Business against the draft law on illegal deprivation of property rights

The European Business Association (EBA) has analyzed the draft law No. 11195 on the mechanism for protecting third-party property rights and appeals to Ruslan Stefanchuk, the Speaker of the Verkhovna Rada and the heads of parliamentary factions not to support this document. This is stated in the EBA press release.

«The draft law proposes to empower public authorities to make decisions on foreclosure of 100% of a block of shares or other securities directly owned by a legal entity in whose ownership structure there is a person subject to an asset freeze, if the determined amount of participation in such a block of shares of the person subject to an asset freeze is less than 25%. If the sanctioned person owns 25% or more of the shares, the alienation will be carried out by filing a corresponding application with the court,» the EBA notes.

According to the EBA experts, although the Draft Law contains the name of a mechanism for protecting the property rights of third parties, in essence it is intended to establish a new legal mechanism for the recovery of shares, not only of sanctioned persons, but also of non-sanctioned persons, into the state’s revenue.

«That is, any one minority shareholder in an enterprise that will be sanctioned by the National Security and Defense Council is enough, and this gives Kambin the right to appropriate shares that belong to non-sanctioned persons. The Draft Law does not provide for any transparent and quick mechanism for restoring the property rights of all other non-sanctioned shareholders,» the statement said.

The Draft Law’s attempt to establish a special procedure for restoring the rights of non-sanctioned persons by opening a special conditional account does not look convincing either. In addition, all shareholders, including non-sanctioned persons, are deprived of the right to participate in and manage a legal entity, which will almost certainly lead to a business shutdown.

«Neither the Ukrainian nor the European doctrine of property rights allows arbitrary interference by the authorities with the protected property right. Moreover, it requires that the deprivation of property has a certain basis in national legislation and that any person could have foreseen its occurrence,» the European Business Association notes.

It is quite obvious from the content of the Draft Law that non-sanctioned shareholders will not be able to foresee deprivation of their property rights or shape their behavior in such a way as to avoid negative consequences for themselves. This may scare away foreign investors.

«Such legislative proposals cannot take place in a democratic state governed by the rule of law, as they not only fail to protect shareholders, but also create wide opportunities for unlawful state interference with property rights and other property and non-property rights. If the Draft Law is adopted, the fundamental constitutional rights of an indefinite number of people and our country’s international obligations will be violated, and Ukraine will lose any investment prospects. Moreover, at such a very difficult time for the country,» the association summarizes.

As GMK Center reported earlier, at the end of April, the Verkhovna Rada registered Draft Law No. 11195 «On Amendments to Certain Laws of Ukraine on the Mechanism for Protecting the Property Rights of Third Parties». The draft law may establish a disguised misappropriation of the relevant assets by the state and deprive the founders of the right to own and manage a legal entity who have not even been sanctioned. This will cause great damage to Ukraine’s investment climate.