Draft law on misappropriation of private property will undermine investors’ confidence in Ukraine - ICC Ukraine
The draft law No. 11195 of April 22, 2024 on amendments to certain laws of Ukraine on the mechanism of protection of property rights of third parties attempts to legalize the mechanism of state appropriation of property rights. This will not only be a manifestation of complete disrespect for the institution of property rights, but will also completely undermine the trust of Western governments and cause irreparable damage to the investment climate.
This is stated in an open letter from the Ukrainian National Committee of the International Chamber of Commerce (lCC Ukraine) to the heads of parliamentary factions and groups, Censor.NET reports.
The Committee reminded that the draft law proposes to establish a special mechanism for the state to recover 100% of the shares (stakes) or other securities directly or indirectly owned by a legal entity, which ownership structure includes a person to whom a sanction in the form of blocking assets has been applied.
At the same time, it is envisaged that a special procedure will be applied to non-sanctioned persons holding shares in such a legal entity, namely, opening of escrow accounts in securities and/or escrow accounts for shares in the company and crediting to such accounts the rights to securities and/or shares in the amount corresponding to the determined size of the shareholding to be transferred to the state. In the future, it is envisaged that it will be possible to register the rights to such shares by persons in respect of whom sanctions have not been applied by transferring the rights to securities, according to ICC Ukraine.
"This draft law attempts to legitimize the mechanism of state appropriation of ownership of shares owned by non-sanctioned persons, with a subsequent non-transparent mechanism for restoring such rights. In addition, during the period of dubious and non-transparent restoration of rights to these shares, unauthorized persons are deprived of the right to participate in and manage a legal entity," the Committee emphasized.
Thus, this draft law may establish a disguised appropriation of the relevant assets by the state, change the ownership structure of legal entities, and deprive the founders who have not even been sanctioned of the right to own and manage a legal entity.
"The adoption of the draft law in the first reading and its further consideration will not only show complete disrespect for the institution of property rights, but will also completely undermine the trust of Western governments and cause irreparable damage to the investment climate. In addition, existing foreign investors may be extremely concerned about such actions of lawmakers, which will further reduce business activity both during the war and during the reconstruction and recovery period. We consider this draft law to violate the fundamental principles of property rights established by the Constitution and international treaties, and urge MPs not to support it during its consideration in the Verkhovna Rada," urged the ICC Ukraine.
