Forced alienation or confiscation of property during martial law: The Rada approved the bill
As the State Nuclear University of the Verkhovna Rada notes, virtually any equipment can be classified as such that “it can be used for the purposes of the military-industrial complex,” and therefore, it can be confiscated, even if there is no urgent need for it, writes Natalia Mamchenko in SOUTH.
On July 29, the Verkhovna Rada adopted as a basis the bill 7605 “On Amendments to Certain Laws of Ukraine to Optimize Certain Issues of Compulsory Alienation and Seizure of Property in the Conditions of the Legal Regime of Martial Law” (author – deputy Maxim Efimov).
Thus, the Law “On the transfer, forced alienation or seizure of property under the legal regime of martial law or a state of emergency” establishes the following.
Compulsory alienation or seizure of equipment that is used or may be used for the purposes of the military-industrial complex (MIC) and in relation to which there is a risk of interruption of its functioning is carried out on the basis of a decision of the National Security and Defense Council.
The right of state ownership of equipment that is used or may be used for the purposes of the military-industrial complex and in relation to which there is a risk of interruption of its operation arises from the date of the entry into force of the decision of the National Security and Defense Council on the forced alienation or seizure of such property.
Compensation for forcibly expropriated property under the legal regime of martial law or a state of emergency, with preliminary reimbursement of its value before the signing of the act, is carried out at the expense of the state budget.
Compensation for the expropriated property under the legal regime of martial law, followed by full reimbursement of its value, shall be carried out over the next 5 budget periods, using funds from the state budget, provided that the location (address) specified in the act of expropriation or seizure of property is not located in the temporarily occupied territory as of the date of such compensation.
The preparation of documents for the compulsory alienation or seizure of property, as well as the payment of costs for the assessment of the alienated property, are carried out at the expense of the state budget.
The Law “On the National Agency of Ukraine for the Detection, Search and Management of Assets Obtained from Corruption and Other Crimes” defines the following.
In exceptional cases, movable and immovable property may be transferred to the management of ARMA subject to the following conditions:
- such assets were forcibly alienated or confiscated in accordance with paragraph 4 of part one of Article 8 of the Law of Ukraine “On the Legal Regime of Martial Law”;
- such assets represent equipment that is used or may be used for the purposes of the military-industrial complex;
- there is a risk of interruption of the functioning of an integral property complex or part of it, which is used or may be used for the purposes of the activities of the defense industry complex.
The body that has made the decision on the forced alienation or seizure of property, no later than the next working day from the date of entry into force of the relevant decision, sends it to ARMA and instructs the military command to ensure the safety of such property until its transfer to the manager.
The return of such assets, the provision of other assets in exchange, or the reimbursement of the value of such assets shall be carried out in accordance with the Law of Ukraine “On the transfer, forced alienation, or seizure of property under the legal regime of martial law or a state of emergency.”
According to the legal initiator, "the adoption of this draft law will improve and optimize the procedure and mechanism for the compulsory alienation and seizure of property under martial law, and will accelerate the transition of industry to a war footing, particularly in heavy industry and mechanical engineering. During a period of shortages of heavy weapons and ammunition, along with obtaining the necessary supplies from our allies, it will allow us to establish our own mechanism for providing our Armed Forces with the necessary weapons and ammunition."
However, as the Main Scientific and Expert Directorate of the Verkhovna Rada points out, the bill contains risks of returning to the practice of "corporate raiding" due to legal uncertainty.
"The new Part 3 of Article 4 of the Law stipulates that 'the forced alienation or seizure of equipment that is used or may be used for the purposes of the military-industrial complex and for which there is a risk of interruption of its functioning is carried out on the basis of a decision of the National Security and Defense Council of Ukraine.'
We would like to point out that this provision does not explain how it is to be established that certain equipment is specifically “used or has been used for the purposes of the military-industrial complex,” since no criteria or lists of such equipment are proposed.
Under such conditions, virtually any equipment—machine tools, computers, laptops, tools, cars—can be classified as “can be used for the purposes of the military-industrial complex,” and therefore confiscated, even if there is no urgent need for it.
Moreover, the said provision in its proposed form creates serious corruption risks and the risk of corporate raiding of other people’s property.
It also seems unclear what the “risk of interruption of operation” of this equipment is and how this can be determined.
Part 1 of the new version of Article 10 of the Law does not contain a provision stating that compensation for expropriated property under martial law or a state of emergency, with prior full reimbursement of its value, is to be provided by the military command or body that made the decision on such expropriation, as is present in the current version. Part 1 of the new version of Article 10 of the Law also does not contain a provision regarding the timing of full compensation payment (under the current version, this must be made before the signing of the act).
"In our opinion, without a clear definition of the person making the compensation payment and the time of payment, receiving full compensation will be significantly complicated," noted the State Scientific and Educational Institution of the Verkhovna Rada.
“It is proposed to supplement paragraph 2-2 of Section V of the Law with a new subparagraph 3, according to the content of which “in exceptional cases, movable and immovable property may be transferred to the management of the National Agency.
First of all, we would like to point out that vesting such powers in the National Agency of Ukraine for Detection, Tracing, and Management of Assets Obtained from Corruption and Other Crimes (ARMA) is inconsistent with the status of this body as defined in the Law. According to Article 2 of the Law, "ARMA is the central executive body with a special status, ensuring the formation and implementation of state policy in the area of identifying and tracing assets that may be seized in criminal proceedings or in a case on recognizing assets as unjustified and their recovery by the state, and/or managing assets that have been seized in criminal proceedings or in a case on recognizing assets as unjustified and their recovery by the state, or confiscated in criminal proceedings or recovered by a court decision by the state as a result of their recognition as unjustified."
However, equipment that is used or may be used for the purposes of the military-industrial complex and in relation to which there is a risk of interruption of its functioning is forcibly alienated or confiscated not on the grounds of its recognition as unjustified assets or as property confiscated or recovered by a court decision, but in connection with the fact that it becomes the property of the state for use under the legal regime of martial law or a state of emergency.
The above-mentioned amendments to the Law propose transferring property to the Agency's management in exceptional cases; however, it is unclear which cases should be considered exceptional and by what criteria such exclusivity is determined.
In our opinion, the use of such approaches in the draft is inconsistent with the principle of legal certainty," the parliament's expert department noted.
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