Moratorium on the land – should we wait for change this year?

For 17 years in Ukraine there is a moratorium on the alienation of agricultural land. The moratorium was introduced as a temporary measure related to the need to adopt a law act that would regulate the transfer of the land. From year to year, this issue is raised by politicians and experts, and each time its consideration is postponed. Is this a problem? Obviously that’s right.

According to the State Geological Survey, the area of agricultural land in Ukraine is 42, 2 million hectares, of which 41 million hectares are submersible, most of which are units. About 78% owners of units lease land to agricultural companies, since the overwhelming majority does not have the capacity to process it. According to analysts of the project “Support to reforms in agriculture and land relations in Ukraine” (CPO Kyiv Economic Institute at the Kyiv School of Economics, the project is funded by the World Bank), today land owners in Ukraine receive 12 times less rent than they could , if the market acted. Accordingly, the cost of the lease would be $ 455 a year per hectare, instead of the current 37.


“All the land will be bought by foreigners and oligarchs”

According to a sociological survey conducted in November by the Razumkov Center, the “Rating” group and KIIS, 72% of respondents – against the sale of agricultural land and only 13% support sale. The main reason that causes concern to people is the fear of acquiring free land plots by the large capital or foreign companies. The lack of a common position on land reform also plays a role. There is a general understanding that during the introduction of the land market the necessary measure will be the introduction of restrictions, in particular the prohibition of the purchase of agricultural land by foreigners and foreign companies. Differences begin with regard to the size of land plots that can be sold in “one hands”. There is no indication as to who this land can be sold – either solely to individuals, or to agricultural companies and holdings.
There are problems with protecting the rights of landowners. The existence of cases of raider seizure of land plots for nobody is news. Reforms of the law enforcement and judicial systems do not add optimism, whose qualitative work could provide certain guarantees. Instead, we have a situation in which the fact that the law on your part does not mean that the property will be protected, but the violated rights – have been restored.


Missed deadline

Continuing the moratorium on land last year, the parliament ordered the government to submit a draft “On the transfer of agricultural land” Law act. In the first quarter of 2019, the government should have submit to the parliament a draft on lifting the moratorium and introducing rules for the transfer of agricultural land. This is not the first failure of the deadline by the Cabinet. In 2015 and 2016, the parliament also binds the government to make a corresponding bill – the results are known to us.


Not the parliament and the government, but the Court

Strangely enough, but the Supreme Court can put an end to the moratorium. The Grand Chamber of the Supreme Court agreed to consider a case in which the prosecutor’s office disputed the validity of the contract of exchange (mines) of land plots. To be short, the fact is that LLC and an individual exchanged land parcels not under the allowed scheme of “unit per unit”, but areas for commercial production that are prohibited at the moment.
Cassation court in the Supreme Court asks the Grand Chamber to resolve an exclusive legal issue that arose after the ECHR judgment of May. Recall that in May last year, the ECHR in the case of «Zelenchuk and Tsitsyura v. Ukraine» recognized a moratorium on disproportionate restrictions on property rights and the right to engage in entrepreneurial activities. Now we have two opposing legal positions. On the one hand, the norms of the Transitional Provisions of the Land Code, which set a moratorium. On the other hand, the ECHR decision and the norms of the Law of Ukraine “On implementation of decisions and application of the European Court of Human Rights practice”. Indeed, the collision is not simple, because it is important not only to choose which norms of law to apply, but also to take into account all the social and economic features of Ukraine as of today.


What will be?

In the event that the Grand Chamber recognizes the legality of the moratorium and does not depart from the conclusions of the “old” Supreme Court, no changes will be made. However, in the case of making the opposite decision – the development of events can be very interesting. A court decision can obviously become a precedent and an impetus for new similar decisions. Landowners and potential farmers will lead to increased business activity. Probably it will be more frequent cases of concluding agreements on the exchange of demarcated lands.
Instead, there would be no other option for the government and legislators to quickly draft and adopt a law to direct such activity on a given controlled basis.


Is it necessary to cancel the moratorium?

According to the World Bank, the opening of the land market can bring Ukraine about 1.6% of GDP each year. Owners of units will also receive more, as the cost of land will increase, and accordingly, the rent for land will increase. Such additional infusions are definitely necessary for the Ukrainian economy, and therefore the land market needs to be launched. However, the first step should be the introduction of information on absolutely all land to the land cadastre. In addition, a feasible step will be to launch the market first in a test format in a certain area, to identify weaknesses and weaknesses in legislative regulation.


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