The role of farm land
"Lifting of the moratorium on land sales would provide great impetus for the sector’s development: real investors will come to us and landowners will finally be able to manage their land plots"IGOR KRAVTSOV, MANAGING PARTNER AT EVRIS LF, PREDICTS
— How significant is the impact of the moratorium on the sale of agricultural land for the Ukrainian economy?
— This is one of the most significant factors hindering the economy’s development along with corruption, bureaucracy, and the country’s weak infrastructure. There is no difference for investors and owners as to precisely what limits the exercise of their rights. The absence of market mechanisms is an important thing. At the same time, we see no objective reasons for the moratorium: all those risks that politicians talk about interrupting each other can be leveled or minimized by adopting clear and understandable rules. But their preparation requires thorough yeoman's work, which will result in an unpopular decision, for which no-one wants to take responsibility.
Having the experience of supporting large and medium-sized agricultural companies, we can say with confidence that lifting of the moratorium on land sales would provide great impetus for the sector’s development. Real investors will come to us, and landowners will finally be able to manage their land plots.
— Can the attitude of the European Court of Human Rights prompt the authorities to adopt this decision?
— Perhaps, when the rulings of Ukrainian courts, delivered on the basis of the ECHR ruling on the Zelenchuk and Tsytsiura vs. Ukraine case (application No. 846/16), become widespread and the state budget will have to allocate funds for compensation to the owners, this will be a weighty argument for the legislative settlement of this issue. Moreover, nothing is easier than to create a dispute, receive a negative court ruling and file a complaint with the ECHR, as all the arguments are already set out in its ruling. But neither the national court nor the ECHR can oblige 226 parliamentarians to vote as a majority in favor of abolishing the moratorium. This requires large-scale educational work within the state supported by international organizations.
— What are current action-oriented issues of the agrarians that require resolution in court?
— The existence of double leases to a property is probably the most pressing issue today. The problem arose with the transfer of all proprietary rights to real estate items, including land, to the State Register of Proprietary Rights to Immovable Property and their Encumbrances from 2013. Legislators did not oblige holders of registries that existed previously to transfer information to the new one or property owners and users to re-register their rights. At the same time, after 2013, persons responsible for state registration, shall we say, fulfilled the requirement to verify the availability of titles to the land plots according to previous registries in a negligent way. As a result, the situations are not uncommon where the State Land Registry (it exists today as part of the State Land Cadastre) contains information on the rights of one leaseholder and the State Register of Proprietary Rights — of another one to the same land plot. Now, technical solutions are in the process of being implemented which do not allow registration to be performed if the proprietary right is registered in the previous register. But this will not help to resolve those disputes that already exist.
The courts have formed more or less balanced approaches to such disputes. They have established what and how the registrar will verify. In general, the attitude of the courts comes down to the fact that priority is placed on the person who was the first to acquire the tenant rights. It’s a different situation if the "primary" tenant's documents are not in order, or violations were committed during their registration. In this case, the outcome of the dispute depends on whether such a violation is significant, and which of the parties has more weighty evidence to confirm its right.
— In the courts of which jurisdiction are such disputes resolved nowadays?
— Land disputes or disputes relating to land title are still considered by courts of administrative, commercial and civil jurisdictions. However, now the rulings of the Grand Chamber of the Supreme Court of Ukraine (SC) have made it clear to which court one shall apply. So, if the purpose of an appeal against the actions of the registrar is to recognize the claimant's proprietary (tenant) rights to the land claimed by another person, then it’s a dispute about the title and the case shall be referred to a commercial court (or a civil court, depending on the parties). The dispute can be considered administrative if there is no other entity applying for such a land plot (for example, in connection with an unlawful refusal to register). The SC applies the same approach both to disputes with local government and state authorities.
The attitude taken by the Supreme Court makes it possible to avoid procedural "ping pong", when none of the courts recognizes its jurisdiction and the individual remains without judicial protection. Such things should not happen today. Certainly, cleaning up the "procedural" mess by the Supreme Court and the abolition of rulings adopted by an incompetent court make it possible for persons in whose favor controversial registration was carried out to extend the right to use, but this is better than endless litigation.
— How are issues resolved if the plots leased by different farm firms form a "chessboard"?
— Farm firms are always trying to come to an agreement. As a rule, they determine the area which each of them shall cultivate. Shareholders who demand allocation of their area in kind for them to cultivate it independently, are more troublesome. In most cases, blackmail or simply the personal committed position of the land plot owner was the purpose of such actions.
— But this is a title…
— Yes, of course. However, we have not heard a single success story of such a farmer, if we are not talking about the cultivation of marginal crops. For example, or some other exotic cases, but we have seen many people willing to "bargain" for bonuses or to show their attitude to agricultural producers in this way. At the same time, the profit earned from processing one land plot is independently comparable to the profit earned from renting it out. And that is the best case scenario.
The Law on land consolidation ("On Amendments to Certain Legislative Acts of Ukraine Regarding the Issue of Collective Ownership of Land, Improving the Land Use Rules in Agricultural Land Massifs, Preventing Illegal Takeover and Stimulating Irrigation in Ukraine") should in this regard resolve many issues. Broadly speaking, it allows tenants to "exchange" land plots between themselves, as well as with owners without their consent, if the tenant has consolidated more than 75 % of cropland on the field in question. Obviously, as soon as this happens, the issue of violation of the proprietary right will arise, but it seems to me that court practice will ‘dot the i's’ in such cases.
— What determines current development of the agricultural sector?
— Technologies. Today, agriculture is one of the most technologically advanced sectors of the Ukrainian economy, no matter what cognitive dissonance this statement causes. The development of agricultural equipment and software that enables you to control and minimize (optimize) costs, logistics, has advanced so much that it now enables impressive results to be achieved in terms of the harvest and, of course, its profitability.
For example, while in the past the principal land plot shareholder could actually block cultivation of the field, since it was problematic to make a detour round it, today there is an opportunity to program tractors so that they do not drive into the area with certain coordinates. Driving a tractor is now akin to controlling an aircraft: large, expensive, high-tech vehicle is controlled by a few touches to the display and the lion's share of work is performed by autopilot.