On 14 September 2024, the Government registered in the Parliament the Draft Law on the State Budget of Ukraine for 2025 (Reg. No. 12000). In the said draft law, the provisions of Article 41 establish a requirement to return to the Pension Fund of Ukraine (PFU) the funds placed on the accounts of internally displaced persons (IDPs) opened with JSC Oschadbank for the payment of pensions (monthly lifetime allowance) in accordance with the Resolution of the Cabinet of Ministers of Ukraine No. 637 “On the Implementation of Social Benefits to Internally Displaced Persons” dated 05 November 2014 (CMU Resolution No. 637). Transfers to the Pension Fund will be made if IDPs have not used their pension account for more than one year and have not undergone physical identification within six months from the date when such identification is due. At the same time, the Government is instructed to approve the procedure for the restoration and payment of pensions returned to the Pension Fund if pensioners apply to JSC Oshchadbank.
The Ministry of Finance of Ukraine reports that the estimated amount of funds that may be withdrawn from IDP accounts is UAH 11.3 billion.
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This proposal to seize funds raises serious concerns. This provision violates Ukrainian and international law, including the Constitution of Ukraine and the European Convention on Human Rights. The proposed withdrawal of funds is unfair and discriminatory, as it applies only to those internally displaced persons who receive pensions in accordance with CMU Resolution No. 637.
The adoption of the Law on the State Budget of Ukraine for 2025 with a provision on the withdrawal of funds from a certain category of pensioners may lead to significant social crises. In order to make such decisions, it is recommended to assess the justification of interference with human rights using the three-part test (legality, legitimate aim, and necessity in a democratic society). Interference with property rights can only be based on the law, as well as any restriction of human rights. Interference must not be excessive. There must be a balance and proportionality between the purpose and the measures taken by the state and the impact on the social group affected by the decision.
Aware of the serious challenges in the context of the lack of funds in the context of war, we consider it necessary to provide warnings about the risks of violation of the property rights of IDPs in view of the following:
- A pension is a citizen’s property, and deprivation of property without proper legal grounds is a serious violation of the law by the state
The transfer of funds placed on IDP pension accounts opened with JSC Oshchadbank is an interference with the right to property, which is unacceptable. In accordance with Article 41 of the Constitution of Ukraine and Article 1 of Protocol 1 to the European Convention on Human Rights, no one shall be unlawfully deprived of his or her property. The case law of the European Court of Human Rights (ECHR) determines that a pension falls under the protection of Article 1 of Protocol 1 (right to property). The right to property is interpreted very broadly – it includes movable and immovable property, as well as property and non-property interests. The ECHR has repeatedly stated in its judgments that depriving a person of property is an interference with the right to property. If the current legislation of a state provides for pension payments, it should be considered as generating a property interest. At the same time, the right to a pension arises from the moment a person makes mandatory contributions to the pension fund, and this right is interpreted as a property right. Thus, the termination of pension payments is an interference with a person’s property right. Any interference with a person’s property right must be provided for by law (which is accessible and clear), pursue a legitimate aim in the public interest, and be proportionate.
Paragraph 2 of Part 1 of Article 3 of the Civil Code of Ukraine (CCU) stipulates that it is inadmissible to deprive of property rights, except in cases established by the Constitution of Ukraine and the law. Article 321(3) of the Civil Code of Ukraine states that the expropriation of property may be applied only as an exception for reasons of public necessity on the basis and in accordance with the procedure established by law and subject to prior and full compensation of its value, except in cases established by Article 353(2) of the Civil Code, namely, in the conditions of martial law or a state of emergency, property may be expropriated from the owner with subsequent full compensation of its value.
The mechanism of transfer, compulsory alienation or seizure of property from individuals for the needs of the state under the legal regime of martial law or a state of emergency is regulated by the Law of Ukraine “On Transfer, Compulsory Alienation or Seizure of Property under the Legal Regime of Martial Law or a State of Emergency” and has a defined terminology “compulsory alienation of property”.
In addition, the Law on the State Budget of Ukraine deals exclusively with the establishment of state revenues and expenditures for general public needs’ therefore it cannot establish other (additional) legal regulation of relations that are the subject of other laws of Ukraine.
Thus, the draft Law of Ukraine on the State Budget of Ukraine for 2025 is not a legislative act that can regulate cases of expropriation of property.
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- The current regulations do not provide for debiting funds from bank accounts in case of non-use within a certain period or failure to physically identify them.
Pursuant to Articles 1071 to 1074 of the Civil Code of Ukraine, a customer’s order is required to debit funds from an account. Without a customer’s order, funds may be debited only under the following conditions:
- a court decision;
- cases established by law;
- cases established by the agreement between the bank and the client;
- conditions of encumbrance, the subject of which are property rights to funds held in a bank account.
Pursuant to Article 1073 of the Civil Code of Ukraine, if a bank unreasonably debits funds from a customer’s account, the bank must immediately credit the relevant amount to the customer’s account upon discovery of the violation. Article 86 of the Law of Ukraine “On Payment Services” sets out the liability of banking institutions in such situations. In the event of an erroneous payment transaction to the account of an improper recipient, the payment service provider is obliged to immediately transfer the amount of the payment transaction to the recipient at its own expense, as well as pay a penalty of 0.1 per cent of the amount of the overdue payment for each day of delay from the date of completion of the erroneous payment transaction to the date of transfer of funds to the recipient’s account, but not more than 10 per cent of the amount of the payment transaction. Due to this provision, an IDP can demand a refund at the expense of the banking institution, provided that there are no legal grounds for debiting funds from bank accounts.
We believe that the adoption of the State Budget of Ukraine with provisions requiring the return to the Pension Fund of Ukraine of funds deposited in the accounts of internally displaced persons in case of their non-use poses a significant threat to the interests of people affected by armed aggression and will have long-term negative consequences. We call on members of the Ukrainian parliament to prevent violations of human property rights by removing this provision from the draft Law of Ukraine on the State Budget for 2025.
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