Category: Ukraine

A new draft personal data protection law, draft Law of Ukraine No. 5628 (“Draft 5628”), was introduced to the Ukrainian parliament on 7 June 2021. Draft 5628 replaces certain earlier draft laws on this subject and is currently the only draft legislation in the area of personal data protection.

The main purpose of Draft 5628 is to align the existing regulatory framework with the General Data Protection Regulation and the amended Council of Europe Convention for the Protection of Individuals with Regard to Automatic Processing of Personal Data (“Convention 108”). Draft 5628 also purports to regulate new aspects of data processing that have, so far, remained unregulated, such as cross-border transfers within a group of related companies. Draft 5628 is currently under review by the parliamentary committee and, at this point, there are no indications as to when the parliament might vote on it. Currently, 1 January 2023 is set out as the date of Draft 5628’s coming into force.

Draft 5628 more specifically regulates the requirements for personal data processing and provides for certain changes to the cross-border transfer of personal data. Key notable provisions include:

1. In addition to the existing methods of granting consent, Draft 5268 broadens and clarifies the ways in which the consent of a data subject can be given, e.g., by choosing the relevant technical settings in the software interface, other assertive actions or behaviour of the data subject suggesting there is consent.
2. When processing data of Ukrainian nationals and in certain other circumstances, a foreign data processor must designate a local Ukrainian representative to interact with the local data protection authority and data subjects. So far, there is no certainty as to the extent to which this provision would be applicable for a foreign processor in relation to data controlled by a Ukrainian entity.
3. A new basis for cross-border data transfer is introduced, i.e., transfers to foreign countries based on mandatory corporate rules (e.g., of a group of companies), subject to approval by the data protection authority. Draft 5268 regulates the scope of such rules in detail. Should a foreign processor fail to get its rules approved to process data on this this basis, it would be able to rely on the express consent of a data subject, which will remain a valid basis for data transfers, including into countries considered as not ensuring an adequate level of protection. For countries/organisations which are not bound by the GDPR and Convention 108 (and therefore are not considered as providing an adequate level of protection by default), the data protection authority may still determine that such countries/organisations do ensure an adequate level of protection for Ukrainian law purposes. A list of such countries/organisations will be published on the site of the data protection authority.
4. Fines will be significantly increased, with the amounts depending on the type of violation. Fines for legal entities are defined as a percentage of their total annual turnover. Maximum fines, depending on the type of violation, range from UAH 50 MIO, or up to 3 per cent of the total annual turnover, to UAH 150 MIO, or up to 8 per cent of total annual turnover of a legal entity.
5. Data processors will be required to document (by way of maintaining protocols) their actions with respect to personal data. The protocols must be available for inspection by the regulator.
6. Data processors will be clearly required to notify the data protection authority within 72 hours after they become aware of a security breach in relation to personal data, except in certain cases. The content of this notification is regulated by Draft 5268.
7. Draft 5628 specifies new types of data falling into the category of sensitive data, e.g., psychometric data or data on sexual orientation. We note that the scope of sensitive data currently envisaged by Draft 5268 is somewhat different from the one provided for in the effective law. In addition, a stricter regime is envisaged for the processing of sensitive personal data.
8. Draft 5628 sets out special rules for the processing of personal data by electronic communication businesses. These rules cover, in particular, data storage, data disclosure as well as rules on reporting of data leakages.
9. In addition to maintaining the existing general requirement to have a data protection officer in the case of sensitive data processing, Draft 5628 further provides for an obligation to appoint a data protection officer in a number of other situations, including: where regular, systematic or large-scale monitoring of actions of data subjects is involved; where large-scale processing of data takes place; and where sensitive or biometric personal data is processed.
10. Data processing for purposes of direct marketing (including without the data subject’s consent based on the legitimate interest of the processor) would be expressly regulated in Ukraine.
11. The principle of personal data protection by design and by default will become part of Ukrainian law.
12. The notion of joint processors – i.e., where purposes and means of data processing are determined by two or more processors jointly – will be introduced. Joint processors will be obliged to interact based on an agreement in relation to the distribution of obligations for complying with data processing requirements.
13. An impact assessment would be required for certain types of data processing.
14. Draft 5268 assumes that a new data protection authority will be created under another law, which is being developed. A new data protection authority is expected to act in two domains – protection of personal data and access to public information.

By Zoryana Sozanska-Matviychuk, Partner, Head of M&A, Andriy Nikiforov, Partner, Head of TMT Sector, and Sergiy Bert, Senior Associate Redcliffe Partners

CMS Kyiv has successfully represented Fresenius Medical Care Ukraine in a commercial dispute against a public healthcare provider before the Ukrainian Supreme Court.

Fresenius Medical Care provides products and services for individuals with renal diseases. The company operates hemodialysis treatment centers in two Ukrainian regions within a state-funded program, offering services for patients whom public healthcare providers are incapable of treating.

According to CMS, the treatment was provided under separate agreements between Fresenius Medical Care Ukraine and each public hospital, concluded within public procurement procedures. “Due to the failure of hospitals to initiate public procurement procedures in a timely manner, there were gap periods when the services were provided but were not covered by written agreements. While Fresenius Medical Care was obliged under Ukrainian law to continue treating the patients, the hospitals refused to pay for these services,” the firm informed.

Fresenius Medical Care filed claims against five hospitals to recover payments during the gap period. Following the judicial proceedings in different instances of the courts, the Supreme Court ruled in favor of the company.

According to CMS, “the Supreme Court’s decision sets out positive practice for several identical cases concerning Fresenius currently being considered in courts of different instances.”

The CMS team was led by Partner Anna Pogrebna and Counsel Oleksandr Protsiuk and included Associate Diana Valyeyeva.

Baker McKenzie has advised First Ukrainian International Bank on the conditional purchase agreement for Idea Bank in Ukraine from its sole owner, the Polish financial group Getin Holding. Sayenko Kharenko advised Getin Holding on the deal.

According to Baker McKenzie, “if completed, the deal will strengthen FUIB’s retail banking business line by the synergy from adding the existing Idea Bank consumer lending business and its digital platform.”

Baker McKenzie’s team was led by Partner Viacheslav Yakymchuk and Counsel Andrii Moskalyk and included Associates Hanna Smyrnova, Mariia Gorokh, Mykyta Stebliuk, Artem Sinelnikov, Dmytro Skydan, Anna Stepanowa, and Andrii Levchenko.

Sayenko Kharenko’s team included Partner Alina Plyushch, Senior Associates Dmitriy Riabikin and Mykhailo Grynyshyn, and associate Anastasiia Yermolenko.

Baker McKenzie has advised EP Ukraine on the structuring, negotiating, and entry into two production sharing agreements with the Ukrainian government in relation to the Okhtyrska and Hrunivska blocks. 

EP Ukraine is a Dutch subsidiary of Czech Energeticky a Prumyslovy holding (EPH) and Slovak NAFTA a.s. EPH is a Central European energy group that owns and operates assets in the Czech Republic, Slovakia, Germany, Italy, Ireland, the UK, France, and Switzerland. EPH is a vertically integrated energy utility covering the complete value chain, ranging from highly efficient cogeneration, power and heat generation, natural gas transmission, and gas storage to gas, heat, and electricity distribution and supply. 

According to Baker McKenzie, “the production sharing agreements, signed on November 8, 2021, relates to petroleum products. They cover two separate areas of over 1,700 square kilometers in total in northeast Ukraine and represent an extensive investment program, including, in the first stage, the realization of seismic measurements and drilling of a significant number of exploration wells. Total investments are expected to reach dozens of millions of US dollars.”

The Baker McKenzie team was led by Counsel Andrii Moskalyk.

Baker McKenzie did not reply to our inquiry on the matter.

Sayenko Kharenko has assisted the Allard Pierson Museum in the ‘Scythian Gold’ case by preparing an expert report on Ukrainian law.

According to Sayenko Kharenko, “on October 26, 2021, the Amsterdam Court of Appeal ruled that the Allard Pierson Museum had to hand over a collection of artifacts, known as the ‘Scythian Gold’, to Ukraine. The collection was being exhibited at the Allard Pierson Museum at the time when the Russian Federation occupied Crimea.”

According to the firm, “the key questions of Ukrainian law for the legal position of the Allard Pierson Museum were as follows: whether the Allard Pierson Museum had validly suspended the performance of its obligations under the contracts concluded with Crimean museums; whether the Allard Pierson Museum was liable in this situation; whether there were grounds for terminating the contracts concluded between the Allard Pierson Museum and the Crimean museums or for establishing that the obligations of the Allard Pierson Museum under said contracts were impossible to perform. On April 16, 2019, the Amsterdam Court of Appeal issued an interim judgment in the case confirming that the position of the Allard Pierson Museum on the suspension of performance of its contractual obligations to the Crimean museums had been correct.”

According to the firm, “in a final judgment on October 26, 2021, the Amsterdam Court of Appeal also confirmed that the contractual obligations of the Allard Pierson Museum to the Crimean museums could not be performed and, therefore, that the Allard Pierson Museum should not return the ‘Crimean Treasures’ to the Crimean museums.” In its interim and final judgments, the Amsterdam Court of Appeal referred, inter alia, to an expert report on Ukrainian law prepared by Sayenko Kharenko.

Sayenko Kharenko’s team was led by Partner Olexander Droug and included Associate Alina Danyleiko and Special Advisor Tatyana Slipachuk.

The finalized version of the Ukrainian ISDA Master Agreement (“Ukrainian ISDA“) was officially published by the Independent Association of the Banks of Ukraine.

The Ukrainian ISDA is the Ukrainian law-governed template agreement for transactions with over-the-counter derivatives (i.e. derivatives which are not exchange-traded). It has been developed by Ukrainian market participants, professional associations and law firms with the support of the USAID Financial Sector Transformation Project.

The Ukrainian ISDA largely follows the ISDA Master Agreements, internationally agreed standardized documents published by the International Swaps and Derivatives Association. Certain important concepts of the ISDA Master Agreements (for example, “single agreement” and “netting”) are reflected in the Ukrainian ISDA, with the necessary changes to align them with the requirements of Ukrainian legislation.

Using the Ukrainian ISDA will help market participants to reduce negotiating time and to achieve more certainty and consistency in OTC derivative transactions. This is the next step in the Ukrainian capital markets reform, which was launched in 2020 with the adoption of the new Capital Markets Law.

By Olexiy Soshenko, Managing Partner, and Olesia Mykhailenko, Senior Associate, Redcliffe Partners

Sayenko Kharenko has successfully represented Auchan before the Supreme Court of Ukraine in a case against the Asset Recovery and Management Agency of Ukraine.

According to Sayenko Kharenko, the case related to the alleged unlawful sale of land plots owned by Auchan and Ceetrus. “In 2013, the Auchan group of companies and Ceetrus acquired the corporate rights of S.P.T. LLC and ABC Technology LLC, which owned 26.8 hectares of land in the Odessa Region. In April 2019, the right to manage the land plots was transferred to the ARMA and, in July, the land plots were sold to a relatively unknown Ukrainian company for only 4 percent of their market value. Auchan had planned to develop the Les Vignes retail park on the land plots, including an Auchan hypermarket, a gallery of boutiques (4,000 square meters), a retail park (42,000 square meters), and a shopping and entertainment mall (35,000 square meters).” 

According to the firm, its team “brought sufficient arguments against ARMA showing it acted in violation of the law. They also questioned the power of ARMA, being the state authority, to sell assets transferred to its possession without direct permission of the owner or a court. For this reason, and due to the inter-jurisdictional nature of the dispute, the case was referred to the Grand Chamber of the Supreme Court.”

“The Grand Chamber of the Supreme Court has created a precedent by issuing a Resolution emphasizing that ARMA cannot sell assets transferred to it in absence of a separate court ruling ordering such sale,” according to SK. “Accordingly, the ARMA has adopted the decision on the sale of the land plot owned by Auchan unlawfully and without а proper authority.”

Auchan Retail Ukraine has been operating in Ukraine since 2008 and has 34 stores of various formats (hypermarkets, supermarkets, and Pick-up-Points around apartment buildings) in nine cities.

Ceetrus is an international developer of shopping malls and retail parks in the country. By the end of 2020, the company was operating seven shopping galleries within the Auchan Shopping Mall in Kyiv and Lviv, Auchan Rive Gauche Shopping Mall, and Retail Park Petrivka in Kyiv.

Sayenko Kharenko’s team included Partners Sergey Pogrebnoy and Sergiy Smirnov, Counsels Oleksiy Koltok and Zlata Simonenko, Senior Associate Sergiy Protyven, Associates Vadym Slesarchuk, Zhanna Zayets, Olena Solonska, and Yevhen Miroshnykov, and Junior Associate Vladyslav Shtager.

Sayenko Kharenko has successfully represented Olfa before the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry.

According to Sayneko Kharenko, “ICAC has awarded to Olfa, the Ukrainian distributor of medical and pharmaceutical products, approximately EUR 3 million in damages in the case against Latvian company Olainfarm. The complex dispute in respect of a long-term contract for the supply of medicines and medical products to Ukraine was pending before the ICAC for over a year within the frame of two parallel cases. Comprehensive consideration of the cases involved numerous experts and witnesses from each side. The arbitrators have also made determinations on the complex legal and factual matters, including the law applicable to the dispute and the amount of damages incurred by Olfa.”

According to the firm, “in the first case, Olfa filed a claim with the ICAC to recover a penalty for non-delivery of goods and damages incurred in 2020 as a result of Olainfarm’s breach of contract. The ICAC accepted Olfa’s position and found Olainfarm in violation of the long-term contract, namely due to its unjustified refusal to perform. As a result, Olfa was awarded damages (lost profit incurred in 2020) in the total amount of approximately EUR 3 million, as well as the contractual penalty.”

Currently, Olfa is seeking enforcement of the award against Olainfarm. Also, Sayenko Kharenko reports, “Olfa has already started the process of recovery of the additional damages incurred due to Olainfarm’s continuous violation of the contract in 2021.”

Sayenko Kharenko’s team included Counsel Volodymyr Yaremko, Senior Associates Andriy Stetsenko and Dmitriy Riabikin, Associates Alina Danyleiko and Yaroslava Frank, and Junior Associate Yuliia Pavlova.

CMS has advised a syndicate of banks led by ING Bank on the extension of a pre-export facility for Ukraine’s Kernel Group as well as an increase in the credit facility to USD 420 million, with an in-built possibility for a further increase to up to USD 450 million.

The Kernel Group is a producer and exporter of sunflower oil and is also a supplier of agricultural products from the Black Sea region to world markets. The company exports its products to more than 80 countries. 

According to CMS, “facilities provided by a syndicate of European banks led by ING are an important financing source for Kernel’s sunflower oil production business, both in terms of its existing needs and its expansion plans, which include the commissioning of a new oil-extraction plant scheduled for spring 2022.” 

Earlier this year, CMS had already advised on another extension of the pre-export facility (as reported by CEE Legal Matters on February 17, 2021).

The CMS team included Partners Elitsa Ivanova and Ihor Olekhov, Counsel Kateryna Chechulina, and Associates Khrystyna Korpan and Ivan Pshyk, with further teams in Switzerland, led by Partner Kaspar Landolt, in Luxembourg, led by Partner Vivian Walry, in the Netherlands, led by Partner Eduard Scheenstra, and in Austria, led by Partner Guenther Hanslik.

Baker McKenzie has advised the shareholders of Depositphotos on the USD 85 million sale of the company to VistaPrint.

The sold portfolio includes Depositphotos’ subsidiary Crello.

Founded in 2009, Depositphotos is a stock photography platform, featuring over 220 million licensed stock photos, graphics, vectors, and videos in its library. In 2017, the company launched the online design tool Crello, which allows the creation of animated videos, web banners, social media posts, email headers, and other formats for web and print.

VistaPrint is a global printing, design, and marketing service provider, operating since 1995.

The Baker McKenzie team included Kyiv-based Partners Viacheslav Yakymchuk and Oksana Simonova, Counsel Andrii Moskalyk, and Senior Associate Olga Mikheieva, Palo Alto-based Partner Lisa Fontenot and New York-based Associate Gwen Karanadze.

Baker McKenzie did not respond to our inquiry on the matter.

Editor’s Note: After this article was published, CEE Legal Matters learned that Kinstellar, working with DLA Piper in the US, advised Vista on Ukrainian law. The Kinstellar team included Co-Managing Partner Margarita Karpenko, Partner Galyna Zagorodniuk, Counsels Anastasiya Bolkhovitinova and Natalia Kirichenko, Senior Associate Maksym Tesliar, Associates Ivan Shatov, Olena Stanishevska, Danylo Rudyk, and Inna Koval, and Junior Associate Tetiana Kostiuk.