The fate of encumbrances upon the termination of private property rights of persons associated with unfriendly countries in the Republic of Crimea

Kutovoi Nikita Sergeevich Lawyer; Nikita Sergeevich Kutovoy's Law Office 195160, Russia, Saint Petersburg, Sverdlovskaya nab., 44, litera D, floor 4, office 414 nk@kutovoi.ru

In connection with the developing sanctions counteraction between Russia and foreign states and territories committing unfriendly actions (the list of which was approved by the Decree of the Government of the Russian Federation dated 03/05/2022 No. 430-r) (hereinafter referred to as "unfriendly countries"), as well as the continuation of a special military operation in Ukraine (SVO), the problem of blocking and seizure of assets has become particularly relevant businesses and individuals of the warring parties, as well as the consequences of encumbrances of this property.

By Resolution No. 1417-2/22 of 10/18/2022, the State Council of the Republic of Crimea introduced a new regulation, namely, supplemented paragraph 1 of Resolution No. 2085-6/14 of the State Council of the Republic of Crimea dated April 30, 2014 "On Property Management Issues of the Republic of Crimea" with paragraph 2, according to which the property of individuals and legal entities associated with the Republic of Crimea may be transferred to the ownership of the Republic of Crimea with unfriendly countries.

For the purposes of this article, when mentioning this procedure, the author will sometimes resort to the term "nationalization", although in reality the legal nature of these grounds for termination of ownership requires fundamental scientific research and comparative legal analysis.

Since the introduction of the analyzed norm, the property of dozens of private legal entities and individuals has been included in the annex of the Resolution of the State Council of the Republic of Crimea dated April 30, 2014 No. 2085-6/14, the rights to which arose in the Republic of Crimea due to the connection of these persons with unfriendly countries. Thus, the norm in question currently entails real legal consequences for the property rights of individuals.

Since previously the above-mentioned property was actively in the civil circulation of the Russian Federation, encumbrances could arise in relation to it, for example, the right to lease or pledge. To simplify the study, this paper will focus on encumbrances that arose after 04/01/2014 (the date of entry into force of Federal Constitutional Law No. 6-FKZ dated 03/21/2014).

An analysis of the legislation of the Republic of Crimea shows that at the level of this subject of the Russian Federation, the issue of the fate of encumbrances of the above-mentioned property after the emergence of the ownership right of the Republic of Crimea to it is not settled.

At the same time, there are potentially compensating norms at the level of federal legislation.

Thus, Article 617 of the Civil Code of the Russian Federation provides for a general rule on the preservation of the right of lease when transferring ownership of the leased property to another person.

A similar rule is provided for as a general rule in Article 353 of the Civil Code of the Russian Federation, Article 38 of Federal Law No. 102-FZ dated 07/16/1998 "On Mortgage (pledge of real estate)" in relation to collateral. However, with regard to the seizure of property for state/municipal needs, requisition and nationalization, the right of pledge to the seized property is terminated (paragraph 1 of Article 41 of Federal Law No. 102-FZ dated 07/16/1998 "On Mortgage (pledge of real estate)". It is worth noting that this requires that the ownership right be terminated on the basis of federal law. At the same time, it is noteworthy that in case of confiscation, the mortgage on the mortgaged property remains (paragraph 2 of Article 41 of the Federal Law No. 102-FZ dated 07/16/1998 "On Mortgage (pledge of real estate)").

This regulation at the level of federal legislation is the subject of extensive discussions in the doctrine ^{[1, 2, 3]}, however, in general it is permissible in relation to nationalization, requisition, seizure for state/municipal needs and confiscation, if, for example, it is recognized that they are derivative methods of acquiring property rights. And as you know, the derivative acquisition of ownership presupposes, as a general rule, succession, that is, it is characterized by the preservation of encumbrances that arose before the acquisition ^[4].

Thus, it is necessary to answer to what extent it is permissible to apply these norms of federal legislation, given that the analyzed basis for the termination of private property rights in the Republic of Crimea is not provided for in federal legislation (in particular, in Article 235 of the Civil Code of the Russian Federation) and cannot directly relate to any type of compulsory termination of private property rights specified therein and seizures of property in favor of the state. Thus, according to the author, the analyzed norm is not directly nationalization based on the definition of this term in Article 306 of the Civil Code of the Russian Federation, and at the present stage of development of civil legislation in Russia occupies an independent place in the system of grounds for termination of property rights ^[5].

The author believes that in this case there is a gap, which must be filled using the analogy of law or the analogy of law.

The analogy of the law, as S. S. Alekseev wrote ^[6], is the application of a rule of law regulating similar relations to a relationship that is not regulated in a specific norm. This method of filling gaps in the law is used if the disputed relationship does not have the necessary regulatory legal regulation, but there is a law regulating similar legal relations. As a result of the application of this method, the norms of the law regulating similar legal relations are applied to an unregulated relationship, the specified regulation is fixed in paragraph 1 of Article 6 of the Civil Code of the Russian Federation.

S. S. Alekseev defined the analogy of law ^[6] as the application to a controversial relationship that is not regulated in a specific norm in the absence of a norm regulating similar relations, common principles and the meaning of legislation. The general principles and meaning of legislation are nothing more than the principles of law (general and sectoral). In the analogy of law, the principles perform a direct regulatory function and act as the only regulatory basis for an enforcement decision. The use of the analogy of law to fill in gaps in the law is possible in the presence of the following circumstance — the absence of any rules governing similar or similar relations. The analogy of law is fixed in clause 2 of Article 6 of the Civil Code of the Russian Federation.

In this case, choosing the necessary analogy is not an easy task. The fact is that, as mentioned above, there is no clear understanding of which method of termination of property rights the analyzed paragraph 2 of paragraph 1 of the Resolution of the State Council of the Republic of Crimea dated April 30, 2014 No. 2085-6/14 refers to or is most inclined to confiscation or nationalization. As can be seen above, for these categories there are different consequences in terms of the legal fate of real estate collateral.

The issue is also complicated by the fact that it is difficult to unambiguously determine the analyzed method of the emergence of the ownership right of the Republic of Crimea to the property of individuals as initial or derivative, since it does not fit into the logic of federal legislation.

Since, in fact, the property is transferred from private ownership to state ownership, and no other regulation is directly provided for, the position has the right to exist, according to which the analyzed method of the emergence of the ownership right of the Republic of Crimea should be considered derivative. This approach also corresponds to the principle of stability of civil turnover.

In turn, the principle of stability of civil turnover may conflict with the need to ensure the public interests and objectives of the appropriate procedure for the compulsory seizure of private property in favor of the state, which may involve the need to completely cleanse the property of encumbrances. In this context, the mechanism for maintaining a balance between private and public interests in the absence of direct legislative regulation may be the fact that the State is aware of the relevant encumbrances. The author believes that this approach should ultimately be implemented when eliminating gaps at the legislative level.

As for the application of the analogy, the author is inclined to believe that the analogy of the law concerning the rules on nationalization as regulating similar legal relations should be applied.

The analogy of the law is applied in cases where there is no specific legal norm for regulating certain public relations. In such situations, the law enforcer uses a rule from another area of law that regulates similar relationships. This makes it possible to fill the gap by using existing norms that are as close as possible in meaning to the necessary ones. The application of the analogy of the law helps to maintain legal stability and avoid situations where certain public relations remain outside legal regulation.

The use of the analogy of the law plays an important role in the conditions of rapid development of public relations and the emergence of new technologies. Legislation does not always keep up with practical needs, and analogy helps to prevent a legal vacuum, ensuring continuity of legal regulation.

Nevertheless, the application of analogy should be reasonable and careful so as not to violate the principle of legal certainty. There is a risk of arbitrary interpretation and application of the rules, which can lead to abuse and reduce confidence in the legal system. Therefore, high professional skills of law enforcement officers and a clear understanding of legal principles are necessary for the effective use of analogy.

Thus, when applying the analogy of the law regulating nationalization issues, in the event of the emergence of the ownership right of the Republic of Crimea to the property of individuals associated with unfriendly countries, encumbrances in the form of rent should be maintained on the basis of Article 617 of the Civil Code of the Russian Federation, and encumbrances in the form of collateral should be terminated on the basis of paragraph 1 of Article 6, paragraph 1 of Article 41 Federal Law No. 102-FZ dated 07/16/1998 "On mortgage (pledge of real estate).

This interpretation, at first glance, looks somewhat contradictory, but it has the right to exist in the absence of direct regulatory norms.

At the same time, the author believes that, according to the spirit of the analyzed procedure, any encumbrances of property transferred to the ownership of the Republic of Crimea on the basis of paragraph 2, paragraph 1 of Resolution No. 2085-6/14 of the State Council of the Republic of Crimea dated April 30, 2014, should be terminated, unless otherwise the purpose in connection with which this property was transferred to state property. This goal, for example, may be the inadmissibility of preserving any rights of persons associated with unfriendly countries in relation to property, since the existence of these rights entails a threat to the defense of the country and the security of the state.

Other civilists support a similar point of view. For example, M. Y. Karpov ^[7] notes that the statement about the derivative acquisition of ownership rights by the Russian Federation or subjects to property during nationalization inevitably entails the thesis that the state will be responsible for all debts of encumbrances.

Draft federal laws also support the initial acquisition of ownership rights.

In paragraph 2 of Part 3 of Article 12 of the Draft Federal Law No. 340689-3 "On the conversion of property owned by legal Entities and individuals into State ownership (nationalization)", submitted for consideration on 06/13/2003, it is indicated that persons who have rights to the property of the owner (lease, easement, pledge, etc.) The amount of the amounts to be paid is determined. That is, the limited proprietary or binding rights of such persons disappear.

This provision repeats Part 4 of Article 19 of the Draft Federal Law No. 388113-7 "On the Basics of Nationalization in the Russian Federation", submitted to the State Duma of the Russian Federation on 02/13/2018: when determining the amount of compensation to the owner of the value of property, all encumbrances imposed on the specified property under the civil obligations of its owner are taken into account. However, Part 1 of Article 11 of the draft law adds a significant clarification, according to which the tenants of the nationalized property retain their rights only if this does not contradict the purposes for which the nationalization takes place. In the author's opinion, this provision takes into account the current world situation.

Identical provisions were specified in Part 4 of Article 17 and Part 1 of Article 14 of the Draft Federal Law No. 692092-7 "On the Basics of Nationalization in the Russian Federation", which was submitted to the State Duma of the Russian Federation for consideration on 04/18/2019.

The corresponding thought of the legislator was reflected in the adopted normative legal acts. According to Part 18 of Article 10 of Federal Law No. 43-FZ dated 04/05/2013 "On the Specifics of Regulating Certain Legal Relations in connection with the Accession of Territories to the Subject of the Russian Federation - the City of Federal Significance of Moscow and on Amendments to Certain Legislative Acts of the Russian Federation" in the wording valid until 03/01/2022, upon the transfer of immovable property to state ownership of the right ownership of objects in connection with their withdrawal of encumbrances of these objects (pledge, lease, right of gratuitous use, etc.) they are not saved.

In accordance with Article 279 of the Civil Code of the Russian Federation and Article 56.11 of the Land Code of the Russian Federation, from the moment of termination of ownership of the seized land plot, easement, pledge and contracts concluded in respect of this plot, including lease agreements, are terminated. Thus, the seizure not only terminates the right of ownership, but also is the basis for the termination of binding rights, encumbrances.

In the modern world, it is impossible to ignore the experience of foreign legislation.

After the collapse of the Soviet Union and the transition of Eastern European countries to a market economy, many of them faced the need to nationalize previously privatized property. In countries such as Poland, Hungary and the Czech Republic, nationalization was often accompanied by various legal conflicts, including issues of encumbrances on nationalized property. For example, in Poland, the nationalization process included the creation of special compensation funds for holders of collateral rights, which allowed them to receive fair compensation ^[8].

The unification of Germany in 1990 raised the question of the fate of the property nationalized in the former GDR before the government. One of the solutions was partial restitution – the return of property to the previous owners if they could prove their rights. If restitution was not possible, compensation was provided to the owners. Encumbrances such as liens or lease rights were recognized as valid and were subject to compliance by the new owner ^[9].

In Latin American countries such as Venezuela and Bolivia, the nationalization of large industrial facilities was also often accompanied by disputes over the fate of encumbrances. In Venezuela, during the reign of Hugo Chavez, the state actively seized private property in the energy and agricultural sectors, which was accompanied by the elimination of all encumbrances on nationalized property. In this context, the state preferred the protection of public interests, which led to serious legal conflicts both within the country and in the international arena ^[10].

South Africa also has an interesting experience in dealing with encumbrances during nationalization. As part of the land reform policy, the Government seized land from white farmers and transferred it to black citizens. At the same time, encumbrances remained, if they did not contradict the goals of the reform. An important element was compensation for nationalized property, which helped to reduce social tension ^[11].

To summarize, the issue of the fate of encumbrances on property nationalized in the Republic of Crimea remains extremely relevant and difficult in law enforcement practice. An analysis of the current legislation and the existing legal doctrine shows the existence of significant gaps and conflicts that need to be resolved to ensure legal certainty and fairness in relation to both private and public interests.

The author believes that the application of the analogy of the law in the absence of direct regulation is an acceptable tool, but it is necessary to take into account the current political situation, in particular retorsions. In this sense, it is extremely important to amend the legislation of the Republic of Crimea, eliminating the identified gaps. According to the author, the spirit of the analyzed procedure would be consistent with regulation, according to which encumbrances of nationalized property remain if their continued existence does not contradict the goals of nationalization of the specified property, in particular, if this does not lead to the preservation of ownership and control over it by persons associated with unfriendly countries.