Category: Ukraine

Sayenko Kharenko has successfully represented seller MHP Food Trading in arbitration proceedings under FOSFA Rules of Arbitration and Appeal against a buyer based in Hong Kong.

MHP Food Trading is the UAE-based subsidiary of the MHP Group, an international food, agro, and tech company with headquarters in Ukraine.

According to Sayenko Kharenko, “the dispute arose under the English law-governed FOSFA Model Contract No. 56 on the supply of sunflower oil by MHP. Since the buyer failed to make the contractually agreed advance payments for the sunflower oil, MHP could not supply the commodity to the buyer and was forced to resale it to a third party with a significant discount. The resulting FOSFA claim against the buyer concerned the damages caused to MHP by the buyer’s breach of the contract. Ensuing arbitration proceedings conducted by the arbitral tribunal of three arbitrators involved multiple submissions by each party on the points of facts and law. The tribunal accepted the position of MHP and awarded it almost USD 1 million, including damages, compound interest, and arbitration costs.”

Sayenko Kharenko’s team included Partner Olexander Droug, Senior Associate Andriy Stetsenko, Associate Vladyslav Bandrovsky, and Junior Associate Yuliia Pavlova.

On 26 January 2023, the Resolution of the Cabinet of Ministers of Ukraine “On Amendments to the Procedure for Investigation and Recording of Accidents, Occupational Diseases and Industrial Accidents” No. 59, dated 20 January 2023, (the “Resolution”) came into effect. The Resolution, among other things, establishes the procedure for the timely and thorough investigation of workplace accidents caused by the military aggression of the russian federation against Ukraine.

Key changes

Accidents that occur to employees and/or to contractors or other workers in result of military hostilities are subject to special investigation, regardless of the severity of the injury (damage to health). Such accidents are investigated at the location (jurisdiction) of their occurrence.

Upon receiving information about an accident, the employer is obliged to report the accident to the relevant authorities in writing or by email within one day.

Investigations of accidents that have caused severe consequences are conducted by the employer’s commission without a corresponding written order from the territorial body of the State Labour Service. If the employer is unable to form a commission and to ensure that the accident is investigated, the obligation to conduct such an investigation is imposed on the territorial body of the State Labour Service at the place of the accident or at the location of the relevant enterprise.

In the event of a group accident resulting in the death of two to four persons, the investigation is conducted by a special commission established by the relevant territorial body of the State Labour Service, and in the event of the death of five or more persons or injuries to 10 or more persons, by a special commission formed by the State Labour Service.

The special accident investigation commission consists of three members, namely the following:

• An official of the territorial body of the State Labour Service (chair of the commission);
• A representative of the territorial body of the Pension Fund of Ukraine
• A representative of the military administration

Meetings of the special commission may be held remotely via conference calls; the meeting protocols, acts, or other documents may be signed by the members of the commission, and approved by the employer or the head of the body that formed the (special) commission, by applying a qualified electronic signature.

If the special commission does not have access to the incident location due to hostilities or its temporary occupation, or if there is a threat of a human-caused or environmental disaster, the protocol of inspection of the place where the accident has occurred may be made based on a certificate drawn up by the employer in any form.

If it is impossible to form a commission and to conduct an investigation (special investigation) due to a threat to the life and health of the commission members, the employer and the relevant territorial body of the State Labour Service should collect, record, and systematize all available information about the accident that is received (or becomes known subsequently) for the purpose of its investigation later.

In the event of a threat to the life and health of the members of the commission (special commission) during the accident investigation, the investigation may be suspended by order of the employer, the State Labour Service or its territorial body that formed the commission. We recommend that employers take into account the above legislative changes.

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

The IT industry in Ukraine remains one of the key drivers of the Ukrainian economy even despite the market turmoil in the times of war. Alongside this, the constant development of technology and the need to honour obligations and commitments to implement EU law in terms of copyright and related rights requires certain amendments to the current Ukrainian legislation.

On 1 January 2023 the new law “On Copyright and Related Rights” (“New Copyright Law”) came into force. With this legal update, Ukraine moves forward on copyright and related rights law, not only chasing the EU requirements, but implementing the best market IP practices on improving IP copyright protection and protection of related rights bringing it in line with the EU regulation.

Below are the key changes which are introduced by the New Copyright Law. It widens the legislative provisions in terms of copyright and related rights, which previously lacked proper details, and makes the regulation of certain legal issues in this area more specific.

The concept of a sui generis right

The New Copyright Law sets out a list of copyright objects, related rights and works which are not afforded copyright protection under the European Union approach. Among them are: abbreviations, the photographs that lack signs of originality (are not photographic works) and non-original objects generated by a computer program (e.g. AI-generated objects) which are now protected by a unique “sui generis” right.

For decades, the droit d’auteur system has advocated that only a human creator can be an author, because in order to qualify for copyright protection, a work created must be original to the author and possess some degree of creativity. If these criteria are not met, an object cannot be protected by copyright, so moral and economic rights do not exist either. With the latter, it basically means that these works may still fall under copyright protection, but in a unique way: there are no moral rights arising out of creating a non-original object, as no individual was involved in its development. But apart from this, some parties may be entitled to exercise some scope of economic rights with respect to machine-generated objects.

Orphan works and other important takeaways

To facilitate digitalisation, a legal framework on the specifics of exploitation of works that have acquired the “orphan” status has been established (the orphan works are the works that are still protected by copyright, but their authors or other rightholders are not known or cannot be located). With the adoption of the New Copyright Law the IP registers are to be created for certain types of IP objects, in particular for orphan works. The exploitation right is granted to libraries, museums with open access to visitors, archives and other organisations for the preservation of funds.

A new approach has been also adopted for the calculation of the copyright protection validity term: from now on, as in EU countries, copyright protects intellectual property objects for 70 years after the author’s death or 70 years after the death of the last surviving author in the case of a work of joint authorship.

The New Copyright Law has also broadened the scope of the moral rights of the author. From now on, the author has been granted a right to name the work or leave it untitled, as well as the right to dedicate the work to a person, event or date.

Violations

In addition, the New Copyright Law covers actions which are considered as those that violate copyright and related rights. Among the violations, there is now an import, distribution of copies of copyright and (or) of related rights objects, from which the economic rights to these objects have been removed or changed without the permission of the rightholder, in particular in electronic (digital) form, or forgery, changing or removing information, in particular in electronic (digital) form, rights management without the permission of the relevant rightholder of copyright or related rights. In addition, new guidance has been suggested for actions which are now considered as threatening violation of personal moral and economic copyright and related rights.

The new copyright regulation has also increased the liability for the infringement of intellectual property rights. In particular, methods of calculating compensation with reference to the subsistence level for able-bodied persons have been supplemented – from 2 to 200 subsistence levels (EUR 135 – EUR 13,600 as of 01.01.2023).

Rights transfer

The contractual provisions on the transfer (alienation) of property rights to objects of copyright or objects of related rights also underwent certain changes. The agreements setting out the transfer of intellectual property rights may now be executed in an electronic form. In addition, it is clearly stated that the economic rights to the object of copyright or the object of related rights can be alienated either to any other person in full in the territory of all states of the world or partially for specific means of exploitation within the territory of certain states of the world, or on all means of exploitation within the territory of certain countries of the world. In the event of the transfer (alienation) of property rights to the intellectual property object or the object of related rights partially, the economic rights in the scope not specified in the contract are considered not to be transferred. Therefore, when entering into agreements on the alienation of proprietary rights or any other agreement envisaging such alienation, it is still highly important to exactly specify the scope of rights to be transferred.

However, an old conflict of laws has been resurrected with the change to the law as regards the intellectual property rights to the object created within the scope of the employment agreement and rights to the object created on request/ordered.

Under Part 2 of Art. 429 of the Civil Code of Ukraine and Art. 440 thereof, the intellectual property rights to a work created within the scope of the employment agreement belong to the employee who created this work and the company or private entrepreneur who hired this employee, jointly, unless otherwise set out by law or the contract. However, the New Copyright Law, which does not affect the provisions of the Civil Code of Ukraine, transfers economic intellectual property rights entirely to the employer, from the moment the work is created, unless otherwise provided by law, the employment contract or another agreement on the alienation of the IP rights. If the economic rights to a work created within the scope of the employment agreement are transferred in full to the employer, the employee, as an author, is entitled to remuneration.

Another issue is that following the provisions of the Civil Code of Ukraine, intellectual property rights to a work created on request/ordered belong to the creator of this object and the customer jointly, unless otherwise set out by the contract or law. However, the New Copyright Law grants the economic rights to a work created on request/ordered to the customer, unless otherwise agreed in the contract (except for a work of fine art).

The employer’s or customer’s right to complete the unfinished work by means of hiring another person or to create amendments to it may be considered as one of the key features as regards the works created on request/ordered and the works created within the scope of the employment agreement.

Computer programmes

The New Copyright Law brings more clarity and details regarding the copyright of computer programmes. The originality criterion is becoming more important for the computer programme to enjoy copyright protection, whereas the protection now covers the computer programmes expressed in source or object code subject to their originality. Namely, it is now specified that the graphic interface of a user, the functions set, the format of data files used in a computer programme to operate its functions shall not be deemed as the forms of computer programme expression and therefore are not protected by copyright. It should be mentioned that following the EU approach, the ideas and principles which underlie any element of a computer programme, including those which underlie its interfaces, logical schemes, algorithms and programming languages, remain outside of copyright protection. It basically means that any exploitation, reproduction of these elements of the computer programme shall not be considered as a violation of the author’s rights.

Droit de Suit
The rates of the equitable remuneration for the resale right have been updated pursuant to European law (where the author is awarded with a percentage, a share, of the resale price of an original manuscript of a literary or musical work in the so-called “droit de suit” or artist’s resale right which is now set at a rate from 0,25% to 6% of the resale price, but shall not exceed EUR 12,500).

With the new copyright regulation, Ukrainian industries dealing with intellectual property rights actually receive both an update in terms of terminology and in terms of copyright protection. Therefore, those companies, primarily involved in the IT business, will now have to reconsider their agreements executed with software developers in terms of copyright protection and update their internal documents related to copyright.

By Olga Ivanova, Associate, Wolf Theiss 

In the 25 January 2023 final decision in the case of Ukraine and the Netherlands v. russia, the Grand Chamber of the European Court of Human Rights (“ECHR”) declared the complaints partly admissibile. The Grand Chamber will now decide the case on the merits.

The case concerns three complaints related to russia-orchestrated military takeover and de facto occupation of the territories in Ukraine through the so-called separatist states “DPR” and “LPR” from spring 2014. Ukraine lodged two applications in relation to a pattern (administrative practice) of continuing violations of a number of Articles of the European Convention on Human Rights (“Convention”) (Ukraine v. russia (re eastern Ukraine) (no. 8019/16)) and on abduction of three groups of children (Ukraine v. russia (II) (no. 43800/14)). The Netherlands’ application concerned the shooting down of Malaysia Airlines flight MH17 (The Netherlands v. russia (no. 28525/20)).

Jurisdictional issues

According to the ECHR russia had effective control over all areas under the “DPR” and “LPR” from 11 May 2014 – the date of the so-called “referendums”. The threshold was satisfied as a result of vast evidence of russian military presence in eastern Ukraine and the decisive degree of influence it had enjoyed over these areas due to its military, political, and economic support to the separatists.

Accordingly, the ECHR established russian spatial jurisdiction over events which took place within the areas of the “DPR” and “LPR” after 11 May 2014, including downing of the MH17 Boeing.

Significance of ECHR jurisdictional conclusions for future BIT cases

The ECHR conclusions on russian effective control over the relevant parts of Ukraine may pave a more certain route for investment arbitration claims emerging from the russian aggression in Ukraine. It will be relevant both for cases on events that occurred since 2014 and during latest stages since 2022.

The ECHR position differs from Crimean investment arbitrations in which tribunals referred to the date of the formal annexation as the starting point of the russian effective control over occupied areas. The ECHR recognised the date of the “referendums” as the starting date to establish russian effective control. This may be a valuable point of reference in establishing russian jurisdiction over actions in Donetsk and Luhansk regions of Ukraine as well as in other parts of Ukraine russia attempted to annex in 2022.

Admissibility issues

The ECHR accepted that Ukraine provided sufficiently substantiated prima facie evidence of an administrative practice and admitted its complaints under Articles 2, 3, 4 § 2, 5, 8, 9, 10, and 14 of the Convention and Article 1 of Protocol No. 1, Article 2 of Protocol No. 1, and Article 2 of Protocol No. 4 to the Convention. Other Ukraine’s complaints were declared inadmissible.

Likewise, the ECHR found that the Netherlands provided sufficiently substantiated prima facie evidence and admitted its Articles 2, 3, and 13 of the Convention complaints.

By Kostiantyn Likarchuk, Senior Partner, Vadim Medvedev, Partner, Oleksii Maslov, Counsel, Avellum

Following their appointment to Counsel in January 2023, former Senior Associate Inna Kostrytska will lead Integrites’ Employment practice while former Senior Associate Kristina Shyposha heads the firm’s Business Protection, Compliance, and Anti-Corruption practice.

Specializing in corporate/M&A and employment with more than 17 years of experience, Kostrytska has been with Integrites since 2019. Before joining her current team, she spent over three years with Jeantet as a Senior Associate and, earlier, over nine years with Gide. Before that, she spent a year as an Associate with Shevchenko Didkovskiy & Partners after beginning her career as a Senior Associate with Consulting Group Prudens, where she spent four years between 2001 and 2005.

Shyposha is a dispute resolution lawyer with more than 12 years of experience. According to the firm, she specializes in business protection for foreign clients, asset tracing and recovery, internal investigations, sanctions, and compliance risks, among others. She joined Integrites in 2017 as a Senior Associate. Earlier, she spent one year as an Associate with Auchan Retail’s Real Estate practice, one and a half years with MFC Gulliver, and three and a half as an Associate with the S-Invest development company.

“Despite the war, we didn’t put the traditional annual evaluation on hold, and its results speak for themselves,” Managing Partner Oleksiy Feliv commented. “We deeply appreciate the professionalism of our colleagues, their long-term loyalty to the firm, and their commitment to grow as experts and lead their respective practices. Lawyers specializing in labor and business protection issues are and will be in high demand by clients in Ukraine. Therefore, my sincere congratulations to Inna and Kristina on their promotion, wishing them many challenging and rewarding projects to follow”.

Integrites has signed a pro bono collaboration agreement with the Ministry of Veterans’ Affairs of Ukraine and the Affordable Housing Institute aimed at developing housing for war veterans and their families.

“The agreement is the next logical step of the expert partnership between Integrites and the Affordable Housing Institute, branded as the Rehousing Ukraine Initiative, which was established in the summer of 2022,” Integrites reported.

According to the firm, the parties will coordinate efforts for the design and construction of a pilot residential property in Kyivska oblast for war veterans and combatants who became internally displaced persons, with the subsequent further expansion of the project to other regions of Ukraine.

The Affordable Housing Institute is a US non-profit impact consultancy company focusing on affordable housing ecosystems in the world.

“We are humbled and proud to contribute to the development of institutions that ensure the country’s defensive capacity,” Integrites Partner Oleh Zahnitko commented. “Veterans set a moral example for the rest of society as long as the fight for Ukraine is concerned. As such, decent homes for the veterans and their families are not only a reward for their service but also a principle for bringing up future defenders.”

“Providing housing for veterans, as well as family members of the deceased male and female warriors who defended the independence, sovereignty, and territorial integrity of Ukraine has been and still remains the priority program for the Ministry of Veterans Affairs,” Ukraine Minister of Veterans Affairs Yuliya Laputina added. “In addition, this is one of the main directions of the future transition from a military career to civilian life. Therefore, we are actively cooperating with other ministries, agencies, and our international partners to elaborate an effective mechanism for the priority provision of housing to these categories of people. I am grateful to our partners for their support and active participation in veteran projects.”

On 5 January 2023, the “Procedure for Organisation and Maintenance of Military Registration of Conscripts, Persons Liable for Military Service and Reservists,” approved by the Resolution of the Cabinet of Ministers of Ukraine No. 1487 dated 30 December 2022 (“Procedure”), came into effect. The Procedure establishes changes regarding the military registration of Ukrainians, including new obligations for employers.

Key changes

• The following persons are subject to military registration:
  • Conscripts under 27 years old;
  • Persons liable for military service and reservists who have not reached the age limit for being in the reserve;
  • Women who have a medical or pharmaceutical specialty; at their own request, women who have a specialty and/or profession according to the list approved by the Ministry of Defence.
• The organisation of military registration at companies is entrusted to the managers. The duties of keeping military records are entrusted to the employees of the personnel service, and, in their absence, to the person who keeps employees’ records at the company. Such a person will be entitled to additional payment of up to 50% of their salary.
• Within seven days from the date of issuance of the order on the appointment or dismissal (removal) of managers and other persons responsible for the organisation and maintenance of military registration, the employer is obliged to notify the relevant territorial centre of recruitment and social support.
• Employment is possible only if it is confirmed that the person liable for military service is on the military register. Within seven days from the date of issuance of the order on hiring or dismissal from work, the employer must send to the relevant territorial centres of recruitment and social support a notice of change to the credentials of the conscripts, persons liable for military service and reservists.
• The employer must inform conscripts, persons liable for military service and reservists of the rules of military registration, which will be confirmed with their personal signature, during the induction process. The rules should also be printed and pinned at a common area on the premises of the employer to ensure good visibility.
• Upon changing the place of residence, conscripts, persons liable for military service and reservists are obliged to appear at the relevant territorial centre of recruitment for military registration within seven days from the date of arrival at the new place of residence.
• Conscripts, persons liable for military service and reservists are obliged to personally notify the authorities where they are registered for military service of changes to their personal data within seven days.
• Failure to submit the lists of citizens subject to registration with military recruiting stations to the territorial centres of recruitment and social support; hiring persons who are not registered with the military; failure to notify conscripts, persons liable for military service and reservists about their call to the territorial centre of recruitment and social support; obstruction of their timely appearance; late submission of documents; and failure to provide information about such persons, may trigger liability of the company’s officials in the form of a fine in the amount of up UAH 8,500 (approx. USD 232) per offense.

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

Integrites has signed a pro bono collaboration agreement with the Ministry of Veterans’ Affairs of Ukraine and the Affordable Housing Institute aimed at developing a 1,700-apartment pilot housing project for war veterans and their families.

“The agreement is the next logical step of the expert partnership between Integrites and the Affordable Housing Institute, branded as the Rehousing Ukraine Initiative, which was established in the summer of 2022,” Integrites reported.

According to the firm, the parties will coordinate efforts for the design and construction of a pilot residential property with approximately 1,700 apartments in Kyivska oblast for war veterans with concomitant infrastructure, including a rehabilitation facility.

The Affordable Housing Institute is a US non-profit impact consultancy company focusing on affordable housing ecosystems in the world.

“Integrites engagement of international financial institutions and other sponsors to the projects and the Affordable Housing Institute will also devise a mechanism to financialize veterans’ housing rights through rent and mortgage subsidies for the pilot project and beyond,” the firm reported. 

“We are humbled and proud to contribute to the development of institutions that ensure the country’s defensive capacity,” Integrites Partner Oleh Zahnitko commented. “Veterans set a moral example for the rest of society as long as the fight for Ukraine is concerned. As such, decent homes for the veterans and their families are not only a reward for their service but also a principle for bringing up future defenders.”

“Providing housing for veterans, as well as family members of the deceased male and female warriors who defended the independence, sovereignty, and territorial integrity of Ukraine has been and still remains the priority program for the Ministry of Veterans Affairs,” Minister of Veterans Affairs of Ukraine Yuliya Laputina added. “In addition, this is one of the main directions of the future transition from a military career to civilian life. Therefore, we are actively cooperating with other ministries, agencies, and our international partners to elaborate an effective mechanism for the priority provision of housing to these categories of people. I am grateful to our partners for their support and active participation in veteran projects.”

Asters, working with Dechert, has advised JSC Ukrainian Railways on the restructuring of two tranches of loan participation notes issued by Rail Capital Markets – one for notes due 2026 and another for notes due 2024 – in a total amount of USD 895 million.

According to Asters, “holders of both loan participations notes agreed to extend the maturity dates of the relevant loan agreements, provide for the deferral of interest during a two-year period, make certain amendments to the covenants contained in the loan agreements, and replace the trustee.”

Ukrainian Railways is a railway network operator in Ukraine that controls the railroad transportation in the country with a combined total length of track of over 24.000 kilometers.

“It is hard to overestimate the importance of Ukrainian Railways for Ukraine’s economy,” Asters Senior Partner Armen Khachaturyan commented. “The successful financial restructuring will allow the company to free up financial resources to eliminate the consequences of the Russian aggression, to maintain the company’s stable operation and uninterrupted rail transportation during the wartime.”

The Asters team was led by Khachaturyan and Counsel Maksym Tereshchuk.

Asters did not respond to our inquiry on the matter.

Editor’s Note: After this article was published, Sayenko Kharenko announced it had advised solicitation agents JP Morgan and Dragon Capital. The Sayenko Kharenko team was led by Partner Igor Lozenko and included Associates Oles Trachuk, Vladyslava Mitsai, and Oleksandr Motin and Junior Associate Yevgen Koval.

Asters has advised the Black Sea Trade and Development Bank on its EUR 8 million financing to the Real Estate Development Centre for the construction of a 128-room hotel in Lviv, Ukraine.

“The loan will be used for the construction, equipping, and commissioning of a 128-room hotel under the Novotel brand, an international mid-range brand for business and leisure travelers,” Asters informed.

The BSTDB is an international financial institution that finances projects in the Black Sea Region. The bank has an authorized capital of EUR 3.45 billion and provides trade and project finance lending, guarantees, and equity participation in private companies and public entities in 11 member countries.

“This case proves that international financial institutions consider Ukraine as an investment destination even during wartime,” Asters Partner Iryna Pokanay commented. “The construction of the hotel should develop the tourism infrastructure and give additional working places in the region.”

The Asters team included Pokanay, Counsels Gabriel Aslanian and Anzhelika Livitska, and Senior Associate Inna Bondarenko.

Asters was unable to disclose further information on the deal.