November 17, 2022
On Wednesday, November 16, at its plenary session, the Second Senate of the Constitutional Court of Ukraine delivered a Decision in the case upon the constitutional complaint of the Private Joint-Stock Company “Odesteplokomunenergo”(hereinafter referred to as the Company) on the compliance of a separate provision of Article 37 of the Law of Ukraine “On State Registration of Property Rights to Immovable Property and Their Burdens” with the Constitution of Ukraine.
The Decision states that in October 2016 and June 2017, state registrars carried out state registration of the Company’s ownership of the unfinished building construction. On September 8, 2017, the Department of Communal Property of the Odessa City Council appealed to the Ministry of Justice of Ukraine with a complaint, in which it filed a petition to cancel the decisions of state registrars on state registration of the Company’s property rights, referring, in particular, to the fact that “Odesa City Council represented by Municipal enterprise “Heat supply of the city of Odesa” is the key holder of the property, the ownership of which is registered by the Company, therefore, “as a result of illegal registration actions on the property of the territorial community of Odessa city, communal property was disposed of.” Due to mistakes made by state registrars, the Ministry of Justice of Ukraine satisfied the Department’s complaint and annulled the decision on state registration of the Company's ownership of real estate.
The subject of the right to a constitutional complaint argued that the impugned provision of the Law is unconstitutional, as it empowers the Ministry of Justice of Ukraine with the authority to deprive a person of the right to property by canceling state registration based on mistake made by the state registrar. Accordingly, this violates the provisions of Article 41.4 of the Constitution of Ukraine, under which the right of ownership is inviolable. In addition, in the complainant’s view, the specified provision establishes the responsibility of the person, the owner of real estate for mistakes made by the state registrar as a representative of the state, which is “absolutely contrary” to Article 3.2 of the Constitution of Ukraine, according to which the state is responsible to a person for its activities.
In this case, the Constitutional Court of Ukraine recognised a separate provision of Article 37.7.1 of the Law as amended by the Law of Ukraine “On Amendments to Certain Laws of Ukraine Regarding the Improvement of the Anti-Raiding Mechanism” dated May 12, 2022 No. 2255-IX, namely the wording “cancellation of the decision of the state registrar” (hereinafter referred to as the impugned provision of Article 37 of the Law), as the subject of constitutional review.
When deliberating the case, the Constitutional Court of Ukraine took into account previously formulated legal positions, the Convention on the Protection of Human Rights and Fundamental Freedoms of 1950 and the practice of the European Court of Human Rights.
Assessing the constitutionality of the impugned provision of Article 37 of the Law, the Constitutional Court of Ukraine assumes that the right to property is not absolute and may be subject to restrictions. However, any interference with property rights must be based on the law, have a legitimate aim and be reasonable.
State interference in constitutional law is possible on the basis of provisions that meet the requirement of legal certainty, which requires that legal norms be clear and precise, as well as that their purpose is to ensure the predictability of situations and legal relations, and only by means that are reasonable.
Assessing the impugned provision of Article 37 of the Law in the specified aspect, the Constitutional Court of Ukraine notes that the adoption by the Ministry of Justice of Ukraine of a decision to cancel the state registration of ownership of real estate can be qualified, foremost, as the termination of official recognition and confirmation by the state of the legal fact of a person’s acquisition of such an ownership right, as a result, an entry is made in the State Register of Rights to Real Estate about the cancellation of state registration of property rights. Therefore, a person loses the opportunity to dispose of his/her property freely and at his/her own discretion. In addition, in the impugned provision of Article 37 of the Law, there is no clear and understandable indication of the legal consequences of the adoption by the Ministry of Justice of Ukraine of a decision to cancel the decision on state registration of property rights in the aspect of determining the identity of the property owner. Accordingly, the cancellation by the Ministry of Justice of Ukraine based on the impugned provision of Article 37 of the Law, of the decision on state registration of ownership causes legal uncertainty in property relations and limits the Company’s disposal of property.
According to the legal position of the Constitutional Court of Ukraine, “The Constitution of Ukraine established the principle of the state’s responsibility to a person for its activities, which is manifested primarily in the constitutional definition of the state’s duties”. The Constitutional Court of Ukraine emphasizes that the state is obliged to guarantee and ensure human rights and freedoms in the manner and within the limits that are predetermined by the Constitution and the laws of Ukraine, as well as refrain from holding a person to legal responsibility or applying other excessive sanctions to him/her in case of erroneous or illegal decisions, actions or inaction of state authorities and other bodies or persons performing state functions.
In this case, the grounds for the annulment of the state registrar’s decision were the erroneous actions and decisions of the state registrars, and not mistakes or illegal actions of the Company, nevertheless, the impugned provision of Article 37 of the Law does not empower the Ministry of Justice of Ukraine with the authority to make a decision on the payment of compensation to the Company or other type of appropriate compensation in connection with the fact that the interference with its ownership occurred as a result of erroneous actions and decisions of state registrars, i.e. subjects who performed actions and made decisions for the performance of state functions.
The Constitutional Court of Ukraine considers that the impugned provision of Article 37 of the Law, contrary to the principles of “responsibility of the state to the person” and “good governance”, does not establish reasonable means of interfering with the right of ownership in cases where the grounds for annulment of the decision on state registration of ownership of real estate are erroneous decisions and actions of the state registrar.
In view of the above, the Constitutional Court of Ukraine recognised that the impugned provision of Article 37 of the Law contradicts Article 3.2, Article 8.1, Article 41.1 and Article 41.4 of the Constitution of Ukraine, and is therefore unconstitutional. The Constitutional Court of Ukraine also noted that the impugned provision of Article 37 of the Law, declared unconstitutional, cease to have effect six months after the adoption of this Decision by the Constitutional Court of Ukraine. According to the Decision, Verkhovna Rada of Ukraine is obliged to bring the normative regulation into compliance with the Constitution of Ukraine and this Decision.
