Special legal regime of Crimea and the city of Sevastopol

The Law of Ukraine "On Ensuring Civil Rights and Freedoms and the Legal Regime in the Temporarily Occupied Territory of Ukraine" became effective on 27 April 2014. The Law directly affects Ukrainian nationals and their business affairs, and applies to the domestic units of foreign concerns as well as foreign concerns having property located in Crimea or conducting business in Crimea.

The core business-related legal issues raised in the Law are as follows:

1. Individuals and legal entities maintain their title to their property located in Crimea if such property was acquired in compliance with Ukrainian law. This rule applies to both movable and immovable property acquired before the annexation of Crimea.

2. The Law introduces special requirements for the transfer of title to real estate located in Crimea:

2.1. Transactions concerning real estate can be conducted only outside of Crimea. This rule will require involving a notary who practices outside of Crimea.

2.2. Any real estate transaction violating the requirements of Ukrainian law, including the above-referred requirement, is considered void.

3. Rules for conducting business in Crimea will be regulated in a separate law. The original draft of the Law provided for heavy limitations on business operations in Crimea. 

4. Territorial court jurisdiction has been amended: all court cases normally falling within jurisdiction of courts located in Crimea will now be considered by the relevant courts in the city of Kyiv.

Even with the Law, the legal regime in Crimea affecting businesses remains very much unclear. Further, businesses will remain under pressure because local authorities in Crimea and the authorities of the Russian Federation will require compliance with Russian law. For the moment, Ukrainian law does not provide a solution on how businesses can operate in a way that observes both Ukrainian and Russian law. As for now, foreign companies conducting business in Crimea may consider transferring operations to their Russian subsidiaries (if available). However, consideration must still be given as to whether such an action could result in liability under Ukrainian law or exposure to current or future international sanctions.


Taras Dumych