Construction Risks (EN)

CONSTRUCTION IN UKRAINE:

ADMINISTRATIVE IMPACT ON CONSTRUCTION WORKS

INVESTMENT PRACTICE IN UKRAINE

State Architectural and Construction Inspectorate

Prosecutor’s Office Law enforcement agencies

Eco Inspectorate

Energy Inspectorate State Service for Mining and Industrial Safety of Ukraine State Sanitation and Epidemiological Service Inspectorate Local authorities and Self-government bodies Social Insurance Fund against Accidents at Work and Occupational Diseases State Inspectorate for Technogenic Safety

Construction in Ukraine: Administrative Impact on Construction Works. / Dmytro Symanov, Olena Zaitseva. – Kyiv: Cai & Lenard, 2012. – 35 p.

Research report of an administrative impact on construction works in Ukraine covers 2011 and the first nine months of 2012.

While using this report or part of it references to the authors and source are necessary. Reproduction and translation are permitted only upon the approval of the authors.

© Cai & Lenard Law Firm, 2012

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Preface Ukrainian building sector has been gradually regaining its footing lost during the financial and economical crisis of 2008 and 2009 when it decreased by almost 60 per cent. It is hard to overestimate a significance of this industry for the overall economical structure of every developed country. One workplace in the building sector creates up to 20 workplaces in the adjacent sectors.

For the moment, the share of the building sector in Ukrainian’s GDP structure is relatively low and constitutes about 3 per cent, but the existing potential for development makes it possible to believe | 3 that this share would increase. However, the realization of this potential for development depends a lot on the general economical development of the country, banking sector’s status, investment climate, adequate legislation, and also the degree of an administrative impact of the state and local authorities.

In this report, which we are happy to present to your attention, we have tried to reflect the impact of the Ukrainian state and local authorities while their performing the controlling, supervising and other functions directly concerned to the construction process. Identification of these functions and discovery of the specifics of their implementation is a primary goal for this research. Unfortunately, the instances of unfair and improper use of these functions are still widespread. And the negative influence of these instances is significant. In order to assess the risks attributed to it and to manage these risks, especially when it concerns the construction investment projects to be approved, it is necessary to have as much important and structured information as possible.

We hope that the information and findings contained in this report will be helpful to all concerned in construction investment process.

Yours faithfully, Dmytro Symanov Cai & Lenard Counsel

Table of contents І.

Introduction .................................................................................................................................5

ІІ.

State and Local Authorities who Impact on Commercial Construction Projects .......................6

ІІІ. State Architectural and Construction Inspectorate .....................................................................9 ІV.

State Sanitation and Epidemiological Service ..........................................................................12

V.

State Inspectorate for Technogenic Safety ...............................................................................14

VI.

State Service for Mining and Industrial Safety .........................................................................16

VII. State Ecological Inspectorate ....................................................................................................18 VIII. State Inspectorate for Consumption of Electricity and Heat ....................................................20 IX.

Social Insurance Fund against Accidents at Work and Occupational Diseases and Insurance Experts on Labor Protection .....................................................................................................22

X.

Local Municipal authorities ......................................................................................................23

XI.

Courts ........................................................................................................................................25

XII. Prosecutor’s Office ...................................................................................................................26 XIIІ. Law enforcement agencies .......................................................................................................28 XIV. State Tax Service ......................................................................................................................30 XV. Other authorities .......................................................................................................................31 XVІ. Review of Procedures for Appealing of Anti-Construction Decisions .....................................33 XVІІ. Research Details ......................................................................................................................35

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І. Introduction In this report, we would like to provide everyone concerned with some information, comments and findings about the administrative impact on the commercial construction process. The scope of the research was limited to the administrative impact of the state and local authorities when they were performing control, supervisory and other functions and they actions directly leaded to suspension, prohibition or restriction of construction works. We have tried not to consider examples of the administrative impact, which may result in a suspension of the construction process, but that suspension is a kind of side effect rather than the direct consequence (for example, when a state | 5 inspector for intellectual property seizes computers, which are allegedly used for unauthorized storing, applying, distributing etc. of a licensed software, from the developer’s office, it may slow down the construction process, but does not necessarily lead to that).

Since construction process is regulated, inter alia, by local rules and regulations and thus may vary from region to region depending on where the building site is located, we have not tried to cover the entire range of administrative impact features in different regions of Ukraine. The research was conducted mainly on the assumption that the commercial building to be constructed would be located in Kyiv.

Each section of this report is usually designated to one state or local authority and contains three subsections: a) Possible Obstacles, b) Grounds for Interference and c) Risk Assessment.

It should be specifically noted that this report does not reflect the aspects of a construction process attributed to construction works commencement permits and approvals, as well as the administrative impact while commissioning of and registering the title to the new-built premises.

ІІ. State and Local Authorities who Impact on Commercial Construction Projects The general list of authorities who may suspend or otherwise impact on a commercial construction project is as follows: 1. The State Architectural and Construction Inspectorate of Ukraine (SAC Inspectorate) 1; 2. The State Sanitation and Epidemiological Service of Ukraine (SES) 2; 3. The State Inspectorate for Technogenic Safety of Ukraine (Technogenic Safety Inspectorate) 3; 4. The State Service for Mining and Industrial Safety of Ukraine (Industrial Safety Service) 4; 5. The State Ecological Inspectorate of Ukraine (Eco Inspectorate) 5;

1

Subject to the following laws and regulations: 1. The Law of Ukraine “On Urban Development Framework” dated November 16, 1992 No. 2780-XII. 2. The Law of Ukraine “On Urban Development Regulation” dated February 17, 2011 No. 3038-VI. 3. The Decree of President of Ukraine “On the State Architectural and Construction Inspectorate of Ukraine Regulations” dated April 8, 2011 No. 439/2011.

4. The Resolution of the Cabinet of Ministers of Ukraine (the “CMU”) “On Approval of the State Architectural and Construction Control Regulation” dated May 23, 2011 No. 553.

5. The Resolution of the CMU “On Licensing of Certain Business Activities in Construction” dated December 5, 2007 No. 1396.

2 Subject to the following laws and regulations: 1. The Decree of President of Ukraine “On the State Sanitation and Epidemiological Service of Ukraine Regulation” dated April 1, 2011 No. 400/2011.

2. The Order of the Ministry of Health of Ukraine (the “Health Ministry”) “On Approval of the Regulation on Local Units of the SES” dated January 19, 2012 No. 34.

3. The Resolution of the CMU “On Approval of the State Sanitation and Epidemiological Control in Ukraine Regulation” dated June 22, 1999 No. 1109.

4. The Order of the Health Ministry “On Approval of Instructions for the State Sanitation and Epidemiological Service of Ukraine about Application of Administrative Preventive Measures (Restriction, Temporary Ban, Prohibition, Suspension and Termination)” dated April 14, 1995 No. 67.

3 Subject to the following laws and regulations: 1. The Law of Ukraine “On Fire Safety” dated December 17, 1993 No. 3745-XII. 2. The Order of the Ministry of Emergencies “On Approval of the Procedure of the State Inspectorate for Technogenic Safety of Ukraine Inspections and on Invalidation of Some Orders of the Ministry of Emergencies” dated May 25, 2012 No. 863.

3. The Law of Ukraine “On Basic Principles of the State Supervision (Control) over the Business Activities” dated April 5, 2007 No. 877-V. 4. The Order of the Ministry of Emergencies “On Approval of the Regulations on the Procedure and Conditions for the Use of Preventive Measures by the State Fire Control Authorities” dated October 21, 2004 No. 130.

5. The Decree of President of Ukraine “On Issues of the State Inspectorate for Technogenic Safety of Ukraine” dated April 6, 2011 No. 392/2011.

4 Subject to the following laws and regulations: 1. The Decree of President of Ukraine “On the State Service for Mining and Industrial Safety of Ukraine Regulation” dated April 6, 2011 No. 408/2011.

2. The Order of the Ministry of Emergencies “On Approval of the Regulations on the Organization and Implementation of the State Mining Supervision, State Supervision (Control) over the Industrial Safety and Health within the structure of the Industrial Safety Service, and of the Unified Certificate of Entity (Production Facility) Inspection” dated August 11, 2011 No. 826.

3. The Resolution of the CMU “On Approval of Criteria for Assessing the Risk of Business Activities with respect to the Industrial Safety and Health and for Determination of Schedules for the State Supervision (Control) Measures” dated April 28, 2009 No. 413.

5 Subject to the Decree of President of Ukraine “On the State Ecological Inspectorate of Ukraine Regulation” dated April 13, 2011 No. 454/2011.

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6. The State Inspectorate for Consumption of Electricity and Heat Energy (Energy Inspectorate) 6; 7. The Social Insurance Fund against Accidents at Work and Occupational Diseases 7; 8. Local authorities and municipal bodies (by the example of Kyiv) 8; 9. Courts; 10. The Prosecutor’s Office 9; |7 10

11. Law enforcement agencies , including: •

The Ministry of Internal Affairs of Ukraine: criminal, traffic and special police, special units for combating organized crimes (UOCD), units for combating economic crimes (UCEC, former “UBEP”), units of homeland security;

•

The Security Service of Ukraine, including special units for combating corruption and organized crimes;

•

The State Tax Service: units of tax police.

12. The State Tax Service of Ukraine 11; 13. Other authorities (the State Labor Inspectorate of Ukraine, the State Agricultural Inspectorate, municipal bodies for cultural heritage protection).

6

Subject to the following laws and regulations: 1. The Law of Ukraine “On Basic Principles of the State Supervision (Control) over the Business Activities” dated April 5, 2007 No. 877-V. 2. The Resolution of the CMU “On Strengthening of Control over Consumption of Electricity and Heat” dated August 7, 1996 No. 929 by which the State Inspectorate for Consumption of Electricity and Heat Regulation was approved.

7 Subject to the following laws and regulations: 1. The Law of Ukraine “On Mandatory Social Insurance against Accidents at Work and Occupational Diseases Leading to Disability” dated September 23, 1999 No. 1105-XIV. 2. The Resolution of the Social Insurance Fund against Accidents at Work and Occupational Diseases “On Approval of the Regulations on Insurance Health Experts Service, Prevention of Industrial Accidents and Occupational Diseases” dated December 20, 2011 No. 63.

8 Subject to the following laws and regulations: 1. The Land Code of Ukraine dated October 25, 2001 No. 2768-III. 2. The Law of Ukraine “On Urban Development Framework” dated November 16, 1992 No. 2780-XII. 3. The Law of Ukraine “On Local State Administrations” dated April 9, 1999 No. 586-XIV. 4. The Law of Ukraine “On the Capital of Ukraine – Hero City of Kyiv” dated January 15, 1999 No. 401-XIV. 5. The Law of Ukraine “On Local Self-Government in Ukraine” dated 21 May, 1997 No. 280/97-ВР.

6. The Law of Ukraine “On the Principles of State Regulatory Policy for Business Activities” dated September 11, 2003 No. 1160IV. 7. The Decision of the Kyiv City Council “On the Kyiv City Council Regulation” dated 14 July, 2011 No. 383/5770.

9 The Law of Ukraine “On Public Prosecutor’s Office” dated November 5, 1991 No. 1789-XII. 10 The Law of Ukraine “On Militia” dated December 20, 1990 No. 565-XII; the Law of Ukraine “On Operational and Search Activity” dated February 18, 1992 No. 2135-XII; the Law of Ukraine “On the Organizational and Legal Framework for Struggle against Corruption and Organized Crime” dated 30 June, 1993 No. 3341-XII; the Regulation on the State Service for Combating Economic Crimes (the Resolution of the CMU dated July 5, 1993 No. 510), etc.

11 The basic laws and regulations: the Tax Code of Ukraine; the Regulation on the State Tax Service of Ukraine (the Decree of President of Ukraine dated May 12, 2011 No. 584/2011); the Resolution of the CMU “On Approval of the Procedure for Coordination of Scheduled On-Site Inspections Performed by the Authorities Controlling the Calculation and Payment of Taxes and Duties” dated 27 December, 2010 No. 1234.

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ІІІ. State Architectural and Construction Inspectorate a) Possible Obstacles The State Architectural and Construction Inspectorate of Ukraine and its local units (the “SAC Inspectorates”) are entitled to: •

suspend construction works (issue respective prescriptions), if such works do not meet the legislation requirements, national standards, rules and regulations, architectural requirements, technical specifications, approved design solutions, local rules for settlement development and use of building materials, products and structures, which are produced in breach of the national standards, in construction 12;

• cancel a Construction Works Permit, if a legal entity (building owner) is dissolved; or in case of the preventing the SAC Inspectorates officers from their performing an inspection if this preventing was committed within one year after a fine for a similar infringement; • require, if necessary, from developers, contractors, manufacturers of building materials, products and designs selective disclosure of structural elements of buildings, conducting surveys and measurements, additional laboratory and other tests of building materials, products and structures; • prohibit the use of new-built objects, which are not put into operation (such decision is made only by a head of the inspectorate or his/her deputy).

The SAC Inspectorates also issue licenses for construction activities and control the observance of the license terms and conditions. Thus they may require to remove the infringements of construction rules, to be in compliance with the license terms and conditions and may rescind or revoke the licenses.

12

A fine of UAH 19,836 (18 minimal wages) is imposed for the violation of a prescription of the State Architectural and Construction Inspectorate of Ukraine or its local units on suspending the construction works as being not complied with the legislation, building codes, government standards and regulations, architectural requirements, approved design solutions, specifications and other laws and regulations (Article 2 of the Law of Ukraine “On Responsibility for Urban Development Offenses”). The fine is calculated as of September 5, 2012. In the case of non-payment of the fines, the SAC Inspectorates may sue the default person to claim the payment: decision of the Economic Court of Kyiv dated October 12, 2011 in case No. 48/417.

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In addition, the SAC Inspectorates may impose fines on the urban development participants 13. The resolutions on fines are enforcement documents 14 and have to be enforced by the State Enforcement Service 15 without any additional court approval. b) Grounds for Interference The obstacles may be created by the SAC Inspectorates as a result of the following inspections (inquiries): | 10 • scheduled inspection (not more than once every six months) of the SAC Inspectorates under the inspection work plan approved by the head of the inspectorate; • unscheduled inspection (which may be appointed due to notifications of violation of urban planning legislation submitted by persons; upon the request of law enforcement agencies; in order to check the fulfillment of prior inspectorate’s prescriptions issued to the urban development participants; for the purpose of verification of the new building fitness for operation declaration).

The legislation envisages the additional grounds for revocation or suspension of a construction license, which may cause a time and resources consuming procedure of challenging such decisions or replacing the affected contractor (subcontractor). These grounds are as follows: (1) revealed violations cannot be cured in due course of the construction activity; (2) the inability of the offending person/entity to comply with the license terms and conditions, (3) an urban development participant’s refusal to accept an inspection of the licensing (regulatory) authority; (4) nonfulfillment of corrective measures or legal requirements relating to the construction license terms and conditions; (5) second violation of the construction license terms and conditions or regulatory requirements committed during a year by the person/entity. c) Risk Assessment The actual practice confirms the relatively high risk of inspections. The publicly available information about the activity of the SAC Inspectorate in Kyiv is evidence to this. In 2010, the SAC Inspectorate in Kyiv conducted 5,723 inspections of construction sites, in 2011, the number of inspections increased to 6,027.

13 Article 2 of the Law of Ukraine “On Responsibility for Offenses in the Field of Urban Development” dated October 14, 1994 No. 208/94-ВР, in particular: fines for the use of building materials that do not comply with government regulations, standards, etc. – in the amount of UAH 99,180, and the construction works in violation of building codes – in the amount of UAH 49,500. Fine sizes are calculated as of September 5, 2012.

14 The provision that the order on imposition of fine is an enforcement document came into force on 19 January, 2012. Earlier the SAC Inspections had to levy the fine in court in the case of non-payment.

15 Article 4 of the Law of Ukraine “On Responsibility for Offenses in the Field of Urban Development” dated October 14, 1994 No. 208/94-ВР.

As of January 1, 2012, there were 568 constructions in progress in Kyiv 16. With some reservations, it appears that each construction was inspected about 11 times in 2011. The SAC Inspectorate in Kyiv also issued 466 prescriptions to cure the urban development violations, including 103 prohibitions of use of completed constructions and 120 suspensions of construction works 17.

As a result of its inspections, the SAC Inspectorate in Kyiv revoked 187 licenses in 2011 comparing with 1,775 new licenses issued in Kyiv the same year 18.

The SAC Inspectorate may bring a court action for compelling a construction process participant to comply with its prescriptions, and the courts satisfy such claims if the SAC Inspectorate officer acted within his/her authority and in line with the law 19. Since a number of laws and regulations covering the SAC Inspectorate activity are relatively fresh, the respective court practice is not established. The court decisions confirming the suspension of construction works are issued in favor of the SAC Inspectorates, inter alia, when there is no designer’s supervision over the construction works 20, or in cases of the construction works permits revocations under the prosecutor’s prescriptions 21. There are court decisions which cancel the suspensions of construction works based on the violations of the procedural rules committed by the SAC Inspectorates officers 22, including the cases when the inspection was conducted without an authorized representative of the inspected entity present 23 or when there was no notification of unscheduled inspection and the inspection report, upon which the prescription was issued, is absent 24. Therefore, the practice shows the SAC Inspectorate’s prescriptions may be cancelled in case the inspectors violated the procedural rules.

16

Buildings Under Construction (Unfinished Constructions) Report (as of January 1, 2012) by the State Statistics Service of Ukraine.

2011 Report of the SAC Inspectorate in Kyiv.

18 2011 Report of the SAC Inspectorate in Kyiv.

19 Resolution of Kyiv District Administrative Court dated May 31, 2012 in case No. 2а-14648/11/2670.

20 Resolution of Kyiv District Administrative Court dated August 1, 2012 in case No. 2а-2215/12/2670.

21 Ruling of the High Administrative Court of Ukraine dated January 12, 2012 in case No. К-34155/10.

22 Resolution of Kyiv District Administrative Court dated June 6, 2012 in case No. 2а-6337/12/2670.

23 Resolution of Kyiv District Administrative Court dated February 17, 2012 in case No. 2а-17822/11/2670.

24 Resolution of Kyiv Administrative Court of Appeal dated May 16, 2012 in case No. 2а-13153/11/2670.

17

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ІV. State Sanitation and Epidemiological Service a) Possible Obstacles The State Sanitation and Epidemiological Service (the “SES”) represented by the chief state sanitary doctors is entitled to: • issue resolutions on restriction, suspension or termination of construction, renovation or modification of the buildings in case of noncompliance with the approved project design; • issue resolutions banning the use of construction materials in case they did not passed the hygienic regulation and state registration procedures or when they are found harmful to health; • issue resolutions on suspension or termination of the investment activity in cases prescribed by law; • issue resolutions on restriction, suspension or termination of activities of undertakings, any facilities and certain manufacturing (processing) operations in case of non-compliance with the sanitation standards and requirements; • issue prescriptions, resolutions and proposals to the undertakings’ owners about restriction of their activity in case of the violations of sanitation regulations which have no direct and adverse effect on health, but may contribute to such effect; • approve design and technical documentation on commissioning of the new and renovated buildings. b) Grounds for Interference Visual inspections and checkups are conducted selectively under the plans prepared by the SES, approved by the chief sanitary doctor in consultation with the superior chief sanitary doctor.

Unscheduled inspections are carried out depending on sanitation and epidemiological situation and as a result of submissions by third persons 25.

Unscheduled visual inspections and checkups are carried out under the decision (order, regulation) of the chief state sanitary doctor.

25

Paragraph 9 of the Resolution of the CMU “On Approval of the State Sanitation and Epidemiological Control in Ukraine Regulation ” dated June 22, 1999 No. 1109.

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c) Risk Assessment The risk of SES inspections is significant. During the first half of 2012 the SES in Kyiv adopted 877 resolutions on prohibition of use of various objects (68 permanent prohibitions and 809 temporary prohibitions) 26. The court practice confirms that it is possible to cancel the SES prescriptions or resolutions because of non-compliance with procedural regulations 27. At the same time, there are cases when the SES request of temporary prohibition of use of the object submitted to the court was denied because of the lack of authority of the court to establish such prohibition 28.

26

Information about Kyiv SES activities in the first half of 2012 (according to the official website of the SES).

Resolution of Kyiv Administrative Court of Appeal dated November 10, 2010 in case No. 2-а-24/09/1070, resolution of Kyiv District Administrative Court dated July 3, 2012 in case No. 2а-684/12/2770, resolution of Kyiv District Administrative Court dated July 26, 2012 in case No. 2а-5640/12/2670.

28 Resolution of Kyiv Administrative Court of Appeal dated May 26, 2011 in case No. 2а-7983/09/0670.

27

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V. State Inspectorate for Technogenic Safety a) Possible Obstacles The state technogenic safety inspectors are entitled to:

•

stop construction works (issuing a respective resolution);

•

issue resolutions (prescriptions) binding upon the undertaking’s officials in order to cure the fire safety infringements and non-compliances;

•

in case of the fire safety violations, which create a threat of fire or prevent its suppression and evacuation, or the absence of fire protection systems and means, suspend or prohibit the operation of buildings, individual premises, heaters, electrical networks, suspend permits for performance of works or fire-risky works. b) Grounds for Interference

The supervision process is carried out by means of scheduled (not more than once a year) and unscheduled inspections. The schedule of inspections is defined according to the criteria approved by resolution of the CMU of February 29, 2012 No. 306. The list of the undertakings to be inspected and the month for which the inspections are scheduled should be disclosed on the official website of the State Inspectorate for Technogenic Safety of Ukraine and its local units.

An unscheduled inspection may take place in case of: • •

•

notifications from public, individuals or undertakings about violations, if the State Inspectorate for Technogenic Safety of Ukraine approves such an inspection; necessity to check the compliance with the prescriptions, rulings, resolutions or other instruments under which the breaching person is obliged to cure the committed violations; occurrence of an accident or death as a result of the accident or fire which relates to the activity of the undertakings to be inspected.

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c) Risk Assessment According to the official website of the State Inspectorate for Technogenic Safety of Ukraine, only for 2012, about 21 thousand inspections were scheduled in Kyiv (the same as for 2011), including 1,452 inspections of new constructions 29. The legislation 30 provides for the financial sanctions to undertakings up to 2 per cent of the company’s monthly payroll for fire and industrial safety violations.

The new procedure for the technogenic (fire) inspections was adopted few months ago, but while | 15 the previous procedure were effective, there have been many court cases about cancelling of fire supervision authorities’ decisions 31. The technogenic (fire) safety authorities non-compliance with the procedural requirements was a reason for the court to uphold the undertakings’ claims.

29

Information on the performed measures of state fire and technological safety control over the undertakings (the official website of the State Inspectorate for Technogenic Safety of Ukraine).

30 Article 35 of the Law of Ukraine “On Fire Safety”.

31 Resolution of Odessa District Administrative Court dated August 28, 2012 in case No. 1570/4004/2012, ruling of Kyiv Administrative Court of Appeal dated July 7, 2011 in case No. 2а-19513/10/2610, resolution of the District Administrative Court of the Autonomous Republic of Crimea dated April 4, 2011 in case No. 2а-1319/11/2/0170, resolution of Luhansk District Administrative Court dated October 15, 2009 in case No. 2а-22614/09/1270.

VI. State Service for Mining and Industrial Safety a) Possible Obstacles The State Service for Mining and Industrial Safety of Ukraine (Industrial Safety Service) and its local units are entitled to: • terminate, suspend, restrict the operation of the undertakings, manufacturing (production, processing) lines, workplaces, buildings, constructions, facilities, performance of certain works by issuing instruments on prohibition which are valid until the violations endangering lives of the workers are cured; • cancel permits and licenses until the violations endangering lives of the workers are cured. b) Grounds for Interference The Industrial Safety Service officials may visit the undertakings during scheduled or unscheduled inspections. As long as the construction works are classified high-risk activity, the scheduled inspection may be carried out not more than once a year 32.

The right to conduct unscheduled inspections may be enjoyed in case of: • notifications from public, individuals or undertakings about violations, if the Industrial Safety Service approves such an inspection; • unreasonable failure to submit the mandatory reports on time 33; • identification and confirmation of the false information contained in the mandatory reports of the undertakings; • necessity to check the compliance with the prescriptions and regulations of the Industrial Safety Service which were issued as a result of scheduled inspections and oblige the breaching person to cure the committed violations; • occurrence of an accident, death as a result of the accident, or an occupational disease which relates to the activity of the undertakings to be inspected 34.

32

The Resolution of the CMU dated April 28, 2009 No. 413.

According to Article 39 of the Law of Ukraine “On Labor Protection” the Industrial Safety Service officials are entitled to receive from the employer and undertaking’s officials written reports on the status of preventive work, causes of violations and corrective measures taken to cure the violations.

34 The circumstances in which an accident is deemed to be related to the activity of the undertakings are identified in paragraph 15 of the Resolution of the CMU “Some Aspects of Investigation and Recording of Accidents, Occupational Diseases and Emergencies at Work” dated November 30, 2011 No. 1232.

33

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The identified violations with references to the laws and regulations breached revealed during the inspections are recorded in the inspection reports. One copy of the inspection report should be delivered to the head or representative of the undertakings who sign the copy to confirm its delivery.

The prohibition of construction works is formalized by a written resolution.

Construction works may be prohibited if the inspectors detect: | 17 • • • •

violations of occupational and industrial safety laws, endangering lives of the workers; absence of permission to perform high-risk works or to operate (use) high-risk machines and equipment; non-performance of the inspection, testing, checkup or expert examination of high-risk machines and equipment; occurrence of an accident with fatal or severe consequences or a group accident. c) Risk Assessment

In 2011, the Industrial Safety Service officials temporarily stopped production lines, works or rendering services in 114,422 cases due to the threat to life and health of the employees 35. If the Industrial Safety Service officials act within their authorities, the courts are usually uphold their decisions 36. Otherwise, in case the officials seriously infringe the procedural rules while inspecting the undertaking, the court cancels their decisions 37.

The fine for the violations may not exceed 5 per cent of the monthly company’s payroll 38.

35

Report on the performance of the Industrial Safety Service’s action plan for 2011 (from the official website of the service).

Resolution of Donetsk District Administrative Court dated July 14, 2010 in case No. 2а-13528/10/0570, resolution of Donetsk Administrative Court of Appeal dated March 9, 2011 in case No. 2а-1455/09/0570.

37 Resolution of the District Administrative Court of the Autonomous Republic of Crimea dated April 14, 2010 in case No. 2а12146/09/6/0170, resolution of Kherson District Administrative Court dated May 14, 2010 in case No. 2а-12728/09/2170.

38 Article 43 of the Law of Ukraine “On Labor Protection”.

36

VII. State Ecological Inspectorate a) Possible Obstacles The State Ecological Inspectorate (hereinafter – the “Eco Inspectorate”) has the right to: • terminate or suspend (temporary) undertakings and facilities activity (operation) if they do not comply with the environmental protection laws, exceed the maximum permissible emissions, physical and biological factors levels or discharge limits of pollutants; • seal up premises, facilities and equipment of undertakings if there is a relevant decision to terminate or temporary suspend their activity (operation).

The undertakings activity is terminated or temporary suspended in case of violations of the environmental rules and regulations, non-compliance with the ecological safety requirements, including those relating to emissions and pollutants regulations; burial, storage or disposal of industrial, household and other wastes without relevant permits 39. b) Grounds for Interference The Eco Inspectorate is entitled to carry out inspections of matters within its responsibilities and issue mandatory prescriptions and regulations to address the revealed violations.

Prior to commencing the inspection, the Eco Inspectorate officials have to present the inspection assignment certificate (and give a copy of it) and their personal ID-cards which confirm the positions occupied at the authority. These documents are presented to the head or representative of the undertaking to be inspected. The inspection assignment certificate must be signed by the head or its deputy of the Eco Inspectorate or its local unit and bear the authority’s seal.

Scheduled inspections may be conducted not more than once a year. Unscheduled inspections may be initiated due to the following circumstances 40: • notifications from public, individuals or undertakings about violations, if the Eco Inspectorate approves such an inspection;

39

Paragraph 4 (в) of the Procedure of limitation, temporary ban (suspension) or termination of businesses, institutions, organizations and facilities activities because of violation of legislation on environmental protection, approved by Parliament of Ukraine on October 29, 1992 No. 2751-XII. 40 Article 6 of the Law of Ukraine “On Fundamental Principles of the State Supervision (Control) in the Field of Business”.

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• necessity to check the compliance with the prescriptions and regulations of the Eco Inspectorate which were issued as a result of scheduled inspections and obliged the breaching person to cure the committed violations. c) Risk Assessment While assessing possible risks for constructions attributed to the activity of the Eco Inspectorate, we should note that the inspectorate and its units seem to be very persistent in performing their control functions. During first ten months of 2011, the Eco Inspectorate and its local units (including the | 19 Eco Inspectorate in Kyiv) conducted 72,000 inspections of the undertakings’ compliance with the environmental laws. For the same period, the undertakings’ activities were terminated or suspended (to cure the violations revealed) in 2,374 cases 41.

Among the grounds for termination and suspension of the undertakings activities, as well as for other remedies and measures applied by the Eco Inspectorate to the breaching undertakings, we may identify the following ones: (1) the lack of an agreement on removal and disposal of the wastes, (2) the lack of necessary records and other documentation with respect to the number, type and composition of the wastes, (3) the lack of a permit for air emissions, (4) contamination of land by construction wastes, and (5) removal of topsoil without special permit 42.

During the first eight months of 2012, administrative courts heard nine cases 43 about cancelling of the Eco Inspectorate in Kyiv resolutions on termination and suspension of the undertakings activities (five resolutions were cancelled). The violations that have led to such measures took place in the areas of waste management and air pollution (due to boiler plants activity and motor vehicles use, etc.). It is worth mentioning that the details of these nine cases show that the challenged resolutions were issued only when the failure to cure the violations identified in the inspection report occurs.

In one of the above cases 44, the court supported the Eco Inspectorate’s position on the validity of the temporary ban (suspension) of construction of a building because of “the lack of the permit for disposal of wastes in 2012, the lack of the approved limits for production and disposal of wastes in 2012 and the lack of the register of wastes in 1-BT form”.

41

2011 Report of the Ministry [of Ecology and Natural Resources] and the national authorities supervised by the CMU through the Minister of Ecology and Natural Resources.

42 Information on checking of “TMO “Liko – Holding” in 2011.

43 According to the Unified State Register of Court Decisions.

44 Resolution of Kyiv District Administrative Court dated May 24, 2012 in case No. 2а-5540/12/2670.

VIII. State Inspectorate for Consumption of Electricity and Heat Energy a) Possible Obstacles The State Inspectorate for Consumption of Electricity and Heat Energy (hereinafter – the “Energy Inspectorate”) 45 has the right to: • submit notices about violations committed by the holders of construction licenses to the SAC Inspectorate; • restrict or suspend power supply of the electric and heat equipment by issuing a respective resolution. b) Grounds for Interference The Energy Inspectorate carries out inspections in accordance with the Law of Ukraine “On Basic Principles of the State Supervision (Control) over the Business Activities”. Scheduled inspections are performed in line with the annual or quarterly plans approved by the Energy Inspectorate. The resolution on performing inspections, both scheduled and unscheduled, should contain the legal name of the undertakings to be inspected.

The grounds for unscheduled inspections are as follows: • •

•

notifications from public, individuals or undertakings about violations, if the Energy Inspectorate approves such an inspection; necessity to check the compliance with the prescriptions and regulations of the Industrial Safety Service which are issued as a result of scheduled inspections and oblige the breaching person to cure the committed violations; occurrence of an accident, death as a result of the accident, or an occupational disease which relates to the activity of the undertakings to be inspected. c) Risk Assessment

Given the number of inspections carried out by all units of the Energy Inspectorate in the first half of 2012 (about 23,000 inspections), it is possible to assess the respective risks for construction as moderate. In addition, the Energy Inspectorate’s interference seems to be immaterial because there were only 20 power supply restrictions or suspensions issued in the first half of 2012 46. The Energy Inspectorate mostly issues prescriptions for the undertakings to cure the violations (in the first half of 2012, 8,300 of such prescriptions were issued). We have not found statistics on the number or 45

Represented by the Chief Inspector of Ukraine on energy supervision, his deputies, senior state inspectors and state inspectors on energy supervision.

46 Report on energy control measures performed in the first six months of 2012.

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results of submissions of the Energy Inspectorate to the SAC Inspectorate about the revealed violations, so it is hard to assess the risks for construction process in this aspect.

In the first eight months of 2012 47, there were eight commercial and administrative cases heard by Kyiv courts, including courts of appeal, related to the control functions of the Energy Inspectorate.

Six cases were about fines imposed by the Energy Inspectorate (the amount of each of them does not exceed UAH 3,400), and the other two cases addressed the Energy Inspectorate’s alleged nonperformance of its functions 48 and the inspectorate’s allegedly illegal resolution respectively 49. In all cases the reasoning of the Energy Inspectorate have been upheld. | 21

47

According to the Unified State Register of Court Decisions.

Resolution of Kyiv District Administrative Court dated July 18, 2012 in case No. 2а-7422/12/2670.

49 Resolution of Kyiv District Administrative Court dated April 25, 2012 in case No. 2а-19376/11/2670.

48

IX. Social Insurance Fund against Accidents at Work and Occupational Diseases and Labor Protection Insurance Experts a) Possible Obstacles Labor protection insurance experts acting as representatives of the Social Insurance Fund against Accidents at Work and Occupational Diseases (the “Fund”) are entitled, in particular, to issue prescriptions which are binding upon the employers and addressing the violations of labor protection laws and regulations. In addition, they may submit the requests for prohibition of use of workplaces, production lines etc. which threaten health or life of the employees to the Industrial Safety Service that may decide on those issues (see section “the State Service for Mining and Industrial Safety of Ukraine (Industrial Safety Service) above). b) Grounds for Interference The scheduled and unscheduled inspections may be performed with respect to not only the entire undertaking’s activity, but also each of its production facilities separately. The scheduled inspections may be carried out not more than once a year.

Unscheduled inspections are conducted in case of: • an emergency, accident at work or occupational disease; • necessity to check the compliance with the prescriptions of the Fund’s experts which oblige the breaching person to cure the committed violations. c) Risk Assessment Very limited grounds for unscheduled inspections and the relevant rarity of scheduled inspections make it possible to assess the risks for construction process as remote. Furthermore, the prohibition of operations is possible only after the relevant resolution of the Industrial Safety Service, and the Fund may only request for such prohibition.

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X. Local Municipal authorities 50 a) Possible Obstacles Within its power, Kyiv City State Administration (the “KCSA”) may issue in cases envisaged by law 51 resolutions on termination of construction, which is not performed in compliance with the urban planning rules and approved design projects or may damage the environment. The KCSA may participate in commissioning of completed constructions 52.

Local state administrations may submit requests 53 for suspension of the undertakings’ activity in case of a breach of the environmental laws and sanitation regulations 54.

Kyiv City Council may restrict, ban (suspend) or terminate the use of land in case of violations of the land laws 55.

In addition, the commissioning of new constructions, reconstructions or building modifications is forbidden without a comprehensive improvement of the adjacent territory 56. The improvement is considered to be completed only after the respective Control Card for Temporary Deterioration of Territory is closed 57. The division of KCSA responsible for territory improvement matters is the Main Department for Control over City’s Improvement in Kyiv.

It should be noted that the possibility of compulsory purchase (expropriation) of the land, where the building is located, due to the public interest does exist. This expropriation is only possible upon the grounds included into the exhaustive list 58. This was the case when Kyiv City Council made a resolution of December 16, 2005 No. 607/3068 “On Partial Removing of Land Plots at Rusanivski and Voskresenski Gardens from the Territory of Construction of the Podilskyi Bridge over the Dnieper River in Kyiv and a Line of Kyiv Subway”.

50

By the example of Kyiv.

We have not found the laws regulating construction that would empower local authorities, including the KCSA, to carry out these functions.

52 Articles 13 and 14 of the Law of Ukraine “On Urban Development Framework”.

53 The undertakings activity that violates the environment laws may be limited, suspended or terminated by the resolution of the authorities listed in paragraph 3 of the Procedure of Limitation, Temporary Ban (Suspension) or Termination of Undertakings or Facilities Activity due to Violation of Environment Laws, approved by Parliament of Ukraine on October 29, 1992 No. 2751-XII: the CMU, Parliament of Crimea, local executive authorities, the Ministry of Ecology and Natural Resources of Ukraine and its local units, state sanitation and epidemiological service’s units, other specially authorized national and local authorities.

54 Article 21 of the Law of Ukraine “On Local State Administrations”.

55 Article 9 of the Land Code of Ukraine 56 Paragraph 2.1.5 of the Kyiv Improvement Rules.

57 Ibid.

58 Article 7 of the Law of Ukraine “On Alienation of Privately Owned Land Plots and Other Objects of Immovable Property Located On Them for the Public Needs and due to the Social Necessity” dated November 17, 2009 No. 1559-VI. 51

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b) Grounds for Interference The law does not clearly list the cases when the interference of local authorities may occur. The actions of local authorities may be initiated upon submissions, internal correspondence within those authorities; letters received from other authorities, law enforcement agencies, community, individuals or entities. In addition, municipal authorities may initiate and organize inspections of the undertakings on the matters within the power delegated to them by state executive authorities 59. c) Risk Assessment For the moment, there are more than 90 cases being heard by the court which relate to challenging Kyiv City Council resolutions and other decisions of the local authorities on suspension of constructions and on cancelling the municipal land alienations 60. There are claims of individuals concerning local administrations inactivity in controlling the construction, which court decided in favor of the plaintiffs 61. According to court practice overview if the transfer of land to private ownership took place in violation of the current legislation there is a significant risk to lose the title.

59

Article 18 of the Law of Ukraine “On Local Self-Government”.

Resolution of Kyiv District Administrative Court dated May 23, 2012 in case No. 2а-18266/11/2670, resolution of Kyiv District Administrative Court dated May 16, 2011 in case No. 2а-705/11/2670, decision of the Economic Court of Kyiv dated January 31, 2012 in case No. 9/20226.01.12.

61 Resolution of Kyiv District Administrative Court dated March 18, 2008 in case No. 5/198, resolution of Kyiv Administrative Court of Appeal dated May 26, 2009 in case No. 22-а-11915/08.

60

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XI. Courts a) Possible Obstacles The court may invalidate contracts (including those related to construction), cancel permits or hear cases about the land allotment matters and issue a preliminary injunction prohibiting performance of certain actions (including construction works). | 25 b) Grounds for Interference The ground for interference may be a legal action brought in the court. The action may be brought against a participant of the construction not only by a representative of the authority, but also by an individual (depending on the nature of the claim). c) Risk Assessment There have been cases when the court issued an injunction prohibiting the performance of construction works 62. This may happen in civil, administrative or economical (commercial) disputes where the defendant is a participant of the construction process. The injunction may cause the suspension of construction works for the period until the final judgment in the case is delivered or the injunction ruling is cancelled by the court of higher instance. The injunction ruling may be valid for several months.

In 2012 63, the said injunctions were issued by the courts of first instance in Kyiv in three cases: • suspension of the construction works permit 64 during the case brought by the residents of the building, which is located next to the construction site, about an allegedly illegal permit for construction works issued by the SAC Inspectorate in Kyiv; • prohibition of the performance of construction works during the case about invalidation of the land sale-purchase agreement and the document of title to the land plot 65, and • prohibition of the performance of construction works during the case about elimination of the infringements of the property rights to the land plot 66.

Court decisions invalidating contracts related to the construction works, land allotment, permits, etc. may stop construction for a considerably long period or even make the further construction impossible.

62

Resolution of the Economic Court of Donetsk Region dated March 13, 2012 in case No. 5006/32/23пн/2012, ruling of Kyiv City Economic Court dated October 7, 2010 in case No. 39/23507.10.10.

63 According to the Unified State Register of Court Decisions data for the period from January to August 2012.

64 Ruling of Kyiv City District Administrative Court dated August 7, 2012 in case No. 2а-9925/12/2670.

65 Ruling of Pechersk District Court of Kyiv dated January 18, 2012 in case No. 2-238/11.

66 Ruling of Obolon District Court of Kyiv dated June 21, 2012 in case No. 2-1664/12.

XII. Prosecutor’s Office a) Possible Obstacles Under the law, the prosecutor’s office has very wide powers while overseeing the compliance with the laws. It may submit proposals on the elimination of violations of the laws (especially, in the field of environmental and land laws when it relates to the construction industry) or apply to the court for protection of the rights of individuals, entities or the state.

The person who received the prosecutor’s proposal should consider it and inform the prosecutor within the period which is indicated in the proposal and should not be less than ten days about the measures taken with respect to the proposal. b) Grounds for Interference The compliance investigation of the prosecutor’s office may be performed upon the requests, reports or other submissions which notify about the violations of the law and require a prosecutor's response. The investigations and inspections are also possible in case they are initiated by the prosecutor him or herself. The inspection as a result of a third party’s submission, except for the submission about a crime, may be conducted by the prosecutor’s office only after the preliminary checkup of the responsible controlling authority or in case this authority failed to decide on the submission on time. The prosecutor should issue a resolution on inspection in which the information about the alleged violations and the reasoning for the measures to be taken are indicated. c) Risk Assessment There are a lot of cases when prosecutors protect the rights of the state (or its authorities) or the local municipal authorities 67. There have been cases of withdrawal of a construction permit 68 and a permit for temporary deterioration of urban territory 69 as a reaction to the prosecutor’s protests 70.

In 2012, the prosecutor’s offices in Kyiv identified the infringements during construction which related to: (1) the unauthorized construction and demolition of greenery on Kikvidze street (therefore the prosecutor filed claims for invalidation of the land leases and issued a protest, which led to cancellation of the construction commencement declaration) and the construction without 67

Resolution of Kyiv Administrative Court of Appeal dated October 5, 2010 in case No. 7/508 (2-a-10215/08), Resolution of the Highest Administrative Court of Ukraine dated October 25, 2011 in case No. K/9991/18701/11, Decision of Kyiv Economic Court dated November 17, 2011 in case No. 18/29410.11.11.

68 Resolution of Kyiv City District Administrative Court dated November 9, 2011 in case No. 2a-13074/11/2670.

69 Resolution of Kyiv City District Administrative Court dated January 18, 2012 in case No. 2a-14470/11/2670.

70 Since December 1, 2012, the only prosecutor’s submission to a party who allegedly breached the law is a proposal

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permits on Pravdy avenue 71; (2) the conduct of the SAC Inspectorate’s officials while registering the notifications on construction works commencement on the land plot on Soshenka street (after the prosecutor had filed a protest, the notifications were cancelled and removed from the respective unified register) 72; (3) violation of the land’s designated use (“lands of the green zone and the central historic area of the capital”) on Staronavodnytska street during the construction of an administrative-hotel-residential complex (Kyiv City District Administrative Court upheld prosecutor’s claim and cancelled the Kyiv City Council’s decision on the land transfer adopted in 2010) 73.

Since the prosecutor has the right to freely enter the premises of companies, has access to | 27 documents and materials necessary for the audit and inspection, including those with the trade secrets or confidential information, the negative effects from that prosecutor’s activity can be significant. However, the actual blocking of construction works is possible to be made by a prosecutor through courts or other state authorities (particularly in connection with the cancellation of permits).

71

Official website of the Prosecutor’s Office in Kyiv, news as at September 13, 2012.

Official website of the Prosecutor’s Office in Kyiv, news as at August 10, 2012.

73 Official website of the Prosecutor’s Office in Kyiv, news as at August 7, 2012.

72

XIIІ. Law enforcement agencies a) Possible Obstacles The temporary suspension of construction works may be a consequence of the investigations carried out by: •

The Ministry of Internal Affairs of Ukraine – criminal, traffic and special police, special units for combating organized crime (UBOZ), units for combating economic crimes | 28 (UBEZ, former “UBEP”);

•

The Security Service of Ukraine including special units for combating corruption and organized crime;

•

The State Tax Service – units of tax police.

The search, seizure, reconstruction of the situation and circumstances of an event (investigative experiment), the detention of certain persons may cause a stop of works on the site from several hours to several days. Use of any materials, equipment or documentation identified as material evidence becomes difficult or even impossible at least during the criminal investigations. These constraints arise in the majority of cases within an opened criminal case (as from November 20, 2012 74 – upon enrollment of the information about an alleged criminal offense to the Unified Registry of Pre-trial Investigations).

The investigators have sufficient powers when determining machinery, motor vehicles, computers, things and documents, etc. as evidence in a criminal case. Such decisions of the law enforcement authorities entail the possibility of the seizure of evidence from a person.

In addition, given the materials of investigations, special units for combating organized crime (UBEZ) have the right to file a suit about cancelling the registration of the undertakings and termination of their activities, as well as to bring a legal action to invalidate agreements under the law of Ukraine. However, there were no such cases in Kyiv in 2012. b) Grounds for Interference The reason for actions of the law enforcement agencies is often a need to verify the operational information about alleged criminal offenses which may be contained in the various submissions of individuals, in the media or independently revealed by these law enforcement agencies. The sphere for militia (police) inspections is quite wide. It allows them to check virtually unlimited scope of undertakings on various aspects of their activities.

74

From the effective date of most of the provisions of the new Criminal Procedural Code of Ukraine.

Law enforcement officials may conduct inspections: • • • • •

to verify information about a criminal offense or preparations to it – within the pre-trial investigations 75; to collect documents 76 (in case there is a statement or report about criminal violations); to perform operational and search activities 77 (if the respective case is opened); to check the premises (in order to stop the crimes, pursue the persons suspected of committing a crime, in case of natural hazards and other emergencies) 78; to perform investigations (search, seizure etc.) – upon enrollment of the information | 29 about an alleged criminal offense to the Unified Registry of Pre-trial Investigations 79.

While combating the organized crime, the members of special units of the Interior Ministry and the Security Service of Ukraine 80 have the right to enter the territory, premises, warehouses and storage companies showing a written order of the respective head of the special unit or prosecutor’s resolution or sanction 81.

The Main Department of the Interior Ministry in Kyiv is entitled to exercise control over the urban improvement measures 82, including check a Control Card for Temporary Deterioration of City’s Territory. c) Risk Assessment The risks of interference of the law enforcement agencies in the construction process are considerable, and the negative consequences of such interference may be significant.

75

Section III of the Criminal Procedural Code of Ukraine dated April 13, 2012 No. 4651-VI. Paragraph 17 of Article 11 of the Law of Ukraine “On Militia”.

77 Articles 8 and 9 of the Law of Ukraine “On Operational and Search Activity”.

78 Paragraph 15 of Article 11 of the Law of Ukraine “On Militia”.

79 Chapter 20 of the Criminal Procedural Code of Ukraine dated April 13, 2012 No. 4651-VI. 80 The Main Department for Combating Organized Crime of the Ministry of Internal Affairs of Ukraine, Department for Combating Organized Crime in Kyiv.

81 Article 12 of the Law of Ukraine “On Organizational and Legal Framework for Struggle against Corruption and Organized Crime”.

82 Paragraph 19.1.1 of the Kyiv Improvement Rules.

76

XIV. State Tax Service a) Possible Obstacles The refusal to present documents for inspection, if there are legal grounds for such inspection, or to allow the tax officials to get on the territory of the undertaking entails the administrative seizure on a taxpayer’s property 83. In case of this seizure, the owner of the property affected cannot dispose of or use it. It is worth noting that the taxpayer’s property can be encumbered by the tax lien in order to ensure the payment of the tax debt. The administrative seizure, to a great degree, and the tax lien may adversely affect the construction.

In addition, a large number of inspections – documentary (scheduled and unscheduled, on-site and off-site) or actual – by tax authorities may result in diversion of labor resources and slow down the implementation of the project. b) Grounds for Interference The actual inspection is conducted on the basis of a decision of the head of the tax service. Copy of the order must be provided to the taxpayer before the beginning of the inspection. It is carried out without warning of the taxpayer by two or more officers of the state tax service in the presence of officials of the entity or its representative and/or the person who actually performs payment operations. The exhaustive list of circumstances for such inspections is established by the Tax Code of Ukraine 84.

The scheduled inspection must be conducted according to the plan (frequency is determined according to risk-ranking of the undertakings). It is conducted on the basis of a decision (an order) of the head of the tax authority. A taxpayer must be noticed at least 10 calendar days before the inspection.

The unscheduled inspection is carried out if there is at least one ground from the exclusive list 85. It is conducted on the basis of a decision (an order) of the head of the tax authority. A taxpayer must be informed one day before the inspection. c) Risk Assessment During the first half of 2012, the state tax authorities of Kyiv mostly focused on the issues of the correct reporting of the value added tax (2,044 unscheduled documentary inspections were held) 86.

In general, the activities of the State Tax Service are quite intense and the risks connected with it are material.

83

Subparagraph 94.2.3 of paragraph 94.2 of Article 94 of the Tax Code of Ukraine.

Paragraph 80.2 of Article 80 of the Tax Code of Ukraine.

85 Article 78 of the Tax Code of Ukraine.

86 The Report of the State Tax Inspectorate in Kyiv for the first half of 2012.

84

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XV. Other authorities The State Labor Inspectorate of Ukraine (the “Labor Inspectorate”) 87 has no official right to stop the construction or the undertaking’s activity, but has the right to: • freely inspect the industrial, office or administrative buildings of employers and check the workplaces of employees; | 31 • issue prescriptions binding upon employers in order to eliminate violations of labor laws, employment and compulsory social insurance regulations.

The state labor inspector may conduct scheduled and unscheduled inspections. The scheduled inspections are conducted not more than once a year.

The grounds for the unscheduled inspections are as follows: • •

•

•

necessity to check the compliance with the prescriptions on elimination of the violations issued as a result of the previous scheduled inspections; notifications, notices or other submissions of individuals or legal entities which notify about the alleged violations. In this situation, the unscheduled inspection is carries out upon the prior approval of the Labor Inspectorate; it is revealed and confirmed that the information disclosed by the employer in its mandatory reports on labor matters is untrue 88, as well as those reports have not been submitted on time with no good reason for that failure and the written explanations about the obstacles to the due submission of such reports; occurrence of an accident, death as a result of the accident, or an occupational disease which relates to the activity of the undertakings to be inspected.

The State Agricultural Inspectorate of Ukraine (the “Agricultural Inspectorate”) 89. The Agricultural Inspectorate is entitled to submit requests to the state or local municipal authorities on the following issues:

87

Subject to the following laws and regulations: 1. The Decree of President of Ukraine “On State Labor Inspectorate of Ukraine Regulations” dated April 6, 2011 No. 386/2011.

2. The Order of the Ministry of Social Policy of Ukraine “On Approval of the Procedure for Inspections Conducted by Officials of the State Labor Inspectorate of Ukraine and its Local Units” dated July 2, 2012 No. 390.

88 Guidelines for Completion of the 10-ПІ Form (annual) “Disabled Occupation and Employment Report” (approved by the Order of the Ministry of Labor of Ukraine on February 10, 2007 No. 42).

89 Subject to the Law of Ukraine “On State Control over Land Use and Its Protection” dated June 19, 2003 No. 963-IV and the Decree of President of Ukraine “On the State Agricultural Inspectorate” dated April 13, 2011 No. 459/2011, the Order of the Ministry of Agricultural Policy and Food of Ukraine “On Approval of the Regulations for the State Agricultural Inspectorates in the Autonomous Republic of Crimea, regions, cities of Kyiv and Sevastopol” dated December 23, 2011 No. 770.

•

•

suspension of construction works and operation of facilities in case of violations of the land laws in order to eliminate the violations and their consequences; termination of the use of the land plot according to the law 90.

The Agricultural Inspectorate has the right to conduct inspections 91 and give binding prescriptions (resolutions). In case of a repeated refusal to comply with the prescription (i.e. the breaching person did not stopped violating the land laws or eliminated the consequences of the violation) and when all possible measures were applied to the breaching person, the Agricultural Inspectorate informs | 32 the prosecutor’s office or city council.

The risk of the Agricultural Inspectorate’s interference in the construction process depends largely on the owner’s (lessee’s) compliance with the designated use of the land. If there is no violation of the land plot’s designated use during the construction, the risk of interference of this inspectorate is remote.

Authorities for cultural heritage protection 92. Within the archaeological areas, historical zones etc., the construction works and earthworks are prohibited without a prior permit of the authority for cultural heritage protection 93. During construction works, the developers and contractors are required to inform within three days local authority for cultural heritage protection (such as the Main Cultural Heritage Department of Kyiv City State Administration) about newly discovered sites with anthropological, archaeological, aesthetic, ethnographic, historical, artistic, scientific or artistic value 94.

It seems that the risk may occur only during earthworks. The more accurate assessment is possible given historical information about the construction site. It is worth mentioning that from January 2009 to August 2012, there were no disputes brought before the courts of Kyiv about the suspension of the construction works or earthworks initiated by the cultural heritage protection authorities.

90

Article 6 of the Law of Ukraine “On State Control over Land Use and Its Protection”.

Pursuant to the Law of Ukraine “On Basic Principles of the State Supervision (Control) over the Business Activities”.

92 Subject to the following laws and regulations: 1. The Law of Ukraine “On Protection of Cultural Heritage” dated June 8, 2000 No. 1805-III. 2. The Law of Ukraine “On Architectural Activity” dated May 20, 1999 No. 687-XIV. 3. The Law of Ukraine “On Protection of Archaeological Heritage” dated March 18, 2004 No. 1626-IV. 93 Article 32 of the Law of Ukraine “On Protection of Cultural Heritage”.

94 Article 27 of the Law of Ukraine “On Architectural Activity”.

91

XVІ. Review of Procedures for Appealing of ‘Anti-Construction’ Decisions As a rule, a decision (resolution, ruling, prescription etc.) of the national or local authorities creating obstacles to construction works can be appealed within the administrative review procedure (an appeal is submitted to the higher authority or official) or the judicial review procedure. The judicial review procedure involves bringing an administrative action to the district administrative court (e.g.

Kyiv District Administrative Court) under the Administrative Procedure Code of Ukraine.

Submitting a claim with the administrative court does not automatically suspend the challenged decision of the national or local authority95. The general limitation of action, in case of a claim for cancelling the challenged decision, is six months 96. The disadvantage of the administrative review is lack of objectivity and completeness of investigation, on the other hand, judicial review may last | 33 quite a long period.

In addition to these general procedures, the grieved person may also apply to the prosecutor’s office that is entitled to issue a proposal to cure the illegal decision or action of an official, which may lead to invalidation of those decisions. Such proposal does not suspend the challenged decision and is subject to consideration by a relevant authority or officer within ten days after its receipt 97.

95

In order to suspend the decision of authorities, an administrative court may issue an injunction.

Part 2 of Article 99 of the Administrative Procedure Code of Ukraine.

97 Article 23 of the Law of Ukraine “On Public Prosecutor’s Office”.

96

Some features of the procedures for appealing the decisions are examined below.

Conduct and decisions of the local units of the SAC Inspectorate may be appealed to the State Architectural and Construction Inspectorate of Ukraine, the Ministry for Regional Development, Construction, Housing and Municipal Services of Ukraine (the Regional Development Ministry).

There are no special internal rules or regulations for appealing to the Regional Development Ministry or the SAC Inspectorate of Ukraine.

The resolution of the SAC Inspectorate on imposition of a fine on the participant to the construction process may be appealed to the court within 15 days after its issue date with the simultaneous notification of the authority that made the decision 98. | 34 The administrative review procedure for appealing decisions of the Chief state sanitary doctor of Ukraine provides the right to appeal to the CMU; decisions of other chief state sanitary doctors and officials of the SES may be appealed to the superior chief state sanitary doctor.

Prescriptions with demand to eliminate violations in the field of the fire and technogenic safety and civil defense may be appealed to the Technogenic Safety Inspectorate of Ukraine. After all violations are cured pursuant to the prescription, the respective participant of the construction process submits a written request for lifting of the restrictions imposed. The authority may arrange an unscheduled inspection in order to check the compliance with the prescription.

Prescriptions and rulings of the local units of the Industrial Safety Service may be appealed to the central office of the Industrial Safety Service of Ukraine.

Decisions of the Energy Inspectorate may be appealed to the Ministry of Energy and Coal Industry of Ukraine.

Appeals against decisions of officials of the Social Insurance Fund against Accidents at Work and Occupational Diseases and labor protection insurance experts may be submitted to the special dispute resolution commissions set up by the Executive Board of the Fund and its operational units.

Decisions of the KCSA may be appealed to the CMU 99. Resolutions of the heads of structural units of the KCSA may be cancelled by the head of KCSA and by the relevant ministry or other executive authority 100.

Judgments (court rulings, resolutions or decisions) may be appealed to the higher court (e.g. the judgments of Kyiv District Administrative Court are appealed to Kyiv Administrative Court of Appeal and the judgments of the latter are appealed to the Highest Administrative Court of Ukraine). Injunction rulings may be also cancelled by the same judge (judges) who issued them in case there is no more need in their application.

The prosecutor’s resolution on inspection may be appealed to the superior prosecutor or to the administrative court within ten days from the receipt of the resolution’s copy 101.

The conduct of the law enforcement agencies’ officers may be complained to the investigating judge 102. The conduct of a militia (police) officer may be complained to the law enforcement agency, the court or the prosecutor 103.

98

Article 5 of the Law of Ukraine “On Responsibility for Offenses in the Field of Urban Development”.

Article 43 of the Law of Ukraine “On Local State Administrations”.

100 Ibid.

101 Paragraph 3 of Article 21 of the Law of Ukraine “On Public Prosecutor’s Office”.

102 Article 306 of the Criminal Procedural Court of Ukraine.

103 Article 25 of the Law of Ukraine “On Militia”.

99

XVІІ. Research Details This report is based on a study of the relevant legislation and the information obtained from the public sources about the activity of the state and local municipal authorities and covers the period from January 2011 till September 2012 (or such other period specifically indicated in each separate case, if necessary). The study was held on the assumption that the commercial construction is carried out in Kyiv.

This study was conducted with respect to the areas that we deemed the most important, risky or needed special attention. This publication should not be taken as a result of systematization and description of all aspects, features and effects of the state and local municipal authorities, which may interfere with the construction process.

We have not considered the aspects of administrative sanctions imposed on the officials of a construction process’ participant.

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