Category: Ukraine

On 24 December 2023, the Ukrainian Parliament adopted a Law of Ukraine No. 3494-IX (the ”Law”), which amends the procedure for granting vacations and their duration. The Law applies to the following:

Paternal leave

One-time paid leave of up to 14 calendar days provided to a father of a newborn child (another relative of a single parent) shall be available within three months following the birth of a child. Previously, there was no deadline for taking this leave.

Monetary compensation for unused vacations to servicemen

At the request of servicemen, they are paid monetary compensation for all unused days of annual leave and additional leave for having children or an adult child with a disability of I group subgroup A. Such compensation is granted based on the application of a serviceman submitted no later than the last day of the month in which a serviceman was released from work in connection with the enlistment in the army. Previously, it was possible to pay such compensation only upon termination of employment.

Unpaid leave

The duration of unpaid leave due to family-related circumstances and other reasons is extended to 30 calendar days per year (before the changes – up to 15 days). Longer duration of unpaid leave may be agreed with an employer in case of the threat of the spread of an epidemic, pandemic, the need for self-isolation of an employee, in the event of a threat of armed aggression against Ukraine, an emergency situation of a man-made, natural or other nature. The time spent on such vacations is excluded from the length of employment record, which gives the right to annual vacation.

Employees who start working after being discharged from military service due to demobilization or the end of a special period have the right to unpaid leave of up to 60 calendar days.

Other vacations

From now on, a trade union is responsible for payment an average salary for the additional leave of members of the elected bodies of the trade union during trade union training.

The duration, procedure, terms of granting and payment for the leave for preparation and participation in sports competitions are specified in the employment agreement and/or CBA.

Weekends and non-working days

The changes abolish the rule on rescheduling of weekends and working days coinciding with a holiday or non-working day according to the recommendation of the government. From now on, such rescheduling is determined in the employment agreement and/or CBA. In the absence of such provisions, the rescheduling is carried out by an internal employer’s order approved by the elected body of the primary trade union or with authorized representatives of employees.

The second day off (in addition to Saturday) within a five-day working week, if it is not defined by legislation, in addition to the company’s work schedule, may also be determined in the employment agreement and/or CBA.

By Inesa Letych, Counsel, and Iryna Shaposhnikova, Associate, Asters

In early September of this year, the President of Ukraine signed the Law “On Amendments to Certain Legislative Acts of Ukraine on Improving Legislation on Protection of Economic Competition and Activities of the Antimonopoly Committee of Ukraine” (the “Law”). 

The Law launches the reform of Ukrainian antitrust legislation which had been blocked by the Ukrainian Parliament for a long time. The main purpose of this reform is to bring Ukrainian competition regulations in line with EU legislation, which has become even more important considering the recently approved decision by the EU Commission to begin negotiations with Ukraine on its joining the EU.

The Law will enter into force on January 1, 2024; thus, domestic and international investors have some time to familiarise themselves with the upcoming changes to the country’s antitrust legal framework.

1. Calculation of financial thresholds

In order to determine whether a transaction qualifies as a concentration and is subject to merger clearance of the Antimonopoly Committee of Ukraine (the “AMC”), it is necessary to perform certain tests involving the calculation of the parties’ financials. If the financials exceed the relevant thresholds, the AMC merger clearance is required for transactions qualified as concentrations by the applicable law (e.g., acquisition of 50% of shares in a company). 

Until the Law comes into effect, the financials of the seller of a business will continue to be included in the financials of the target. This is done even if the control relationship between the seller and the target business are to be terminated as a result of the concentration. Such a situation contradicts the requirements of the EU competition law and often leads to situations whereby an acquisition of 100% of the shares in a target not related to Ukraine could require a merger clearance from the AMC due to the target’s current owner’s Ukrainian financials exceeding established thresholds. 

The Law, however, only solves this problem partially. It sets forth that the financials of the target will not be included into the financials of its seller if their control relationship is terminated as a result of the concentration. However, this rule will only apply if the target (i) has no assets in Ukraine, and (ii) has not conducted business in Ukraine for the last two financial years and during the year in which the transaction takes place. 

Thus, if the target has no connection to Ukraine, then no merger clearance from the AMC will be required. Nonetheless, if the target has even minimal assets or insignificant business activities in Ukraine, including sales to Ukrainian counterparties, there is still a chance that approval will be necessary because the seller’s financials will be included in the target’s assets and turnover.

2. Establishment of joint ventures

Prior to the introduction of the Law, the establishment of any joint venture (including a shell joint venture without assets) could potentially trigger merger requirements in Ukraine. The Law aligns the relevant provisions with those of the EU, and once it becomes effective, the establishment of only a fully functional joint venture may require AMC merger clearance.

Nevertheless, in certain cases, the establishment of a not yet fully functional or a shell joint venture may still require separate concerted actions approval from the Ukrainian competition authority. It is recommended that parties be properly advised in this regard. 

3. Enforcement of AMC decisions 

The Law grants the acts (called the “orders”) of the Chairman of the AMC and its territorial offices on the enforcement of certain decisions by the AMC (in particular regarding the collection of fines) the status of enforcement documents. The relevant novelty would make AMC orders similar to court orders issued based on court decisions. This means that state enforcement authorities may collect fines imposed by the AMC based on such an order. 

Prior to that, AMC decisions on applying fines were mostly challenged by the parties in courts, and were enforced only if the parties lost the challenge. Thus, it often took the AMC two years, sometimes even longer, from the moment the decision was made for it to launch enforcement proceedings. During that time, the parties that were the subject of the AMC decisions could have tried to declare bankruptcy, reorganise, or simply divest themselves of assets. 

The new rule on AMC order enforcement is expected to significantly simplify and shorten the AMC’s timeframe for collecting competition law-related fines. It will also increase the importance of the AMC’s own hearings and investigation of competition cases.  

4. Introduction of joint and several liability

Previously, the AMC would impose fines on a single legal entity that violated the law. The competition authority could not target other affiliated companies or the companies’ shareholders. As noted above, this often allowed a group of companies to avoid liability by bankrupting a particular legal entity or depriving it of property that could be subject to a fine.

The Law changes this status quo by providing for joint and several subsidiary liability of the legal successors of such an entity or its shareholders.

5. Improvement of the leniency program 

The leniency program was introduced by the AMC over ten years ago (in 2012), but it has not been widely used in practice. The reason for this is primarily the lack of clear guarantees for program participants.

The new Law improves the leniency procedure by providing a list of requirements that guarantees exemption from liability, as well as by establishing the possibility of reducing fines for subsequent applicants in the procedure (down to 50, 30 and 20 percent, respectively).  

6. Introduction of the settlement procedure 

The Law provides for the possibility of a settlement procedure between the parties and the AMC. The procedure may be applied in cases of abuse of dominance and anticompetitive concerted actions. The main advantage for a party is a 15% reduction in the amount of the fine, while for the AMC it is an opportunity to collect fines more quickly and to remedy the claimed antitrust violations.

7. Conducting inspections

The Law has regulated the procedure for conducting inspections of legal entities by the AMC in greater detail.

Namely, according to it:

• A prior decision by the commercial court is required for conducting an inspection by the AMC. 

Prior to this, a mere decision by the AMC was sufficient to conduct an investigation that could potentially lead to an abuse of power by the authority.

• The AMC inspection should not generally exceed a 30-calendar day period.

Previously, there was no maximum term for an inspection.

• Inspections are to be carried out during office hours (from 8 am until 6 pm) with a prohibition to conduct inspections on weekends, holidays or outside office hours.

• Pursuant to a request by the inspected entity, its legal counsel should be involved in the inspection. The relevant person should be allowed to join the investigation within three hours of the inspected entity’s request. This also means that if the relevant entity is not able to involve its legal counsel within that timeframe, the AMC may proceed with the inspection without the inspected entity being legally represented.

Overall, the relevant regulation with regard to inspections is expected to enable inspected entities to better protect their rights during the aforementioned inspections.

8. Clarification of the parties’ rights

The Law of Ukraine “On Protection of Economic Competition” in its current version provides for a short and limited list of rights attributed to the parties involved in antitrust cases. These rights include:

• familiarisation with case materials;
• provision of evidence, submission of petitions, oral and written explanations (objections), proposals regarding issues that have been submitted for examination;
• obtainment of copies of decisions; and
• challenging decisions.

Given that the above list seems to be exhaustive, one may argue that the parties do not have other rights except for the foregoing. In particular, the rights to translation or making copies may be denied.

The Law solved this problem by extending and detailing a list of rights of the parties involved in antitrust cases. For instance, the right to use interpretation (translation) services, make copies and extracts from the AMC files have been added to the list. Moreover, the Law expressly specifies that the relevant list is non-exhaustive, and the parties may enjoy other rights provided by the competition law. 

To summarise, the Law can be viewed positively, having corrected certain flaws in the Ukrainian competition regulations. However, not all of these flaws have been addressed and clarified. Furthermore, the Law has increased the importance of the AMC’s own proceedings, arguably bringing them on a par with court proceedings. Time will tell how the relevant innovations will be applied in practice, nevertheless, businesses need to be prepared to operate within the new competition regulatory framework.

By Olga Ivlyeva, Associate, Wolf Theiss

Vasil Kisil & Partners has successfully represented the interests of Kischenzi in a tax dispute.

Kischenzi is an integrated farm consisting of agricultural, dairy, vegetable, and pig activities and is located in the Central part of Ukraine.

According to Vasil, Kisil & Partners, “unidentified persons who pretended to act for the Dutch company with whom Kischenzi previously made a heifer supply contract and, accordingly, made partial payment for the goods, sent an email in April 2019, asking the company to remit the other part of the payment due under the contract but this time to another bank account. The company, being 100% sure that it was in fact its counterparty, remitted the money to the account so notified.”

Subsequently, according to the firm, “based on its inspection findings in autumn 2022, a tax authority brought a claim that the company’s transfer of funds to the unidentified persons’ account was an import transaction and directly concerned the contract made with the Dutch company. Thus, it applied provisions of the Law of Ukraine on Currency and Currency Transactions to the company and imposed the maximum penalty possible, that is, a penalty of the paid amount (almost EUR 200,000) for missing payment deadlines. The first instance court affirmed in full such a position of the tax authority.”

Finally, Vasil Kisil & Partner succeeded in getting a positive outcome before the appellate instance court which found that “a transaction related to the importation of goods is conditional upon the Ukrainian resident and its non-resident counterparty having a contractual relationship involving the supply (purchase) of the goods […] However, there is no relationship of such kind between the claimant and the unidentified person (persons) to whom […] the payment was erroneously made pursuant to the payment order.”

The Vasil Kisil & Partners team included Managing Partner Andriy Stelmashchuk, Partner Volodymyr Igonin, Senior Associate Yehor Svidlo, and Associates Vasyl Prytula and Alina Ratushna.

On 18 October 2023, the National Energy and Utilities Regulatory Commission (“NEURC”) adopted the Licensing Terms for Aggregation in the Electricity Market under Resolution No. 1909 (“Resolution”).

Background

The aggregation was first introduced earlier this year by Law of Ukraine “On Amendments to Certain Laws of Ukraine on Restoration and Green Transformation of the Energy System of Ukraine” No. 3220-IX, dated 30 June 2023 (“Law”). While the Law set the general legal framework for the aggregation, it was left to the NEURC to refine more precise rules for such activities.

The Law defined aggregation as an activity of managing interconnected electrical installations with the aim to produce (not more than 20 MW), use, store, buy, and sell electricity or provide ancillary and/or balancing services in the electricity market.

Simply put, aggregation is the process of combining the energy consumption or production by multiple individuals or entities into a single, larger group. This consolidation allows for more efficient management of energy resources, often resulting in cost savings, better access to renewable energy sources, and improved sustainability.

Resolution’s key points

To obtain a license, a company has to submit to the NEURC an application supported by the documents identifying the applicant and detailing the way such applicant intends to carry out aggregation.

Once the license is obtained, the company has to comply, inter alia, with the following licensing terms:

• draw up daily electricity schedules in accordance with the volumes of purchased and sold electricity and provide them to the transmission system operator
• pay quarterly contribution fees in the amount determined by the NEURC
• provide balancing and ancillary services if required by the Law and market rules
• maintain a website with the company’s contact details and terms for joining the aggregation group
• inform the members of the aggregated group at least once per billing period about the results of the aggregated group’s activities (volumes and cost of purchased and/or sold electricity and/or services in the electricity market, etc.)
• abstain from transferring the license or any rights and obligations of the aggregator under the said license to third parties
• keep separate records of expenses and income from business activities related to aggregation in the electricity market and other types of business activities the aggregator conducts
• notify the NEURC of all changes in the data specified in the license application and in the documents attached to the application no later than one month from the date of such changes

The Resolution will come into force on 19 December 2023.

By Glib Bondar, Senior Partner, and Maksym Maksymenko, Partner, Avellum

CMS has advised a syndicate of banks led by ING Bank on the adjustment to the loan repayment terms under the USD 450 million pre-export facility for Ukraine’s Kernel Group. Allen & Overy reportedly advised Natixis, one of Kernel Group’s creditors. White & Case reportedly advised the Kernel Group.

Kernel Holding is Ukraine’s largest producer of sunflower oil, which it exports to over 70 countries.

According to CMS, “the adjusted repayment terms and conditions for their application during the period of standstill granted by the lenders have been developed based on IBR prepared by international financial advisers and agreed in parallel by the majority of Kernel’s bank creditors, including Natixis, the EBRD, EIB, and various Ukrainian banks. CMS also advised the PXF-lenders on the impact of Kernel’s de-listing on the PXF facilities and assisted with the implementation of the transition from LIBOR to a risk-free rate under the PXF facilities.”

The CMS team included Partners Elitsa Ivanova and Ihor Olekhov, Counsel Kateryna Chechulina, Associates Ivan Pshyk and Iryna Barlit, and Trainee Ruslan Dotsenko, as well as further lawyers in Switzerland and Luxembourg.

Editor’s Note: After this article was published, White & Case confirmed its involvement to CEE Legal Matters. The firm’s team included lawyers based in London and Paris.

Amendments to Law of Ukraine “On Advertising” No. 270/96-ВР of 3 July 1996 (the “Advertising Law”) have recently come into force. The amendments update obsolete regulations on advertising in Ukraine, thus ensuring advertising standards correspond to current technological developments.

The main novelties of the updated advertising regulatory landscape in Ukraine are as follows:

• Extension of the concept of “advertising”. Advertising now covers information on person, goods or idea, disseminated either for monetary or other compensation, or for the purpose of self-promotion where intended to directly or indirectly raise consumer awareness of an advertisement and promote interest in such a person, idea, and/or product.
• Applicability of Ukrainian advertising laws. The amendments to the Advertising Law introduce the system of criteria for determining whether or not particular advertising falls under the jurisdiction of Ukrainian advertising law requirements.
• Implementation of technological neutrality principle. Several forms of distribution of advertising were moved out of the so-called regulatory “grey zone” and are now specifically regulated under Ukrainian advertising laws. Namely, advertising on information sharing platforms (e.g. social media), video sharing platforms (e.g. video streaming services), as well as advertising distributed by means of electronic communications, are now subject to the same regulatory framework as “traditional” advertising (for example audiovisual media such as television, and printed media).
• Product placement regulation. In keeping with the evolving advertising landscape, the enacted amendments to the Advertising Law extend its coverage to encompass product placement. Specifically, the Advertising Law prohibits product placement of the following goods/activities in audiovisual media, video sharing platforms and information sharing platforms: 
  • tobacco products, devices for the consumption of tobacco products without combustion and items related to their use, herbal smoking products, electronic cigarettes, refill containers, liquids used in electronic cigarettes, and tobacco-containing products for electronic heating via electronic management, as well as placement of goods of persons whose main activity is the production and/or sale of such goods, 
  • medicines available only by prescription and/or prohibited from being advertised, as well as medical equipment, prevention, diagnosis, treatment, and rehabilitation methods that require specialized knowledge and training for use, 
  • goods, the advertising, production, or distribution of which is prohibited by law.

The above restrictions apply exclusively to audiovisual media programs and user-generated videos created after 1 January 2024, while penalties for violations of applicable advertising laws are deferred until 1 January 2025. The Advertising Law also now prohibits product placement of advertising.

• Development of legal framework for combating IP rights infringements by websites. To enforce efforts to combat piracy, the Advertising Law now provides for the details of inclusion of websites into a national list of websites deemed to be raising concerns with respect to intellectual property rights compliance. 

In particular, a website is included in this list following the approval of a request submitted by the respective copyright or related rights holder, and provided that there is adequate evidence that the website owner has committed either of the following within the past 365 days: (i) three or more infringements of IP rights that have not been rectified by the website owner as of the date of the request, or (ii) two or more infringements of IP rights documented by the applicant before the date of the request, whereby the website owner has failed to comply with the requirements to make available in the WHOIS database information on the respective website owner and hosting service provider. 

The Advertising Law now provides for liability against those placing advertising on the websites included in the list.

The procedure for the inclusion into the list and its maintenance is not yet in place and is to be adopted by the Ministry of Economy of Ukraine.

• Prohibition on advertising by residents of the “aggressor state”. The Advertising Law also now prohibits any advertising by residents in Ukraine from the “aggressor state,” namely the Russian Federation. This novelty is expected to contribute to the battle against Russian disinformation.

The amended Advertising Law reflects a concerted effort to create a more transparent, responsible and updated with industry trends advertising environment in Ukraine.

By Natalia Kirichenko, Partner, and Anna Baliura, Associate, Kinstellar

On 27 October 2023, the Cabinet of Ministers of Ukraine approved the regulation that allows non-household consumers to operate without interruption during power outages, with some exceptions. In other words, in the event of infrastructure damage this winter, imported electricity may be used to avoid supply restrictions.

The regulation provides that if the transmission system operator (i.e., NPC Ukrenergo) is forced to apply a power outage command to consumers due to operational security reasons, the disconnection will not apply to non-household consumers whose total electricity consumption in each billing hour includes at least 30% of purchased imported electricity during May-September and 50% during October-April.

If the percentage of consumption of imported electricity in a billing hour falls below these volumes, NPC Ukrenergo will resume application of a power outage command if necessary.

In critical situations, when NPC Ukrenergo applies special emergency outage schedules, activates special load disconnection automation or automatic frequency unloading devices, outages cannot be avoided, even if a non-household consumer has purchased enough imported electricity.

To buy electricity from the EU, it is also necessary to obtain access to a cross-border crossing. Access to the cross-border crossings can be purchased from the transmission system operator NPC Ukrenergo, which holds auctions for the allocation of cross-border capacity daily.

Currently, the capacity is quite limited. According to recent information from the Ministry of Energy of Ukraine, starting from 1 December, the capacity for importing electricity from the European countries increased from 1.2 GW to 1.7 GW.

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

On November 28, 2023, the President signed two laws that modify the procedure for opening and formalizing inheritance. These laws were developed to protect the rights of heirs in times of war or a state of emergency.

These laws are specifically identified as Law No. 9287 amending certain laws of Ukraine to improve the procedure for accepting inheritance and Law No. 9288 amending the Civil Code of Ukraine to enhance the procedure for accepting inheritance.

Law No. 9288 introduces changes to the Civil Code of Ukraine, including:

• establishing a rule that the place of opening the inheritance is the last place of residence of the testator or the location of their property. It is worth noting that, according to the current version of this norm (which came into force on May 22, 2023), the place of opening the inheritance is considered the place of submission of the first application indicating the expression of will regarding the inheritance property, heirs, executors of the will, persons interested in protecting such property, or creditors’ claims;
• providing for the suspension of limitation periods during the period of military or a state of emergency in Ukraine;
• setting special deadlines and a specific procedure for regulating inheritance legal relations during the period of military or a state of emergency in Ukraine or specific localities. In particular, it is specified that in case of registering the death of a natural person later than one months from the date of their death, the deadlines for accepting the inheritance, refusal to accept it, issuing certificates of the right to inheritance are calculated from the date of the state registration of the testator’s death, not from the date of opening the inheritance (paragraph 20 of the Final and Transitional Provisions);
• during the period of military or a state of emergency in Ukraine or specific localities, and within six months from its termination or cancellation, if the place of opening the inheritance is a locality in the territory of which the state authorities temporarily do not exercise or do not fully exercise their powers, the territory on which active hostilities are being conducted or temporarily occupied territory, statements regarding the acceptance of inheritance, refusal to accept it, creditors’ claims against the heirs, and other statements related to inheritance are submitted to a notary regardless of the place of opening the inheritance (paragraph 21 of the Final and Transitional Provisions).

Special rules also apply to inheritances opened after the introduction of military or a state of emergency in Ukraine or specific localities until Law No. 9288 comes into effect, as well as to inheritances opened before the introduction of military or a state of emergency, the deadline for accepting which has not expired before its introduction.

Law No. 9287 provides for amendments to the Laws of Ukraine “On Notary” and “On Ensuring the Rights and Freedoms of Citizens and the Legal Regime on the Temporarily Occupied Territory of Ukraine” and aligns their provisions related to inheritance with the changes made to the Civil Code of Ukraine.

Both laws (No. 9287 and No. 9288) will come into effect two months after their official publication.

By Talina Kravtsova, Partner, Yuri Neklyaev, Senior Associate, Asters

Redcliffe Partners has advised the IFC, EBRD, and DFC on their USD 480 million loan to Ukrainian poultry and grain producer MHP. Avellum advised MHP. CMS and Harneys reportedly advised the DFC and EBRD, with Harneys and Baker Botts reportedly advising the IFC.

According to Redcliffe Partners, the loan is for refinancing MHP “Eurobonds, which will strengthen the global and Ukrainian food security.”

The Redcliffe Partners team included Managing Partner Olexiy Soshenko and Associate Sevastian Viktoruk.

The Avellum team included Senior Partner Glib Bondar, Partner Vadim Medvedev, Of Counsel Yuriy Krasnoliudskyi, Senior Associate Anton Zaderyholova, and Associates Mariana Veremchuk, Yaroslav Pavliuk, Andrii Kroshko, Taisiia Duda, and Marharyta Brianska.

Editor’s Note: After this article was published, CMS confirmed its involvement to CEE Legal Matters. The firm’s team included Partner Rafal Zakrzewski and Senior Associate Evgeniy Vazhynskiy.

Former Sayenko Kharenko Partner Yaroslav Ognevyuk – together with Tetiana Ohneviuk – has set up a new law firm in Ukraine: the Ambassadors law firm.

According to Ognevyuk, a part of the Sayenko Kharenko IP team – which he previously led – has joined the new firm alongside his move (as reported by CEE Legal Matters on October 31, 2023). “The Ambassadors team will continue to provide high-quality legal and patent services in the field of intellectual property, we will be legal ambassadors of brands, innovations, and technologies. At the same time, Partner Tetiana Ohneviuk will become an ambassador of justice and Head the Dispute Resolution practice with a focus on non-standard and complex litigations in commercial, civil, and administrative proceedings.”

Prior to setting up Ambassadors, Ognevyuk spent almost five years with Sayenko Kharenko, where he was the Head of the IP practice. Before that, he spent over 12 years with Doubinsky & Osharova, two years with the Patent Office of Ukraine, and, earlier still, two years in-house with Educational Book.

Partner Tetiana Ohneviuk was also part of Sayenko Kharenko, as an Associate, between 2019 and 2021. Earlier, she spent six months as an Associate with Doubinsky & Osharova. She is currently an Associate Professor of the Department of Civil Law at the University of Customs and Finances, since 2020.