State regulation in wartime: how the President and MPs managed the country in the first hundred days of martial law
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State regulation in wartime: how the President and MPs managed the country in the first hundred days of martial law

Photo: ua.depositphotos.com / g.evgenij
20 June 2022
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During the 100 days of russia’s full-scale war against Ukraine, we collected statutes and regulations of the National Bank, the President, the Verkhovna Rada, the Cabinet of Ministers, and other agencies to analyze how the authorities helped the country recover from the shock of the first days of the war. We looked into how they met defense needs and responded to humanitarian challenges. In the second of a series of articles, we analyzed the most crucial decrees of Ukraine’s President, Volodymyr Zelensky, and laws passed by the Verkhovna Rada and signed by the President during the hundred days of martial law.

Since February 24, we have counted nearly three hundred presidential decrees. Nineteen of them had to do directly with introducing martial law, mobilizations, strategic management of the Armed Forces, and addressing humanitarian issues. Other decrees related to awarding decorations and scholarships, appointing and dismissing officials, etc.)

The Verkhovna Rada addressed far more areas since laws set the key rules of the gamein many spheres of social life. Naturally, many documents adopted at the time dealt with defense and national security concerns, such as aspects of the Armed Forces’ activity, territorial defense units, and law enforcement agencies. They also dealt with determining and regulating punishment for war crimes, whose surge, sadly, came as a result of russia’s occupation of a considerable part of Ukraine’s territory. Some laws dealt with the country’s economy in wartime, i.e., business issues, tax benefits, and the social sphere. We saw speedy adoption of some regulations only after the beginning of the war. However, they were needed much earlier (we are talking about legislation on territorial defense, in the first place), while other decisions reflected new realities.

We are keeping track of economic reforms that will have a long-term effect under our Reform Index project.

Read more about each area below.

President of Ukraine

Introducing martial law. On the first day of the war, Volodymyr Zelensky introduced (with Parliament’s consent) martial law in Ukraine for thirty days, until March 25. The President subsequently extended martial law by 30 days twice (from March 26 to April 24 and from April 25 to May 24). The last extension of martial law occurred on May 17, when the President extended it by nearly three months (90 days).

Mobilization and staffing of the Armed Forces. Like martial law, mass mobilization in Ukraine was announced on February 24. According to the presidential decree, it lasted ninety days in all regions of Ukraine. The General Staff of the Armed Forces had set up the process and scope of the draft. In addition, Zelensky issued a decree allowing the use of Ukraine’s Armed Forces and other legitimate armed units to repel russia’s armed aggression. Since russia had not stopped waging war or given up on its aggressive intentions, Volodymyr Zelensky extended the general mobilization by another ninety days, effective from May 25.

To strategically manage Ukraine’s Armed Forces, Zelensky formed the Staff of the Supreme Commander at the beginning of the full-scale war. It comprised him as chairperson, secretary of the National Security and Defense Council Oleksiy Danilov as coordinator, heads of law enforcement agencies and special services, the top officials in the President’s Office, and Prime Minister Denys Shmyhal, and Chairman of the Verkhovna Rada Oleksiy Stefanchuk.

Zelensky expanded the opportunities for foreign volunteers joining the Armed Forces to take part in defending Ukraine. The President temporarily allowed visa-free entry into Ukraine for those willing to join Ukraine’s International Legion and for medical workers and employees of international humanitarian organizations. He also withdrew Ukrainian soldiers and other personnel members from participating in global peacekeeping operations abroad to fight the russian invaders. Zelensky made it possible to award the rank of sergeant and senior officer to privates with combat experience but without higher military education during martial law to supplement armed forces staff with relevant commanders. In April, Zelensky also canceled the spring draft and postponed the transfer of conscript soldiers to the reserve force.

Financing the defense needs. To finance the defense needs, the President recommended the NBU transfer its full-year profits for 2021 to the state budget without awaiting audit results and buy military bonds in the amount and on the terms agreed upon with the Cabinet of Ministers of Ukraine. The day before (March 4), the Verkhovna Rada passed the law allowing the NBU to directly buy domestic government loan bonds (OVDPs) from the Ministry of Finance.

Increase in the OVDP bond portfolio from February 24 to June 3, 2022; billion UAH. Data: National Bank of Ukraine

Humanitarian issues and the reconstruction of Ukraine. To unite the international community to support Ukraine in the war and its post-war reconstruction, the President signed a decree establishing the national brand, UNITED24. Under the brand, the Cabinet of Ministers created a single web page for charitable donations to different causes (the Armed Forces, humanitarian and medical needs, infrastructure restoration, and digital and information-related countermeasures to russian aggression).

In addition, Zelensky set up the Coordination Headquarters for Humanitarian and Social Affairs, designed to help Ukrainians who ended up in difficult life situations because of the war. The President also tasked the Cabinet of Ministers with establishing a commission to assess the damage caused to Ukraine by russia.

The Verkhovna Rada

Military service and popular resistance. After the outbreak of the war, creating efficient popular resistance forces became one of the Ukrainian Government’s tasks of highest priority. Therefore, in the first weeks of martial law, civilians were allowed to take part in defending the country against the invaders. Parliament legitimized the handing out of firearms and removed responsibility for using them against russian soldiers. In addition, the local authorities had to create consultation centers where citizens could learn about the possibility of participating in civil defense based on their abilities and skills.

The first days of the large-scale war showed that Ukrainian civilians were ready and capable of firmly resisting the occupying army and even taking military equipment away from them (e.g., BMPs). To encourage people to hand the captured russian military equipment over to the AFU, Parliament passed a law offering a monetary reward for each item. Ukrainians can now receive $100,000 for handing a russian tank over to the Armed Forces and $50,000 for an armored personnel carrier. The brave hearts able to seize a combat aircraft or a grade-one or grade-two ship have the chance to get the most money ($1 million). In a separate vein, Parliament passed a law exempting rewards of this kind from taxation.

Some decisions have to do with staff support for the Ukrainian army. Thus, under martial law, Parliament allowed foreigners to end their military service contracts early at their discretion and work for Ukrainian intelligence agencies. In addition, Parliament passed a law increasing the staff of Ukraine’s State Border Service to 60,000 people (previously, the State Border Service had 53,000 staff). Parliament also sped up entry into force of the law on military chaplaincy.

Parliament allowed pregnant women, parents on maternity/paternity leave, or parents raising underage children single-handedly to be released from military service during martial law.

Enhancing accountability for war crimes. The Verkhovna Rada passed laws enhancing accountability for crimes committed during wartime. In particular:

  • Those committing sabotage and treason during wartime will receive terms ranging from 15 years to life, with confiscation of property. Someone tasked with doing something by the enemy but refusing to do it and notifying Ukrainian authorities about it will be exempt from liability;
  • looting in wartime will be punishable by imprisonment for three to ten years;
  • publicly denying russia’s war against Ukraine and calls to support the decisions of the occupation administration or russia’s military (including on the internet); spreading propaganda in educational institutions and altering educational programs to russian ones; transferring property to the occupiers; holding positions with occupation administrations and unlawful authorities or law enforcement agencies; organizing pro-russian rallies, and the like will be deemed collaborationism. According to the law, anyone committing this crime cannot hold official positions or positions in local self-government bodies, work in election commissions, or build a political career for 15 years. In April, accountability for helping the occupiers was enhanced: Supporting the occupier’s decisions and actions, voluntarily collecting and transferring resources or property to them to harm Ukraine will be punishable by 10-12 years’ imprisonment. It can also entail confiscating property and being banned from certain activities for 10-15 years;
  • insulting or threatening Ukraine’s defenders will be punishable by restriction or deprivation of liberty for a term of three to five years;
  • it is forbidden to refer to russia’s aggression in Ukraine as an “internal conflict” or “civil war” or glorify the occupiers, including by calling them “liberators,” “militia,” or “the polite military.” Political parties, public and religious organizations could be closed for such violations based on a court decision. One can be sentenced to up to two years of correctional labor, up to six months of arrest, or up to three years of imprisonment for justifying russia’s aggression. Producing material justifying russia’s aggression is punishable by restriction or deprivation of liberty for a term of up to five years, possibly with confiscation of property. If the crime is committed by a group of persons or using mass media, the punishment can be 5-8 years of imprisonment and confiscation of property;
  • disseminating information about Ukrainian troops’ location and movement is punishable by three to five years’ imprisonment unless publicly available from Ukraine’s General Staff. If the data in question allows the enemy to precisely identify the location of Ukrainian troops in the area, it will be punishable by eight to twelve years in prison. The same applies to making known information about the routes of movement of military aid;
  • selling humanitarian aid or misusing charitable donations will be punishable by a fine of between UAH 34,000 and UAH 54,000, correctional labor for up to two years, or the restriction of freedom for up to four years. Criminals can also face up to seven years in prison, depending on the circumstances and severity of the crime; 
  • increased accountability for illegal interference in the work of information systems.

The Verkhovna Rada adopted several exemptions from criminal liability, including:

  • Exempting service members from criminal liability during combat missions, except in cases of violating the customs of war or international treaties to which Ukraine is a party;
  • the possibility of canceling the measure of restraint to be drafted for military service during mobilization (except for crimes against the foundations of Ukraine’s national security, intentional murder, rape, robbery, hold-up, extortion, and a number of crimes against public safety); 
  • removing criminal liability in the event of voluntary surrender of weapons, ammunition, explosives, and devices.

Law enforcement and the judiciary. Under martial law, Parliament regulated the work of the national police, including treating prisoners of war and detainees, admitting police members to demining sites, and collecting biometric data. The changes also affected the specifics of pre-trial investigations. Parliament allowed detention of persons who are flight risks to evade criminal responsibility (previously, such detention was only possible in some cases under suspicion of wrongdoing). It also increased the maximum detention term to 216 hours (nine days) without the decision of an investigating judge (according to the Constitution, it used to be 72 hours). Parliament also expanded the list of criminal offenses for which detention could be extended by up to 30 days and regulated the process of initiating a pre-trial investigation and recording its progress in the absence of access to the Unified Register of Pre-trial Investigations.

Parliament also passed a law regulating cooperation with the International Criminal Court. If the International Criminal Court requests that someone be temporarily arrested or transferred, they can be subject to pre-trial restrictions in the form of detention without bail.

Parliament streamlined the procedure for assigning special ranks to police members. Parliament also forbade those having close relatives in russia from being employed by state security, requiring candidates for this job to pass a polygraph test.

Parliament also regulated issues related to russian prisoners of war. The law allows the creation of precincts in colonies to hold captives if they cannot be taken to a special camp. However, it is stipulated that in this case, prisoners of war must be kept separately from other convicts and transferred to a special camp at the first available opportunity.

A number of humanitarian issues were addressed. Parliament regulated the legal status of those missing during the war and created the position of Commissioner to oversee such matters. It also addressed the social and legal protection of Ukrainian captives and enabled victims of sexual violence and torture to obtain legal aid at the expense of the state budget during wartime.

Local Government. Parliament prohibited conducting elections and referendums in the territories temporarily occupied by russian troops, regulated the specifics of the establishment and operation of military administrations in settlements, and canceled competitions for civil-service positions in local government bodies or state institutions. Military administrations were also entrusted with the authority to organize the provision of social services during martial law.

Parliament addressed the legal regime in the temporarily occupied territories. According to law, any territory temporarily occupied by russia is an integral part of Ukraine. It is subject to Ukraine’s Constitution and all laws and international treaties, whereas temporary occupation is unlawful and does not give the russian invaders any territorial rights. The Cabinet of Ministers will draw the line of demarcation between the temporarily occupied territories and other areas of Ukraine, and the NDSC will implement temporary border control on this line.

Taxation and the peculiarities of doing business. Most of the economic laws passed by Parliament during the hundred days of martial law had to do with taxation. At the onset of the war, the legislature offered some substantial tax breaks to support businesses, most notably:

  • The possibility of switching to the simplified tax system (STS), replacing income and value-added tax (VAT) with a turnover tax of 2%. Initially, only enterprises with a turnover of up to UAH 10 billion were allowed to use the STS, but this restriction was lifted later. This benefit does not apply to industries like gambling, foreign currency exchange, sale of excise goods, mining, financial companies, and non-resident companies;
  • abolishing the single tax and USC for individual entrepreneurs of groups I and II;
  • the fuel excise tax rate was reduced to zero, with VAT on the fuel reduced from 20% to 7%;
  • effective from March 1, 2022, areas temporarily occupied by russia, or areas where active hostilities occurred are exempt from paying land tax and rent for a year. The minimum tax liability will not be enforced for these lands, and the environmental tax will not be charged for the territories on them;
  • for entrepreneurs who switched to STS, VAT was canceled on goods imported to Ukraine. VAT, import duty, and excise duty were canceled on imported cars, trailers, and motorcycles able to transport up to ten people. These changes do not apply to goods imported from russia (later, the Cabinet of Ministers altogether banned imports of russian goods);
  • canceling VAT registration for taxpayers who switched to the simplified scheme. The Government subsequently also suspended the VAT Electronic Administration System (EAS). However, since these decisions made life more difficult for businesses, the VAT EAS resumed operation on May 27;
  • removing responsibility for late payment of taxes with an obligation to pay them within three months from the date of the lifting of martial law;
  • discontinuing new and ongoing tax audits;
  • allowing the transport of fuel and ethyl alcohol under a consignment note if it is impossible to register an excise invoice;
  • the voluntary transfer of funds or goods to the Armed Forces is not taxable;
  • removing responsibility for the late submission of financial statements during martial law.

However, Parliament later made updated the Tax Code to partially restore responsibility for non-payment of taxes, namely:

  • Restoring tax liability and reporting for taxpayers who can do so on a timely basis. The Ministry of Finance will define documents confirming the impossibility of fulfilling tax obligations on time;
  • businesses must resume paying taxes within two months after it becomes possible for them to do so. Relevant by-laws must approve additional criteria for determining these conditions;
  • taxpayers who switched to the simplified tax system are exempt from liability for the delayed fulfillment of tax obligations from February 24, 2022, if they start paying taxes within 60 days of switching to the simplified scheme;
  • resuming unscheduled inspections and inspections based exclusively on reported tax data (desktop audits);
  • tax invoices for February-May need to be registered no later than July 15;
  • duty-free import of busses, trucks, and special vehicles that meet Euro 3 standards by legal entities for their own use.

Parliament tightened the requirements for electronic communication service providers to improve information security during martial law. A special national center will monitor the providers’ activities, and failure to meet its requirements might lead to terminating the provider’s work.

Parliament also passed a law suspending the terms of protection of property rights. They will remain in force during martial law, and the owners can renew them within 90 days after lifting martial law without paying additional fees.

Under martial law, labor regulations were also updated: 

  • employers are allowed to increase the working week to 60 hours (40 hours for a reduced schedule) and days off to 24 hours per week;
  • employers can suspend employment contracts but not end them;
  • employers can dismiss employees from the first day of the end of vacation or sick leave (except for maternity leave or leave for childcare);
  • Critical infrastructure workers can be denied leave (except for pregnancy, maternity leave, or leave for childcare). However, employers can give employees an unlimited unpaid leave of absence;
  • employees can resign without a mandatory two weeks’ notice;
  • employers are exempt from liability for late payment of wages if they can prove that it occurred because of hostilities. Here, the state must fully reimburse salaries and other compensatory payments.

In addition, Parliament simplified the process of granting unemployment status to internally displaced persons to enable them to receive their due benefits. In particular, IDPs do not have to visit the employment center to receive unemployment benefits. Also, the requirement to find a suitable job does not apply to them.

During martial law, Parliament enacted changes for businesses in the sphere of ecology and agriculture, including:

  • Automatic extension of agricultural land lease contracts for one year under all forms of ownership;
  • a simplified process for leasing state and communal agricultural land plots used for commercial production;
  • simplified phytosanitary requirements for exports, imports, and movement of plant products in Ukraine; a possibility of issuing a digital phytosanitary certificate;
  • abolishing the mandatory environmental impact assessment for works to eliminate the consequences of hostilities and all types of felling and meliorative fishing.

Among other changes for businesses during martial law is empowering the Cabinet of Ministers to establish special procedures for leasing state and communal property, including a need to assess it before the auction, the permission to sign documents with a digital signature, and automatic extension of lease terms. Enterprises will also be able to receive state aid without having to notify the Antimonopoly Committee of Ukraine.

Social issues. In the 100 days of the full-scale war, the Verkhovna Rada adopted a number of changes to enhance social security for service members and their families:

  • Territorial defense volunteers will be officially recognized as war veterans. This will enable them to receive war-related disability status and the corresponding benefits. Relatives and families of killed volunteers will also be able to receive benefits and payments;
  • the social protection system for veterans will be subject to a thorough review every three years after the end of the war;
  • a new mechanism for paying pensions in the event of losing a breadwinner who died because of hostilities. If the deceased’s parents, husband, wife, or a disabled family member are entitled to the payment, it is set at 70% of the dead’s monetary support per family member. If two or more disabled family members (except parents, wife, and husband) are entitled to such a pension, it will be paid as 50% of the deceased’s financial support per person;
  • free psychological assistance will be provided to combat veterans;
  • Defenders of Ukraine can go abroad during martial law for treatment and rehabilitation with the medical personnel accompanying them. The host party or the state will reimburse the travel costs and payments for the services provided.

The Verkhovna Rada made changes to adapt the educational process to wartime conditions:

  • until the end of martial law, Parliament canceled external independent evaluation (ZNO), final state certification for future bachelor’s degree holders, and the unified entrance exam for master’s degree seekers. According to the Education Ministry’s order, a multi-subject test (MST) will be held in 2022 instead;
  • Educational institution employees are guaranteed to keep their jobs and average salary. High school and university students are guaranteed remote education or education in some other format. Scholarships will be retained for students and a place in the dormitory and food (if need be).

Sanctions against russia. Parliament adopted three laws to counter russia’s influence in Ukraine and increase the sanctions’ effectiveness. In particular:

  • It allowed the forced nationalization of the assets of russia and its residents (legal entities) with no compensation for their value. Such assets can be movable and immovable property, money, bank deposits, securities, and corporate rights registered in Ukraine;
  • discontinued enforcement proceedings, for which russia was the debt collector;
  • allowed the state to recover assets belonging to some individuals or legal entities from russia or assets they could dispose of directly or indirectly.

During the 100 hundred days, parliamentarians adopted many laws to meet wartime needs and support the economy on the home front. While changes in the defense sphere were expected and needed “already yesterday,” economic changes (primarily in the tax system) were extremely radical and not thoroughly thought out. The unprecedented tax benefits were clearly intended as “emergency aid” for businesses in a critical situation. However, such indiscriminateness (all businesses in Ukraine received benefits, not only those in combat zones or under occupation that genuinely needed them) led to a significant reduction in state budget revenues. Thus, state budget revenue exceeded spending in May by only a third. The state received UAH 83 billion from taxes and customs duties and UAH 18 billion in foreign aid, while spending reached UAH 250 billion. Other shortcomings of these changes are the factual existence of two tax systems, leading to abuses and complicating the administration.

The Government, too, understands that tax revenues are critically important for financing the army. The Ministry of Finance announced the return of the tax and customs systems to where they stood “on February 23.” The Government registered a corresponding bill in the Verkhovna Rada on May 28. But so far, MPs have lacked the will to adopt the law.

To support businesses during wartime, the Government can use other measures that do not reduce budgetary revenues, such as abolishing excessive bureaucracy, lifting regulatory restrictions (deregulation), continuing to digitize administrative services for businesses, etc.

The economy is gradually adapting to the war, so the Government and Parliament must shift from “putting out fires” to making informed decisions to strengthen and rebuild the country.

Besides, the war should not be a reason to neglect essential reforms, as they are a key to cooperating with international partners and attracting funds for Ukraine’s post-war reconstruction. However, in the first hundred days, Parliament never began to pass laws designed to fulfill Ukraine’s obligations under the Association Agreement.

Authors

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