Date of publication: 24 March 2014
Maksym Kopeychykov, Attorney at Law, Partner
The bankers seem the luckiest of all owners of the Crimean assets. Anyway, they have more tools to minimize losses resulting from separation of the Crimea than the owners of retail chains, transshipment complexes or industrial enterprises, i.e. factoring transactions, the possibility of reaching agreements on transfer of property of the Crimean outlets with the Russian banks. The main task is to mitigate risks of defaults on Crimean loans, since currently the probability of payment default is high enough.
The future of the Crimean branches of the Ukrainian companies and the Crimean business is still unclear.
If Ukraine and the world do not recognize the Crimean referendum (which has already happened), the “authorities” of the peninsula as an “independent state” may refuse to recognize the documents issued by Ukraine (at present or earlier) on state registration of legal entities, or even limit the owners’ rights to certain property. It can be justified by the principle of reciprocity: treat others as you would like to be treated (Ukraine does not recognize the Crimea, and the Crimea does not recognize Ukraine).
However, if the Crimea becomes a part of the Russian Federation, the Ukrainian companies are likely to preserve status quo, especially if all Ukrainian-Russian agreements and treaties remain effective.
The question is: how to change the country of registration or make two legal entities registered in two different countries out of one without termination of activities? There is no answer, and international best practices are also not available.
Trans-Dniester has not been recognized by the international community, and local banks still work only with Russia. Moreover, there was no large and medium Moldovan business during the conflict, thus, there was nothing to quarrel over.
Kosovo is also a bad example as, unlike the Crimea, the country gained independence and was recognized by most Western countries.
The things are clear enough with the Crimean property of the Ukrainian government and state-owned enterprises: almost no chances to retain ownership of lands in the Crimea, not to mention buildings and constructions. Firstly, such conclusion is made due to the revolutionary situation: without taking away at least state-owned enterprises from Ukraine, the new government of the Crimea has no ground for building a new state. Secondly, it follows from some statements on nationalization made by Vladimir Konstantinov (Chairman of the Supreme Council of the Crimea – Focus) and Sergei Aksenov (Chairman of the Council of Ministers of the Crimea – Focus). Some assets of Chornomornaftogaz ad Ukrtranshaz have already been nationalized.
However, there is good news: consequences of the Crimean separation may be less complex and tragic for the Ukrainian citizens than for business. It is difficult to imagine that the Crimean apartments, villas and lands will be expropriated by local authorities, unless the authorities decide to ignore the citizens’ rights enshrined in the European Convention for the Protection of Human Rights and Fundamental Freedoms (Article 1. Protection of property, Protocol 1 to the Convention).
In general, it hardly makes sense to take out the Russian citizenship only to not lose a house in the Crimea. However, it is not clear how the issue on access to state registers (land cadastre, registries of rights to real estate, mortgages, prohibitions of alienation, etc.) will be resolved. At present, the Ministry of Justice has blocked access to these registers for the Crimean – so that, as the head of the Ministry Pavel Petrenko stated, “to keep information about the property of the Ukrainian citizens”. Nobody knows how Ukraine, Crimea and Russia will solve this problem.
Unfortunately, even qualified lawyers cannot suggest how to protect the Crimean estate legally. Just because the events on the peninsula are beyond legal field and any legal mechanisms are ineffective.