Summarizing Panel Discussion on Legal Aspects of Doing Business and Protection of Property in Crimea

In the summer of this year, Ilyashev & Partners Law Firm opened an office in Simferopol, thus becoming the only Ukrainian law firm that established a new branch in the occupied peninsula. Sharing experience in legal support of clients in the Crimea, Ilyashev & Partners Law Firm has organized a panel discussion “Doing business and property in Crimea: legal aspects and new protection methods”. The event took place on October 9, 2014 in the capital Hyatt Regency Hotel. The title media partner was The Yurydychna Praktyka Publishing House.

The annexation of the Crimea by the Russian Federation and the subsequent changes of the legal framework raised a number of questions to business, banking system, and property owners on the peninsula. The key focus areas of the discussion were: registration of rights in rem to real estate situated in the territory of the Crimea, applicable law, concurrent re-registration of real estate in two jurisdictions, law on free economic zone in the Crimea, special aspects of dispute resolution with the Crimean defendants, work of banks with the Crimean depositors and borrowers.

The event was attended by more than 150 people – judges, lawyers, government officials and business executives – who shared their experiences in legal resolution of issues on doing business and protection of property in Crimea in the conditions of annexation.

Mikhail Ilyashev, attorney at law, managing partner at Ilyashev & Partners Law Firm, in his welcome speech noted: “The Russian Federation has opened a Pandora’s box by putting a number of legal issues to various branches of legal science. Unfortunately, the more time passes since the annexation of the Crimea, the more all governmental agencies of Ukraine lose their control over the territory. The so-called Crimean authorities adopted a number of laws and regulations. De jure they are void for Ukraine, but we must proceed from reality – whether they are such de facto in the Crimea.

Much has been said about nationalization of Ukraine’s property in the Crimea. All resolutions passed by the State Council of Crimea are called “on nationalization …”. Although current developments can be called expropriation or confiscation rather than nationalization.Considering the recent events in the Crimea, it seems to me that the Russian government subconsciously expects that sooner or later it will have to bear responsibility for what happened”.

Ganna Onyschenko, Chairman of the State Registration Service of Ukraine, has clearly and firmly stated the agency’s position on registration of rights to real estate in the Crimea: “Currently, the Registration Service has determined – we do not recognize decisions and regulations of the Russian Federation. To find the best way out of the situation we are studying the international experience of recognition/non-recognition of documents issued in the territories of unrecognized or occupied states”.

Leonid Gilevich, lawyer at Ilyashev & Partners Law Firm, suggested considering re-registration of real estate in two jurisdictions concurrently: “Occupation of the Crimea by the Russian Federation triggered resolution of real estate related issues by two different legal orders. On the one hand, the legislation of Ukraine declaring invalid any real estate related action, which violates the Ukrainian legal rules, on the other – laws and regulations of the Russian Federation and a newly created Republic of Crimea. In such circumstances, those wishing to enter into real estate transactions, or just to register their (already existing) rights may perform “concurrent” actions in both jurisdictions. Further, in some cases (depending on the subjective and objective nature of specific legal relations) it is possible to take a number of actions for the transfer of rights to property, which meet the rules of both Ukrainian and Russian legislation, and, accordingly, ensure appropriate transfer pursuant to the laws of both states”.

Georgy Logvynsky, attorney, Chairman of the Expert Council of the Ministry of Justice of Ukraine, adviser to the Minister of Justice of Ukraine, focused on possibilities and domestic legal methods of compensation for damage caused by the temporary occupation of the Crimea. “To apply to the European Court of Human Rights you need to exhaust all possible domestic remedies. However, the plaintiff is not obliged to file lawsuits to “illegal” courts – courts on the territory of the Crimea”, Mr. Logvynsky explained.

In turn, Oleksiy Yevsikov, judge, deputy secretary of the first trial chamber of the Supreme Economic Court of Ukraine, spoke on the features of commercial disputes with the Crimean defendants. “Legal framework of the judicial system has actually been restructured. I believe that, unfortunately, now in case of a property dispute involving the “residents of the Crimea”, double proceedings are necessary”, Mr. Yevsikov advised.

Olena Sytnyk, judge of the High Specialized Court of Ukraine for Civil and Criminal Cases, focused on civil disputes with the Crimean defendants: “At present the law sets forth that concerning the territorial jurisdiction of such cases the law stipulates that the plaintiff shall only go to the Kyiv Court of Appeal, which refers cases to the district courts”, she said.

Dmytro Shemelin, lawyer at Ilyashev & Partners Law Firm, spoke on international protection for the owners of assets in the Crimea, especially in the framework of the European Court of Human Rights and investment arbitration. “Although proceedings in international courts are lengthy and costly, prospects of lawsuits against Russia regarding situation in the Crimea are good enough. Both tangible assets and corporate rights and even the rights of claim to the Crimean enterprises, if their real value decreased as a result of illegal actions of the Crimean or federal authorities, can be protected. After the Russian courts refuse to protect the rights of “foreigners”, a number of similar international lawsuits is to be expected”, Mr. Shemelin said.

Yan Akhramovich, attorney at law at Simferopol office, Ilyashev & Partners Law Firm, reported on the practical aspects of dealing with disputes in the Crimea. “Courts of the Russian Federation recognize the right of apply to the courts of Ukraine for cassation”, Mr. Akhramovich said.

Andriy Onistrat, Chairman of the Supervisory Board of the Bank National Credit, raised the issue of responsibility of the Crimean borrowers to the Ukrainian banks: “The vast number of borrowers no longer service the loans. Liquidity of collateral has declined substantially. The state needs to decide fundamentally how to improve operational efficiency of banks”.