Category: Ukraine

Aequo has advised Dragon Capital on the acquisition of the Amtel office-and-logistic complex in Ukraine. Baker McKenzie advised Amtel properties on the deal.

The Amtel complex, which consists of 100,208 square meters of warehouse and office premises, is located near the Bilohorodka village close to the Kyiv Bypass Road.

Aequo’s team included Partners Yulia Kyrpa and Sergey Denisenko, Counsels Bohdan Dmykhovskyy and Vasyl Mishchenko, Senior Associates Anna Litvinova and Mykhaylo Soroka, and Associate Yevheniia Chernetsova.

Baker McKenzie’s team included Kyiv-based Partner Lina Nemchenko and Associate Elmaz Abkhairova and London-based Associate Robert Gray.

Aequo has advised BlaBlaCar on the acquisition of Ukrainian company Octobus, which has developed an inventory management system for the automation of bus passenger transportation.

BlaBlaCar is a community-based travel network enabling over 90 million members to share a ride across 22 markets. 

Aequo’s team included Partners Anna Babych and Sergey Denisenko, Counsels Michael Lukashenko and Mykyta Polatayko, Senior Associate Anna Litvinova, and Associates Maria Derechina, Yelyzaveta Shram, and Anna Yareha.

Aequo did not reply to our inquiry on the matter.

Ukraine’s transport and infrastructure system plays a key role in the country’s economy, particularly with its role in export and trade in the agricultural, industrial, and other sectors. Ukraine is conveniently located on different transport routes. However, it does not fully capitalize on its geographical benefits and does not fulfill its potential as a transit country, as it is not yet well-integrated in international transport networks, lacks modern infrastructure, and has limited market opportunities in certain segments (for example, railway services).

Under the EU-Ukraine Association Agreement, Ukraine has to liberalize the market and increase competition, improve the quality of transport services, implement European technical rules and standards, and develop multimodal, TEN-T-connected networks. The Government approved the National Transport Strategy and subsector-specific strategies and programs. However, implementation is not uniform and needs to speed up to meet the applicable timelines. Progress with the sector reforms so far is largely due to IFIs such as the IFC, the GIF, the World Bank, and EBRD, which have provided technical and financial support, including the creation of the new concession framework and the launch of PPP projects. 

High on the List of Priorities

Attraction of private investment is among state priorities. Transport and infrastructure projects account for 40% of some 100 priority investment projects shortlisted by the Government for 2021-2023. An unprecedented “Big Construction” program was launched to modernize the country’s infrastructure. Recently, the “On the State Support of Investment Projects with Significant Investments in Ukraine” Law was adopted, providing for state support to projects which have a total investment value of over EUR 20 million. State support can take different forms, including tax exemption, creation of the supporting infrastructure by the state, facilitation of access to the grid, and granting of preemptive rights to use or own land. The total amount of state support cannot exceed 30% of the investment volume.

Pilot Concession Projects Catalyzed by the New Concession Framework

In 2019, the new, long-awaited “On Concessions” law was adopted, facilitating the launch of pilot concession projects. The law streamlined tender procedures and improved the balance of responsibilities and increased protections for investors, including the right to select the foreign governing law and to enter into direct agreements. The outlook for bankability of PPP projects has hence been improved. Based on the new framework, the property of state stevedoring enterprises in the ports of Kherson and Olvia was granted as a concession. At an estimated USD 120 million, the Olvia project, implemented by QTerminals, a Qatari company, in the Mykolayiv region, represents one of the largest foreign direct private investments in Ukraine’s history.

OPRC to Improve the Outlook for the Road Sector

In November 2020, the first Road PPP Program was announced, involving long-term (20+ years) output and performance-based road contracts with availability payments to be made from the State Road Fund. Notably, the investors will not have to undertake the traffic risk. Several pilot projects have been shortlisted, with the first tenders expected in autumn 2021.

What is Next for the Industry?

Despite the progress, much work still lies ahead. In the near term, budget laws have to be changed to provide long-term budget commitments for PPP projects and to prioritize the availability payments. With the State Road Fund as an example, other sector-specific funds – including airports and inland waterways, among other things – have to be introduced. The landlord port model has to be implemented to enable port authorities to consolidate and grant land and other property within seaports to investors.  A new law on railway transport is required to demonopolize the rail market and enable rail carriers, whatever their ownership structures, to provide services and obtain nondiscriminatory access to the rail infrastructure. An independent transport regulator has to be introduced, and systemic capacity-building efforts are needed to improve performance of the public sector.

The regulatory reforms will greatly influence the launch and success of investment projects. Following the pilot concessions, more such projects across different sectors are likely, including concessions for the railway and ferry complex and freight terminals in the Chornomorsk seaport; concession for the passenger terminal in the Odessa seaport; concessions for berths in the Berdiansk seaport; and concessions for railway stations in Kyiv, Kharkiv, Dnipro, and Mykolayiv, among other cities. Certain facilities, including those of several regional grid operators and stevedoring companies, are waiting to be offered for privatization. However, the primary focus and expectation remains on PPP projects as the main instrument of private investment in the sector.

By Svitlana Teush, Partner, Redcliffe Partners

This Article was originally published in Issue 8.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The long-awaited Law of Ukraine “On amendments to the Land Code of Ukraine and other legislative acts to improve the governance of land relations and their deregulation” No. 1423-IX (“Law”) entered into force (save for certain provisions).

The Law aims to boost the capabilities of local authorities (“Municipalities”) by granting them ownership rights to state-owned lands located outside villages and towns (“Rural Areas”). As a result, the Municipalities will manage the Outside Lands instead of the State Service of Ukraine for Geodesy, Cartography and Cadastre and other state authorities.

According to the Law, the Municipalities will become owners of the Rural Areas either: 

1. by registering their ownership rights with the State Register of Proprietary Rights to Immovable Property (“Real Estate Register”) if it already contains information on the Rural Areas; or
2. automatically if the Real Estate Register does not contain information on the Rural Areas.

There will be no need for the Rural Areas’ users to amend their agreements due to the change of the landlord.

Additionally, the Law:

• allows emphyteuta (a user under emphyteusis agreement) to lease out the land plot without the landlord’s permission;
• allows tenants of privately owned agricultural land plots to sell their lease rights without the landlord’s permission;
• allows users of privately owned agricultural lands plots to pledge their land use rights to any third parties;
• sets the detailed foreclosure procedure on the pledged land use rights;
• allows owners of the buildings located within the coastal protection zones to reconstruct them; and
• introduces the rankings of pre-emptive right to purchase agricultural land plots.

We believe that the Law will boost the Municipalities and enable agricultural land users to raise additional funding for their business.

By Maksym Maksymenko, Partner, and Dmytro Radzivon, Associate, Avellum

Vasil Kisil and Partners has successfully represented commercial audio content provider PressCom and its clients Testi Food (which operates the KFC restaurants chain) and Bastet Fem (which operates the Pesto Cafe chain) in a lawsuit brought against them by the Ukrainian League of Copyright and Related Rights for lost profits allegedly arising from their use of PressCom sourced music in their restaurants.

The Northern Commercial Court of Appeal dismissed the claims against KFC and Pesto Cafe, and as a result, the ULCRR also dropped new lawsuits filed against other PressCom clients.

Vasil Kisil & Partners’ team consisted of Counsel Ilarion Tomarov and Associate Daria Romashchenko.

Avellum has acted as Ukrainian counsel to Diligent Capital Partners on the joint acquisition with the FMO bank of a minority stake in Ukrainian feed producer Edinstvo Group. The OMP law firm reportedly advised the seller.

DCP is a private equity manager focused on food and agribusiness, export-oriented businesses, and the consumer goods and services industries. FMO is a Netherlands-based entrepreneurial development bank.

According to Avellum, as a result of the transaction, the Edinstvo Group obtained USD 20 million in financing that it plans to use to construct a soybean processing plant, expand feed additives production capacity, and install additional feed packaging lines.

Avellum’s team included Managing Partner Mykola Stetsenko, Counsel Andriy Romanchuk, Senior Associate Anton Arkhypov, and Associates Maryna Buinytska, Yuliia Chelebii-Kravchenko, Iryna Fonotova, Yelyzaveta Kashyna, Andriy Kornuta, and Yaroslav Pavliuk.

Sayenko Kharenko has advised the EBRD on the extension of an up-to-EUR 25 million loan to Credit Agricole Bank Ukraine.

According to Sayenko Kharenko, “the proceeds of the loan will be used by Credit Agricole Bank Ukraine to expand its local currency leasing solutions to micro, small, and medium-sized enterprises across Ukraine. Such leasing solutions will allow eligible enterprises to invest in upgrades of their machinery, equipment, and technologies that are compliant with EU product quality, health and safety, and environmental protection standards. In addition, following the completion of upgrade projects lessee companies will be eligible for grant support funded by the EU.”

Sayenko Kharenko’s team was led by Partner Igor Lozenko and included Associate Vladyslava Mitsai and Junior Associate Oleksandr Motin.

Former Philip Morris Manager Andrii Trostin has joined Eterna Law as Head of Government Relations.

According to Eterna Law, Trostin is experienced in government-relation strategies in regulated markets, participating in the development and implementation of legislation, and dialogue with government agencies, among other areas.

“A systematic approach to government relations creates transparent dialogue with state and local authorities, enables participation in drafting of new legislation, and secures favorable environment for business development,” commented Andrey Astapov, Managing Partner at Eterna Law. “We are looking forward to working with Andrii in his new role, as his deep engagement in the firm’s business will strengthen our position.”

Trostin spent the past 12 years at Philip Morris, first with Philip Morris Ukraine from 2009 to 2018, then with Philip Morris International from 2018 to 2019, and then again with Philip Morris Ukraine from 2020.

According to Eterna Law Partner Oleh Malskyy, “in his new role as the Head of Government Relations Practice, Andrii will focus on the development of effective comprehensive GR strategies; establishment of a transparent dialogue with state bodies; analysis, development, and maintenance of legislation; and provision of media coverage in business interests of clients.”

Latham & Watkins has advised DTEK Energy on the restructuring of over USD 2 billion of its bank and bond indebtedness pursuant to two inter-conditional schemes of arrangement. Hogan Lovells and Asters advised an unidentified group of ad hoc lenders on the matter.

According to Latham & Watkins, the schemes were sanctioned on May 13, 2021 and the restructuring was completed on May 17, 2021. “Under the terms of the restructuring, restructured note-holders received new notes issued by DTEK Finance plc and NGD Holdings B.V. and bank lenders received DFPLC Notes in exchange for the release and cancelation of their restructured indebtedness. Application was also made for Chapter 15 recognition of the schemes in New York.”

Latham’s team was led by London-based Partner John Houghton and Moscow-based Counsel Edward Kempson, with London-based Associates Husni Almousli, Tom Davies, and Hafza Hussein, and Moscow-based Associates Seb Tuohy, Alexander Kartyshev, Ksenia Koroleva, Alexandra Samsonova, and Ivan Alaev. The Chapter 15 application was led by New York-based Partner Adam Goldberg and included Associate Jeramy Webb.

Asters’ team included Partners Iryna Pokanay, Yaroslav Petrov, Oleksiy Demyanenko, Igor Svechkar, and Markiyan Kliuchkovskyi, Counsels Gabriel Aslanian and Dmytro Shemelin, Senior Associate Marta Halabala, and Associates Inna Bondarenko and Viktoria Zagreba.

Hogan Lovells’ team included, in London, Partners Alex Kay and Philip Harle, Counsel Aaron Burchell, Senior Associate Celine Buttanshaw, Associates Jonny Morris and Ben Lewis, and Trainees India Maddison and Chiraag Thadani; and in the Netherlands, Partners Wouter Jongen and Manon Cordewener, Counsels Dylan Goedegebuure and Alexander Fortuin, Senior Tax Advisor Matthijs Dols, and Associate Yvette Voermans.

Editor’s note: After this article was published, Avellum informed CEE Legal Matters that it advised DTEK on Ukrainian legal matters related go the restructuring. The firm’s team included Senior Partner Glib Bondar, Senior Associate Anastasiya Voronova, and Associate Anna Mykhalova.

Redcliffe Partners has acted as Ukrainian legal counsel to the European Bank for Reconstruction and Development in connection with a EUR 13.8 million loan to the Kokhavynska Paper Factory.

KPF is a producer of recycled base paper products located in Western Ukraine. The financing will be used to increase its production capacity and improve operating efficiency. Improvements are to be made regarding water usage, carbon dioxide emissions, energy efficiency, and wastewater filtering.

The Redcliffe Partners team consisted of Managing Partner Olexiy Soshenko, Senior Associate Olesia Mykhailenko, and Associate Eduard Olentsevych.

KPF was advised by its in-house team on the matter.

Editor’s note: After this article was published, CMS informed CEE Legal Matters that it had acted as English legal counsel to the EBRD on the matter. The firm’s team included Partner Elitsa Ivanova and Associate Katerina Hristova in Sofia and Partner Ihor Olekhov and Senior Associate Orest Matviychuk in Kyiv.