Category: Ukraine

Asters, working with Mayer Brown, has advised the United States International Development Finance Corporation on a loan portfolio guarantee for ProCredit Bank.

According to Asters, the 10-year loan portfolio guarantee agreement is for a total of “USD 28 million to support the financing of small and medium-sized enterprises in Ukraine. The United States Agency for International Development co-sponsored the transaction with DFC. The new guaranty will enable ProCredit Bank to disburse loans of up to USD 56 million in total with a credit risk coverage of up to 80%.”

The Asters team included Partner Oleksiy Demyanenko, Counsel Oleksandr Khomenko, and Senior Associate Yuliia Savchenko.

Asters could not provide additional information on the matter.

On 9 September, the Ministry of Finance of Ukraine officially published Order No. 380 dated 1 August 2024, which introduces significant changes to the regulation of customs clearance of biomethane by pipeline. From now on, Ukrainian biomethane producers will be able to export biomethane to the European Union via the Ukrainian gas transmission system through interstate interconnection points with four EU countries.

At the same time, biomethane producers do not have to connect their biomethane plants directly to the gas transmission system but can connect to gas distribution networks.

We previously published information on the adopted amendments required for the export of biomethane in our Energy Policy Pulse No. 23, namely, amendments to the Customs Code regarding customs clearance of biomethane. According to the adopted amendments, the terms and tariffs for connection, transportation, and export by the Ukrainian gas transmission system for biomethane producers are similar to those for natural gas producers but without the export restrictions that exist for natural gas.

How does this work in practice?

The Order establishes clear regulatory rules for two main customs stages: biomethane passage and release.

Passage (the customs authority’s granting of a permit to the relevant person to move goods across the customs border of Ukraine, taking into account the declared purpose of such movement) allows the physical movement of biomethane across the border of Ukraine and refers to what is submitted to the customs for export.

Release – the completion of customs procedures for its free use in the domestic market or export, refers to the release into the export customs regime.

The passage of volumes of biomethane through the customs border of Ukraine will be carried out on the basis of:

• a periodic customs declaration
• a certificate of compliance with biomethane sustainability criteria
• documents confirming the connection of the producer to the gas transmission system (GTS) or gas distribution system (GDS)
• an act of acceptance and transfer of produced biomethane
• an act of the Ukrainian gas storage operator on the movement of natural gas and biomethane in gas storage facilities

The release of biomethane under the customs export regime is possible subject to the submission of:

• an additional declaration indicating the exact volumes of biomethane transported
• Proof of Sustainability of biomethane
• a general act of acceptance and transfer of natural gas signed by the operators of the gas transmission system of Ukraine and the partner country
• a certificate of the GTS operator on the accounting of commercial supplies and withdrawals of natural gas and a mixture of gases, biomethane of the customer

What does this mean for Ukraine?

We remind you that biomethane is a purified biogas that corresponds to natural gas in terms of its characteristics and can be used in the same areas as heating, electricity generation and transport fuel. Importantly, it can be integrated into the existing gas infrastructure without additional costs for new networks, making this resource not only profitable but also available for widespread use.

Ukraine’s ability to export biomethane to the EU has several key advantages. With its vast agricultural resources, Ukraine is well-positioned to meet a significant portion of Europe’s renewable energy demand through biomethane production. The Strategic Partnership established in February 2023 between Ukraine and the EU strengthens cooperation in the field of renewable gases, contributing to Ukraine’s deeper integration into the EU energy market. It also contributes to sustainable economic development in rural areas by providing opportunities for sustainable income. In addition, biomethane can replace natural gas, strengthening Ukraine’s and the EU’s energy independence by reducing dependence on imports from Russia. Recent legislation clears the way for exports, with the first test transactions expected by September 2024.

By Yaroslav Petrov, Partner, and Marta Halabala, Counsel, Asters

Since the onset of Russia’s February 2022 invasion of Ukraine, Germany has emerged as a steadfast ally, providing extensive support across various domains.

German Chancellor Olaf Scholz recently reaffirmed this commitment, emphasizing that Germany will remain Ukraine’s biggest national supporter in Europe, even amid discussions of budget cuts. During a visit to Moldova, Scholz declared, “Germany will not let up in its support for Ukraine. We will continue to support Ukraine for as long as necessary.” Germany is also exploring technical solutions to use frozen Russian assets to aid Ukraine—just one example of its multifaceted approach to supporting the war-torn nation. Before Russia’s invasion, Germany was one of Ukraine’s top three investors. This history of cooperation between the two nations has no doubt contributed to Germany’s resolve to support Ukraine.

Financial assistance and economic support

Germany has committed significant financial resources to stabilize Ukraine’s economy and support its recovery. As of 2024, Germany has provided nearly €34 billion in various forms of aid, including direct financial assistance, loans, and contributions to international financial institutions. These efforts are vital in helping Ukraine maintain economic stability and fund essential government functions during the conflict.

In addition to direct financial aid, Germany has been instrumental in fostering economic ties between the two nations. German businesses have been encouraged to invest in Ukraine, with 43 percent of German companies in Ukraine planning new investments in sectors such as energy, pharmaceuticals, IT, and outsourcing. These investments are crucial for Ukraine’s economic recovery, providing jobs and stimulating growth despite the ongoing conflict. Additionally, trade between the two countries has flourished, with Ukraine’s trade volume with Germany surpassing that of Germany’s trade with Russia. Ukrainian entrepreneurs have also benefited from German support, with grants of up to €20,000 available to help them restart and sustain their businesses.

Humanitarian aid and reconstruction efforts

Germany has been at the forefront of humanitarian efforts, delivering essential supplies, medical aid, and support for displaced Ukrainians. The German government has worked closely with NGOs and international organizations to provide food, water, shelter and medical care to those affected by the conflict. Furthermore, Germany has pledged substantial funds for the reconstruction of war-torn areas, focusing on rebuilding infrastructure and restoring essential services. The reconstruction efforts are concentrated on critical sectors such as energy, healthcare, and infrastructure, ensuring that Ukraine can recover and rebuild its economy.

The German Development Bank (KfW) plays a crucial role in these efforts, financing projects that support economic recovery in regions like Sumy, Chernihiv and Kyiv. Through initiatives like grants for micro-enterprises and small businesses, KfW is helping to revitalize Ukraine’s economy at the grassroots level, fostering resilience and growth in the face of adversity.

Diplomatic and technical support

Germany has also played a pivotal diplomatic role in rallying international support for Ukraine. This includes advocating for sanctions against Russia, supporting Ukraine’s bid for EU membership and participating in international forums to uphold Ukraine’s sovereignty and territorial integrity. German agencies like Euler Hermes have provided export credit financing and war-risk insurance programs to protect businesses operating in Ukraine, mitigating the financial risks associated with the conflict. In many cases war-risk insurance programs are crucial for final decisions on investment in Ukraine.

Technical support has been another crucial area of German assistance. Germany has provided expertise in governance, legal reforms and anti-corruption measures, helping Ukraine build a more transparent and accountable government. These efforts are essential for Ukraine’s long-term stability and integration into European and global markets.

Support for the energy sector and infrastructure

Recognizing the strategic importance of energy security, Germany has provided substantial support to Ukraine’s energy sector. This includes financial aid for energy infrastructure projects, technical assistance for energy reforms and investments in renewable energy sources. Germany has been instrumental in helping Ukraine repair and upgrade its energy infrastructure, ensuring a stable supply of electricity and gas.

Investment in Ukraine’s defense sector

German defense companies are actively involved in supporting Ukraine’s defense sector and armed forces. For instance, Flensburger Fahrzeugbau GmbH (FFG) is constructing a military repair hub in Western Ukraine to service German military equipment like Leopard 1A5 tanks, enhancing the efficiency of repairs and training Ukrainian mechanics on-site. Additionally, Rheinmetall has formed a joint venture with the Ukrainian Defense Industry to produce weapons and military equipment within Ukraine, further bolstering Ukraine’s defense capabilities. These initiatives aim to streamline logistics and ensure rapid redeployment of military assets.

Another notable development is the production of German Vector drones in Ukraine. German UAV manufacturer Quantum-Systems has launched a factory in Ukraine that produces these drones for the Ukrainian Armed Forces. This partnership not only enhances Ukraine’s defense capabilities but also contributes to the country’s technological and industrial base, further strengthening its resilience.

Challenges and future outlook

Despite Germany’s comprehensive support, challenges remain. Debates within Germany’s coalition government over budget allocations have raised concerns about the sustainability of future aid. The planned US$50 billion loan agreed upon by G7 leaders, intended to cover Ukraine’s budget deficit and military needs, has faced technical challenges and political objections. Despite Chancellor Scholz’s insistence that Germany will continue to be Ukraine’s most significant supporter in Europe, the recent state election victory of the far-right party Alternative for Germany (AfD) could signal a shift in German politics, potentially reducing support for Ukraine as the AfD gains more influence.

Germany’s multifaceted support for Ukraine underscores its commitment to helping the country navigate the challenges posed by the ongoing conflict. Through financial aid, humanitarian assistance, military support, and economic cooperation, Germany continues to stand by Ukraine in its time of need, demonstrating a deep and enduring partnership that is crucial for Ukraine’s survival and future prosperity.

By Adam Mycyk, Partner, and Evgenia Prudko, Legal Advisor, Dentons

Avellum has advised DTEK Renewables Finance on a successful consent solicitation in relation to its EUR 325 million 8.50% senior notes due 2024.

According to Avellum, “the consent solicitation in relation to the notes resulted in the extension of the notes’ maturity by three years – from November 2024 to November 2027. Noteholders also supported the proposals related to the development of the second phase of DTEK Tyligulska wind power plant construction for 384 megawatts noting the crucial importance of the project for bolstering Ukraine’s energy capacity and addressing the severe damage inflicted on the country’s energy infrastructure due to the Russian ongoing attacks.”

The Avellum team included Senior Partner Glib Bondar, Managing Associate Mariana Veremchuk, Associate Andrii Kroshko, and Junior Associate Olha Harhola.

CMS has advised a consortium led by NJJ Holding and Horizon Capital on the acquisition of Datagroup-Volia and Lifecell. Avellum advised NJJ on obtaining merger control clearance from the Antimonopoly Committee of Ukraine for the acquisition. Kinstellar also advised NJJ.

NJJ Holding is an investment firm owned by Xavier Niel, the founder of the European telecom group Iliad.

Horizon Capital is a USA-based private equity firm.

Datagroup-Volia is a Ukrainian fixed telecom and pay TV provider.

Lifecell is Ukraine’s third-largest mobile operator. 

According to CMS, “this landmark transaction merges Datagroup-Volia and Lifecell, creating a converged telecom platform that will support the continued growth, modernization, and resilience of Ukraine’s telecommunications sector. The newly combined platform will deliver mobile connectivity to nearly ten million Ukrainians, while its fixed network will reach over four million households nationwide. Future integration will enable the platform to offer a triple-play service, combining mobile, fixed connectivity, and pay-TV, enhancing service quality, pricing, and the integration of European standards.”

The CMS team included Ukraine-based Partners Ihor Olekhov, Olga Shenk, Natalia Kushniruk, Olga Bieliakova, and Graham Conlon, Counsels Louise Cakar and Kateryna Chechulina, Senior Associates Vitalii Mainarovych, Inna Koval, Yavor Danailov, Mariana Saienko, Khrystyna Korpan, Mykola Heletiy, Nataliya Nakonechna, Volodymyr Kolvakh, and Maksym Morozov, Associates Ihor Pavliukov, Bohdan Ilchenko, Iryna Barlit, Iryna Kvasnytsia, Kateryna Korneliuk, Ivan Pshyk, Oleksandr Sytnyk, and Artem Grudinin, Junior Associate Bohdan Krivuts, Lawyers Denys Hatseniuk, Olga Stetsenko, and Yevhen Chornyi, and Trainees Danylo Onyshchenko, Ruslan Dotsenko, Bulgaria-based Counsel Veliko Savov, Istanbul-based Managing Partner Alican Babalioglu, Senior Associate Aysegul Onol, and Associates Ezgi Bahar and Eylul Sakoglu, as well as further team members in the UK, France, and Netherlands.

The Avellum team included Partner Mykyta Nota, Counsel Anton Arkhypov, and Associate Veronika Humeniuk.

The Kinstellar team included Managing Partner Olena Kuchynska, Partner Natalia Kirichenko, Of Counsel Ihor Kitela, Counsel Yulia Eismont, Managing Associate Oleksandra Poliakova, Senior Associates Olena Stanishevska and Mykola Lykhoglyad, Associate Diana Malysh, and Junior Associate Danylo Kholodyan.

Editor’s Note: After this article was published, Clifford Chance announced that it advised the European Bank for Reconstruction and Development and the International Finance Corporation on the deal.

Additionally, Redcliffe Partners announced that it had advised the EBRD and IFC on USD 435 million financing in connection with the merger. The firm’s team included Managing Partner Olexiy Soshenko, Partner Albert Sych, Of Counsel Natalia Pakhomovska, Counsels Olesia Mykhailenko and Denys Medvediev, Associates Sevastian Viktoruk, Kateryna Zheltova, Arthur Mukha, and Zakhar Kymberskyi, Junior Associates Artem Mykhailyk and Georgy Smirnov, and Paralegals Andriy Kostiuk, Olha Shcherbak, and Daryna Riashko.

As the war in Ukraine reshapes the country’s economic landscape, the antitrust sector faces significant challenges and transformations, according to Integrites Senior Partner Vyacheslav Korchev, who highlights a growing trend of domestic M&A activity and a push toward aligning with European regulatory standards.

“When the war began, the number of foreign transactions in Ukraine plummeted as international clients grew hesitant to engage in the market,” Korchev begins. “Many clients now question whether they need to file antitrust notifications at all or if they can bypass the Ukrainian market entirely.”

He goes on to say that “the local market has remained very active, with a notable increase in domestic M&A transactions. As a result, the market has rebalanced, maintaining roughly the same volume and number of filings as before the war, though the nature of these transactions has shifted.” Moreover, he reports that the pipeline international work is growing again: “When the war started, many Ukrainian business owners began rethinking their strategies; some relocated their operations abroad, and others pursued small M&A deals outside of Ukraine, particularly in the pharmaceutical, agribusiness, and IT sector.” Korchev explains that these cross-border transactions have been a significant trend, reflecting a broader push by Ukrainian companies to expand to new markets and align their internal policies and procedures with European standards. 

Still, this alignment brings a host of compliance challenges and new projects. “Ukrainian companies are increasingly trying to adopt European practices in their domestic operations, which is also part of the country’s broader effort to harmonize its laws with the European Union. For instance, we currently have five active projects where Ukrainian clients are working with Brussels-based firms to bring their operations in line with Western European standards,” Korchev reveals. 

Focusing on specific legislative endeavors to facilitate this harmonization, Korchev reports that the Ukrainian parliament is considering two critical bills. “Being part of the ongoing competition reform, one [of these bills] focuses on dawn raids, seeking to reform current procedures to ensure they align with European norms. Although the state authority [Antimonopoly Committee of Ukraine] has had the right to conduct dawn raids since the beginning of the year, no comprehensive inspections have been carried out yet due to procedural gaps. And this bill should ultimately deal with them,” he says. The second bill, focused on the protection of fair competition, proposes adjustments to merger thresholds within privatisation which has again been given a way in Ukraine. Moreover, Korchev says that another noteworthy trend is the “increasing emphasis on economic analysis in cross-border antitrust matters.”

Reporting on the sectors that are currently the most active in terms of antitrust filings and M&A activity, Korchev indicates that there is ample activity in “pharmaceuticals, energy, and food production. Additionally, fintech and foodtech companies are particularly dynamic, often needing merger clearances across multiple jurisdictions—sometimes as many as seven or eight.”

Looking ahead, Korchev believes that the future is both challenging and promising. “As Ukraine strives to integrate with European standards, we can expect a continued evolution in antitrust laws and enforcement. The increased focus on economic analysis and the push for legislative reforms will likely create new opportunities for both domestic and international firms operating in Ukraine.” Despite the ongoing conflict, there’s a “clear drive toward modernization and alignment with global practices, which will ultimately strengthen the country’s competitive landscape,” Korchev concludes.

On 10 September 2024, amendments to the foreign currency (“FX”) regulation came into force, aimed at easing restrictions on business and, on the other hand, at introducing measures to counteract capital outflows.

Specifically, the latest package of amendments, introduced by Resolution No. 108 of the National Bank of Ukraine (the “NBU”) dated 06 September 2024 (“Resolution No. 108”), includes the following measures:

1. Permission to transfer funds to pay taxes in the EU countries

E-commerce entities that are residents of Ukraine and registered as VAT payers in EU Member States can now transfer funds in FX to pay mandatory payments to the budget of the country of registration. This easing is intended to support small and medium-sized businesses that export their goods to EU markets.

2. An option to compensate for coupon payments made on Eurobonds

Resolution No. 108 allowed companies that have not had any incomplete currency supervision of their exports of goods in the last 12 months to reimburse affiliated non-resident legal entities that are issuers of Eurobonds for the amount of coupon payments made for the period from 24 February 2022 to 09 July 2024. Notably, such payments may be made exclusively using own funds in FX, not borrowed ones.

These amendments are complementary to the easing of dividend payments for Eurobond repayment introduced in July this year, which we described in more detail in this issue of Legal Alert.

3. Permission for transfers to purchase carbon emission quotas 

State-owned companies can now make transfers to non-resident entities in order to purchase emission quotas to cover or compensate for carbon dioxide (CO2) emissions arising from aviation activities. This amendment is designed to ensure uninterrupted servicing of defence procurement, air transportation abroad and support military-technical cooperation with Western partners.

4. Permission to make payments under reinsurance agreements

Resolution No. 108 provided the possibility of making all necessary payments under reinsurance agreements concluded with foreign nuclear pools, and not only payments for reinsurance premiums or payments, as was the case before. This mitigation will allow the Nuclear Insurance Pool to fully fulfil its obligations to partners.

5. Limits on payments for certain goods and services

The NBU has set a monthly limit on foreign payments made using payment cards in the amount of:

• UAH 100,000 for transactions with merchant codes 5094 (precious stones, metals and jewellery), 5944 (watches, jewellery and silver items) and 5972 (coin and stamp shops)
• UAH 500,000 for transactions with merchant code 6513 (real estate agents and managers)

These changes are justified by the need to prevent capital outflow from the country and prevent attempts to circumvent the established foreign exchange restrictions.

By Roman Stepanenko, Partner, and Kateryna Oliynyk, Counsel, Asters

Avellum has advised the European Bank for Reconstruction and Development on a senior EUR 70 million loan to New Post LLC – the principal operating subsidiary of Nova group.

Nova group offers a suite of logistics, financial, and related services to private clients and businesses.

According to Avellum, “this financing marks a critical step in supporting the resilience and expansion of Ukraine’s top express delivery service amidst ongoing war challenges. The borrower will use the loan proceeds to finance its long-term growth strategy, which includes expanding and upgrading its extensive network of parcel lockers and branches, acquiring new equipment, and implementing safety measures to protect employees and customers from the ongoing threats of shelling, bombings, and missile attacks during the war.”

The Avellum team included Senior Partner Glib Bondar, Managing Associate Mariana Veremchuk, and Junior Associates Nikita Tipikin-Holovko and Olha Harhola.

Avellum did not respond to our inquiry on the matter.

On 16 August 2024, new rules for the registration of geographical indications in Ukraine came into force (“Rules”). In accordance with Order of the Ministry of Economy of Ukraine No. 16370 dated 09.07.2024, the Rules establish requirements for the registration of geographical indications for agricultural goods, food and alcoholic beverages.

The provisions of the Rules align with the requirements of EU legislation, which enables national producers to protect and recognize Ukrainian geographical indications in the EU.

The Rules specify the following, in particular:

• who is eligible for registration
• what documents must be submitted
• how to draw up a product specification

In addition, the Rules define new forms of documents for the application of a geographical indication for state registration.

Key changes

• What is a geographical indication?

A geographical indication is a distinctive sign used as the name of a product whose special qualities, namely reputation and properties, are due to its place of origin. In addition, at least one of the stages of production of such a product must be carried out in a certain geographical area.

For instance, geographical indications can be registered for mineral water, wine, cheese and consumer goods that were produced in a particular region. Among the geographical indications registered in Ukraine are Transcarpathian honey, Kherson watermelon, and Yalpug and Danube Bessarabia wines. Among other things, 38 objects have been registered under the national procedure, of which 29 geographical indications are exclusively Ukrainian.

• Who can register a geographical indication?
  • An association of persons that produces goods and/or extracts and/or processes raw materials for goods in the specified geographical location, the special quality, reputation or other characteristics of which are due to this geographical location
  • An individual or legal entity in the cases established by the law

​Moreover, an application for a name denoting a transboundary geographical location may be filed with the Ukrainian National Office for Intellectual Property and Innovations (“UANIPIO”) jointly by foreigners from different states directly or through the relevant authorities of the applicant’s foreign state. foreign legal entities and

What documents are required for registration?

The application is submitted in Ukrainian in paper or electronic form. It can relate to only one geographical indication.

The application must contain the following:

• application for registration of a geographical indication
• a “Holistic Document,” a special form established by the new Rules that includes a summary of the applied geographical indication
• specification of goods approved by the relevant specially authorized body

In addition, it is possible to file an opposition to the UANIPIO regarding the noncompliance of the claimed geographical indication with the conditions for granting legal protection.

Recommendations

Overall, the new rules for the registration of geographical indications can be considered positive from a business standpoint. The Rules contribute to the harmonization of Ukrainian legislation with the EU on the registration of geographical indications. This improves and speeds up the registration process, which allows businesses to enter new markets while guaranteeing the high quality of the goods. Moreover, the registration of geographical indications helps avoid unfair competition and promote traditional goods from different regions, increasing their recognition.

By Ruslan Drobyazko​, Partner, and Myroslava Koval-Lavok, Senior Associate, Baker McKenzie

Weil and Sayenko Kharenko have advised an ad hoc committee of bondholders of Ukraine’s Eurobonds on a USD 23 billion restructuring of Ukraine’s sovereign debt. White & Case and Avellum reportedly advised the Ministry of Finance of Ukraine.

According to Weil, “the restructuring, agreed in principle between the committee and Ukraine in mid-July, was implemented through an exchange offer and consent solicitation, pursuant to which each series of Eurobonds was exchanged for a package of new step-up A bonds and step-up B bonds.”

The Weil team was led by London-based Partner Andrew Wilkinson.

The Sayenko Kharenko team included Partners Nazar Chernyavsky, Anton Korobeynikov, and Igor Lozenko and Senior Associate Oles Trachuk.

Editor’s Note: After this article was published, Avellum confirmed its involvement. The firm’s team included Senior Partner Glib Bondar, Managing Associates Mariana Veremchuk and Yurii Krasnoliudskyi, Associates Andrii Kroshko, Elina Kryhan, Nikita Tipikin-Holovko, and Olha Harhola.