One of the most significant factors hindering economic development along with corruption, bureaucracy and weak infrastructure – a moratorium on land sales, which has been extended for a year. However, there are no objective reasons for the moratorium: all those risks that politicians talk about can be offset or minimized by adopting clear and understandable rules.
But parliament has it is own plan with controversial intentions – on December 20, 2018, the moratorium on the sale of agricultural land was extended by 2020. In particular, obliging the government, by March 1, 2019, to develop and submit to the Verkhovna Rada a draft law on the circulation of agricultural land.
Ihor Kravtsov, managing partner at Evris, in his the interview for annual research 50 Leading Law Firms of Ukraine 2018 underlines that the lifting of the moratorium on land sales will be a great impetus for the development of the industry: real investors will come to us, and landowners will finally be able to manage their land shares.
How significant is the moratorium’s impact on the sale of agricultural land for the Ukrainian economy?
This is one of the most significant factors hindering economic development along with corruption, bureaucracy and weak infrastructure. For investors and owners, there is no difference what limits the exercise of their rights, the very fact that there are no market mechanisms is important. And we see no objective reasons for the moratorium: all those risks that politicians talk about can be offset or minimized by adopting clear and understandable rules. But their development requires careful hard work, and the result will be an unpopular decision, for which no one wants to take responsibility.
Having experience in assisting large and medium-sized agricultural companies, we can confidently say that lifting the moratorium will be a great impetus for the development of the industry. Real investors will come to us, and land owners will finally be able to manage their land shares.
Could the ECHR’s position encourage the authorities to make this decision?
It is possible that when decisions of the Ukrainian courts, made on the basis of the ECHR’s decision in the case Zelenchuk and Tsytsiura v. Ukraine (Petition No. 846/16), become a common practice and it will become necessary to allocate funds from the budget to compensate owners, this will be a compelling argument for legislative settlement of the issue.
Moreover, there is nothing easier than to create a dispute, to get a negative court decision and to file a complaint with the ECHR – all arguments are already set forth in its decision. But neither national courts nor the ECHR are capable to oblige 226 members of Parliament to vote for the moratorium lifting. What is required here is large-scale educational work within the state, supported by international organizations.
What practical issues requiring court decisions do agrarians have today?
Probably, the most topical issue today is the double lease. The problem arose in 2013 after the transfer of all real rights to real estate assets, including land, to the State Register of Real Estate Rights and Encumbrances. The legislator failed to oblige the holders of previously existing registers to transfer information to a new one, as well as property owners and users to re-register their rights. At the same time, persons responsible for state registration after 2013, so to speak, neglected their duties in respect of verifying the availability of rights to the land plots according to the previous registers. As a result, the situations, when rights of one tenant are specified in the State Land Register (today it is a part of the State Land Cadastre), while rights of another tenant are specified in the State Register of Real Rights, are quite common. Technical solutions preventing to perform a registration action if the real right is registered in the previous register, are now in the process of implementation. However, this will not resolve the on-going disputes. The courts in such disputes have formed more or less balanced approaches. It has been established what and how the registrar should verify. In general, the courts’ position comes down to the fact that priority is recognized for the person, who has acquired the right to lease earlier. Another thing, if the “primary” tenant has problems with the documents or there have been violations during their registration. In this case, the outcome of the dispute depends on whether such a violation is significant and which of the parties justifies its right with more compelling evidence.
In the courts of which jurisdiction are such disputes resolved today?
Land disputes or disputes related to land rights are still considered by courts of administrative, commercial and civil jurisdictions. However, now resolutions of the Grand Chamber of the Supreme Court (SC) have clarified when and to which court to apply. So, if the purpose of appealing against the registrar’s actions is to recognize the plaintiff’s real (lease) rights to the land claimed by another person, then there is clearly a dispute about the right, and it should be a commercial court (or a civil court – depending on the parties). The dispute can be administrative only if there is no other party laying claim for such a land plot (for example, in connection with an unlawful refusal to register). The SC applies the same approach to disputes with local self-governing bodies and state authorities.
The Supreme Court’s positions make it possible to avoid procedural “football”, when none of the courts recognize its jurisdiction and the person is left without judicial protection. Today such a situation is impossible, if it is not done on purpose. Of course, the fact that the SC managed to put the “procedural” house in order and revoked decisions adopted by an incompetent court makes it possible for persons, in whose favor the disputed registration actions were performed, to extend their right to use, but this is better than endless litigation.
How do different agricultural companies solve issues, if the leased land plots form a “chessboard”?
Agricultural companies always try to negotiate with each other. As a rule, the area that each of them farms is determined. Far more troubles were brought by shareholders, who demanded to allocate their land plots for them in kind to farm them independently. In most cases, the purpose of such actions was blackmail or just a personal principled position of the land plot owner.
But this is a proprietary right…
Yes of course. However, we have not heard a single success story about such farmers, if we are not talking about the cultivation of marginal crops, for example, or some other extraordinary cases; on the other hand, we have seen too many people, who wanted to “bargain” bonuses or to demonstrate their attitude to agricultural producers. In this case, the profit from farming one land share independently is comparable to the profit from renting it out. And that is the best-case scenario. The Law “On Land Consolidation” (“On Amendments to Certain Legislative Acts of Ukraine Regarding the Issue of Collective Ownership of Land, Improving the Land Use Rules in Agricultural Land Massifs, Preventing Raidership and Stimulating Irrigation in Ukraine”) is intended to resolve many issues in this regard. In general terms, it allows tenants to “exchange” land plots among themselves, as well as with their owners without consent of the latter, if the tenant has consolidated more than 75% of arable land in the respective field. Obviously, as soon as this happens, the issue of violation of proprietary rights will arise, but it seems to me that in such cases only judicial practice will set the record straight.
What determines the development of the agricultural sector today?
Technology. Today agriculture is one of the most technologically advanced sectors of the Ukrainian economy – regardless of the cognitive dissonance this statement may cause. The development of agricultural equipment and software, which allows you to control and minimize (optimize) costs, logistics, is so advanced that it makes possible to achieve impressive results in terms of crop and, of course, its profitability.
For example, if earlier a principled shareholder could actually block the farming of the field, since it was problematic to drive around it, today there is an option to program the tractors so that they will not enter the land plot with certain coordinates. Today driving a tractor is akin to controlling an aircraft – a large, expensive, high-tech vehicle is controlled by a few clicks on the touch screen, while the lion’s share of work is done by an autopilot.