Ukraine: Ukraine’s Foreign Investors And The Lifting Of Farm Land Moratorium

Last Updated: 24 August 2012

Article by Alex Frishberg, Esq.

Ukraine has long been called "the bread-basket of Europe," and for one excellent reason: its fertile, black soil. The estimated value of this treasure is anywhere between 40 and 80 billion dollars. The only problem with investing in such an obviously profitable business was an artificial bureaucratic/legislative barrier commonly known as the "moratorium on alienation of farm land" (the "Moratorium").

As a background, the Moratorium prohibits not only alienation of any land that is designated (zoned) as "farm land," but it specifically bars all foreign citizens and foreign-owned companies from owning such land. Consequently, foreign investors had no choice but to gain a foothold in agricultural land by leasing it directly from farmers that could legally own their small parcels. The lease term was usually either medium (up to 25 years) or long-term (up to 99 years), with an option to buyout such land whenever the Moratorium was lifted.

Using this set up, foreign investors registered wholly-owned Ukrainian companies, which would sign literally hundreds or even thousands of lease agreements with private farmers, allowing them to accumulate fairly large parcels of farmland. In one way or another, all of these foreign investors planned to cash in whenever the Ukrainian government lifted the moratorium. Some hoped to sell their Ukrainian companies, with valid lease agreements, to the highest bidder(s). Others invested into the infrastructure (buildings, tractors) and planned to purchase their leased land so that they could continue running their farming operations long-term.

At long last it appears that the Moratorium will be lifted in 2013. Will these foreign investors finally be able to buy the farmland they have been leasing all these years? Highly doubtful. After all, this is Ukraine, where doing business has never been easy or predictable. Once again, an unfortunate legislative tendency of creating unnecessary problems will probably repeat itself for the following reasons.

The Land Cadastre Law is a very ambitious piece of legislation, which regulates the main principles of forming and maintaining the land cadastre (the unified land register of all landholders in Ukraine). A major portion of this law has come into force on January 1, 2012, while the remaining provisions will come into effect only in 2013. Unfortunately, all too many if its provisions refer to specific procedures necessary to register farm land in the cadastre that are yet to be determined by sub-legislative acts of the Cabinet of Ministers of Ukraine.

The Land Cadastre Law has introduced a number of changes to the Law "On Land Lease" and other laws, requiring lessees (in many cases, foreign investors) to re-enter into their lease agreements with farmers. Pursuant to the amendments to the Law "On Land Lease", one of the material provisions of a lease agreement is the cadastre number of a land plot. If a lease agreement fails to reflect one of the required material provisions, then it may be deemed to be invalid (i.e., terminated). Also, prior land valuation will have to be reconsidered in line with the indicative price of land leases. These two factors will also need to be reflected in the land lease agreements with farmers.

Presently, only the Land Cadastre Law has been passed, and the last barrier to lifting the moratorium remains the passing of the law on the land market. In fact, the Ukrainian Parliament has already adopted a draft law "On the Land Market" No. 9001-1 in July, 2011, and even published it on its website. On its face, this document permits the sale of agricultural land plots starting on January 1, 2012, although the absence of other necessary legislation (and accompanying instructions) made that deadline seem irrelevant.

The initial draft law "On the Land Market" provided that the acquisition of agricultural land by foreign citizens and companies with non-resident shareholders holding over 10% of the authorized capital is prohibited. Only Ukrainian citizens and farming businesses will be able to purchase agricultural land; however, they will NOT be allowed to change the purposeful designation (zoning) of such land plots for the duration of ten years (i.e., once labeled "farmland," one cannot re-zone into, for example, "residential development" for ten years).

Other significant limitations existed, including: (a) the re-sale of agricultural land in this period will be possible only upon payment of 30-100% of its normative value; (b) agricultural land plots may

be purchased directly from the seller or at auctions; (c) a Ukrainian citizen may not purchase more than 2,100 hectares in the steppes (temperate grassland/prairie), 1,500 hectares in forest areas or 900-1,100 hectares in mountain regions.

On December 9, 2011, the Ukrainian Parliament passed a yet another draft of law No. 9001-d "On the Land Market," which also contains significant barriers to land ownership by foreign companies. First, this law strictly prohibits all non-residents (foreign companies) from buying Ukrainian farm land. Second, the law excludes all legal entities from the list of potential landowners, allowing only various government agencies and Ukrainian citizens to own such land (even then, Ukrainian natural persons cannot own more than 100 hectares of land).

Another problem in the draft law is a rather strange tax on the potential farm land buyers: if purchased during the first year permitted by the law, the buyer has to pay one hundred percent (100%) of the land plot price. This number drops by 10% for the second year (90% tax), with similar reductions in each following year. This provision assures that any interested buyer will have to pay about twice the value of any land.

Last, but not least, the looming threat of eminent domain (government take-over of land) is everpresent. Under the current draft law, any lease agreement may be terminated if the lessee fails to comply with the land designation (purpose) or somehow damages the quality of the leased land. Such cancellation of lease agreements frightens many investors, existing and potential.

Importantly, none of the above barriers apply to "non-agricultural land." Obviously, one loophole that many foreign lessees will seek to employ involves having the farmers (lessors) change the socalled "purposeful designation" (zoning) of the land thereby selling to buyers land with another purposeful designation (private, commercial, etc.). How is that done? GosZemAgency gave its consent in several regions for scientific research institutes in the fields of land use and land improvement to issue conclusions regarding the nature of certain lands and their unsuitability for use in agricultural business. Any land judged to be "impoverished or bare" is by definition considered to be poorly adapted for agricultural use/business, thereby allowing the local authorities (Regional Councils) to change the "purposeful designation" due to their unsuitability for agricultural use. After this change, the owners (farmers) may sell such land without any limitations set on the sale-purchase of agricultural land.

For those who elect to change the "purposeful designation" of their land, time is of the essence. They must do so before any information in the land cadastre will be transferred from paper to electronic form and published on the website of GosZemAgency and other internet sources. While the information from the land cadastre has not yet been published on the Internet, there is still an opportunity to change purposeful designation (zoning).

In conclusion, it appears that the long-awaited lifting of the moratorium on sale of farmland will take place in 2013. Nobody can predict the final rules that will eventually emerge. Although the necessary laws and instructions, which will regulate this complex process, are yet to be passed, one thing is certain: the initial transfer of land will be problematic for numerous legal and bureaucratic (administrative) reasons, some of which were outlined above. At that point, the assistance of experienced lawyers will become indispensible.hberg & Partners 2012

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions