Due to Russian aggression, Ukraine has already lost much more than the country's annual GDP of $564.9 billion. In total, 37,000 square metres of housing stock have been destroyed in the 47 days of Russian aggression in Ukraine. The amount of damage continues to grow every day. Parliamentarians have taken care to ensure that compensation and reparations are regulated by law. At the end of March, the Verkhovna Rada registered draft law No. 7237.

Earlier, the parliament had already passed a draft law on compensation in the first reading, No. 7198. According to it, in the event of property damage, Ukrainians can receive cash compensation to their account, or compensation in the form of housing (up to 150 square metres), or financing for the construction of private houses. The amount of such compensation is proposed to be determined based on the results of an assessment of the cost of restoring the property, taking into account the degree of damage.

However, unlike the previous draft law, MPs propose to establish two levels of compensation in draft law No. 7237: initial and full compensation. Thus, the right to initial compensation will be provided by the state gradually and proportionally depending on the financial capabilities of the individual. And the right to full compensation is provided subject to the payment of reparations and/or other penalties from the Russian Federation.

In turn, Draft Law No. 7198 does not provide for such a division into types of payments: only compensation from the Fund (at the expense of the state budget), and then the said compensation must be covered by reparations from the Russian Federation (based on court decisions).

Who will receive compensation?

Today in Ukraine, the amount of financial assistance to victims ranges from three to 15 subsistence minimums for able-bodied persons (from UAH 7179 to 35895), taking into account the amount of material damage, insurance payments, and other types of assistance.

The amount of monetary compensation to the victims is determined by the indirect cost of housing construction in the regions of Ukraine in accordance with the location of the housing (but not more than UAH 300,000 per one destroyed housing object).

What is proposed in the draft law?

The right to compensation for property lost, damaged or destroyed as a result of armed aggression is granted to affected individuals, their heirs and legal entities. The value of such property must exceed UAH 119,650.

Who is not entitled to compensation:

• Individuals: those subject to sanctions, as well as persons related to them;
• citizens of the Russian Federation;
• legal entities
• those with a non-transparent ownership structure (no disclosure of beneficial owners);

• legal entities in which Russia or Belarus have a stake, and persons controlled by such legal entities;
• beneficial owners of 10 per cent or more of the shares (stakes) of which are residents of the Russian Federation;
• persons subject to special economic and other restrictive measures (sanctions) in accordance with the Law of Ukraine ‘On Sanctions’, as well as persons related to them.

These restrictions do not apply to individuals and legal entities if such persons:

1) have been awarded departmental incentive awards for services to Ukraine aimed at preserving its territorial integrity, sovereignty and independence;

2) have publicly opposed the aggression of the Russian Federation since at least 2014;

3) there is no evidence of actions or statements aimed at violating the territorial integrity of Ukraine;

4) have not been representatives of the state authorities of the Russian Federation and/or subjects of public law of the Russian Federation and/or legal entities under the control of the authorities of the Russian Federation for the last ten years.

How much compensation can be received?

Forms and amount of initial compensation

Initial compensation can be received in two forms: money and additional support (tax benefits and other tax regulation measures in accordance with the Tax Code of Ukraine; preferential lending for the restoration of production facilities; introduction of quotas for certain types of goods; write-off of tax debt; other measures aimed at restoring the activities of legal entities).

Initial compensation will be provided from the state budget.

The value of such property will be determined using a special valuation system. The draft law establishes a ceiling on the value of compensation. However, the lawmakers did not specify the value of the compensation. Perhaps this data will be included during the second reading. Thus, as of today, the draft law does not clearly set the ceiling level.

Full compensation mechanism

Full compensation is ensured through the fair and targeted distribution of reparations from the Russian Federation. However, the draft law does not set out the timeframe and decision-making process for full compensation.

The amount of full compensation is the difference between the amount of the assessment and the amount of the initial compensation paid.

The draft law also provides for a procedure for compensation to persons whose property was lost, damaged or destroyed in the temporarily occupied territories by applying to the Ukrainian Parliament Commissioner for Human Rights.

How to receive compensation and reparations?

Reparations will be collected on the basis of:

1) agreements between Ukraine and the Russian Federation and/or another aggressor state;

2) decisions of an international body, including, but not limited to, the International Court of Justice of the United Nations

3) agreements between Ukraine and any other state that voluntarily transfers assets and other property of the Russian Federation, citizens of the Russian Federation, legal entities of the Russian Federation and/or other legal entities whose ultimate beneficial owners are citizens of the Russian Federation to Ukraine;

4) any other grounds not prohibited.

The sources of reparations are:

1) funds from the federal budget of the Russian Federation, budgets of the constituent entities of the Russian Federation; 2) the gold and foreign exchange reserve of the Russian Federation

3) international reserves of the Russian Federation

4) other assets of the Russian Federation, assets of ultimate beneficial owners who are residents of the Russian Federation and assets of related parties;

5) property rights under international contracts to which the Russian Federation is a party, legal entities owned by the Russian Federation, as well as those owned by persons who have committed war crimes on the territory of Ukraine;

6) any other items of material value.

Instructions for obtaining compensation:

1. You must submit an application through the Diia portal or the ASC at the place of application with the required package of documents. In addition, you can also submit photos or videos of damaged or destroyed property; contact details of witnesses who can confirm the fact of damage.
2. The data is entered into the State Register of Property Destroyed, Damaged and Lost as a Result of the Armed Aggression of the Russian Federation.
3. Within 90 days, the damaged or destroyed property is inspected by the Commission for the Inspection of Property Destroyed or Damaged as a Result of the Armed Aggression of the Russian Federation. The Commission is formed by the RSA or the relevant military-civilian administration, in accordance with the procedure established by the CMU.
4. The assessment of the lost, damaged or destroyed property is carried out no later than 14 working days after the inspection of the property.

The Institute of Legislative Ideas has analysed the provisions of the draft law and identified a number of comments that should be taken into account when preparing the draft law:

• It is necessary to set deadlines for making a decision on compensation.
• The lower level of property value that can be compensated is set without justification (if the property is worth less than UAH 119,650, there will be no compensation).
• It does not specify in which cases additional support measures may be provided to affected persons. This may lead to the adoption of various, non-systemic decisions. Also, such support may be provided with a corrupt component by granting privileges to specific individuals.
• The lawmakers did not specify the exact amount of compensation to be paid.

‘The Institute of Legislative Ideas continues to analyse the legislation adopted during the war and make sure that each law is another step towards victory