Forced expropriation of property under martial law
As you know, the legal regime of martial law is characterized by temporary restrictions on the constitutional rights of both human and civil liberties, and the rights and legitimate interests of legal entities. In particular, restrictions on property rights may be imposed in the form of forced expropriation, in accordance with which any property in favour of the state may be forcibly alienated in accordance with the procedure established by law. In this regard, we bring to your attention general information in this regard and relevant practical recommendations.
1. Key regulations:
– Law of Ukraine “On Transfer, Expropriation or Seizure of Property under the Legal Order of Martial Law or State of Emergency” No.4765-VI dated 17.05.2012;
– Law of Ukraine ” On the Legal Regime of Martial Law ” No.389-VIII dated 12.05.2015;
– Resolution of the Cabinet of Ministers of Ukraine No.988 dd. 31.10.2012 “Some issues on full compensation for property forcibly alienated under the legal order of martial law or state of emergency”.
2. Authorities that make decisions on expropriation
Expropriation is carried out by the decision of the military command, agreed in accordance with the regional, district administration or the executive body of the relevant local council. Given that for the time of martial law, regional state administrations have been transformed into regional military administrations, this body can and usually provides the appropriate approvals.
In areas where hostilities are taking place, expropriation is carried out by the decision of the military command without the above consent.
So far, all the directives and orders we have dealt with in Odesa region have been approved by the Odesa regional military administration.
3. Military command
The term “military command” is used in the meaning given in the Law of Ukraine “On the Legal Regime of Martial Law”, namely:
Commander-in-Chief of the Armed Forces of Ukraine;
Commander of the Joint Forces of the Armed Forces of Ukraine;
commanders of types and separate branches of troops (forces) of the Armed Forces of Ukraine,
commanders (chiefs) of military authorities;
commanders of formations, military units of the Armed Forces of Ukraine and other military formations formed in accordance with the laws of Ukraine.
Therefore, the decision to expropriation is made by the relevant person holding the position of commander of a military unit or higher.
4. Taking a decision on expropriation
The military command issues binding orders and directives on defence, public safety and order, and the implementation of martial law. It should be noted that the law does not detail the list of mandatory details that should be in such decision, the approximate form of such decision is also not established, i.e. the form and content depends on the person who makes such a decision.
5. Act on expropriation
Based on the results of the forced expropriation, an Act is drawn up. The form of the Act is established by the legislation, the form of the act is made according to the uniform sample approved by the Cabinet of Ministers, and the profile law defines requirements to its maintenance. Thus, the act states:
– the name of the military command and the body that agreed on the decision on the forced expropriation, or the military command or body which made such a decision;
– information about the owner (owners) of the property:
– for legal entities – full name, location and identification code;
– for individuals – name, place of permanent residence and tax number;
– information on the document establishing the ownership of the property (if any);
– description of the property, sufficient for its identification. For immovable property – information on location (address), for movable property (motor, water and air vehicles) – information on vehicle registration number, make, model, chassis number, year of manufacture and other registration data;
– the amount of funds paid (in the case of previous full reimbursement of the value of the property).
The act should be signed by the owner of the property (or his representative) and authorized persons of the military command and the body that agreed the decision on expropriation, and sealed by the military command and/ or mentioned bodies. The right of state ownership of property arises from the date of signing the act.
If the owner of the property or (its representative) at the time of drawing up the act on expropriation is absent, such an act shall be drawn up without its participation. In this case, the owner of the property or its representative has the right to familiarize with the act on expropriation. A copy of the act and a document containing a conclusion on the estimated value of the property shall be handed over against a receipt to the person from whom the property is expropriated, or to his authorized representative.
We aware with cases when the property was actually seized from the owners and transferred for storage to the warehouses of the Ukrainian State Agency of Reserve. However, due to the fact that the military command usually does not have information about the owner of the property, the owners were not informed about the decision and therefore did not take part in drawing up the act. Herewith, the military command reported that the said property was not expropriated from the owner, but was temporarily transferred for storage. In case of need its further expropriation, the property would be assessed, an act on expropriation will be drawn up and compensations will be paid in accordance with the established procedure. Thus, the owners were in fact limited in their property rights, but did not receive proper documentation and confirmation in this regard.
6. Appraisal of property
In case of expropriation, the act shall be accompanied by a property appraisal report on the date of its execution. Appraisal of property subject to expropriation is carried out in accordance with the procedure established by the legislation on appraisal of property, property rights and professional appraisal activities. If it is impossible to involve for appraisal of the property of professional appraisal, in that case upon consent the property owner such appraisal is carried out by competent public authorities or local governmental appraisal. In case of refusal or absence of the owner of the property, specified bodies have the right to conduct such appraisal independently. The appraisal report on value of the property, according to which its cost should be reimbursed to the previous owner, may be challenged in court.
It should be noted that the law does not prohibit the involvement of a professional appraiser by a person whose property is expropriated. Herewith, we assume that due to a certain conflict of interest, the military command may object to such involvement in order to avoid overestimation. Instead, in the current reality, when the involvement of other appraisers is difficult, and the law requires involvement in the act of property valuation, we assume that the involvement of an appraiser by the property owner will be acceptable, or perhaps the only possible. According to the law, appraisal should be borne by the military command, but it is unlikely that this can be expected if the appraiser is involved independently.
7. Reimbursement of the value of the expropriation
Expropriation takes place exclusively on a paid basis with prior reimbursement or subsequent payment of compensation. Legal entities and individuals whose property has been expropriated or their successors and heirs are entitled to compensation.
Compensation for expropriation with prior reimbursement of its value is carried out by the military command at the expense of the state budget before the signing of the act on expropriation.
Compensation for expropriation, followed by full reimbursement of its value, is carried out during the next 5 (five) budget periods after the abolition of the martial law regime at the expense of the state budget.
8. Compensation receipt
To receive the next full compensation for expropriation, the former owner (his representative) after the abolition of martial law applies to the territorial center of acquisition and social support (military enlistment office) located at the place of expropriation with an application accompanied by an act on requisition and a document containing property value (appraisal report). Under such conditions, it is important to have the original of these documents and the quality of the executed act.
The application is considered within 10 working days from the date of submission and, if necessary, the consideration period may be extended to 1 month. Based on the results of the review, a conclusion on making payments is drawn up. Payment of full compensation is made by the bodies that made the decision on expropriation, in the order of priority of drawing conclusions at the expense and within the funds provided in the state budget for payment of the next full compensation for expropriation.
9. Return of preserved property
If, after the abolition of the legal regime of martial law, the property that was forcibly expropriated is preserved, and the former owner insists on the return of this property, such return is carried out in court. The basis for the return of property is a court decision to restore ownership of such property, which has entered into force. At the same time, the person undertakes to return the amount of money received by him in connection with expropriation, except a reasonable fee for the use of this property. The former owner of the property that has been forcibly expropriated may request another property in return, if possible.
Summarizing all the above, we provide our recommendations, which should be paid special attention to, if the property of your company was decided to be expropriated during martial law:
1. Expropriation is carried out on the basis of an order or directive of the military command, which states which property should be alienated. This decision is agreed with the military administration. In the case of expropriation in the area where hostilities are taking place, such approval is not required.
2. Based on the results of the expropriation, an Act of the established form is drawn up. It is important that the act contain correct information of the owner of the property, the document confirming the ownership of the property, the details of the decision on the basis of which the property was expropriated. The act must be signed by a representative of the military command and stamped. It is necessary to obtain and preserve the original Act, as it is the basis for obtaining compensation for expropriation.
3. Appraisal report of forcibly expropriated property must be attached to the act. It should be noted that this requirement is usually not met in practice. In this regard, we recommend that, if possible, a professional appraiser has to be engaged. Such engagement has to be approved by liaised with representative of military command. We emphasize that appraisal report on the value of expropriated property also has to be enclosed to the application for compensation receipt.
4. If the expropriation concerns property that is not privately owned by your company (accepted for storage, transportation, lease, etc.), in order to avoid potential claims from the property owner, we recommend immediately notify the owner in written on the decision of the military command and propose to take part in drafting the Act. In case of non-arrival of the owner’s representative, we recommend to sign the Act on expropriation with remark that such property is in the possession of your company, but does not belong to you. Based on the results of the expropriation, we recommend to send to the owner notification with enclosing the copy of drawn act.