Oda Russian Commercial Law 2007-1
.pdf
322 |
PROPERTY AND LAND LAW |
cannot be disposed of without the consent of the owner. The state, on the other hand, is entitled to take away “excessive” property, or property which is not used in accordance with the purpose of the enterprise or institution (Art.296). Unitary enterprises which are based on this right over the assets are called treasury enterprises (kazennoe predpriiatie).
4LAND LAW
1)The Abolition of the State Ownership of Land
The modern history of land ownership in Russia goes back to the mid-19th century. By the Emancipation in 1861, peasants were allocated agricultural land in return for the payment of redemption. However, the title to the land was given not to individual peasants, but to village communes. It was only after 1906 that through a reform initiated by P.A.Stolypin, the prime minister, individual ownership of land by peasants emerged. However, the reform failed in 1914, and the village communes remained the predominant owners of land until the October Revolution.
One of the rst decrees which the Bolshevik government issued after the October Revolution was the renowned Decree on Land. Private ownership of land was abolished altogether without any compensation; land was placed under the control of the local land committees together with the buildings, implements, livestock and everything pertaining thereto. It was prohibited to sell, buy, pledge, or otherwise dispose of land. The right to use land was acknowledged to all citizens, but the use of paid labour was not allowed.25 This was con rmed by another decree of February 19, 1918. While these decrees were primarily aimed at rural land, yet another decree issued on August 20, 1918 totally abolished the private ownership of land by individuals as well as enterprises in the urban area.26 In fact, the peasants interpreted these decrees as authorising the seizure and redistribution of large estates. The bulk of the agricultural land in European Russia was actually taken over by the peasants and used in a traditional manner. An astute observer pointed out that the Bolsheviks did not achieve socialisation, but instead, individualisation of land.27
The 1922 Civil Code excluded rights over land, and instead, these rights came to be regulated by the Land Code, which was part of administrative law.28
25SU RSFSR 1917 No.10, item 150.
26SU RSFSR 1918 No.62, item 674.
27V.Gsovski, Soviet Civil Law, vol.1, Ann Arbor 1948, pp.693-694.
28SU RSFSR 1922 No.68, item 901.
CHAPTER 9 |
323 |
The Land Code, which was enacted in the same year, was rather different from the decrees which had been issued after the October Revolution. Although it repeated the phrases of the preceding decrees on the abolition of private ownership of land, subsoil, water and forests and its replacement by state ownership, the village commune and the individual household were entitled to select any type of land tenure, including individual enclosure similar to that introduced by the Stolypin reform. Individual peasants and their communes were granted the right of “immediate toil tenure of land without time limit”.29 It is no wonder that the Land Code was dubbed the Magna Carta of landowners. It was inevitable that the Land Code went into oblivion in the late 1920s when these individual peasants were labelled kulaks (“rich peasants”) and “liquidated as a class”. Land, together with all sorts of natural resources, came to be solely owned by the state.
After the collapse of socialism, this system radically changed. A substantial part of the land has been “de-étatised” since then. The process started primarily with agricultural land. Already towards the end of socialism, in February 1990, members of collective and state farms were given the right to the land which belonged to those farms, if they desired to set up a farmer’s business by the Fundamental Principles of Land Legislation.30 Such a transfer of land to private ownership was effected in a gratuitous manner. The RSFSR Law on Land Reform of December 27, 1990 declared that land and other natural resources were the “property of the people” and that the state monopoly of land was to be abolished. Various forms of ownership over land, including private ownership, were acknowledged. In the process of reform, land was to be distributed to citizens, enterprises, institutions, associations and companies and regarding distribution to citizens, land was to be transferred to their ownership for individual gardening as well as farming and other agricultural purposes. No payment was required for the land up to a certain limit. On the other hand, unlike in the Central and Eastern European countries, land was not to be returned to those who were its owners before the Revolution.31 This was followed by a similar provision in the Land Code of 1991. In 1992, the scope of private ownership was extended in that the subject of ownership came to include juridical persons, and the available land extended to non-agricultural land.
Since the early 1990s, collective and state farms were reorganised into agricultural enterprises based upon private ownership, and private farmer’s households were created. There are currently around 270,200 farmer’s households
29Gsovski, supra, pp.698-703.
30I.A.Ikonitskaia, Zemel’noe pravo Rossiiskoi Federatsii, Moscow 1999, pp.21-26.
31VVS RSFSR 1990 No.26, item 327.
324 |
PROPERTY AND LAND LAW |
which collectively own 6.2% of all agricultural land. A further 63% of agricultural land is under the joint ownership (share and common ownership) of members of the agricultural commercial organisations.32 108 million hectares of agricultural land was eventually transferred to farmers and 12 million rural inhabitants became landowners and were issued a “certi cate of the right of ownership”.33
In the urban areas, the 1991 Land Code provided that urban land would be made available for individual ownership for a limited range of purposes such as gardening. The 1997 decree of the president decreed that land is either sold or leased in the urban area by the state or municipal government by auction in which “any person may take part”.34 However, there is strong scepticism towards the fullyedged private ownership of land. A commentator stated as follows:
Rules of city and town planning are mandatory for companies, state agencies as well as individuals. Local administrative agencies are empowered to give instructions to the subjects of rights over the land in order to ensure the compatibility of economical development and the optimal use of the natural environment. However, if private ownership of land is to be introduced, it would be dif cult for administrative agencies to interfere with the use of land, even when it is necessary. In the urban area, there is a necessity for limiting private ownership of land and making the lease the basic form of land use.35
In major cities such as Moscow, following the above idea, the lease is the basic form of land use.
The circulation of land is also severely limited. The amendment to the 1978 RSFSR Constitution in 1991, while acknowledging private ownership of land, introduced a 10 year moratorium on the sale of land. This moratorium was gradually lifted, rst in relation to subsidiary farming plots and dacha businesses, gardening, and individual housing construction. A presidential decree of 1993 allowed individuals and juridical persons who are owners of land to transfer land by inheritance, gift, lease, exchange, and investment in companies, including those with foreign investment. The 1993 Constitution granted the owners the right to freely possess, use, and dispose of land insofar as they do not cause any damage to the environment or infringe the rights and interests of other persons (Art.36). The Civil Code repeats this and allows circulation within the limit established by law, but is vague on the actual scope of permissible circula-
32Bystrov, supra, p.47.
33Ikonitskaia, supra, p.67.
34RG, January 12, 1997. This decree is not in force any more.
35S.A.Bogoliubov, Zemliia i pravo, Moscow 1998, pp.100-101.
CHAPTER 9 |
325 |
tion (Art.209, para.3). Furthermore, it provides that persons who own land are entitled to sell it, give it as a gift, pledge it, lease it, and dispose of it in other ways insofar as the piece of land in question is not excluded from circulation or restricted of circulation on the basis of law (Art.260, para.1).
Land for subsidiary farming, dachas, and possibly housing in the rural areas can be sold. There is also “no restriction on the sale of agricultural land”. But in reality, as far as agricultural land and land for housing as well as land for entrepreneurial use are concerned, circulation of land is very much limited. The new Land Code of 2001 does not seem to set excessive restrictions on the circulation of land either [see infra].
2)Legal Framework of the Land Law
Despite the above developments towards de-étatisation of land, a systematic legal basis for these developments had been absent until 2001, when the new Land Code was nally adopted and took effect. The 1991 Land Code was amended in 1993 after the adoption of the Constitution and a majority of the provisions were deleted. Since then, several drafts of the Land Code have been submitted to the Duma, but failed to become law. The primary points of disagreement were reported to be the permissible scope of private ownership and of the circulation of land. There was more or less a common understanding that the reemergence of large scale land ownership should be prevented. Some people were apprehensive of the possible growth of speculative transactions which may lead to an accumulation of land in the hands of a small number of people, once free circulation of land is allowed. On the other hand, there was a view that unless free circulation of land is allowed, private ownership is incomplete.
While the new Land Code was not in place, primary sources of regulations concerning land were presidential decrees, edicts of the government, orders and instructions of the State Committee for the Management of State Property as well as the laws of the constituent entities of the Russian Federation. The Constitution provides that the conditions and procedure for the use of land are determined on the basis of Federal law (Art.36, para.3). However, various constituent entities of the Russian Federation have adopted laws which seemingly contradict the provision of the Federal Constitution. For example, the constitution and Land Law of Dagestan deny private ownership of land. The Constitution of the Sakha Republic does not recognise private ownership of agricultural land.36 There was no clear demarcation between the land which belongs to the Russian Federation,
36 Kostiuk, supra, p.30.
326 |
PROPERTY AND LAND LAW |
constituent entities, and municipalities. Some entities have enacted their own constitution and laws and claim ownership over land and natural resources in the Republic. The Land Code of Kareliia did not recognise Federal ownership over land.
Confusion in this respect was widespread. The number of disputes involving land has been increasing; in 1999, the commercial court handled 2,507 cases of disputes involving the use of land; the number has more than doubled since 1996.37 A Russian specialist characterises the state of land law by its “insuf-ciency, lack of system, contradiction, ambiguity, and instability”.38 In the absence of comprehensive and clear legislation, the market for land has reportedly become subject to corrupt and ambiguous deals.39 There was even a view that the new Land Code was delayed by some people who do not want it, since with the absence of the Code they can operate without being penalised.40 According to another Russian specialist, the existing system of disposal, possession and use of land in fact restricts access to land resources and does not allow for the redistribution and transfer of land to entities who can effectively manage it. The system of guaranteeing the right to land is lacking.41 The absence of the market made secured nancing by land impossible.
The new Land Code was adopted in October 2001 and took effect on the day of its publication. Accordingly, Chapter 17 of the Civil Code also took effect.
The taking of effect of the new Land Code and Chapter 17 is certainly a major step forward. For example, there is now an explicit provision to the effect that the laws of the constituent entities should coincide with the Federal law. This will contribute to putting an end to the arbitrary creation of regional law. On the other hand, although the new Code is advanced than the previous Code in terms of legislative technique, it cannot be denied that it is an outcome of various compromises, e.g. in relation to the right of ownership of foreign individuals and juridical persons. The latest commentary on the Code points out that there are defects many of which are essential.42
37“Sudebno-arbitrazhnaia statistika”, VVAS RF 2000, No.3, p.8.
38Bystrov, supra, p.49.
39Ibid., p.51.
40Ibid.
41Kostiuk, supra, p.29.
42Chubukov, supra, pp.7-8.
CHAPTER 9 |
327 |
3)The Land Code
The new Land Code of 2001 provides that Land Law regulates the use and protection of land in the Russian Federation, while the proprietary relationship concerning the possession, use, and disposal of land as well as transactions with land is to be regulated by civil legislation, unless otherwise provided by the land, forestry, water and sub-soil legislation, environmental and other special Federal laws (Art.3). This is another af rmation of the fact that land relations are basically civil law relationships, not administrative law relationships.
Whether foreign nationals can own land was hitherto not clear. In 1992, as part of the privatisation of state and municipal enterprises, those who became owners of a privatised enterprise including foreign nationals and juridical persons were allowed to acquire the land of these enterprises as well.43 However, this part of the decree concerning the right of foreign nationals was deleted in 1997. The 1993 Constitution does not speci cally refer to the right of foreign nationals to own land. The Foreign Investment Law of 1999 merely provides that acquisition of land, natural resources, buildings, installations and other immovable is to be effected in accordance with the law of the Russian Federation and constituent entities (Art.15).
The draft Land Code did not give foreign individuals and juridical persons the right to ownership of land; they were merely entitled to a lease.44 The new Land Code does not explicitly prohibit land ownership by foreign nationals, nor does it declare such a right of foreign nationals in a straightforward manner. It merely provides that the right of foreign individuals and juridical persons to own land is to be determined by the Land Code and Federal laws (Art.5, para.2). However, the Land Code itself is silent on this matter, except that foreign individuals and juridical persons are prohibited from owning land in the border areas. The list of areas where these people are not allowed to own land is to be set by the president (ibid., para.3). The only other Federal law which refers to the right of foreign nationals with regards to land is the above-mentioned Foreign Investment Law.
The arrangement of this provision is said to be an outcome of a compromise between those who support the idea of granting ownership to foreign nationals and those who are against. Because of the wording, it is still not clear whether land ownership by foreign nationals is allowed in areas other than the border areas or whether only a lease is available to them as the Foreign Investment Law
43VVS i SN RSFSR, 1992 No.25, item 1427.
44Ikonitskaia, supra, p.70.
328 |
PROPERTY AND LAND LAW |
provides. It should be noted that the Land Code has a provision that rules on land accommodated in other Federal laws must comply with the provisions of the Land Code (Art.2, para.1).
There was an interesting case in this regard which was brought to the Constitutional Court in 2004. The provincial duma of Murmansk applied to the Constitutional Court to rule on the constitutionality of various provisions of the new Land Code, including Article 15, para.3. The argument against it was that this provision, by allowing ownership of land by foreign nationals, contradicts the Constitution, since “it reduces (restricts) the territorial basis of the life and activities of the people of the Russian Federation, creates possibilities for the cessation of land to foreign states by way of transactions or by presentation of territorial claims to the Russian Federation, and may lead to the violation of its sovereignty”. The Constitutional Court, however, ruled that this provision was not unconstitutional. This may imply that the Constitutional Court had presupposed that the given provision actually allows foreigners to own land.45
Owners of land are under an obligation to use the land in accordance with the purpose of the land (e.g. if it is purported to be for housing, it should not be used for industrial purposes), the owner must not cause damage to the environment and the soil, he must pay in a timely manner the payment for land, and observe planning, construction, ecological, sanitary, re and other regulations (Art.42).
The ownership of land is terminated by assignment of land to another person by the owner, waiver of the right of ownership by the owner, and compulsory withdrawal of land by the procedure established by civil legislation (Art.44).
Land can be withdrawn in a compulsory manner (including compulsory purchase) from the owner for the needs of the state or municipality in exceptional cases as follows (Art.49):
i)implementation of international obligations of the Russian Federation;
ii)allocation of objects of state or municipal signi cance, if there is no alternative site;
iii)other cases provided by Federal law or law of constituent entities.
Compulsory withdrawal of land for the need of the state or municipality can be made only with advance compensation equal to the value of the land, and on the basis of court judgment (Art.55, para.2). If the owner so wishes, alternative land of an equal value is provided (Art.63, para.1). Chapter 17 of the Civil Code has similar provisions on those matters.
45 Chubukov, supra, p.121.
CHAPTER 9 |
329 |
While the permissibility of free circulation of land was a much debated issue before the enactment, there is no reference to the free circulation of land in the new Code.As a rule, land which is excluded from circulation cannot be an object of private ownership, or an object of transactions provided by the Civil Code. There is a list of such land which is excluded from circulation, which includes natural reserves and national parks as well as land occupied by military and nuclear energy installations. The list is not particularly extensive or unreasonable and is regarded as exhaustive. Land is to be circulated in accordance with the Civil Code and the Land Code (Art.27).
Then, the problem is whether the land which is not withdrawn from circulation is really allowed to be an object of sale and other transactions.As mentioned above, Article 260 of the Civil Code which came into effect with the enactment of the Land Code allows for the sale and other transactions involving land. However, to what extent free circulation of land is allowed in practice is still open to questions.
Concerning agricultural land, the Law on the Circulation of Land for Agricultural Purposes was enacted in 2002.46 The Law provides for the preferential right of the constituent entities to purchase land, except in cases of auction. Foreign individuals and nationals as well as Russian juridical persons with more than 50% foreign capital are not allowed to purchase agricultural land. Instead they may only take out lease.
There is a speci c provision on the sale of land in the Land Code. First of all, only the land which is accounted for in the land cadastre (kadastr) can be an object of sale. The seller is under an obligation to provide information on all encumbrances on the land to the buyer (Art.37, para.1). The following terms of sale are void (ibid., para.2):
i)sale with the seller’s repurchase option;
ii)sale with terms restricting the creation of hypothec, lease, and the effecting of other transactions;
iii)sale with terms limiting the liability of the seller when a third party asserts his right over the land.
Sale with the seller’s repurchase option was a common instrument for securing claims, but has now been made void by the Land Code insofar as land is concerned.
46 Law No.101-FZ of July 24, 2002.
330 |
PROPERTY AND LAND LAW |
4)Rights on Land other than Ownership
Chapter 17 of the Civil Code accommodates provisions on the right of ownership and other real rights over land. The Civil Code lists the following rights on land in addition to the right to ownership:
i)the right of life-long, inheritable possession;
ii)the right of permanent (inde nite) use of land;
iii)servitude
iv)lease
v)gratuitous use
The right of life-long, inheritable possession is a right very similar to ownership which emerged towards the end of socialism, when “it was still terrifying to talk publicly about private ownership of land”.47 This is a right to possess and use land, and it is inheritable. The power to dispose of land is very much limited. In the past, this right has been granted in rural areas by local administrative agencies.48 Although it was a concept of the transitional period and was abolished in the early 1990s, it was restored in the Civil Code (Art.265). The new Land Code still retains this, but only insofar as the person has obtained this right before the new Land Code took effect (Art.21, para.1).
The right to permanent (inde nite) use of land, according to the Land Code, is the right to possess and use land which is under state or municipal ownership. This is a gratuitous right; no rent is payable. This right is not available to individuals; it is only for government and municipal institutions, Federal treasury enterprises, and state and municipal representative bodies (Art.20, para.1). The new Land Code also provides for free use of land, but this is for a xed period (Art.24).
Servitude is a right of limited use of land by neighbours. Servitude may be established for passing through the land, the passage of livestock, laying of cables etc. Servitude retains its effect even when the title to the land is transferred. Servitude can be created by contract, or by law. The new Land Code leaves “private servitude”, i.e. servitude created by agreement, to the Civil Code and provides only for “public servitude” (Art.23, para.1). Public servitude can be created by federal law and normative acts and by the law and normative acts of the constituent entities (ibid., para.2). These include servitude for crossing a
47S.A.Bogoliubov, Zemlia i pravo, Moscow 1998, p.300.
48Ikonitskaia, supra, p.85.
CHAPTER 9 |
331 |
piece of land, for the use of land to repair cables and transportation infrastructure, for drainage etc. (ibid., para.3).
The lease of land is provided for by the Civil Code as a typical contract in the part on the Law of Obligation.
5)Land and Buildings
The Civil Code provides that if there is a building or installation on a piece of land, these objects can be owned separately. If the ownership of the building is transferred to another person, the right to use the land also shifts from the seller to the buyer. If the seller of the building is simultaneously the owner of that land, then the buyer of the building acquires the lease or any other rights to use the land (Art.552, paras.1 and 2). If the land and the building belonged to the same person and the land is sold to another person without the building, the seller retains the right to use the land (Art.553).
5REGISTRATION OF THE RIGHT OF OWNERSHIP AND OTHER REAL
RIGHTS
The right of ownership and other real rights on immovables, the encumbrance on these rights, as well as creation, transfer, and termination of these rights are all subject to state registration (Art.131, para.1). Although they are not real rights, lease and rights based upon trust are also subject to registration. Registration is not merely for authentication of these rights. It has a “creative effect”, i.e. it is a prerequisite of those rights having effect. State registration is the sole evidence for the existence of registered rights. These registered rights can only be contested through court procedure.
Concerning land, there was no uni ed system of registration under socialism. Since land and other immovables were not in circulation, there was no real need for it. There was a system of land survey and accounting (uchet), but this was merely a record keeping system for the state. Besides, the means and the agency of recording differed, depending on the type of land and the region.
The move for land registration began in 1992 by the Federal Special Purpose Programme for the creation of the automatised system of state land cadastre. In 1993 a presidential decree on land registration was issued. Registration was to be handled by the land commission and its local entities – local committees on land resources and redistribution. After 1994, in some regions, land registration was introduced, but it was only in 1997, when the new Law on the Registration