Analysis of the draft law 5655 in the version of December 9, 2022
16.12.2022   //   1 Переглядів

The draft law No. 5655 «On Amendments to Certain Legislative Acts of Ukraine on Reforming the Sphere of Urban Development» (draft law card) by the head of the Servant of the People party Olena Shulyak has significant flaws. (Ukrainian version of the text at the link.)

1) Optional compliance with the requirements of the legislation.

The reform in general provides for a significant reduction in the institutional capacity of the state to monitor compliance with the legislation in construction. There is a weakening of control over both the construction itself and the actions of officials. At the same time, a significant part of powers is transferred from officials to private individuals, thus the performance of these functions is removed from the supervision of anti-corruption legislation and special anti-corruption bodies.

This will lead to a significant increase in the share of illegal construction and will make developers who are trying to work in accordance with the requirements of the legislation, such as foreign companies and investors, uncompetitive.

2) The state abdicates its responsibility for the legality of granting the right to build.

The reform does not provide for a full-fledged automatic check when registering the right to build. Automation provides for granting the right without the participation of an official upon the availability of a package of documents. Legality checks are transferred to the «manual mode» to expert organizations chosen by the developer.

As a result, possible mistakes and violations will be detected at the stages when significant funds have been invested in the project and the correction of the consequences of the violation will require additional significant costs. This may lead to irrational use of funds allocated for reconstruction.

3) Optional compliance with spatial planning requirements.

The system does not provide for mandatory verification of compliance with the requirements of urban planning documentation (Spatial planning). The relationship between the planning of the territory and the development of the territory in the interests of the most profitable use of their own plots by individuals is broken. Given the amount of destruction, reconstruction without quality spatial planning and/or in violation of planning requirements will lead to inefficient use of funds and will not be able to create a full-fledged living environment.

The NACP made comments, but they were not fully taken into account.

4) Deprivation of local self-government of a fundamental part of its rights.

Planning of city development in the interests of territorial communities is the exclusive authority of the territorial community itself and its local self-government bodies. The scheme of issuance of initial data for design, registration of the right to build and the scope of possible inspections in the order of urban planning control, laid down in the draft law, de facto deprive local governments of the opportunity to enforce compliance with urban planning documentation.

This deprivation of local self-government of some rights is, in fact, a violation of the principles of the European Charter of Local Self-Government and an attempt to build a system in the interests of private business that contradicts generally accepted democratic norms.

As in clause 3, the NACP made comments, but they were not fully taken into account.

5) Weakening of internal anti-corruption control.

Currently, internal anti-corruption control is carried out in the framework of the State Architectural and Construction Supervision and provides for scheduled and unscheduled inspections and constant monitoring of the legality of officials’ actions through documentary and in-house inspections.

The reform envisages the creation of the State Urban Planning Supervision, which provides for only unscheduled inspections in case of notification of violations.

6) It does not provide for the elimination of the vast majority of identified violations of the law.

The procedure of the State Urban Planning Supervision (control over officials, designers, experts, etc.) provides only for punishment of the guilty and does not contain mechanisms to eliminate the identified violations. This makes it extremely profitable for developers to obtain construction permits with various violations and will stimulate the growth of violations.

The NACP made comments, but they were not fully taken into account.

7) Amnesty for illegal construction with permits obtained through corruption before the entry into force of the draft law 5655.

The procedures for issuing various documents in the field of construction have been changed many times and are now indefinite since 2011, and are valid until the completion of construction. Draft law 5655 fundamentally narrows the list of issues that can be checked during the implementation of urban planning control and does not provide for the elimination of violations identified during the implementation of urban planning supervision.

These changes in the system of control lead to the impossibility of eliminating violations of the law, if the developers have received the right to build under a corrupt scheme before the entry into force. In fact, this is a hidden amnesty – the state will not take measures to stop violations of the law, officials guilty of corruption violations are exempted from liability.

8) The rights of the public to control construction are significantly reduced.

Public control always plays a key role in the system of control in the liberalization of the economy. The draft law deprives the public of the right to initiate mandatory inspections of construction in case of violations. The possibility to initiate inspections of governing bodies, designers, expert organizations remains, but the system of urban planning supervision does not provide for the elimination of identified violations (clause 5).

9) A significant increase in cases of violent confrontation between the public and developers.

Construction in Ukraine, due to a significant number of illegal buildings, has always been accompanied by numerous cases of violent confrontation between the public and developers. Simultaneous significant reduction of control by the state and the rights of the public will lead to a significant increase in cases of forceful struggle against illegal construction, as the only effective mechanism left to the public.

Given the overall situation in Ukraine after the war, this could lead to critical destabilization, mass protests and significant complications in the implementation of the recovery program.

10) Private urban planning control in the proposed form directly contradicts the provisions of the Constitution of Ukraine.

According to the provisions of Part 3 of Article 42 of the Constitution of Ukraine, the State exercises control over the quality and safety of products and all types of services and works. Thus, the presence of state control should be mandatory in construction.

However, 5655 provides for the creation of private control and the absence of state control over objects where contracts are concluded with private authorized persons, which directly contradicts the Constitution. The implementation of urban planning control by private persons will not contradict the Constitution in the case of delegation of these powers by the State and the consideration of such private controllers in the Law of Ukraine «On Prevention of Corruption» as persons authorized to perform state functions.

Comments on this were provided by the NACP, but were not taken into account by the authors of the draft law.

Adoption of the law that contradicts the Constitution may lead to the abolition of some of its provisions by the Constitutional Court, will be a sign of the legislature’s unwillingness to carry out reforms in compliance with the rule of law and will increase public distrust in the government, which can have extremely negative consequences during the war.

11) Creation of a significant number of new controlling bodies and increase in the number of officials.

The reform provides for the mandatory creation of own urban planning control bodies in each territorial community, of which there are almost 1500. In previous years, only about 100 communities voluntarily agreed to assume these powers.

Creation of additional almost 1400 executive bodies will lead to an increase in the number of officials by at least 5-6 thousand people, requires significant additional funding, it is extremely doubtful to attract properly qualified specialists to rural communities, significantly complicates the implementation of anti-corruption control in the field of construction (the number of officials in the urban planning control bodies will increase several times).

12) Centralization of powers in one Ministry.

Although the law is presented as decentralization, on the contrary, it is dominated by centralization of powers. The following powers are raised to the highest possible level of control of the Ministry

  • The current powers of the State Inspection of Architecture and Urban Planning (SIAP) to carry out State architectural and construction supervision.
  • Current powers of the SIAU and local self-government bodies to control the activities of design and expert organizations, author’s and technical supervision.

Resolution of the Cabinet of Ministers of Ukraine No. 1343 dated 02.12.2022 established the Ministry of Communities, Territories and Infrastructure Development of Ukraine, which combines the former Ministry of Infrastructure and the Ministry of Communities and Territories Development.

As a result of the creation of the new Ministry, if draft law 5655 is adopted, all key control over the «Big Reconstruction» will be concentrated in one ministry.

  • Disposal of funds for reconstruction and setting priorities.
  • Formation of state policy and approval of the regulatory framework in construction.
  • Direct control over the activities of designers and expert organizations.
  • Indirect control over the implementation of construction through the coordination of SIAM activities by the Minister.

Such concentration of powers in one Ministry creates significant corruption risks in the course of the «Great Reconstruction», because within the framework of one Ministry the issues of allocation of funds, creation of a «convenient» regulatory framework, and control over its «correct» implementation in all areas are solved.

13) Threats to the banking sector as a result of the synergy of the Law «On Guaranteeing Real Property Rights to Real Estate Objects to be Constructed in the Future» and Draft Law 5655.

On 10.10.2022, the Law 2518-IX «On Guaranteeing Real Property Rights to Real Estate Objects to be Constructed in the Future» entered into force. This Law establishes a new type of rights «special property rights to future construction objects», the state registration of which occurs automatically after obtaining the right to build. This law also regulates the procedure for mortgaging these «special property rights» with their automatic valuation.

At the same time, the Law 2518-IX in case of cancellation of the right to construction does not provide mechanisms for the cancellation of these rights and does not establish restrictions on their civil circulation.

If the draft law 5655 is adopted and the automatic registration of construction rights is launched without proper verification of its legality, automatic state registration of «special property rights» will take place, including for a significant number of illegal construction projects.

This creates ideal conditions for the emergence of a new type of «garbage assets» that will be automatically evaluated and can easily be used for fraudulent withdrawal of assets from banks through the issuance of mortgage loans secured by «special property rights».

14) Digitalization of the construction sector and transparency of all processes in construction have already been implemented since 01.12.2020 in pursuance of Law 199-IX and do not depend on the adoption of Draft Law 5655.

A significant part of the positive aspects of the new reform, which, according to its authors, will help to overcome corruption and illegal construction, are provided for by the law adopted in 2019 and implemented almost from 01.12.2020. Such issues include the digitalization of all processes, the public State Electronic System in the field of construction, the electronic digital footprint of responsible persons.

However, in the absence of an effective control system that ensures the inevitability of punishment and elimination of violations, this did not give the expected results. Obviously, further reduction of the level of control, the abolition of the need to eliminate most possible violations, a significant reduction in the rights of the public, etc. will only lead to a deterioration of the situation and an increase in the number of violations of the legislation in the field of construction.

Georgiy Mohylny, specially for «Our Money»