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Human rights in Ukraine 2011. XV. PROPERTY RIGHTS

22.03.2012

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1. Overview

Providing conditions for protection, realization and respect for everybody’s right of ownership is an essential element of the implementation by the state of the peaceful proprietary interest. It also includes the legality, reasonableness and proportionality of restrictions of the ownership by the public authorities.

In 2011, Ukraine, as in previous years, had a lot of problems with the introduction of guarantees of property rights, and with unlawful restriction of this right by the state. It should be noted that the authorities were often inefficient responding to various violations of property rights, while on the other hand, people often fought back to the ropes for their rights.

The lack of an effective system of registration of ownership of immovable estate has become one of the thorny problems faced by virtually every person living in Ukraine. Despite some positive steps made by the state to implement the Law of Ukraine “On state registration of rights to immovable property and their encumbrance”, this has not led to actual changes that might strengthen the guarantees of property rights protection. Today they are only in for preparations intended to implement this law. In addition, there is still no body responsible for registration which hampers the improvement of the system of property registration.

There is also an important problem of non-enforcement of national courts’ decisions protecting property. In recent years, nothing changed in this respect: the state is inept to solve this systemic problem. The number of cases of non-compliance with the lawful judgment of courts increases annually, and, accordingly, the state debt grows. The European Court of Human Rights stressed the existence of this is problem making a “pilot decision” in the case of “Yuri Mykolayovych Ivanov vs. Ukraine” giving Ukraine one year to solve this problem. But the end of second year is near, but this decision remains virtually unenforced. Therefore, there are rally no guarantees that awards will be carried out permitting people to protect their property.

In the context of non-compliance with awards of the court protecting the property, it is noteworthy that there are significant problems faced by thousand of Ukrainians asserting their rights in court. The deadlines of consideration are missed; the frequent procedural violations are committed by the courts failing to institute a legal action; there are problems of demarcation of competence of courts trying cases of property protection.

As before, there are problems using the Law of Ukraine “On alienation of land and other immovable property on it, which are in private ownership for public purposes or for reasons of public necessity.” Unfortunately, the shortcomings of the law are very often used for unlawful restriction of property rights. This is a result of vagueness of legal conceptions of social need and social necessity, lack of market principles in matters of compensation for the property and the existing opportunities for corruption among public officials.

There remain problematic issues of protection of property rights in land relations. Especially if there exists a moratorium on buying and selling of agricultural land; there are also other problems in this area, in particular, financial and procedural obstacles restricting the ownership of those people who have old land titles. Equally difficult are the problems related to construction and paper work for the project.

These and many other problems with property rights in Ukraine show that people in our country still cannot count on the fact that their right to possess, use and dispose of the property is respected, protected and realized by the state at the level, which would allow them to feel themselves as full owners.

2. Guarantees of property rights

2.1. The state registration of tenure

The creation of a unified system of state registration of tenure (including the land) is one of the main tasks of the state in ensuring the right to peaceful enjoyment of one’s possessions. Creating such a system should provide adequate protection for the rights of individuals and juridical entities in real estate.

In Ukraine, over a long period of time, there have been systemic problems in this area, which were repeatedly covered in the annual reports on the human rights[2]. Until now the system of registration of real rights on estate on realty in Ukraine has been functioning in the form of registration of documents establishing ownership; the process includes the registration or record of documents affecting the interest in real property.

The main drawback of such a system of registration of documents establishing ownership is that, by itself, this system does not provide guarantees of property rights: the system simply invites seekers to check the copies of documents and to draw on their own conclusions on the legality of the relevant property rights. The great number of authorities that are responsible for the introduction of various registers, where those rights are recorded, only deepens the problem of actual insecurity of property rights in Ukraine.

The very understanding of the fact that there is such a problem in Ukraine urges to find ways out. The system of registration of property rights is considered an alternative system of registration of documents establishing ownership in the case of transfer of ownership. According to this system, each plot of land or immovable estate should be marked on the plan and the relevant rights related to the plot or estate should be entered in the register. In addition, the name of the owner of the estate should be also entered in the register. When all assets are transferred to the new owner, all you have to do is to change the name of the owner.

In the vast majority of civilized countries the access to the estate registry is open and available to any member of the public without any restrictions on access level. In other words, any person may have access to all information contained in the registry (usually by paying the appropriate fee), even if that information relates to property of another person. Anyway, even in countries in which there are some access restrictions, you can easily obtain the information on the identity of the owner. In Ukraine, it is almost impossible to access information on the owners of real property, including the list of co-owners of condominiums, which prevents the creation of Associations of Co-owners of Apartment Houses; the public comes to know about the property of politicians and bureaucrats only as a result of investigative journalism and so on[3].

It should be noted that Ukraine over the past two years made certain steps toward reforming the registration of immovable property, including the Ukrainian parliament in 2010 adopted a new Law of Ukraine “On state registration of rights to immovable property and their encumbrances,” which, according to the preamble to it, “...aims to provide recognition and protection of these rights by the state, create conditions for the real estate market.”

The “real estate” in this law was defined as “estate and objects located on the plot which cannot be move without their impairment and change in purpose.” That is “land” and “buildings” finally became “property”, and experts noted that in Ukraine, finally, land and buildings located on it would be registered by one organization, as it is throughout the civilized world.

The law generally aims to better the practice existing in Ukraine in the regulation of relations connected with the state registration of real rights to realty. Thus, the law provides for a unified system of state registration of rights to realty and their liens and identifies new approaches to state regulation of civil relations in this area. This law defined a different conceptual approach to the procedure of state registration of rights to immovable property and the system of state registration of rights to realty.

Under this law the state registration of proprietary rights to realty will be carried out on a “single window” principle, which means that one agency will register all rights and encumbrances to real property, both land and objects located on them.

The new approach to the system of state registration is based on the fact that the state registration of rights to realty and their encumbrances means a formal recognition and confirmation by the state of the facts of emergence, transfer or termination of rights to immovable property and restrictions that accompanied the data input to State Register of real rights on real estate and their encumbrances. That is, the state registration of rights is solely a function of the state, which acquires and exercises its rights and responsibilities through public authorities, and that is why it is the public authority that must ensure the exercise of such functions.

According to the law, the system of state registration of real rights to realty will consist of a specially authorized central executive body of state registration rights, which is the holder of the State register of real rights to immovable property, and its territorial bodies, which are agencies of state registration of rights.

However, in the course of administrative reform the system of agencies of state registration of real rights to realty and their encumbrances changed as well. Thus, according to the Decree of the President of Ukraine dated December 9, 2010 #1085/2010 “On the optimization of the system of central bodies of executive power”, they initiated the administrative reform in Ukraine, one of concepts of which consists in vesting ministries, services, agencies and inspections with different responsibilities.

The Decree founded the State Registration Service which should be responsible for implementing government policy on registration of legal persons and natural persons or entrepreneurs in the field of registration of religious organizations and functions of the Ministry of Justice responsible for implementing the state policy on registration.

On April 6, 2011 the President of Ukraine signed the Decree #401/2011 “On approval of the Statute of the State Registration Service of Ukraine”, according to which the State Registration Service is the central body of executive power with activity directed and coordinated by the Cabinet of Ministers of Ukraine through the Minister of Justice of Ukraine and is a part of the system of executive power. In accordance with the said decree, this agency, in particular, will provide the state registration of real rights to immovable property according to law.

Experts viewed the decree as a next step to implement the system of registration of immovable property, which was slightly more effective than the existing one.

But on April 8, 2011 the President of Ukraine signed another decree No. 445/2011 “On State Agency of Land Resources of Ukraine”, which approved the Statute of this agency. The decree states that the State Agency of Land Resources of Ukraine is the successor of the State Committee of Ukraine for Land Resources.

And according to the approved statute, the State Agency of Land Resources of Ukraine is the central body of executive power on issues of land resources and is directed and coordinated by the Cabinet of Ministers of Ukraine through the Minister of Agricultural Policy and Food of Ukraine, is a part of the system of executive power and realizes the government policy in the sphere of land relations.

according to the decree, this body, performs maintenance and administration of state land cadastre and carries out state registration of plots and state registration of property rights, rights of use of plots (servitude), the right of permanent use of land, contracts of lease of plots, rights of land use for agricultural purposes (emphyteusis), site development licences (superficies).

And it should be noted that in effect in Ukraine they created two registry offices at once, and now it is not clear how this is consistent with the provisions of the Law of Ukraine “On state registration of rights to immovable property and their encumbrances,” according to which “the State register of real rights on realty is the only state information system that contains information about rights to realty, their encumbrances, as well as objects and subjects of these rights”[4]. Therefore, under such conditions the law will be ineffective.

In addition, the experts believe that this redaction of the law is not without flaws. For example, you can take to Article 5 of the Law of Ukraine “On state registration of rights to immovable property and their encumbrances,” which contains a list of real property the rights to which are subject to state registration. According to the article, “The State registry of rights registers rights to such immovable property located on the plot which cannot be moved without their impairment and change in purpose: houses, apartments, buildings with premises intended for human residence, placement of movable property, preservation of tangibles, production purposes etc., structures (engineering, hydraulic facilities etc.), land melioration that does not belong to buildings and premises designed for specific technical functions; premises as a part of indoor cubic content of houses, buildings, apartments, limited with building elements.” This list does not contain such object as a single property complex[5].

In turn, the Association of BTI representatives notes that the enactment of the new procedure for registration of rights to real estate in 2012 will entail a lot of negativity for the property owners and the state as a whole.

The representatives of the Association believe that the situation in Ukraine is such that the registration of real estate is not possible without constant use of long-term data archives, like settling real estate disputes by a judicial inquiry and work of public officers of the law. It is the result of total absence of registration of property rights (about 40% of all private sector), which reaches back to the Soviet era.

The main blunder made by the Ministry of Justice consists in actual increase, under the new redaction of the Law, of the number of agencies involved in registering the estate of freehold. Their number increases to 4; the chain of offices making this paperwork will include private institutions, whose activities licensed by the state will consist in preparing “indexed cadastral maps”, and notaries. Accordingly, the owners will spend more time and money on realty paperwork and the number of formalities will go up.

The weak point of the law consists in empowering anyone who has a degree in law to work as a registrar at the State registry of rights. In the opinion of BTI representatives, for such work it is not enough to be interviewed by the “theorists” from the Ministry of Justice, but the long-term experience is necessary as well.

The BTI employees pay notice of the increasing expenditures for owners in the process of creation of the future State registry of rights. They think that the register with a new name is essentially the same as the current register, but the owners will have to pay additional money to transfer data there from the current Register. The same happened during the transition from hard-copy forms of real estate registration to electronic register; the Association of BTIs expects the same effect in the case of new emendations of the law[6].

We can conclude thatlast year the situation with the registration of rights to real estate did not change for the better, but it was a year of certain preparatory actions aimed at reforming the system. However, the effectiveness and correctness of these government actions will be clear from the results of reform.

2.2. Guarantees of legal ownership to corporate rights

The guarantees of ownership of corporate rights is an important element of the right to peaceful enjoyment of possessions. The legal regulation in this area should be clear and aimed at comprehensive protection of property rights of each owner.

In Ukraine, the relevant regulation was foreseen in the Law of Ukraine “On Joint Stock Companies”. In fact, 2011 had to become the first year of full realization of the law because the law stipulated a transitional period, which ended in 2010.

However, in practice the joint-stock companies found it too difficult to adapt to changes due to a number of factors, including the imperfection of many provisions of the law. Most of the companies ignored the requirements of the law, the other part tried to fulfill all legislative requirements within the prescribed period, but because of the lack of mechanism and numerous related problems they failed to do the job.

No wonder, it resulted in the need in numerous amendments to the Law of Ukraine “On Joint Stock Companies”. There emerged serious procedural problems with such amendments, which significantly violated property rights of stockholders.

The first amendments to the Law of Ukraine “On State Budget of Ukraine for 2010” made on April 27, 2010 presented a good procedural example, but on November 30, 2010 the Constitutional Court of Ukraine in its Decision on the case #1-47/2010 indicated that, according to the Law of Ukraine “On the State Budget”, no amendments to other laws may be introduced, the enactment of laws can neither be stopped nor cancelled because objectively this leads to contradictions in the law, and found these provisions unconstitutional.

The Law of Ukraine “On some questions of the budget process in 2010” adopted on December 3, 2010 did make amendments related to the procedure of approval and payment of dividends. But it is important to note that these amendments eliminated the procedure of payment of dividends, including the timing, which misled businesses even more. And again new amendments were needed. All this did not contribute to legal certainty, and therefore weakened thereby the guarantees of property rights in this area.

At the same time even more problems arose in connection with the adoption of the Bill of Ukraine “On Amendments to the Law of Ukraine “On Joint Stock Companies” in order to improve the mechanism of functioning of joint stock companies.”

The Bill adopted by Verkhovna Rada on December 22, 2010 proposed to establish the right of the controlling stockholder owning 95% shares to require from other stockholders to perform the forced sale of their shares.

It should be noted that the establishment of such a requirement would be a violation of law, because the adopted concept did not account for a real mechanism of private ownership protection and did not comply with the constitutional principle of the inviolability of private property under the Constitution of Ukraine.

The Constitution of Ukraine allows the use of forced expropriation of objects of private property only as an exception for reasons of public necessity, and under the procedure established by law and subject to advance and complete compensation of their value. And in this case we see the identification of corporate interests to engross 100% of shares for reasons of public necessity, which is unacceptable.

The Ukrainian Helsinki Human Rights Union stated[7] that this statutory procedure for alienation of shares owned by other minority stockholders could lead to violations:

—  Of basic constitutional principles for the protection of all subjects of property rights by the state (Article 13 of the Constitution);

—  Of the right of everyone to own, use and dispose of his property, inviolability of private property, expropriation of objects of private property only as an exception for reasons of public necessity (Article 41);

—  Of the constitutional guarantees of observance of human and civil rights determined by Article 22 of the Constitution under which the adoption of new laws or amending existing laws shall not diminish the content and scope of existing rights and freedoms.

Taking into account the presence in the new law of these problems with the rights of minority stockholders, the President of Ukraine vetoed the bill. As a consequence, this rule was excluded from the final version of the Law No. 2994-VI dated February 3, 2011.

This situation shows that the big business tends to amass all property of the companies and deprive minority stockholders of the possibility to protect their property. In fact, the state, often declaring support for the middle class, performs actions that lead to its destruction, enlarging the gap between rich and poor existing in Ukraine.

When there are problems with legal regulation of joint stock companies, when there exists a transition period, the property rights of those who can least protect themselves are in real danger. Therefore, the state needs to develop clearly defined and systematic legislation establishing guarantees of ownership of corporate rights in Ukraine.

2.3. Guarantees of judicial protection of property rights

It should be noted that violations of property rights are extremely common in Ukraine. Thus, the uniform state register of court decisions contains more than 420,000 court decisions on violations of property rights (of which more than 180 000 are decisions made during 2010–2011, i. e. in less than eighteen months the uniform state register of court decisions included about 200,000 cases of various violations of property rights). And these are not the comprehensive data, since only a part of the judgments is registered[8].

But people still have not fully realized what it means to be the owner, and that their ownership is inviolable, that is no one shall be unlawfully deprived of that right or restricted in its realization.

Against this background, it should be noted that the effectiveness of protection of any rights in Ukraine is low; today the system of security and protection of any rights hardly works, including property rights. The delay of the case largely exceeds reasonable time for trial, which greatly affects the efficiency and timeliness of protection.

In most cases involving the protection of property rights, the courts violate terms of consideration; moreover, sometimes the dawdling makes protection irrelevant. There are also procedural violations committed by the court failing to sustain a case, especially in matters concerning the property rights protection. Often, the complainant requests to forbid the defendant or third parties to perform certain actions on his property, for example, build a house (other property) in disputed area, cut down trees, and turn down fences etc. However, the court, in contradiction with the procedural law, shelves such demands, which causes the violation of property rights and the inability to protect its future even if there is a positive decision for the individual.

In addition, the effectiveness of judicial protection is largely influenced by legal disputes of the insiders on the delimitation of competence in dealing with cases, often linked to property and financial affairs related to ownership. The repeatedly changing interpretation of jurisdiction in land disputes between citizens and authorities may serve a striking example. For example, as a result of such frequent interpretation, the citizens have but to file the complaint for the fourth time (initially the lawsuit was filed in accordance with the requirements of civil proceedings; they gave the complaint back explaining that it should be filed in accordance with requirements established by the Code of Administrative Court Proceedings of Ukraine. Following the opening of the trial according to the Code of Administrative Court Proceedings of Ukraine, it was closed once again, because it had to comply with the CPC of Ukraine, and now, after the ruling of the Constitutional Court of Ukraine, which finished this confrontation, they had to go to court again for the fourth time in accordance with requirements established by the Code of Administrative Court Proceedings of Ukraine)[9].

A bit different, but in many respects similar situation occurred with jurisdiction in cases of social benefits, which were groundlessly transferred from the administrative to the civil justice which the Constitutional Court of Ukraine ruled unconstitutional again. And thus the protection of property rights was considerably complicated.

2.4. Failure to comply with judicial decisions that protect property

The non-compliance with the lawful judgments of courts on protection of property rights is a huge problem in Ukraine. Lack of effective execution of such judgments leads to the inability of the state to protect property rights, ability of each owner to protect her/his right to possess, use and dispose of their property.

Despite the broad regulatory framework for the completion of the protection of violated rights, today the question remains open and painful, because, according to statistics, about 60–70% of judgments of national courts are not executed[10].

The European Court of Human Rights also recognized the existence of the problem of non-compliance with the lawful rulings of national courts. And this was done not only by making decisions on violations of the right to a fair trial in the event of non-execution of court decisions, but also by the use of pilot judgment in the case “Yuriy Ivanov vs. Ukraine.” This ruling obliged the state within a year to introduce the best line of defense (or a complex of such measures) that would provide adequate and sufficient protection against the failure or delay in execution of the ruling of the national court, for which it is responsible under the principles established by the practice of the European Court of Human Rights.

However, in 2010, the state did virtually nothing to execute pilot decision of the European Court of Human Rights[11]. So, nothing was done to strengthen the protection of property rights.

In 2011, the time of execution determined to let the country tackle the problem, or at least significantly improve the implementation of decisions of national courts expired. At the same time, Ukraine was given another chance to solve the problem, and, accordingly, the time of pilot decision execution in the case of “Yuri Ivanov vs. Ukraine” was extended for six months (i.e. until July 2011).

The submission to the Verkhovna Rada of Ukraine in January 2011 of the Bill of Ukraine No. 7562 “On state guarantees of execution of court judgments” made one of the reasons advanced by the Government to extend the time of carrying out this decision. But this project contained significant flaws that could hinder the execution of pilot decision. Many NGOs, including the Ukrainian Helsinki Human Rights Union also were against the adoption of this bill.

The Parliament declined the bill. So, before the end of the extended term of execution of the pilot decision Ukraine again did next to nothing to tackle the systemic problems of non-compliance with the rulings of national courts protecting property.

Instead, on September 8, 2011 the Cabinet of Ministers of Ukraine submitted to the Verkhovna Rada of Ukraine the Bill No. 9127 “On state guarantees of execution of the judgments of courts”, the text of which was almost identical to the text of already mentioned bill No. 7562. However, unlike its predecessor, the bill was considered by the Verkhovna Rada of Ukraine and adopted as a basis.

In connection with possible adoption of this law as a whole it is important to emphasize its main propositions and significant drawbacks.

First, it should be noted that this bill provides for establishment of a special procedure of execution of the judgments of national courts, as well as redistribution of authority among branches of power in the area of forced sale of property of legal persons.

The realization of certain specific measures intended to tackle the problems of non-compliance with the rulings of national courts is the best novelty in the bill. In particular, the authors propose to introduce special procedure of execution of court decisions where the respondent is the state, lift moratorium on execution of court decisions, and implement mechanism of compensation for long-term non-compliance.

However, this project has significant shortcomings that may be obstacles to overcome systemic problems of non-compliance with the judgments of national courts.

There remains the most important question of the sources of funding for execution of decisions of national courts where the State is the defendant, as well as future decisions by national courts in cases currently under consideration. What is at issue is thousands of decisions which, because of non-compliance, sooner or later will be examined by the European Court of Human Rights, which will result in an unconditional obligation of the state to pay these costs.

Although the bill provides for certain procedural steps to resolve this issue, including inventory of court-ordered delayed payments, the execution of which is guaranteed by the state, development on the basis of this inventory of the debt repayment schedule. At the same time they are still not on-budget funds, and there is a reasonable doubt about the capacity of the state to budget the full program provided for this purpose.

Therefore, there remains a high risk that the procedure, which may be approved by the Cabinet of Ministers of Ukraine by 2013, will significantly limit the size and scheduling of debt repayment, as well as establish specific terms of repayment. Accordingly, this procedure will not effectively protect the individual’s right to execution of the ruling of the national court within a reasonable time.

The possibility of such limitations is confirmed by the existing provisions of the bill which fix the procedure for determining the amount of court-ordered unpaid debts, which had been enacted prior to this Law (Section 4 of Chapter II of the Bill). The too short periods of submission of execution documents for execution and recognition of documents violating the schedule as executed ones as foreseen in paragraph 4 may lead to actual non-compliance with court judgments which means violation of article 124 of the Constitution of Ukraine on compulsory execution of courts’ rulings throughout the territory of Ukraine. This fact may be a reason for the new application to the European Court of Human Rights for non-compliance with such decisions on violations, including the right to peaceful ownership.

The provisions of the bill on implementation of a mechanism to tackle the prolonged non-compliance with court rulings exacerbate the problem. These are very positive steps intended to improve the execution of court judgments; however, the sanctions for execution delays are too small (0.3% per annum). This could be a major obstacle to effective application of this mechanism. If you compare the size of the sanction with the inflation rate (annual inflation rate in Ukraine in 2010: 9.1%), you will understand that this sanction will not become a stimulating factor for the timely execution of court decisions. Moreover, it would be more advantageous for the state to pay this minimum compensation than to comply with the court ruling.

The problem of the lack of budgetary funds for implementation of decisions, where the respondent is a State, is a systemic problem, which is closely related to the complicated system of benefits and social benefits. Due to the presence of benefits and social guarantees, which are nothing but unfunded declaration, there are so many court judgments on Ukraine’s default on its commitments. And many of these decisions are not carried out, because the state does not provide funding to implement them in its annual budget.

At the same time state in the said bill proposes to solve this problem through real reform of social security, and by the way of curbing social and economic rights of people which cannot be an adequate way to tackle the problem of non-compliance with the rulings of national courts.

Another problem concerning the non-compliance with the rulings of national courts, as well as the issue of equality of different forms of ownership is the existence of the moratoriums, which allow the state enterprises to stop the enforcement of decisions. Along with the fact that the bill provides for the abolition of the provisions of laws, which provided such opportunity for public enterprises, the bill proposed to authorize the Government to prohibit the forced sale of property of legal persons.

This proposal does not correlate with the content of the constitutional provision by which the legal regime of property is determined exclusively by the laws of Ukraine, which determine its features (paragraph 7 of Part 1 of Art. 92 of the Constitution of Ukraine). Instead, having received the appropriate authority, the Cabinet of Ministers of Ukraine will realize it through bylaws that is inconsistent with the principle of priority of law in the system of legal acts of Ukraine and with the principle of separation of powers and the requirement for public authorities to act on the basis and within the authority and in the manner envisaged by the Constitution and laws of Ukraine. That is, eliminating the problem, the state creates a new one, similar to the previous one.

In addition, the bill #9127 fails to tackle many important problems recognized, in particular, by the Committee of Ministers of the Council of Europe as systemic ones that require rapid response. In particular, the ineffectiveness of the executive service, inadequate management of public enterprises, problems of legal regulation of bankruptcy, lack of some legal mechanism for compensation of losses made by criminal actions of civil servants and other persons and so on.

Therefore, taking into account the presence of both positive and negative aspects of the bill #9127 “On state guarantees of execution of court rulings”, one can be conclude that, despite its focus on implementation of the pilot decision of the European Court of Human Rights in the case “Yuriy Ivanov vs. Ukraine” and the introduction of appropriate mechanisms for effective implementation of decisions of national courts, this bill will not solve most of the systemic problems in this area. Moreover, it may give rise to new complaints to the European Court of Human Rights. Therefore, the Ukrainian Helsinki Human Rights Union has once again expressed recommendations for rejection of this bill in its present wording and resubmission of the document after its improvement[12].

The question of inefficiency of executive service and problems with the legal regulation of bankruptcy were considered by the state during the preparation and adoption of other regulations. The effectiveness of execution of court decisions that protect property largely depends on the solution of these problems.

In particular, the problem of ineffective enforcement service was brought up when considering amendments to the Law of Ukraine “On Enforcement Jurisdiction” and other legislative acts of Ukraine on improving the procedure for execution of court decisions and other bodies (officials). These changes were adopted and entered into force on March 9, 2011. This law aims to improve the effectiveness of the state executive service for execution of courts’ decisions. It is too early to draw conclusions about the results of applying this law; however, it should be noted that many of its provisions, strengthen the possibilities of of law enforcement officers carrying out the rulings of national courts.

Some provisions concerning the protection of creditors’ rights in the implementation of bankruptcy procedures or restoration of its solvency were included into the Law passed by the Verkhovna Rada of Ukraine “On Amending Certain Legislative Acts of Ukraine concerning settlement between creditors and consumers of financial services.” This law came into force only on October 16, 2011, and accordingly, it is also too early to make conclusions about possible improvements in this area.

Finally, it is noteworthy that since the adoption of “pilot decision in the case of “Yuriy Ivanov vs. Ukraine, namely in January 2010, the state implemented but a few measures to implement this decision. It is important to note that there are some positive steps taken by the state, including legislative changes, which enhance the efficiency of executive service and improve protection of creditors’ rights in the implementation of bankruptcy procedures. Also important is the “intent” of the state to introduce a special procedure of execution of court decisions where the state is the respondent, lifting the moratoriums on enforcement of court decisions, introduction of the mechanism of compensation for long-term failure, as contained in the bill No. 9127.

But at the same time there exist significant problems with the realization of this “pilot decision” due to the absence of real reform of the system of benefits, lack of funding for execution of decisions, where the state is the respondent, existence of various moratoriums on enforcement of court decisions, lack of enforcement mechanisms of execution of courts’ decisions where the state is the respondent. We should also display caution speaking about defects in the “intentions” of the state to improve the guarantees of enforcement of courts’ rulings, as defined in the bill No. 9127, and which may reduce to zero all positive aspects of these “intentions” of the state.

Therefore, one could argue that Ukraine in 2011 was still very far from sufficient in ensuring effective implementation of courts’ decisions aimed at protecting property rights.

2.5. Problems in the implementation of guarantees of property rights
in the construction industry

Ukraine has a rather complex legislation on registration of documents for the implementation of new construction, expansion of existing construction and legitimation of arbitrarily constructed buildings and structures. The citizens make their property and subsequently cannot process documents in a proper way because of the complexity of this legitimating.

It should be noted that the practice of unlicensed construction is rather widespread. Generally such construction is one of those illegal phenomena, which, on the one hand, violate the requirements of land planning and development and, on the other, afflict the rule of law in modern land relations and create some preconditions for the shadow real estate market. In some cases of unlicensed construction on illegally occupied sites it may not only violate the right to land of citizens, legal persons, state, and local communities, but also harm the environment in general and, in particular, the land as part of the environment.

Despite the relatively large number of laws and regulations in city planning in Ukraine, the residents prefer unlicensed construction, primarily because they believe that legitimating of such construction is simpler than obtaining all permits and approvals for construction. The Civil Code of Ukraine provides for legalization of unlicensed construction in court, namely, p. 3 art. 376 of the Civil Code of Ukraine states that ownership of arbitrarily constructed property can be recognized by the court in the favor of the person, who made the unlicensed construction on the site that had not been reserved for this purpose, subject to the provision that the site would be allocated in the prescribed manner to the person owning the already built real estate. If the owner of the plot objects to the recognition of ownership of real property by a person who carried out the unlicensed construction on her/his site, or if it violates the rights of others, the property is subject to demolition by the person who carried out the unlicensed construction, or at her/his expense.

Unlike the norm of art.105 of the CC of UkrSSR (1963), according to which, in the case of unlicensed construction, the facility, following the suit filed by the local council, could be transferred to its books, the norm of art.376 of the Civil Code of Ukraine establishes another rule. Any land owner (not only the local rada, but also natural and legal persons) or land user may apply to court to demand recognition for her/his ownership of arbitrarily constructed object, if it does not violate the rights of others. Its safety must be confirmed by the findings of sanitary, fire, and architectural inspectorates.

According to the legislation, it looks like legalizing unlicensed construction were simpler requiring less money and effort than the procedure for obtaining a building permit, or replanning. However, in practice it does not look that positive. Legalizing unlicensed construction the developers run into various problems at the level of administration, and at the level of courts. One of the most common problems consists in obtaining consent of neighbors while legitimizing the unlicensed construction.

For example, in connection with severe housing shortage and the inability of the city rada to improve his/her living conditions, a person performed unlicensed construction, which expanded the area of ​​the apartment using existing cantilevers within a single complex, which increased the total area of the apartment adding a utility room in order to bring the apartment to the norms established by the State construction standards in Ukraine. The person took care of the building documentation, had all permits and permissions, and applied to inter-agency commission to give him permission to legalization. However, because of personal hostility and constant conflict with her neighbor this person cannot obtain such permission. In addition, the neighbor fails to explain the reasons for the refusal of consent — nothing but personal animosity. In this case the person went to the court to recognize the consent of her neighbor unreasonable, although such a question, if the denial is really unfounded, could be resolved at the local government level.

By experience we know that the domestic courts do not redress counter-claims of citizens to legalize unlicensed construction in cases where the public authority was the first ti file an action demanding to take the unlicensed construction down.

It is noteworthy that prior to legitimization of the arbitrarily constructed object the title to it does not occur, i.e. there is no building as an object of rights, you cannot sell, give, and receive as an inheritance. So the fact of building a house (a property) is not enough to get ownership. Legally, this house does not exist. That is why the residents take extreme interest in legitimizing property built without proper permits and approvals. Meanwhile, the local authorities often make different decisions in similar cases: sometimes they permit to legitimize, sometimes not.

According to statistics, show that there are very many cases related to unlicensed construction. Some of them deal with legalization of such buildings, while others are related to claims instituted by local governments or state architectural-and-building inspectorates demanding to take the arbitrarily constructed buildings and structures down. All this proves that people, despite the understanding that they violate the law on construction without permits and/or without project documentation, still work their will.

Motives for this are clear: the current procedure for obtaining a building permit is too complicated; moreover, the average resident can hardly grasp it and collect all necessary documents and so on. If you comply with the law, it may take about a year and more. One should also take into account the time and funds necessary for the processing of all necessary documents. Therefore it is easier to build a house, finish building, make alterations, etc., and then let the authorities know about violations and only then they start looking for the way out of the situation; but if the authorities do not know, everything remains as it is. However, the problems can arise at the time of inheritance; for example, the heir would like to inherit the house and while accepting succession it surfaces that it was built illegally, and no documents on it exist.

So we can see, that the problems associated with unlicensed construction, and litigation of this category of cases suggest that at present there is no uniform legal regulation of relations in this area, and as a result there is no single approach to law enforcement practice. This fact weakens the guarantees of the right to peaceful enjoyment of one’s possessions.

3. The activity of the authorities limiting the right to ownership

3.1. The private sites buyout for public use

The ownership is an inviolable right. It is so stated in Article 41 of the Constitution of Ukraine. Accordingly, no one may be unlawfully deprived of property rights. Also, the Constitution of Ukraine guarantees that the compulsory alienation of private property can be applied only as an exception for reasons of public necessity, and under the procedure established by law and subject to advance and complete compensation of their value. Expropriation of such objects with subsequent complete compensation of their value is permitted only under conditions of martial law or emergency.

This is an important guarantee of observance of the right to peaceful enjoyment of one’s possessions, and the state should do its best to enforce these constitutional provisions. This has been declared in the recently adopted Law of Ukraine “On alienation of land and other immovable property in private ownership located on it for public purposes or for reasons of public necessity,” which came into force in December 2009 .

This Law applies to social relations associated with the buyout of land and other immovable property located on it, which are owned by individuals or entities, for public purposes or related to the expropriation of these realty objects out of public necessity, if such needs cannot be achieved through the use of state or municipal property.

Unfortunately, along with some positive aspects, the adoption of this law not only failed to improve the situation of implementation of constitutional provisions, but rather led to numerous violations of property rights due to the deficiencies of the law itself and corruption of various state agencies involved in this process.

As predicted by human rights activists[13], among existing deficiencies of the above law the most detrimental are as follows:

—  Blurring of notions of social needs and social necessity, actual duplication of a list of objects;

—  Lack of market principles in matters of compensation for the lost property;

—  Extensive powers for the court in matters of redistribution of property rights to land, determining its value, and municipalities in matters of initiation of expropriation;

—  There are opportunities for corruption in the buyout of real property for public purposes or for reasons of public necessity.

The application of this law in 2011 shows that the guarantees of the rights of residents, whose land is taken away for public purposes, are seriously endangered.

Here is an example of violation of the law: in Lviv Oblast the sites with garages on them had to be bought out for reasons of social necessity in accordance with the decision of the Cabinet of Ministers of Ukraine.

In this case, the resident owned 29 sq m of land pursuant to public act on the right of private property. This plot was located on the territory of garage co-operative on a street in Lviv. It was seized for reasons of public necessity for the reconstruction of the runway at Lviv airport in accordance with the ruling of the Cabinet of Ministers of Ukraine No. 948-r of 21.04.2010. “On the buyout of objects of private property and land for reasons of public necessity.” According to this ruling the Lviv Oblast State Administration was obliged to buy out before July 1, 2010, because of social necessity, land, garden houses, refund the cost of perennial plants, as well as buy out garage boxes and other on-site real estate located on the plot of land, which is allocated for construction and reconstruction of Lviv airport in accordance with the reconstruction of the aerodrome of the State Enterprise “International airport” Lviv “ approved by the Cabinet of Ministers of Ukraine on January 28, 2009 No. 103, and land use project for allotment of the respective land.

Based on this ruling the Lviv Regional State Administration represented by the Office of Capital Construction carried out the buyout of the objects of private property that have been placed on this land, namely the garage boxes (over 250).

However, the Lviv Regional State Administration “forgot” to decide on the buyout or allocation of other equivalent land in exchange for the seized one.

The Lviv Regional State Administration had just bought out a metal garage box erected on the site belonging to the resident.

In fact, the resident received compensation for the building, which belonged to him on the right of private property, but did not receive adequate compensation for his land. This is despite the fact that the law is on the side of owners; namely, it specifies that if the owner of the land, which is to be compulsorily alienated from public necessity, is the owner of the house, other buildings, structures, and perennial plants on this plot, the expropriation of land from public necessity should be considered together with the requirement to terminate the ownership of such facilities (Part 3 art. 351 of the Civil Code of Ukraine). Therefore, contrary to the above requirements of the law, they violate the property rights of owners, which they later have to defend in court[14].

The buyout of land and property to ensure the construction of facilities necessary for holding of Euro 2012 in Ukraine is another example of the shortcomings of the above law that resulted in the violation of property rights. There is a good example of the buyout from the villagers of Zubra Village, Lviv Oblast, of land needed to build a stadium for Euro-2012.

The case concerns the buyout of plots on which, according to the general plan of the territory around the Euro-stadium, they have to build an electrical substation and power lines as well as roads to the future stadium for “Euro-2012”. To this end the state had to buy out a large quantity of land owned by the villagers.

At the same time, according to the state expertise, they offer villagers UAH 6.20 per 1 sq m of secondary agricultural land. The seller’s price per 1 sq m of land belonging to lawn-and-garden cooperatives makes UAH 65. And the experts called admissible these “funny” non-market prices.

Naturally, some owners did not agree with the above estimates. People are in despair and do not agree to give their land for a song, and maintain that they were threatened. Even the representative of the Lviv City Rada Vasyl Pawliuk said: “Of course, the state has its own interests. But this is private property and the state is not empowered to rob these people blind.” He added that people made independent expert evaluation of their land, and it differs significantly from the estimates offered by the state[15] [16].

But despite assurances from the authorities to somehow fix the problem, the situation does not change. Therefore, the villagers of Zubra are continuing their fight for fair compensation for their land. Moreover, on May 30, 2011 they held a press conference “Who is to blame for the blood of the residents of Zubra Village shed during the expropriation of their land for Euro-2012?”

The problem with the lack of market principles in matters of compensation for the lost property reflects the situation with the land buyout in the Rivne Oblast. Here the road to Euro-2012 was constructed directly on the private land. The road management department is trying to prove that the plot, which is bought out for public use, costs UAH 8,503 (the independent appraisal: UAH 159,768).

It should be noted that the Dubno City-Region Court and Lviv Court of Appeal decided to cancel the decision of Ptytska Village Rada “On expropriation of land motivated by public necessity”; however, the village head still keeps denying the very fact of violation of private property.

In this case, the owner is haunting courts’ thresholds demanding fair compensation and lodging complaints against the road management department for disproportionate compensation[17].

These examples bring out significant problems in this area. The biggest problem is that in most cases people do not try to defend their title, and the above examples show that only a few owners, whose rights have been violated, go to court to protect their rights. Accordingly, we cannot fully realize the scope of threat from the use of the Law “On the alienation of private land and other immovable property located on it for public purposes or for reasons of public necessity”. And, obviously, the judicial branch will play the key role in protecting the rights of owners as far as the domestic courts will be able to protect these people and their rights.

3.2. Moratorium on sale of farmland

Making of a full-fledged land market, one of the important elements of which are free purchase and sale, is a topical problem of land reform in Ukraine that affects the interests of the whole society and its future. This problem also concerns the protection of the residents’ right to peaceful enjoyment of possessions.

The citizens of Ukraine, under current legislation, are free to buy and sell only household plots for doing gardening, dacha and garage construction (pursuant to the Decree of the Cabinet of Ministers of Ukraine “On privatization of land” from December 26, 1992).

The postponement on expropriation of other agricultural land in our country, according to the laws that were adopted at different times, was legally authorized in the form of moratorium (ban on the farmland alienation through its sale). Presently the legislator does not link the abolition of “moratorium” to specific dates extending it until two legal facts — entry into force of the laws of Ukraine on state land cadastre and land market.

On July 7, 2011 the Verkhovna Rada of Ukraine adopted on second reading and as a whole the Bill “On State Land Cadastre”. The document updates the basics of the state land cadastre, contained in the current Land Code. This law was signed by the President of Ukraine and came into force on January 1, 2012.

Relative to the land market settlement, in March 2011, the Verkhovna Rada of Ukraine turned down three bills on the land market. However, on July 19, 2011 the Cabinet of Ministers of Ukraine brought in one more bill #9001-1 aimed at creating a land market. But because of current animated discussions of this document, nobody knows when the legal regulation of the land will be resolved.

It is clear that the issue of land is one of the most controversial and politicized in Ukraine, which has been discussed for two decades now; however, there is still no consensus on how this market should look like. Many in Ukraine are scared by the possibility of farmland circulation. Thence the difference in suggested, sometimes contrary, solutions of the problem: from land lease market to removal of any and all restrictions on the transfer of the property / trade in farmland.

According to many experts, the private land ownership encourages the efficient use and economic development of the country. The land market brings out the advantages of private ownership: the stability of property rights, possibility of transferring them from one person to another, matching the real value and prices of land and so on.

Prohibition of farmland purchase and sale distorts the nature of real estate: while existing juridically, it does not work economically. The owner cannot use land as an instrument to attract loans and investments because of the moratorium, it cannot be offered as collateral, and the right to land lease is very difficult to give as collateral. Problem is further complicated by the fact that the shadow trade in land is underway in Ukraine.

On the other hand, it is important to understand that in the absence of clear legislative mechanism of realization of the right of private ownership of land (especially its sale), when there are great differences between the normative and the real (market) price of land, the lifting of the moratorium could bring more harm than benefit[18].

Solving this problem is also complicated by the high level of mistrust of Ukraine’s population to the government. Thus, according to the Institute of Sociology of NAS, the negative attitude towards land market is caused not so much by a rejection of the market, as by the lack of faith in the fact that its introduction may be made in an orderly, fair, honest and legal way, i.e. by the distrust in government institutions[19].

Therefore, despite the progress in establishing the legal regulation of farmland purchase and sale and therefore creation of proper conditions for lifting the moratorium, this process is far from its completion. Moreover, as the discussion[20] around the draft law on land market, the issues of formation of proper land market and corresponding strict state regulation in this area are unlikely to be resolved soon, as well as the issues of lifting the moratorium on farmland purchase and sale.

3.3. Inability of realization of land ownership in connection with the need
to replace the old-style state act
with a new one

While discussing the issue of land ownership it is important to note that the old public deeds contain no cadastral number of the plot of land; at the same time, according to the Land Code of Ukraine, this cadastral number of the plot of land should be necessarily stated in the land alienation deeds. The transfer of land ownership occurs during conclusion of various agreements aimed at obtaining a plot of land, such as sale, gift, rent, barter, permanent alimony, and inheritance of land.

However, during the sale of land or execution of inheritance documents there emerges the problem associated with the need to re-state the old deed of land ownership (issued before 2003), because it contains no cadastral number of the plot of land.

The official old land deeds remain valid and certify the ownership of the plot of land. No one shall be forcibly deprived of land ownership on this basis. The only limitation for these owners is the inability to sell (donate) land, which had been certified before the re-processing of the old deed and issuance of the new one (with the cadastral numbers). The same need for a new deed occurs and when you execute the land inheritance documents.

At the same time, in order to get a new deed one needs to make documents, without which it is impossible to re-register the old to the new deed. In particular, you must order the preparation of new land management documentation in the appropriate licensed land management organization (public or private). The list of such organizations one can get at every district department of the State Committee for Land Management. After the contract land surveying organizations carry out surveying to establish the limits of the plot of land on the plan, it will prepare technical land-management documentation for approval to a territorial department of the State Committee for Land Management located in the region of the plot in question. This is a very time-consuming and costly procedure.

Therefore, the procedure for making a new official deed is very expensive and time-consuming, during which period the owner cannot dispose of her/his property[21].

3.4. Impediments to the right of use of one’s property for business

The fact that in many towns one cannot use the living space on upper floors for offices may serve an example of such obstacles. Such decisions are made by relevant local radas. Such decisions often run counter to the requirements of civil legislation, which guarantees the right to use one’s property for business, although, according to Part 1 art.383 of the Civil Code of Ukraine, the owner of dwelling houses or apartment may use her/his living space for her/his dwelling, dwelling of his family, and others and may not use it for commercial production. That is the only restriction for the owner of premises is the inability to use it for commercial production.

Although at the end of 2011 the Verkhovna Rada of Ukraine adopted amendments to the Housing Code of Ukraine, according to which the owner has the right to use the living space solely for dwelling and cannot use it for any other purpose.

However, according to many experts[22], such legislative provisions breach the right of ownership, since the limits of property rights, defined by art.319 of the Civil Code of Ukraine, have been determined on other principles. Namely, the owner has the right to perform on his property any action not inconsistent with law; exercising her/his rights and responsibilities the owner must follow the moral principles of society and cannot use the title to the detriment of the rights, freedoms and dignity of citizens, interests of society, impair ecological situation and natural qualities of land. Moreover, the state should not interfere with the exercise by the owner of her/his property rights. Therefore, the recently adopted legislator’s amendments do not meet the above principles.

3.5. Impediments in the use and disposal of foreign currency

In 2011 the National Bank of Ukraine (NBU) made a decision by which the exchange of foreign currency should be performed only upon presentation of a document certifying the person. The NBU also made a list of documents on which individuals can exchange currency. The list of documents is in the letter (No. 28-211/3864-11318), sent to commercial banks. An employee of the bank must ensure the protection of the copies of pages of the document proving the identity of a person in the package of daily documents. In particular, the individual residential status should be confirmed with a passport of individual resident, foreign passport (w/o mark of residence abroad), identity card of a stateless person traveling abroad, refugee certificate, passport of another country of permanent residence. The individual non-resident will need her/his national passport of another country or foreign passport of the citizen of Ukraine, but with a note in the passport for permanent residence abroad.

Such rules of exchange are in force in Ukraine as of September 23, 2011. According to experts[23], it is an unlawful restriction on disposal of property right to national or foreign currency. Currently there are dozens of lawsuits filed against the NBU demanding to annul the above rules. And finally the NBU revoked the order to copy the passport of an individual, but ordered her/him to show her/his passport in the case of currency exchange.

4. Recommendations

1. To create a transparent and effective working system of state registration of rights to immovable property.

2. To improve the protection of the rights of land owners, create mechanisms to counter forced takeover of these lands, adopt legislation regulating main aspects of the land market.

3. To tackle the problem of non-compliance with the rulings of national courts protecting property, including improved judicial control over the execution of court decisions, and to terminate the moratorium on the forced sale of assets of public enterprises. To take other measures to execute the “pilot decision” made by the European Court of Human Rights in the case of “Yuriy Ivanov vs. Ukraine”.

4. To promote transparency and simplifying of procedures for housing development and ensure the rights of investors in this area.

5. To improve the legislative regulation of joint stock companies in order to prevent the illegal seizure of enterprises and organizations in Ukraine, as well as the emergence of corporate conflicts.

6. To eliminate barriers to the realization of the right to use one’s property for business, including the use of living space for any purpose other than dwelling.

7. To regulate the expropriation of land and housing for reasons of social necessity in strict accordance with the Constitution and international obligations of Ukraine.

8. To remove barriers to the use and disposal of foreign currency.

 

 

[1]  Prepared by M. Shcherbatiuk, UHHRU.

[2]  Ukrainian Helsinki Human Rights Union. Annual Reports on Human Rights http://helsinki.org.ua/index.php?id=1298357458, http://helsinki.org.ua/index.php?id = 1245859763

[3]  T. Montian. Unsupported support apparatus “Dzerkalo tyzhnia. Ukrayina”, No. 14, April 15, 2011 http://dt.ua/articles/79649

[4]  T. Montian. Unsupported support apparatus // “Dzerkalo tyzhnia. Ukrayina”, No. 14, April 15, 2011 http://dt.ua/articles/79649

[5]  I. Marushko. Combining of functions of a number of agencies is a considerable improvement of the new registration system — // Ukrayinskiy Yuryst, #5 http://lp.ua/ukr/public.php?news_id=270

[6]  BTI: chaos awaits the registration of rights to real estate in 2012 http://news.ligazakon.ua/news/2011/3/16/39611.htm

[7]  Another legal way to take away property from citizens emerged in Ukraine http://unian.net/ukr/news/news-413877.html

[8]  In Lviv they identified top “10” violations of property rights in Ukraine http://cga.in.ua/index.php?itemid=1155

[9]  The inviolable right to property: EuropeanPrinciples and Ukrainian reality http://cga.in.ua/index.php?itemid=1065

[10]  This is about judgments in civil and commercial cases, as well as judgments of administrative courts. The judgments in criminal cases and cases of administrative violations were not considered. Data for 2004–2010.

[11]  Human rights in Ukraine: 2009-2010. The Report of Human rights organizations http://helsinki.org.ua/index.php?id=1298357458

[12]  The Bill “On state guarantees of execution of the rulings of national courts”: new name against old problems http://helsinki.org.ua/index.php?id=1316774325

[13]  Ukrainian Helsinki Human Rights Union. Annual Reports on Human Rights http://helsinki.org.ua/index.php?id=1298357458, http://helsinki.org.ua/index.php?id = 1245859763

[14]  The legal assistance in this matter is carried out in the framework of the project “Information and Consultation Center as a legal means of strengthening the legal possibilities of vulnerable population,” supported by the Initiative “Strengthening legal capacity of the poor” realized by the International Fund “Vidrodzhennia” according to the Program “The Rule of Law”.

[15]  The people who disagree with the assessment of their land, seized for the purpose of building the Euro-stadium in Lviv, are offered an alternative http://zik.ua/ua/news/2010/12/10/261225

[16]  Tomorrow the residents of Zubry will go to the stadium to protect their land from the “Euro-2012” http://zik.ua/ ua/news/2011/05/30/290393

[17]  Preparing for Euro-2012: the asphalted private land http://novaukraina.org/news/urn:news:9CE898

[18]  Serhiy Osypchuk “Underhand dealing with land” “Dzerkalo tyzhnia. Ukrayina”, No. 5, February 11, 2011.

[19]  Iryna Lukomska “Land market: taking on trust” http://pravda.com.ua/rus/articles/2011/10/18/6659751/

[20]  S. Dorosh “Time for purchase and sale of land in Ukraine has not come yet” http://bbc.co.uk/ukrainian/business/2011/09/110921_land_market_ukraine_sd.shtml

[21]  Top 10 violations of property rights in Ukraine. The Lviv Research Center for Public Advocacy http://civicua.org/ news/view.html?q=1709902

[22]  Ibid.

[23]  Ibid.

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