Category: Ukraine

Sayenko Kharenko has successfully represented Societe BIC in a dispute with the Ukrainian IP office regarding a three-dimensional mark.

According to Sayenko Kharenko, “On April 11, 2023, the Northern Commercial Court of Appeal dismissed the appeals of the Ministry of Economy of Ukraine (the former IP Office) and State Undertaking Ukrainian National Office of Intellectual Property and Innovations (the current IP Office) and upheld the judgment of the first instance court under which decisions of the Ukrainian IP Office and the Appeal Board of the IP Office should be canceled. Both court decisions reconfirm that the shape of the BIC lighter is highly distinctive and is thus trademarkable. Trademarking the shape of the BIC lighter is also an important element of the company’s anti-counterfeiting strategy.”

Furthermore, Sayenko Kharenkor reports that “remarkably, the current IP Office refrained from lodging a cassation appeal even though the IP Office is usually going through all the instances of the Ukrainian courts. The judgment has been enforced voluntarily, i.e., substantive examination of the client’s trademark application has been resumed. The IP Office re-examined the Societe BIC’s trademark application and, considering the judgment of the first instance court decided on the registrability of the trademark for all goods in class 34 for which the registration is sought.”

The Sayenko Kharenko team included Partner Yaroslav Ognevyuk, Counsel Oleg Klymchuk, Senior Associate Volodymyr Hrunskyi, and Associates Khrystyna Ivanytska and Mykola Lysenko.

In addition to the modernisation of corporate governance in joint stock companies (“JSCs”), the new version of the Law of Ukraine “On Joint Stock Companies” (“Law”) introduces partial amendments concerning corporate governance in limited liability companies (“LLCs”).

However, the Law introduces such amendments in an unusual way, in particular:

• Rather than describing LLCs’ corporate governance structures in the Law of Ukraine “On Limited Liability Companies and Additional Liability Companies” (“LLC Law”), the Law amends the article of the Civil Code of Ukraine (“CCU”) that regulates corporate governance structures of JSCs, stating that its provisions apply to LLCs by way of analogy.
• The CCU establishes two structures of corporate governance in JSCs (and, therefore, in LLCs):
  • one-tier structure consisting of a general shareholders’ meeting and a board of directors, and
  • two-tier structure consisting of a general shareholders’ meeting, a supervisory board and an executive body.

We analysed such structures’ main advantages and disadvantages in our previous publication.

• Most importantly, the Law introduces only minor amendments to the LLC Law regarding the LLCs’ executive body and its members. In particular, under the LLC Law (as amended by the Law):
  • under Article 28, the general shareholders’ meeting, the supervisory board (if established), and the executive body are the LLC’s governing bodies;
  • under Article 31, the general meeting may be convened by the LLC’s executive body or upon a request of the supervisory board or the board of directors. Therefore, in this article, the LLC Law distinguishes the executive body from the board of directors;
  • under Article 39, the charter may provide that the executive body of the LLC is a collective one and is named the “directorate”, unless the charter provides otherwise. In this article, the LLC Law does not explicitly offer the option to establish a board of directors in case of a one-tier corporate governance structure; and
  • at the same time, Article 39 provides that the executive and non-executive directors may be elected to the collective executive body and that the non-executive director is an individual elected as a member of the company’s board of directors who carries out supervision, risk management, and control over the executive directors and the company as a whole. Only these provisions minimally regulate the activity of the board of directors in LLCs, indicating that the board of directors is the company’s executive body. Additionally, in contradiction with Article 39, which entitles to choose any name of the collective executive body in the LLC’s charter, the mentioned provision defines the non-executive director as a member of the board of directors only.

As a result, the Law only amends the CCU by applying the corporate governance structures of JSCs to LLCs by analogy. It does not explicitly entitle to select a one-tier or two-tier corporate governance structure in the LLC Law and does not clearly differentiate between them.

Given the above, we recommend introducing additional amendments to the LLC Law. These amendments should clearly define and differentiate between various corporate governance structures, as is done for JSCs. Pending such amendments, we recommend describing LLCs’ corporate governance structure as well as the composition and powers of LLCs’ bodies in detail in their charters, using the discretionary nature of the LLC Law.

By Maryna Buinytska, and Yelyzaveta Kravtsova, Senior Associates, Oleksandr Volodin, and Galyna Vdovenko Associates, Avellum

On 2 May 2023, the Ukrainian Parliament adopted Law “On Amendments to the Laws of Ukraine Regarding Improvements of Legal Regulation of Notarial and Registration Actions When Acquiring the Land Plots” No. 3065-IX (“Law”).

The Law aims to regulate specific issues related to acquisition of the ownership right to agricultural land plots (“Agri Lands”). In particular, the Law:

• simplifies the acquisition of the Agri Lands for gardening and personal farming
• prohibits participants and ultimate beneficial owners of sanctioned legal entities from acquiring the Agri Lands
• limits the effect of the pre-emptive right to purchase the Agri Lands to the validity of a special permit for subsoil use and/or a lease agreement
• allows a person ineligible to own the Agri Land to assign their pre-emptive right of purchasing such land plot to persons entitled to purchase the Agri Lands
• requires the notarisation of the mortgagee’s consent to terminate the lease agreement for the Agri Land

We will follow up on the impact of the implemented developments on the agricultural land market.

By Inna Erbelidze, Associate, Avellum

Despite the challenges, Ukraine’s internal economy remains strong – and there are significant opportunities for those who can navigate the complexities of the current situation – with lawyers busy with litigation and arbitration, sanctions and antitrust, as well as restructuring and privatization matters, according to Arzinger Founding and Managing Partner Timur Bondaryev.

“Over the past year and a half, both colleagues and clients have been closely monitoring the war situation. It has been a challenging period, but it has also made us stronger,” Bondaryev begins. “We are grateful to the people and governments from other jurisdictions who have supported us during this time. It took a while, but we appreciate everyone who has stood by us.”

“We are confident that Ukraine will survive and ultimately win the war with Russia and it’s just a matter of time before we can resume our operations as before,” Bondaryev says. “Our pipeline is solid, although not as active as before the invasion. However, once the war is over or there is a framework for peace, we anticipate a significant increase in workload.” He believes that “for the next two decades, lawyers will be busy rebuilding and shaping the new Ukraine while also pursuing the necessary legal actions to claim damages from the aggressor.”

Sharing more about his firm’s workload, Bondaryev points to litigation, sanctions, white-collar crime, and arbitration: “We have been involved in international litigation to claim damages from Russia, which has kept us extremely busy. Additionally, our IP, patent, and tax departments have seen a substantial workload. Disputes, including patent, tax, commercial, and arbitration cases, have been booming across all sectors.” Furthermore, he reports an increase in mandates related to insolvency and debt restructuring, as well as the privatization of state-owned assets. “We were lucky that, due to the firm’s market position and recognition, we always had work,” he explains. “While it wasn’t always great, or interesting, or that profitable, we were busy. And now we’re busier, having to increase headcounts, and we’re bringing people back to Ukraine.”

“And the infrastructure sector has had to adapt to the disruption of sea routes and transition to rail transportation, complicated by the wide-gauge/narrow-gauge disparity between railways in Ukraine and Romania or Poland,” Bondaryev reports. “Rebuilding supply and logistics chains, especially for grain exports, has been a priority for the country, and our lawyers as well.” Additionally, a privatization process has been initiated by the government, “focusing on keeping national champions and selling off other state-owned assets. And that pool of assets has increased with the freezing and nationalization of formerly Russian-owned assets that are now also up for sale. This has opened up opportunities for both investment and legal work,” he says.

In Ukraine, the antimonopoly agency plays “a significant role in controlling investments and outflows,” Bondaryev notes, “and is incredibly busy right now. Although we do not work for Russians, some of our clients have JVs or business relationships with Russian entities. It requires a lot of careful navigation to ensure the smooth progression of transactions for our clients.”

In terms of clients, according to Bondaryev, “the war and subsequent currency restrictions have led to a significant amount of capital being stuck in Ukraine. This has fueled M&A activity, as companies are utilizing their available capital for acquisitions and privatizations.” Due to the circumstances, “the assets are usually undervalued significantly and many local players, who recognize the value of these assets, have been active in privatization processes.”

“Most of our clients are companies that have been operating in Ukraine even before the war started. These clients have a deep understanding of the market and are adept at managing the associated risks,” Bondaryev explains. “We also work with foreign investors, particularly those in the agriculture sector, who have a long-standing presence in Ukraine. Furthermore, we have observed opportunistic risk-takers from outside Ukraine, especially in private equity, eyeing formerly Russian-owned assets.”

Everlegal has become the legal partner of the USAID/ENGAGE program – funded by USAID and implemented by Pact in Ukraine – in an educational project aiming to provide legal support to civil society organizations, small and medium-sized enterprises, and the citizens of Ukraine on martial law and other regulatory changes introduced during the war.

The goal of USAID/ENGAGE is to increase awareness and engagement of citizens in civic activities at national, regional, and local levels. 

According to Everlegal, “the main goal of this project is to provide citizens, as well as national and local CSOs and SMEs, with knowledge about martial law and other regulatory changes introduced during the war, as well as to provide participants with practical advice on their life, work, and volunteer activities under martial law and how to properly address new challenges.”

The Everlegal team is led by Partner Oleksandr Ruzhytskyi and included nine Lawyers.

On 5 July 2023, the President of Ukraine signed Law of Ukraine “On Consumer Protection” No. 3153‑IX (the “CP Law”). Most provisions of the CP Law will become effective one year after its publication, which is yet to be made, but not earlier than the date of termination or cancellation of martial law in Ukraine.

The CP Law will replace the current consumer protection law adopted back in 1991.

The CP Law is essential in harmonising Ukrainian consumer protection laws with European standards. By adopting it, Ukraine fulfils its commitments under the EU-Ukraine Association Agreement, ensuring a high level of consumer protection and achieving compatibility between Ukraine’s and the EU’s consumer protection systems.

E-commerce and consumer protections

In addition to the existing e-commerce laws, the CP Law expressly imposes consumer protection requirements on key e-commerce players – marketplaces, classifieds and price aggregators. These requirements include specific pre-contractual information obligations.

Furthermore, the CP Law lays down the framework for establishing the Unified State Web Portal for Consumers in E-Commerce (the “E‑Consumer Portal”). The E-Consumer Portal is expected to be launched no later than three years after the publication of the CP Law. It will be a publicly available online platform designed to:

• facilitate interactions among consumers, traders and consumer protection authority. For example, via the E-Consumer Portal, consumers will be able to file complaints if their rights are violated in e-commerce transactions. They will be able to track the progress and outcomes of their complaints through that Portal; and
• ensure that certain e-commerce traders undergo mandatory registration procedures with the E-Consumer Portal and attain the status of verified traders. These traders will be bound to ensure that the information on the Portal will remain up-to-date, while the above approach will ensure that the relevant trader is real and not involved in fraudulent activities.

Other developments

In addition to strengthening consumer protections in the e-commerce sector, the CP Law provides the following:

• Scope of protection. The CP Law extends consumer protection to the food products industry while excluding specific areas, such as gambling and lotteries, which are subject to separate regulations.
• Consumer guarantees. The CP Law introduces mandatory guarantee periods depending on the category of the purchased goods (e.g., two years for new goods, including digital products). Traders can also provide commercial guarantees.
• Unfair commercial practices and consumer protections. The CP Law offers significant safeguards against unfair commercial practices – the activities that hinder consumers from making fully informed and free decisions. It also strengthens consumer rights aligning them with the applicable EU framework.
• Powers of supervisory authority. The consumer protection authority is granted additional powers to address violations of consumer rights. For instance, it can request internet service providers to restrict access to websites of traders that fail to disclose their name and/or location.

We will keep monitoring the change of rules for e-commerce to provide you with further updates.

By Oleksandr Kozhukhar and Olha Rudevych, Associates, Avellum

Former Counsels Oleksiy Stolyarenko and Andrii Moskalyk have been appointed as Partners with Baker McKenzie in Kyiv on July 1, 2023.

Stolyarenko is an IP and technology lawyer also working on data privacy, e-commerce, media, and advertising matters and representing clients in trademark and patent litigation. He joined the firm in 2008, after spending over two years with the State Department of Intellectual Property of Ukraine, as a Senior Specialist in the Copyright and Related Rights Division.

Moskalyk is an M&A lawyer focusing on oil and gas, energy, and mining and infrastructure transactions as well as deals in IT, financial services, transportation, and agriculture. He joined the firm in 2016 as a Senior Associate, before making Counsel in 2018. Earlier, he spent two years with EY Law and six years with Clifford Chance as a Senior Associate, between 2009 and 2015.

“With the new appointments, today, Baker McKenzie’s Kyiv office has more than 50 lawyers, including ten Partners, six Counsel, and 15 Senior Associates,” the firm announced. 

“My sincere congratulations to our newly promoted Partners. Each promotion is an immensely deserved recognition of deep knowledge, hard work, and dedication to the profession. The promotions reflect our firm’s steady global growth and strong market positions,” Managing Partner Viacheslav Yakymchuk commented.

On June 27, 2023, Asters Partner Markiyan Kliuchkovskyi was voted in as Executive Director of the International Register of Damage Caused by the Aggression of the Russian Federation against Ukraine. Following the appointment, Kliuchkovskyi resigned from his partnership at Asters on July 1, 2023.

According to Asters, “the Secretary General of the Council of Europe will now formally appoint Markiyan. Earlier, on June 24, 2023, Markiyan’s candidacy for this position was approved for nomination by the Cabinet of Ministers of Ukraine.”

According to the firm, “the Register of Damage has been established in May 2023, and it will have its seat in The Hague. Its function is to serve as a record of claims and evidence on damage, loss, or injury caused by the Russian aggression against Ukraine. It paves the way toward a future international comprehensive compensation mechanism for the victims of Russian aggression. 42 states, as well as the European Union, are members of the Register.”

Asters Co-Managing Partner Oleksiy Didkovskiy, who previously co-headed the International Arbitration and Cross-Border Litigation department with Kliuchkovskyi, will now assume leadership of the practice.

“We are grateful to Markiyan for our long-standing cooperation, thank him for his leadership and valuable contribution to the firm’s development, and wish him success in his new role,” Didkovskiy commented. “While it is always sad when a great colleague and a close friend departs, we also believe that his work will be of great benefit to Ukraine. His unique experience and expertise will be instrumental in establishing a solid legal framework to hold the aggressor state accountable for the damage caused to Ukraine and Ukrainians.”

The National Bank of Ukraine (“NBU”) recently allowed Ukrainian borrowers to transfer foreign currency (“FX”) funds abroad to fulfil their obligations under the following categories of loans from foreign lenders:

• loans backed by way of guarantee or surety from international financial institutions (“IFIs”);
• loans granted, insured or backed by way of guarantee or surety from foreign export credit agencies (“ECAs”) or foreign states through authorised institutions or foreign companies
• which have a foreign state or a foreign state bank among their shareholders; and
• new loans granted after 20 June 2023 by foreign lenders by way of disbursement of such loans to Ukrainian borrowers’ bank accounts opened with Ukrainian banks.

To recap, following the Russian invasion of Ukraine, the NBU introduced a moratorium on FX cross-border payments for the period of martial law in Ukraine. As a result, repayment of FX loans from foreign lenders was and remains prohibited unless such repayment falls within the exhaustive list of statutory exemptions.

Exemptions for the first two categories of loans took effect on 16 June 2023. As a result, Ukrainian borrowers have been granted the opportunity to repay these categories of loans (including both principal and interest) under the terms of their respective loan agreements.

Exemptions for the third category of loans took effect on 21 June 2023. Ukrainian borrowers would be able to transfer the funds for fulfilling obligations under such loans, subject to compliance with the following cumulative conditions:

• the maximum interest rate under such loans should not exceed 12% per annum;
• borrowers must repay the loans with maturities of up to three years with their own funds;
• if the maturity period of the loans exceeds three years, the borrower may purchase FX for the repayment of principal, interest, commissions, fees and fines starting with the fourth year only.

At the same time, for all three categories of the above mentioned loans, the NBU prohibited (a) early repayment of such loans and (b) amendment of loan agreements to shorten the repayment periods.

Such comprehensive approach to easing certain FX restrictions, together with establishing the corresponding preventive measures, should allow Ukraine to attract more loan inflows, surpassing the outflows from loan repayments.

By Mariana Veremchuk and Yaroslav Pavliuk, Associates, Avellum

The National Bank of Ukraine (NBU) gradually continues to lift martial law limitations for cross-border borrowings.

Previously, the NBU allowed for Ukrainian borrowers to make some “Permitted Repayments,” under loans provided or covered by Export-credit agencies, International financial institutions or other sovereign-related creditors (“Institutional Lenders”).

Starting from 21 June 2023, additionally it will be allowed to make cross-border payments from Ukraine under new loans granted by any other foreign creditors, subject to the following conditions:

1. Loan funds were transferred from abroad to the borrower’s accounts opened in Ukraine after 20 June 2023.

2. The total cost of service payments under the loan (i.e., interest, fees, other payments, etc.) may not exceed the maximum rate of 12 percent per year.

3. (a) For loans with tenor of up to three years, any payments under the loan (e.g., interest, principal, fees, other payments, etc.) could be made from foreign currency funds accumulated by the borrower (but not purchased on the FX market or received as a loan).

(b) For loans with tenor of three or more years, payments of interest, fees and other payments (except for the principal) could be made from foreign currency purchased on the FX market in Ukraine from the outset. The principal indebtedness should be paid from borrower’s own foreign currency funds within first three years of the maturity term and starting from the fourth year (also from foreign currency funds purchased on the FX market in Ukraine).

4. Same as with Permitted Repayments, repayments can only be carried out upon maturity of the loan as set out in the loan documentation, Ukrainian servicing banks are prohibited from servicing repayments under shortened terms.

The above changes come into force starting from 21 June 2023.

Repayments under loans provided before 20 June 2023 are still restricted (save for the Permitted Repayments to the Institutional Lenders). It is therefore advisable for the lenders under such loans to keep their claims and security in good order until the conditions for debt restructuring arise.

Source: NBU Resolution No. 77 dated 20 June 2023 “On amendments to Resolution of the National Bank of Ukraine No. 18 dated 24 February 2022”

By Natalia Selyakova, Partner, and Artem Lukyanov, Senior Associate, Dentons