How to Protect and Save Assets that Remained in Crimea

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As a result of the illegal annexation of the Crimea by the Russian Federation, many owners of the property and assets in the Crimea have gotten quite difficult issue: how to protect and save these assets?

Many Ukrainian companies and foreign owners have owned assets in Crimea. Because of the illegal annexation of Crimea by the Russian Federation quite difficult issues about protecting or rescuing these assets appear.

One of the main obstacles for saving business assets is the fact that Ukraine has closed access to all state registries about the property in Crimea. According to this
decision, in addition to positive moments (it helps to preserve the information in state registries about the property from illegal actions of third parties), there are negative moments, as a result of this action the notary (who makes real estate transactions according to Ukrainian law) cannot work with documents for property in Crimea. Ukraine blocked access to registers of property rights on real estate, individual acts, personal data of owners of real estate, information about enforcement proceedings, etc. This led, in fact, to “freeze” of all assets in Crimea. On the other side, Russian state registries have not started their work yet, and the legal nature of the information from these registries about the property in Crimea raises more questions than answers.

It is well known that the most valuable assets, first of all, are real estate, it is impossible to move it from Crimea to other territory. So we can offer the following list of actions to protect and save assets.

First of all, it should be understood that in this situation the main value acquire title establishing documents for the real estate on tangible media that will make possible justifying your right for some property. According to this you need to put in order all title establishing documents and other documents of title for the property in Crimea, including title establishing documents for land-property, and try to get any other documents using all methods (even semi legal). As it is not a secret that the search for and provision of documents in Crimea “retroactively” has become a kind of business for clerks. We should not forget that not only property documents can be useful but also the documents establishing other facts, such as documents about using of mineral resources, the exclusive rights of commercial structures, etc.

It is possible to initiate lawsuits with these documents for returning of material losses or return/refund business after the establishment of Ukrainian jurisdiction over Crimea. There are no reason to non-accept the title establishing documents for the property in Crimea issued by Ukrainian state institutions in the past. That is why such kinds of documents will be accepted by courts, including international courts. All these documents may be the evidence of guilt of Russia as a state which encroached on the property of third parties in Crimea and created the conditions for violations of the right for private property (which is guaranteed by the Convention for the Protection of Human Rights and Fundamental Freedoms, 1950 and Article 1 of the First Protocol to the Convention).

European Court of Human Rights (referred to as “ECHR”) believes that the defendant is always the state that actually holds an annexation, as in this case such state brings its jurisdiction in the occupied territories. There are some cases in ECHR with affairs of the state arbitrariness (look at case №20680/92 dated November 15, 1996 “Tsomtsos and others v Greece”, №19385/92 dated November 15, 1996 “Katikaridis and others v Greece”), denial of access to the property (look at case №15318/89 dated December 18, 1996 “Loizidou v Turkey”). The last case is very interesting due to the fact that the ECHR fully rejected arguments of the Turkish government that the political situation in Cyprus had justified a permanent denial of access of Greek Cypriots people to the property located on the territory controlled by Turkey. The ECHR stated that the establishment of actual barriers can be considered as a violation of the European Convention in the same way as a based on the law restriction which is very similar to the situation with Russian annexation of the Crimea.

However, if we consider the option of assets protection through the ECHR, the application to the international court have to be sent after the exhaustion of protecting rights and interests at the national courts, including the highest level. And the case “Loizidou v Turkey” can be very useful in this situation, because circumstances indicate that firstly we have to apply to national authorities of Russia as an aggressor-state. At the same time, we should not forget about the criterion of an effectiveness of national courts which the ECHR uses in considering of individual applications. According to this criterion, courts should be effective not only in theory but also in practice, i.e., available at the time of trial, they have to be able to satisfy the claim, and to have a reasonable prospect of a positive outcome.

There is the opinion that it is possible to apply a complaint directly to the ECHR, due to the fact of absence of effective remedies in Crimea for Ukrainian property and property rights. The position of the European Community concerning the evaluation of the actions of Russia is obvious. We can use the case of Catherine Rakhno like an example. It is about the abduction of her husband Eugene Rakhno in Crimea. The complaint was quickly transferred from the ECHR to governments of Ukraine and Russia for communication. We would like to note that the deadline for applying an individual application to the ECHR is only six months. Do not forget about it. Therefore, if you want to apply to the ECHR without decisions of national institutions, you should prepare substantiation (including some of the documents) that, to a certain point of time, there was no evidence of risk for property and rights for it, and these risks and threats have come just now.

We should also consider the protection of investments made in Crimea. Firstly, the investor who had invested in Crimea has to check whether the country of his/her residence or the country of his/her entity’s residence has a bilateral agreement with Russia on mutual protection of investments. For today, there are a lot of such agreements between Russia and other economically developed countries, including the United States of America, Netherlands, Japan, Austria, Switzerland, Kazakhstan, Armenia. Moreover, many agreements require protection against direct and indirect investments. If yes, then this investor has an opportunity to protect their investments and property rights in Crimea through application to international arbitration. Unfortunately, Russia has signed but not ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, so it is impossible to use such legal instrument like the International Centre for Settlement of Investment Disputes (ICSID, Washington) for the protection of investments in Crimea.

Summing up, we can say that the issue of protection of assets and investments in Crimea is rather complicated and time-consuming. At the same time, foreign owners of assets and investments in Crimea can use more possibilities to protect their rights and interests, and so advise to take an advantage of such opportunities and to collect necessary documents and evidence for further legal protection in international court institutions.

Igor Kydalov has degrees in Economics and Law. He has been working in consulting and law since 2002. Currently, he is the head of his own law firm. He specializes is supporting business processes, including investment, the sale of corporate rights or businesses, due diligence, bankruptcy proceedings, and representation in courts. His practice is focused primarily on supporting small and medium sized businesses and startups. His preferred areas of business are the IT sphere, the production of consumer goods, food, and support of pilot projects in the field of energy, agriculture, manufacturing and the construction industries. He is an expert in corporate security, the protection of rights and interests of investors and business owners, risk issues, and corporate disputes. In addition, he has the experience of being an arbitrator in international commercial arbitration cases. He has conducted ad hoc arbitration individually and as part of a panel of arbitrators.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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