Category: Belarus

Sayenko Kharenko has advised Getin Holding S.A. on its sale of 99.9% of the shares in Idea Bank Belarus to Belarus’s MTBank.

Sayenko Kharenko previously assisted Getin Holding on its sale of a stake in Idea Bank JSC in Ukraine to Dragon Capital (as reported by CEE Legal Matters on January 3, 2020).

Idea Bank Belarus was established in 2004 under the name JSC Sombelbank. In 2008, it was acquired by Getin Holding — a Warsaw-based company that primarily invests in banks, insurance, leasing, and brokerage companies in Poland and other countries in Eastern and Southern Europe.

Sayenko Kharenko’s team included Partner Alina Plyushch, Senior Associate Dmitriy Riabikin, and Associate Yaroslava Chernyshchuk.

Grata International has advised Multigroup Trade on the acquisition of Brestskoe Pivo, a Belarusian producer of alcoholic beverages.

Multigroup Trade is a part of the Armenian concern Multi Group, which owns companies in the beverages, vehicle retail, mining, sport, and hotel industries, among others.

The transaction involved obtaining the approval from creditors of Brestskoe Pivo, which was undergoing bankruptcy proceedings, the termination of those proceedings, and rebuilding of the corporate structure of the company.

According to Grata International, the project was valued at EUR 2.5 million. The firm reported that, according to the terms of the deal, this amount should be transferred to the regional budget by Multigroup Trade within ten years. In addition, the firm reported that the buyer is obligated to invest at least BYN 25 million (approximately EUR 8 million) in the modernization of Brestskoe Pivo’s production and maintain the existing number of jobs at the company over the course of the next ten years.

Grata International’s team included Managing Partner Dmitry Viltovsky and Associate Polina Antonenko.

The current political situation in Belarus remains strained, according to Maksim Salahub, Partner at Sorainen in Minsk. Salahub reports that President Lukashenko held an “All-Belarusian Assembly” between February 11 and 12 – an event Salahub describes as “politically sterile.” According to him, “even though the event was supposed to seem all-Belarusian, the participants were carefully selected by the authorities so that the event would instead be attended by Lukashenko loyalists.” Nonetheless, Salahub says, many followed the event closely, hoping that some constructive ideas would be voiced and de-escalation measures proposed. Unfortunately, in Salahub’s opinion, the event only indicated that repression against the pro-reform groups will continue and that the same economic course will be followed as before.

The rigidity of that economic strategy is problematic, and Salahub says that the Belarusian economy has been stagnating for the last ten years, in an outdated structure, with huge government involvement and resistance to privatization. With the Covid-19 pandemic in the mix, the economic woes were only exacerbated. “I have not seen a green- or brown-field investment projects since July,” he sighs.

Still, he says, the situation is not entirely dire, yet. “The salaries, although lagging behind almost every other country in the region, allow maintaining more or less decent living, so no one is starving,” he says, and despite the political controversy, there has not yet been an exit of a major foreign investor from the market, suggesting that large investment projects are likely to continue, albeit at a slower pace and provided the situation does not deteriorate much further.

Salahub confirms that there has been some brain-drain from the Belarusian IT sector into Lithuania, Latvia, and Estonia, but he reports that the sector is far from dead. “We can still see newcomers to our High-Tech Park, which is a special economic zone for IT companies,” he says, although he concedes that, due to the crisis, newcomers are mostly startups, rather than mature IT companies.

According to Salahub, Belarus’s legal framework for investments has improved by leaps and bounds in the last twenty years, and it is soon to be bolstered by a new Law on Commercial Companies. The law will go into effect in April 2021 and, Salahub reports, will bring a more viable concept of shareholders agreements and better mechanisms for resolving issues between shareholders and company management. “Another major bit of legislation is the Law on Personal Data Protection,” he says, “which will bring us closer to the GDPR.”

Salahub reports that the legal market has had its share of turbulence in the past few months as well, with several lawyers –  including Maksim Znak and Liliya Vlasova – having been arrested in connection with participating in the pro-change movement (as reported by CEE Legal Matters on September 2, 2020). Nonetheless, Salahub says that there have not been any significant exits or entries on the legal market. “Yet, the situation remains highly uncertain and we might be facing an entirely different picture even a few months from now.”

Dentons and Cyprus-based Stelios Americanos has advised Zubr Capital on the sale by it and the EBRD of Targetprocess to tech business management solutions provider Apptio. Kirkland & Ellis advised Apptio on the deal.

Targetprocess is a product IT company founded in 2004. Its flagship product is the Agile Portfolio and Work Management system Targetprocess. 

Zubr Capital is the first private equity fund management company in Belarus. Founded in 2010, the company specializes in investing in IT, Tech, and Internet businesses.

Apptio, with headquarters in Washington, USA, is a portfolio company of Vista Equity Partners, one of the largest private equity firms in the US. 

Dentons’ team was led by New York-based Partner Ilan Katz.

In 2018, Decree of the President of Belarus No. 8 “On Development of Digital Economy” entered into force, which, inter alia, legally recognized cryptocurrencies in Belarus. In this article we briefly summarize the main aspects of the Belarusian regulatory framework for cryptocurrencies, along with significant risks and perspectives.

General Provisions

By adopting the decree Belarus became one of the first jurisdictions in the world with a complex regulatory regime for businesses based on blockchain technology. It established a legislative framework for using cryptocurrencies, legalized the operation of cryptocurrency exchanges and platforms, and defined such terms as “mining,” “token,” “cryptocurrency,” and so on. While in Japan Bitcoin is recognized as a legal means of payment and in Switzerland cryptocurrencies are subject to the same regulations as foreign currencies, in Belarus cryptocurrencies cannot be considered money (whether electronic money or foreign currency) or securities, and activity related to cryptocurrencies is directly excluded from currency and licensing regulations, as well as regulations of banking and securities activity. Therefore, in Belarus cryptocurrency is considered a unique asset in a dematerialized form.

Belarusian legislation does not impose any specific restrictions or requirements for the creation, issue, storage, sale, or exchange of tokens. Legal entities can own tokens and store them in virtual wallets, but they may create, acquire, alienate tokens, and perform other transactions with them only through residents of the High Technology Park (a territory in Belarus with a special legal regime), which have the widest and generally exclusive rights in respect of cryptocurrencies, including the right to operate cryptocurrency exchanges and platforms in order to perform transactions with tokens in the interests of clients or their own interests, to create and place tokens in Belarus and abroad, and to conduct cryptocurrency mining. Any individual in Belarus can own tokens, store them in virtual wallets, and exchange them for other tokens, as well as acquiring, alienating, donating, bequeathing, and mining them.

In terms of taxation Belarusian legislation is quite liberal – activities related to the mining, creation, acquisition, and sale of tokens will remain tax-free until January 1, 2023.

Risks and Perspectives

Despite the generally positive attitude of Belarus’s Government towards cryptocurrencies, the National Bank of Belarus pays attention to the following points in respect of cryptocurrencies: (1) cryptocurrencies are not money (though tokens may be used as remuneration for verification and other transactions in blockchain) – the only legal payment unit in Belarus is the Belarusian rouble; (2) the sphere of circulation of tokens is limited, since they cannot be exchanged for any objects other than Belarusian roubles, foreign currency, electronic money, and other tokens; (3) transactions with tokens are very risky and usually speculative – risks are associated with the lack of a clear and understandable mechanism for forming their price and the absence of any proper guarantees protecting the rights and legitimate interests of tokenholders.

Nevertheless, Belarusian companies have been extremely interested in cryptocurrencies and continued improvements in this area. On November 13, 2020 the first legal cryptocurrency exchange service was launched in Belarus. Previously it was possible to exchange cryptocurrencies only on specialized exchanges, but now Belarusbank provides citizens of Belarus and Russia the option of buying and selling cryptocurrencies using Visa payment cards. Currently the service performs financial transactions only with Bitcoin, which may be exchanged for Belarusian and Russian roubles and US dollars. In the future, it plans to add additional cryptocurrencies and to expand the list of countries whose citizens will be able to exchange cryptocurrencies for Belarusian and Russian roubles, US dollars, and Euros.

Belarusian legislation in the sphere of cryptocurrencies is undoubtedly progressive: it brings together the traditional finance industry and cryptocurrencies and allows for the attracting of new investments. It is believed that blockchain technology will allow financial transactions to be made faster, cheaper, and more reliably than traditional financial channels. On the other hand, as a new instrument, cryptocurrency may bear certain risks to its holders. Despite the rapid development of the cryptocurrency market in Belarus, it is still too early to draw any legal conclusions. We believe that increased interest to cryptocurrencies and the development of a relevant practice will reveal legal gaps and any improvements needed in the near future.

By Dennis Turovets, Partner, and Anastasia Yarokhovich, Senior Associate, Egorov Puginsky Afanasiev & Partners

This Article was originally published in Issue 7.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Revera has advised Eurotorg on a USD 300 million IPO and listing on the London Stock Exchange.

Revera describes Eurotorg, which was founded in 1993, as “the largest food retailer in Belarus, accounting for 19% of the market.” The company operates 870 stores of various formats (including hypermarkets, supermarkets, and convenience stores) under the Euroopt and Brusnichka brands.

Revera’s team was led by Partner Olga Polozova and included Managing Partner Dmitry Arkhipenko.

The political situation in Belarus at the moment is “quite challenging,” says Darya Zhuk, the Managing Partner of Cobalt’s Minsk office, referring to the fallout from the August 9 presidential election. “People have been protesting in the streets since the election,” she says, and discontent about the results of that election are being felt “deep inside every sphere of society.”

In fact, Zhuk says, the unrest has spilled over into other areas, including lawmaking and the overall economy. “Prior to the elections, we had huge projects in the financial, industrial, and M&A sectors, and there was a lot of optimism in the market,” she reports. Now, she says, the general outlook has become pessimistic, due to the uncertainty which riddles the post-election Belarusian economy. “There are still no formal international sanctions against Belarus, other than individual ones against certain politicians,” she notes, but “a number of grants, potential FDIs, and support programs are no longer available in the country.” Unsurprisingly, she explains, the financial sector is experiencing liquidity problems and the exchange rates are in disarray. “People do not trust the banking system right now, and many have chosen to withdraw their deposits.” 

Nonetheless, Zhuk insists that not all is bleak, and she says that, despite the troubles in the market, some deals are still going on. “None of the projects we are working on were cancelled, and some of them are supposed to be completed soon,” she says. “Probably the reason why our business environment did not suffer as much as elsewhere in Europe was because Belarus was among the few countries which did not impose lockdowns,” she opines. “Some of the industries are doing well, such as IT, e-commerce, and pharmaceuticals,” she reports, concluding that, “the EBRD is still active in Belarus, and has partnered with certain local private equity funds on start-up funding deals.”

Sorainen has helped the Turkey Wealth Fund obtain approval from the Ministry of Antimonopoly Regulation and Trade of the Republic of Belarus for the acquisition of control over Belarusian Telecommunications Network CJSC, one of three Belarusian mobile network operators and a member of the Turkcell group.

The Turkey Wealth Fund, which was established in August 2016, provides equity to strategic investments in Turkey.

With more than one million clients, the Belarusian Telecommunications Network is the third biggest mobile network operator in Belarus. It operates under the “life:) brand” that was implemented by the company after the acquisition of an 80% stake by Turkcell in 2008. The remaining 20% is held by the Belarusian Government.

Sorainen’s team included Partner Alexey Anischenko, Senior Associate Viktoryia Mikhnevich, and Associate Aliaksei Vashkevich.

Sorainen’s Belarus office has advised Australia’s Aristocrat Digital gambling machine manufacturer on an undisclosed investment in Belarusian game development studio Neskin Games.

The investment comes two years after Aristocrat Digital’s 2018 acquisition of Big Fish Games, a Seattle-based game development studio and a cooperating partner of Neskin Games.

Sorainen’s team in Belarus consisted of Partner Kiryl Apanasevich, Senior Associate Viktoryia Mikhnevich, and Associates Aliaksei Vashkevich and Tatsiana Zubarava.

Belarus’s Vlasova Mikhel & Partners is reporting that, on August 31, the Financial Investigations Department of the State Control Committee of the Republic of Belarus arrested prominent Belarusian attorney and firm Founding Partner Liliya Vlasova.

According to VMP, on August 19, Vlasova, who played a critical role in creating Belarus’s post-communist legal market (and was identified by CEE Legal Matters as the exclusive “Market Maker” for Belarus in June, 2017), “was elected as a member of the Presidium of the Coordinating Council – a representative body created by the Belarusian public following the results of voting at the elections of the President of the Republic of Belarus on August 9, 2020.”

According to the firm, “Liliya Vlasova’s contribution to creation of the rule of law, legal culture and respect to the law in our country may hardly be overestimated. Over the years of her professional career as a lawyer and as a mediator Liliya Vlasova has been an example of professionalism and integrity. That is why her detention came as a shock not only to her colleagues, close associates and friends, but also to the entire legal community.”

“We are not aware of any details of the alleged economic violations that are being imposed on Liliya Vlasova,” the firm’s report continued. “But we strongly believe that her personal features and her professional competences both as a lawyer and as a mediator allow for a dialogue and eliminate the need for her pre-trial detention.”

Finally, the firm announced, “We – colleagues, friends, relatives, clients and simply concerned individuals – express our sincere human support to Liliya Vlasova. We appeal to those who are entrusted with decision-making authority to take all steps towards Liliya Vlasova’s release from custody.”

The firm’s announcement concludes with a petition it is asking others to sign to express their objection and demand Vlasova’s release. More details can be found on the firm’s website.