Business asks to develop a new draft law on the mechanism of third-party property rights protection

The Cabinet of Ministers proposes to authorize the government to decide on the foreclosure of 100% of a block of shares or other securities directly owned by a legal entity that includes a person subject to an asset freeze, if the determined amount of participation in such a block of shares of a person subject to an asset freeze is less than 25%. If the sanctioned person owns 25% or more of the shares, the alienation will be carried out by filing a relevant application with the court.

This provision is included in the draft law on the mechanism for protecting the property rights of third parties No. 11195.

Given the threats to the constitutional principles of property rights, the potential destruction of the investment climate and the possible deterioration of the economic situation associated with the consideration of Draft Law No. 11195, the business community, united by the European Business Association, the American Chamber of Commerce in Ukraine, and the Union of Ukrainian Entrepreneurs, strongly criticized the draft law and urged MPs not to support it.

The Ministry of Justice of Ukraine organized and held a number of meetings with business representatives to discuss approaches and ways to solve the problem of recovering assets of a person subject to sanctions without violating the rights of other legal owners of shares in such assets.

In developing such approaches, the business proceeds from the unconditional observance of the principles of exclusively judicial procedure for foreclosure on assets of sanctioned persons and related actions, continuity of ownership of assets by non-sanctioned persons, individual responsibility of sanctioned persons, inviolability of the rights of non-sanctioned persons to participate in the management and profit from the activities of Ukrainian legal entities and other rights arising from the ownership of corporate rights.

The business would like to emphasize once again that the adoption of the draft law in the proposed version will have a significant impact on the economic situation in Ukraine, in particular:

• Investment climate and attractiveness of the jurisdiction.
• Relations with partner countries in view of Ukraine's ongoing integration into global economic processes.
• Potential recovery of funds from the state of Ukraine in international arbitrations in favor of unauthorized persons in case of violation of their property rights guaranteed by international law, the amount of which will exceed the value of such assets.

It should be noted that these risks cannot be mitigated by finalizing Draft Law No. 11195.

There should be a broad discussion and development of a qualitatively new (this is important) document with the involvement of the Ministry of Justice of Ukraine, the Ministry of Economy of Ukraine, the business community, international law experts, MPs of Ukraine, and the judiciary, including representatives of the High Anti-Corruption Court of Ukraine.

Therefore, the European Business Association, the American Chamber of Commerce in Ukraine, and the Union of Ukrainian Entrepreneurs appeal to the Chairman of the Verkhovna Rada Committee on Economic Development Dmytro Natalukha to create a working group on the basis of the Economic Development Committee that will bring together a wide range of stakeholders to develop a document that, on the one hand, will enable the state to implement sanctions policy, and on the other hand, will not lead to a deterioration in the investment climate and will not scare investors away from Ukraine.