Will the President’s proposed anti-raid prevention tools be effective? - the view of Oleksandr Skliarenko

Despite constant statements by politicians and measures aimed at preventing, strengthening the struggle, responsibility, risk minimization and other traditional improvements and enhancements, raiding still remains a headache for business owners. This is recognized by the new government, promising to restore order again.

This week the President signed Decree No. 542 “On measures to counter raiding”. The document, as stated in the Office of the President, contains a set of tools that will be introduced in the near future "to properly protect business owners and counter deprivation of their property rights."

Whether the next improvements will have at least some effect, - Oleksandr Skliarenko, managing partner of Skliarenko, Sydorenko and Partners, was looking for the answer for the publication “Legal Practice”.

It so happened that a bad law and (or) precursors has traditionally been accused of Ukrainian problems. Therefore, in fact, the main efforts of reformers are often aimed not at ensuring the proper implementation of existing norms, but at rewriting them. Problem of raiding was no exception: The decree instructs the government to develop a draft law within three months and submit to Verkhovna Rada of Ukraine a draft law aimed at strengthening the guarantees of state protection of immovable property rights and their encumbrances, protecting the rights of founders (participants) of legal entities and countering raiding

In addition, the regulatory act obliges the Government to provide, until 2021, transfer to the State Land Cadastre of information on land plots, restrictions (encumbrances) in their use, registered before January 1, 2013 in the State Land Registry.

Recall one of the main reasons for the spread of raiding in Ukraine is the change in the system of registration of rights to land, held in early 2013. Then the functions of the registrar were transferred from the land administration to justice. Precisely because a large data set (cadastral records on registration of rights) was not transferred to the new registry, there was a gap for abuse, which is still actively used by raiders. This problem is well-known in expert circles and the delay in its resolution negates the importance of all other measures. Therefore, the desire to streamline the inventory can be called a good intention, should not remain on paper. Otherwise, the remaining steps will also lead to economic hell.

With regard to the proposed legislative shortcomings, among them it is worth paying attention to such as:

1. Immediate reporting of registration actions. This additional mechanism should make it impossible to carry out registration actions without the knowledge of the owner of the immovable property, the founder (participant) of the legal entity.

Services of automatic operative informing owners about the content of registration actions with their property are now offered on a commercial basis. They really help prevent fraud. In 2016, the Government even introduced a pilot project providing for a system of paid services for informing Ukrainian citizens about any registration actions performed with their real estate (see Cabinet Directive No. 789-p of October 26, 2016). If this option becomes mandatory and free, it will be much easier to track changes in the status of real estate objects, and accordingly, to take possible measures to prevent the violation.

2. The gradual elimination of the state registrar. Introduction of the possibility of implementing separate registration actions in an automatic mode will relieve the state registrars of a part of the work and their earnings. However, in the conditions of technical development such “digitalization” is inevitable.

With the provision of clear identification and access to the registry system, the gradual elimination of registrars from the process of entering information into the registry can minimize the risks of corruption.

3. Exclusion from the process of accredited subjects. This idea, set forth in the Decree, looks like a complete exclusion from the registration of a whole network of non-state actors who paid money for accreditation, established themselves a business on registration services.

Until 2016, the state registration service was engaged in the registration of real estate and business. But the Ministry of Justice conducted a reform, as a result of which the functions of the civil service were transferred to companies accredited by the Ministry of Justice itself. Employees of such companies took three-day courses on working with registries, after which they received the keys and became registrars. In practice, this "business" for relatively small amount of money, helped raiders in the registers rewrite data about the owners of the property.

4. The introduction of the principle of simultaneity. It is proposed that in some cases the registration of rights to immovable property and their encumbrances be carried out exclusively by a notary who performed the corresponding notarial act. This, of course, should save time and money, because in this case there is no need to actually contact twice on the same occasion: first to the notary, then to the registrar.

5. Verification of court decisions. A registration action on the basis of a court decision will be possible only in cases where 1) this document is in the Unified State Register of Court Decisions or 2) after the registrar received the decision, the authenticity of which is certified by a qualified electronic signature.

Counterfeiting of court decisions (as a rule, it is carried out in the areas of the eastern regions of Ukraine, bordering with temporarily occupied territories) is also a separate area of “business” accompanying raiding. Therefore, certification can prevent cases of unlawful registration actions on the basis of false court decisions.

6. Obligation of notarization of contracts, the subject of which is the alienation of a share in the authorized capital of a legal entity. Agreements on the alienation of corporate rights are the most vulnerable to counterfeit documents. And the return of the need for their notarization, despite the complexity of the procedure, can be an additional guarantee for the protection of the rights of owners.

The only thing that the notarization will not concern the contracts created on the portal of electronic services of legal entities, individuals - entrepreneurs and public formations and signed using a qualified electronic signature.

7. Strengthening control over officials and accountability for criminals. These are obligatory for the Ukrainian tradition (but not always effective) means of solving system problems.

This time, the Decree proposes to improve the basis for appealing decisions, actions or inaction in the sphere of state registration of rights to real estate and their encumbrances and in the sphere of state registration of legal entities, individuals - entrepreneurs and public formations. Probably, here we are talking about the optimization of the work of the so-called anti-raider commission of the Ministry of Justice, which has been repeatedly criticized.

With regard to enhancing responsibility for violating the law, it should be understood that the crime rate is not affected by the size of sanctions established by law (they have already been increased by the Law of 06.10.2016 No. 1666-VIII), but by the inevitability of punishment for the offense committed.

Therefore, the behavior of officials who should contribute to the development of business in Ukraine, and the ability of raiders who seek to pick up the results of the development of this business predominantly depend on the political will and ability of the state to ensure the implementation of already existing norms of behavior. Therefore, the ideal law, which is not being fulfilled, also remains only good intentions.