On 15 April 2014 Ukrainian Parliament adoptedthe Law “On Ensuring Protection of the Rights and Freedoms of Citizens andLegal Regime on the Temporarily Occupied Territory of Ukraine” (the “Law”), yetanother piece of legislation necessitated by the Russian military interventionin the Crimea. 

The Law sets up a special legal regime withinthe Crimean territory (that includes onshore, internal waters, territorial sea,continental shelf and air space) to protect the rights and freedoms ofUkrainian citizens and legitimate interests of legal entities. In this alert weaddress the main impacts of the Law for both businesses and individualsresiding in the Crimea.

Legal Status of theCrimea

The Crimea is an inherent territory ofUkraine with a special legal status as an occupied territory. Migration to andfrom the Crimean peninsula is subject to specific control by the frontierservice, specifically: 

- Ukrainian citizens are allowed to freelyenter and leave the Crimea at check points, provided that they are able topresent a document evidencing their Ukrainian citizenship; and

- foreigners and stateless persons needspecial permission from Ukrainian authorities to enter the Occupied Territory.

Rights and Freedoms ofUkrainian Citizens

Ukraine protects the rights and freedoms ofall Ukrainian citizens residing in the Crimea, such rights being guaranteedunder the Constitution of Ukraine, Ukrainian laws and international agreementsto which Ukraine is a party. Ukraine also maintains social, economic, political,financial, informational, cultural and other ties with Ukrainian citizens inthe Crimea.  

At the same time, the Law clearly states thatthe liability for violation of the protected rights and freedoms, and fordamage of any kind caused in connection with the Russian military interventionin the Crimea to legal entities and individuals (Ukrainian citizens, foreignersand stateless persons), or to cultural heritage in the Crimean territory, isplaced on the Russian Federation, as the occupant. Ukraine, in turn, shall byall possible means aim to facilitate such compensation. 

The Law, however, does not specify legalremedies available to individuals and legal entities. Ostensibly, since theUkrainian courts have no jurisdictional power to bind other sovereign states,such as the Russian Federation, with its decisions, legal entities andindividuals may de-facto rely only on the legal remedies offered underinternational law (for example, the diplomatic espousal) and the EuropeanConvention on Human Rights. 

The State Authority inthe Crimea

The only legitimate bodies of state power arethose established in accordance with Ukrainian law. Any other quasi-state orself-government authorities in the Crimea are illegitimate. However,interaction and cooperation between legitimate Ukrainian authorities andself-established (illegitimate) authorities is possible if there is a need toprotect national interests, the rights and freedoms of Ukrainian citizens, inorder to fulfil Ukraine’s obligations under international agreements, or torestore the constitutional order in the Crimea. 

The Law is silent on whether Ukrainianauthorities are able to interact with the Crimean self-established(illegitimate) authorities to protect the interests of legal entities (e.g. to provideinformation from state registers) and it appears that only shareholders –Ukrainian citizens or foreigners protected under investment protection treatiesof Ukraine – can turn to Ukrainian state authorities with a request for suchcooperation. 

The Law does not impose any direct liabilityon individuals or legal entities for cooperation with illegitimate authorities(collaborationism). At the same time, both individuals and senior management oflegal entities must be aware that in certain cases such cooperation may beconsidered as treason under the criminal law of Ukraine.

Rendering of Justice

The Law recognises that Ukrainian courtscannot render justice on the occupied territory, therefore all cases (i.e.civil, commercial, administrative and criminal) falling under the jurisdictionof the Crimean courts shall be reviewed by the competent courts in Kyiv,Ukraine. 

The jurisdiction of investigation authoritiesin respect of criminal offences committed in the Crimea will be determined bythe General Prosecutors Office of Ukraine. 

Those Ukrainian state authorities that arenot able to function normally in the Crimea can be transferred to the mainlandby resolution of the Government.

Economic Activities

It was highly anticipated that the Law wouldimpose very strict limitations on business activities in the Crimea. However,the final draft of the Law does not include the business section and onlystates that the respective provisions are to be provided by law. The Lawinstructs the Cabinet of Ministers of Ukraine to establish and submit to theUkrainian Parliament a respective draft within 15 days of the effective date ofthe Law.

At the same time, operating a business underUkrainian law without the required permit or licence, or operating a prohibitedbusiness, is a criminal offence. Therefore, registering and operating abusiness in the Crimea in accordance with the laws of the Russian Federationmay result in criminal liability for management under Ukrainian law, includingliability for tax evasion.

Title to Property

Ukraine, the Autonomous Republic of theCrimea, local communities, bodies of the state power and self-government, andother public entities retain the legal ownership of their property (includingland plots and military property) in the Crimea. The earth, subsoil, air space,water and other natural resources located within the territory of Ukraine, itscontinental shelf and exclusive (maritime) economic zone is the property ofUkraine and may not be acquired by other states, legal entities or individuals.

Individuals, enterprises, institutions andorganisations retain the legal ownership of property (including real estate),which they acquired in accordance with Ukrainian law. The Law further providesthat the title to real estate property located within the occupied territoryshall be acquired or terminated in accordance with Ukrainian law in effectoutside the occupied territory. Any act related to real estate property locatedin the Crimea executed in violation of Ukrainian law, in particular, theLaw(e.g. in accordance with the laws of Russian Federation), is null and void. 

In accordance with Ukrainian law, atransaction with real estate property is completed once it is entered into theState Register of Proprietary Rights to Immovable Property. The Law providesthat if the state registrar in the Crimea is unable to register a transaction,the registration can take place elsewhere. The Ministry of Justice has recentlyissued an order, pursuant to which transactions with real estate propertylocated in the Crimea are registered by the state registrars in Dnipropetrovsk,Odessa, Khmelnytsk, Kherson, Zaporizhya and Chernihiv regions (depending on howthe registration takes place).

Social Rights ofIndividuals

Ukrainian citizens residing in the Crimea areentitled to social security benefits guaranteed under Ukrainian law. The rightto a pension will, however, be lost if a Ukrainian citizen receives a pensionor other social benefits from the Russian Federation. As mentioned in ourrecently published article, pensions in the Crimea will be paid by Ukrainesolely from funds collected within the Crimea. It is, however, not sufficientlyclear how the Government will manage and ensure payments from the pension fundin the Crimea.

Ukrainian citizens that have decided to moveto mainland Ukraine also preserve their right to social security benefits. Suchindividuals have to register with the appropriate authorities and can restoretheir personal identification documents if these were lost (the information canbe taken from the State Register of Electors).

In advance of the forthcoming presidentialelections, the Law sets out a number of important restrictions on voting in theCrimea. In particular, the Law provides that neither elections of the Presidentor members of the Parliament, nor the all-Ukrainian referendum, can take placein the occupied territory. However, Ukrainian citizens residing in the Crimeaare not deprived of their voting rights and can cast their vote at voting placesorganised in other regions of Ukraine.

Further Amendments andSecondary Legislation

The Law also introduces a number of changesto the primary legislation that regulates the matters reviewed by the Law. Inparticular, the Law provides that the Government must adopt legislationregulating generation and sales of electricity within/to the Crimean peninsula. 

The Government must also develop allnecessary procedures and bring secondary legislation in to compliance with theLaw within fifteen days as of the Law’s effective date. A recommendation torevise banking regulations has also been given to the National Bank of Ukraine;however, no definitive deadlines have been set.

The Law“On Ensuring Protection of the Rights and Freedoms of Citizens and Legal Regimein the Temporarily Occupied Territory of Ukraine No. 1207-VII dated 15 April2014

 Authors:

OlexanderMartinenko, Senior Partner, olexander.martinenko@cms-cmck.com

VictoriaKaplan, Senior Associate, victoria.kaplan@cms-cmck.com

VolodymyrKolvakh, Associate, volodymyr.kolvakh@cms-cmck.com