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For the past 17 years, Ukraine’s moratorium on the sale of agricultural land was a given. But recently the drive to lift the moratorium is gaining strength, with more support from activists, members of parliament and farmers.
Switching to a land market, however, will require careful attention to avoid land grabbing by oligarchs and foreign players like Russia or China that can pose a security threat. According to World Bank estimates, with a land market, Ukraine’s annual gross domestic product will increase by up to 1.7 percent annually, or billions of dollars. So it is important to ensure that the rules are fair.
Even though most Ukrainians still oppose a land market in Ukraine, experts are confident that the moratorium will be lifted before long.
In 2001, the country introduced the moratorium to prevent the concentration of land ownership in the hands of a few wealthy citizens and to ensure that land was not sold to foreigners. This step, they said, would help small farmers compete. Initially, the moratorium was supposed to be temporary.
Igor Ogorodniychuk, a partner at OMP law firm, says that people have effectively been trading land plots all this time.
“For decades we have had the means to bypass the moratorium. And a lot of farmers have been using this circumvention — sometimes out of their own will, and sometimes out of necessity,” explains Ogorodniychuk. “One such (method of) circumvention is the land plot exchange scheme.”
Under this scheme, parties sign a contract to exchange land plots. The party with the smaller land plot pays additional money to compensate for the size difference. Legally, this is an exchange and not a sale.
But this bypass is inefficient and still slows down economic activity, which is why Ukraine’s Western donors, business associations, the European Court of Human Rights, and pro-market politicians want to end the moratorium and allow the free circulation of arable land.
Polls show most against land market
According to a report published in November 2018 by three leading sociological groups — Kyiv International Institute of Sociology, Rating Group and Razumkov Center — 71 percent of the country’s population opposes a land market, with most of the opponents living in rural areas.
Acting Agriculture Minister Olga Trofimtseva, a supporter of lifting the moratorium, says that a land market should be created carefully.
“I am very cautious about that… because I know about the sensitivity of this topic, I know about the complexity of this topic and that’s why, to tell the truth, this is exactly the kind of reform where we cannot allow ourselves any kind of mistakes,” Trofimtseva told the Kyiv Post. “We should be prepared perfectly here. Because in such an important and sensitive issue like the land market, even a small gap can be the reason for huge turmoil…”
There are two legal ways to lift the moratorium, explains Oleg Kachmar, a partner at Vasil Kisil & Partners law firm: “Either the Verkhovna Rada passes the respective law and abolishes the moratorium, or the Constitutional Court recognizes (the moratorium as unconstitutional).”
In September 2018, 69 members of parliament submitted a motion to Ukraine’s Constitutional Court to lift the moratorium. But the court refused to accept the motion.
The outgoing parliament upheld the moratorium in December and then-President Petro Poroshenko signed the bill in February. The legislation will be in effect until Jan. 1, 2020.
Populist politicians have been hesitant to lift Ukraine’s landsales moratorium. They play on fears that other countries will buy up Ukraine’s land. The moratorium hasn’t been lifted for almost two decades, despite World Bank estimates that a land market could add billions of dollars to Ukraine’s economy yearly.
However, activists are trying to abolish the moratorium by using international courts. This resulted in a European Court of Human Rights ruling that the state violated the rights of property ownership of two Ukrainian retirees. Moreover, the court established that “the burden imposed (by the moratorium) on the two applicants had been excessive.” The court advised Ukraine to “take appropriate legislative or other measures to ensure a fair balance between the interests of farmland owners and the general community.”
Olga Balytska, a lawyer at PWC Legal in Ukraine, is outspoken against the land moratorium. “I have personally spoken with the judges (of the European Court of Human Rights). The European courts do not write anything just for the sake of writing. They have left the possibility for the citizens to protect their rights not only through the legislative branch but also in Ukrainian courts.”
Balytska and her colleagues have decided to refer land disputes of their clients to courts. They are currently handling a pro bono case of selling one hectare of land in Lviv Oblast to farmer Dmytro Ognyov. So far the case is heard by the court of appeals in Lviv, the city of 720,000 people located 541 kilometers west of Kyiv. Balytska is upbeat about winning the case. Kachmar, however, is not.
Trofimtseva thinks the moratorium might be lifted in 2020, but that creation of a land market would take another five years.
Limiting amount of land that can be owned
Balytska says that Ukraine’s “registration system is ready” for ending the moratorium, but thinks that lawmakers might impose additional safeguards to limit the number of hectares that a person can own.
Kachmar says that modernizing the state land cadaster is important to ensure transactions are properly filed and to make it more difficult to rent land plots to several lessees — a widespread practice in Ukraine.
Ogorodniychuk also supports the idea of establishing the rules of the game before letting market forces rule. He advises to limit the scope of the market “to citizens of Ukraine by the number of hectares held in one pair of hands” and by establishing the minimum price per hectare. Establishing such safeguards “will take away the social tension,” says Ogorodniychuk.
When people start selling and buying land, the courts will face a wave of cases, Kachmar predicts. “There is no ideal system or ideal regulation and no matter how good our law is time will call for corrections of some issues,” he says. “The earlier the state starts this process and opens up this market, the earlier we will be able to overcome all the difficulties, obstacles and gaps in regulation. The earlier this happens, the better for all.”
