Category: Ukraine

  • Redcliffe Partners Supports EBRD in Launch of Renewable Energy Generation Plant in Western Ukraine

    Redcliffe Partners Supports EBRD in Launch of Renewable Energy Generation Plant in Western Ukraine

    Redcliffe Partners has provided legal advice to the EBRD in connection with a EUR 3.3 million financing of an Aquanova Development LLC loan facility for the construction of a small hydro power plant, Nyzhniy Bystryi, with a generation capacity of 1.7 MW, located on the Rika River in the Khust District of the Zakarpattya Region of Ukraine. Clifford Chance advised EBRD on English law aspects of the financing.

    According to Redcliffe Partners, “the project was implemented in Phase II of the Ukraine Sustainable Energy Lending Facility (USELF), which was designed to promote renewable energy generation in Ukraine, an increasingly important factor in the country’s energy security. The USELF program strengthens [the] sustainability of the renewables sector in Ukraine, especially in times of limited availability of funding for such projects from private banks. The USELF replicates a well-established EBRD model, which is already in place in other countries of Eastern Europe, Central Asia, and the Caucasus.”

    “EBRD is the largest financial investor and facilitator of energy efficiency solutions in Ukraine,” said Redcliffe Partners’ Managing Partner Olexiy Soshenko, who led the firm’s team on the deal. “We were happy to participate in the Aquanova hydro power plant financing as one of the multiple investments of EBRD aimed at the development of an environmental and social foundation for renewables operations in Ukraine.” 

    Soshenko was joined on the Redcliffe Partners team by Associate Evgeniy Vazhynskiy and Junior Associate Anatoliy Doludenko. 

  • Ukrainian M&A Market Review in 2016

    The year of 2016 was marked by relatively low M&A activity in Ukraine. Although transactions were carried out in almost every industry, their total number turned out to be quite moderate.

    Here we should distinguish transactions relating to the Ukrainian market only and transactions that were affected on a global scale containing, however, a Ukrainian element. If we speak of Ukrainian transactions only, a number of banking transactions are worth mentioning – in particular the acquisition of Ukrsotsbank by Alfa Group. Also, we witnessed a certain number of transactions in the agricultural sector (the sale of Creative Group, for instance), the IT segment (Soros’ investment in Ciklum), and the investment of Horizon Capital, a private equity fund, in Rozetka.

    A huge event in December was the state’s sudden nationalization of PrivatBank, the largest bank in Ukraine. Its consequences for the country remain yet to be seen. 

    Unfortunately, no deals were concluded in the engineering and heavy industry sector, and the FMCG segment also reported no intense activity. 

    The pharmaceutical market became a noteworthy exception with a number of transactions, with Farmak’s investment in Poland the most distinguished. This investment of a Ukrainian company into Eastern Europe became a pleasant exception at a time of low business activity and general exits by Ukrainian companies from the Russian and Crimean markets. A vivid example of this exiting phenomenon can be found in MHP’s withdrawal from Russian business by means of an exchange of its assets in Russia for the Ukrainian assets of the Agrocultura Group.

    The infrastructure segment, particularly seaports, whips up more and more interest. The establishment of a joint venture between TIS Group and Cargill, the world’s agro-industrial giant, may serve as a model here. As far as we know, Ukrainian and foreign investors are also discussing a number of transactions related to port infrastructure and transshipment terminals.

    The dramatic increase of activity in the non-performing loans (NPLs) market (i.e., the market for secured or unsecured default loans) became a new trend this year. Although the targets of such transactions are rights of claim under loan agreements, in fact such transactions are M&A transactions typically of an unfriendly or opportunistic nature.

    Unlike the Ukrainian M&A market, the global M&A market once again looks likely to reach a stratospheric level in terms of total transaction value. The USA remains the leader in the value and the number of transactions. These transactions sometimes involve Ukraine, if only from the merger-control clearance perspective (if new financial thresholds are exceeded). Some transactions (e.g., IT transactions) are even more tied to Ukraine, since many of the specialists employed by IT companies are concentrated here. An excellent example of such a transaction can be found in the acquisition of Lohika, a premier software development firm, by Altran, a global leader in innovation and a high-tech engineering consulting company. Headquartered in Silicon Valley, Lohika is a leading software developer most active in North America, with experienced delivery teams in Ukraine and Romania consisting of more than 700 employees, most of them software engineers. 

    What has not happened so far? 

    First, everyone expected massive privatization to be launched in Ukraine. Unfortunately, that has not happened so far, although two attempts were made to sell the Odesa Port Plant in 2016. Privatization of energy companies has also been postponed until 2017. At the moment, privatization of Ukrspyrt is being actively discussed, though it has not yet been initiated. Although there are undoubtedly a number of reasons for these delays, the market continues to hope for one or more successful privatizations in the coming year. 

    Second, the Ukrainian Deposit Guarantee Fund has not started to sell its assets actively, even though by now it has accumulated an enormous volume of assets previously owned by liquidated banks. The Fund has already carried out an inventory of available assets, however, and, its representatives report working on the creation of transparent sales mechanisms involving the use of auction marketplaces, including the ProZorro system.

    Headwinds 

    Both economic and psychological factors operate to restrain M&A in Ukraine.

    Economic factors include the low purchasing power of the majority of Ukrainian investors and the absence of high-quality assets for sale. On some level, this is a repetition of the situation in 2009 when a great many companies became insolvent, but their owners refused to sell them at actual market value. However, as compared to that previous crisis, Ukrainian banks this time are more aggressively disposed and ready to enforce pledged assets, so it is definitely good news that Ukrainian bankruptcy and financial restructuring laws have been actively evolving.

    The restraining effect of the foreign exchange restrictions in Ukraine serves as an unconditional limiting factor. However, gradual liberalization of these restrictions – namely the permission to pay out dividends in part – is definitely having a positive impact.

    The procedure for purchasing rights of claim under loan agreements has a number of drawbacks, which certainly restrict the free sale of default loans and serve as a restraining factor for foreign investors.

    One should also consider psychological factors, since the fear of corrupt Ukrainian courts still prevails. However, these fears may be gradually dispelled upon the successful implementation of judicial reform in Ukraine.

    Unfortunately, the conflict in Eastern Ukraine, the annexation of Crimea, and potential Russian aggression still puts considerable pressure on the Ukrainian investment environment. Yet, as we can see, Ukrainian investors have already come to terms with this factor, while foreign investors are getting used to it.

    Legislative Background

    During the past year, the legislative environment experienced a number of changes that, in particular, had a positive impact on the M&A market, including:

    • the significant decrease of regulatory requirements in Ukraine
    • the increase and enhancement of financial thresholds for merger control purposes
    • the adoption of critical changes to the Law on Joint Stock Companies that entered into force on May 1, 2016
    • the cancellation of the requirement to register foreign investments in Ukraine
    • the adoption of legislative amendments aimed against raiding, in particular the introduction of mandatory notarization of documents changing directors or making other changes in membership.

    It is also crucial to highlight a number of draft laws submitted to Parliament for consideration, including a draft Law on Limited Liability Companies, draft Law on Shareholder Agreements, and draft Law on squeeze-out/sell-out. The adoption of all these draft laws should improve the quality of corporate legislation in Ukraine.

    By Mykola Stetsenko, Managing Partner, Avellum
    This Article was originally published in Our Third Special Year-End Issue of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
  • Asters Defends ACNielsen Against Allegations of Collusion

    Asters Defends ACNielsen Against Allegations of Collusion

    Asters has represented ACNielsen Ukraine in a successful defense of the company’s interests in an alleged retail cartel case that has lasted for over a year and a half.

    On March 2, 2017, the High Commercial Court of Ukraine reached its decision, ruling that charges brought by the Antimonopoly Committee of Ukraine against ACNielsen lacked evidence and revoking the corresponding decision of the Committee.

    “The Court’s decision in this case is important for Ukrainian legal practice because it has a significant impact on the framework of the business’ legal freedom and on the market conditions in many industries,” said Oleksandr Voznyuk, Partner at Asters. This decision reaffirms the European approach to assessing the influence of information support and information exchange on the competition and on the market efficiency for consumers.”

    “The questioned AMCU’s decision set the precedent for the information exchange issues,” added Partner Alexey Pustovit. “In fact this decision led to a ban on preparation and use of marketing researches that would significantly limit the possibilities for business to understand and to track the market trends. The HCCU’s decision sets the markers of allowed information exchange and creates the basis for successful completion of continuing proceedings of other defendants in the case.”

    Voznyuk and Pustovit were assisted on the case by Asters Associate Dmytro Vidsota.

  • Changes in the Procedure for Obtaining Work Permits for Foreign Nationals

    On February 3, 2017, Resolution of the Cabinet of the Ministers of Ukraine No. 28 “On Amendments to Order on Issuance, Prolongation and Cancellation of Work Permits for Foreign Nationals and Stateless Persons”, dated January 18, 2017 (the “Resolution”), became effective.

    Consequently, employers now can obtain more than one work permit for the same foreign national or stateless person (the “Work Permit”). Therefore, foreign nationals can be employed by more than one employer in Ukraine. In addition, the Resolution slightly amends the procedure for obtaining a Work Permit.

    Work Permit for individuals holding more than one office

    Under the Resolution, two or more employers can now obtain Work Permits for the same foreign national (for example, if such foreign national occupies the position of Director for several Ukrainian legal entities). Previously, such option was unavailable.

    Extending the Work Permit

    To extend a Work Permit, the employer must submit the required documents to the relevant territorial State Employment Center (the “Employment Center”) no later than 20 calendar days (but not earlier than 40 calendar days) before the current Work Permit expires.

    Consideration of the application

    If an application for a Work Permit is incomplete and/or does not comply with legal requirements, the Employment Center will not consider the application. The Employment Center must notify this to the employer (applicant) no later than within three business days (after it receives the application) and return the application to the employer.

    Among the new grounds for the refusal to issue a Work Permit is an employer’s failure to submit a copy of documents identifying a copyright object and/or related rights and certifying copyright (provided submission of such documents is required to obtain a Work Permit for a particular category of individual).

    Conclusion of employment agreement (contract)

    According to the Resolution, the employer must submit a copy of the employment agreement (contract) concluded with a foreign employee to the Employment Center within 10 calendar days after its conclusion with the relevant foreign national for whom a Work Permit was obtained. In turn, an employment agreement (contract) must be concluded with a foreign national no later than within 90 calendar days after a Work Permit is obtained by the employer.

    By Lina Nemchenko, Partner, and Mariana Marchuk, Counsel, Baker McKenzie,

  • Eterna Law Succesful for Clients on Appeal in British Virgin Islands

    Eterna Law Succesful for Clients on Appeal in British Virgin Islands

    Eterna Law, working in cooperation with Maples and Calder in the British Virgin Islands and Matthew Hardwick QC (instructed by Maples and Calder Partner Arabella di Iorio), successfully appealed a lower court’s ruling involving the discharge of a worldwide freezing injunction on behalf of clients Rustam Yusufovich Gilfanov and Sergey Aleksandrovich Tokarev in the Eastern Caribbean Court of Appeal (BVI Court of Appeal).

    According to Eterna Law, “on 3 February 2017 the Eastern Caribbean Court Appeal, having considered the matter reported as (1) Rustam Yusufovich Gilfanov and (2) Sergey Aleksandrovich Tokarev v (1) Maxim Valeriovich Polyakov (2) Valeriy Oleksandrovich Polyakov and (3) Phoenix Holdings Limited … allowed the appeal of Mr. Gilfanov and Mr. Tokarev and reinstated a USD 10 million freezing injunction against the Defendants – Maxim Valeriovich Polyakov, Valeriy Oleksandrovich Polyakov and Phoenix Holdings Limited – principally on the basis that the judge had been wrong to find (1) that there was no general risk of dissipation; and (2) no loss.”

    Eterna Law also reported that “the judgment of the ECCA provides an up to date analysis of (1) the relevance of a finding of a good arguable case of fraud to the inference of a risk of dissipation; (2) the assessment of damages in cases where property has been acquired in reliance on a fraudulent misrepresentation; and (3) the circumstances where the BVI court can order a freezing injunction against a non-cause of action defendant.”

    The Eterna Law team consisted of Partner Oleh Beketov and Senior Associate Aleksandr Lugovskyi.

  • Nagorny Elected Deputy Chairman and Stetsenko and Sayenko to Public Council of Antimonopoly Committee

    Nagorny Elected Deputy Chairman and Stetsenko and Sayenko to Public Council of Antimonopoly Committee

    Sayenko Kharenko Counsel Oleksandr Nagorny has been appointed Deputy Chairman of the Antimonopoly Committee of Ukrainе and Avellum Managing Partner Mykola Stetsenko and Sayenko Kharenko Partner Vladimir Sayenko have been elected to its Public Council at the Committee’s constituent assembly on February 24, 2017. 

    This marks Sayenko’s third election to the Public Council, a permanent collegial elected advisory body established to induce participation of citizens in state affairs, public control over activities of the Antimonopoly Committee of Ukraine, establishment of effective interaction with the public, and consideration of public opinion during the formation and implementation of state policy on the protection of economic competition.

    Stetsenko, Sayenko, and 39 other new members of the Council were elected for a two-year term.

  • Ruzhytskyi Promoted to Partner at Everlegal

    Ruzhytskyi Promoted to Partner at Everlegal

    Ukraine’s Everlegal has announced the promotion of Counsel Oleksandr Ruzhytskyi to the firm’s partnership.

    Ruzhytskyi specializes in Dispute Resolution, Human Rights, and Corporate/Commercial law. He joined Beiten Burkhardt in Kyiv after graduating from the Lviv National University Law School in 2008, and also worked at Vasil Kisil & Partners, Astapov Lawyers, and the L.A. Group before joining Everlegal as Counsel in 2015. 

  • Sayenko Kharenko Obtains AMC Clearance for MTIBU on New Claims Settlement System

    Sayenko Kharenko Obtains AMC Clearance for MTIBU on New Claims Settlement System

    Sayenko Kharenko’s antitrust team has secured clearance from the Antimonopoly Committee of Ukraine for the introduction of a new direct claims settlement agreement between the Motor (Transport) Insurance Bureau of Ukraine (MTIBU) and its insurer members.

    According to Sayenko Kharenko, “the agreement introduces a new system for claims settlement. This system allows the affected person to apply for the settlement of claims to their specific insurer, which is subject to the executed compulsory motor vehicle liability insurance agreement. As a result of the adoption of this new system, the potentially affected person will now be able to choose an insurer in advance according to the required criteria, and will have assurances that when any insurance-related event occurs, timely compensation will be guaranteed. On the other hand, the insurer will be motivated to provide high-quality services by offering full coverage and settling client claims in a timely manner based on the terms of contractual relations between them. The insurers will be encouraged to compete not only by price, but also in terms of the quality of their services.”

    The firm reports that “the system developed by MTIBU is based on advanced European experience and aims to develop the domestic market of motor vehicle liability insurance in line with the best international practices and standards,” and says that “the agreement was signed by 18 insurance companies that are members of MTIBU: AXA Insurance, Arsenal Insurance, PZU Ukraine, VUSO, UASK ASKA, Oranta, Prosto-strahuvannya, Uniqa, Providna, INGO Ukraine, Universalna, International Insurance Company, Credo, ASKO-Donbass Pivnichnyi, Kolonneyd Ukraine, Brokbusiness, and IC Krayina.” On February 1, 2017, IC European Insurance Alliance also signed on to the agreement.

    Finally, according to  Sayenko Kharenko, “the AMC granted approval for concerted practices on October 27, 2016 for a two-year term. The corresponding decision of the AMC was granted after a thorough investigation of the impact of the proposed concerted practices on the market of motor vehicle liability insurance services in accordance with the law on the protection of economic competition, and after consideration of the anticipated favorable impact of these direct claim settlement practices on the market.”

    Sayenko Kharenko’s antitrust team for the project was led by Partner Vladimir Sayenko and included Senior Associate Valentyna Hvozd and Associate Anastasiіa Bodnar.”

  • Aequo Defends Interests of Zara in Tax Dispute

    Aequo Defends Interests of Zara in Tax Dispute

    Aequo’s Tax Disputes team has successfully defended the interests of Zara in a tax dispute before the Kyiv Administrative Court of Appeal. The case concerned the refusal by the Ukrainian tax authority to credit the amounts of advance corporate profit tax paid by the company upon the distribution of dividends towards its current corporate profit tax liabilities.

    According to Aequo, “the background of the case was complicated by the different approach of the tax authority applied to 2013 and 2014 payments, while substantive law remained unchanged.”

    The Kyiv Administrative Court of Appeal reversed the decision of the local administrative court and decided in favor of Zara. The Court canceled the tax claim and decision on imposition of the tax pledge over the client’s assets issued by the tax authority and obliged the tax authority to take due account of the amounts of advance corporate profit tax which it previously, and according to the Court unlawfully, disregarded.

    Aequo’s team was supervised by Managing Partner Denis Lysenko and included Senior Associates Yevgen Levitskyi and Myroslava Savchuk and Associate Vasyl Mishchenko.

  • Lavrynovych & Partners Launches Private Clients Practice

    Lavrynovych & Partners Launches Private Clients Practice

    Ukraine’s Lavrnovych & Partners has announced the creation and launch of a new Private Clients Practice, to be led by Oleksander Onufrienko, who the firm describes as “one of the most experienced Ukrainian consultants on structuring and private assets management.”

    Lavrynovych & Partners announced its intention to “provide a full range of legal registration of private capital for successful entrepreneurs and owners of family businesses and other private clients,” including (according to the firm):

    • Protection of personal assets from hostile acts of third parties;
    • Organization of effective structures for the control and management of private assets;
    • Development of succession plans for business and private assets;
    • Development of preservation plans for private assets and businesses in the absence of the owner;
    • Settlements of property and inheritance aspects of family relationships;
    • Creation of company management monitoring systems for the heirs and/or family members of entrepreneurs;
    • Legal registration of children’s, heirs’ and the other trustees’ rights concerning their business assets.