With effect from 27 April 2014, the Law of Ukraine “On Ensuring Rights and Freedoms of Citizens and the Legal Regime in the Temporarily Occupied Territory of Ukraine” dated 15 April 2014 (the “Law“) entered into force. This Law sets out provisions governing the current legal regime in Crimea and the city of Sevastopol (together “Crimea“). We provide a summary of the key provisions of the Law with regard to business activities in Crimea in this post.
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Crimea is confirmed to be an integral part of Ukraine and thus the Constitution and the other laws of Ukraine apply there.
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Any body or authority established in Crimea other than in accordance with Ukrainian legislation is deemed illegal and its acts are void and have no legal significance; the same applies to the officials of such bodies and their acts. Ukrainian state authorities may communicate or otherwise interact with such bodies or officers with the sole purpose of furthering the interests of Ukraine, protecting the rights and freedoms of Ukrainian citizens, implementing international agreements ratified by Ukraine or restoring the constitutional order of Ukraine in Crimea.
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The Law does not restrict business activities in Crimea, but provides for the adoption of a separate law which would set out a special legal regime for the carrying out of business activities in Crimea. No draft of this separate law is yet available for review, and the timing of its adoption is not known. The Law provides no guidance as to the features of such special regime of business activities.
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Ownership rights and other property rights of any legal entity or individual to any property located in Crimea, including land plots and other immovable property, are recognized and maintained to the extent that these ownership rights or other property rights have been or are acquired in accordance with the laws of Ukraine. The State of Ukraine, the Autonomous Republic of Crimea (as part of Ukraine), Ukrainian state or municipal authorities, territorial communities and public law entities retain ownership rights and other property rights to any property located in Crimea, including land plots and other immovable property.
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Ownership rights to immovable property located in Crimea are to be acquired or terminated (transferred) in accordance with the applicable Ukrainian legislation. Any transactions violating this requirement will be void ab initio. The Cabinet of Ministers of Ukraine is authorized to determine the state registration body for the registration of property rights to and encumbrances over immovable property located in Crimea in cases where the state registrar cannot perform its regular functions with respect to such immovable property.
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The state-owned land, subsoil resources, air, water and other natural resources, including those in the continental shelf and within the exclusive maritime economic zone, property of military units, state bodies, institutions and enterprises may not be transferred into the ownership of any other state, entity or individual other than in accordance with the procedure envisaged by the laws of Ukraine.
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Specific rules for the production, transfer, distribution, supply, purchase-sale and use of electricity in Crimea is to be regulated by the Cabinet of Ministers of Ukraine separately (no such regulations are yet available).
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Ukrainian citizens are guaranteed free entry to and exit from the territory of Crimea through the established control points upon the provision of identification documents. Foreign citizens and persons without citizenship may enter and exit from the territory of Crimea through the established control points on the basis of special individual permits in accordance with the regulation to be adopted by the Cabinet of Ministers of Ukraine (this regulation has not yet been adopted).
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The automatic conversion of Ukrainian citizens residing in Crimea to Russian citizenship is not recognized and does not result in the termination of Ukrainian citizenship.
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The law provides for the jurisdiction of the relevant courts of the City of Kyiv and Kyiv Region over disputes and cases which would otherwise be heard by the competent Ukrainian courts in Crimea.
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The Law asserts the liability of the Russian Federation for any damage or loss of property and “moral damage” suffered by legal entities or individuals as a result of the occupation of Crimea by the Russian Federation, and provides that the State of Ukraine will assist in obtaining the compensation of such losses and damages by the Russian Federation “by all available means”.
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The Law recommends the National Bank of Ukraine to adopt regulations to ensure the implementation of the Law, this obviously relates to the banking activities and currency regulations. The Law does not provide any guidance as to the regime to be set out in such new regulations of the National Bank of Ukraine.
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The Law amends the Criminal Code, the Criminal Procedure Code, the Administrative Code, the Administrative Procedure Code, border control and certain other legislation to provide for or increase liability of legal entities and individuals for violations of the provisions and requirements of the Law.
The Law does not provide tax relief or tax exemptions for activities in Crimea. Therefore, and until further legislative changes, from the standpoint of Ukrainian law, the generally applicable requirements of the Ukrainian tax legislation continue to apply to activities in Crimea.
Although the Law clarifies various key areas of the legal regime in Crimea, it leaves the specific regulation of business activities in Crimea for a separate law which is yet to be adopted. Also, additional legislation in the tax and currency control areas is likely to be introduced in order to protect the interests of Ukrainian and foreign/international businesses operating in Crimea.
