Legal status of business during martial law

Two weeks ago, the  chiefs of the country made a decision on the introduction of martial law. First of all, introduction was planned on the territory of the entire state, but after the debate in the parliament it was limited to 10 border regions.

Experts call such a decision quite risky in the context of investment in Ukraine and business development. Therefore, it is necessary to analyze the reason for such assertions, constraints and threats could be faced by business.


What did members of parliament vote for?

Consequently, on November 26, the parliament passed the legislative act, which approved the President’s decree on the introduction of martial law for thirty days. The basic information about possible restrictions is indicated in the Decree and “On the Legal Status of martial law” Act. According to the Decree, the constitutional rights of a person may be restricted during martial law. In the aspect of doing business, the most interesting is the possible restriction of right to ownership, entrepreneurship, work and strike. The decree specifies the possible restrictions of rights of legal entities in accordance with the special act.


Measures that can be used during martial law

Specific measures that can be applied during the martial law are envisaged by the “On the Legal Status of martial law” Act. So, let’s analyze at the rules of legislation that can have the greatest influence on business.

  1. Labor duty


Forced labor of able-bodied citizens can be used at works to ensuring the defense capability, as well as the elimination of the consequences of emergencies. These works are performed for the needs of the Ukraine Army and other military formations temporarily, and the place of the main work is necessarily kept for the employees. It should be noted that people who can not be admitted to their health and women with children under three years of age and pregnant women can not be involved if there is a risk of harm to their health. The decision to involve citizens in such work is taken by the military governance, which includes the General Staff of the Armed Forces, the Joint Operational Headquarters of the Armed Forces and operational management, as well as governance of the types of army, military units and units. The decision can be taken in conjunction with local authorities and independently. The detailed procedure for involving people into forced labor is regulated by the separate Cabinet of Ministry resolution.

The introduction of labor duties can negatively affect the mode of operation of enterprises, in the case of attracting a significant number of employees, as it can significantly reduce the efficiency of the enterprise, causing:


  • downtime at the enterprise;
  • untimely fulfillment of obligations under contracts with counterparties.


  1. Use of enterprises for defense purposes


This restriction can be divided into the following components:

  • using production capacities for defense orders

In this case, the equipment of the enterprise is used to meet the needs of defense and army. Accordingly, work on the defense order will be implemented first and foremost. The consequence may be a temporary termination of the company’s performance of its functions, or execution of them to a lesser extent.

  • using labor resources – is another form of using the employee when the personnel of a particular enterprise are used to perform a particular task, for example, the same defense order. The consequences that may be caused by the involvement of staff are already known to the owner.
  • changing of the operating mode – this limitation may relate to changes start and the end of work day, the setting of a variable mode of operation and other changes in working hours of working time, which are possible in accordance with the Labor Code. It can bring a lot of inconvenience to the owner, because it requires alteration of the process of work on the new schedule.
  • changing of the conditions of production activity – change of labor functions of workers, change of the harmfulness of working conditions or on the contrary – creation of new conditions of production


  1. Forced alienation of property


Alienation of property is the deprivation of a person’s ownership of this property in favor of the state, provided that it is reimbursed on the basis of an assessment made in accordance with the law. The reimbursement of the value can be done both to the alienation, and after it. The decision on alienation is taken by local administrations, local councils and military command. There is also a possible free withdrawal option that can be applied to state-owned enterprises. However, the ownership of the alienated property can be returned in court, after the completion or cancellation of the military status. Of course, in this case, the person is obliged to return the money that was paid as compensation.

The opportunity to carry out this measure has business risks, as it is a field for abuses by the authorities or military command. Сases of alienation of property that took place in history weren’t always sufficiently substantiated or indeed necessary.

  1. Establish control over the activities of publishing and telecommunication enterprises


The law allows regulating the work of publishing houses, telecommunication and telegraph enterprises.

  1. Restrictions on the sale of certain goods


In the course of the martial law, the sale of weapons, alcohol and potent substances may be prohibited. Limitations on the production and sale of drugs containing narcotic substances or precursors may also be introduced.

  1. Change of management of enterprises


Management can be eliminated and replaced in case of improper fulfillment of duties related to the martial law. This is also a rather controversial provision, which is definitely needed in such circumstances, but it includes the risk of excessive authority and unjustified suspension of company management.

  1. Provision of temporary housing for servicemen


If it is necessary, for individuals and legal entities can be establish the conscription from the quartering of the military. Therefore, the military command can force the company to provide a living space, in the presence of appropriate facilities, for the needs of the army.



Of course, there is should not panic because of the possibility of introducing these restrictions. Although they are foreseen by law, however, it seems that there is currently no need for most of them, since active military operations are conducted only on the territory of the operation of the united forces. Emergencies have not yet taken place, and defense enterprises are being dealt with as defensive orders by enterprises of the defense-industrial complex. However, any owner of the enterprise in the territory where the military situation is in place should be prepared for a probable scenario of the development of events, when legislative measures are taken and a plan for business steps is developed.


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