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8/10/2013


MORATORIUM CONTRADICTS INTERNATIONAL OBLIGATIONS OF UKRAINE

 

   Moratorium on alienation of land shares (pai) was first imposed by the Law of Ukraine of January 18, 2001 “On agreements for alienation of land shares (pai)”. The said law prohibited alienation of land shares except for cases of inheritance and compulsory purchase. This first ever moratorium should have stayed in force till the order of realization of rights to land share had been defined by the Land Code of Ukraine.
   But with adoption of the new Land Code of Ukraine (hereinafter refered to as LCU) of October 25, 2001, the moratorium was not lifted. Moreover, section 15 of Transition clauses of LCU prohibited not only sale of land shares, but also of land plots for farming and other agricultural production use. The ban should have acted till January 1, 2005, but the Law of Ukraine of October postponed its lifting till January 1, 2007.
   Then the Law of Ukraine of December 19, 2006 prolonged the moratorium for another year, till January 1, 2008. This Law became effective only on January 13, 2007, because the Parliament had to overcome the veto imposed by the President (that is to say that the ban did not applied between 1 and 13 of January, 2007). This Law also made lifting of moratorium dependent on adoption of two laws – on land cadastre and land market.
   The Law of Ukraine of December 28, 2008 have actually made the moratorium eternal, because its deadline was postponed till the moment when laws of Ukraine on land cadastre and land market come into force. Despite the fact that the Constitutional Court of Ukraine ruled that Law null and void on May 22, 2008, this Law got reincarnated, and Parliament passed the similar act on June 3, 2008. Moreover, this new Law of June 3, 2008 had got retroactive effect and should apply from the date when the Constitutional Court stroke down its predecessor of December 28, 2008.
   As of today, section 15 of Transition Clauses of LCU reads as follows:
«15. Before laws of Ukraine on state land cadastre and land market come into force, there shall be prohibited:
a) sale and purchase of land plots of agricultural use of state and municipal ownership, except for compulsory purchase;
b) sale and purchase or by other means alienation of land plots and change of end-use of land plots owned by citizens and legal entities and meant for agricultural commodity production, of land plots allocated in kind to owners of land shares for carrying out personal peasant farming, and of land shares except for the cases of inheritance, exchange of land plots for another plots according to the law, and compulsory purchase.
Sale and purchase or by other means alienation of land plots and land shares mentioned above under “a” and “b” of this title shall be allowed provided laws of Ukraine on land cadastre and land market come into force, which laws shall define specifics of market circulation of state-owned and municipally-owned land as well as of lands for agricultural commodity production.
Agreements (including power of attorney) which have been entered into during the period of effectiveness of the prohibition on sale and purchase or by other means alienation of land plots and land shares specified under “a” and “b” of this title, shall be null and void prospectively from the date of conclusion or notarization as regards sale or alienation or transfer of right to dispose of them».
   Finally, section 12 of the Law of Ukraine of October 31, 2008 widened the scope of moratorium to the limit. This Law imposed ban upon alienation of any kind of agricultural land:
«12. There shall be prohibition on sale of land of agricultural use till January 1, 2010».
   To sum up, we would point out that by passing a number of laws starting from February 2001 (when the law of January 18, 2001 came into force), Ukraine deprived owners of land shares of right to dispose of their landed property. Similar limitation was imposed later on by LCU on owners of different types of agricultural land plots, and finally the limitation has become total.

   Despite the fact that the prohibition looks like interim measure, it is impossible to define the moment when it is to be lifted (if ever).
   Limitation or even deprivation of owners of the possibility to dispose of their land plots (shares) in many aspects means that owners are deprived of major share of benefits associated with peaceful enjoyment of property. This will take place when a person holds a small plot allocated for agricultural commodity production, and it is economically unviable to farm it according to the legal end-use. The average size of a land share in Ukraine is 4 ha; at the same time the Institute of agrarian economy reports that an optimal size of a grain farm is 300-400 ha. When a cattle farm holds less then 55 ha it will be unprofitable, loss-making. One may discuss the issue of optimal size of a viable farm, but there are little doubts that this size is much bigger than 4 ha.

   Similar situation exists when a person because of old age is incapable of farming land effectively (and most land share owners are of age of retirement). In such cases a prohibition to sale land means that the owner cannot enjoy normal economic effect of the property. We would point out that under current conditions lease of agricultural land cannot compensate losses entailed by the impossibility of sale of land, because of low rents. According to the official figures of the State Committee of Ukraine, 68% of all concluded lease contracts provides for the rent at the level of 1,5-3% (average annual rate – UAH 250 per ha). Compare this rate with the average rates for bank deposits, which according to the National bank of Ukraine reached the level of 20,3%. The principal reason for low level of the rent for agricultural land is the moratorium on alienation of such land. That means that introduction of moratorium incurred grave damage upon owners of land shares and land plots of agricultural use; this damage, in principle, may be quantified and proven. But the most important is that the moratorium takes away the very essence of the property right when it restricts disposal and prevents enjoyment of normal economic benefits of peaceful possession of land.
   So the prohibition imposed upon alienation of land shares and land plots of agricultural use shall be declared “deprivation of possessions” according to § 1 Article 1 of the First Protocol to European Convention on Human Rights and Fundamental Freedoms (ratified by Uklraine on July 17, 1997). In our case deprivation of possessions takes place with violation of requirements which legitimate such deprivation under the Protocol: the deprivations takes place not for the benefit of the society, without any prior compensation and not in line with any provision of the law, because the moratorium contradicts the Constitution of Ukraine which explicitly forbids narrowing or impairment of existing rights and freedoms while adopting new laws or introducing changes into the old ones (art.22).
   In turn, article 41 of the Constitution of Ukraine allows for compulsory purchase as an exception for the benefits of the society, in cases and according to the procedure specified by the law and under condition of prior and full compensation of value. Introduction of moratorium does not meet requirements of legitimacy of compulsory purchase.
   First of all, the prohibition affects over 6 million people, and this excludes its qualification as an “exception”.
   Secondly, the prohibition may not be substantiated by “benefits (needs) of the society; in our opinion, it is missing any rational substantiation, it is discretional and arbitrary, thus there shall be no place for such thing in the state with the rule of law (as Ukraine declared itself in the Constitution – article 1). It is asserted that the moratorium protects peasants and farmers from becoming landless. But in fact the moratorium brought about the situation which it allegedly had to prevent: instead of elimination of the threat of deprivation of property it led to such deprivation. Moratorium also blocks optimization of the structure of agricultural land tenure. Small land plot may not be farmed with use of progressive agrarian technologies. Within the boundaries of a former field of crop rotation there are 20 and more land plots with different legal regimes. Under such conditions no crop rotation and protection of soil are possible. Parcelization of agricultural land leads to exhausting and irrational use of land though natural type of production and degradation of soil fertility. Moratorium also prevents investments into the agriculture because it renders mortgage impossible, it blocks redistribution of land in favour of better owners and farmers; land does not produce what it could.

   Thirdly, it is not only “prior compensation” missing, there is no compensation whatsoever. At the same time damage is significant (we can quote the difference between ground rent and deposit rates, it is almost 20%). In the state with the rule of law one cannot be deprived of anything without due compensation in exchange.
   Though the Constitution of Ukraine in art.41 regulates cases when there is alienation of property, we believe that there are strong arguments to construe this article broadly and to apply constitutional safeguards to the situation when neither property (land) nor right to it is formally taken away from the owner, but the latter suffers such restrictions and limitations that he loses opportunity to enjoy his property and to get from it normal economic benefit.
   Under such conditions there are grounds for protection of property right encroached upon by the moratorium by way of filing an application with the European Court of Human Rights.
   In our opinion, the applicant shall not first exhaust the national means of protection (i.e. to go through all levels of the national judiciary), because in Ukraine there are no any means of protection for cases when a law contains norms which are in direct conflict with the Convention.
   We believe that there is a very good chance for protection of rights limited by the section 15 of Transition Clauses of LCU in the European Court of Human Rights.
   Center for Land reform Policy is ready to provide necessary assistance to owners of land shares and agricultural land plots in drafting applications. Please contact us through e-mail myland@myland.org.ua or write to use: Center for Land reform Policy in Ukraine, post office box 65, Kiev, 04119, Ukraine.

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