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BOC successfully manages to get fair payment for lease of land

24.06.2019

Subject of complaint: Zaporizhzhia Oblast State Administration, Main Department of the State Geocadastre in Zaporizhzhia Oblast

Complaint in brief: A foreign company that planned to build a solar park in Zaporizhia Oblast approached the Council. The company complained against local authorities that violated the terms of the previous agreements reached within the framework of the international cooperation program and transferred the plot to another tenant.

Existence of working arrangements were confirmed by investor correspondence with Zaporizhzhia Oblast State Administration. In addition, according to these arrangements, the Сhairman of the village council filed a motion with the StateGeoCadastre of Zaporizhzhia Oblast (StateGeoCadastre) seeking expansion of the boundaries of the village and inclusion of adjacent agricultural lands in its borders. Merging current (63 ha) and new (72 ha) areas would allow creating a 135 ha area required for solar power plant construction by the foreign investor.

Three days later, a private Ukrainian company also approached the StateGeoCadastre of Zaporozhzhia Oblast. The applicant, who did not show interest in the lands in the village before, suddenly wanted to lease the same plot (72 ha) also supposedly for construction of the power facility. The StateGeoCadastre very quickly allowed the Ukrainian company to develop land use documents for the said land plot. Of course, nobody informed the foreign investor thereof.

At the same time, the Chairman of oblast state administration assured the foreign company director in writing that government agencies supported the project and enclosed a map of the land plot layout for construction of a solar power station. The investor continued to get ready for launching construction process.

Meanwhile, the regional StateGeoCadastre approved all necessary documents and leased the plot to the Ukrainian company. The lease contract was signed, despite the absence of the land value normative evaluation (“NGO”). The lease fee was approved in the amount of UAH 56k per year making up 3% of the NGO of the arable land in the oblast. This amount was ten times less than the market value calculated for the foreign investor before.

Only months later, the foreign company learned that the land had been leased to a third party. Shocked and disappointed by the actions of government authorities, the investor turned to the Business Ombudsman Council.

Actions taken: The Council’s investigation revealed several pieces of evidence that the Ukrainian company-tenant could be controlled or related to the former Head of the Main Department State Land Agency in Zaporizhzhia Oblast – an authority whose legal successor was the Main Department of the StateGeoCadastre Zaporizhzhia Oblast.

During five months the Council sent 5 appeals to various government agencies and local municipalities and performed a set of other actions aimed at investigating and resolving this case. In particular, the investigator identified a legal deficiency that occurred during disposal of the land plot – absence of normative monetary evaluation and, accordingly, fairly calculated lease amount and drew the StateGeoCadastre of Ukraine attention to it.
 
Unfortunately, the complexity and ambiguity of the legal component of the situation made it impossible to achieve a quick positive result. Investigation of possible linkages between the tenant and former or current Ukrainian government agencies officials could not be conducted without engagement of law enforcement through applying to them by a concerned party (e. g. the Complainant) and leaving the land plot would be impossible without lawsuits, whose initiation also required the Complainant’s involvement. Realizing that the foreign investor, which did not even come to Ukraine, was not interested in initiating lengthy litigations and criminal cases, the Council began working hard to at least eliminate discrimination of the investor – to establish a fair fee for land use for the power plant for the current tenant.
 
Result achieved: Taking into account actual circumstances, the foreign investor decided to reduce the scope of construction and abandoned plans with respect to the second part of the plot. He leased an available plot of 63 ha in Zaporizhzha Oblast. Thus, the submitted complaint was no longer relevant. Given the positive experience of cooperation with the village council and thanks to the efforts of the BOC and UkraineInvest Investment Promotion Office, one managed to persuade the foreign company not to give up plans to invest in Ukraine.

Besides, the Council managed to ensure a fair evaluation of land plot, thus tackled a legal deficiency and eliminated discrimination against the foreign investor. It means that the Ukrainian tenant that appears to be linked to a former official, should now pay for the use of the land about UAH 2 mn a year – it is 40 times more than the previous value and close to the market one calculated earlier for the foreign investor. The case was closed.