Disposal of Assets Under Martial Law

In connection with the adoption by the Verkhovna Rada of Ukraine of the Law of Ukraine "On the Approval of the Decree of the President of Ukraine "On the Imposition of Martial Law in Ukraine" dated 26.11.2018 No. 2630-VIII, which provides for the partial imposition of martial law in the border territories of Ukraine bordering the Russian Federation and Transnistria from November 26, 2018, to December 26, 2018, we believe it will be useful to explain what threats this may pose to ordinary citizens and business owners in accordance with the Law of Ukraine "On the Legal Regime of Martial Law" (hereinafter referred to as the Law "On ML").

What special measures are introduced during martial law in the country

The Verkhovna Rada of Ukraine, upon the submission of the President of Ukraine, introduced special measures during martial law in the country (Art. 8 of the Law "On ML"), including:

1. Enhanced protection of important objects of the state economy and objects responsible for ensuring the normal life of the population.
2. Labor duty for all able-bodied persons who are not involved in work in the defense sector.
3. Introduction of a curfew.
4. Compulsory alienation of state/communal/private property.
5. Special regime for entry/exit to/from the territory of Ukraine.
6. Verification of documents, citizens, transport, premises, and housing.
7. Prohibition of any mass events: rallies, strikes, demonstrations, etc.
8. Prohibition of political parties' activities.
9. Regulation of media operations, etc.

The most significant measure that caused concern among business owners is the compulsory alienation of property, not only state or communal but also private, in favor of the state in case of urgent necessity.

What does this "urgent necessity" mean?

The Law "On ML" does not provide an explanation.

At the same time, the Law of Ukraine "On the Transfer, Compulsory Alienation or Seizure of Property under the Legal Regime of Martial Law or State of Emergency" (hereinafter referred to as the Law "On Alienation during ML") introduces a special procedure for such alienation: the decision is made by the military command with subsequent approval by the regional/district/city state administration or the executive body of the local council.

In areas where active hostilities are taking place, the military command does not require such a decision and has the right to independently decide on the necessity of such actions and declare an "urgent necessity."

During alienation, owners must be provided with the following documents (Art. 7 of the Law "On Alienation during ML"):

1. An act of compulsory alienation of property, which must be signed on one side by the property owner or their authorized representative, and on the other side by an official representative of the military command.
2. A valuation report of the property, prepared by legal entities or individual entrepreneurs officially registered as appraisal entities in the State Register of Appraisal Entities – Business Entities.
3. In certain cases, when the property owner or their official representative is not found or was absent from the location, the Act may be drawn up unilaterally by the military command.

Payment of funds for the compulsory alienation of property can be made both before such alienation (before the parties sign the Act) and after (after signing the Act, within 5 budget periods after the cancellation of martial law, upon application to the military commissariat). However, since martial law has been introduced in our country for the first time, in practice, no one can tell you how long it will actually take to compensate for the value of your property.

How to return alienated property

In cases where your property has been preserved after the cancellation of martial law and you intend to reclaim it, you have the right to file a lawsuit in court for the return of compulsorily alienated property. Property can only be returned to your ownership based on a court decision. If the court rules in your favor, you must reimburse the state for the funds you received as compensation for your property (if you indeed received them).

You also have the right to demand that the state provide you with other property in ownership instead of yours, but the state may refer to paragraph 3 of Article 12 of the Law "On Alienation during ML," which indeed defines such a right of the owner with the sole limitation "if possible." Therefore, such actions are carried out solely at the discretion of the state.

Therefore, we recommend that you be very attentive and cautious during martial law in the country, as not all state authorities, officials/military personnel, and not under all circumstances have the right to alienate your property.

However, we still draw your attention to the fact that compulsory alienation of private property can only occur during an armed attack on the territory of Ukraine (in this case, during an armed attack by the Russian Federation), and according to statements by public figures in the country, maximum measures will be taken to avoid violations and significant restrictions of human rights.