In April 2014, the Verkhovna Rada of Ukraine adopted the Law of Ukraine “On Ensuring the Rights and Freedoms of Citizens and the Legal Regime in the Temporarily Occupied Territory of Ukraine” (Law No. 1207-VII), aiming to ensure the observance and protection of human and citizen rights and freedoms in temporarily occupied territories.
In July 2021, Law of Ukraine No. 1618-IX supplemented Article 15 of Law No. 1207-VII with Part 6, specifically designed to protect the interests of individuals who secured mortgage loans for real estate located in temporarily occupied territories (TOT). In particular, the amendments established that:
"During the period of temporary occupation, persons residing in or moving from the temporarily occupied territory are exempted from the obligation to repay the principal amount of the mortgage loan and accrued interest thereon, if the object of the mortgage is property located (registered) in the territory that, after the conclusion of such a mortgage agreement, was temporarily occupied. The National Bank of Ukraine decides to change the classification of such mortgage loans or other decisions in order to prevent deterioration of the liquidity (financial condition) of the lender."
Thus, Ukrainian state authorities effectively introduced a statutory moratorium preventing banks from demanding repayment of the principal debt and the accrual of interest on mortgage-secured loan agreements where the collateral is located in territories occupied by the Russian Federation.
The Enforcement Challenge: Preventive Lawsuits
Despite these statutory protections, certain financial institutions continued attempts to recover debt prior to de-occupation, issuing demands for early repayment of loans and interest.
To defend their rights, affected debtors were forced to initiate court proceedings, asking courts to declare such demands unlawful and to compel banks to refrain from coercive actions. A landmark ruling in this category is the Supreme Court decision of February 5, 2025, in case No. 757/29209/22-ц, where the panel of judges of the Second Judicial Chamber of the Civil Court of Cassation (CCC) established critical legal conclusions regarding jurisdictional admissibility, IDP status, and judicial supervision.
Key Conclusions of the Supreme Court
1. Are Such Claims Subject to Judicial Consideration?
The Supreme Court concluded that a proactive claim demanding that a court compel a bank to release a debtor from mortgage payment obligations prior to de-occupation cannot be considered as an independent civil claim.
The Court emphasized that the statutory relief (deferral of performance) occurs by operation of law upon the occurrence of specific legal facts:
- Temporary occupation of a specific territory of Ukraine;
- Residence of a person in or movement from that territory;
- Conclusion of the mortgage agreement prior to occupation;
- Property area within statutory limits set by the Tax Code of Ukraine.
Because the law automatically defers the obligation, filing a standalone preventive lawsuit asking the court to "release" the debtor does not serve to protect an actively violated right at that moment. Such arguments must instead be raised as substantive defenses if a bank initiates a judicial claim for debt recovery.
2. Who is Covered by the Guarantees?
The Supreme Court clarified that the statutory mechanism constitutes a deferral of performance rather than a total termination of the debt obligation. The provisions apply to residential real estate provided total areas do not exceed statutory thresholds under Article 266 of the Tax Code (e.g., 60 sq. meters for apartments, 120 sq. meters for houses, or 180 sq. meters combined).
3. Is IDP Status Decisive?
The CCC of the Supreme Court noted that formal registration as an internally displaced person (IDP) is not decisive. The protection applies equally to individuals residing in the temporarily occupied territory and those who have relocated from it, regardless of internal or external registration.
4. Impact on Financial Institutions
While the law does not relieve financial institutions of accounting for the debt or accruing interest on paper, it strictly prohibits any active steps by lenders to induce the debtor to repay or recover the debt until the end of the temporary occupation.
A Separate Decision and the Role of the NBU
Significantly, the CCC of the Supreme Court issued a separate ruling directing the National Bank of Ukraine (NBU) to verify instances of non-compliance by financial institutions with the statutory guarantees of Part 6 of Article 15 of Law No. 1207-VII (specifically, the issuance of unlawful repayment demands).
This highlights the vital supervisory role of the NBU in enforcing regulatory compliance and protecting financial service consumers during wartime.
Prepared by Viktor Surnyk, Managing Partner of ALARIUS Law Firm, for Yurydychna Praktyka newspaper.
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