Category: Ukraine

KPD Consulting has provided legal support to Porsche Ukraine in criminal proceedings seeking the return of automobiles stolen during the occupation of the Kyiv region.

Porsche Ukraine imports the automobiles and commercial vehicles of the Volkswagen group in Ukraine.

“As a result, passenger cars stolen by the occupiers during the hostilities in the Kyiv region were returned,” KPD Consulting informed. “The court confirmed the legality of returning the cars to the legitimate owner. This is one of the first similar precedents in the practice of Ukrainian law enforcement agencies and courts. Taking into account the massive number of property theft cases, the real restoration of owners’ rights has begun. This way of protection has significant advantages since the procedure for restoring the owner’s rights is simplified, accelerated, and less expensive, there is no need to wait for a court verdict.”

The KPD Consulting team was led by Partner Kyrylo Kazak.

March 2022 was a breakthrough month for the virtual assets market in Ukraine. With the help of Ukraine‑based Everstake and Kuna, the Ministry of Digital Transformation of Ukraine set up a fund to accept donations in crypto assets to primarily support Ukraine’s military needs. According to the Ministry, Ukraine’s government has raised over USD60 million in crypto donations to date. Also, Unchain Ukraine, a project of Ukrainian blockchain activists, launched a card that has been marketed as ‘the first charitable cryptocurrency card’ powered by Weld Money and Unex Bank. The crypto assets raised are exchanged into UAH and made available to women and children in need using Unchain Help Card, a virtual card issued by Unex Bank.

In the wake of these events, on 15 March 2022, the President of Ukraine signed the Virtual Assets Act that previously had not been receiving much attention. The Act will enter into effect simultaneously with the act on the taxation of crypto transactions. The most recent bill on taxation of such transactions was registered in the parliament on 13 March 2022 and, in accordance with the current draft, is proposed to enter into force on 1 October 2022.

The Virtual Assets Act lays the groundwork for the regulation of the virtual assets industry and establishes rules applicable to contracts for virtual assets.

Under the Act, a virtual asset service provider is an entity that provides any of the following services: (a) custody of virtual assets and administration of private cryptographic keys, (b) exchange of virtual assets for other virtual assets or fiat currencies, (c) transfer of virtual assets, and (d) intermediary services in the interests of third parties, including public offerings and placements of virtual assets.

An entity may provide any such service if it has been issued a permit by the National Commission for Securities and Stock Market (the “Securities Commission“). When applying for the permit, a virtual asset service provider would need, in particular, to demonstrate that it has an impeccable business reputation under Ukraine’s AML Act (as defined below) and must disclose its ownership structure and ultimate beneficial owners.

In April 2020, the new Act of Ukraine on Preventing and Fighting Money Laundering and Financing of Terrorism and WMDs Proliferation No. 361-IX (the “AML Act“) came into effect. In line with the 5th EU AML Directive, the AML Act names providers of virtual asset services as obliged entities for reporting purposes. The Virtual Assets Act brings further updates to the AML Act in relation to the AML obligations of providers of services on transfer of virtual assets.

If the service concerns virtual assets related to currencies or other currency valuables, such as stablecoins, a service provider must be also licensed as a financial company in Ukraine.

Under the Virtual Assets Act, a foreign crypto business may provide services to Ukrainian clients if it complies with the requirements for this type of activity under the law of its home jurisdiction, has a charter capital of the amount required by the Act, and has been issued a permit by Ukraine’s Securities Commission as discussed above. The Virtual Assets Act provides that the Securities Commission shall approve a special regulation regarding the activities of non-resident service providers within six months following the Act entering into effect.

Ukraine has not followed certain other jurisdictions in recognising virtual assets as a digital representation of value that can be used for payment. Under the Virtual Assets Act, a virtual asset is not considered legal tender in the territory of Ukraine, and can only be exchanged for other virtual assets or fiat money.

More recently, in an attempt to limit the outflow of capital from Ukraine, on 20 April 2022, the National Bank of Ukraine prohibited Ukrainian banks from processing instructions of Ukraine individuals on purchasing virtual assets in an amount exceeding UAH100,000 per calendar month and/or using UAH funds. This limitation is likely to remain in place as long as the Russian aggression continues.

By Andriy Nikiforov, Managing Partner, Redcliffe Partners 

Avellum has advised the seller on the sale of the Pep Group to Locaria. Lexence reportedly advised the buyer.

According to Avellum, “this transaction will allow Locaria to bolster its media and content production capabilities across its global network.”

The Pep Group is a design, creative, production, and asset management provider for brands including Kimberly-Clark, Colgate-Palmolive, and Church & Dwight.

Locaria is a multilingual content agency that specializes in supporting in-house marketing and e-commerce teams, media agencies, and creative production houses.

“I’m excited to solidify our offering, grow the team, and add value as a complement to Locaria’s omnichannel marketing expertise and extensive global reach,” Pep Group Founder Mykhailo Pimenov commented.

The Avellum team was led by Managing Partner Mykola Stetsenko and included Associate Maryna Buinytska.

On 27 May 2022, Law of Ukraine “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine Regarding the Peculiarities of Tax Administration of Taxes, Fees and Unified Social Contribution During Martial Law and the State of Emergency” No. 2260-IX, dated 12 May 2022 (the “Law”), entered into force. The Law introduced several changes to the taxpayers’ rights and obligations during martial law.

Tax liabilities renewal

Tax relief measures imposed under martial law in Ukraine were limited. Taxpayers that can fulfil their tax obligations must file tax returns by 20 July 2022 and pay taxes by 31 July 2022.

Taxpayers must file tax returns, pay taxes, and register VAT invoices within 60 days after the month in which they renewed their ability to meet tax obligations. The Ministry of Finance of Ukraine will adopt the procedure and a list of documents for confirmation of inability to fulfil tax obligations.

Taxpayers paying unified tax at a preferential 2% rate must fulfil their tax obligations which are not related to the preferential regime within 60 days after returning to their usual tax regime.

VAT administration and VAT refunds

The registration of VAT invoices and VAT refund procedures are renewed. Taxpayers must register VAT invoices for February – May 2022 reporting period by 15 July 2022.

Tax inspections renewal

The Law further removes prohibition of all in-house inspections and certain unscheduled documentary inspections.

Such inspections are subject to access to territories, premises, financial statements and documents, information on taxpayer’s expenses and other tax information, etc.

Special timeline for VAT return tax inspections and VAT refunds is introduced.

By Vadim Medvedev, Partner, and Taisiia Duda, Associate, Avellum

On February 15, 2022, the Ukrainian Parliament adopted draft Law No. 5090 on Amendments to the Budget Code of Ukraine on the Regulation of Budgetary Relations in the Implementation of Contracts Concluded within the Framework of Public-Private Partnerships, Including Concession Contracts (Law 5090). The law is vital for the functioning of public-private partnerships (PPP) in the road and highway reconstruction sector since it enables public partners to provide guarantees of fulfillment of their long-term obligations under relevant PPP projects.

Law 5090 is yet to be signed by the President of Ukraine, but there is no doubt that it will be enacted. The destruction brought on by the Russian forces during their invasion of Ukraine made it clear that rapid restoration of the infrastructure will be necessary. And PPPs will be used as one of the key instruments of Ukraine’s infrastructure reconstruction. To elaborate on the importance of Law 5090, firstly, we should identify the problem it solves.

One of the major characteristics of a PPP project is the long-term nature of the relationship between the public and private partners. Both the Ukrainian Law on Concession (Concession Law) and Law on Public-Private Partnership (PPP Law) follow this principle and state that the PPP project should be 5-50 years long. Any short-term projects are not considered PPP projects and, thus, are not regulated by the mentioned laws.

At the same time, both the Concession Law and PPP Law provide for the state support of projects, including payments made by the state to private partners, for example, availability payments. Previously, the Ukrainian Government planned to carry out six concession projects for six segments of highways, by the end of 2023, using the availability payments instead of tolls.

However, the effective Budget Code of Ukraine lacks budget instruments to provide such state support as availability payments to the long-term road PPP projects. This issue is considered a material risk by investors, especially foreign ones, who would otherwise participate in these PPP projects. Additionally, investors saw a bad example set by the green tariff crisis in the renewable energy market – when the Ukrainian Government declared that it had become too burdensome financially and initiated a discussion of a potential tariff decrease with investors.

Law 5090 solves this risk by amending the Budget Code of Ukraine and providing public partners with a right to undertake long-term obligations under PPP projects, including availability payments, for the term of the respective PPP or concession agreement. Respectively, all payments to be made by a public partner under such agreements will be funded by the special fund of the state budget annually, during the relevant project’s term.

For this purpose, Law 5090 also specifies the funding sources for road PPP projects. Notably, it limits the annual payments that should be made to private partners under state road PPP projects to 30% of the revenues earned by the special fund of the state budget – the State Road Fund of Ukraine (Road Fund). The Ukrainian Government will determine the procedure for distributing revenues of the Road Fund. At the same time, the annual payments under the municipal roads PPP projects are limited to 30% of the local budget’s revenue.

Additionally, Law 5090 expands the list of funding sources of the Road Fund by adding a toll for trucks weighing more than 12 tons using the state roads. Since the relevant draft laws No. 6087 and No. 6089 have not been voted in the first reading as of now, this new source of funding is yet to be implemented.

At the same time, state support for road PPP projects is not the only issue that impedes Ukraine from effective implementation of road PPP projects. Rapid post-war reconstruction requires the facilitation of certain procedures, including allotment, changing the designated use of land plots, and simplification of construction-related procedures. Optimizing these procedures beforehand will significantly increase the efficiency of the post-war reconstruction.

The adoption of Law 5090 is indeed a major step toward the expansion of successful PPP projects in Ukraine’s track record. However, the reconstruction may only begin after the hostilities have ceased and there is sufficient financing to cover the expenses. After that, we believe that Ukraine will welcome all investors willing to participate in the restoration of the infrastructure under the PPP framework.

By Maksym Maksymenko, Partner, and Rostyslav Mushka, Associate, Avellum

This Article was originally published in Issue 9.4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Asters, working pro bono with Quinn Emanuel Urquhart & Sullivan, has advised the Ministry of Justice of Ukraine on the inter-state proceedings being brought by Ukraine against the Russian Federation before the European Court of Human Rights.

According to Asters, “on June 23, 2022, the Ministry of Justice of Ukraine acting on behalf of the State of Ukraine filed the first part of Ukraine’s substantive submissions in its application before the European Court of Human Rights in Strasbourg, France, to address the damages caused by the violations committed by the Russian Federation over the first phase of the full-scale Russian invasion of Ukraine.”

“The proceedings concern, inter alia, Ukraine’s claims for monetary compensation by the Russian Federation payable to all individual parties injured by a multitude of violations of the most fundamental rights protected by the Convention, including violations of the right to life, the prohibition on torture, the right to liberty and security, the right to respect for private and family life, the rights to freedom of thought and expression, and the right to protection of property,” the firm announced. “The damage resulting from Russia’s illegal invasion of the sovereign territory of Ukraine only over the first phase commencing on February 24, 2022, until April 7, 2022, for which Ukraine will seek redress amounts to at least USD 80 billion.”

The Asters team is led by Co-Managing Partner Oleksiy Didkovskiy and Partner Markiyan Kliuchkovskyi and includes Counsels Oksana Legka and Oleksandr Volkov, Associate Nataliia Savula, and Junior Associates Valeriia Yakimova and Oleksandr Lutsenko.

Redcliffe Partners, working with Simmons & Simmons, has advised the EBRD on a EUR 24 million short-term unsecured loan to Ukrainian poultry and grain producer MHP.

According to Redcliffe Partners, the loan will finance the borrower’s working capital needs for crop farming operations in Ukraine. “The project is part of the EBRD’s Food Security Ukraine package, within the Resilience and Livelihoods Framework, adopted by the bank to support the Ukrainian economy after Russia’s invasion,” the firm informed.

MHP produces and exports chicken from Ukraine. The company also specializes in the cultivation of cereals, as well as other agricultural activities, including manufacturing meat and sausage products and ready-to-eat meat products.

The Redcliffe Partners team included Managing Partner Olexiy Soshenko and Senior Associate Evgeniy Vazhynskiy.

Kinstellar has announced it is providing pro bono legal advice to public charity organization Soborna Ukraine on implementing its programs across the country.

Soborna Ukraine is a public charity that was established by Ukrainian entrepreneurs after the Russian invasion of Ukraine. According to the firm, “a US non-profit organization was established to continue and broaden the work of an earlier charity initiative of the CEO Club Ukraine – to support resistance to the Russian invasion and promote national unity, provide humanitarian aid to Ukraine, and will contribute to the rebuilding of Ukraine’s infrastructure after the end of the war.” The firm is advising Sorbona Ukraine on implementing its programs in the country, as the organization manages critical projects close to the front line.

The Kinstellar team is led by Partners Illya Sverdlov and Alla Kozachenko and includes Senior Associate Anna Vizniak and Junior Associate Tetiana Kostiuk.

Sayenko Kharenko has successfully represented the inventors of the Krovospas hemostatic agent in an intellectual property dispute against the Teteriv Production Association.

According to Sayenko Kharenko, “in 2015, a group of inventors transferred the intellectual property objects, related know-how, and relevant technical documentation to the Teteriv Production Association under a contract. The right to produce and sell the hemostatic agent Krovospas was also granted to the Teteriv Production Association.”

“Despite further commercialization of Krovospas, which generated sufficient income, the Teteriv Production Association did not fulfill its payment obligations to the inventors. This created the grounds for the inventors to sue for protection of their rights in court,” the firm added, noting the proceedings were finalized in the courts of first, appeal, and cassation instances.

The Sayenko Kharenko team included Partner Yaroslav Ognevyuk, Senior Associate Volodymyr Hrunskyi, and Associates Tetiana Yushchenko and Kateryna Bumaha.

Asters Partner and Co-Head of International Arbitration and Cross-Border Litigation Markiyan Kliuchkovskyi has been appointed to the working group on the development and implementation of international legal mechanisms to seek compensation for the damages caused by Russia’s war against Ukraine.

Specializing in international arbitration and cross-border litigation disputes, Kliuchkovskyi has been a Partner at Asters since 2018. Between 2018 and 2019, he was a Vice President of the Ukrainian Premier League (as reported by CEE Legal Matters on April 12, 2018). Previously, Kliuchkovskyi spent over seven years at Egorov Puginsky Afanasiev & Partners, having first joined as a Counsel in 2011 and being promoted to a Partner the same year. Earlier still, he worked at Magisters from 2004 to 2011, first as Junior Associate between 2004 and 2005, and later promoted to Associate, Senior Associate, and Counsel in 2005, 2010, and 2011, respectively. In 2008, Kliuchkovskyi also spent two months on secondment to White & Case.

According to Asters, “the working group was established by President Volodymyr Zelenskyy on May 18, 2022. Comprising the leading international and Ukrainian public law practitioners and scholars as well as representatives of Ukrainian state authorities, the working group develops a proposal for the establishment of the International Claims Commission for Ukraine to adjudicate claims for compensation arising out of Russia’s armed invasion of Ukraine.”