Industrial hemp is not a narcotic drug.

This idea is enshrined in the draft law on the trade of hemp for medical, industrial, scientific, and scientific-technical applications, recently published by the Ministry of Health of Ukraine.

The process of public consultation on the document is currently initiated: https://bit.ly/3czVfc1

Why is this important?

The world market for industrial hemp is estimated by experts at more than $ 4 billion and is an investable agriculture sector.

At the same time, in Ukraine, the current regulation is complex and conflicting. Industrial hemp is subject to regulation equivalent to the regulation of narcotic drugs. That is why entrepreneurs are obliged to obtain a license to cultivate narcotic drugs. Moreover, this activity is still subject to annual quotas.

What does the draft law offer?

• industrial hemp, as well as goods made from hemp and hemp-derived products, shall not be included in the list of narcotic drugs, psychotropic substances, and precursors if their THC content does not exceed 0.2%;
• the permitted THC is equal to the indicators set in the EU;
• it is allowed to use all industrial hemp components of the (leaves, inflorescences, stems, seeds, roots), etc.

Last year, experts from the Better Regulation Delivery Office (BRDO) conducted an analysis of the industrial hemp market (https://bit.ly/3yTseSF) that also contained mechanisms for its development in Ukraine.

From now on, there is a chance that Ukraine will finally have a clear and understandable regulation with structured tools to control the industrial hemp market that will comply with EU legislation and world best practices.

Registration raiding has not yet been not prevented effectively in Ukraine. Raiding is a capturing of business and assets. Registration raiding of agricultural land is caused by illegal interference in the work of state registries and data manipulation as a result of which farmers lose their harvest and sometimes even their land rights. Particularly medium and small agricultural farms suffer from raider attacks, due to factors such as their remoteness, lack of resources to seek recourse and lack of political influence.

On November 10, 2021, BRDO experts presented a Roadmap for preventing registration raiding of agricultural land, which was developed with support from the EU funded and the World Bank implemented “Supporting Transparent Land Governance in Ukraine” Project. The Roadmap covers 2 years and prioritizes the eliminating of key risk factors, while creating instruments sustainable blocking of raider attacks.

“Land reform has opened huge opportunities for transactions both in terms of actual land, but also in terms of financial market. But raiding is a considerable issue that affects security of property rights and the rule of law. And that’s why we are happy that Ministry of Justice together with BRDO and “Pravo-Justice” project already established collaboration in the analysis and discussion that we are having today,” said Klaus Deininger, Lead economist, World Bank, Team leader of the Project “Supporting Transparent Land Governance in Ukraine”.

Raider attacks are mainly caused by loopholes due to legislation gaps, loopholes in the registration workflow and the ineffectiveness of state institutions which should be combating raiding. For example, Police investigators do not use registries, and the Board of the Ministry of Justice lacks an effective recourse mechanism for the chains of re-registrations, while raider related court cases take an unreasonably long time to be completed, in particular due to changes in the legal positions of the Grand Chamber of the Supreme Court.

“Combatting raiding is a long-term reform. Ministry of Justice has implemented the Presidential Decree #542 and the Law of Ukraine On amendments to certain laws of Ukraine on property rights’ protection, developed jointly with BRDO and adopted in 2019, making raiding attacks more complicated to perform. However, the progress of today needs to become sustainable. The problem of raiding is immense for property rights’ protection and business climate in Ukraine. That is why in our Roadmap we suggest a set of priority initiatives which will help in decreasing the risks of raiding”, commented Oleksii Dorogan, CEO of the Better Regulation Delivery Office (BRDO).

How to prevent raiding of agricultural land and protect owners’ rights?

In comparison with 2019, in 2020-2021 raiding incidents reduced due to the elimination of accredited entities and introduction of two-factor authorization. According to Tymur Mykhailov, BRDO’s lawyer, priorities towards elimination of raiding are the modernization of the real estate register and business-register and introducing risk management subsystems. To successfully withstand raiding attacks, risk management should focus on the following functions:

• Automatic monitoring of risky transactions by MoJ;
• Mandatory “step-by-step workflow” for registration of transactions, while specifying the list of documents to be uploaded, without which it will be impossible to complete the registration of the transaction. This also requires agreement and approval of a standardized lists of documents for all business processes of real estate register and business-register.
• Establish a land owner’s electronic cabinet, i.e., a web page which allows each land owner to receive information on request for changes in the registration, access administrative services, as well as – the option to block or confirm registration changes actions (this function requires additional expert discussion).

“The concept of step-by-step workflow needs to be detailed based on business analysis. We have already planned integration with registries, as well as have ongoing data exchange with the State Taz Service and data verification with State Migration Service of Ukraine. Apart from that, data exchange with the Single State System in Construction is already established, and after directories of real estate objects are updated, we will have two basic types of a land plot and a real estate object. In fact, we are already implementing first approach to step-by-step workflow, when during selection one of the types the mandatory inquiry to state registries is programmed. We are hoping for further support of our international partners in our work of implementing step-by-step workflow,” stated Sergiy Orlov, Deputy Minister of the Ministry of Justice (CDTO).

These three initiatives together with other planned work, such as introduction of Electronic Notary System, integration of registries, and improvement of the legislation will help combatting raiding in Ukraine.

In the presentations and discussions also participated: Dmytro Lutsenko, lawyer and legal expert of the Verkhovna Rada Temporary commission of inquiry on Investor Rights Protection, Markus Klingler, Team Leader for Agriculture and SPS, European Commission, SGUA – Support Group for Ukraine, Christian Ben Hell, Sector Manager for Land, Agriculture, Forestry, and Food Safety, EU Delegation, Klaus Deininger, Lead economist, World Bank; Team leader of the Project “Supporting Transparent Land Governance in Ukraine”, Dovydas Vitkauskas, the European Union project “Pravo-Justice”, Viktor Dubovik, Head of the Anti-Raid Office, Yaroslav Gregirchak, Deputy Business Ombudsman, Inna Bernadska, Vice President of the Notary Chamber of Ukraine, Ivan Slobodyanyk, Executive Director of the All-Ukrainian Association of Communities. “Agro-Food Council”, Olga Matviyiva, Director of NGO” Business Varta”.

BRDO presentation is available here.

The roadmap is available here

Proceedings on the presentation and discussion – download

Borsch index: changes in food prices in Ukraine within a year

A portion of borsch made traditionally for four people will cost UAH 65.16.

Compared to October 2020, the price increased by 5.52%.

Prices for beets, carrots and cabbage increased the most — + 62.43%, + 35.01% and + 34.87%, respectively. The price for other ingredients also increased, but not as significantly.

Only potatoes (-8.05%) and sour cream (-8.04%) fell in price.

Ukraine has a real opportunity to get a digital visa-free arrangement with the EU – to join the Single Digital Market of the European Union. In particular, this will allow removing barriers to e-commerce. According to the Prime Minister, integration with the EU market and the use of its instruments will allow Ukraine to receive from 2.5 to 3.5 billion dollars in goods and up to half a billion dollars of benefits in services.

A reform of the electronic communications sector and, above all, the creation of an independent regulator in the sector is key to the integration.

To achieve this goal, the Verkhovna Rada Committee on Digital Transformation submitted draft law #6055 “On the National Commission for State Regulation in the Spheres of Electronic Communications, Radio Frequency Spectrum and Postal Services of Ukraine” to the Verkhovna Rada.

This draft law should set out the principles for establishing an independent regulatory body in the sector. Instead, it contains some provisions that undermine the independence of the regulator and do not comply with the Constitution of Ukraine and the obligations under the Association Agreement with the EU.

Under the draft law, the President of Ukraine shall create an Expert Digitalization Council that has an impact on the appointment and dismissal of regulator’s members. This contradicts Article 106 of the Constitution of Ukraine stating that the President has no powers related to the accountability of a regulatory body. That is, regulator’s members cannot be appointed and dismissed by the Expert Council, which is established by a presidential decree and reports to the President.

Moreover, the Expert Council is empowered to issue a negative opinion on the work of the regulator’s members within one year. At the same time, there are no clear criteria for declaring the work unsatisfactory. That is, regulator’s members may be dismissed subject to the will of the Expert Council. So, there is no way that the regulatory body will be independent and impartial. This threatens Ukraine’s chances to integrate into the EU digital market.

There are some other comments on the draft law. In particular:

• It provides for the powers of the regulator enabling it to introduce mandatory registration of subscribers (we wroteabout the risks of such mandatory registration earlier).
• It creates conditions to oblige consumers to verify the legality of purchased mobile phones independently (BRDO experts have already stressed that it would be unacceptable to shift the responsibility for the violation of requirements for the legality of importing mobile equipment by third parties to consumers).

The draft law 6055 needs to be improved. In this regard, the BRDO appealed to the Verkhovna Rada Committee on Digital Transformation, the President of Ukraine, the Ministry of Digital Transformation, the Deputy Prime Minister of European and Euro-Atlantic Integration of Ukraine, and the Verkhovna Rada Committee on Ukraine’s Integration into the European Union. For their part, BRDO experts are ready to actively participate in the drafting work and have already prepared some proposals on the revision of the draft law.

It is no secret that the consumer protection system is still imperfect in our country, unlike in Europe and the United States. Therefore, the government has recently approved a new version of the Law “On Consumer Protection”. The draft law is aimed at introducing European standards of consumer protection in Ukraine,  ensuring a level playing field for e-commerce and fair competition, as well as reducing the burden on business by repealing outdated rules.

“Information about products and services can be provided to consumers only if they agreed to receive such information”

“Current consumer protection legislation becomes irrelevant and does not meet present-day challenges. This leads to an increase in consumer rights violations. Actually, consumers find themselves alone in dealing with their problems. The adoption of the new draft law will allow improving the consumer protection, in particular, in the e-commerce sector and the warranty service on products, as well as eliminating the potential for unfair commercial activities,” Iryna Novikova, Deputy Minister of Economy of Ukraine, said.

However, ordinary Ukrainians are primarily interested in what rights the new law protects and how people can exercise their rights. Therefore, Facty.ua asked one of the drafters of the law — the Better Regulation Delivery Office (BRDO) — to explain the details. This is an independent analytical center funded by international donors, foremost by the European Union. Lyudmyla Lisina, a lawyer at the Better Regulation Delivery Office (BRDO) answered our questions.

— What innovations aimed at introducing European consumer protection standards in Ukraine are provided for by the draft law?

— First of all, from now on, our law will define the consumer protection principles similar to the European legislation, such as:

• prioritizing consumer rights and interests over any other interests and goals of business entities;
• making a decision in favor of a consumer if a statutory provision or any regulatory act allows ambiguous or multiple interpretations of rights and obligations of consumers or business entities, as well as if a contract between a consumer and a business entity contains vague or ambiguous provisions;
• protecting economic interests of consumers from unfair and misleading or aggressive commercial practices;
• ensuring availability of useful and clear information about the goods, services, and works offered, including information that provides the product identification and traceability of its origin.

The draft law also provides for the provisions on the relationship between buyers and sellers in e-commerce, as well as defines certain rules on the purchase and sale of digital products. This is all within the framework of European practices. It also takes into account other European approaches. For example, product information may be sent to a consumer email or phone only if they agreed to receive such information from a business entity.

“In case of failure to provide mandatory information, sellers will be punished by fines”

—  What information about products and sellers will be required to provide in e-commerce and what liability is prescribed by law for the lack of such information?

— For the conscious and informed choice of consumers about the necessity or expediency of purchasing products, a seller should provide consumers with the following product information regardless of whether the sales are made in a physical retail shop or on a seller’s website through e-commerce:

• the product name, the product/service mark name or reproduction;
• data on main consumer properties of goods or basic characteristics of works (services);
• quantity of products in units of measurement established under the legislation on metrology and metrological activity, depending on the type of product;
• information on the content of harmful substances, if any, as well as warnings on the use of certain products, if such warnings are stipulated by law;
• the product price or the method of its calculation;
• any special storage requirements and use conditions, as well as possible negative consequences of consumption (use), if specified by the manufacturer or envisaged by regulatory acts;
• information about business entity’s warranty obligations;
• the name, contact phone number, and location of the manufacturer (performer), as well as the name, number, and location of the business entity responsible for accepting and reviewing claims for warranty liabilities and commercial guarantees, or other consumer complaints, if such a business entity is not the manufacturer (performer);
• date of manufacture and expiration date or service life. If the use of goods beyond the established lifetime may be hazardous to consumer life and health, and environment or may damage the property of consumers, information on the necessary actions after that period, as well as possible consequences of failure to perform such actions, should be specified.

In case of failure to provide such information, sellers will be punished by fines in the amount of 30 percent of the value of goods received for the sale, works performed (services provided), but not less than five non-taxable minimum incomes (UAH 85). If the business entity does not keep detailed accounts under the law, the fine will be five non-taxable minimum incomes (UAH 85).

The main e-commerce feature is that the law will require that the seller’s website contains true seller’s information sufficient to identify them (such as the legal entity’s name or the full name of a private entrepreneur, seller’s address or location, identification code under EDRPOU, the presence of a permit or license (if required by law), phone number, e-mail address if available or other means of communication, as well as the name and location of business entities responsible for accepting and reviewing warranty liabilities claims.

If the seller’s website does not contain this information, they will be punished by a fine in the amount of ten thousand non-taxable minimum incomes (UAH 170 thousand).

— How will the consumer’s rights change in case of providing low-quality goods or services?

— The law establishes that consumers have the right to receive quality goods and services. And if the consumer finds a shortage of goods through no fault of them during the warranty period specified in the law (not less than 2 years for new and not less than 1 year for used goods from the date of purchase), the seller should provide the warranty repair of goods, or, if they cannot be repaired, replace them for similar ones.   If it is impossible neither to repair, nor replace the goods, the consumer has the right to claim a reduction in the price of goods in proportion to the reduced value of the goods received as compared to the value of goods with no shortage. The reduction in the price of a defective product is determined by the seller upon agreement with the customer.

If it is impossible to implement any of these options, the consumer has the right to claim the avoidance of a contract, ie the repayment of funds paid for such low-quality goods, with the simultaneous return of the goods to the seller. The only legal requirement for the consumer is the need to provide a payment document (sale receipt) given by the seller when selling the goods.

“A new competence of the State Service on Food Safety and Consumer Protection is the right to apply to Internet service providers to restrict access to websites”

— The draft law proposes to extend the Law of Ukraine “On Consumer Protection” to cover food products in terms of the economic rights of consumers. What exactly is meant?

— Food safety and quality are regulated by the Law of Ukraine “On Basic Principles and Requirements for Food Safety and Quality”, and food information requirements are established by the Law of Ukraine “On Information for Consumers on Food Products”.

However, these laws do not specify what to do if a consumer buys a non-suitable for consumption or unsafe food product.

The new version of the Law “On Consumer Protection” stipulates that in this case the consumer has the right to claim the replacement of the non-suitable for consumption or unsafe food product for a food product that is suitable for consumption from the seller after providing a relevant payment document, or the customer has the right to cancel a contract and claim a refund.   The procedure for returning or replacing non-suitable for consumption or unsafe food products is determined by the Cabinet of Ministers of Ukraine.

— What are the changes in rights and responsibilities of the State Service on Food Safety and Consumer Protection and public consumer associations?

— The draft law stipulates that the State Service on Food Safety and Consumer Protection will be responsible for state supervision (control) over the compliance of requirements of the Law “On Consumer Protection” by business entities only by conducting unscheduled state supervision (control) measures. The law does not provide for scheduled measures, and this reduces administrative pressure on entrepreneurs.

Additionally, from now on the State Service on Food Safety and Consumer Protection can file lawsuits to protect consumer rights, in particular regarding an indefinite range of consumers, without paying court fees. This will allow this state agency to exercise the state function on the protection of violated rights of citizens.

Another new competence of the State Service on Food Safety and Consumer Protection is the right to apply to Internet service providers to restrict access to websites (parts of websites, some software) in respect of business entities that do not provide true information about their name and location on their websites as this makes it impossible to implement state supervision (control) measures under requirements of the Law of Ukraine “On Basic Principles of State Supervision (Control) in the Sphere of Economic Activity” to restore the violated rights of consumers.

Moreover, in this time of the spread of e-commerce, the State Service on Food Safety and Consumer Protection has new powers to maintain a register of declarations of e-commerce entities that intend to conduct electronic commerce in the manner prescribed by the Cabinet of Ministers of Ukraine. Such a register is open, and e-commerce entities will be able to enter information about themselves on a voluntary and free basis. This option will allow such business entities to gain certain competitive advantages through the openness of information about themselves.

The law is also aimed at strengthening the capacity of public consumer associations that currently do not have enough influence to fully protect violated consumer rights.

For example, the law stipulates that public consumer associations have the right to:

• participate in the process of formation and implementation of state policy in the field of consumer protection;
• inform the public about consumer rights, the results of their activities, as well as provide advice and organize consumer protection trainings;
• study consumer properties of products, their demand, and conduct population surveys o identify public opinion about the quality and safety of products manufactured and sold;
• conduct independently or apply to authorized state agencies for independent examination (research) and testing of products;
• make proposals to restrict or prohibit the introduction or sale, withdrawal from circulation or recall of unsafe or counterfeit products or unauthorized goods with providing supporting documents or copies thereof;
• file lawsuits to protect consumer rights, including regarding an indefinite range of consumers.

It should be noted that public consumer associations, as well as consumers, will not pay court fees in cases related to consumer protection,” Lyudmila Lisina summed up.

It deserves mentioning that the Verkhovna Rada adopted draft law #5091 “On Guaranteeing Property Rights to Real Estate to Be Constructed in the Future” in the first reading. The drafters of the law assure that its adoption will create effective legal mechanisms for the state to guarantee property rights to unfinished construction projects and future real estate. That is, real estate buyers will be much better protected and receive guarantees of protection of their rights in case of, for example, suspended construction.

Source: Fakty.ua

Although Ukraine is among the top 5 world leaders in honey production and export, for a long time, the state has not been aware of how many bee farms and bee colonies are registered as well as who produces honey in the country. 

Everything has changed with the adoption of the Order of the Ministry of Economy “On some issues in beekeeping” that, in particular, introduces an electronic register of bee farm certificates.

Before the adoption of this document, 851 bee farm certificates, and 42,054 bee colonies were registered in the Register of Veterinary-Sanitary Certificates of Bee Farms. As of today, there are almost 43,500 bee farm certificates and 2,236,144 bee colonies in the Register. That is, the number of registered bee farms and bee colonies has increased more than 50 times!

How was it before?

Back in 2018, BRDO experts analyzed the honey market in Ukraine. According to our estimates, only 2% of honey was produced by registered business entities, and the other 98% was produced by households. That raised a problem in counting the number of producers, the amount of honey produced, and the sources of its origin. There were also risks in international trade.

Additionally, business entities can not confirm the presence of their bee farms and the number of bees in case of poisoning and be recompensed for losses. This made them legally unprotected. Beekeepers also could not receive state support in carrying out business activities because they were not registered.

How will it be now?

Today, every business entity can register a bee farm free of charge by submitting the necessary documents in writing or electronically to the local office of the State Service on Food Safety and Consumer Protection at the bee farm owner’s place of residence or the bee farm location. Information about the business entity is automatically entered into the electronic register of bee farm certificates.

In such a way, the Order of the Ministry of Economy developed with the participation of BRDO experts provided opportunities for unshadowing of Ukrainian honey production. From now on, anyone can quickly and easily register a bee farm, receive state support and protect their interests in the event of bee poisoning by plant protection agents.

Finally, the state and international partners now have complete information on the number of beekeepers, bee colonies, and sources of honey. This also makes a positive impact on international trade.

To figure it out and draw attention to state inspections, Texty.org.ua developed a project “Under Supervision”. As part of this project, they analyzed the open data of the Inspection Portal, containing    information on scheduled and unscheduled inspections, conducted by state regulatory authorities, and their results. 

Why is this important?

 More than 6 million people have used the Inspection Portal since 2017. The portal has already registered 886 regulatory agencies and contains information on more than 700,000 inspections conducted in 2018-2021.

Due to the increased transparency of the state regulatory sector and the digitization of documents, the number of inspections decreased by 7.5 times: 1.3 million inspections were conducted in 2013, 172 thousand inspections – in 2019.

What else can you learn?

This article contains brief tips for entrepreneurs on how to be prepared for inspections.

Moreover, it contains recommendations for regulatory authorities to improve the quality of inspection data they enter into the database of the Inspection Portal.

As a reminder, the Inspection Portal provides real-time accessible information on inspections. This web service was launched by the Better Regulation Delivery Office (BRDO) together with the State Regulatory Service in 2017.

The project was developed by Texty.org.ua with the support of the USAID/UK aid Transparency and Accountability in Public Administration and Services (TAPAS) project.

To protect the rights of consumers, the government approved a new version of the draft law developed by the Ministry of Economy of Ukraine together with BRDO experts.

This is about modern mechanisms for consumer protection. Additionally, the draft law is aimed at fulfilling Ukraine’s obligations under the Association Agreement and the implementation of EU legislation.

Why is this important?

Today, consumer rights are not fully protected due to outdated laws. The current law on consumer protection has been in force since May 12, 1991.

What changes does the document provide for?

Consumers will have more opportunities to protect their rights and interests in case of their violation, in particular:

• New tools for consumer protection in e-commerce are introduced. For example, access to websites that contain no vendor information may be restricted.
• The list of unfair business practices was extended. For example, making invited product reviews to raise/lower the rating will be considered an unfair business practice and be fined UAH 25.5 thousand.
• The rights of consumers who buy goods with digital content are defined. If new updates are required to ensure the proper quality and safety of a product with digital content, consumers have the right to obtain it along with the information about its availability.
• A minimum warranty period (at least 2 years for new products and at least 1 year for second-hand goods) was established.
• Consumer rights are expanded in cases when purchased products are found to be defective. All goods will be returned for repair at the seller’s expense (under the current law, only those goods weighing more than 5 kg can be returned). If a product is beyond repair, the period for its replacement is reduced from 2 months to 14 days.
• The rights and obligations of buyers and sellers in case of pre-payment for goods are defined. Prepayment is accompanied by a mandatory contract that can be terminated by a buyer if he/she has not received the goods within the prescribed period. In this case, a seller is obliged to refund the money within 14 days.

We hope the draft law will be promptly adopted in the parliament!

The draft law that was adopted as a whole finally cancelled the terms of providing administrative services during the quarantine. So from now on, quarantine will not be a reason to suspend these terms — they are obliged to deliver services in time.

On March 17, 2020, at the very beginning of the pandemic and quarantine in Ukraine, the Verkhovna Rada adopted the Law of Ukraine “On Amendments to Certain Legislative Acts of Ukraine Aimed to Prevent the Occurrence and Spread of Coronavirus (COVID-19)” #530-IX.

The above-mentioned law established that the period to apply for administrative and other services and the duration of providing these services determined by law should be suspended from the day when the quarantine was announced. From the date of quarantine termination, these terms should be extended, taking into account the time that has passed before their suspension.

That is, officials were allowed to set a deadline for consideration of documents to obtain a certain administrative service. However, due to the long quarantine duration, the terms of providing any administrative services have become virtually unlimited, and the documents submitted to obtain certain services have been considered for several months.

BRDO experts participated in the drafting of the law aimed at cancelling indefinite terms of the provision of administrative services.

So we are sure that it will make life much easier for both business and society!

In early August, the draft law amending the Law of Ukraine “On Electronic Communications” to protect the interests of the state and users of electronic communication services was published for discussion by the Parliament Committee on Digital Transformation.

This document contains some conflicting provisions that make it difficult for citizens to buy mobile phones and other terminal equipment. BRDO experts analyzed the draft law in detail and consider the amendments proposed by this legislative initiative to be unacceptable and therefore addressed a letter to the Committee.

Under the draft law, if a user buys a mobile phone with IMEI that has not been entered with the status of permitted for use in the mobile network in the register of identifiers, they will be able to use it only for a few months or will have to change the mobile phone status by their own. In fact, end users are responsible for verifying the legality of devices they have lawfully purchased; otherwise, they bear the risk of being disconnected from the network.

Additionally, the draft law lays the responsibility on end users to change the status of purchased devices from ‘temporarily permitted’ to ‘permitted for use in the electronic communication network’ independently, if these devices were purchased abroad and brought in Ukraine as personal items. For this purpose, they need to apply to the competent authorities and confirm the purchase of a mobile phone or the border crossing. Unfortunately, the draft law does not take into account that a large number of users do not have the opportunities and skills to take these measures (elderly people, people with disabilities, etc., people who do not have Internet access). This group of users may lose access to voice communication and mobile Internet services. But this is inconsistent with the guaranteed right of end users to free access to electronic communication services provided for by the Law “On Electronic Communications” (Part 1 of Article 107).

Also, it can be expected that unscrupulous importers will take advantage of this provision by selling the equipment together with sales receipts (real or fictitious) or changing the IMEI status with the help of front persons who actually crossed the state border. Therefore, it is doubtful that the changes introduced by the draft law will help fight against ‘grey imports’.

In such a way, the draft law leaves end users to deal with the problem of improper performance of state’s functions on combating the illicit market trade of mobile terminal equipment, its counterfeit and illegal traffic, instead of protecting their interests.

Moreover, this legislative initiative contains some provisions that are inconsistent with other laws and Ukraine’s international obligations.

BRDO experts consider the amendments to the Law “On Electronic Communications” that violate the rights of end users, contradict the laws of Ukraine, and obligations under the EU-Ukraine Association Agreement unacceptable. We hope that this legislative initiative will not be supported by parliamentarians.

The Verkhovna Rada adopted draft law #5091 on guaranteeing property rights to real estate to be constructed in the future in the first reading.

The adoption of the draft law creates effective legal mechanisms for the state to guarantee property rights to unfinished construction projects and future real estate – from now on real estate buyers are much better protected and receive guarantees of protection of their rights in case of, for example, suspended construction.

What is changed?

• As a result of concluding a purchase/sale contract, a buyer receives the status of a guaranteed buyer instead of the investor status with risks and, accordingly, is protected by laws on consumer protection (for individuals) and property rights
• Special property rights will be registered for the future real estate object. This makes it impossible to resell it
• A construction project owner/developer can start the sale of future real estate only after the registration of special property rights, separately for all apartments or other objects. This also makes it impossible to purchase residential or non-residential premises in illegally constructed buildings
• Introducing a guaranteed construction segment — a part of the object that a developer cannot sell before the completion of construction. This is an effective source to cover costs in case of completion of unfinished construction by another construction project owner
• A construction project owner/developer is obliged to agree on adjustments in the design documentation with buyers if such adjustments affect their interests
• The law establishes mandatory requirements for the publication of information about a construction project owner and a future apartment building

BRDO experts actively participated in drafting the law. We are grateful for the support given by people’s deputies and look forward to the adoption of the draft law as a whole!

In Ukraine, it is very easy not to pay for digital content today, as the law does not prohibit the production, sale, and use of illegal conditional access devices, so offenders cannot be held liable for their actions.

In Europe, digital content access services have been protected by Directive 98/84/EC since 1998.  In the context of harmonization of Ukrainian laws with the European legislation, we have to meet certain criteria, in particular, resolve the issue of Ukraine’s integration into the EU internal market in the field of the digital economy. For this purpose, BRDO experts have drafted a law on the protection of certain services based on, or consisting of, conditional access.

The draft law defines mechanisms for protection against unauthorized access to digital television and radio services received by users for a fee. Simply put, the draft law prevents digital piracy and brings the Ukrainian legislation closer to the European one, as required by the EU-Ukraine Association Agreement.

The Ministry of Economy finalized the document drafted by the BRDO and divided it into two draft laws #5870 and #5871 that were registered in the Verkhovna Rada on August 27, 2021.  

Why is this important?

The adoption of these draft laws will promote fair competition between providers of electronic communications services for conditional access to television and radio services, protect digital content customers who have received it lawfully, and create the environment for the development of secure services based on, or consisting of, conditional access. Moreover, it will allow the implementation of Directive 98/84/EC into Ukrainian legislation and promote Ukraine’s European integration.

Ukrainians buy apartments in new buildings trusting the word of real estate developers. How to avoid fraud?

Ukrainian government is going to adopt a law that will reduce the number of fraud schemes in the construction sector. Apostrophe tried to figure out how the authorities planned to protect buyers of apartments in new buildings from real estate developers and whether we should expect growing housing prices.

It is my contract: it covers whatever I want

Housing construction is one of the dynamic sectors of the Ukrainian economy. However, there have been huge scandals around numerous construction sites for many years. Sometimes real estate developers abandon their construction projects, while in other cases, suddenly it turns out that each apartment in a new building was sold to several buyers or, after the construction is completed, buyers find out that they have invested in the project that does not have the necessary permits and cannot be commissioned…

Each such case is a personal tragedy because people often buy apartments with the last of their money and get into unsustainable debts, hoping to improve their housing conditions. However, neither the public clamor, nor appeals to the government, nor the relevant lawsuits improve their chances, as there is almost no healthy way to save them from this situation.

But the state can help its citizens avoid facing new construction scams by introducing rules that regulate the sale of apartments in future new buildings. The draft law “On Guaranteeing Property Rights to Real Estate to Be Constructed in the Future”, which has been recently considered and approved in the first reading by the Verkhovna Rada, is aimed at addressing these issues.

The purpose of this draft law is to provide the best protection for the rights of people who buy apartments in the future or unfinished construction objects.

“If we carefully study the texts of contracts signed today by investors and real estate developers, we can see that they have one important thing in common: they all are made in the interests of real estate developers, while buyers virtually have no rights,” Oleksii Dorogan, BRDO (Better Regulation Delivery Office) CEO and one of the drafters of the law, told Apostrophe. “And if real estate developers decide that they cannot complete their construction projects or provide investors with apartments for some reason, buyers can hardly protect themselves.”

In fact, the good will of real estate developers is the only guarantee for investors. Of course, they can go to court, but without much hope of winning a lawsuit, because the texts of contracts are made by highly qualified lawyers who try to exclude the responsibility of developers.

News rights – new guarantees

The drafters of the law propose to solve this problem by introducing a special right to objects under construction – a special property right.

“Initially, it was proposed to introduce the ownership of future construction objects. However, under civil law, the right of ownership provides for the right to possess, dispose of and enjoy property objects. But in this case, we are talking about property objects that do not yet exist. Therefore, it is not possible to enjoy them. In such a way, it was decided to introduce a new concept – a special property right. It is somewhat narrower than the ownership right and provides for the right to possess and dispose of property,” Oleksii Dorogan said.

Under the draft law, a real estate developer will have to notarize special property rights for each apartment or commercial premises that are part of the future building even before the sale of apartments in this building. A special open state register will contain all records of this right.

When selling apartments, this right will be transferred to buyers through a notary contract. Thus, buyers of apartments in future buildings will no longer be investors who invest in a potentially risky object. They will the buyers who have a legal right to their purchased objects, can confirm this right with documents and defend it in court.

It is important that the draft law obliges notaries to check whether real estate developers have all the necessary documents and permits to launch construction works by using the databases of the State Architecture and Urban Planning Inspectorate of Ukraine at the initial registration of special property rights. In such a way, a company that decides to launch construction works without proper documents will not be able to register such a right, and therefore will not be able to sell apartments. According to the drafters, this procedure should help reduce the number of illegal construction cases.

Also, the introduction of special property rights should prevent using another construction fraud scheme – the sale of one object to several buyers. Today, the right to an apartment in a new building is confirmed only by a contract between investors and real estate developers. So, when buying an apartment, it is almost impossible to find out whether it has been sold to someone else before. But after the law is adopted, the special property right for each apartment will be officially registered in the open state register. Therefore, when registering the apartment purchase, both notaries and buyers will be able to make sure in advance that the apartment has not been sold to anyone before.

Under the draft law, property rights will be transferred from real estate developers to buyers when they pay the full cost of future apartments.

“This decision was a necessary compromise. It is aimed at preventing abuse by buyers who may decide that they no longer need to pay for an apartment after obtaining the right to it,” Oleksii Dorogan explained.

As the special property right is a somewhat narrow right of ownership, those who own it will have new important rights and opportunities that construction company investors do not have today. For example, this right can be sold. Therefore, if necessary, investors will be able to sell a new apartment before the construction project is completed.

Another important innovation: construction companies will be obliged to agree on any adjustments in the initial building design with apartment owners. Now real estate developers simply say to apartment buyers that the buildings where they purchased apartments do not look like in advertising brochures without asking them first.

However, if the law comes into force, developers will no longer be able to build a few extra floors in the building or change the layout of apartments as they wish. For this purpose, they will have to obtain the consent of all apartment owners, but it will be extremely difficult to do this.

Given that real estate developers often draw up purchase/sale contracts for unfinished construction objects as they wish, neglecting the interests and rights of buyers, the draft law establishes some mandatory requirements for such documents. They should contain a lot of information that is essential for consumer protection. In particular, it includes a cadastral number of the land plot, on which the building is located, an entry number confirming the right of ownership or use of this land plot, technical specifications of the building, a design-based building plan, references to all entries in state registers confirming the legality of construction, the apartment price, the estimated schedule of its commissioning and many other details that should provide the buyers with the opportunity to make sure that they are dealing with a reliable partner and will be able to protect their rights in case of troubles.

Additionally, apartment owners will have the right to dissolve purchase contracts at their initiative if the real estate developer delays in fulfilling its obligations for more than 6 months. Probably, this rule will allow at least some investors to withdraw their investments in suspicious construction, without waiting for its transformation into hopeless long-delayed construction projects.

Let’s see the color of your money first

It should be mentioned that there is a proven and much easier way to avoid all of the above problems.

“In many countries, real estate developers are prohibited to sell unfinished construction objects. A project developer should first complete a building, commission it, and then can sell apartments that you can move into immediately,” Oleksii Dorogan said.

Of course, in this case, buyers do not worry that their apartments will be sold to someone else at the same time or the developer will fail to meet construction deadlines or will change the building design. They do not worry whether the developer will complete construction or will disappear with the money.

However, in the Ukrainian reality, such a decision is hardly possible, because in this case, real estate developers would have to take loans for construction. Of course, they would include the loan interests and all the possible risks in the cost of finished housing. So, this would lead to a significant increase in real estate prices. With low people’s incomes, this would lead to the housing construction collapse.

Therefore, the rules proposed by the draft law allow reducing the existing problems significantly, while keeping the existing market prices.

Of course, real estate developers will have to spend extra money on the services of a notary who will register special property rights before the sale of apartments. But the cost of notary services is very low compared to real estate prices, so it is not worth mentioning.

However, the introduction of new rules may still lead to higher prices in a particular sector.

“It’s no secret that some developers start construction activities without all the necessary permits. Therefore, investing in such projects is a risky business due to the high probability that the building will not be completed or commissioned. And, of course, developers set somewhat lower prices than the market average ones to attract buyers to such dubious projects. Accordingly, if new rules that make all real estate developers worry about the legality of their projects are applied, such companies will be forced to register permits like any other business entities and increase the price of their housing. Well, I think such an increase will not be an excessive payment for reduced risks,” Oleksii Dorogan said.

Safeguard against unfinished construction projects

A few more words about unfinished construction projects. In Kyiv and other cities of Ukraine, there are many buildings with apartments completely sold (sometimes more than once). The real estate developers involved simply disappeared. Such buildings have been empty for many years. Construction companies do not want to complete these projects, as they have no interest in them.

In this case, the draft law provides for the introduction of a mechanism that will be a certain safeguard against such situations. This is a guaranteed share that implies a certain number of apartments that cannot be sold until the construction project is completed and commissioned.

If for any reason a real estate developer failed to complete the construction, it is possible to propose another company that will be able to sell a guaranteed share of apartments for its benefit and cover the expenses to complete the project.

“Construction companies are not charitable organizations. They work to make a profit. Therefore, they will not complete abandoned construction projects without hoping to make money. And if they have a chance to earn money by selling some apartments, the probability that such projects will be completed is much higher,” the co-drafter of the law explained.

Of course, even if this draft law is finally adopted and enters into force, it will not solve all the systemic problems existing in this sector. And it will not help the situation of people who have already become victims of construction scams. However, there is great hope that the rules proposed by legislators will reduce the number of abuses in this sector.

Source: Apostrophe

Recently, the Parliament Committee on Digital Transformation has published a draft law amending the Law of Ukraine “On Electronic Communications” regarding the identification of users of electronic communications services for discussion.

The draft law stipulates that mobile subscribers should be subject to forced registration by the operator, otherwise they will not receive mobile services. That is, users lose the right to receive mobile services anonymously and are obliged to provide their personal data to mobile providers. If subscribers refuse to register, from January 1, 2025, mobile operators will be obliged to suspend and then stop providing mobile services to users who have not entered into a written contract or have not been identified by the provider.

BRDO experts analyzed the draft law and consider it unacceptable, as it contradicts the Constitution of Ukraine and current legislation, as well as limits the rights and freedoms of citizens provided by law.

The provisions of the draft law are similar to those adopted by the “dictatorship laws of January 16” and those contained in the draft law “On Electronic Communications” (registration #1083). It was submitted by MPs who were members of the Parliamentary Committee on Digital Transformation and was withdrawn in 2019, in particular, due to conflicting provisions on compulsory registration of subscribers.

Both cases have shown that such legislative initiatives provoked strong public opposition while being perceived as restrictions of rights and freedoms. The Ukrainian legislation does not provide and has not provided for any restrictions on the rights of consumers to anonymized receipt of telecommunications services. The Law “On Telecommunications” (para. 16, part 1, Article 32) contains provisions on the anonymized provision of services. The Law of Ukraine “On Electronic Communications” (part 5, Article 104) directly establishes the right of end-users to receive the service in the anonymized form under the rules of provision and receipt of electronic communications services and terms of services established by the provider. Moreover, Art. 22 of the Constitution of Ukraine directly indicates that it is unacceptable to limit the nature and scope of current rights and freedoms when drafting and adopting new laws or amending existing ones.

BRDO experts believe that the above-mentioned legislative initiative is unacceptable as it limits the rights and freedoms provided by law and contradicts the Constitution of Ukraine, so they officially appealed to the relevant committee.

We hope that this legislative initiative will not be supported by parliamentarians.