Category: Ukraine

  • Avellum Promotes Yuri Nechayev to Partner

    Avellum Promotes Yuri Nechayev to Partner

    Avellum has announced the promotion of Yuri Nechayev to Partner.

    Nechayev, who joined Avellum as an associate when the firm was founded in 2009 after spending three years at Baker & McKenzie, focuses on Corporate/M&A and Private Equity. He becomes the first Avellum associate to join the partnership.

    According to Avellum, Nechayev “regularly advises leading international and Ukrainian companies on various aspects of their business activities in Ukraine. His experience includes advising clients on a range of major cross-border and local corporate transactions, and on various commercial law matters.”

    Nechayev obtained his Masters of International Law degree from the Institute of International Relations of the Kyiv International University in 2007. 

     

  • Baker McKenzie and Gestors Persuade Ukrainian Ministry of Economy to Impose Anti-Dumping Duties on Russian Steel Production

    Baker McKenzie and Gestors Persuade Ukrainian Ministry of Economy to Impose Anti-Dumping Duties on Russian Steel Production

    Baker McKenzie, in cooperation with Gestors, has assisted Arcelor Mittal Kryvyi Rih with an anti-dumping investigation involving the import of reinforcing steel bars and wire rods from the Russian Federation.

    The anti-dumping investigation was in progress for more than ten months. As a result of the investigation, Ukraine imposed final anti-dumping duties on reinforcing steel bars and wire rod from the Russian Federation at a rate of 15.21% for a period of five years.

    Baker McKenzie and Gestors assisted Arcelor Mittal Kryvyi Rih with preparation and submission of a complaint to the Ministry of Economy, requesting that it launch the anti-dumping investigation. Both law firms also supported the completion process of a questionnaire and comments to the Ministry of Economy, and represented Arcelor Mittal Kryvyi Rih in public hearings and negotiations, as well as providing legal assistance during the verification procedures.

    The Baker McKenzie team was led by Managing Partner Serhiy Piontkovsky, and included Associates Iryna Varanchuk and Nadiia Filozop. Gestors was represented by Partners Andriy Tsvyetkov and Yaroslav Snigur.

     

  • Spenser & Kauffmann Advises Chinese Textile Company on Investment Project in Ukraine

    Spenser & Kauffmann Advises Chinese Textile Company on Investment Project in Ukraine

    Spenser & Kauffmann has advised Chinese textile producers Yuyue Home Textile in connection with business structuring issues in Ukraine.

    The textile company plans to start operating a retail chain in Ukraine in 2018-2020. According to Spenser & Kauffmann, “the law firm has assisted Yuyue Home Textile in developing the optimal market entrance and corporate structure, project financing, as well as legal due diligence of several real estate assets in downtown Kyiv.”

    Spenser & Kauffmann’s team included Managing Partner Valentyn Zagariya and Partner Igor Chernyshenko.

     

  • Transfer Pricing Disputes: The Coming Trend in Ukraine

    Ukraine revised transfer pricing rules and introduced new reporting and documentation requirements in 2013. Since then, the rules have been changed every year. And three years after the introduction of the new transfer pricing (TP) rules, we are witnessing an increasing wave of TP audits and the first TP disputes.

    TP Audits

    Ukraine’s Tax Code provides broad grounds for TP audits, making any company which has carried out controlled transactions potentially subject to one. 

    There are a number of protective provisions for taxpayers. In particular: (1) a general tax audit may not review TP matters; (2) a taxpayer may be subject to only one TP audit per year; and (3) matters which were already reviewed in a TP audit may not be re-opened (except in a limited number of cases).

    Generally, TP audits are significantly less stressful for taxpayers then ordinary audits. They are monitored by the central office of the State Fiscal Service and consist of an exchange of documents and explanations. Therefore, even though the TP audit is significantly longer than general audits (up to 18 months compared to 25 business days), it is less intrusive for business.

    TP Disputes 

    As mentioned above, a number of TP disputes have been reviewed by courts, most of which involved technical compliance issues. However, several disputes heard by the courts have involved actual TP adjustments, which have brought more clarity to TP rules and provisions.

    Kernel-Trade

    One such case involved Kernel-Trade – an exporter of sunflower oil based on forward contracts, some of which contained amended amount of supply and contract terms. Under the Tax Code, the arm’s length nature of prices in forward contracts should be confirmed as of the date of the contract. The company confirmed arm’s length nature of prices in its forward contracts as of the date of the initial contract and of the date of relevant amendments. The tax authorities argued that the company had to comply with the requirement that arm’s length prices be confirmed only as of the date of initial contract, based on the literal reading of the law. The court of appeal cancelled the tax assessment and allowed a separate TP study for each amendment to the initial forward contract.

    Grain Innovation Systems

    In the Grain Innovations Systems case, the company was an exporter of grain and oilseeds. Tax authorities challenged the prices of export contract agreed-on between the company and its purchasers based on information in Ukrainian price monitoring media. However, the courts rejected the tax authorities’ TP assessment for a number of reasons, including, in particular, the fact that the source of the information used by the tax authority did not specify the quality of the purchased goods, the basis of supply, or other material aspects of the transaction.

    Sub-Threshold TP Disputes 

    Another sphere for disputes on TP matters is the purchase of goods or services from low-tax jurisdictions. Such transactions are subject to TP control only if the total value of transactions with a counter-party exceeds UAH 10 million (approximately EUR 320,000). Where the amount of the transactions falls below that threshold, the taxpayer may deduct only 70 percent of its expenses on the purchase of goods or services in its tax accounts. The taxpayer may opt for voluntary TP control by confirming that the value of purchased goods or services was made at arm’s length.

    The issue with this is that an ordinary tax audit will control and review whether the taxpayer deducted only 30 percent of its expenses or the whole amount. As a result, in some cases, local tax authorities who are not able to verify whether the transactions were made at arms’ length tend to disregard the taxpayer’s request for voluntary TP control and require the 30 percent adjustment.

    Trend and Concern

    There is a wave of TP disputes coming. Most already-initiated TP audits are still pending and it is highly likely that many of them will end up in additional TP assessments and adjustments. Such assessments in most instances will be challenged in court, which will require additional expertise in TP disputes.

    Even in those substantial TP disputes which have already been completed, the courts have failed to pursue detailed functional analysis, review economic studies, or re-calculate prices or margins. The concern is that the temptation of the courts to delegate economic studies in TP disputes to economic experts will be too high and that the disputes will be ultimately reviewed by the expert instead of the court. So far, the courts have been reasonable in resorting to expert opinions and we hope they will continue in the same manner. Taxpayers in TP disputes should be reasonable in requesting expert opinions as well.

    By Mykola Stetsenko, Managing Partner, and Vadim Medvedev, Counsel, Avellum

    This Article was originally published in Issue 4.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

  • The Buzz in Ukraine: Interview with Mykola Stetsenko of Avellum

    The Buzz in Ukraine: Interview with Mykola Stetsenko of Avellum

    There is a “changing season” in Ukraine, says Mykola Stetsenko, Managing Partner at Avellum, who reports an unusual amount of activity to begin the year, in what is normally a quieter period in the market. “I may sound too optimistic — but I am quite positive.”

    Stetsenko describes a flow of steady investments in the country, with most funds placed into such areas as IT (particularly software and video game development) and agriculture. The latter is experiencing growth even though the long-awaited land reform remains incomplete, and will probably not happen before the country’s presidential elections in March 2019. “I think we lost time,” he says, “and this is a very political issue.”

    Finance is active as well. “Some companies are looking into debt capital market and issuing new Eurobonds,” Stetsenko says. International financial institutions such as the EBRD, the IFC, European banks, and recently OPIC are all active in the Ukrainian market. For example, the EBRD has recently increased its investment to Ukraine by a third. In addition, he notes, many banks are continuing their investments to long-standing clients this year, such as MHP, which will likely prolong sourcing funds for its pre-export facility.

    Stetsenko reports that the instability in Eastern Ukraine is increasingly accepted by investors as a predictable factor. In addition, the slowing of the economy in recent years and devaluation of the hrivnya has resulted in a cheap workforce — Stetsenko reports that it’s actually cheaper than Chinese labor at the moment — also stimulating investing activity. This is particularly evident in Western Ukraine, which is reporting significant development and job growth, as a number of companies — particularly several focusing on spare parts production for automobile giants — have recently opened factories there.

    Stetsenko acknowledges the relative success of the country’s well-documented judicial reform efforts in the fight against corruption, but he says the extent of the problem may have been overblown. “I think many experts make this mistake, saying that the biggest problem in Ukraine is corruption. I don’t think so — I think it’s bureaucracy.” However, Stetsenko believes that the new Privatization law adopted in mid-January of this year will bring transparency to the system, by simplifying the privatization of state enterprises.

     

  • Western Ukraine Office of Konnov & Sozanovsky Partners with Lexter in Western Ukraine

    Western Ukraine Office of Konnov & Sozanovsky Partners with Lexter in Western Ukraine

    Konnov & Sozanovsky has announced that it will operate its office in Chernovtsy, in Western Ukraine, in partnership with the Lexter Law Firm. 

    According to Konnov & Sozanovsky, the office, which will be headed by Lexter Managing Partner Igor Baitsar going forward, “will advise clients on commercial, corporate, civil, administrative, criminal, and copyright law matters.”

    According to Konnov & Sozanovsky, Baitsar “has over ten years of practice as a lawyer. His experience includes legal support of business, handling complex civil and administrative cases, land- and labor-related disputes.” He is joined by Lexter Senior Partners Zinoviy Melnyk (who the firm describes as “an experienced lawyer practicing over 24 years, specialized in the area of handling motor vehicle accident cases”), and Iosif Bobyk (“an attorney practicing for over seven years, focusing on tax law and criminal defense work”).

     

  • Avellum Advises Commercial Bank Center on Increasing Charter Capital

    Avellum Advises Commercial Bank Center on Increasing Charter Capital

    Avellum has advised the Public Joint Stock Company Commercial Bank Center and its sole shareholder Hamed Alikhani on increasing the bank’s charter capital to UAH 200 million.

    According to Avellum, the firm advised both clients on a number of corporate, regulatory, securities issues related to increasing the charter capital, and on further acquisitions of new shares of PJSC CB Center. Also, the law firm advised on obtaining approval from the National Bank of Ukraine and the National Securities and Stock Market Commission.

    PJSC CB Center performed additional capitalization to comply with the capital requirements of the NBU. According to such requirements, Ukrainian banks must have a minimum charter capital of UAH 200 million.

    In 2016, Avellum acted as the Ukrainian legal advisor of Hamed Alikhani to obtain the approval from the NBU for the acquisition of respective shareholding in PJSC CB Center, as well as to obtain a merger control clearance from the Antimonopoly Committee of Ukraine for the acquisition of PJSC CB Center (as reported by CEE Legal Matters on October 19, 2016).

    The Avellum team was led by Managing Partner Mykola Stetsenko and included Senior Associate Andriy Romanchuk and Associates Dmytro Tkachuk, Andrii Gumenchuk, and Anton Arkhypov.

     

  • TMT Expert Yuriy Kotliarov Joins Asters

    TMT Expert Yuriy Kotliarov Joins Asters

    Yuriy Kotliarov has joined Asters as a partner in charge of the Technology, Media and Telecommunications practice.

    According to Asters, Kotliarov “has extensive work experience both in consulting business, technology and telecommunications industries, including working for nine years as Head of Legal Department at Ukrtelecom, the largest telecommunications operator in Ukraine. Kotliarov’s portfolio includes advising multinational corporations and major Ukrainian companies such as Vodafone Ukraine, Telia Carrier, and Volia-Cable.”

    Kotliarov joins from the Juscutum law firm, where he was a partner and Head of TMT

    The firm also announced that lawyer Sergiy Tsyba has joined as a counsel.

    According to Asters Managing Partner Oleksiy Didkovskiy, “with their proven industry knowledge and expertise, Yuriy Kotliarov and Sergiy Tsyba are an ideal addition to Asters’ TMT practice team. Hiring such experienced legal practitioners is a clear commitment of our partnership for the further development of this dynamic and promising practice of law within our firm.”

     

  • Sayenko Kharenko Advises on EUR 30 Million Loan for Ukrainian Universities

    Sayenko Kharenko Advises on EUR 30 Million Loan for Ukrainian Universities

    Sayenko Kharenko has advised the Nordic Environment Finance Corporation on its EUR 30 million loan to Ukraine, intended to fund a project designed to boost energy efficiency programs in Ukrainian universities and the teaching conditions in the facilities. 

    This is NEFCO’s first loan transaction in Ukraine, and it has been partially guaranteed by the Swedish International Development Cooperation Agency.

    The total value of the project is estimated at EUR 160 million and it will be co-financed by the European Investment Bank – acting as lead financier to the “Higher Education of Ukraine” project approved by the Cabinet of Ministers of Ukraine – and through grants from the Eastern Europe Energy Efficiency and Environment Partnership.

    The first phase of the project, scheduled to begin in 2018, will involve universities in Chernihiv, Kharkiv, Kyiv, Lviv, Poltava, Sumy, and Vinnytsia. The second phase of the project may include additional universities and is expected to be be completed by the end of 2022.

    Sayenko Kharenko Partner Nazar Chernyavsky commented that: “Energy efficiency is key to Ukraine’s sustainable growth. Making our universities better means investing in our young people and the future of our country. I am proud that our firm is part of this prominent project, which helps us to create a better Ukraine and improve our chances to secure an important role in the European economic and cultural landscape.”

    Chernyavsky led the Sayenko Kharenko team, which included Senior Associate Marta Lozenko and Junior Associate Oles Trachuk.

     

  • CMS Advises EBRD on Public Buildings Energy Efficiency Improvement in Ukraine

    CMS Advises EBRD on Public Buildings Energy Efficiency Improvement in Ukraine

    CMS Cameron McKenna Nabarro Olswang has advised the EBRWD on funding to improve the energy efficiency of public buildings in Ukraine. The Central Ukrainian city of Kremenchuk is the first municipality to receive funding under the EBRD’s Public Sector Energy Efficiency Financing Framework.

    The EBRD will provide loan financing of up to EUR 7.5 million and a EUR 1.5 million grant to the Kremenchuk Municipal Energy Service Company. The financing will be secured by a municipal guarantee of the Kremenchuk City Council.

    As an integral part of the project, a large number of Kremenchuk’s public buildings, including kindergartens, schools, and hospitals, are expected to undergo energy efficiency improvements.

    The CMS team was led by Partner Elitsa Ivanova and Senior Associate Vyacheslav Ovechkin, and included Khrystyna Korpan.