"Compensation" Or Reparations? What Should Be The Law On Compensation For Damage To Housing And Other Real Estate

Rebuilding Ukraine

Читайте оригінал українською мовою 

On April 1, 2022, the Verkhovna Rada of Ukraine adopted in first reading the draft Law “On Compensation for Damage and Destruction of Certain Categories of Immovable Property as a Result of Combat, Terrorist Acts, Sabotage Caused by Military Aggression of the Russian Federation” (№ 7198 of 24.03.2022).

On the one hand, the bill declares a noble goal, which is close and clear to everyone who lost their home due to the aggression of the russian federation: to provide new house instead of the lost one, or the opportunity (funds) to build a new house on their own. The bill itself is a positive signal to the citizens: Verkhovna Rada remembers the losses and damages caused by the aggressor and is ready to help.

But if we set aside the political declarations of the bill and look at the practical mechanisms of its implementation, it turns out that there are some problems. And there is a risk that a good political promise declared in the bill will be impossible to implement in practice due to the mechanisms provided by the bill. And thus the more painful will be the disappointment of the people who expected the help.

We have analyzed in detail the practical mechanisms and conceptual approach of the bill. Here are the main theses:

  1. A distinction should be made between the urgent provision of housing for those who have lost it and the compensation for damages caused by the russian federation. It is possible and necessary to provide people with housing now, without waiting for the adoption of a separate law. Compensation for damages by the russian federation will be determined by international agreements. However, in the bill these tasks and tools for achieving them are mixed.

  2. The mechanism of "compensation" provided by the bill, in essence, is not really compensation for losses by the russian federation, but simply a state-funded aid from the state budget of Ukraine to certain categories of citizens.

  3. This approach is ideologically and politically dangerous, as it diverts the responsibility of the Russian Federation, but instead creates a risk of weird situation where Ukrainian citizens will sue Ukrainian local governments for the damage caused by the aggressor.

  4. Moreover, this approach of the bill has no practical implementation. After all, from the point of view of finances, it makes no sense to talk about any payments as long as there is no source of such payments. The actual ability to provide such payments will depend on intergovernmental agreements and international treaties. Until then, it is necessary to form and justify the amount of reparations to be paid by the russian federation. To do this, it is necessary to use a clear and unambiguous legal mechanism for the cession (transfer) of the claim rights from Ukrainian residents to the state of Ukraine. Payments themselves can be made later, after the sources of these payments are determined according to international agreements/treaties.

  5. Therefore, the bill’s approach of "compensation" (which in fact is a state-funded aid) should be abandoned. Instead of the law on "compensation", we need a law on the cession (transfer) of the claim rights against russian federation from Ukrainian residents to the state of Ukraine. The purpose of such a law should be to consolidate in the hands of the state of Ukraine all proven claims of individuals, legal entities, local communities against the russian federation, for more effective seizure of funds from the aggressor through international legal mechanisms available to states and not available to individuals.

  6. The law on the cession (transfer) of the claim rights against russian federation must:

  • be applied to all entities whose property in Ukraine has been destroyed or damaged: to individuals, legal entities, local communities,
  • be applied to all types of real estate, not just housing,
  • provide only monetary payment for the cession (transfer) of the claim rights against russian federation (losses are estimated in UAH / USD / EUR, not in "square meters"),
  • determine the body that will buy and consolidate the rights of claim (for example, the Ministry of Finance of Ukraine),
  • not set “limits” on “compensation”, but instead must recognize/accept the amount of damages set by the court,
  • not limit the use of the received payments to any "target purpose",
  • provide the estimation of the damages by special state commissions, to reduce the workload of the courts,
  • determine the sequence of payments in accordance with the their sources (reparations).

This is the brief summary of the more comprehensive analysis and suggestions available in Ukrainian here.