Category: Ukraine

Arzinger has successfully represented the interests of Lyudmyla Ivanivna Mayboroda before the European Court of Human Rights in the Mayboroda versus Ukraine case, on a pro bono basis.

Accordin to Arzinger, “in 2000, the applicant was admitted to hospital with complaints about her health. Doctors found that the cause could be internal bleeding. To stop it, the doctors suggested that the applicant undergo surgery to eliminate the causes and consequences of the bleeding, which, with the applicant’s consent, was performed. Later, the applicant was discharged from hospital and given medical documents with no record of the organ removal.”

According to the firm, the doctors forgot “minor details: first informing the applicant about (obtaining her consent for) the kidney removal surgery, and about the removal itself after the surgery.” Subsequently, “the doctors were exposed in an anonymous call – the applicant was informed that her left kidney had been stolen.” Additionally, Arzinger outlines that the “doctors ignored the applicant’s calls urging them to explain what had happened and why she had lost a healthy (in her opinion) organ. The doctors said that the kidney had to be removed and they were going to inform the applicant about it at her next appointment after some time (six months). Six months later, the applicant’s medical records were corrected.”

As the firm explains it, the hospital sought to shift blame away from the doctors: “it’s all about Soviet legislation. The management of the hospital replied to the request of the prosecutor’s office that there was no Ukrainian law that the doctors had violated. The doctors were guided by the old principles of the Soviet legislation (1970), and it was ethical not to inform about the kidney removal, because such a message could affect the patient’s emotional state. As a matter of fact, the Ukrainian Medical Society in Lviv supported the doctors’ decision and the patient’s being not informed about the removal of her kidney (a separate issue of alleged ‘medical’ solidarity).”

Furthermore, “the criminal proceedings were closed. There was no full-fledged investigation, and the case was formally closed. The prosecutors did not find a single document that would establish the scope of the doctors’ authority to practice and issue official medical documents. Thus, since the statement was filled out by doctors who were not officially employed with the hospital, such a statement was not an official document at all. Regarding the episode with the removal of the kidney (possibly for sale on the black market), the prosecutor found no grounds to institute proceedings (as numerous medical commissions confirmed that the kidney was removed to save the patient’s life).”

As for the civil case, Arzinger reports that “the consultant physician (physiologist), who was supposed to inform the applicant about the removal of her kidney, was partially guilty. Therefore, the courts awarded the applicant UAH 50,000 (to be paid by the consulting physician for failure to notify her of the kidney removal) and denied recovery of damages from the surgeon.”

Finally, the ECHR, “more than 23 years after the operation, 16 years after the application was filed, and seven years after the applicant’s death – found that there had been a violation of Article 8 (Right to respect for private and family life) of the Convention in respect of protecting the applicant’s right to informed consent and that the authorities failed to verify whether it was possible to obtain consent for the removal of the kidney from Ms. Mayboroda before the operation, or from her relatives during the operation, and that the State had not established an adequate legal framework to protect [the patient’s] right to informed consent.”

Arzinger’s team included Founding Partner Serhii Shkliar and Attorneys at Law Pavlo Khodakovskyi and Kateryna Shapran.

As Ukraine experiences a period of relative tranquility following a tumultuous year, its M&A sector has witnessed surprising developments, and ongoing discussions about war insurance are also showing promise, according to Asters Co-Managing Partner Oleksiy Didkovskiy.

“The past few months have been relatively calm in many Ukrainian regions, although the air raid sirens frequently go off, and the military movements in the Black Sea region remain active,” Didkovskiy begins. “Compared to the intense and frightening experiences of the previous year, the situation is more manageable now. Over the last three months, people have been gradually returning to Ukraine. While safety and security concerns persist, it is encouraging to see an increasing number of women returning with their families.”

The question that Ukrainian law firms are now facing, according to Didkovskiy, is what will be the next potential line of work: “our current workload is diverse and not concentrated in high volumes in areas such as regular corporate and M&A or real estate. However, we have noticed a growing demand for litigation work, primarily aimed at recovering damages.” According to him, “it is challenging to navigate the complexities and uncertainties of these cases, which is why local law firms maintain contact with international law firms so that they can collaborate effectively and financially as a team before these tribunals to successfully recover damages.”

Surprisingly, Didkovskiy notes, there has still been an increase in interest in M&A in the past two months. “From an economic and banking perspective, the situation is pretty challenging due to the increased regulations and difficulties in extracting resources from the country,” Didkovskiy says. “In light of that, investing capital locally seems to be a good idea, considering it is not possible to export the capital generated here. Even foreign investors cannot easily distribute dividends, resulting in a huge accumulation of money in Ukraine. Therefore, there is an increased interest in growing the company locally. Although unexpected, this is the reality that we are dealing with.”

“Additionally, over the past few months, investment banks and large international institutional investors have shown a particular interest in coming to Ukraine,” Didkovskiy adds. “However, it is unclear how much money is needed, and there are risks related to the ongoing war and other factors.” He highlights that “to address this, there are also talks of war insurance to secure the big international funds and investors from the natural war risks they are likely to face.”

Ultimately, Didkovskiy points to the agriculture and IT industries, as the most resilient sectors: “the agriculture sector has been active, and the IT industry continues to grow, particularly in the western regions. This is what we have observed, and we expect it to continue for the foreseeable future.”

Asters has successfully represented Andriy Kuzmenko’s estate in copyright proceedings in Ukraine.

According to Asters, “on March 28, 2023, the Northern Commercial Court of Appeal dismissed the appeal of Moon Records LLC and upheld the decision of the first instance court to recognize that the copyright in the lyrics of musician and leader of Skryabin band Andriy Kuzmenko belongs to Kuzma Skryabin LLC. The rights were acquired under an agreement with Andriy Kuzmenko’s widow. Importantly, the courts have also confirmed Andriy Kuzmenko’s authorship for the lyrics.”

According to the firm, “in 2021, Moon Records LLC applied to the court against Kuzma Skryabin LLC and Folio Publishers Ltd claiming infringement of copyright in the “Rocky Road to Berlin” book, which was first published in 2006 and comprised the texts of songs. The plaintiff relied on the alleged recent acquisition of copyright in the songs from other band members and sought compensation. However, in September 2022, the Commercial Court of the city of Kyiv rejected the claim ruling that the plaintiff and other band members failed to prove their copyright.”

Asters’ team included Partner Julia Semeniy, Senior Associate Olena Kozhokar, and Junior Associate Tetiana Melnyk.

Baker McKenzie has advised Digital Media Solutions on its acquisition of the assets of global performance marketing company ClickDealer.

Digital Media Solutions is a provider of technology-enabled digital performance advertising solutions.

According to Baker McKenzie, “the deal will allow DMS to expand its brand-direct business globally, enabling DMS to serve more advertisers and consumers in key verticals and end markets.”

Baker McKenzie’s team in Kyiv included Managing Partner Viacheslav Yakymchuk, Senior Associate Alyona Furda, and Associates Artem Sinelnikov, Oleksandr Savvi, Dmytro Skydan, Olga Sikorska, and Ievgen Bidnyi.

 

Tax information exchange aims to enable tax authorities to receive information about their residents’ foreign financial accounts and assets and identify potential tax evasion or non-compliance.

1. What is a tax information exchange?

Tax information exchange aims to enable tax authorities to receive information about their residents’ foreign financial accounts and assets and identify potential tax evasion or non-compliance. One example of such exchange is obtaining and sending information on controlled foreign companies (“CFC”). The reporting burden under the CFC rules is on a taxpayer, which means that the person controlling a CFC must submit notifications to the tax authorities in case of an acquisition or alienation of a share in a CFC.

However, the exchange of CFC information might be subject to some risks. Namely, there is a risk of non-compliance since the taxpayer may decide to keep some information undisclosed. In addition, the whole process of obtaining information and then sending it to foreign tax authorities is quite lengthy.

In general, there are three different ways to exchange tax information:

• exchange upon request (jurisdiction B requests jurisdiction A to provide information on specific operation in jurisdiction A conducted by jurisdiction B’s taxpayer);
• spontaneous exchange (jurisdiction A on its own will sends to jurisdiction B’s tax authorities the information it has about jurisdiction B’s taxpayer);
• automatic exchange (jurisdiction A regularly transfers to jurisdiction B information on the accounts and financial transactions of jurisdiction B’s taxpayers in jurisdiction A).

Automatic exchange is the most effective method since it provides an opportunity to receive information quickly and systematically.

The interaction under the Common Reporting Standard (the “CRS”), which sets out the rules and procedures for automatic exchange, takes place as follows:

1) financial institutions of jurisdiction A (participating jurisdiction) carry out due diligence to identify reportable financial accounts;
2) reporting financial institutions transfer the obtained information to the jurisdiction A’s tax authorities;
3) once a year, jurisdiction A’s tax authorities send to tax authorities of jurisdiction B (reportable jurisdiction) the information they have about all residents of jurisdiction B.Financial institutions collect, store and transmit tax information to reportable jurisdictions in electronic form by maintaining an electronic database of accountable accounts.

2. What is the Ukrainian approach to CRS?

In Ukraine, the CFC rules came into force in January 2022. Shortly after, on 19 August 2022, Ukraine acceded to the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (the “CRS MCAA”).

To implement the CRS, the Ukrainian parliament adopted the relevant Law (the “Law”), which adapts Ukrainian legislation to the named international standards. In addition, the Ukrainian government has undertaken to develop some relevant secondary legislation.

The full-scale russian invasion of Ukraine affected the speed of CRS implementation, but good progress is still being made.

3. What are the main implications for clients?

Tax residents of Ukraine should be careful to comply with Ukrainian CFC rules. Foreign tax residents should comply with their local CFC rules and declare their assets and income originating in Ukraine.

4. What information will Ukrainian tax authorities obtain and exchange?

According to the Law, financial institutions shall collect and exchange information on reportable financial accounts, including bank accounts, payment accounts, securities accounts, and other accounts and agreements defined by the FATCA Agreement or the CRS MCAA.

Particularly, financial institutions shall inform the tax authorities about the following:

• name, address, tax identification number, jurisdiction of residence and date and place of birth (in the case of an individual) of an account holder;
• account number
• account balance or value at the end of the reporting period;
• total gross income generated with respect to the assets held in the account.

5. Who is a reportable person?

Tax authorities will collect and exchange information about reportable accounts of individuals and legal entities that are not tax residents of Ukraine.
To determine whether an account is reportable, financial institutions consider some criteria established by CRS. For instance, entities’ accounts whose aggregate balance at the end of the reporting year is at most USD250,000 are not subject to review.

6. What jurisdictions will exchange information?

Ukraine will share all collected information with other signatories of the CRS MCAA that chose to participate in information exchange with Ukraine. For instance, Switzerland has already expressed its intention to exchange financial account information with Ukraine, and Germany has included Ukraine in the list of participating states.
Once Ukraine completes the process of the CRS implementation, the full list of participating states may be found in the “Activated exchange relationships for CRS information” section on the OECD webpage.

7. What is the first reporting period?
The first reporting period will cover the time span from 1 July 2023 to 31 December 2023.

8. What should be done?
Banks and other financial institutions should be prepared to bear an additional compliance burden by creating mechanisms for collecting and processing more information about their clients. This might include (1) expanding existing departments or establishing new ones for information processing; (2) setting up infrastructure, namely the electronic system necessary for information exchange; and (3) allocating funds for such actions.
The clients should comply with CFC rules, duly reporting their income and assets.

By Anton Zaderyholova, Counsel, and Olha Rudevych, Associate, Avellum

Ilyashev & Partners has represented, pro bono, the interests of the Fencing Federation of Ukraine before the Court of Arbitration for Sport in a matter involving the cancellation of the Extraordinary Congress of the International Fencing Federation decisions about the return of Russian and Belarusian athletes and officials to participating in individual and group competitions.

Founded by the International Olympic Committee in 1984 in Lausanne, Switzerland, the Court of Arbitration for Sport is an international arbitration institution that administers sports arbitration disputes.

The Ilyashev & Partners team included Managing Partner Mikhail Ilyashev and Counsel Roman Protsyshyn.

On 23 February 2023, the Ukrainian Parliament adopted the Law of Ukraine “On Compensation for Damage and Destruction of Certain Categories of Real Estate as a Result of Hostilities, Terrorist Acts, and Sabotage Caused by the Armed Aggression of the Russian Federation Against Ukraine, and the State Register of Property Damaged and Destroyed as a Result of Hostilities, Terrorist Acts, and Sabotage Caused by the Armed Aggression of the Russian Federation Against Ukraine” No. 2923-IX (“Law”), which will enter into force on 22 May 2023.

The Law establishes the basic principles for obtaining compensation for damage to or destruction of residential real estate in connection with the armed aggression of the Russian Federation against Ukraine.

In particular, it provides that:

• citizens of Ukraine and managers of apartment buildings may receive compensation (“Compensation Recipients”)
• a certain number of subjects have a priority right to compensation, including combatants, disabled persons, and multi-child families
• a commission specially established by a decision of the local council or military (military civilian) administration (“Commission”) will resolve on the compensation
• the Compensation Recipients will submit the applications and supporting documents (“Application”) electronically via Diia or in paper form to the Centers for the Provision of

Administrative Services, social security authorities or notaries following the procedure established by the Law

• you can submit the Application during the martial law period and one year after it’s lifted/terminated (with certain exceptions)
• registration of the Application will be carried out in the State Register of Property Damaged and Destroyed as a Result of Hostilities, Terrorist Acts, and Sabotage Caused by the Armed

Aggression of the russian federation against Ukraine

• the Commission will consider the Applications within one month (with the possibility of extending this term) on a first-come, first-served basis and
• the amount of compensation for the destroyed real estate object will be determined by multiplying the total area of such an object by the cost per 1 m2 of the area defined following
• the procedure provided by the Ukrainian Government.

The Law distinguishes the following ways of compensation:

For the destroyed property:

• providing funds with a special use regime (this form of compensation applies only in case of destructed garden/cottage houses) or
• financing the purchase of an apartment or other residential premises using a housing certificate (the only form of compensation for the destructed apartments and an alternative one
• in case of destructed garden/cottage houses)

For damaged property:

• construction works on the damaged real estate and/or
• providing building materials for such works.

The Ukrainian Government will further establish the procedure for providing compensation for damaged real estate.

We hope that, except accomplishing the primary objective, the enforcement of this Law will facilitate the accumulation of a database for Ukraine’s future successful claims against the Russian Federation for compensation for damages resulting from its aggression.

By Daryna Mykhailenko, Senior Associate, Inna Erbelidze and Yuliia Seredynska, Associates, Avellum

Wolf Theiss, working with Simpson Thacher & Bartlett, has advised KKR on its USD 450 million investment in Hero Future Energies.

KKR is an investment firm that offers alternative asset management as well as capital markets and insurance solutions.

Hero Future Energies operates in India, Bangladesh, Vietnam, Singapore, Ukraine, and the UK. The company is an independent power producer with approximately 1.6 gigawatts of operating assets across the utility, commercial, and industrial sectors.

According to Wolf Theiss, “KKR and Hero Future Energies, the renewable energy arm of the Hero Group, closed a transaction under which KKR invested USD 450 million in HFE to enable the company to expand its renewable energy capacity and capabilities across technologies such as solar, wind, battery storage, and green hydrogen. The investment also aims to support HFE with its expansion into new markets over time.”

The Wolf Theiss team included Partner Taras Dumych, Senior Associates Sergii Zheka and Oksana Volynets, and Associates Olena Kravtsova and Olga Ivanova.

Wolf Theiss was unable to provide additional information on the matter.

Asters, working with Quinn Emanuel Urquhart & Sullivan, has successfully represented the interests of the Republic of Ukraine before the UK Supreme Court in a dispute with Russia concerning a USD 3 billion eurobond issuance from 2013. 

According to Asters, the “UK Supreme Court has handed down its judgment to send for a full public trial the legal proceedings initiated on behalf of Russia relating to the USD 3 billion in eurobonds issued by Ukraine in December 2013. This landmark ruling permits Ukraine to defend the claim in the English courts on the ground of duress exercised by Russia against Ukraine through threats of aggression back in 2013, and Russia’s subsequent behavior could not realistically be ignored. The full disclosure will adduce another evidence that Ukraine has truth and right on its side.”

The Asters team included Co-Managing Partner Oleksiy Didkovskiy, Senior Partner Armen Khachaturyan, Counsels Oksana Legka and Anna Tkachova, and Associate Anna Lalaiants.

Viacheslav Yakymchuk joins Serhiy Chorny as Co-Managing Partner of Baker McKenzie’s Kyiv office. He takes over from Serhiy Piontkovsky, who has held that position since 2010 and will continue to lead the firm’s Real Estate practice group in Kyiv.

Yakymchuk, who has been heading the firm’s Corporate/M&A and Private Equity practice groups, has been with the firm since 2002. He made Partner in 2008. Before joining the firm, he was an Assistant Corporate Counsel Europe at Archer Daniels Midland, from 2005 to 2008, and a Senior Associate with Squire Patton Boggs legacy firm Squire Sanders & Dempsey, from 1998 to 2002.

Chorny has been a Co-Managing Partner of the Kyiv office of Baker McKenzie since 2010. Specializing in banking and finance, capital markets, and insolvency and restructuring, Chorny first joined the firm in 1993 and was promoted to Partner in 1998. Since 2010, he has also been heading the firm’s Banking, Finance, and Capital Markets practice groups in Kyiv.

“In 2022, Baker McKenzie marked the 30th anniversary of its operations in Ukraine. Despite the war, the Kyiv office maintains operation in these unprecedented circumstances and continues to provide services to Ukrainian and international clients,” the firm’s press release stated. “As a team, the Kyiv partners are working together to ensure the smooth operation and further successful development of the Kyiv office during the war and following the victory of Ukraine.”