Hard way home: legal integration of Crimea into Russia

The Crimea joined Russia. Russia obtained one more subject of the federation – the event is definitely enjoyable, especially because it was complete surprise to most Russians. Whether or not it was a surprise to leadership of our country we do not know, but apparently, there were no prior preparation for such developments.

Political events unfolded so quickly that it was necessary to make decisions immediately. The most important thing was to use the results of the referendum in the Crimea and to formalize legislatively the Crimea as part of Russia. After that there was some time for rest – without a major war to take over part of Russia, that has been recognized by nobody, is impossible.

That’s how events unfolded. Further we specify dates without comments, which are not necessary since all enacted regulations are subject to one regulation – while no one has regained consciousness, formalize the Crimea as a part of Russia by legal means.

These stages should be known – since they are now our history.

On March 17, 2014, based on the results of the referendum, the Supreme Council of the Autonomous Republic of Crimea proclaimed the Crimea as an independent sovereign state – the Republic of Crimea, in which Sebastopol has a special status.

The Republic of Crimea, represented by its highest authority – the State Council of the Republic of Crimea – applied to the Russian Federation with a proposal for the adoption the Republic of Crimea as a new subject of the Russian Federation with the status of the republic. The parliament of the Crimea summarily prepared a draft of intergovernmental agreement on joining of the Republic of Crimea to the Russian Federation.

On the same day, taking into account the will of the people of Crimea, President Putin signed a resolution on recognition as a sovereign and independent state of the Republic of Crimea.

Adoption of a foreign state or its part shall be governed by the Federal Constitutional Law “On the Procedure for adoption into the Russian Federation and formation of new subjects of the Russian Federation”, adopted in 2001. Subject to the law, the initiative must come from the territory which intends to join the Russian Federation.

On March 18, 2014, President of Russia Vladimir Putin began the procedure of acceptance by notifying the Government, the State Duma and the Council of the Federation of proposals of the State Council of the Crimea and Sevastopol Legislative Assembly of joining the Russian Federation and the creation of new subjects. Then Vladimir Putin approved draft agreement on acceptance into the Russian Federation the Republic of Crimea. In St George’s Hall of the Kremlin in the presence of the leaders of the Crimea and Sevastopol, Putin addressed the Federal Assembly of the Russian Federation. After that intergovernmental agreement was signed on acceptance of the Republic of Crimea into Russia, according to which new subjects are formed within the Russian Federation – Republic of Crimea and the federal city of Sevastopol. The agreement entered into force after ratification by the Federal Assembly on March 21, but applied provisionally from the date of signing.

On March 18, the Constitutional Court of the Russian Federation received a request from President of the Russian Federation to examine the compliance of Constitution of the Russian Federation with signed agreement between Russian Federation and the Republic of Crimea on acceptance into the Russian Federation of the Republic of Crimea and formation within the Russian Federation of new subjects. The request was accepted for consideration without public hearings.

On March 19 the Constitutional Court declared the compliance of the agreement with constitution. On the same day, President Putin submitted for ratification to the State Duma the Agreement on the acceptance into the Russian Federation of the Republic of Crimea and amendment to Constitution regarding formation of a new subjects of Federation.

On March 20, the State Duma of the Russian Federation ratified the Agreement on acceptance into the Russian Federation of the Republic of Crimea with just one vote against.

On March 21, the agreement was ratified by the Council of the Federation. The Federal Constitutional Law on formation in the Russian Federation of two new subjects -the Republic of Crimea and Sevastopol, city of federal status was adopted. On March 21, Vladimir Putin signed the law on ratification of the agreement on acceptance into the Russian Federation of the Republic of Crimea and the federal constitutional law on procedure of accepting the Crimea and Sevastopol into Russia and transitional period of integration of new subjects of Federation.

The Crimean Federal District (CFD) was formed on 21 March. On 2 April, Vladimir Putin signed a decree that Crimea is included into the Southern Military District.

On 11 April the Republic of Crimea and the city of federal status  Sevastopol  were included into the list of subjects of the Russian Federation in the Constitution of Russia.

On  April 25, 2014 the frontier of Russia between the Crimea and Ukraine was established.

After that, there was some time to catch some breath – official status of the Crimea was established. However, external takeover does not mean that the Crimea is automatically integrated into Russia. Integration is a long process and should occur simultaneously in different directions. Main directions of integration – political, social, economic and legal. We will concentrate on the latter.

Any freshman of law faculty knows that there is no answer to the question – which comes first, the law or the state. One can not exist without the other, because there is no leadership. But in this case, the state already exists – it is Russia. And the law is already there – it is the Russian legal system. The problem is that the Crimea can not automatically start using Russian legal system due to the fact that for the last twenty years it functioned within another system of law – Ukrainian. Principles of the Russian and Ukrainian legal systems are common – they originate from the continental (Roman) law system. But there were significant differences.

Since then, as the Crimea became part of Russia it as any subject of the federation should first comply with Constitution. According to Constitution of the Russian Federation there are only laws of the Russian Federation on its territory, this is one of the basic principles of the sovereignty of any state. Application of foreign norms is possible only in exceptional cases and in the manner prescribed by international treaties.

The Constitution states that the Russian Federation – Russia is a democratic federal state based on rule of law with the republican form of governance. The Russian Federation consists of the republics, territories, regions, federal cities, autonomous regions, autonomous areas – equal subjects of the Russian Federation.

Accordingly, the power is distributed in federal state based on competence. The exclusive jurisdiction of the Russian Federation: the judicial system; Prosecutor’s Office; criminal law, criminal procedure and penal laws; Amnesty and pardon; civil law, civil procedure and arbitration legislation; legal regulation of intellectual property, as well as financial, currency, credit and customs regulations, money issue, principles of pricing policy; federal economic services, including federal banks.

Administrative and civil law are of joint competence of federal subjects and the Russian Federation. It seems that there are no problems regarding exclusive competence of Russia – the Crimea should comply with existing laws and it is not necessary to adjust them specifically for the Crimea. But it is certainly not the case. For example, in the area of criminal law and criminal procedure there will be many problems – what to do with those who have been convicted under the Criminal Code of Ukraine, by the Ukrainian court. There are three options:

• declare amnesty, as Bolsheviks did in 1917 and that, of course, for Russia is unacceptable;
• recognize the legitimacy of all the sentences of the Ukrainian courts;
• review all sentences of Ukrainian courts by Russian courts.

But there is no basis neither for the second nor for the third options in the Russian criminal procedural law. What to do with criminal cases, initiated by the law enforcement bodies of Ukraine. Continue to execute them, but in compliance with the Russian Code of Criminal Procedure. But Russia is not  legal successor of Ukraine, as the case was for Russia which was legal successor of Soviet Union.

Regulation is required which would settle all these problems. Of course, upon some time integration will take place, since transition period for the social and economic reforms is until 01.01.2015. But  criminal proceedings can not stop and wait, it must operate continuously. Particularly difficult situation  has developed in the criminal justice in Crimea. Law enforcement and judicial authorities of new subjects of the federation currently do not work in practice, that creates prerequisites for worsening of crime situation in the new subjects of the federation. Therefore, the first package of laws on legalization of the Crimea within Russia included draft law “On application of provisions of Criminal Code and Criminal Procedure Code of the Russian Federation on the territory of the Republic of Crimea and the city of Sevastopol.” On April 14, 2014 at the meeting of State Duma committee Federal Law was recommended to be adopted in the first reading, and already on May 5 President signed the law as of May 5, 2014 № 91-FL “On application of provisions of Criminal Code and the Criminal Procedure Code of the Russian Federation on the territories of the Republic of Crimea and Sevastopol city of federal status”.

The law determines that crime and punishment for offenses committed on the territory of new subjects of the federation until  March 18, 2014, as well as other criminal consequences of such offences are defined in accordance with criminal law of Russia. Thus, in accordance with Constitution of Russian it is prohibited to turn for the worse when qualifying offences and determining criminal sentence. It is stipulated that if the action with regard to which the pre-trial investigation was conducted before March 18, 2014, under the Criminal Code is not treated as a crime, and there are no grounds for criminal case, the resolution on refusal of  prosecution is adopted. If there was a ruling of the courts with regard to such case, it may be revised in accordance with the law.

The law introduced provisions ensuring bringing types of prosecution and jurisdiction in the Crimea and Sevastopol in accordance with the Criminal Procedure Code of the Russian Federation. The integrity of legal space will be secured by provision of the draft law on permissibility of using in the Russian criminal proceedings of evidence received before March 18, 2014 in accordance with the Ukrainian legislation on criminal procedure. In addition, in the Russian Federation the ruling are recognized as enforceable which were adopted by the courts of the Crimea and Sevastopol before the date of the referendum in the Crimea and Sevastopol, and will be executed in the part that does not contradict the laws of the Russian Federation.

Citizens affected by prosecution before March 18, are not eligible for compensation. Russia will not pay for crimes and mistakes of Ukrainian justice. In addition, starting from January 1, 2018, in Crimea and Sevastopol it is planned to involve jury for dealing with criminal cases.

As Ukrainian laws do not provide the right to the accused and other participants of the proceedings to familiarize with all the materials of the criminal case, the law provides the enforcement  of this right in accordance with Russian legislation. This provision applies equally to offenses committed before  March 18, 2014.

It is clear that, neither proceedings in criminal and administrative cases, no resolution of civil disputes are possible without institution in the subject of federation of judiciary, that constitutes integral part of judicial system in Russia.

On May 5 a number of laws were introduced into the State Duma, regulating the creation of a judicial system in the Crimea and Sevastopol. With the draft law № 512892-6 ” On judiciary of the Republic of Crimea and the city of federal status Sevastopol”, the draft law № 512893-6 “On establishment of courts of the Russian Federation on the territory of the Republic of Crimea and the city of federal status Sevastopol”, the draft law № 512894-6 “On Procedure for selection of candidates for federal courts created in the territories of the Republic of Crimea and the city of federal status   Sevastopol” and the draft law № 512895-6 “On creation of the Twenty First arbitration appellate Court and amending the Federal Constitutional Law “On Arbitration Courts in the Russian Federation”. We believe that in the nearest future this package will be approved by legislators, signed by the President and will come into force. According to the draft law “On establishment of courts of the Russian Federation on the territory of the Republic of Crimea and the city of federal status Sevastopol”, the Supreme Court of the Republic of Crimea, the Arbitration Court of the Republic of Crimea, 24 district and municipal courts of the Republic of Crimea, the Arbitration Court of Sevastopol, Sevastopol City Court, four district courts in Sevastopol and Crimea garrison military Court and Sevastopol garrison military court will be established soon. The question of establishing an institute of magistrate courts will be considered after consultation with local authorities.

Also the package includes a draft law “On creation of the Twenty First Arbitration Appellate Court and amending the Federal Constitutional Law “On Arbitration Courts in the Russian Federation”. This court will check the correctness of rulings made by courts of arbitration in the Crimea and Sevastopol by appeal hearing. Verification of reasonableness of the rulings of the Twenty first Arbitration Appellate Court is referred to the competence of the Arbitration Court of the North Caucasus District.

In addition, the draft law “On procedure for selection of candidates for original compositions of the federal courts established in the Republic of Crimea and the city of federal status Sevastopol” was submitted to the State Duma. The document states that selection of judges will be conducted by Higher Qualification Commission of Judges. Priority right in competition selection will have people who were appointed to the office of judge at the time of joining the Crimea and Sevastopol to Russia. But in order to retain their office they will have to receive Russian citizenship.

According to the draft law “On the bodies of  judiciary community of the Republic of Crimea and the city of federal status – Sevastopol” the procedure of election of delegates at first conference of judges of the Crimea and Sevastopol, the procedure for convening and holding conferences will be approved by the Presidium of Judicial Council.

Another problem that needs to be tackled is promotion of tax system in newly created federal subjects. Tax systems of Ukraine and Russia have some differences, therefore simple transition cannot be expected here, besides Crimea when being part of Ukraine was not donor region. Due to stagnation and subsequent collapse of Ukrainian economy, the financial status of this region looked gloomy. Lawmakers being aware that it is unrealistic to apply full tax burden to new subjects prescribed transition period for adjusting the Crimea to Russian tax system.

In addition, it was immediate established in Federal constitutional law as of  March 21, 2014 № 6-FKZ “On acceptance into the Russian Federation of the Republic of Crimea and formation within the Russian Federation of new subjects – Republic of Crimea and the city of federal status Sevastopol” that Russian legislation on taxes and fees was applicable on the territories of the Republic of the Crimea and the city of Sevastopol as of  January 1, 2015.

In turn, until January 1, 2015 on the territories of Crimea and Sevastopol the relationship relating to  introduction, operation and collection of taxes and charges, as well as enforcement of tax exemptions, and relationship arising in the process of tax control, appealing resolutions of  tax authorities, actions (inaction) of their officers and holding liable for committing tax offences shall be regulated by local regulations of the Republic of Crimea and the city of Sevastopol. Until  January 1, 2015 tax and non-tax revenues, prescribed by such regulations, shall be transferred accordingly to the budget of the Republic of Crimea, budget of the city of federal status Sevastopol and local budgets.

This means that until the end of current year all taxes on the territory of the Republic of Crimea and Sevastopol shall be collected on the basis of their local regulations of such subjects of the federation. Besides all taxes will remain in the budget of the Republic of Crimea and Sevastopol in full.

Such regulations were adopted soon. The Resolution of the State Council of the Republic of Crimea dated  April 11, 2014 № 2010-6/14 approved the Regulations on special aspects of application of the legislation on taxes and fees in the Republic of Crimea within transition period. The document stipulates that establishment, introduction and collection of taxes and fees in the Republic of Crimea shall be regulated in the manner in force as of  March 17, 2014, unless otherwise stipulated by regulations of the Republic of Crimea. As for newly registered legal entities located on the territory of the Republic of Crimea, and individual proprietors domiciled on the territory of the Crimea, the law of the Russian Federation on taxes and fees (except land tax and stamp duty) shall be applied.

The issues of taxation of a number of transactions by value added tax (hereinafter – VAT) has been settled. In particular, it has been determined that the amount of VAT charged against Ukrainian taxpayers will be recorded as part of expenses within the scope of profits tax until  December 31, 2014. In addition, as of May 1, 2014 VAT rate (excluding some operations) will be reduced from 20% to 18%. VAT excess payment  or VAT debts, formed as of March 1, 2014 are not subject to refund and recovery. Excess payment or outstanding amounts of other taxes and charges shall be converted into rubles at the rate of 3.8 rubles per hryvnia.

It has been established that qualifying tax declarations (calculations) for the reporting (tax) periods, expired before February 1, 2014, shall not be submitted by taxpayers. The tax is paid in rubles at the exchange rate as of the date of submission of tax declaration to tax authority.

Special section for taxpayers of the Crimea and Sevastopol was opened on official website of FTS of Russia. On a separate page, in particular, the following information can be found:

• normative legal base of transition period;
• clarifications of FTS of Russia for taxpayers of the Republic of Crimea and Sevastopol in transition period;
• answers to frequently asked questions;
• taxation in accordance with Russian law;

Clarifications of FTS of Russia for the taxpayers of the Republic of Crimea and Sevastopol in the transition period have been posted in section for residents of the Crimea, relating to organization of registration of companies and individuals with tax authorities of the Russian Federation on the territory of the Republic of Crimea and the city of federal status Sevastopol, application of legislation of the Russian Federation on taxes and charges on the territory of the Republic of Crimea and Sevastopol until January 1, 2015, registration and re-registration of legal entities and individuals as individual proprietors in the transition period.

Another serious issue has emerged in connection with registration of real property rights. As we know, the only indisputable proof of ownership of real property is relevant registration entry in National Register. This has been and is currently a standard for Ukraine and Russia.

However, information regarding real property located on the territory of the Crimea and Sevastopol is contained in the official register of Ukraine. However, Ukrainian authorities blocked access to the register of real property rights of the Crimea. It is impossible to obtain this information. Of course, the owners may have documents confirming their rights – certificate of ownership, etc. But some people might not have such documents while others just failed to register their ownership rights, even though they are entitled thereto. So even if Russia recognizes the lawfulness of such documents before conducting re-registration and registering ownership rights relating to Crimean real property in the Russian Unified register of real property ownership rights, it would be almost impossible to avoid disputes and scandals. Besides, the development of social and political circumstances related to return of Crimean Tatars and regulation failures of Ukrainian authorities in the Crimea, the system of land takeover was on the rise. It is absolutely clear that such appropriators of land will try to legalize appropriated pieces of land within the frames of registration campaign. The fact that property rights can be confirmed only by paper-based means, may lead to abuse of law and various kinds of fraud.

Re-registration of real property ownership rights and registration of legal documents in the Republic of Crimea is possible only after formation in Crimea and Sevastopol of territorial departments of Federal Service for State Registration, Cadastre and Cartography of the Russian Federation (Russian State Register), and after employing relevant professionals by the service.

Until that moment, in accordance with the laws of the Russian Federation the documents issued by the state and other official authorities of Ukraine, the Crimea and the city of Sevastopol shall be enforceable on the territory of Crimea and Sevastopol, without limitation of term of their validity and any confirmation on the part of official authorities of the Russian Federation, the Republic of Crimea or official authorities of Sevastopol.

So far on the territory of Crimea the owners may not dispose property, it can be neither sold nor bought or donated or inherited, because any action in respect of real property should be reflected in the state register. Ukrainian registers are blocked and there is no technical possibility to conduct any actions connected with registration of real property rights in the Crimea whereas Russian territorial departments of Russian state register in the Crimea and Sevastopol have not been formed yet.

When territorial departments of Russian state register are established in the Crimea, residents of the Crimea will be able to conduct state registration/re-registration of real property ownership rights. And only after that the owners will be able to dispose of their property.

This is the summery of what has been done in terms of legal integration of Crimea into Russian legal space within two months that have passed after takeover. The issues related to customs integration and establishment of customs borders and posts shall be addressed as part of further agenda. Unification with Russian legislation on administrative offences. Questions of application of the Civil Code of the Russian Federation on the territory of the Crimea and the most important question – the question regarding land and property. The process  of  legal integration is difficult and will take some time, but we will monitor the developments relating thereto.