Category: Ukraine

Golaw has successfully represented international cosmetics manufacturer Evyap Trading Ukraine in a tax dispute worth UAH 4 million.

According to Golaw, “in 2020, as a result of a desk audit, tax liabilities and fines amounting to almost 4 Million UAH were unreasonably imposed on [the] client. The reason for imposing a fine was allegedly incorrect filling out of the income tax return.”

The firm said it was successful in proving that “the supervisory body abused its power and went beyond the desk audit, having conducted the analysis of the tax reporting indicators.” In contrast, Evyap “correctly declared and paid the income tax return.”

The firm represented the company in another tax dispute last year (as reported by CEE Legal Matters on May 14, 2020).

The Golaw team working on the matter consisted of Senior Associate Olena Sulyma and Junior Associate Anna Sokur, under the guidance of Partner and Head of Tax Iryna Kalnytska.

On April 16, 2021, CEE Legal Matters reported that KPD Consulting had successfully represented the community of the Vozdvyzhenka neighborhood in Kyiv in a dispute with the developer of the Podol Grad Vintage residential complex. CEE In-House Matters spoke with Tatiana Maksymenko, Project Manager of Development of the Communal Reform at Vozdvyzhenka Street Committee, to learn more about the dispute.

CEEIHM: What is the Vozdvyzhenka Street Committee and what is its mission?

Tatiana: Vozdvyzhenka Street Committee is the representative body created by the residents of Vozdvyzhenka (a part of Podil). The main tasks and activities of Vozdvyzhenka Street Committee are: (a) creating the conditions for the participation of the residents in solving issues of local importance; (b) satisfying social, cultural, household, communal, and other needs of the residents of the district, by assisting in providing them with appropriate services; and (c) participating in the implementation of programs of socio-economic and cultural development and other local programs adopted by the Kyiv City Council concerning the relevant territory of the neighborhood.

CEEIHM: What led to the dispute with the developer of the Podol Grad Vintage residential complex?

Tatiana: The construction of the Podol Grad Vintage residential complex has started right next to the school building, which is currently being reconstructed for the residents of Vozdvyzhenka and the whole of Podil. In addition, the land plot used is affiliated to the Ancient Kyiv State Historical and Architectural Reserve, which is unacceptable.

CEEIHM: What were the main arguments supporting your case?

Tatiana: Following difficult litigation, the court agreed that the procedure of issuing the land plot to the developer was not compliant with the law and entered a judgment in favor of the community. In particular, the historical and cultural purpose of the land wasn`t taken into account during the transfer of the land plot for the construction of the residential complex, and the restrictions provided in this regard were ignored. The court also took into account the affiliation of the land plot to the Ancient Kyiv State Historical and Architectural Reserve, so the land lease agreement for construction was made illegally. The Ancient Kyiv State Historical and Architectural Reserve is a complex of monuments of the historical center of Kyiv. The reserve has the status of a complex monument of urban planning, and its entire territory has the status of land of historical and cultural significance.

CEEIHM: What are your plans now, following the decision?

Tatiana: We are now preparing to hear this case by the Supreme Court. We hope that the illegal construction of the historical and cultural reserve will stop.

CEEIHM: Why did you choose KPD Consulting as your legal representative?

Tatiana: KPD Consulting is one of the best in Ukraine in real estate. KPD`s specialists in real estate reviewed building permits scrupulously, as well as checked compliance with the law by the developer, government authorities, and the Kyiv City Council. The results of the review revealed numerous and significant violations of the law. Based on this, KPD’s lawyers drafted and filed claims on behalf of the community of the Vozdvyzhenka and the school next to the construction.

Originally reported by CEE In-House Matters.

The ILF law firm has represented Pavlo Schwartz – a candidate for the position of the Bishop of the German Evangelical Lutheran Church of Ukraine – in a dispute over being registered as head of the church.

According to ILF, Schwartz was almost denied his position, despite having the support of the Lutheran community in Germany, the German embassy, and the majority of church communities in Ukraine. His opponent has, in an attempt to seize control of the church “resorted to openly illegal methods: he created grounds for being registered as [the] head of the church by falsifying the minutes of the Synod and managing to get the registration service to go through with it. Thus, in violation of the church’s charter, a parallel structure of communities was created which started making its own decisions and managing property: pastors’ apartments, cars, as well as church buildings themselves.” According to the firm, “the self-proclaimed Bishop tried to completely overhaul the organization of the church, aiming to get rid of opposing communities and pastors. With that in mind, using two fabricated lawsuits that allegedly challenged the synod’s decision, he convinced an administrative court to grant an injunction against making any changes to the information about the organization, including changes regarding its head.”

ILF has, firstly, filed and won an appeal against the administrative court’s injunction. According to the firm, when Schwartz’s opponent appealed the decision before a district court, the firm filed an appeal as well. The matter was brought before a Commercial Court, which found that it had no jurisdiction over the matter. ILF resolved the matter by contacting the registrar’s office directly and helping “the communities to prepare a new founding document. Then, on the basis of the synod’s decisions and with the required quorum present, [the firm] finally had Pavlo Schwartz registered as the legitimate Bishop.”

Finally, according to ILF, the opposing side has appealed to the Ministry of Justice, which denied the appeal thus confirming the legitimacy of the new charter as well as Schwartz’s registration as the Bishop.

According to Avellum Partner Maksym Maksymenko, the key developments in the country’s economy revolve around infrastructure projects, agricultural land regime liberalization, and large-scale privatization of certain state-owned companies. Maksymenko also reports several updates in legislation, primarily in the areas of zoning and city planning, and capital markets.

“One of the main promises of the current government was the Big construction program,“ Maksymenko says. “Under the program, until the end of this year, the government plans to reconstruct more than 6,500 km of roads, as well as many hospitals, schools, and kindergartens,“ he explains. “The current state of Ukraine’s road infrastructure is fairly poor, so this program will be beneficial to the whole nation,“ he notes. He also points out that the Kyiv ring road is to be built as a part of the program, which is expected to alleviate the traffic issues in Ukraine’s capital. According to Maksymenko, Ukravtodor, the Ukrainian state agency that manages public road infrastructure, is in charge of the program. “The program will be financed by Ukravtodor’s recent USD 700 million bond issuance,“ he says (as reported by CEE Legal Matters on July 14, 2021).

In addition, according to Maksymenko, the number of PPP deals has increased in recent times. He points to Ukraine’s 2018 overhaul of the PPP legislation, which brought it in line with EU practices and laws, as the main reason behind the rise. “The process has been made simpler and more transparent and last year Ukraine signed concession agreements for Olvia and Kherson seaports under these regulations.“

Another important event in Ukraine’s economy was the lifting of the moratorium on agricultural land acquisition. “Around 70% of the country is agricultural land and its sale had been prohibited for 20 years.” Under the new law, Maksymenko explains, Ukrainian citizens and Ukrainian-owned companies are allowed to purchase land and even change its designated use. He reports that, since the law’s entry into force on July 1, 2021, there have been more than 8,000 registered acquisitions.

Privatization seems to be the next big thing, according to Maksymenko, with the government looking into selling various state-owned companies. “The tender for the privatization of the world’s biggest titanium and zirconium producer, United Mining Chemical Company, will be held on August 31, 2021,” he says and adds that the starting price has been set at USD 136 million. “The Ukrainian State Property Fund also plans to sell the Kyiv Machine Building plant for a starting price of USD 52 million,” he says and notes that the plant covers around 35 hectares of prime real estate in Kyiv.

Moving on to legislation matters, Maksymenko reports that the zoning and city planning law underwent a significant reform, which has simplified procedures related to land allotment and change of its designated use, among other things. Finally, he also notes that on July 1, 2021, an amendment to the law on capital markets has been adopted, which was designed to give impetus to the development of financial technology in the country.

Former Kinstellar Kyiv Counsel Andriy Nikiforov has joined Redcliffe Partners’ Banking & Finance practice as a Partner. He will lead the firm’s cross-practice Technology, Media, and Telecommunications industry group.

According to Redcliffe Partners, “along with his extensive banking & finance experience, [Nikiforov] brings impressive expertise in regulation of financial services and technology businesses.”

Nikiforov began his career in 2003 at Asters, where he spent nearly four years. He moved to Baker & McKenzie in 2006, where he was an Associate until 2010, then a Senior Associate until 2016. He joined Kinstellar in April 2016. Nikiforov received his Bachelor of Laws and Master of Laws from the Kyiv National Taras Shevchenko University in 2003 and 2005, and his Master of Laws from the University of California, Berkeley in 2016.

“Andriy’s wide-ranging experience is a fantastic addition as we strengthen our existing capabilities across various financial products, financial services regulation, and TMT,” commented Redcliffe Partners’ Managing Partner Olexiy Soshenko. “As a firm, we are very fortunate and delighted to welcome Andriy to our team!”

Golaw has successfully defended the interests of Canadian investor TIU Canada over a solar power plant disconnection.

TIU Canada is a Canadian investor that has invested more than USD 65 million in Ukrainian solar energy over the past four years. According to Golaw, “the company put into operation a 10.5-megawatt solar power plant in Nikopol in January 2018, which was illegally disconnected from the grids by the Nikopol Ferroalloy Plant. The plant is owned by Ukrainian oligarchs Igor Kolomoisky, Gennadiy Bogolyubov, and Viktor Pinchuk.”

According to Golaw, “the operation of the solar power plant TIU Canada, a project with about USD 15 million of investments, has been blocked for more than a year due to illegal actions of the Nikopol Ferroalloy Plant, to the grids of which the solar power plant had been connected. The Nikopol Ferroalloy Plant arbitrarily disconnected the station, justifying its actions by the alleged need for repairs. In fact, there have been no repairs so far. The company has been idle for almost a year, and its investor continues to incur multimillion losses.”

According to the firm, “on July 26, the court completed its preparatory actions and the hearing on the merits took place. The representatives of the plant did not appear in court. However, the court heard Golaw attorneys as claimants in the case.

The next hearing is scheduled for September 8, 2021, which will take place in the Northern Commercial Court of Appeal.”

Golaw’s team included Partner Kateryna Manoylenko and Counsel Kateryna Tsvetkova.

Iurii Sukhov has joined Arzinger as a Partner and will lead the firm’s White Collar Crime practice together with Kateryna Gupalo and Oleksander Plotnikov. 

According to Arzinger, “Sukhov is a seasoned attorney-at-law with many years of experience, known for a number of the most high-profile and intellectually complex criminal cases, in which he successfully defended the interests of his clients – famous Ukrainian businessmen and politicians.” 

Prior to joining Arzinger, Sukhov worked at the State Tax Administration of Ukraine (1996-2001), was the Deputy Director of the Budget Legislation Compliance Control Department of the Accounting Chamber of Ukraine (2001-2002), served as Director of the Department and Deputy Chairman of the Committee within the State Committee of Ukraine for Nationalities and Migration (2002-2008), and then held the position of Government Commissioner for Anti-Corruption Policy (2009-2010). He has been practicing law since 2010.

“Joining Arzinger as Partner is an important and logical step at this stage of my career,” Sukhov said. “I am delighted that we have very similar professional and leadership aspirations. I am convinced that combining my experience and knowledge as a civil servant, attorney-at-law, and researcher with Arzinger, its team, its system of practices and industries, and its brand lays the basis for the mutual realization of our ambitious goals.”

“Arzinger’s expertise in White Collar Crime has enjoyed increasing demand in recent years, and this trend is growing steadily,” commented Managing Partner Timur Bondaryev. “This is why Iurii Sukhov’s joining us is a logical and expected step to implement this strategy as well as a response to the needs of our clients.”

Sayenko Kharenko has acted as Ukrainian legal counsel to the EBRD on its provision of a Hryvnia currency loan equivalent to EUR 25 million to Ukrgasbank.

According to Sayenko Kharenko, “Ukrgasbank will on-lend the proceeds of the loan to local small and medium-sized companies to upgrade their processes and equipment and to advance sound health and safety practices … [and]… at least 70 % of the loan will finance investments in green technologies.”

Sayenko Kharenko’s team included Partner Igor Lozenko, Associate Denis Nakonechnyi, And Junior Associate Oleksandr Motin.

The firm could not disclose information about the other side’s legal advisor.

The fundamental goal of each company is to increase sales. For this purpose, players that operate in the Ukrainian pharma market utilize a wide range of promotional activities. However, Ukrainian laws on health protection allow very few of them when it comes to prescription (or “Rx”) pharmaceuticals.

Currently, advertising Rx pharmaceuticals, sponsoring events that are open to the general public, and ordering the preferred sheltering of such products in places accessible to customers is prohibited. As a result, Ukrainian pharma companies tend to promote new Rx pharmaceutical products using alternative methods – which very often lack clear legal regulation.

The key allowed promotional activities for Rx pharmaceuticals are: (1) Sponsoring scientific events for qualified healthcare professionals (HCPs) as speakers/moderators or participants; (2) Sponsoring publications in specialized periodicals; (3) Dispatching  samples and promotional materials among HCPs; and (4) Creating or donating to hospital- and patient-organizations charities.

All such activities must serve a scientific purpose or create a positive image for the company. Pharmaceutical companies are prohibited from demanding that HCPs increase the number of prescriptions of Rx pharmaceuticals following such activities.

Moreover, pharma companies must be careful when engaging state officials, public servants, chief doctors, senior medical assistants of public healthcare institutions (together, “Officials”) in their promotional activities as these individuals are subject to anti-corruption legislation.

If an Official participates in a scientific event as a speaker or moderator, he/she may receive a reasonable reward. In addition, pharma companies may also provide Officials with gifts or signs of hospitality. The value of such benefits cannot exceed the established threshold (currently around USD 79 for one-time gift and USD 157 for all gifts received during one year from a single source).

Violations of anti-corruption legislation may lead to administrative or criminal liability.

Officials may bear administrative liability for accepting excessive gifts or signs of hospitality, performing actions influenced by an actual conflict of interest, or failing to take appropriate measures to reveal a corruption offence. Administrative liability may be imposed in confiscating the gift or a fine amounting to up to USD 245.

At the same time, both representatives of pharmaceutical companies and Officials may be subject to criminal liability for the following offenses: (1) Accepting unlawful benefits; (2) Proposing and giving an unlawful benefit; (3) Bribing an officer of a privately-owned legal entity, regardless of the organizational and legal form; and (4) Bribing an employee of a legal entity.

The sanctions for these crimes vary, and may take the form of a fine of up to USD 2400, arrest, imprisonment, and/or prohibition from holding certain positions and engaging in certain activities. Under the most aggravating circumstances, crimes may result in up-to ten years of imprisonment for proposing and/or giving an unlawful benefit, being prohibited from holding certain positions and engaging in certain activities for up to three years, and having property confiscated.

Pharma companies also use sampling and dispatching promotional materials to promote their Rx pharmaceuticals. Under Ukrainian law, HCPs may receive samples only for personal use and clinical trials, but not for their professional activities. Moreover, the distribution of samples directly to patients is prohibited. Pharma companies may distribute promotional materials only to duly-qualified HCPs. Samples and promotional materials are also treated as gifts. Thus, if a pharma company provides an HCP with samples and/or promotional materials with a value exceeding the threshold established for gifts, administrative or criminal liability will apply.

Participating in charitable activities is also a well-known practice that may help pharma companies create a positive image and raise loyalty to their brand. Still, to comply with Ukrainian anti-corruption laws, the key goal of such activities must be the creation of an actual charity. This means that pharma companies must not link their charity budgets to increasing the sales of their products.

Therefore, based on legislative restrictions, pharma companies must promote their new Rx pharmaceuticals with due diligence. Apart from following legislative requirements, companies are encouraged to have an anti-corruption program, to regulate interaction with HCPs, and, particularly, with Officials. In addition, pharma companies may want to apply a stress-check program to ensure compliance with anti-corruption law when launching each promotional and marketing activity with regard to Rx pharmaceuticals.

By Mykola Stetsenko, Managing Partner, and Bogdana Parkhomchuk, Associate, Avellum

This Article was originally published in Issue 8.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Despite the recent escalation of the conflict in Eastern Ukraine and its negative impact on business in the country, Anastasiya Bolkhovitinova, Counsel at Kinstellar, says that telecommunications and IT have been on the rise, and significant legal changes were introduced on tech incentives, foreign direct investment, capital markets, and agricultural land.

“Ukraine recently made news and not in a good way,” Bolkhovitinova says. She explains that the conflict in the eastern parts of the country has escalated and that the president of Ukraine has enacted sanctions against Russian-owned businesses and individuals. “We have had requests from clients to review business continuity plans and advise on whether they should relocate their business,” she says while noting that there haven’t been significant exits from the market yet.

Despite the political instability, the IT sector has kept growing. Her firm advised on a number of deals in the sector, including the Stillfront Group’s acquisition of Game Labs Inc (as reported by CEE Legal Matters on May 20, 2021). The telecommunications sector has also been active, with one of the more notable transactions being Polhem Infra’s acquisition of Telia Carrier (as reported by CEE Legal Matters on October 23, 2020).

Recognizing the upward trend in the tech market, Bolkhovitinova explains that Ukraine passed a law in July 2021 aiming to offer foreign tech companies preferential tax treatment and reduction of business-associated risks. However, Ukraine remains protective of some other industries, Bolkhovitinova says, as the government is developing FDI regulation which will require foreign investors in strategic industries, such as oil and telecommunications among others, to receive clearance from the competent authority before investing. She also points out that, within three months from July this year, Ukrainian companies will have to disclose not only the ultimate beneficial owner of the company but their entire ownership structure.

In addition, Bolkhovitinova says that the new law on capital markets came into force on July 1, introducing new financial instruments, such as derivatives, green bonds, and infrastructure bonds. She notes the new law differentiates between qualified and unqualified investors, to which different sets of regulation apply. Bolkhovitinova also reports that the moratorium on agricultural land acquisition was lifted on July 1, 2021, which now enables Ukrainian citizens to acquire up to 100 hectares of land.

Finally, speaking of changes in the legal market, Bolkhovitinova lists Kinstellar’s takeover of the Ukrainian DLA Piper office (as reported by CEE Legal Matters on June 14, 2021) as the most significant one.