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Seizure of Property of the Russian Federation and Its Residents in Ukraine: Legal Procedure
The Law of Ukraine “On Basic Principles of Compulsory Seizure of Property of the Russian Federation and Its Residents” No. 2116-IX of March 03, 2022 defines the grounds and procedure for compulsory seizure of property, the need for which is caused, as stated in the preamble to the Law, by the full-scale aggressive war, taking into account the need for an immediate and effective response to existing threats to the national interests of Ukraine.
The Law declares the following provisions:
- Which Legal Relations Are Covered by the Law
The Law applies to legal relations in the process of forcible seizure of property of the Russian Federation and its residents on the grounds of public necessity (including cases where military necessity so requires) in favor of the state of Ukraine.
- Which Property Can Be Forcibly Seized
Movable and immovable property, funds, bank deposits, securities, corporate rights, other property (assets) located (registered) on the territory of Ukraine and directly or through affiliates owned by the Russian Federation and its residents may be seized.
- Who Can Have Their Property Seized
On April 1, the Parliament passed the Law to clarify the list of persons whose property can be seized (Draft Law No. 7169 of March 15, 2022), namely:
- natural persons – citizens of the Russian Federation, as well as persons who are not citizens of the Russian Federation, but have the closest connection with the Russian Federation, in particular, have a place of residence there or are engaged in the main activity;
- legal entities (their branches, representative offices) carrying out their activities in accordance with the legislation of Ukraine on the territory of Ukraine:
- the founder (participant, shareholder) or beneficiary of which is directly or indirectly the Russian Federation; and/or
- in which the Russian Federation directly or indirectly has a share in the authorized (composed) capital, shares, other membership (participation in any form) in a legal entity; or
- in which legal entities, the founder (participant, shareholder) or beneficiary of which is directly or indirectly the Russian Federation, have a share in the authorized (composed) capital, shares, other membership (participation in any form) in the legal entity.
In addition, it is noted that by the decision of the National Security and Defense Council of Ukraine or a court, natural or legal persons (regardless of citizenship, place of residence, location, main activity, etc.) who:
– publicly deny or support the armed aggression of the Russian Federation against Ukraine, the establishment and approval of the temporary occupation of part of Ukraine, and who have not terminated or stopped their economic activities in the Russian Federation during martial law in Ukraine, may be equated to residents.
The Law will enter into force on the day following the day of its publication. The current version of the Law provides for the possibility of forcible seizure only of property of legal entities that are directly or indirectly related to the Russian Federation.
- Principle of Gratuitous Seizure
The forcible seizure of property of the Russian Federation and its residents in Ukraine shall be carried out without any compensation (reimbursement) of their value, given the full-scale aggressive war started and waged by the Russian Federation against Ukraine and the Ukrainian people.
- Procedure for Property Seizure
- the draft decision shall be submitted by the Cabinet of Ministers of Ukraine for consideration by the National Security and Defense Council;
- the decision to forcibly seize property of the Russian Federation and its residents in Ukraine shall be adopted by the National Security and Defense Council of Ukraine and shall be enacted by a decree of the President of Ukraine;
- no later than six months after the abolition or termination of martial law in Ukraine, the decree of the President of Ukraine, which enacted the decision of the National Security and Defense Council of Ukraine on the forcible seizure of property in Ukraine and its residents, shall be approved by the Verkhovna Rada through the adoption of a correspondent law.
- Status of Seized Property
- the property shall be transferred to the ownership of the state;
with regard to the property the right of ownership to which is subject to state registration, such right shall be registered by the state represented by the Cabinet of Ministers of Ukraine at the request of the Cabinet of Ministers of Ukraine only on the basis of the decree of the President of Ukraine, which enacted the decision of the National Security and Defense Council.