies” does not provide directly such rights for the stockholders (participants). As a rule, courts deny to stock holders in satisfying respective suits proceeding from the absence of the indicated rights. In this sense rather unpleasant is an explication of the Resolution of Plenum of Supreme Court of Ukraine dated October 24, 2008, № 13 “On Practice of Court Trials on Corporate Disputes”.

In clause 51 of the Resolution, the Plenum indicates that the Law does not provide a stockholder (participant) of the economic company with a right to lodge a suit on protection of rights or protected by the state interests of the company beyond the relations of representation; on this background Commercial Courts should deny to the stockholders (participants) of the economic company in satisfying a pledge on conclusion, modification, termination or acknowledgement as invalid of the agreements and other juristic acts, concluded by economic company.

In practice courts tend to apply the clause of the Resolution of Plenum of the Supreme Court of Ukraine depriving the stockholder of an opportunity to protect value of his shares, being depreciated as a result of deliberate property removal from a joint stock company. Thereafter having attempted to protect the stockholders and/or joint stock companies from the illegal property removal, the Law did not provide ways to implement such a protection.

One more potentially dangerous moment is the fact that in Article 50 the Law of Ukraine “On Joint Stock Companies” provides right to appeal the decisions of stockholders meetings in court in case the decision of general meeting or the order of taking the decision violate regulations of the Law, other legislative acts, statute or clause on general meeting of the joint-stock company. Besides there is a short appeal term established – 3 months (before, general limitation of action terms had been applied once for three years). On one hand establishing such a short appeal term the law-makers tried to protect joint stock companies from unfair appeals resulting in long term interruption of joint stock companies’ activity. On the other hand, taking into consideration complications present in the Law concerning information about the meeting, the stockholders simply will not be able to know on time about such a meeting that may be “advantageous” for raiders.

Also dangerous is the restriction in Article 50 of the Law; in compliance with this restriction the court has a right, considering all the circumstances of the case, to leave valid the decision appealed, if the violations allowed are not related to legal rights of a stockholder making an appeal. The reduced terms for restriction of action mentioned and last restriction concerning violation of stockholder rights in future may considerably reduce rights of stockholders for judicial protection from corporate raid seizures.

Unlike the Law of Ukraine “On Economic Companies” the Law of Ukraine “On Joint Stock Companies” makes an attempt to regulate the issue of priority right of private joint stock company and the company itself for purchasing shares of the company offered by its owner for sale to a third party. According to the Part 2, Article 7 of the Law of Ukraine “On Joint Stock Companies” such a “priority right” is provided not by the Law, but by the company statute. In case if statute provides such a priority right, it is fulfilled in compliance with Parts 6-7, Article 7 of the Law of Ukraine “On Joint Stock Companies”.

At the same time in the form, indicated “priority right” is guaranteed in the Law, in fact it does not protect the stock holders from the unwanted “companions”, making the shares circulation much more difficult. The way of judicial protection for the priority right chosen by law-makers is unsuccessful. According to Clause 5, Article 7 of the Law of Ukraine “On Joint Stock Companies” in case of violation of priority right for shares purchase indicated in the article any stockholder of the company and/or the company itself (if the statute provides priority right for purchase of shares by the company) has a right during three months from the moment of stockholder or the company got to know or had to know on such a violation, to demand in court rights and duties of shares the buyer transferred to them. It is necessary to state that very often the transference of rights and duties of shares buyer to other persons is a way of corporate raid seizure regarding property rights to shares.
Applying analogy of Article 362 of the Civil Code of Ukraine previous owners had certain guarantees, in particular concerning the requirement of depositing by the plaintiff the value of purchase-sale object to the court. In this redaction of the Law of Ukraine “On Joint Stock Companies” such a requirement is absent, providing a danger of property withdrawal without compensation. Besides, it is not clear, why do law-makers allow transference of rights and duties for one stockholder (the plaintiff) and to what extent will the rights of other stockholders be taken into consideration.8

In such a way the Law of Ukraine “On Joint Stock Companies” having made certain steps in direction of joint stock companies protection from corporate raid seizures left unsolved several problems and did not exclude future critical corporate disputes. So, the practical application of the Law will depend rather much on how attentively will the stockholders elaborate and adopt a company statute and also on law enforcement practice.

Available problems in protection of property rights and non-transparence of privatization processes in Ukraine are confirmed by numerous corporate conflicts taking place in Ukraine. In particular, the conflict around Arcelor Mittal, the owner of one of biggest enterprises in Ukraine – “Kryvorizhstal” should be named. In this case the General Prosecutor’s Office initiated the trial on fulfillment by the owner of the investment liabilities. It was perceived by Arcelor Mittal as an attempt for enterprise reprivatisation.9 Although later on as a result of international pressure in this particular case the General Prosecutor’s Office revoked its claim, such situations confirm weak level of owner’s property rights protection in Ukraine depending more not on strictly defined legal clauses but on the fact what political force is at power today.

Another example of weak property rights protection in Ukraine is a conflict between Illichivsk port and stevedore company “Ukrtranskonteiner”. In 2009 Illichivsk port canceled an agreement with private enterprise “Ukrtranskonteiner” on common activity, considering it to be leonine and non efficient. The agreement was concluded in 2005 for 30 year term. The lawsuit on cancelling the agreement was started in interests of the state. It was submitted by the prosecutor’s office together with the port and the Ministry for Transportation and Communication. Economic Court of Odessa region satisfied the demands of plaintiffs: cancelled the agreement on common activity. Later, the Higher Economic Court of Ukraine (HECU) renewed the action of the agreement. But the Higher Court of Ukraine (HCU) annulled the ruling by HECU and left in force resolution of the first instance court.

The peculiarity of the situation is that investor was driven out from the moorings but the investment remains not returned. Illichivsk port, acquiring the management over container terminal continues using property of “Ukrtranskonteiner” (modern container transfer machines, other mooring equipment) and earning money with it.10

Private company “Ukrtranskonteiner” exhausted all the ways of its rights protection within the country and in April 2010 went to the European Court of Human Rights with the declaration against Ukraine on property right violation.

Similar problems with property rights protection occurred with other stevedore company “Agro-class” operating in Berdyansk Sea Trade Port. In this case there was an attempt of corporate raid seizure of the company by a private structure being one of the company stockholders.11

Drawbacks of the legislation and in many cases its plain non-fulfillment lead to violation of owners’ rights at transference of companies’ property belonging to the state. Here it is possible to mention a conflict of 2010 related to Kyiv company “Kyivmiskbud”12, where part of shares belonging to the territorial community of Kyiv-city first were given to a private company and than were turned back to state property.

These and many other conflicts appearing in connection with the absence of precise and efficient system of property rights registration and also weak owner’s rights protection demonstrate considerable problems in the field. Efficiency of Ukrainian economy and its investment attractiveness depend on resolution of these problems.

On December 22, 2010 the Parliament adopted the Law “On Making Amendments to the “Law on Joint Stock Companies” obliging the stockholders owning minor amount of shares to sell their shares to a big stockholder or joint stockholders group owning in sum more than 95% company shares.

According to the Constitution of Ukraine the forced alienation of objects of private property right is allowed only as an exception, because of social need, on grounds and in order established by the law and under condition of prior and full compensation of its value. And in this law we have identification of corporate interests concerning concentration of 100% of shares by one stockholder with the social need, which is unacceptable. Actually the amendments to the Law mentioned violate articles 13, 22 and 41 of the Constitution of Ukraine. Obviously big business aims at concentrating all the property of enterprises and in a way at preventing minor stockholder from protecting his/her property.

The state, declaring its support to middle class, acts in a way leading to its elimination, increasing already big gap between the rich and the poor already existing in Ukraine.


Non-enforcement of court rulings protecting property rights

Non-enforcement of rulings by national courts in part of property levy protecting the property remains one of the most acute problems in providing the right for peaceful possession of one’s property.

According to the Minister of Justice of Ukraine O. Lavrynovych, for the years of independence there formed the arrears of Ukraine on court rulings implementation concerning human rights violations in the dimension of 130 billion of UAH and, as he says, the arrears grow every day and will continue growing if there is no mechanism for solution of the problem will be found.13

The problem was pointed out for many times by both international and Ukrainian organizations. Thus on October 15, 2009 the European Court of Human Rights for the first time applied the procedure of “pilot judgment” against Ukraine in case of Yuriy Ivanov. The court underlined the problem of constant non-enforcement of court rulings established already in more than 300 rulings of the Court against Ukraine. In particular the first case dealing with impossibility to obtain payments of judgment, related to the finishing military service was solved by the Court as far back as in 2004 (Voytenko against Ukraine).

The case of Yuriy Nikolaevich Ivanov raising the same issues “demonstrated that the problem of long-term non-enforcement of court rulings that had come into legal force and the absence of efficient national ways of protection remained unsolved within the Ukrainian legal system, in spite of understandable decisional practice, appealing to the Government to carry out necessary measures to solve these issues”.

The systematic character of problems in the field is also confirmed by the fact that only in the beginning of 2010 in the Court about 1400 declarations against Ukraine dealing fully or partially with such problems wait for consideration. And the amount of such declarations is continuously growing.

Whereas mentioned above the Court came to conclusion that facts of non enforcement of national court rulings are not related to separate cases or particular events of the case, but result to be consequence of defects in regulatory and administrative practice of state power bodies concerning fulfillment of national court rulings they are responsible for. Respectively, the situation in the field is defined by the Court as resulting from practice non compliant with regulations of the Convention on Human Rights Protection and Fundamental Freedoms.

It became one of the main backgrounds for the Court to apply regarding to Ukraine the “Pilot Judgment” procedure. Within the judgment the Court obliged the Government during a year after the date when the judgment would acquire definite, to introduce efficient way of protection or the combination of such ways capable to provide adequate and sufficient compensation in case of non-fulfillment or delay in fulfillment of national court rulings.


Case of Yuriy Nikolaevich Ivanov against Ukraine (application № 40450/04)

In October 2010, the applicant dismissed from the Armed Forces of Ukraine. He had a right for dismissal pay at retiring and pecuniary compensation for the material property not received, but these sums were not paid to him at dismissal. In July 2001 the applicant lodged a civil suit with a military court of Cherkassy garrison against military unit A-1575 demanding paying out the arrears mentioned. On August 22, 2001 the court satisfied his suit to the full and obliged the military unit to pay the applicant a compensation for non received material property.

The executive procedure on court ruling dated August 22, 2001 was opened on August 24, 2002. During the procedure the bailiffs informed the applicant that although bank accounts of the debtor had been arrested, there were no funds available on the accounts. In the letter dated November 12, 2002 the Ministry of Defence informed the applicant that action of legal provisions providing his right for pecuniary compensation for military uniform was stopped and that in budget there were no funds provided for these payments.

By the letter dated April 06, 2004 the Bailiff’s Service informed the applicant that military unit А-0680 had no funds to pay out to the applicant arrears according to the decision from August 22, 2001. Also they indicated that forced sale of property belonging to military units is forbidden by the law. In fact they acknowledged the impossibility to enforce court ruling.

Being not agree with such arguments the applicant addressed the European Court of Human Rights and on January 15, 2010 the Court issued a ruling in favor of the applicant, but the most important is that the Court applied the procedure of pilot judgment regarding to Ukraine in the case.

It was declared that structural problems indicated by the Court in this case were wide scale and complex. Judging from information available they require carrying out comprehensive measures, possibly of legislative and administrative character, attracting different national bodies.

The Court favorably stated that issues on implementing measures to overcome structural problems of long-lasting non enforcement of rulings and absence of national juristic protection means had already been considered in detail by the Committee of Ministers in cooperation with authorities in Ukraine. But the analysis of the conclusions the Court came to in the case and other similar cases against Ukraine together with other corresponding materials available to the Court confirm that the state – defendant demonstrated almost complete lack of will to solve the problems mentioned.

At that the Court declared that it was necessary to introduce urgently defined legislation and administrative practice reforms in order to bring them in compliance with Court conclusions in this ruling and with the requirements of Article 46 of the Convention. The Court left it to the Committee of Ministers to determine which way of overcoming the problems mentioned would be the adequate one and to indicate one or another general measure to take by the state-defendant.

In any case the state defendant must urgently – no later than in one year from the date the decision becomes final, - introduce within the national legal system corresponding measure of juristic protection or a complex of such measures and provide theoretical and practical correspondence of these measures to key criteria established by the Court in its practice, indicated in the ruling. Besides, Ukrainian authorities should properly take into account the recommendations by the Committee of Ministers concerning states-participants of the Agreement, on improvement of national legal protection measures.

This problem is also acknowledged by the supreme state bodies of Ukraine. In particular, the Cabinet of Ministers of Ukraine approved the resolution № 222-р, dated February 11, 2010 affirming the plan of primary measures to eliminate systemic defects resulting in non-enforcement of rulings by national courts.

But it is necessary to mention that in fact all the measures provided by the resolution had nod been implemented by the state.

According to the Resolution in 2010 it was planned in the Draft Bill “On State Budget of Ukraine for 2010” to provide funds, required for payment of compensation in compliance with the “pilot judgment” of the European Court of Human Rights in the case Yuriy Nikolaevich Ivanov against Ukraine.

At the same time in the Law of Ukraine “On State Budget of Ukraine for 2010 (dated 27.04.2010 №2154-VI) adopted by the Verkhovna Rada of Ukraine the expenses indicated above were not considered.

In particular it is indicated by departments of the Ministry of Labor and Social Policy, stressing on the fact that in budget, approved for 2010, expenses for enforcement of court rulings, where the defendant is the state represented by the ministry are not provided. Besides, the ministry stressed on need to provide additional funds for the enforcement of court rulings issued in favor of citizens while making amendments to the Law of Ukraine “On State Budget of Ukraine for 2010”, but the amendments had not been approved.

Also, according to the Resolution of the Cabinet of Ministers of Ukraine it was determined the necessity to provide maintenance in Verkhovna Rada for the Draft Bills “On Making Amendments to Certain Laws of Ukraine on Limitation of Moratorium Action for Forced Sale of Debtor’s Property”, “On Making Amendments to Certain Legislative Acts of Ukraine concerning Protection of Pre-Trial Proceeding, Legal Investigation by Court Body of Executive Proceeding in Fair Term” before their adoption. At the same time draft bills submitted in 2009 on March 11, 2010 were revoked by the new Cabinet of Ministers of Ukraine.

Also it was planned that the Cabinet of Ministers of Ukraine had to elaborate and submit before March 2010 draft bills on the order of enforcement for the rulings of national courts, where the state is the defendant, state authorities, state institutions and organizations, bodies of local self-government and enterprises subject to the Law of Ukraine “On Introducing Moratorium for Forced Sale of Property” and also draft bills on protection of creditors’ rights in time of liquidation of state and communal enterprises and other enterprises subject to the Law of Ukraine “On Introducing Moratorium for Forced Sale of Property”.

Unfortunately to date there are no such draft bills yet, also there is no such an important special law for Ukraine concerning compensations in case of crime. The Civil Code of Ukraine requires such a law. According to the Article 1177 of the Code the property damage caused to the property of physical person as a result of crime is indemnified by the state if there is no person having committed a crime established of if a person involved is insolvent. Conditions and the order of property damage compensation caused to property of physical person – victim of crime is defined by the law. But once there is no such Law, than the damage caused by criminal actions of insolvent employees of the state and other persons is not indemnified.

In the same way there are several moratoriums existing to date. In particular there are moratoriums on forced sale of property for state companies, companies of fuel and energy complex, pipeline transportation, companies of Ukrrudrom (Ukrainian Ore Industry), shipbuilding sector.

At the same time European Court of Human Rights in multiple cases against Ukraine related to non enforcement of national court rulings on payment of wages, compensations related to loss of health, other labor payments stated that infringement by Ukraine of its commitments to the right for fair trial and right for peaceful enjoying once property is related to existing corresponding moratoria.

The problem is acknowledged by state authorities too. Minister of Justice of Ukraine Oleksandr Lavrynovych declares the necessity to solve the issue of moratorium for property sale not allowing to bodies of State Bailiff Service to enforce the court ruling only because the state has a 25% share of company property.14 In spite of all this there are no changes for the best on the issue. As it was mentioned above, the draft bill “On Making Amendments to Certain Laws of Ukraine on Limitation of Moratorium for Forced Sale of Debtor’s Property”, submitted by the Cabinet of Ministers of Ukraine was later revoked by it. As before part of companies remain in privileged condition in comparison to companies of other sectors.

It is necessary to stress that laws on establishing moratoria are non-constitutional. Granting any privileges to certain owners or introducing privileged economical activity modes infringes directly Article 13 of Constitution of Ukraine.

Another reason for non enforcement of national court rulings is imperfection of liquidation procedure for the companies and their acknowledgement as bankrupts. It is connected to the fact that in many cases liquidation procedures related to companies, institutions and organizations in fact make it impossible to collect wages, social payments, damage to property and moral damage arrears from the defendant by court ruling.

In the middle of 2007 the draft bill №1105 was submitted to the Verkhovna Rada of Ukraine dated December 04, 2007 “On Making Amendments to the Law of Ukraine “On Renewal of Solvency of the Debtor or its Declaration a Bankrupt” (on the sequence of satisfaction of the demands at arrears in wages)”, aimed at resolution of the problem.

But the draft bill was several times sent by the Verkhovna Rada of Ukraine for improvement. As a result of its consideration in second repeated reading the draft bill was voted down. Thus the problem remains unsolved and keeps on causing the non enforcement of rulings by national courts.

Safeguarding the property rights of investors in the area of construction

From the fall of 2008 Ukrainian economy following the world economy experienced financial crisis. Due to lack of liquidity the banks stopped to credit both construction developers and potential investors wishing to purchase real estate on primary market.

As a result large amount of people who had invested their funds in order to receive the dreamed square meters spent all their savings and for long years put themselves into dependence becoming bank debtors.

For sure the function of control over the fulfillment of rights of investors and fair risk distribution between the participants of the investment process in competitive environment should be performed by the state. But, to our regret, we have to ascertain that the state, declaring its assistance and control in area of construction in reality withdrew itself from the resolution of this global problem. Even more, some state authorities by their inactivity and sometimes by their actions take sides and “cover” unfair developers, leaving investors face to face with their problems.

As a rule the situation around the construction stopped is as follows. The company-developer having obtained the rights for the land plot to carry out construction and having invested small compared to cost of the object amount of money in siting and project (often only in its draft), starts to attract funds either by “direct sale of apartments” or by receiving line of credit for construction of the object.

In case of “direct sale of apartments” investors who contribute funds acquire property rights defined by the mechanism of such funds attraction (right to demand from the developer). At the same time developer’s duty to return the amount of credit received also as a rule is envisaged by means of mortgaging property rights of the developer for the apartments mortgaged.

Thus in connection with obtaining funds from the third parties the developer acquires certain liabilities and in fact submits part of his rights to the object to third parties – the creditors.

The following scheme on construction market is widely applied: the first building is finished at the expense of funds, attracted for the construction of second house; the second is finished at the expense of funds for the third and so on.

Under such construction conditions often there is a situation when the developer does not have possibility to continue financing the construction of the object and the construction is stopped. It becomes impossible for the developer to attract funds by means of “direct sale of apartments” or by obtaining credits under conditions acceptable for him. Investors, anxious about non fulfillment of developer’s liabilities start to appear; they are in panic and ask the developer to give them back funds received from them.

Suits to the court appear demanding to return funds also follow arrests of property and funds on accounts of the developer. Declarations to law enforcement bodies appear (sometimes criminal files are initiated, documents are withdrawn), panic spreads among the investors.

Signing agreements with developer companies, investors in most cases planned immediately after the indicated term of building commission to repair apartments and live there. Instead of it today as a result of developers’ actions attracting private investors funds and violated terms of building commissions, they are obliged to pay out credits to the banks for the apartments non received, to pay rent and to bear considerable losses.

Today the investors who had invested in residential construction do not acquire property rights for the object of investments; it results in fraudulent actions by owners of construction companies. It is the situation when objects are not commissioned, investors can not own them, neither dispose of it and at the same time developers illegally own, dispose of and use funds of private investors.

In this connection several loud construction scandals took place last years in Ukraine. Among them there are conflicts around group of companies “Elita-Tsentr”, “Agrobudpererobka” company, “Kyivvysotbud” company, “Smarteh Systems” company and the other. According to law enforcement bodies total amount of funds received from the investors by swindlers only in “Elita-tsentr” consist of about 400 million UAH.

As we can see the amount of situations similar to the one described increases every day, resulting in multiple investors’ property rights violations, growth of social tension among the population, extends distrust to authorities.

To date there are many examples of attempt to solve and cover problems that appeared recently in residential construction field.

In such a way the Verkhovna Rada of Ukraine created Interim Inquiry Panel on clarification of circumstances for establishing high prices of housing in the city of Kyiv, other cities of Ukraine and also on non fulfillment of their commitments on residential construction investment agreements by the developers. The Commission was commended to clear up the reasons for non fulfillment of liabilities, for inactivity of the authorities of the executive bodies and local self government bodies resulting in such consequences. Based upon the results the Commission had to submit for consideration by Verkhovna Rada of Ukraine proposals on improvement of the Legislation of Ukraine in order to create efficient mechanism regulating relations on housing market, fulfillment by the developers their commitments regarding agreements on residential construction investment, mechanism of the protection for investors’ interests. But the Commission existed for only half a year, than its work was stopped by Verkhovna Rada of Ukraine. Probably, from the point of view of people’s deputies everything is fine in construction field and Commission’s work is not necessary anymore.

On December, 2008 the Law of Ukraine “On Preventing of World Financial Crisis Negative Impact on Construction Sector Development and Housing Construction” was adopted, aimed at overcoming of crisis phenomenon in construction sector and regulation of legal relations related to housing construction. The Law was adopted in order to stabilize construction field, increase purchasing capacity of the population, implementation of housing rights for citizens requiring state assistance, stipulation of the development of construction and interfacing sectors under world financial crisis conditions.

But there are rather contradictory evaluations as regard to the Law effectiveness. Thus, in opinion of many authors, in connection with crisis aggravation the Law today is applied more by the developers to avoid accountability to investors and local government. In their opinion the initiators from construction lobby that “promoted” the anti-crisis law had their aim to deprive developers from any responsibility for the funds collected when the construction is not finished. As a result construction companies in spite of their liabilities on housing construction may not be accountable to those whose money they had taken. Thus, in Clause 4, Article 3 of the Law it is said directly that until January 1st, 2012 physical and juridical bodies can not break the agreements with construction organizations, even if those fail to meet the obligations. The prohibition is not extended only on construction projects of the objects, where term of the commission is postponed for more than 18 months. In other words unfair founders of construction companies are given 18 months to withdraw funds from the project to bring the developer to bankruptcy.15

Many examples of infringements private investors’ rights in construction may be cited. For example a conflict situation appeared between the investors of the house №2 on Khmelnytskyy str. in the town of Bucha, Kiev Region and “Kyivmiskbud” holding company. More than a year passed since the date of the official moving in date for the residents, but the house is not commissioned yet. According to residents, the funds for the construction were collected fully 18 months ago but it is not finished yet. “Kyivmiskbud” uses a crisis as a cover, but the building has no relation to the crisis because the planned commission date was May 31, 2008. “Kyivmiskbud” officials keep on promising “to do everything in two weeks”. These two weeks last already for a year. “Entire volumes of declarations were written including ones to the President of Ukraine, to core ministries and to other controlling bodies. But the situation has not changed” investors claim, adding that 250 families remained on the street.

Here there is another example. In the beginning of March 2009 a group of investors of multi-apartment buildings “Troyeshinski Lypky” in connection with their property rights infringement started permanent rally and hunger strike near Secretariat of the President.

In the city of Donetsk another construction fraud takes a turn for the worse. The investors can not divide the apartments, and the developer company disappeared. People who had invested in aspired square meters cherished a hope to move into new house as far back as in 2007. The house on Polotska Street has not been commissioned yet, and in proper house erect four people pretend on each apartment. It turned out to be that “Dontechlisprom” Ltd –the contractor company guaranteeing house to investors, sold every apartment two times to different people. In such a way almost all the apartments in the new building today have several owners. Also, as soon it was found out by the investors of the house, the third pretender for apartments appeared – the bank. The house had to be commissioned in second quarter of 2007. Investors filed a declaration to the prosecutor’s office to initiate criminal file on the fact of fraudulent scheme of the apartment’s sale.

It is necessary to state that today people who became victims of developers’ actions in fact remain alone with their problems. State authorities that should occupy with their rights protection more often protect interests of the developers and not of investors.

Actually until the present day several measures aimed a struggle with these problems offered by the President V. Yuschenko16 as far back as in 2008 remain not implemented.

They include:

- improvement in the norms of current legislation regulating urban construction work, for example, the creation of mechanisms by which a specific investment project for potential construction is put to auction or tender. Only those economic players who have the relevant financial, technical and production capacity for its implementation would be able to bid to be chosen as builder or subcontractor;

- envisaging in legislation mechanisms for ensuring enforcement of the contractual conditions for the construction of a multi-apartment building via mortgage of the land site granted in ownership or use to the builder, or guarantees from solvent members of the market;

- ensuring proper monitoring in the construction area, increasing liability of the local authorities though the obligation to keep a register of investment contracts and agreements on construction of multi-apartment buildings;

- introduction of registers for builders and building objects where private investors are involved;

- mandatory reporting by construction companies and investment funds on money obtained from individuals during the implementation of the construction or assembly work;

- carrying out a thorough analysis of money obtained in the regions from members of the public for the construction of housing and observance by builders (developers) and investment funds of the conditions of their agreements;

- where circumstances arise to institute bankruptcy proceedings against a builder, only procedure for readjustment of a debtor should be applied, for example, through the participation of individual investors or local authorities;

- prohibition of advertising and announcements about the sale of flats by builders (developers) before building permits have been obtained;

- creation of proper conditions for carrying out effective public control over developers and investment funds.

Punishment of those infringing property rights

In should be mentioned that recently in Ukraine increased the amount of crimes aimed against property rights. Thus, according to the First Deputy Minister of Internal Affairs Serhiy Popkov, there has been growth of one third of crimes registered, increase of criminal cases amount occurred in all the regions of the country. It has happened because of 2, 5 times growth of thefts registered.17

In order to react on these circumstances the Ministry of Internal Affairs together with General Prosecutor’s Office prepared proposals on elevating the limit of damage caused resulting in criminal liability for theft of property belonging to others.18 Later also it was coordinated the norm of bringing to criminal liability for property theft regardless amount of stolen if the theft had been committed in a socially dangerous way.19

It should be mentioned that in June, 2009 the Verkhovna Rada decreased the minimal value of property stolen resulting in criminal liability from 907, 50 UAH to 60, 5 UAH.

The Verkhovna Rada established that the theft is considered minor if the value of property stolen does not exceed 0, 2 exemption limits (60, 5 UAH). Such thefts result in administrative liability and the theft of property its value exceeding the sum mentioned results in criminal liability.

In such a way on one hand theft classification as criminal offence brings to imposing enormous fines on persons who commit it. These persons most probably will not be able to pay it out because most often a person steals due to lack of money, so he/she will be imprisoned. And the state will have to spend considerable amount out of state funds for custody of a person who had stolen for example 100 UAH and also for maintaining of prisons because they will be overcrowded with such delinquents. It may improve statistics on disclosure of minor thefts but it will not be able to change the situation radically.

At the same time on the other hand considerable elevation of limit for criminal liability regarding property theft may result in further growth of minor crimes against property rights, as far as administrative responsibility does not stop the delinquents. And this in turn will result in considerable decrease in securing property rights.

In compliance with the international standards every offender must obtain proportional punishment. Usually in democratic countries criminal offences are divided into two or three groups depending on social danger. In our legislation a concept of administrative offence is applied. There is a notion of “criminal misdemeanor”. Introduction of criminal misdemeanor and its separation from criminal offence is one of elements in reform of criminal justice. Than, definitely, minor theft becomes criminal misdemeanor. But there is a big difference for the person convicted. The responsibility for criminal misdemeanor does not lead to deprivation of liberty. In our system only administrative and criminal offences exist. If the first does not stop the offenders, a crime as socially dangerous action provides either very big fines or deprivation of liberty.

World experience proves that in order to decrease minor thefts it is more efficient to increase level of wages and pensions, decrease unemployment and not to introduce higher level of legal responsibility.


3. Activity of the authorities in restricting property rights

Purchase of privately owned land for public needs

The problem of privately owned land plots purchase for social needs remains valid in relation to limitation of property rights.

Especially pressing the problem became in connection with the adoption on November 17, 2009 by the Verkhovna Rada of Ukraine the Law of Ukraine “On Alienation of Land Plots and Other Objects of Immovable Property for the Social Needs and on the Grounds of Social Necessity”

The author of the legislative initiative was former Prime-Minister of Ukraine Yulia Tymoshenko. It general it is necessary to acknowledge the need for legislative definition of legal, organization and financial backgrounds for these relations regulation. The Document was submitted to the Parliament on January 30, 2009. It was adopted as a background in the Parliament on March 18 and was fully adopted on June 25. But the norm of the Law does not guarantee the constitutional principle of right for private property inviolability.

That is why on July 24 the President offered to vote down the draft bill as such “not providing at resolution of the issues included the real protection of private owner property right, observation of constitutional guarantees for right to private property”.

Nevertheless on November 17 presidential veto was overcome on the second attempt and 326 votes.

Ukrainian Helsinki Human Rights Union stood against the adoption of the Law in its present redaction. Undoubtedly social needs should dominate over individual needs, in particular in land field. But there is an impression in regard to the Law that it secures not social need domination over private interests but rather domination of private interest over somebody’s property rights.

The Law determines social need as “conditioned by all-state interests or interests of territorial community. The exclusive need allowing forced alienation of a land plot, other real estate objects located on it…” And the social want – is “conditioned by all-state interests or interests of territorial community want in land plots including those with real estate objects located, the redemption of those is carried out in the order established by the law”.

The difference is that in the case of social need your property may be withdrawn in forced way through corresponding judgment of the court, also mentioned in the Law. And the social want provides owners agreement with his property buy-out.

Social want is considered by the Law as need for land plot to build roads, oil and gas pipelines, transmission lines, transportation facilities, state parks, nursery schools, sports grounds, stadiums, etc. the list does not include definite types of objects for those a land may be alienated.

List of the objects presenting a social need in a considerable way duplicates the previous one. In particular it mentions: objects of national security and defence; line objects, transport and energy infrastructural objects and objects required for their maintenance; objects related to mining operations of state importance; objects of nature reserves fund; cemeteries.

And now let’s model a situation. Let’s say there is a land plot in rural area in favorable location or in a picturesque place. And somebody having money and influence (physical or juridical person) has an idea to obtain the land plot. There is no need to deal with the owner on land sale for a market price (and it is not obvious that the owner wants to sell it because of his/her subjective motives). The next step of the influential raider will be a visit to village council where, for certain motivation the deputies will raise an issue of social need – to locate on your land an object for example of nature reserve fund. There is no doubt of positive decision. The next step – you will be offered to give the land on your own free will for the price determined by the expert, appointed by the same village council. If you resist, the court will interfere issuing a ruling on forced confiscation of the land plot and determining the amount of financial or material compensation for the property alienated. Besides, market principles in the issue of compensation for the property lost are not mentioned at all.

After all, local authorities become the owner of the land mentioned. And further nothing impedes to change the destination of the land plot say for construction and submit it to corresponding hands.

Besides, the law does not divide strictly social need and want. For example if the authorities did not agree with the owner the buy-out price of real estate withdrawn for the social need, than, on one hand the law declares that the real estate remains with owner and on the other hand it gives the right to the authority to prove in the court that there is a social need for the real estate object mentioned, following the forced buy-out.

Everything mentioned also gives backgrounds for the conclusion on the possibility of application of the scheme of buy-out (forced alienation) for social wants (in connection with social needs) from private owner for the most attractive land plots, other real estate for further transfer of such property to other persons, creating the background for abuse while buy-out (forced alienation) of land plots from private owners.

Obviously the model mentioned is rather conditional and real alienation ways “for a song” will be much more sophisticated. As an argument the fact may be mentioned that, despite the direct and exhaustive prohibition of agricultural land market circulation, agricultural land has been already sold for a long time on a black market.

The Law mentioned offers gives rather wide powers both to the court (administrative branch of judicial power) in the issue of redistribution of property rights on land plot, definition of its value, and to municipal powers in the issue of forced alienation of property.

It is obvious that the law is raw and ambiguity of its terms and conditions provides wide opportunities for different legal maneuvers and ambiguous interpretations. It is improbable that the law-makers and more than 300 deputies who voted to overcome veto failed to notice those.20

The Ministry of Justice of Ukraine also mentioned considerable problems of the Law. Thus, Deputy Minister of Justice Valeria Lutkovska at the end of 2009 declared that the Law on Forced Alienation of Land for Social Needs had to be sent to the Constitutional Court of Ukraine as one containing disputable issues.

“I think that there will be an address to the Constitutional Court anyway… I agree that the definition “social need” is not present in the legislation today” – Lutkovska declared. Also she added: “The Law will remain dead until the time when the explanation of what it is will appear in the legislation. The explanation must be very precise not to violate human rights".21

The same is declared by practicing lawyers who say that the Law may become a considerable threat to guarantees of property rights in Ukraine.22

Moratorium on the sale of agricultural land

In 2009 – 2010 the state did not manage to adopt corresponding laws on state register, on land market, on management of state property lands, on national infrastructure of geo-spatial data and the other. These are extremely important legislative acts for implementation of owners’ property rights on land plots.

Instead of it on January 19, 2010 the Verkhovna Rada of Ukraine again prolonged the moratorium on sale of agricultural land. At this time the moratorium was prolonged until January 1, 2012 having overcome the veto by the President of Ukraine Viktor Yuschenko. Besides, in November 2009 the Verkhovna Rada of Ukraine did not support the improved draft bill “On State Land Register” with the proposals of the President of Ukraine.

Despite the assurance from the President of Ukraine V.F. Yanukovych23, and his team24 of the desire to create transparent land market as soon as possible, necessary laws are not adopted yet. Although in the program of economical reforms presented by Yanukovych in June, 2010 it was planned to introduce free agricultural land market before the end of 2012.

Although some steps in the field are made (there is a discussion regarding necessary draft bills on the level of ministries, projects and programs of reforms are being prepared in the field)25, but they had not changed the situation for the better yet.


Non-return of deposits

As it is known the resolution by the National Bank of Ukraine “On Additional measures on banking activities” dated October 11, 2008 № 319 prohibited early termination of fixed deposit agreements and early return of deposits, provoking mass indignation of the citizens, as far as the resolution mentioned contradicted to common sense and to norms of the Civil Code of Ukraine. In particular it violated the right of person to receive his or her deposit from the bank on first request, which is inviolable and provided by Part 2, Article 1060 of the Code mentioned.

Under pressure of criticism the National Bank of Ukraine soon issued a resolution “«On particular issues of banking activities» dated December 04, 2008, № 413, annulling to the full the resolution № 319. It seemed that finally one could retrieve deposit from a bank. But the good news turned out to be premature, because in new resolution also there was a prohibition of early termination of deposit agreements and payments. It was proved by citation in the paragraph 5, clause 2 of the document mentioned: “ …Apply all the necessary measures to provide positive dynamics the deposits amount (first of all in national currency of Ukraine) in order not to allow early return of funds allocated by the depositors”.

In such a way the National Bank of Ukraine shifted all the responsibility for deposits no return on banks, having mentioned in Clause 5, Resolution № 413, that the Direction of Banking Regulation and Control of the National Bank of Ukraine had to establish control over fulfillment by the banks of Clause 2 of the Document and if required to take prompt action to banks – violators.

Ukrainian Helsinki Human Rights Union at that time was in charge of several cases concerning protection of rights of owners in order to return their deposits. And in many cases of those result positive for the dilatants was reached. In particular in the case of citizen B. where the applicant was not returned the deposit from the commercial bank OJSC “Ukrgazbank”. The bank in the case rejected from breaking the agreement and returning the amount of the deposit and corresponding interest, having sent on December 12, 2008 the written answer, founding its rejection by the Resolution of the National Bank of Ukraine №413 dated December 04, 2008 “On particular issues of banking activities” and also by the letter of the National Bank of Ukraine № 22-310/946-17250 dated December 06, 2008. The applicant did not agree with that and filed a suit to the court on protection of her property rights. With the assistance of Ukrainian Helsinki Human Rights Union26 she was returned the deposit and the interest related. But, unfortunately, it was not possible in the case to acknowledge as illegal the clauses of the Resolution of the National Bank of Ukraine allowing banks not to return deposits.

Rather soon in connection with “consolidation of certain positive tendencies related to renewal of depositors’ trust to the banking system”, the National Bank of Ukraine with its resolution dated May 12, 2009 № 282 annulled clauses 2 and 5 of the Resolution № 413, raising in fact the moratorium on early return of the deposits and allowing clients of financial organizations to demand return of the deposits regardless its term of return.

At the same time there remained a problem with return of the deposits in banks where temporary administration had been introduced. According to the Law of Ukraine “On Banks and Banking Activity” in case of serious threat to the solvency of a bank the National Bank of Ukraine has a right to assign the temporary administration, that is part of introducing the moratorium on meeting the demands of the creditors (the depositors). The Law of Ukraine “On Making Amendments to Certain Legal Acts on Special Measures for Financial Sanitation of the Banks” № 1617-VI reduced the term of the moratorium from six to three months, but allowed to the Regulator to prolong its action in banks where the temporary administration was working at the time of the Law approval.

From January, 2009 the National Bank of Ukraine introduced temporary administration in several big banks (“Nadra”, “Ukrprombank”, “Rodovid”, “Volodymyrsky”, “Dialog-bank”, “Imprombank” and the other). For the first quarter of 2009 thousands of depositors could not return their deposits, although term of their agreements already was over. As a rule bank officials explained that temporary administrations declared moratoriums on return of deposits, that is deferment of payment under liabilities of the Bank as regard to clients was applied.

It should be said that introduction of the moratorium as regarding the demands of creditors (depositors) by the temporary administration does not provide a bank with a right not to pay the deposits.

The National Bank of Ukraine in its letter № 44-020/1357-2796 dated February 02, 2009 stressed that in Article 2 of the Law of Ukraine “On Banks and Banking Activity” it is determined that moratorium is – suspension by the bank to fulfill property liabilities and liabilities related to payment of taxes and fees (compulsory payments), subject to fulfill prior the introduction of the moratorium and suspension of the measures aimed at provision of these liabilities and liabilities related to payment of taxes and fees (compulsory payments), applied prior the decision on introduction of the moratorium.

According to Article 85 of the Law mentioned the moratorium does not apply to current operations performed by the temporary administrator, neither to the claim for payment of wages, alimonies, reimbursement of damage caused to life and health of citizens, royalties and satisfying claims of creditors related to the bank liabilities during the introduction of the temporary administration. Apart it is necessary to stress that the Article of the Law states directly that moratorium does not apply to the claims, related to payment of wages. At the same time neither term of the claim, related to payments, nor creditor’s person are defined.

Taking into consideration all mentioned above the National Bank of Ukraine declared that claims related to the deposit agreements, ending after the introduction of the temporary administration do not apply to the moratorium and must be satisfied by the banks in terms defined by the agreements. At the same time it was mentioned that failure to meet the demands with a term after the introduction of temporary administration by the banks, may be caused only due to lack of funds on bank’s correspondent account. At the same time all the declarations related to return of the deposits, ending after the introduction of the temporary administration should be registered and satisfied upon the availability of funds in the order of queue.

It should be mentioned that to date several problem banks still do not return deposits expired, others pay out the deposits limiting the money give out, transfer the deposit to debit card account explaining it with a lack of funds and in fact continue in such a way to enjoy other’s property.27



1) Create a transparent and efficient system of State registration for real estate property rights;

2) Improve safeguards of the ownership rights of land shares, create mechanisms for combating forced seizure of this land, pass legislative acts to regulate the fundamental aspects of the functioning of the land market;

3) Carry out reform of the Bailiffs’ Service to ensure unfailing fulfillment of all its functions, including judicial control over enforcement of court rulings, and also lift the moratorium on compulsory sale of property from State enterprises to retrieve money owed. Also carry out other measures to implement “Pilot Judgment” by the European Court of Human Rights in case “Yuriy Nikolaevich Ivanov against Ukraine”.

4) Contribute to the transparency of residential construction and also provide protection for rights of investors in the field.

5) Improve legal regulation of privatization processes and joint stock companies operation in order not to allow illegal seizure of companies and organizations in Ukraine and emerging corporate conflicts in privatization process and post-privatization activity.

6) Carry out regulation for the problem of land and housing withdrawal because of social need in strict correspondence with the Constitution and international commitments taken by Ukraine.

7) Provide efficient mechanism of property rights protection in “problem” banks where the temporary administration is introduced.


1 Prepared by M. Scherbatiuk, UHHRU

2 Operation “Formalization”, V. Tsushko. // Internet media “Ukrainska Pravda” ttp://

3 I have a right. K. Kravchuk. Ukrainian business weekly “Kontrakty” / № 17 dated May 06, 2010

4 Ibid.

5 (Global Competitiveness Report) for 2010-2011

6 Important Juristic Act (ukr. значний правочин). – According to the Law of Ukraine “On Joint Stock Companies” – “The important juristic act – is a juristic act (except for juristic act of proper stock floatation by the company) performed by the joint stock company if market value of property (works, services) consisting its subject is 10 and more per cent of company assets value according to the last yearly financial report”.

7 Current issues of the implementation of the Law of Ukraine “On Joint Stock Companies” in context of counteraction to corporate raids activity

8 Current issues of implementation of the Law of Ukraine “On Joint Stock Companies” in a context of counteraction to corporate raids activity

9 ArcelorMіttal: “situation around the enterprise in Kryvyy Rig – a bad signal to all the investors”, , 6078690, 00.html

10 Illichivsk port against “Ukrtranskonteiner” losses are incurred by the state// Dzerkalo tyzhnia

№ 36 (816) October 2 — 8, 2010

11 Forced partnership. In spite of the Higher Economic Court rulings a partner is holding under arrest the property of the model stevedore company of Ukraine // Dzerkalo tyzhnia № 36 (816) October 2 — 8, 2010

12 “Kyivmiskbud”: everything was stolen before (for) us // Dzerkalo tyzhnia № 36 (816) October 2 — 8, 2010

13 Ukraine already owes to the victims of human rights violations 130 billion.

14 Ukraine already owes to the victims of human rights violations 130 billion

15 Position of the Association on conditions of rights protection regarding investors to residential construction in Ukraine.

16 „Yuschenko embarrassed Tymoshenko with construction frauds”// “Glavred” Internet Media.

17 Ministry of Internal Affairs: results of internal affairs bodies work for the first half-year.

18 Ibid.

19 At Medvedko’s they declared that Mass media interpreted wrongly position related to minor

20 “Social need” will easily deprive anyone of his private property” // Dzerkalo Tyzhnia № 48 (776) 12 — 18 December, 2009

21 The Law on forced alienation of the land for social needs will be appealed against in the Constitutional Court of Ukraine – Ministry of Justice.

22 The land may be withdrawn !? #more-1022

23 The Law on land market is prepared by the fall.

24 Akimova stands for early termination of moratorium on agricultural land sale.

25 State Committee for Land: Before the end of the year it is necessary to adopt five laws on land market.

26 The case was supported by the Strategic Litigation Fund of the UHHRU

27 “Sick banks non returning deposits and blocking cards”


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