Category: Ukraine

Asters has successfully represented Power Construction Corporation of China and Powerchina Huadong Engineering Corporation in challenging security measures granted by the Kyiv Court of Appeal in assistance to arbitration proceedings pending before the Dubai International Arbitration Center against the Fursy Energy Group and FAS Energy.

The firm explained that “the procedure for interim measures of protection in aid of international arbitration was introduced to the Civil Procedure Code of Ukraine in December 2017 with the full-scale reform of Ukrainian procedural codes. Despite some sporadic previous decisions by the Ukrainian courts, the Powechina case became the first one addressing fundamental issues regarding interim measures procedure, such as the international jurisdiction of the Ukrainian court in such cases with multiple foreign defendants.”

As background, according to Asters, “in spring 2022, Fursy Energy Group LLC and FAS Energy LLC, the owners and operators of the Photovoltaic power plant in the Kyiv Region, launched an arbitration in the DIAC against Powerchina. In parallel, Fursy applied to the Kyiv Court of Appeal for security measures in aid of international arbitration seeking a prohibition for Powerchina to collect the pledged and mortgaged assets in Ukraine for the certified debts of Fursy. In May 2022, the Kyiv Court of Appeal ex parte upheld Fursy’s application. Notably, this was the first known ruling rendered against collectively two foreign companies upon an application filed in aid of international arbitration having no seat in Ukraine. In June 2022, Powerchina appealed the Kyiv Court of Appeal’s ruling on multiple grounds, challenging the international jurisdiction of the Ukrainian courts over Powerchina and claiming a lack of substantive grounds to grant the interim measures.”

According to the firm, the Supreme Court held that “in the case of multiple defendants, the international jurisdictions of the Ukrainian court shall be established with respect to each of such defendants.” Furthermore “Kyiv Court of Appeal erred in establishing its jurisdiction since the court did not have jurisdiction over one of the Powerchina companies, which does not have a representative office and/or property in Ukraine,” and it “sided with Powerchina and Asters by finding that the subject matter of the claim referred by Fursy to arbitration does not correlate with the measures requested before the Ukrainian courts.” Finally, it “found that the requested measures were disproportionate.”

The Asters team included Co-Managing Partner Oleksiy Didkovskiy and Partners Markiyan Kliuchkovskyi, Yaroslav Petrov and Iryna Pokanay, Counsels Oleksandr Volkov, Anzhelika Livitska and Gabriel Aslanian, Senior Associate Viktor Tarasenkov, and Associate Oleksii Izotov.

Avellum has advised the Ministry of Finance of Ukraine on extending a EUR 200 million 15-year loan from the Italian Republic and a CAD 450 million 10-year loan from Canada. Sayenko Kharenko advised the Government of Canada.

According to Avellum, “the loan from Italy will help to cover the social expenses of the state budget of Ukraine, including to pay salaries to teachers in Ukraine. Italy co-finances these expenses together with USD 4.5 billion financing provided by the World Bank under its PEACE project.”

“The loan from Canada will be directed towards the general purposes of the state budget of Ukraine,” the firm added. “This latest loan brings total financial support provided by Canada to date in 2022 to CAD 1.95 billion.”

The Avellum team was led by Senior Partner Glib Bondar and included Senior Associate Oleg Krainskyi and Associates Mariana Veremchuk, Yaroslav Pavliuk, and Oleksandra Mohylna.

The Sayenko Kharenko team was led by Partner Igor Lozenko and included Associates Oles Trachuk, Vladyslava Mitsai, and Oleksandr Motin.

Kinstellar has advised telecommunications operator Kyivstar on its acquisition of a controlling stake in digital healthcare company Helsi.

Veon subsidiary Kyivstar is a digital operator in Ukraine with about 25 million mobile subscribers and over 1.2 million home internet subscribers, as of June 2022. The company provides services related to mobile and fixed-line technologies, including 4G.

Helsi is a medical information system and a digital provider in the healthcare field in Ukraine, with over four million Helsi mobile application users.

“By signing the agreement with Helsi we see great potential to take the lead in the e-health industry,” Kyivstar CEO Alexander Komarov commented. “Kyivstar is planning to expand its business and invest in the next three years in the development of digital eco-systems for the health of Ukrainians, developing new products, enhancing critical infrastructure, and creating new jobs.”

The Kinstellar team was led by Partner Galyna Zagorodniuk and Counsel Natalia Kirichenko and included Senior Associates Danylo Rudyk and Ivan Shatov and Associates Andrii Kornuta and Olena Stanishevska.

Editor’s Note: After this article was published, Sayenko Kharenko announced that it had advised Helsi’s shareholders and management. The firm’s team included Partners Vladimir Sayenko and Oleksandr Nikolaichyk, Senior Associates Ilhar Hakhramanov, Igor Pomaz, and Pavlo Kovalchuk, and Associate Nazarii Pylypchuk.

Avellum, working with White & Case, has advised the Ministry of Finance of Ukraine on the restructuring of Ukraine’s sovereign debt. Sayenko Kharenko, working with Latham & Watkins, advised JP Morgan in its role as solicitation agent. Weil Gotshal & Manges advised some of the GDP-warrant and bondholders.

According to Sayenko Kharenko, the project included a solicitation for 13 series of Ukraine’s outstanding Eurobonds, amounting to approximately USD 19.5 billion of the sovereign debt, and a separate consent solicitation in relation to approximately USD 3 billion GDP-linked securities issued by Ukraine in 2015.

“The three-week negotiations with bondholders and GDP warrants holders resulted in the successful amendment of all of Ukraine’s sovereign international Eurobonds and GDP warrants, as well as state-guaranteed Eurobonds,” the Ministry of Finance of Ukraine announced. “Holders of around 75% of the aggregate principal amount of Ukraine’s 13 Eurobond series outstanding voted in favor of amending the conditions of the Eurobonds (with at least two thirds of the aggregate principal amount of Eurobonds outstanding being required for successful amendment). Furthermore, each series of sovereign Eurobonds received more than 50% of votes in favor of amending the conditions, in line with the applicable consent requirements.”

According to Sayenko Kharenko, “the successful liability management exercise was primarily focused on the extension of the notes’ maturity and introduction of coupon deferral mechanics, allowing Ukraine to postpone servicing its debt until 2024. The deal received unprecedented support from a group of creditors of Ukraine within the G7 and the Paris Club that committed to providing a coordinated suspension of debt service to Ukraine.”

The Avellum team included Senior Partner Glib Bondar, Senior Associates Oleg Krainsky and Anastasiya Voronova, Associate Yaroslav Pavliuk, and Junior Associates Mariana Veremchuk and Oleksandra Mohylna.

The Sayenko Kharenko team was led by Partners Igor Lozenko and Anton Korobeynikov and included Associate Oles Trachuk and Junior Associate Yevgen Koval.

Asters has advised Olson Family Trust Director Chuck Olson prior to and during his visit to Ukraine on the implementation of the first phase of the trust’s humanitarian mission. 

According to the firm, the goals of the mission include: the delivery of humanitarian aid (food, medicines, personal items, children’s products) to the frontline zones; the evacuation of Ukrainian citizens from the war zone to the western part of Ukraine as well as arranging housing for them; financial support to Ukrainian farmers who suffered damages and losses from Russian military aggression; updating the US donors and federal government on the ways to support Ukraine; support and guidance to the US journalists who spread information about Russian crimes in Ukraine.

Asters’ team included Senior Partner Armen Khachaturyan, Partner Yaroslav Petrov, Counsel Maksym Tereshchuk, and Associate Anastasiia Pozhar.

The Laws of Ukraine “On Amendments to Certain Laws of Ukraine Regarding Priority Reform Measures in the Field of Town-Planning” No. 2254-IX, dated 12 May 2022 (“Law 2254”) and “On Amendments to Certain Legislative Acts of Ukraine Regarding Regulatory Peculiarities of Land Relations under Martial Law” No. 2247-IX, dated 12 May 2022 (“Law 2247”, hereinafter together with Law 2254 – “Laws”) came into force more than a month ago.

The Laws simplify land and town-planning legislation to create conditions for the placement and construction of structures and buildings to be resided by the persons who lost their homes because of the full-scale war of the Russian federation against Ukraine.

The Laws provide two following types of housing to accommodate the citizens temporarily:

1. temporary structures (“Temporary Structures”) for internally displaced persons, as movable property, which may be placed:

• on land plots of any ownership type and category (except lands for the nature reserve and other environmental use, historical and cultural use, and forestry lands) without changing the designated use
• on land plots of municipal property following the Temporary Structures’ layout developed based on a decision of a local authority or head of military administration of a town
• with no need to obtain construction permits

2. buildings for temporary residence of internally displaced persons, as real estate, for construction of which:

• it is possible to establish/change the designated use of a land plot without observing the rules of the balance between the types of designated use of a plot and the functional purpose of the territory and without the local town-planning documentation
• establishing/changing the designated use of a land plot for the construction requires obtaining a conclusion of a local town-planning and architecture authority (“Conclusion”)
• there is no need to obtain town-planning conditions and restrictions if the Conclusion is in place

Placement and construction of the specified housing types are allowed only on those land plots of municipal property, which are granted to the executive bodies of local councils for permanent use. The transfer of such land plots to private parties on the basis of any other proprietary right is prohibited.

We hope that the changes introduced by the Laws will contribute to the prompt provision of housing to as many citizens as possible who suffered because of the Russian federation’s aggression until damaged and/or destroyed residential real estate objects of such persons are restored.

By Inna Erbelidze, Junior Associate, and Daryna Mykhailenko, Associate, Avellum

Over the last years the Ukrainian legal community has been actively discussing the developments in the antitrust reform and making practical efforts to implement it. MPs, the Antimonopoly Committee (the AMC) and other state bodies, international organizations, domestic and foreign antitrust experts have been involved in this process. This article provides an overview of certain changes that will further contribute to the development of the Ukrainian antitrust and competition legislation, and which have already been reflected in draft laws. Most of them were published in the form of recommendations provided to Ukraine by the OECD (Organisation for Economic Co-operation and Development) several years ago. 

So what can be done to give a boost to the reform of the antitrust and competition area in Ukraine?

To broaden the scope of the leniency program in order to provide fine reductions to subsequent applicants 

Leniency program is a fundamental tool to detect cartels, as it ensures an opportunity for undertakings to provide competition authorities with valuable information about cartels in which they participated in exchange for full or partial immunity from fines.

The possibility of being exempt from liability for the anticompetitive concerted actions (participation in cartels) is provided in the Law of Ukraine “On Protection of Economic Competition”, the procedural features of which were determined by the Procedure for Exemption from Liability, which was presented and has been in force since 2012. However, the current leniency rules allow for the possibility to grant an exemption only to the first applicant.

This recommendation was also provided to Ukraine in the OECD Reviews of Competition Law and Policy (the OECD Reviews). The recommendation suggests granting fine reductions not only to the first applicant notifying the AMC of the anticompetitive concerted actions, but also to the subsequent applicants contacting the AMC and providing relevant information and evidence to facilitate investigation.

Several draft laws propose to introduce possible fine reductions for other applicants who may not claim full exemption from liability, as the exemption was granted to an earlier applicant that participated in the relevant anticompetitive concerted practices. Such applicants are required to voluntarily provide evidence of the anticompetitive concerted actions not available with the AMC, which are of the essential importance to adopt the decision in the case. The AMC cuts the pre-calculated amount of the fine depending on the order of application: the first applicant shall be eligible for up to 50% reduction, the second – for up to 30%, and all other applicants – for up to 20%. 

To bestow the AMC with the power to reach settlements with infringers

The settlement option would enable the AMC to speed up the consideration of cases and focus on the priority cases of violations. In addition, infringers would be able to receive fines lower than those which they could have faced without the possibility of settlement.

Several draft laws provide for bestowing the appropriate powers to the competition authority. An undertaking that has committed an infringement in the form of the anticompetitive concerted practices or abuse of dominance may be subject to a settlement procedure. The settlement procedure in the case may be initiated after the submission of preliminary conclusions in the case of violation and before the AMC brings a final decision in the case. Upon receipt of preliminary conclusions in the case the defendant may request the relevant body of the AMC to settle the case. A case will be considered settled when a settlement agreement between the AMC and the defendant is signed and then validated by a commercial court.

The essential conditions of a settlement agreement include:

• the defendant acknowledges participation in the violation specified in the preliminary conclusions;
• the defendant accepts the amount of the imposed fine;
• the amount of fine is 15% lower than it could be should the AMC refuse the settlement procedure.

The settlement agreement as approved by a commercial court would be the basis for a final decision in the case against the defendant, in accordance with the terms of the agreement. The draft provisions state that the procedure for approving the settlement agreement on the case will be determined by the Commercial Procedural Code of Ukraine.

To enable the AMC to prioritize enforcement 

This recommendation was also provided to Ukraine in the OECD Reviews.

The AMC begins considering cases regarding violations of the competition law upon applications from the business entities, individuals, associations, institutions, and organizations on violation of their rights due to the actions or omissions defined by the Law “On Protection of Economic Competition”; or upon submissions from the state authorities, local governments, administrative and economic management and control bodies about the same. According to the law, if the alleged actions or omissions do not affect competition in the market, the applicant may be denied consideration of the case. In practice, the AMC does not apply this provision of the law.

Several draft laws provide for enabling the AMC not to initiate proceedings upon applications of business entities, citizens, associations, institutions, organizations, or submissions of state authorities, local governments, administrative bodies of economic management and control, if the signs of violation of the legislation on protection of economic competition specified in the application do not correspond to the AMC’s operational priorities. In such cases, the AMC would be required to issue a reasoned order to refuse to consider a case that doesn’t meet AMC’s established priorities.

To enable the AMC to directly enforce penalties for breaching the Antitrust law, without having to resort to the courts in the absence of voluntary payment

This recommendation was also provided to Ukraine in the OECD Reviews. To-date, the AMC has not been enabled to that effect.

The draft law stipulates that if the decision of the AMC body is not executed voluntarily, the AMC body that imposed a fine may issue an enforcement order. It will be an executive document, which enters into force on the day of its adoption and is passed by the AMC or the Head of the AMC’s territorial branch to the state executive service for enforcement.

To strengthen due process and procedural rights of the parties involved in competition procedures

This recommendation was also provided to Ukraine in the OECD Reviews. Several draft laws envisage significant strengthening and detailing of the procedural rights of the parties in the antitrust cases and inspections of the AMC. The respective changes are long-awaited by the AMC and business community because they are expected to provide for improving procedural fairness and effectiveness of the antitrust proceedings.

To establish parental liability for the anticompetitive conduct of their subsidiaries 

This recommendation was also provided to Ukraine in the OECD Reviews . Currently, this liability is non-existent.

Several draft laws stipulate imposing a fine on the business entity that exercises control over a group of legal entities and/or individual entrepreneurs, in the event that several of these legal entities and/or individual entrepreneurs have committed acts (actions, omissions) that were recognized as violation of the antitrust legislation. The obligation to pay the fine imposed on these legal entities and/or individual entrepreneurs will be joint and several.

To revise the Code of Administrative Offenses in order to enable the AMC to impose effective and deterrent fines on individuals 

This recommendation was also provided to Ukraine in the OECD Reviews . Several draft laws stipulate amendments to legislative framework to enable imposing effective and deterrent fines on individuals. When officials of public authorities, local governments, administrative and economic management and control bodies, other individuals fail to show up to give explanations concerning the consideration of the case of violation, they will face a fine of 50 to 500 non-taxable minimum incomes of citizens.

To upgrade the merger control regime

Several draft laws envisage the exclusion of the seller’s value indicators (merger control thresholds) when calculating respective indicators of the parties to mergers.  Such exclusion is stipulated in the EU-Ukraine Association Agreement as a step towards harmonization of the national legislation on the protection of economic competition with the relevant EU standards. In the future the conclusion of the asset management agreements by the asset management companies may be exempt from obtaining the AMC’s merger clearance, provided that such actions are purely financial transactions.

To establish clear and independent process for appointing state commissioners of the AMC

This recommendation was also provided to Ukraine by the OECD Reviews .

The AMC state commissioners are nominated by the Prime Minister of Ukraine, based on proposals of the AMC Chairman, and can be dismissed by the President of Ukraine. The term of office of an AMC state commissioner is seven years. Appointment of a state commissioner as the first deputy or deputy Chairman of the AMC is not a ground for renewing the seven-year term. Upon expiration of the term of office, the state commissioner shall continue to perform his/her duties until a new state commissioner is appointed to this position. A citizen of Ukraine who has reached the age of thirty, has a higher legal or economic education, and at least five years of relevant work experience in the last ten years may be appointed a state commissioner. Currently, the AMC is composed of the Chairman and eight state commissioners. 

Several draft laws propose that the AMC must have at least five state commissioners with a law degree and at least two state commissioners with a degree in economics. Furthermore, the draft laws provide that the positions of the Chairman and state commissioners are filled through competitive selection by the Selection Commission. This Commission shall consist of three persons appointed by the President of Ukraine, three persons appointed by the Verkhovna Rada (Parliament) of Ukraine, and three persons appointed by the Cabinet of Ministers of Ukraine. The Selection Commission shall be considered as established if at least seven members in its composition have been approved. One draft law suggests that the number of state commissioners should be increased to 12.

Latest AMC achievements and innovations

• In 2017, the AMC approved the Standard Requirements for Vertical Agreements of Business Entities Concerning the Supply and Use of Goods.
• In 2018, the AMC approved the Standard Requirements for Concerted Actions of Business Entities in the Field of Technology Transfer, compliance with which allows to carry out concerted practices without the prior approval of the AMC.
• In 2018, the AMC prepared a Review of the practices of the Supreme Commercial Court of Ukraine and the Supreme Court of Ukraine on the application of antitrust law.
• In 2019, the AMC presented a draft order “On approving Guidelines on market definition”.
• In 2019, the AMC presented a draft order “On approval of the Methodology for determining the monopoly (dominant) position of economic entities in the market”.
• In 2020, the AMC approved Guidelines on application of the small but significant and non-transitory increase in price (SSNIP test).
• In 2020, the AMC summarized and approved the enforcement practice in connection with the abuse of dominance.
• In 2020, the AMC approved a draft Guidelines for calculating the Competitive Environment Monitoring Index.
• In 2022, the AMC prepared a Review of the practice of the Supreme Court of Ukraine on the application of antitrust law for 2018 – 2021.
• As of 2022, Guidelines on conducting market studies are being drafted by the AMC.

In conclusion

The abovementioned list displays the progress in the preparation for the antitrust reform in Ukraine in general, as well as the already developed legislative framework for its implementation. The proper legislative consolidation of the analyzed issues will have a positive impact on the development and improvement of the domestic antitrust legislation, the functioning of the economy and the corporate sector.

By Yaroslav Medvediev, Counsel, Integrites

Asters has successfully defended the interests of PrivatBank before the Supreme Court in a case relating to the bank’s nationalization.

According to Asters, PrivatBank is Ukraine’s largest bank in terms of assets.

On July 26, 2022, the Supreme Court of Ukraine “overturned the decisions of the courts of previous instances and dismissed the claim of Triantal Investments, PrivatBank’s former shareholders, to declare illegal and cancel the order of the National Bank of Ukraine regarding the inspection of PrivatBank, which preceded its nationalization,” Asters announced. 

According to the firm, “the former shareholders used the unlawful decisions of the courts of previous instances (the Kyiv District Administrative Court and the Sixth Administrative Court of Appeal) as one of the main grounds to appeal the nationalization of PrivatBank in other court proceedings. The Supreme Court’s decision deprives the former shareholders of one of the key arguments in further disputes related to challenging the bank’s nationalization.”

Asters’ team included Partner Andriy Pozhidayev and Senior Associates Vira Baulina, Oleksandr Yakovenko, and Oleksiy Ukolov.

Former Counsel Vitaliy Odzhykovskyy has been promoted to Partner with Sayenko Kharenko.

Specializing in tax, Odzhykovskyy has been with Sayenko Kharenko as a Counsel for over five years, having first joined in 2017. Before joining the firm, he was a Senior Counsel with WTS Consulting, from 2014 to 2017, and Senior Of Counsel with KM Partners, from 2013 to 2017. In 2011, he was a Junior Attorney at Baker McKenzie. Between 2009 and 2011, he worked as an Advisor at KM Partners. Earlier still, Odzhykovskyy was a Legal Counsel with Pari-Match, from 2007 to 2008.

“Historically, we invest a lot of effort and resources in building a strong team of professionals,” Sayenko Kharenko Partner Vladimir Sayenko commented. “And every promotion within the company proves the correctness of our strategy. I am very pleased to welcome Vitaliy Odzhykovskyy to his new status, which reflects Vitaliy’s significant contribution to the success of our law firm. With the beginning of the full-scale Russian invasion, Vitaliy and his team showed the ability to adapt the work of the tax practice to new conditions and a conscious civic position in initiatives that help Ukraine bring victory closer and change it for the better. Therefore, this promotion is deserved and logical, despite the difficulties that the legal market and the entire country are facing today.”

“For about five years, we have been successfully helping clients together and participating in important national projects,” Odzhykovskyy added. “The war changed the emphasis and priorities in work, but the belief in our victory and making maximum efforts for it on the part of everyone did not change. The new role carries greater responsibility and new challenges, but I am sure it will be an interesting and productive experience.”

On 15 March 2022, the Parliament of Ukraine passed Law of Ukraine “On Organisation of Labour Relations under the Martial Law” No. 2136-IX, dated 1 July 2022 (“Law 2136”). Law 2136 was intended to define the aspects of labour relations during martial law.

However, the provisions of Law 2136 have displayed a number of collisions and legal gaps in the first months of application. In order to address these shortcomings, on 1 July 2022, the Ukrainian Parliament adopted Law of Ukraine “On Amendments to Certain Laws of Ukraine Regarding Optimisation of Labour Relations” No. 2352-IX, dated 1 July 2022 (the “Law”). The Law came into force on 19 July 2022. Among other things, it contains critical changes regarding labour relations regulation during the martial law.

Remuneration for employees in military service

The employer is no longer obliged to pay the average salary to the employees currently in military service. However, the employer remains under the obligation to reserve the workplace and position of such an employee.

Suspension of employment agreements

The Law regulates suspension of employment agreements. Specifically, if parties to an employment agreement are unable to fulfil their duties due to the armed aggression against Ukraine, the employer may issue an HR order, for the duration of the martial law, suspending such an agreement with the consent of the civil-military administration. 

An employee may disagree with such an order. In that case, the employee or a trade union acting on the employee’s behalf may challenge the relevant order before the State Labour Service of Ukraine. In its turn, the State Labour Service of Ukraine may, with the consent of the civil-military administration, adopt a ruling to rescind the corresponding order or to address the violation of labour laws in another manner. The employer must take action prescribed by the ruling within 14 days from the day of its receipt. It may also revoke such a ruling in court within 10 calendar days.

Termination of labour relations

The legislator has introduced new grounds for dismissal, specifically:

• death of the employer, or entry into effect of a court decision declaring the employer missing or deceased;
• death of the employee, or a court decision declaring the employee missing or deceased;
• employee’s absence from work without providing reasons for such absence during four consecutive months; and
• inability to provide working conditions due to the destruction of the enterprise, its property or other work equipment as a result of hostilities. The notice period between the employee and the primary trade union organisation to effect further dismissal under this condition is ten calendar days. However, in this case the dismissal is possible if the employee cannot be transferred to another position with his/her consent. An employee dismissed on this ground will have the right to be reinstated for one year if employees with the same qualifications are hired.

Settlements upon dismissal

From now on, a limit is set on settlement payments for the employee upon dismissal. If the employer failed, through its fault, to make timely payments to the employee upon dismissal, the employee may demand payment of the average salary for the entire time of delay up to six months.

Electronic communication with employees 

For the duration of the martial law or state of emergency, the employer may communicate with the employees in electronic form, specifically notifying them about orders and directives. However, such communication must be effected subject to mandatory application of an advanced or qualified electronic signature.

Vacation regulations  

For the duration of the martial law, the annual paid vacation may not exceed 24 days. The remainder of the vacation days, to which the employee may be entitled, including the vacation from preceding years, is carried over to the period after the end of the martial law. The compensation for the unused vacation days may be paid out upon dismissal.

The legislators also simplified the procedure for payment of salary prior to the start of the vacation. As opposed to the mandatory payment no later than three days before the start of vacation, this issue is currently resolved at the discretion of the parties. However, such payment must be made no later than on the last day before the actual start of the vacation.

We will keep you updated and notified of the consequent changes in the labour regulations. 

By Bogdana Parkhomchuk, Senior Associate, and Andrii Andryishyn, Associate, Avellum