The Echo of Mazepa's Case: What Lies Behind the Call to Shield Businesses from Law Enforcement?

At the end of December 2024, President Vladimir Zelensky met with representatives of the Council for Entrepreneurship Support. One of the main topics discussed during that meeting was the adoption of a draft law intended to protect entrepreneurs from pressure from law enforcement agencies.

A month prior, the founder of Ajax Systems, Alexander Konotopsky reported that the development of the mentioned draft law was initiated by big business. This document is essentially a response to the high-profile arrest of businessman Igor Mazepa in early 2024.

At that time, law enforcement officials sought to imprison him for 12 years over a case from many years ago: allegedly, Mazepa and his accomplices "misappropriated" land plots from the water fund near the Kyiv Hydro Power Plant, where the investment banker was constructing cottage communities. After the publicity of this story surfaced, he was released, but the case has not yet been closed.

The business community in Ukraine continually faces abuses from law enforcement, according to the "Union of Ukrainian Entrepreneurs," which supported the adoption of the draft law for the first reading. This view is also shared by Mazepa himself.

"Unfortunately, we are currently witnessing a situation where no one is safe from the possibility that 10-15 years after legally acquiring property, prosecutors may come to you and claim that you have stolen it," the investment banker stated.

Concerns regarding law enforcement actions are also confirmed by reports from the Business Ombudsman Council. In the first three quarters of 2024, they received 922 complaints regarding abuses by officials. The traditional leader was complaints concerning the actions of tax authorities, followed by law enforcement, which were reported in 13% of cases.

The draft law has already been voted on in the first reading. However, representatives of anti-corruption NGOs argue that in its current form, the proposed changes to the Civil Code contain corruption risks that would allow officials to "legalize land plots stolen" from the state. Who is right?

Ten years - and no claims

The main idea of the draft law is that property or land cannot be reclaimed from a bona fide purchaser if more than 10 years have passed since the state registration of private ownership rights. This pertains to real estate that was previously in state or municipal ownership.

A similar statute of limitations applies to state or municipal property that was transferred to private ownership and for which no transaction registration was required (for example, minerals, temporary non-capital structures on land, roads, main pipelines, heat networks, communications networks, and others).

At the same time, the provisions of the Civil Code will continue to apply, meaning that property cannot be confiscated from a bona fide purchaser if it was transferred through the execution of court decisions or privatization procedures.

The 10-year period during which the state or community can reclaim property does not pause or restart even if it has changed hands multiple times. For instance, if property or land was removed from state ownership in 2000, the statute of limitations for that property expired in 2010.

However, the above-mentioned provisions do not apply to critical or strategic infrastructure, cultural heritage, or nature reserves.

What should be done if property or land is returned to the state or community? In such cases, the draft law proposes to require the authorities to compensate the bona fide owner for the estimated market value through a "judicial deposit" mechanism. This means that the state or community, after the court has ordered the confiscation of property, transfers funds to the deposit account, which are paid out immediately to the former owner without a separate lawsuit.

The Executive Director of the "Union of Ukrainian Entrepreneurs," Ekaterina Glazkova, stated that this draft law is crucial for protecting business rights from abuses by law enforcement agencies, which may question the legality of land acquisition or privatization and use this as leverage against businesses.

"Illegal expropriation of land from state ownership is a problem, but it is not the fault of businesses. Because it is officials who expropriate the plots. We support the protection of property rights - a fundamental condition for the country's development. Therefore, it is very important to secure the rights of bona fide purchasers," adds Glazkova.

She believes that it is vital for the business community to have clear regulations and to develop further within the legal framework. Otherwise, businesses operate as if on a "powder keg" with a constant risk that unwanted interest from law enforcement could arise at any moment.

For example, the Kyiv regional prosecutor's office in 2022 attempted to seize a land plot near Kyiv from MacPaw through the courts, which the company had acquired several years earlier. MacPaw's founder, Alexander Kosovan, claimed that the prosecutor's lawsuit was filed with "manifestly unfounded claims" and was a tool for pressure. Ultimately, the Supreme Court recognized the company as the rightful owner of the plot.

Will the draft law resolve the issue of pressure on businesses? The General Director of Concord Capital, Igor Mazepa, believes that it will all depend on law enforcement's adherence to the proposed norms and the application of changes by the courts in their decisions.

"As we see, the existence of a law is sometimes not an obstacle for law enforcement in initiating unfounded criminal proceedings, as my case demonstrates," added Mazepa.

Corruption Risks

The head of the NGO "Center for Anti-Corruption" Vitaliy Shabunin states that assets that could not legally become private (for example, coastal strips or water bodies) often transition into private ownership through illegal schemes. In his opinion, this draft law would legitimize such cases and effectively legalize these manipulations.

Moreover, schemes for transferring land were previously organized through the change of several owners so that the final owner could be considered "bona fide," he says. A notable example is the case of former Minister of Agrarian Policy Mykola Solskyi, who, according to investigators, acquired state land valued at 290 million UAH by reassigning it to ATO participants.

As explained by the chair of the Verkhovna Rada Committee on Anti-Corruption Policy, Anastasia Radina, the current draft law indeed creates a situation where there are contradictions between the positions of businesses and anti-corruption activists.

"On one hand, activists are right that the state could lose the chance to reclaim valuable lands stolen 10 years ago. On the other hand, businesses are also right: they face pressure or demands for bribes due to criminal cases regarding lands they legally acquired, even though those lands were removed from state ownership by entirely different individuals 15 years ago," she clarified.

The head of the anti-corruption committee proposes establishing a separate statute of limitations for certain "valuable" lands and limiting the right to appeal property ownership only to the highest level of prosecutorial bodies (in Ukraine, this is the Office of the Prosecutor General), which would help avoid abuses by local prosecutors (district level).

At the same time, this "delineation" of land should be clear and defined at the legislative level to avoid disputes in court over whether a particular plot is especially valuable or not. However, this categorization of value needs to be adopted in conjunction with changes to land legislation.

What’s Next

Radina noted that businesses are correct in saying that without establishing a "deadline" for contesting property rights, it makes no sense to talk about a favorable investment climate in the country. Glazkova from SUP shares this view.

However, the head of the anti-corruption committee added that this draft law still needs to be refined.

During the conversation between Zelensky and the Council of Entrepreneurs, the president "immersed himself in business issues" and "immediately assigned most tasks to his team," said a source from the business community.

According to Forbes Ukraine, during the meeting with businesses, Zelensky promised to address the issue of land and property privatization by the anniversary of the establishment of the Council for Entrepreneurship Issues - January 26.