Category: Ukraine

The owner’s rights are guaranteed by the Constitution. However, a person can still be restricted or stripped of enjoying its title to the property if so provided by the statutory law passed by Verkhovna Rada. Mandatory transfer of property for the needs of defence or other public emergencies is called requisition and such transfer must be subject to prior and fair compensation, except “where extraordinary circumstances require otherwise”.

Requisition

The statutes on the extraordinary periods and respective regulations direct the executive branch of the government to create a plan for enabling responses to the national security threats. The plan adopted by Ukraine’s Cabinet of Ministers on 24 February 2022 stipulates possibility of requisition in the form of mandatory (a) divestment by private and municipal owners and (b) disposal (in use, lease, consignment etc.) of the property owned by state enterprises, public business organizations may be seized for public needs. 

The decision to requisition – sell or otherwise dispose – the assets must be made by a respective authorized body: the defense council at a corresponding district or military administrations (if any), military brass, intendants.  

The owner is entitled to request: 

• a certificate signed by the requisitioning officer and by the body that approved the transfer. Please note: property can be requisitioned without approval in the war zone or threatened by the war conflict. Given RF invasion tactics of deliberate rocket and airplane strikes anywhere in Ukraine, there seem to be no clear line between a war zone and safer territory (unlike 2014-2021 period, where localities for intensive fighting or imminent threats could have been defined with more precision). As an entrepreneur or an officer of the company, one should be prepared for requisition by developing the certificate templates and the updated list of inventory and fixed assets. Unfortunately, the tax law does not comprise favorable regime for donation of the assets to the defense sector even as it often were the only ratinal way to use or dispose of it in the war zone;   

• an appraiser’s report on the value of the requisitioned assets – to be issued by independent certified appraiser or state (local) authority, which should guarantee unbiased approach to the price of compensation to the owner. However, it is easy to foresee disputes about true value and valuation methods, therefore, both transferor and the transferee can contest the report in the court.  

The compensation to the owner must be made as follows: 

• Prior compensation in full can be paid by the state treasury prior to signing of the transfer certificate. Obviously, a requisitor has limited funds. Moreover, the owner is unlikely to check or even have the access to the data on whether the funds are sufficient or available at all – due to lack of time, fluid situation and secrecy of the subject. Since detailed criteria are not set in the law, the rationale for the refusal to compensate immediately for the transferred property will have to be tested by the court; 

• subsequent compensation in full is paid within 5 years after the cancellation of a martial law. To receive the subsequent full compensation, a former owner should file an application supported by the transfer certificate and the appraiser’s report to a local center for [military] recruitment and [veteran’s] social support. Considering that anyone would not have a slight idea when the aggression, ongoing as of 2014 will end, it may prove elusive to rely on the subsequent compensation or return of property at a fair price;  

• return of assets – a former owner may request the replacement, where available, or return their property (if it was preserved) by applying to court. However, they will be required to give back the money paid to them as consideration for such property. It is unclear, how the owner will be compensated for damage, wear and tear; or whether owner will have to pay for any difference in price (in case of replacement with better asset), upgrades and retrofitting (in case of return).  

In addition, Directive no. 186-р of the Cabinet of Ministers of Ukraine dated 26 February 2022 ordered transfer in care of Ukraine’s Ministry of Defense of all the previously confiscated, abandoned and abeyant property (where title is already passed to the state).  

Property of the Aggressor State(s)

Bill “On Fundamentals of Compulsory Seizure of the Russian Federation and the RF Residents’ Property in Ukraine” provides that any assets owned by the Russian State or its residents on the territory of Ukraine must be seized (confiscated) without consideration or compensation. Decision to seize the assets will be made by the National Security and Defence Council of Ukraine; under the Constitution, all decisions of that body are made effective through a Decree of the President of Ukraine. No hostile action has yet been made with respect to Republic Belarus or its resident business and natural entities.  

Protection of the Title Marketability

Besides the requisition, martial law may be limiting the possession, use or disposal of property – e.g., military or its stock may be stationed in the real estate, transport vehicles used part-time for defence supplies or intelligence tasks, the equipment used for production of the emergency needs. However, lawful limitations are strictly regulated: property may be requisitioned only by designated authorities. And, if the owner does not receive the compensation or has other claims, they can appeal to judiciary.  

Nevertheless, the wars and other military conflicts had been famously showing unlawful limitations and deprivation of property. Therefore, when someone misappropriated or swindled a property of a person or company, or does not respect the owners’ rights, standard rules for disputes apply regardless: vindication (claiming for unlawfully owned property), negation (recognizing the transaction concluded under pressure or due to difficult circumstances invalid or applying such consequences to a void transaction) or negatory claim (eliminating obstacles to exercise property rights). Under the martial law, judiciary are not terminated, suspended or restricted, just as well as the constitutional right to seek protection in the courts. However, the office hours of each court are based on the ongoing situation – the hearings at or correspondence with the court may be scheduled in other location or another day to ensure safety and due process of the people involved. It is worth noting that so far a few owners succeeded in defending their rights, and usually after several years – based on the cases related to the property located in the annexed territory of the Autonomous Republic of Crimea and occupied districts in Donetska region and Luhanska region.  

Resources: Plan for introducing and ensuring measures to implement the legal regime prescribed by the martial law in Ukraine: approved by Cabinet of Ministers of Ukraine Resolution no.181-р dated 24 February 2022.

By Oleh Zahnitko, Partner, Integrites

On March 30, the Antimonopoly Committee of Ukraine (the AMCU) adopted Recommendations on some issues related to submission and consideration of applications for permission for concerted actions, mergers of economic entities during martial law (Recommendations). 

During martial law: 

• Participants to mergers/concerted actions are NOT exempt from obligation to submit to the AMCU applications for permission for concerted actions or for mergers of economic entities in cases provided by Antitrust legislation. 

• The capacity of economic entities to collect, prepare and submit relevant applications may be limited (in particular due to the consequences of military actions). The AMCU allows entities to submit an abbreviated list of documents, however, applications must contain the minimum list of data specified in the Recommendations: ​

1. name of the state body; reference to the relevant legal act, which provides for submission to the AMCU; names and details of the participants of the merger/concerted actions, their activities; names and contacts of responsible persons or representatives; 

2. essence of the merger/concerted actions; list of documents and information attached to the application; 

3. information on ultimate beneficial owners of the parties to the merger/concerted actions and the presence in their structure individuals and legal entities – residents of Russia; 

4. documents confirming payment of the fee for the submission of application, the scheme of control relations of the parties to the merger/concerted actions; copies of powers of attorney of authorized representatives; copies of documents for identification of an individual – an applicant. ​

• The application and the documents attached thereto must be submitted to the AMCU at least 15 calendar days before the merger or concerted actions. 

• The AMCU introduces a simplified application procedure and the possibility to submit an application by e-mail. 

At the same time, during martial law the AMCU is working remotely and doesn’t have the access to state registers, that’s why a new term was set – three months after the cessation or abolition of martial law, during which: 

• applicants or their authorized representatives must submit to the body of the AMCU documents and information according to jurisdiction specified by law, which were not submitted with the application during martial law; and 

• the AMCU resumes consideration of the application received. 

Besides, in such circumstances the AMCU may consider the applications on merits AFTER the concerted actions or mergers have been conducted by the economic entities. ​

The responsibility for such violations during martial law is regulated as follows: 

• The amount of fines will vary depending on the applicants’ compliance/non-compliance with the requirements set out in the Recommendations. 

• In case of merger conducted during martial law without the relevant permission of the AMCU, if such a permission is necessary and such a merger does not lead to monopolization or significant restriction of competition in the whole market (or in the most of its part) and is not prohibited in accordance with the Law of Ukraine “On Sanctions”/concerted actions are not prohibited, the fine will be determined in the amount that doesn’t exceed 3000 non-taxable minimum incomes (only if the requirements and deadlines for filing and submitting the application specified in the Recommendations are met) – UAH 51,000. 

• If an undertaking violated the requirements and deadlines for filing and submitting the application specified in the Recommendations, the fine will be determined in the amount that doesn’t exceed 20,000 non-taxable minimum incomes – UAH 340,000. 

• The fine will be determined in the maximum amount, if the ultimate beneficial owner(s) of one of the parties to the merger/concerted actions is the russian federation or citizens of the russian federation who have supported military aggression against Ukraine, or if the AMCU has reasonable suspicions that the purpose of the merger is to remove assets/shares/units/stocks from the scope of international sanctions imposed for military aggression against Ukraine. 

By Yaroslav Medvediev, Counsel, Integrites

From February 24, 2022, under martial law, the banking system operates in a special mode.

Payments within Ukraine

• Non-cash payments. There are no restrictions on the use of standard accounts. According to the NBU, the electronic payment system (EPS) operates normally. Banks of Ukraine are connected to EPS and continue to operate as usual and without interruptions.
• E-money. Banks issuing e-money suspended issuance of e-money, replenishing e-wallets with e-money, and e-money distribution. Quasi cash transactions (replenishment of e-wallets, brokerage or forex accounts, payment of traveler’s checks, purchase of virtual assets, etc) and P2P transfers are limited to UAH 100,000 (equivalent) per month.
• Cash.There are restrictions on cash withdrawals: UAH 100,000 per day (excluding wages and social benefits) or the equivalent of up to UAH 100,000 in foreign currency.

Restrictions do not apply to the accounts of enterprises that ensure the implementation of mobilization plans and in bank branches located in areas threatened by Russian occupation (these are probably the areas with the most intense hostilities).

However, many bank branches did not work and, accordingly, did not provide cash for civil transactions. In turn, retail stores that have card payment terminals can issue cash if it is in cash register.​

Foreign economic transactions and other transfers in foreign currency are frozen.

Exceptions (quite wide) are:

• Operations to carry out mobilization and other activities;
• Import operations of residents on the purchase of goods of critical imports, approved by the Resolution of the Cabinet of Ministers of Ukraine № 153 of February 24, 2022 (with further additions). These include items of tactical protection, medicines, medical devices, semiconductors, fuel, energy carriers, most groups of food and components, paper products, plant protection products, seed material, electric generator sets, chemical alkalis and acids, sewing material made of cotton and staple, agricultural inputs, raw materials for the production of light industry goods, etc;
• By special permission of the NBU on the submission of the Cabinet of Ministers of Ukraine.

Foregoing payments are made by banks under a significantly simplified procedure of currency supervision and without restrictions.

Payments on transactions with the aggressor state

Any payments are prohibited:

• with the use of Russian or Belarusian rubles;
• with the use of cards issued in the territory of the Russian Federation or the Republic of Belarus or transfers using systems that have participants from these countries;
• to fulfill obligations to persons who are registered or permanently resident in the Russian Federation or the Republic of Belarus;
• to fulfill obligations to the business entity, controlled or beneficially owned by persons from the Russian Federation or the Republic of Belarus.

By Igor Krasovskiy, Partner, and Oleh Zahnitko, Partner, Integrites

On 30 March 2022, the Antimonopoly Committee of Ukraine (the “AMC“) adopted the guidelines on the merger control procedure during the time of the martial law in Ukraine (the “Guidelines“).

Pursuant to the Guidelines, the obligation to obtain prior clearance for notifiable transactions remains in force during the time of the martial law. The AMC will accept the filings but will review them only after the end of the martial law. If the transaction is closed before the approval of the AMC is received, the AMC will impose capped nominal fines for non-problematic transactions if they were timely filed pursuant to the Guidelines.

Key points of the Guidelines:

• the parties may initially submit a shortened set of information/documents together with a filing;
• the parties will have up to 3 months after termination of the martial law to submit the outstanding information/documents (within the standard scope required by the Ukrainian Merger Control Regulation);
• the filing should be submitted not less than 15 calendar days prior to closing of a notifiable transaction;
• the filings should be submitted to the AMC’s office in Lviv;
• the parties are allowed to submit a filing via email if they are unable to submit it to the AMC’s office in Lviv;
• the filings are/will not be reviewed by the AMC during the time of the martial law;
• the AMC will start reviewing the submitted filings after termination of the martial law, and after receiving the full set of information/documents.

Potential fines

The amounts of a gun-jumping fine for filings will be as follows:

– up to UAH 51k (approx. EUR 1.6k) if (i) a transaction does not lead to monopolisation of or a significant restriction of competition in the Ukrainian market(s), (ii) such transaction is not prohibited under the Law of Ukraine “On Sanctions”, and (iii) a filing is timely submitted in accordance with the Guidelines;
– up to UAH 340k (approx. EUR 11.5k) if (i) a transaction does not lead to monopolisation of or a significant restriction of competition in the Ukrainian market(s), and (ii) the parties failed to timely submit a filing in accordance with the Guidelines; and
– 5% of the acquirer’s annual turnover (possibly at a group level) in cases where:

• the russian federation or its citizen(s) supporting military aggression against Ukraine are UBO(s) of at least one of the parties to the transaction; and/or
• the AMC has substantiated suspicions that the transaction is aimed to evade international sanctions related to the russian military aggression against Ukraine.

Minimum set of information/documents

The filings should initially contain the following information/documents in order to be submitted:

• the description of a notifiable event(s);
• the description of the parties’ activities in Ukraine;
• the description of control relations between the parties’ entities which are registered and/or active in Ukraine – up to the level of the ultimate beneficiary owners;
• the control charts of the parties prior to and after implementation of a transaction;
• the information on russian shareholders (if any) of the parties;
• the PoAs for the authorised representatives of the parties;
• the filing fee payment order.

The parties will have up to 3 months after termination of the martial law to submit the rest of the information/documents from the standard set required by the Ukrainian Merger Control Regulation. Meanwhile, the parties are allowed to submit the full set of information/documents together with a filing, if possible.

By  Anastasia Usova, Partner, and Denys Medvediev, Senior Associate, Redcliffe Partners 

On 24 February 2022, the Russian Federation launched a military aggression against Ukraine. This became the basis for the imposition of the martial law in Ukraine from 24 February 2022, with further extension until 26 April 2022.

Military aggression of the Russian Federation and/or its consequences on the territory of Ukraine may directly or indirectly affect the ability of a party to a contract (including an international contract) to fulfill its obligations to its contracting party. 

Please see the answers to key questions about force majeure, as well as important recommendations. 

Is the military aggression of the Russian Federation against Ukraine a force majeure circumstance? 

Yes. 

On 28 February 2022, the Ukrainian Chamber of Commerce and Industry (the CCI of Ukraine) deviated from the standard procedure for the certification of force majeure by issuing certificates individually and issued a general official letter certifying force majeure: military aggression of the Russian Federation against Ukraine, which led to the imposition of martial law from 05:30 a.m. on 24 February 2022 for a period of 30 days, according to the Decree of the President of Ukraine dated 24 February 2022 No. 64/2022 “On the imposition of martial law in Ukraine”. 

The CCI of Ukraine confirmed that these circumstances from 24 February 2022 until their official ending, are extraordinary, unavoidable, and objective circumstances, in particular, for the parties to the contract, if the fulfillment of obligations under the contract became impossible within the specified period due to the occurrence of such force majeure circumstances.  

The letter of the CCI of Ukraine in Ukrainian and English is available on the website of the CCI of Ukraine. 

How to use the letter of the CCI of Ukraine and whether it is necessary to additionally apply to the CCI of Ukraine / its authorized regional CCI to obtain a certificate? 

This question depends on the situation. 

Letter of the CCI of Ukraine:  

• may be used by anyone to whom it may concern; 

• allows a party to a contract not to apply to the CCI of Ukraine / its authorized regional CCI to obtain a force majeure certificate for a particular contract, while martial law is in effect in Ukraine; 

• at the same time, it is not an individual confirmation of the existence of force majeure under a specific contract, but rather a general clarification.   

Therefore, the party, which does not have an objective opportunity from 24 February 2022 to fulfill its obligations under the contract, should notify the contracting party about this and attach a general letter of the CCI of Ukraine.  

If the contracting party denies that the military aggression and/or its consequences on the territory of Ukraine interfere with the fulfillment of the obligations, then after the cancellation / termination of martial law, it is recommended to apply to the CCI of Ukraine for a force majeure certificate under a specific contract, having previously collected supporting evidence (see Recommendations below).  

Is the military aggression of the Russian Federation against Ukraine a force majeure circumstance for each contract?  

No. 

The military aggression of the Russian Federation against Ukraine and its consequences cannot be a force majeure for every contract. This is explained by the fact that active military operations do not take place on the entire territory of Ukraine, and the imposition of martial law has not yet led to significant restrictions of rights and freedoms. In addition, these circumstances do not make it possible to fulfill all contractual obligations without exception.  

In order to determine that the contractual obligations are impossible to fulfill (namely, “impossible” itself, not “difficult” or “unprofitable”), the party must assess which specific events during the war do not allow it to fulfill its own obligations. The main condition is the existence of a causal link between the war and the affected party’s inability to perform the contract. 

The impossibility of performance must be caused by events independent of the party to the contract. If the impossibility is due to the acts or omissions of the party, then such an event is not force majeure. 

Circumstances that are generally not considered force majeure: financial and economic crisis, default, increase of official and commercial exchange rates of foreign currency to national currency rate, non-compliance/violation of obligations by the debtor’s contracting party, lack of goods on the market necessary to fulfill the obligation, lack of the debtor’s necessary funds, etc. 

In this context, consider three possible options: 

• The performance of the contractual obligation became temporarily impossible.   

• The performance of the contractual obligation became completely impossible. 

• The performance of the contractual obligation is possible (even if additional funding or other efforts are required). 

Examples. 

(1) The party is temporarily unable to fulfill its obligation to deliver the goods to locality that is besieged by the occupier for a certain period of time, due to the disruption of the logistic chain. 

(2) A party cannot completely fulfil its obligation, if as a result of hostilities, the subject of the contract, which cannot be replaced by another, has been destroyed, or the factory where the goods are to be manufactured has been destroyed. 

(3) The party is unable to fulfill its obligations to pay for the goods due to a lack of full amount due to the situation in Ukraine.  

Does the existence of force majeure circumstance exempt from the fulfillment of contractual obligations? 

No. 

In general, a force majeure circumstance does not allow a party to the contract to avoid fulfilling its obligations after the effect of such a circumstance has expired. Force majeure circumstances allows to suspend obligations or release the party from liability for improper performance (payment of fines, penalties, etc.). Force majeure may also be a ground for amending or terminating a contract. 

The contract may also provide for other consequences of force majeure (for example, prolonged effect of force majeure may give a party the right to terminate the contract unilaterally, or, conversely, impose additional obligations, such as finding a new contracting party, replacing the goods, etc). 

Recommendations for the parties if: 

• the war and its consequences have affected the ability to fulfil your own contractual obligations; 

• the contracting party invokes in bad faith the war and its consequences as force majeure. 

The algorithm of action in both cases is almost the same. 

1. Check all existing contracts and highlight those obligations that: 

• are due after 24 February 2022, and 

• cannot be fulfilled due to the war and its consequences.  

2. Check the wording of the force majeure clauses in the contract: 

• Which specific circumstances are included into the contract?  

• What is the “standard” of the impact that force majeure has on performance of contractual obligations – just an impossibility to perform the contract or other consequences as well? 

• Is it necessary to obtain confirmation of the occurrence of force majeure circumstance and where? 

• In what terms and how exactly it is necessary to notify the contracting party? 

• What are the consequences of the force majeure notice? 

3. Check the applicable law, as it may supplement the contractual provisions on force majeure: 

• If Ukrainian law is applied to the contract, except for the contractual provisions on force majeure, analyze the provisions of Article 141 of the Law “On Chambers of Commerce and Industry” (including war, military events, etc. as force majeure), as well as the provisions of Article 617 of the Civil Code of Ukraine and Article 218 of the Commercial Code of Ukraine. 

• If the law of a foreign state is applied (mainly for international contracts), it is advised to check the default provisions of the applicable law with regard to force majeure (if any), as well as the peculiarities of the application of this institution in the relevant legal system. 

• If international instruments are applicable, e.g., the Vienna Convention of 1980, the UNIDROIT Principles, it is recommended to check the provisions set therein and align them with those in the contract. 

4. Check the consequences of notification / non-notification of force majeure circumstance, in particular: 

• Is there a maximum time limit for force majeure? 

• Will the force majeure notice result in termination of the contract? 

• Will the force majeure notice under one contract have negative impact on other related contracts (e.g., within a single project or chain of contracts)?  

• Do you have to send a force majeure notice to other contracting parties (for example, an insurance company or a bank)?  

• What are the consequences of non-notification or notification after the deadline?  

5. Contact the contracting party immediately, report the force majeure and explain the (temporary) impossibility of performance of contractual obligations.  

Without justifiable reasons, the terms and procedure for notification of force majeure circumstance cannot be violated, otherwise the right to force majeure may be lost. 

If possible, send the message in the manner prescribed by the contract. However, if in military conditions such a method is temporarily unavailable, you can use another reliable way to record the performance of dispatch: by e-mail, SMS-message or via messenger to the address of the director (another authorized person) with an explanation of the reasons for deviation from the method provided by the contract. 

The other party has the right to require evidence of force majeure. 

6. Collect evidence confirming the impossibility to fulfill your specific contractual obligations due to the war and its consequences in Ukraine. Such evidence may include: publications in the media, letters from other contracting parties, confirmation of the existence of force majeure circumstances from the competent authority (specified in the contract). It is also important to record the impossibility to fulfill the contractual obligations in the company’s internal documents (internal orders, etc.). All this evidence may subsequently be of great importance in the classification of a particular circumstance as force majeure.  

7. Be very careful when communicating with your contracting party. Keep the records in writing and record audios (with an appropriate warning thereof). It can be of crucial importance for further dispute resolution, if it comes to that.  If you agree to amend the contract or terminate it within the process of communication, it will facilitate further formalization of the arrangements. 

8. Check your insurance. As a rule, war is an exception. However, some insurers in the event of war provide separate insurance products (e.g., political risk insurance). Companies with an insurance policy are strongly recommended to look into it. And if such an event is considered as an insured accident, you should notify the insurance company immediately and take other steps provided for in the policy in order to maintain the right for an insurance compensation.  

9. Entering the new contract after 24 February 2022, be careful. As a general rule, circumstances which existed or could be foreseen at the time of the conclusion of the contract, cannot be qualified as force majeure.  

If your contracting party wrongfully invokes force majeure to justify failure to perform its obligations, please use the recommendations above. 

By Olena Perepelynska, Partner, Integrites

24 March 2022, Law of Ukraine “On Arrangement of Labour Relations under Martial Law” No. 2136-ІХ dated 15 March 2022 (the Law) entered into force.

The Law provides more opportunities for employers to promptly respond to challenges during the war and introduces the following key amendments to the instruments governing employer-employee relations:

• Form of Employment Agreement: the written form is no longer required in cases set forth in the Labour Code.
• Probation: when an employment agreement is concluded, a probation period may be set for any category of employees without the restrictions referred to in Part 3, Article 26 of the Labour Code.
• Replacement of Absent Employees: employers may enter into fixed-term employment agreements with new employees for the period over which the war continues or a temporary absent employee is replaced.​
• Transfer to another job: while the martial law remains in effect, an employer is entitled to transfer an employee to another job (position) not covered by the employment agreement without his/her consent (however an employee may not be relocated to the other area where active hostilities continue):

     – if such duties are not medically contraindicated for the employee;

     – with no other purpose other than to prevent or eliminate consequences of hostilities or other circumstances that endanger or may endanger lives or normal living conditions of people;

     – with the renumeration not less than the average salary for the performance of their previous duties.​

• Change of Essential Terms of Employment: an employer may change essential terms of employment due to changes in arranging operations and labour without giving a 2-month prior notice to the employee. Should the employee disagree with such changes, he/she may be dismissed by virtue of Clause 6, Part 1, Article 36 of the Labour Code.
• Resignation: an employee may terminate the employment agreement on his/her own initiative without giving a 2-week prior notice to the employer if the area where the enterprise is located is under attack, and the employee’s life and health are endangered.
• Dismissal during Temporary Incapacity or Vacation: an employee may be dismissed when on sick leave or vacation (except when a woman is on pregnancy or maternity leave), and the dismissal date will be the first working day following the temporary incapacity end date specified in the document proving temporary incapacity or the first working day after the vacation.
• Working Hours and Leisure Time: while the martial law remains in effect, normal working hours of employees may not exceed 60 hours per week (50 hours for the employees with less working hours as set forth by law). The time when an employee should start and finish his/her daily work (shift) is determined by their employer, and the duration of weekly uninterrupted leisure time may be reduced up to 24 hours.

During the period while the martial law remains in force, working hours on the day before holidays, days-off and weekends are not reduced, and overtime thresholds, regulations on “no work on holidays, days-off and weekends” as well as on the shift of holidays and weekends do not apply.

• Leaves: the duration of an annual basic paid leave provided to employees is 24 calendar days. While the martial law remains in force, an employer may deny the employee’s request for any type of leave except for the pregnancy and maternity leave, if such an employee is engaged in operations of critical infrastructure facilities.

Upon the employee’s request, the leave without pay may be provided for an unlimited period.

• Employment of Women and Disabled People: women (except for those who are pregnant or breastfeed a child under the age of one) may be engaged to perform hard work or work presupposing harmful or dangerous working conditions, and underground work.

Pregnant women, women with children under the age of one, disabled people who have respective medical contraindications may not be engaged to perform works at night, unless absolutely necessary.

• Possibility to Postpone Payment of Salaries: the Law says that an employer may postpone the payment of salaries if their inability to pay salaries results from armed hostilities. Should this be the case, the employer becomes obliged to pay salaries as soon as the company recuperates to perform its activities.​
• Release of Employer from Liability for Delayed Payment of Salaries: if an employer proves that such a delay was caused by hostilities or other circumstances of insuperable force, the Law releases them from liability. However, it does not mean that the employer is no longer obliged to pay salaries.
• Possibility to Suspend the Payment of Salaries: if an enterprise is unable to pay salaries due to armed hostilities, such payments may be suspended until it recuperates to perform its main activities.
• Partial Termination of Collective Bargaining Agreement: certain provisions of the collective agreement may be suspended on the employer’s initiative for the period while the martial law remains in effect.
• Suspension of Employment Agreement: an employment agreement may be suspended due to military hostilities which exclude the opportunity to provide services and perform works. Suspension means the temporary release of an employer from its obligation to provide the employee with work and the temporary release of an employee from its obligation to perform work under the employment agreement which does not result in the termination of employer-employee relations. The employer and the employee must notify each other of such suspension, if possible, by any available means.

The Law says that salaries, guaranteed amounts and compensations to employees for the period while their employment agreements are suspended must be reimbursed by the aggressor state.

• Trade Unions: while the martial law remains in force, the consent of the trade union is not required to terminate an employment agreement on the employer’s initiative. This rule does not apply to cases when the employees elected to trade union bodies are dismissed. Employers are also released from their obligation to pay contributions to trade unions.
• Keeping Records: to minimize costs for keeping all HR records, the Law enables the employer, at their own discretion, to determine the order of HR operations as well as the list of HR documents to be kept while the martial law remains in force. At the same time, the employer shall keep faithful records of the works performed by its employees and payroll costs.

The Law stipulates that the provisions of labour laws governing the relations regulated by the Law do not apply while the martial law remains in force.

By Illya Tkachuk, Partner, Integrites

One of Ukraine’s legal responses to Russia’s full-scale aggression was a legislative initiative aimed to confiscate the property of the aggressor state. On 3 March, the Ukrainian Parliament put this initiative into practice by adopting the Law of Ukraine “On Basic Principles of Confiscation of Property Held in Ukraine by the Russian Federation and its Residents” (“Law”), and on 10 March, the Law was signed by the President.

How and against whom will the confiscation be carried out?

The Law establishes an extremely efficient and quick confiscation procedure. The Ukrainian Government determines the list of the relevant property, while the National Security and Defence Council (an advisory body to the Ukrainian President) adopts the decision on confiscation, which shall then be enacted by a presidential decree. The Law also provides that within six months after the martial law is lifted, the relevant presidential decree must be approved by the Ukrainian Parliament. The confiscated property will automatically be transferred to state ownership without any compensation once the presidential decree enters into force.

The Law applies to both the property of the Russian Federation and that of its “residents”. Because of the wording used, the media have spread the view that assets of Russian non-state businesses in Ukraine would also be confiscated. However, the Law gives a special definition of the term “resident”, which encompasses only those Ukrainian and foreign legal entities whose beneficiary or direct or indirect owner is the Russian Federation.

The question as to which Russian property Ukraine intends to confiscate under the Law remains open. After the beginning of Russian aggression in 2014, the share of Russian business in Ukraine, especially state-owned Russian business, has decreased dramatically. In addition, almost immediately after the full-scale Russian invasion, the National Bank of Ukraine revoked banking licences and initiated winding-up of the remaining state-owned Russian banks in Ukraine – Prominvestbank and International Reserve Bank (a subsidiary of Russian Sberbank) – from the market. The buildings and property of diplomatic and consular institutions enjoy immunity from confiscation under the norms of two Vienna Conventions. Thus, it is yet unclear what kind of property the government will propose the National Security and Defence Council to seize under the Law. Perhaps it will concern goods and products which Ukrainian enterprises have not delivered to Russian state-owned companies due to the outbreak of hostilities. According to some media reports, Ukrainian authorities have already drawn up a list of potential targets, containing more than 20 enterprises.

Can Russia prevent or appeal against confiscation?

Russia and the companies controlled by it are likely to seek ways to reverse or at least obtain compensation for the confiscation of their property. Given the unambiguous provisions of the Law, it seems unlikely that they will be able to appeal against the confiscation of property on the basis of procedural violations. However, they may try substantiating their case by references to rights and freedoms enshrined in the Ukrainian Constitution. Article 41 of the Constitution provides that the right of private property is inviolable, prohibiting the confiscation of private property without full compensation. It is difficult to predict whether such arguments will be successful in Ukrainian courts, as it will largely depend on the facts of the case, including the types of property involved. For example, different counter-arguments could be raised in relation to property directly owned by state bodies or companies of the Russian Federation as opposed to property privately owned by a Ukrainian company that indirectly belongs to Russia.

In addition, we should keep in mind that the Agreement on Encouragement and Mutual Protection of Investments (“Agreement”) between Ukraine and Russia remains in force. The provisions of this Agreement imply, inter alia, that any expropriation must be followed by a prompt, adequate, and effective compensation. The Agreement contains no explicit exceptions to this rule. Most probably, in the event of confiscation under the Law, an investment claim would be brought against Ukraine under the Agreement. Again, the prospects of such a claim are anything but certain.

Issues at play in potential investment dispute

First, only “investors” can file a claim under the Agreement. The definition of an “investor” under the Agreement covers legal entities established under Ukrainian or Russian law, respectively, and does not apply to Russia or Ukraine as states (or their state bodies). Thus, if the property owned directly by Russia (e.g., by one of its governmental authorities) is expropriated, it would not have the opportunity to make a claim under the Agreement, since it would not qualify as a protected investor.

Second, a claim can only be filed with respect to “investments”. The prerequisites for an asset to qualify as an “investment” is a separate and complex topic, but it is safe to say that transactions in ordinary international trade (for example, goods bought but not yet delivered to Russia) most likely will not be regarded as investments.

Second, even if criteria of “investor” and “investments” are met, Ukraine still would be able to raise a number of arguments in defence of the potential investment claim. For example, customary international law sets out a number of “grounds precluding wrongfulness”, exceptions according to which a state may be wholly or partially exempted from liability for acts constituting a violation of international law (in this case, a potential violation of the prohibition of expropriation).

One of such tools is the doctrine of necessity, recognised as part of customary international law. It provides that the wrongfulness of a state’s conduct may be precluded if its actions are aimed at protecting its essential interests against a grave and imminent peril. However, such actions must be the only available course of action and must not affect other essential interests. There is no doubt that Russia’s full-scale military aggression against Ukraine poses a grave and imminent threat to Ukraine and its essential interests, as it calls into question its territorial integrity and very existence as a sovereign state. Ukraine can also argue that the expropriation of Russian property is the only response possible in the face of such an unprecedented violation of international law by Russia. In international investment disputes, necessity has been applied successfully in a few cases only. In LG&E v. Argentina, for example, government representatives proved that the imposition of price controls in response to a severe economic crisis was the only feasible step to restore economic stability and public peace in Argentina. However, in other cases that involved claims by other investors under the same factual circumstances, the arbitrators did not consider it possible to apply the state of necessity. Therefore, to successfully avail of this defence it will be essential for Ukraine to prove that the expropriation was the only possible step in these factual circumstances.

Another potential line of defence is to qualify the expropriation as countermeasures, another ground precluding the wrongfulness of the state’s conduct. Countermeasures are temporary non-performance by the state of its obligations under international law in response to a violation of international law by another state. However, the doctrine of countermeasures has not yet been successfully applied in international investment disputes. One of the main reasons is the view that countermeasures may only be applied against a state and not against investors of that state. In such a case, applying this line of defence to assets seized from Russian companies owned by Russia would require convincing arbitrators to take a more liberal and broad approach to countermeasures.

An attentive reader might wonder: if the Agreement gives Russian investors an opportunity for compensation, why not terminate the Agreement? Unfortunately, it’s not that simple. Even if Ukraine unilaterally terminates the Agreement, the Agreement will remain in force for 10 years for all Russian investments made prior to the termination.

Summary

The confiscation of Russia’s assets is an understandable and legitimate response to aggression. However, before applying it to specific assets of the aggressor state, Ukraine should carefully weigh potential benefits of against the existing international law restrictions and consider in advance whether such confiscation may lead to legal claims against Ukraine and what Ukrainian defences in such proceedings will be.

By Oleksiy Maslov, Senior Associate, Avellum

On March 16, the International Court of Justice (ICJ) delivered its order on Ukraine’s request for indication of provisional measures against Russia. 

By 13 votes to two, it ordered Russia to immediately suspend the military operations that it commenced on Feb. 24 in the territory of Ukraine and ensure that any military or irregular armed units which may be directed or supported by it, as well as any organizations and persons which may be subject to its control or direction take no steps in furtherance of the military operations. 

Both Ukraine and Russia were ordered not to aggravate or extend the dispute before the Court or make it more difficult to resolve.

The Court emphasized that in discharging its duty to prevent genocide, every state may only act within the limits permitted by international law. It observed that the Court is not in the possession of evidence substantiating Russia’s allegations that genocide has been committed in Ukraine. Moreover, “it is doubtful that the Convention, in light of its object and purpose, authorizes a Contracting Party’s unilateral use of force in the territory of another State, for the purpose of preventing or punishing an alleged genocide,” the Court added. 

Two judges who voted against provisional measures are judge Kirill Gevorgian, a Russian-born Vice-President of the Court, and judge Xue Hanqin from China. 

Judge Mohamed Bennouna, a Moroccan diplomat, also voiced doubts as to the Court’s jurisdiction to hear this dispute. However, he voted in favor of the order because he “felt compelled by this tragic situation, in which terrible suffering is being inflicted on the Ukrainian people, to join the call by the World Court to bring an end to the war.” 

Some judges also added that whilst they voted in favor of the non-aggravation measure ordered by the Court, they did not believe it should have been directed at Ukraine. Judge Patrick Lipton Robinson also expressed the view that it was “regrettable” that the Court did not grant Ukraine’s request for Russia to provide periodic reports on the measures taken to implement the Court’s order “in view of the very grave situation in Ukraine caused by the military operation.”

The Court’s order came only nine days after the first hearing in Ukraine v Russian Federation. 

Instead of showing up at the first hearing, on March 7, Russia filed a document objecting to the Court’s jurisdiction. It complained that the hearing was scheduled on “a short notice” and “it would be difficult, if not impossible, to take all necessary decisions regarding the participation in the proceedings and conduct proper analyses of the Request in five working days.”

Russia also complained that Ukraine attempts to litigate the issues of legality of use of force by Russia in Ukraine and the recognition by Russia of the occupied areas of eastern Ukraine as “Donetsk and Luhansk Peoples’ Republics” using the 1948 Convention on the Prevention and Punishment of the Crime of Genocide (Convention) as a vehicle.

Russia then went even further, reiterating that its so-called “special military operation” amounted to a self-defense under Article 51 of the United Nations Charter, of which it informed the Security Council on Feb. 24. 

It also tried to recant its own words by alleging that Russian dictator Vladimir Putin’s reference to genocide in the Feb. 24 address to Russian people was not “equal to the invocation of the Convention or the existence of a dispute under it.”

Russia hasn’t shown any signs of being ready to abide by the Court’s order. Assuming that Article 94(2) of the UN Charter regarding recourse to the Security Council is applicable only to judgements, there are no means to enforce Court’s orders.

On March 16, the Committee of Ministers of the Council of Europe, a human rights watchdog based in Strasbourg, decided that the Russian Federation ceases to be a member of the Council of Europe as from today, after 26 years of membership. For now, the European Court of Human Rights decided to suspend the examination of all applications against Russia pending consideration of the consequences of the Committee of Ministers’ resolution.

This decision came after Russia pre-emptively withdrew from the organization on March 15 in anticipation of expulsion. In its tweet, Russia’s Ministry of Foreign Affairs threatened that “responsibility for destruction of the common humanitarian space on the continent & the consequences for Council of Europe – which, without Russia, will lose its pan-European character – will be borne solely by those who are forcing [Russia] to take this step.”

On the same day, the Parliamentary Assembly unanimously recognized that Russia’s armed attack on Ukraine is “in breach of the Charter of the United Nations, qualifies as crime against peace under Nuremberg Charter and qualifies as “aggression” under the terms of Resolution 3314 (XXIX) of the United Nations General Assembly adopted in 1974.” 

The Parliamentary Assembly supported all efforts aimed at ensuring accountability, including the decision by the Prosecutor of the International Criminal Court (ICC) to investigate the situation in Ukraine and the establishment of a special investigation commission by the United Nations Human Rights Council. It repeatedly called upon Russia to comply with the interim measures indicated by the European Court of Human Rights on March 1 and 4, namely, cessation of military attacks against civilians and civilian objects in Ukraine.

By Mariana Antonovych, Senior Associate, Avellum

On March 7, or the 12th day of Russia’s all-out war against Ukraine, the International Court of Justice (ICJ) held the first hearing in the “Ukraine v. Russian Federation” case.

One of the six United Nations principal organs based in The Hague, ICJ heard Ukraine’s request for indication of provisional measures against Russia in the proceedings instituted by Ukraine on Feb. 26. 

Though Russia refused to participate in the ICJ hearings in its letter of March 5, the Court will proceed without hearing Russia’s arguments.

“The fact that Russian seats are empty speaks loudly,” Anton Korynevych, Ukraine’s representative to the ICJ, said in his opening speech before the Court.

“They are not here in this court of law. They are on the battlefield waging aggressive war against [Ukraine]. This is how Russia solves disputes.”

ICJ proceedings

Two days after Russia launched a full-scale war against Ukraine, Kyiv filed an application to the ICJ instituting proceedings against Russia under the Convention on the Prevention and Punishment of the Crime of Genocide (Genocide Convention). 

Both Ukraine and Russia are parties to the Genocide Convention and submitted disputes “relating to the interpretation, application or fulfillment of the Convention, including those relating to the responsibility of a State for genocide” to the ICJ’s jurisdiction.

Ukraine’s application addresses Russia’s unjustified use of genocide as a pretext for aggression against Ukraine. 

In its address to Russian people on Feb. 24, Russian President Vladimir Putin stated: “I have taken the decision to carry out a special military operation. Its goal will be to defend people who for eight years have been suffering persecution and genocide by the Kyiv regime. For this we will aim for demilitarization and denazification of Ukraine, as well as taking to court those who carried out multiple bloody crimes against civilians, including citizens of the Russian Federation.”

Ukraine’s claims are wide-ranging: from the request that the Court declares that no acts of genocide have been committed in the Luhansk and Donetsk oblasts of Ukraine to the request that Russia’s subsequent actions taken on this false premise – namely, recognition of Russian-occupied parts of Donbas as independent states on Feb. 22 and launch of special military operation on Feb. 24 – are illegal. 

As the ICJ proceedings may be lengthy – in certain cases up to 15 years – Ukraine applied for indication of provisional measures against Russia. It seeks immediate suspension of the military operations commenced against Ukraine by Russia and its proxies and assurances that no action is taken that may aggravate the dispute. 

As stated by Harold Koh, lawyer for Ukraine, during the hearing: “The risk that Russia will irreparably harm Ukraine and its people in the name of preventing and punishing a non-existent genocide is very real. Unless Russia halts its military operation, Ukraine’s plausible claim that Russia is violating and abusing the Convention will only be heard when it is too late.”

It is expected that the Court’s order in relation to Ukraine’s request for indication of provisional measures will be rendered shortly. Whilst in practice it takes around 11 weeks, it is expected that the ICJ would move faster given the urgency of the situation in Ukraine. 

Other avenues

The situation is complicated with Russia being a permanent member of the UN Security Council. Only the latter may determine the existence of any act of aggression and decide what measures shall be taken to maintain or restore international peace and security under Chapter VII of the UN Charter. 

The UN Security Council consists of five permanent members – Russia, China, the U.K., the U.S. and France – and 10 non-permanent members. Unless there are concurring votes of all five permanent members, the UN Security Council cannot decide on substantive matters such as restoration of international peace and security. 

On Feb. 25, Russia vetoed a draft resolution intended to end its military offensive against Ukraine. The draft, submitted by Albania and the U.S. garnered support from 11 members, which was sufficient for the resolution to be adopted absent Russia’s veto.

Other international bodies were more supportive of Ukraine. In the following days, on Feb. 28, the Prosecutor of International Criminal Court (ICC) opened an investigation into the situation in Ukraine. As Ukraine is not a party to the Rome Statute of the ICC, it could not itself refer the situation to the Prosecutor’s Office. That is why the Court based its jurisdiction on Ukraine’s declarations of 2014 and 2015 accepting the ICC jurisdiction with respect to alleged crimes committed on Ukrainian territory from February 2014 onwards. 

The ICC, unlike the ICJ which deals with the issues of state responsibility, may hold individuals accountable of crimes within its jurisdiction, namely, genocide, crimes against humanity, war crimes and crime of aggression. 

On March 1, in response to Ukraine’s request of Feb. 28, the European Court of Human Rights ordered the Government of Russia to refrain from military attacks against civilians and civilian objects in Ukraine.

In view of the UN Security Council’s inability to address Russia’s war against Ukraine, on March 2, the UN General Assembly adopted a resolution demanding that Russia immediately end its military aggression. A total of 141 countries voted in favour of the resolution, with Russia, Belarus, North Korea, Eritrea and Syria voting against it and another 35 states abstaining. 

Finally, on March 4, the UN Human Rights Council adopted a resolution calling for the “swift and verifiable” withdrawal of Russian troops and Russian-backed armed groups from the entire territory of Ukraine and agreed to establish a commission to investigate violations committed during Russia’s military attack on Ukraine.

By blocking and/or ignoring various international avenues discussed above, including an opportunity to defend its far-fetched genocide allegations before the ICJ, Russia sends a clear signal to the world that what it calls a special military operation is nothing but a pure act of aggression. 

As Koh stated during the March 7 hearing, addressing the ICJ, “President Putin’s short game is force. The world’s long game is law. For other institutions to do their job inside and outside the UN system, first [the ICJ should do its job]. … But if [it] does not act decisively … rest assured this will not be the last such case.”

By Mariana Antonovych, Senior Associate, Avellum

The goal of our ButLaw series – dedicated to interviews on anything *but* the law or the practice of law – is to give CEELM readers (ahem, listeners) the chance to meet the humans behind the lawyers we often feature in our magazine. For this edition, we spoke with Bryan Jardine of Wolf Theiss about his pet project, Jardine Hills, and agrotourism in Romania.