Parliament’s resolution overriding the president’s veto on the sale of farmland has once again split Ukraine. The issue is being argued in all quarters, but it is so complicated that trying to solve it with the aid of polls and even referendums appears too risky. A simple mathematical majority, which is likely to generate prejudices, stereotypes, and even fears, may well guide this country in the wrong direction. Now that society’s views have somewhat changed, another professional discussion is needed, like the one that was conducted earlier on the pages of The Day). I propose to start this discussion here.
I will try to briefly analyze the kind of legislative changes we can expect in terms of land relations after the next round of restrictions on the sale of farmland in the Law “On Changes to the Land Code of Ukraine (in Regard to Interdictions on the Sale of Farmland and Enactment of Pertinent Legislative Acts,” which will come into force now that the VR has overridden the president’s veto.
In my opinion, the starting point of the discussion should be that, even though the law mentions Jan. 1, 2008, as the end of the moratorium, it sets forth a rather unrealistic condition of its termination: the enactment prior to this date of Ukrainian laws on land cadastre, land market, and a legal specifications of plots under state and municipal ownership. In the other words, the termination of this moratorium is not linked to a calendar date but a certain political event.
Remarkably, this law does not oblige the parliamentarians to approve pertinent legislative acts before Jan. 1, 2008. In other words, the political games around the moratorium may continue in 2008. One reason for doubting the implementation of this proviso is the fact that the Ukrainian parliament has delayed enacting laws required for the implementation of the Land Code since it was adopted more than five years ago, and it is hardly likely to do so during this calendar year. This procrastination is proof that certain political forces are systematically exerting influence on the political decision-making process - forces that are loath to see land transactions legitimized in Ukraine, i.e., the liquidation of Ukraine’s shadow land market that has fully taken shape and is instrumental in boosting speculative land prices.
In addition to the wording (still in force) of Items 14 and 15 of the Temporary Provisions of the Land Code of Ukraine, the law bans the purchase and sale of farmland whether under state or municipal ownership.
In addition, this moratorium will now be binding on “land allocated in kind (on a given territory) for the benefit of the owners of such plots (shares) in order to carry out private farming.” This formulation implies ambiguous interpretation and thus deserves special notice.
In accordance with the first interpretation, such an interdiction extends to so-called personal private farming plots (OSH) that were originally part of “collective agricultural enterprises” (KSP) and distributed among their members, with each KSP member receiving a plot (share) certificate affirming the right to own this share in kind and to receive a government deed attesting to the holder’s right to own this land. Thus, plots of land in kind granted to owners for target-oriented use of a given plot as private farmland fall under the jurisdiction of the moratorium.
Applying this logic, these legal provisos will also extend to plots of land as free allocation from government- or municipal-owned lands, the size of which was increased by adding land shares in kind in keeping with Item 2, Article 121 of the Land Code. This way the moratorium does not extend to OSH land shares that have changed owners after being allocated in kind as a result of alienation or inheritance. Therefore, government land ownership deeds issued to new owners as grounds for issuance will indicate civil law proceedings, for example, purchase-sale contracts. This moratorium also does not extend to OSH lands whose origins are not connected to the sharing of land (e.g., plots privatized free of charge, bought from government or municipal property; plots converted to OSH status after their designated purpose was changed).
Another sales ban option can be extended to all OSH-shared plots, regardless of what is stated in the government land title act. This interpretation is likely to spark a multitude of objections and complaints from potential buyers and sellers. Therefore, it remains to be seen which of these options will be adopted by the judiciary and land resource authorities of Ukraine.
In any case, problems relating to the sale of agricultural land can be avoided, like before, by changing their designated purpose. According to Derzhkomzem, the State Land Management Committee, the designated purpose of 16,300 hectares of land in Kyiv oblast alone has been changed. The fact that at the last moment the parliamentarians excluded from the text of the law the clause banning changes to the designated purpose of agricultural land is once again turning this moratorium into a complex and rather costly formality that will not halt the practical application of time-tested schemes for bypassing the moratorium. Moreover, it will encourage the continued burgeoning of the shadow land market, in which land is sold cheaply by peasants and then resold at high prices by intermediaries with the right kinds of contacts in relevant state bodies.
If a transparent land market existed in Ukraine, the free sale and purchase of land would lead to the formation of market prices. Land would have real owners, who want to generate income. This, in turn, means that land would receive investments capable of getting Ukrainian agriculture out of its present difficult crisis. Considering that land is also an effective collateral instrument, our farmers could also obtain bank loans and use them to develop agricultural output. A direct, positive consequence of canceling this moratorium would be more effective use of farmland and increased revenues to the budget from the sale of and tax on land.
Lifting the moratorium would also play a major role in the growth of investments for creating and developing key assets, since investors coming into the market want to have land where they can be full-fledged owners and be protected rather than restricted by the government.
