In July, it will be three years since the opening of the land market in Ukraine. The second stage of land reform is currently underway, during which legal entities have gained access to the market. The third and final stage aims to harmonize Ukraine’s land legislation with EU norms, including the possibility of participation by citizens and legal entities from EU countries in the land market.
This issue is very sensitive for Ukraine. In 2020-2021, a package of laws was adopted that initiated the market circulation of agricultural land. At the same time, a compromise was reached regarding the participation of foreigners in the land market: the final decision should be made in a nationwide referendum. Due to the war and martial law, the referendum is currently impossible.
Despite the war, Ukraine has begun negotiations for EU membership, which involves adapting national legislation to EU standards. As part of this process, the Concept of Harmonization of Ukraine’s Land Legislation with EU Law has been developed, which includes the development of relevant draft laws.
The EU’s position on land legislation
The European Union is based on four freedoms: the free movement of goods, capital, services, and labor. The free movement of capital includes agricultural land under Article 63 of the Treaty on the Functioning of the European Union (TFEU). This means that market participants in land should not be subject to restrictions on the movement of capital between EU member states. National laws of member states cannot restrict this movement.
Currently, according to the Land Code of Ukraine, foreigners and legal entities established under the laws of other countries cannot acquire ownership of agricultural land. This provision contradicts the aforementioned Article 63 of the DCFTA and may be construed as discrimination against citizens and legal entities of the EU. Accordingly, Ukrainian land legislation requires amendments for full membership in the EU.
The experience of new EU members
The admission of foreigners to the land market in no EU country has led to a mass sale of land. Each state established its own restrictions and protective mechanisms. For example, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, and Slovakia had restrictions on the purchase of land by foreigners at the time of their accession to the EU in 2004. Each of these countries had a transitional period to maintain existing regulations, and Poland had even a twelve-year period. A similar transitional period was granted to Bulgaria and Romania upon their accession in 2007.
Ukraine may also establish its own framework for land legislation during the transitional period.
Economic effect
Access for citizens and legal entities from the EU to the land market will contribute to attracting investments, revitalizing, and growing the economy of Ukraine. Foreign companies will bring new technologies, best practices, and skills, which will increase the productivity of the agricultural sector. Landowners will receive market compensation for the sale or lease of land, which will promote the increase in the value of land plots.
Hour for reflection
The opening of the land market for EU citizens is not an urgent issue for Ukraine. First, the war is ongoing, and until its conclusion, the sale of land to foreigners will not be possible. Second, negotiations for EU membership may take several more years. However, it is already necessary to prepare proposals and reform the legislation to take national interests into account as much as possible during the negotiations.
Ukrainian society must understand the logic of European legislation, which ensures the rule of law and protects rights and freedoms. Business and the state will get time for strategic planning in order to make the most of the opportunities arising from the opening of the land market to foreign players.
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