Category: Ukraine

Sayenko Kharenko, working with the Italian office of Bird & Bird, has successfully represented the Consorzio di Tutela della Denominazione di Origine Controllata Prosecco before the Ukrainian Competition Authority in a dispute over the misuse of the prosecco protected designation of origin by Ukraine’s Tairovo Winery.

According to Sayenko Kharenko, based on the evidence provided by the Consorzio and collected during the unfair competition proceedings, the Competition Authority imposed a fine of UAH 946,909 (approximately EUR 24,000) on the defendant.

The Sayenko Kharenko team included Counsel Oleg Klymchuk, Senior Associate Volodymyr Hrunskyi, Associate Anastasia Bondarenko, and Junior Associate Anastasiia Havryliuk.

Sayenko Kharenko has advised Viseven on an investment from Horizon Capital. Avellum advised Horizon.

Founded in 2009, Viseven has expanded to over 30 countries, with development hubs in Ukraine, Argentina, Estonia, India, Poland, and North America. According to Sayenko Kharenko, its products include a “digital content factory, cloud-based CRM and CLM suites powered by no-code functionality and enabled by AI tools, for an end-to-end digital marketing platform.” 

Horizon Capital is a private equity firm in Central and Eastern Europe, managing over USD 1.5 billion in assets.

The Sayenko Kharenko team included Partner Alina Plyushch, Senior Associates Dmitriy Riabikin and Roman Drozhanskyi, Associate Zarina Khalimon, and Junior Associate Dmytro Zaiachkivskyi.

The Avellum team included Managing Partner Mykola Stetsenko, Partner Mykyta Nota, Senior Associate Maryna Buinytska, and Associate Andrii Andryishyn.

On 8 January 2024, the Ministry of Energy of Ukraine issued the order “On Measures to Reduce Mutual Debts on the Electricity Market” (the “Order“), which sets out the methods for dealing with the situations where market participants have unpaid bills to each other. The purpose of the Order is to stabilize the operation of the electricity market and reduce debts in its specific segments.

The Order regulates mutual debts on the electricity market that have accrued from 1 January 2020 to 30 November 2023.

According to the Order, the transmission system operator (NPC “Ukrenergo”) and electricity market participants must offset the homogeneous counterclaims, i.e., those involving simultaneous participation of the parties in two obligations where the creditor under one obligation is the debtor under another. The claims are considered homogeneous if the obligations of the parties towards each other are to be performed similarly, while the grounds for the obligations may vary.

The offsetting of homogeneous counterclaims occurs only within the limits of the debts recognized by NPC “Ukrenergo” and electricity market participants based on electricity purchase and sale agreements and/or acceptance and transmission of services acts, for which there are no disputes arising from the following agreements:

• on the settlement of electricity imbalances and participation in the balancing market
• on the provision of ancillary services for frequency and active power regulation
• on the provision of ancillary services (for frequency and active power regulation in the power system of Ukraine, specifically for reserve replacement – tertiary regulation) to ensure supply safety
• on the provision of ancillary services to ensure the restoration of the functioning of the power system of Ukraine
• on the provision of services for frequency and active power regulation by offsetting the homogeneous counterclaims regarding debts of electricity market participants to the transmission system operator for dispatch (operational-technological) management services.

NPC “Ukrenergo” is required to draw up and sign relevant agreements (acts) with electricity market participants and settle obligations under payment documents.

By Yaroslav Petrov, Partner, and Olena Sichkovska-Chornobyl, Associate, Asters

Ukraine is actively gearing up for the imminent post-war reconstruction, a major undertaking to restore the infrastructure destroyed by hostilities. An integral aspect of the preparatory measures involves enhancing the legal framework to establish favourable conditions for attracting private investments into the extensive reconstruction.

The government has consistently voiced its commitment to ramping up efforts in the realm of public-private partnerships (PPP), recognizing this collaborative approach as an effective tool in the post-war reconstruction process. Notably, there are imminent expectations for the Parliament’s adoption of Draft Law No. 7508 to simplify and enhance the PPP procedures. It is anticipated that the following changes will be adopted in the regulation of PPP:

1. New forms of financing

The government acknowledges that a significant portion of PPP projects will be implemented with funding from foreign partners. Therefore, it proposes to introduce the concept of a donor into legislation – an entity providing a grant either directly to the private partner or through the state and local budgets of the government partner. Donors may include the EU, foreign states, international organizations, foreign municipalities, and other institutions and organizations.

2. New forms of state support for PPP

Anticipated legislative amendments include a comprehensive review and expansion of the range of state support mechanisms available for PPP projects. In addition, the draft law proposes to enhance the support mechanism pursuant to which the public partner would be able to provide backing to the private partner through the assurance of payment for goods or services essential for project execution. This support will serve to offset the disparity between the projected and actual levels of demand for the goods or services.

3. Simplification and streamlining of PPP project preparation procedures 

A pivotal innovation eagerly anticipated within the framework of this PPP reform is the introduction of the concept of a “small” PPP project, which is set to undergo a simplified preparation procedure. It is planned that a project will be considered “small” if its expected value is less than the equivalent of EUR 5,382,000.

The simplification entails the elimination of the requirement for the preparation of technical and economic justification for projects, as well as a reduction in the decision-making period for implementing PPP and preparing for the tender. In such cases, the decision to proceed with the PPP will be made based solely on the preparation and detailed analysis of the conceptual note.

4. Infrastructure and economic recovery projects

The proposed legislation outlines a specialized procedure for the preparation, selection, and conduct of tender to identify a private partner for the construction or reconstruction of infrastructure that has been destroyed or damaged due to military aggression against Ukraine. These projects will be formulated and executed at the state and local levels.

The distinctive feature of this specialized procedure is that conceptual notes, technical and economic justifications, and efficiency analyses are not required. This approach aims to reduce the preparation time for PPPs by 10-12 months. Additionally, model sets of competition documentation, estimated budgets, and other templates will be prepared for such projects. This special procedure is planned for implementation only for a limited period – during the martial law and five years after its conclusion.

The purpose and rationale behind this special procedure are to streamline and expedite the mechanism for engaging private partners in the reconstruction of devastated infrastructure.

5. “Infrastructure on installments”

The reform drafters intend to enhance a form of PPP that relies on government payments to a private partner, essentially characterized as “infrastructure by installments,” to meet the needs of future post-war reconstruction. This collaborative approach has the potential to be highly effective and efficient.

6. Expansion of the list of public partners

The government aims to streamline the process of involving state-owned companies in PPP, thereby facilitating the attraction of additional private investments for infrastructure development.

7. Digital system for PPP

The introduction of a unified digital system for conducting tender to select private partners is envisaged. This system will enable the creation, posting, disclosure, and exchange of information and documents in electronic format, facilitating the entire tender process. Additionally, it will facilitate interaction with the digital project preparation and management platform.

The Ministry of Economy of Ukraine is already developing such an electronic system and plans to launch it in 2025.

The suggested legislative amendments establish favorable conditions for the efficient implementation of the PPP mechanism in the post-war reconstruction of Ukraine. Streamlined procedures for engaging private partners, novel forms of collaboration, and various types of guarantees indicate that PPPs can emerge as a robust tool for attracting investments in the rehabilitation of infrastructure devastated by war.
We are optimistic that the Parliament will expeditiously adopt Draft Law No. 7508, initiating the process of attracting investments into reconstruction process.

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

Avellum has announced the appointment of Andriy Fortunenko, Andriy Romanchuk, and Anton Zaderyholova as Partners, starting January 1, 2024.

Fortunenko will also Head the firm’s White-Collar Crime practice, part of the firm’s larger Dispute Resolution practice. Fortunenko has been with Avellum since 2015. Before that, he spent two and a half years with Asters.

Romanchuk was promoted to Partner in the firm’s Corporate and M&A practice. According to Avellum, he has “extensive experience in the technology, [military technology], agricultural, and banking sectors.” He has been with the firm since 2013.

Zaderyholova became a Partner in the Tax & Private Client practice. According to the firm, he will “focus on effectively structuring corporate clients’ international deals and business processes.” He has been with the firm since 2018, having previously spent over three years with DLA Piper and, earlier, over a year with the ILF Law Firm.

“We are thrilled to introduce Andriy Fortunenko, Andriy Romanchuk, and Anton Zaderyholova as our newest Partners,” Managing Partner Mykola Stetsenko commented. “Their persistent dedication to clients and team goals has significantly strengthened Avellum.”

Avellum has advised the Kernel Group on the acquisition of 100% of shares in Reni-Oil LLC – a sunflower oil transshipment terminal with a storage capacity of 15,000 tons, in the port of Reni, on the Danube – for a consideration of USD 24.75 million.

According to Avellum, Kernel is the world’s leading producer of sunflower oil and Ukraine’s largest exporter. “The transshipment terminal is the only one with proper intake, storage, and off-loading capacities among Ukrainian Danube river ports, allowing the export of sunflower oil even in case of the blockade of the Black Sea ports.”

Back in 2022, Avellum had also advised Kernel Holding on the sale of several of its farming entities to a company controlled by Andrii Verevskyi (as reported by CEE Legal Matters on May 6, 2022).

The Avellum team was led by Partner Yuriy Nechayev and included Associates Oleksandr Kozhukhar and Olha Rudevych.

In 2024, certain currency control restrictions introduced on the first day of the full-scale invasion are still in force in Ukraine. The National Bank of Ukraine reviews and eases some of these restrictions, but many of the prohibitions on foreign exchange transactions remain.

1. RESTRICTIONS ON CROSS-BORDER TRANSFERS

A general ban on cross-border transfers is in force with the following exceptions:

• Payment for the import of goods specified in a special list, provided the delivery of such goods occurred after 23 February 2021
• Refunding an advance to a non-resident entity under an unfulfilled contract
• Payment of insurance premiums under a loan insurance contract
• Transfers by a resident to the accounts of its separate subdivisions in foreign countries, meeting specified conditions
• Settlements under vehicle leasing agreements, vehicle rental agreements, etc.

The list of exceptions is expansive and includes numerous reservations. Consequently, each transaction necessitates a thorough preliminary analysis to ensure compliance with applicable regulations.

2. DRAWDOWN AND REPAYMENT OF FOREIGN LOANS 

The Ukrainian legislation stipulates that the conclusion of loan agreements with foreign lenders is possible but on certain conditions. Notably, the maximum interest rate allowed under foreign loans is 12% annually. During the initial three years of the agreement, the debtor is restricted to settle the principal debt solely with its own funds in foreign currency, with the option to acquire foreign currency to pay interest, fees and other associated charges.

As for loan agreements with foreign lenders concluded before 24 February 2022, the current provisions only allow for the payment of interest falling due between 24 February 2022 and 10 August 2022, contingent upon meeting specified requirements. Regrettably, the repayment of principal or interest accrued in other periods remains significantly restricted under the present legal framework. Furthermore, it is essential to emphasize that the law explicitly prohibits the reduction of the maturity of obligations under both existing and future foreign loans.

3. SETTLEMENT DEADLINES FOR THE EXPORT AND IMPORT TRANSACTIONS

The settlement deadlines for the export and import transactions have been adjusted to 180 calendar days, as opposed to the previous 365 days. This modification is applicable to transactions executed from 5 April 2022 onwards.

Furthermore, it is imperative to note that the offsetting of counterclaims of the same type is not permissible for the termination of obligations arising from export and import transactions.

4. DISTINCTIVE ASPECTS OF PURCHASING FOREIGN CURRENCIES

Prior to acquiring foreign currency, a legal entity is obligated to satisfy its obligations in foreign currency from its existing funds. What is more, residents of Ukraine are obliged to utilize the acquired foreign currency within two days from its crediting to their current account.

The acquisition of foreign currency is permissible only when the entity possesses less than UAH 400,000 in equivalent funds. To facilitate the purchase of foreign currency, comprehensive details regarding the total amount of funds in foreign currency held across current and deposit accounts must be provided.

5. RESTRICTIONS ON CASH WITHDRAWAL

It is prohibited to withdraw cash in foreign currency more than UAH 100,000 equivalent per day (subject to specific exemptions). This restriction is applicable to cash withdrawals from a Ukrainian bank account, whether conducted within Ukraine or abroad.

6. PROHIBITION OF TRANSACTIONS WITH RUSSIAN AND BELARUSIAN ENTITIES

It is prohibited to carry out any foreign exchange transactions involving a legal entity or individual located in the Russian Federation or the Republic of Belarus, as well as to fulfill obligations to legal entities or individuals located in the Russian Federation or the Republic of Belarus.

The list of restrictions and rules is not exhaustive. The National Bank of Ukraine is constantly reviewing and updating these rules, so each currency transaction should be reviewed separately for compliance with the applicable laws.

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

Asters has advised the European Bank for Reconstruction and Development on its EUR 10 million financing for a Ukrainian manufacturer of oak lamellas.

According to Asters, “the loan will be used to finance the ongoing company’s activities and construction of a renewable energy facility to reduce energy costs.”

The Asters team included Partner Iryna Pokanay, Senior Associate Inna Bondarenko, and Associate Viktoria Zagreba.

Sayenko Kharenko has advised the International Finance Corporation on a EUR 40 million equivalent risk-sharing facility for Credit Agricole Ukraine. 

According to Sayenko Kharenko, the IFC will “share half the risk on an aggregate portfolio of EUR 40 million equivalent to be extended as critical financial support to smaller businesses, including agricultural and rural micro, small, and medium-sized enterprises. This is the third transaction the IFC provides in Ukraine under the IFC’s Small Loan Guarantee Program, supported by the European Commission via the European Fund for Sustainable Development.”

The Sayenko Kharenko team included Partner Igor Lozenko, Senior Associate Oles Trachuk, and Junior Associates Yevgen Koval and Sofya Tatarinova.

Counsels Oksana Legka and Oleksandr Volkov have been appointed as Partners in Asters’ International Arbitration and Cross-Border Litigation practice, effective January 1, 2024.

According to Asters, Legka focuses on dispute resolution issues, including multi-jurisdictional litigation, investor-state, and international commercial arbitration. She has been with the firm since 2009 and had previously spent two years with Peterka & Partners.

According to the firm, Volkov has over 15 years of experience in international commercial, investment, and sports arbitration, as well as cross-border litigation. He has been with the firm since 2018. Before that, he spent six years with Egorov Puginsky Afanasiev & Partners’ Kyiv office as well as four and a half years with Shkrebets and Partners.

“The promotion of Oksana and Oleksandr is one of the examples that Asters is a firm where strong players rise from Associates to Partners, where high-profile projects foster the development of talent, and where a healthy working atmosphere encourages both professional and personal growth,” Co-Managing Partner and Head of International Arbitration and Cross-Border Litigation Oleksiy Didkovskiy commented. “We have been working together for many years to achieve the best results for our clients and I firmly believe that we will see many successes in their new roles.”