Category: Ukraine

Vasil Kisil and Partners has successfully represented the interests of the applicant, Czech national Vasil Sadocha, in a case against Ukraine before the European Court of Human Rights.

According to VKP, “upon consideration of the application, written observation on merits of the case and just satisfaction, filed by Vasil Kisil and Partners’ lawyers, the Court found that confiscation of cash seized by customs officers when [Sadocha] crossed the customs border was disproportionate and led to the violation of [his] right to the peaceful enjoyment of his possessions. The Court awarded [Sadocha] EUR 29,500 in respect of pecuniary damage.”

The VKP team was led by Partner Nazar Kulchytskyy and included Associate Mariia Novikova.

Ukraine’s LCF Law Group has become a legal partner of the Ukrainian Association of Renewable Energy.

According to LCF, “as we know, today Ukrainian renewable energy is going through difficult times and crises. Investors faced delays in payments due to the financial deficit of the State enterprise Guaranteed Buyer and National Power Company Ukrenergo. Moreover, this tendency added load curtailments for RES producers and potential restructuring of the feed-in tariff. To solve these problems, not only technical and economic expertise is needed, but also professional legal support. That’s why LCF Law Group together with UARE.com.ua starts its cooperation in contributing to the development of this industry.”

The firm’s team working in partnership with the UARE is led by Head of Energy and Natural Resources Ivan Bondarchuk and includes Partners Sergiy Benedysiuk and Andriy Reun (on Project Finance matters), and Partners Olena Volyanska and Yulia Atamanova (on Investment Protection matters).

Golaw has successfully represented international cosmetics manufacturer Evyap Trading Ukraine in a tax dispute worth over UAH 65 million.

According to Golaw, Ukraine’s tax authority imposed sanctions on Evyap Trading Ukraine for using its parent company trademark rights free of charge, as well as providing free advertising services to its non-resident parent company by using its trademark to conduct business.

Golaw established to the court that the tax authority’s conclusions had not been based on a correct interpretation of the Tax Code of Ukraine, nor on the general principles of Ukraine’s Civil Code regarding the use of trademarks and advertising rules.

The Golaw team was led by Partner Iryna Kalnytska and included Senior Associate Olena Sulyma.

Sayenko Kharenko has successfully defended the interests of pharmaceutical manufacturer Bayer AG before the Supreme Court of Ukraine regarding a patent dispute over the drug Rivaroxaban.

According to Sayenko Kharenko, “In early 2018, the defendant imported products including the invention protected by a patent for the active substance Rivaroxaban. These imports infringed on the intellectual property rights of Bayer who owns the rights to the invention under the Ukrainian patent ‘Substituted oxazolidinones and the use thereof to prevent blood clotting,’ used in manufacturing and sale of Xarelto drug with the active ingredient Rivarox. The defendant did not deny the fact of the import and use of the Bayer patent but referred to the fact that it imported products for scientific purposes. According to the Law of Ukraine, the use of a patented invention for scientific purposes or an experiment is not considered a violation of the rights arising from the patent. The court of the first instance and the Appellate court agreed with the arguments of the defendant. [The] Sayenko Kharenko team did not agree with the decision by the courts of the lower level and appealed it to the Supreme Court which, on April 14, 2020, overturned the decision of the lower-level courts.”

Sayenko Kharenko’s team included Partner Yaroslav Ognevyuk, Senior Lawyer Maksym Medvid, and Lawyer Pavlo Kovalchuk. 

VB Partners has successfully represented the interests of educational start-up SkyEng in a trademark registration proceeding in Ukraine.

VB Partners describes SkyEng, which it reports as being valued at more than USD 130 million, as “a distance English [language] learning company with more than 100,000 students.” According to the firm, “one of the [company’s] former managers, acting illegally and in bad faith, registered [SkyEng’s] trademark in his name and, using this registration, tried to block the company’s activity in Ukraine… the courts of first and appellate instances ruled in favor of [SkyEng] and canceled the illegal registration of the competitor’s trademark.”

VB Partners’ team was led by Partner Oleksandr Lukyanenko.

GOLAW team is gathering and updating constantly the information on the legal aspects of the combating COVID-19 in Ukraine. Laws and regulations adopted by the central government introduce specific extraordinary measures affecting both businesses and everybody personally. Brief summary of the latest legislation aimed at preventing and combating COVID-19 is laid down below.

Decree of Cabinet of Ministers of Ukraine as of 04.05.2020 No. 343 “On amending of some legal acts of Cabinet of Ministers of Ukraine”  

The Government of Ukraine has extended the duration of the quarantine to May 22, 2020. At the same time a number of restrictive measures are mitigated. From May 11, 2020, the Government of Ukraine has allowed to open:

• parks, squares, recreation areas;
• barbershops and beauty salon, manicure salons;
• summer platform at restaurant and cafes;
• takeaway catering work;
• wholesale and retail trade in non-food goods (except for shopping and entertainment centers);
• consumer services enterprises;
• museums and libraries;
• dentistry;
• the work of lawyers, auditors, notaries;
• team sports training for professional teams.
• business entities working with the production of audiovisual works, in particular recording of films and videos in the open air, in vehicles, houses, buildings, premises;
• rehearsals, trainings and other events in theaters, circuses, concert organizations, artistic groups (up to 50 people and without spectators).

The operation of the mentioned activities will be allowed provided the compliance with the following measures will be ensured:

• keeping of social distance;
• use of masks;
• regular disinfection;
• compliance with anti-epidemic measures.

Additionally the Government of Ukraine has allowed carrying out planned operations and hospitalization of patients before the end of quarantine.

Moreover, the following measures are continued till May 22, 2020:

• closing of checkpoints across the state border for international passenger traffic, entry into the temporarily occupied territory of the Autonomous Republic of Crimea and Sevastopol and prohibition of crossing the state border to enter Ukraine for foreigners and stateless persons;
• acceptance and departure of aircraft performing passenger transportation;
• emergency mode throughout Ukraine.

Therefore, the following restrictions continue to apply:

• working of food courts and entertainment areas in shopping malls, as well as work of cinemas and theaters;
• operation of the subway and public transport without special passes;
• work of suburban, intercity, intraregional, interregional transport, as well as regular railway and air connections;
• work of gyms and fitness centers;
• studying in universities, schools and kindergartens, as well as holding mass events;
• moving in groups more than 2 people (except for children);
• staying in public without a mask or respirator;
• staying in public without identity documents.

Decree of Cabinet of Ministers of Ukraine as of 22.04.2020 No. 291 “On amending of the certain acts of Cabinet of Ministers of Ukraine”  

The Government of Ukraine has extended the duration of the quarantine and restrictive measures to May 11, 2020.

The Government has permitted:

• during the quarantine and 30 days thereafter, to engage the employees of the certain professions at the enterprises and organizations, which operations are related to provision of services to the public (designated in the list), that are subject to the mandatory preventive medical examination, without undergoing the preventive medical examination, provided such an examination has been due within the term of the quarantine.
• persons, who agreed to self-isolation while using the “Dii vdoma” resource before crossing the sate border or ports of entry to/from temporarily occupied territory, not to undergo medical observation (isolation).

Decree of Cabinet of Ministers of Ukraine as of 08.04.2020 No. 262 “On amending of the Decree of Cabinet of Ministers of Ukraine No. 211 as of March 11, 2020”   

The Government of Ukraine has changes some quarantine restrictions.

The Cabinet of Ministers of Ukraine updated a list of objects that can work during quarantine.

In particular, the Government additionally allowed the following activities:

• postal and courier services;
• construction works;
• waste collection and storage;
• trade of building materials;
• dry-cleaners.

Also, certain categories of 60-year-old citizens were excluded from the list of persons who required self-isolation, namely:

• persons covered by the Law of Ukraine “On Prevention of Corruption”;
• servicemen and employees of the Armed Forces, other military entities and law enforcement;
• persons carrying out activities, related to the non-proliferation of COVID-19;
• persons that ensure activities of energy, chemical, petrochemical, machine-building industry, mining, metallurgical industry, transport, information, communication technologies, electronic communications, banking and financial sectors and defense industry enterprises, at companies that provide services in areas of centralized water, electricity and gas supply, sewerage, food production, agriculture and health care, etc.

Order of Cabinet of Ministers of Ukraine as of 02.04.2020 No. 370-p “On introducing amendments to the Annexes 1 and 2 of Order of Cabinet of Ministers of Ukraine as of March 31, 2020 No. 288-p”

Government is tightening restrictions on border to prevent the spread of coronavirus.

Starting from April 7, 2020 Ukraine’s state border will be allowed to cross only by motor vehicles and exceptionally through 19 checkpoints.

According to the changes, 115 checkpoints will be temporarily closed, and at 28 checkpoints pedestrian traffic will be temporarily suspended.

The Customs Service has updated an online map and marked all checkpoints – those already closed and those to be closed from April 07, as well as open – for both passenger and freight services.

Decree of Cabinet of Ministers of Ukraine as of 02.04.2020 No. 255 “On amending of Decree of Cabinet of Ministers of Ukraine No. 211 as of March 11, 2020”

            The Government has amended the Decree of Cabinet of Ministers of Ukraine No. 211 as of March 11, 2020 by restating it in whole and has imposed restrictive measures that are more stringent. Restated restrictions provide for the following:

Quarantine shall be effective from March 12 to April 24, 2020;

Until April 24, 2020 it is prohibited:

• to stay in the public space without wearing a mask or respirator (starting from April 6, 2020);
• to move in groups by more than 2 persons except for the instances of professional necessity and accompanying of children under 14 years old (starting from April 6, 2020);
• to stay in public places for persons under 14 years old without parents or relatives accompanying thereof;
• to attend educational institutions by students;
• to visit parks, square parks, recreational areas, forest park and coastal zones, except for walking of pets by one person or in case of professional necessity;
• to visit sport and children’s playgrounds;
• to hold all mass events (cultural, entertaining, sport, social, religious, promotional, etc.), except for the events necessary for ensuring activity of the central governmental bodies and local governmental bodies, etc.;
• to carry out activities by businesses implying visitation of customers, including activity of public food services (restaurants, cafes, etc.), shopping malls and entertainment complexes, other entertainment establishments, gyms, cultural institutions, public trading and amenity services providers;
• scheduled and chartered transportation of passengers by automobile transport, except for transportation by personal vehicles or company car;
• transportation of passengers by railway transport, within all kinds of internal routes, except for individually approved passenger hauls within internal railway routes;
• visitation of the institutions and establishments providing palliative care;
• to visit centers of temporary stay for foreigners and stateless persons who stay illegally in Ukraine;
• to stay in streets without identity documents confirming citizenship or special status;
• to leave places of observation (isolation) unauthorized.

However subject to provision of personal protection equipment to the personnel and visitors the activity of the following establishments is allowed:

• retail sale of the groceries, patrol (gas stations), hygiene products, medicines and products of medical purpose
• sale of means of communication, including mobile phones, smartphones, tablets, laptops;
• sale of veterinary medication, feeds, pesticides and agricultural chemicals, seeds and seeding products, day growing poultry;
• financial institutions, banking and insurance business;
• medical and veterinary practice;
• address delivery of the meals subject to provision of personal protection equipment to the personnel and visitors;
• operations of accommodation facilities where medical personnel and persons under observation live, as well as where live other persons designated pursuant to the decision of the State commission of technogenic and ecological security and emergencies;
• operations of sale, lease and repair of vehicles, etc.

Private Entrepreneurs and self-employed persons are allowed during the quarantine to account income and expenses without maintenance of the book for accounting income and expenses;

The legal status of the “persons requiring self-isolation” is defined, along with rights and obligations thereof as well as administrative and criminal liability for violations of self-isolation regime. Also the list of personal data of such persons is determined that upon consent of the person will be entered into relevant informational systems;

The list of the persons, who are subjects to mandatory hospitalization to observation (isolation) facilities for 14 days term, is designated as follows:

• persons who declared voluntary hospitalization;
• persons who violated conditions for self-isolations two times;
• persons who have been in contact with COVID-19 patients or those with symptoms of COVID-19 subject to the instruction of treating doctor;
• persons crossing the state border;
• persons entering from the temporarily occupied territories;

Children under 12 years old shall be hospitalized to observation (isolation) facilities together with of the parents or other persons in accordance with the law.

– enterprises, institutions and organizations during the quarantine are advised to ensure:

• shift system of work for employees and/or if possible remote work regime via Internet;
• keeping distance not less than 1,5 meters between visitors awaiting permission to enter premises;
• twenty-four-hour and/or extended work regime (schedule) for legal persons and private entrepreneurs carrying out business permitted under the Decree No. 255 (without need to approve any particular regime (schedule));

Upon the order of the CMU regional and Kyiv state city administration shall impose special regime for entry/exit to/from the territory of the regions by citizens and vehicles, including by creating control check point, organizing monitoring of the health condition of the travelers via contactless measuring of temperature and in case of deterioration of epidemiological situation by restricting the movement between the regions;

Law No. 540-IX On Amending of certain legislative acts to provide additional social and economic guarantees in relation to the spread of coronavirus disease (COVID-19)

In effect from April 02, 2020

            At an extraordinary session, the Parliament has approved the draft law No. 3275, which provides support for business, medicine and local communities during quarantine. The draft law prescribes, inter alia, the following amendments:

           Limits of income for taxpayers of 1st, 2nd and 3rd group of simplified tax system was increased:

o          1st group – 1 000 000 000 UAH;

o          2nd group – 5 000 000 000 UAH;

o          3rd group – 7 000 000 000 UAH.

           Relief from VAT and import duty of goods necessary for combating COVID-19;

           Documentary and factual tax audits inspections for the period from March 18 to May 31, 2020 are prohibited (moratorium), except those related to cases of VAT or negative VAT more than UAH 100 thousand reimbursement;

           From March 1, 2020 to March 31, 2020 land tax shall not be accrued and paid (earlier the period of relief was until April 30).

           From March 1 to May 31, 2020 the fines and interests for not paying Unified Social Contribution shall not be imposed and accrued.

           Moratorium for Unified Social Contribution inspections established from March 1 to May 31, 2020, already initiated inspections shall be suspended for the mentioned period;

           Raising of the interest rate on the loan agreement is forbidden during spread of COVID-19;

           The law directly establishes that the quarantine is a circumstance out of control of the tenant. Thus, tenants may be relieved from rent payments for lease of property the were hindered to use due to quarantine on the basis of para 6 Article 762 of the Civil Code of Ukraine;

           Persons liable for submission and publication of financial statements shall be relieved from liability for delayed publication of financial statements for 2019 or consolidated financial statements for 2019 with auditor report in case such statements will be published during quarantine or within 90 days after its end but in any case not later than December 31, 2020;

           Due to quarantine and restrictive measures requirements regarding conduction of general meeting of shareholders of joint stock companies and limited liability companies-emitters of stock certificates temporary shall not apply;

           Possibility to arrange distance work (flexible work time) was introduced to Labor Code of Ukraine;

           If employing persons for distance work adhering of written form of employment contract is compulsory. In its turn it is allowed during quarantine to establish distance work for employees who are already employed by issuing respective order;

           Idle time of the enterprise’s work not attributable to the employee’s fault shall be paid in amount not less than 2/3 of wage;

           Within the period of anti-COVID-19 measures the Cabinet of Ministers of Ukraine is entitled to temporary suspend issuance of work permits to foreigners.

           All the scheduled inspections of business are restricted until June 30, 2020 (except: business rated with high level of risk; inspections in relation to adhering of regulated prices; sanitary and epidemiologic inspections).

Also the law prescribes peculiarities for work of court system during quarantine and social help measures during unemployment.

On March 26, 2020 the President of Ukraine informed citizens on border closure

During daily address to the citizens the President of Ukraine informed that by the end of Friday, March 27, the state border will be closed and all passenger traffic will be suspended.

Those who will not be able to return within the next two days will be assisted by our diplomatic missions and Ukrainian communities abroad.

Decree of Cabinet of Ministers of Ukraine as of March 25, 2020 No. 239 on amending of certain decisions of Cabinet of Ministers of Ukraine (No. 211, 228, 287 , 291)

The Government has extended until April 24, 2020 the quarantine and other restrictive measures period, namely:

– border checkpoints for passengers transportation, including border with occupied territory of Crimea for citizens of Ukraine are closed until April 24, 2020;

– border for foreigners is closed until April 24, 2020. The restriction does not refer to foreigners who have permanent or temporary residence permit, spouses or children of Ukrainian citizens; spouses or children of Ukrainian citizens, employees (and their families) of diplomatic (consular) missions, international missions and organizations; drivers and service personnel of freight vehicles, crew members;

– arrival and departure of aircrafts with passengers who travel for touristic purposes is prohibited until April 24, 2020;

– departure and arrival of aircrafts to airports of Ukraine is prohibited until April 24, 2020. Departure and arrival of aircrafts allowed only via Boryspil International Airport or, in case of non-availability of Boryspil, over Lviv International Airport Danyla Halytskoho as a reserve airport.

Also, the Government eased some restrictive measures, in particular has expanded the list of allowed activities during quarantine:

         –  the ban on wholesale of food, trade of veterinary goods, veterinary practice, sale of forages, pesticides and agrochemicals, seeds and planting materials, as well as some other activities was cancelled;

       –  requirements to passenger transportation that is undertaken by enterprises for productive purposes were eased.

For carrying out the abovementioned activities, as well as during passenger transportation the appropriate personnel, drivers and passengers must be provide  with personal protective equipment and be compliance with appropriate sanitary and anti-epidemic measures.

The rest of restrictive measures introduced by Decree No. 211 with amendments made by Decree 215 remain in force until April 24, 2020.

Order of the Cabinet of Ministers of Ukraine as of March 25, 2020 No. 338-р

The Cabinet of Ministers of Ukraine has introduced a 30-day emergency situation regime in the entire territory of Ukraine until April 24, 2020.

The emergency regime does entail any restrictions for business, as well as not limit the rights of citizens, but only consolidates efforts to overcome the threat.

For the most part, regime of emergency situation introduces a special procedure of operation for authorities and civil protection systems, which will work intensely for the duration of an emergency situation.

In fact, the legal emergency regime is aimed at enhancing the coordination of central, local authorities and civil protection system – all services and bodies involved against the spread of the coronavirus.

Among the measures to be taken during an emergency situation are the following:

•  strengthening of public order;
•  informing citizens;
•  disinfection of objects and territories;
•  sanitary-hygienic anti-epidemic measures.

Decree of Cabinet of Ministers of Ukraine as of March 23, 2020 No. 228

It is prohibited starting from 12:00 March 24 to April 03, 2020:

•  arrival and departure of aircrafts with passengers who travel for touristic purposes;
•  to perform departure and arrival of aircrafts to airports of Ukraine. Departure and arrival of aircrafts allowed only via Boryspil International Airport or, in case of non-availability of Boryspil, over Lviv International Airport Danyla Halytskoho as a reserve airport.

Order of Cabinet of Ministers of Ukraine as of March 23, 2020 No. 333-р            

Emergency situation regime declared in Donetsk, Ternopil and Cherkasy regions.

Emergency situation does not result in suspension of activity of all enterprises automatically and do not entail restriction of rights of businesses and public. Emergency situation regime generally imposes special mode of work for sate bodies and system of civil protection.

Minutes No. 16 of Permanent commission of techno genic ecologic security and emergencies “On prevention of spreading of severe respiratory disease COVID-19, caused by coronavirus SARS-CoV-2, and implementation of additional restrictive measures on the territory of Kyiv”   •          Internal transportation by surface transport is restricted.

Starting 22.03.2020 transportation will be conducted via specially designed routes exclusively of people working in city’s vital public services, who have appropriate special tickets, identity documents and means of personal protection.

• Grocery stores and drug stores chains starting 25.03.2020 will allow stay of customers in premises only in a number of 1 person per 10 sq.m and will have to ensure measures of sanitary safety.

Orders No. 320-p as of March 16, 2020, No. 321-p as of March 18, 2020, No. 322-p, 323-p, 324-p as of March 20, 2020 of Cabinet of Ministers of Ukraine “On establishing an emergency situation regime”       

Emergency situation regime declared in Kyiv City, Kyiv, Dnipro, Ivano-Frankivsk, Chernivtsi, Zhytomyr regions.

Emergency situation does not result in suspension of activity of all enterprises automatically and do not entail restriction of rights of businesses and public. Emergency situation regime generally imposes special mode of work for sate bodies and system of civil protection.

Law of Ukraine 533-IX “On amending the Tax Code of Ukraine and other laws of Ukraine as to assistance of taxpayers during the period of effecting measures aimed at prevention and combating of outbreak and spread of the coronavirus disease (COVID-19)”

• From March 18 to May 31, 2020 all scheduled documentation and office tax inspections shall be prohibited, except for:

           high risk enterprises;

           in the state pricing area of activity;

           in the area of sanitary and epidemiological security of the public.

• Since March 18 to May 31, 2020 fines for violation of the tax law shall not be imposed, except for penalties for:

           violations of the provisions set for contracts of long term life insurance or insurance agreements in providing non-state pensions, particularly for insurance of the additional pension;

           alienation of the property under tax lien without consent of the tax authorities;

           violations of the rules of recording, production and turnover of the patrol and ethyl spirit at the excise warehouses, which are used under the regular circumstances;

           violations of the accrual, declaring and payment of the VAT, excise duty, rent payments.

• From March 1 to March 31 and from April 1 to April 30, 2020 payment of Unified social contribution (USC) is temporarily cancelled for certain categories of taxpayers, namely:

           Private Entrepreneurs, including ones who have chosen simplified tax system;

           Sole Practitioners in Professional Fields (i.e. attorneys, notaries, etc.);

           Members of Farming households.

Please note that according to the abovementioned the USC shall not be accrued for and paid by these taxpayers for themselves only, i.e. the accrual and payment of USC is not cancelled in respect of employees of abovementioned categories of taxpayers.

It should be noted, however, that USC for the foregoing period may be paid voluntarily by the taxpayers.

• From March 1 to May 31, 2020 the interest on the amount of tax charged by tax authorities as a result of tax inspection will not be accrued, and accrued but not payed interest for that term shall be written off.
• Ban for documental inspections of correctness of unified social tax accrual, calculation and payment for the period from March 18 to May 18, 2020.
• From March 1 to March 31 and from April 1 to April 30, 2020 the fines and interests for not paying Unified Social Contribution shall not be imposed and accrued.
• From March 1, 2020 to April 30, 2020 land tax shall not be accrued and paid.
• From March 1 to April 30, 2020 real estate property in ownership of the natural and legal persons is not subject to the real estate tax.
• From March 1 to April 30, 2020 consumers of credits are excepted from liability for delay in performance of obligations under the contracts, i.e. obligations to pay the creditor a default penalty (interest, fine) and other payments prescribed by the contracts of the consumer’s credit.
• Personal income tax payment is postponed. It is allowed to taxpayers-natural persons to defer the submission of the Tax Annual Report for the 2019 by the July 1, 2020. Correspondingly, the personal income tax inferred from the Tax Annual Report shall be paid by the October 1, 2020.

Law of Ukraine 530-IX “On amending certain legislation of Ukraine, aimed at prevention and combating of outbreak and spread of the coronavirus disease (COVID-19)”

• Amendments to the Code of Administrative Offences:

           fines for the breach of the quarantine rules by the citizens amounting to UAH 17 000 – UAH 34 000 and for officials (officers) – UAH 34 000 – UAH 170 000;

           breach of special public procurement rules set be the law for the period of combating COVID-19 disease will entail penalties.

• Amendments to the Criminal Code of Ukraine:

           breach of the rules and regulations for prevention of the coronavirus has been listed among offences that entail criminal liability by imposing fines and by imprisonment.

• Import of medicines and personal protections for combating COVID-19 disease has been relieved of VAT payment.
• Import of medicines and personal protections for combating COVID-19 disease has been relieved of import duty and cleared first ahead of the line.
• Quarantine in connection with COVID-19 can be recognized as force majeure (act of god).
• Public procurement procedures shall not apply to goods, works and services necessary for performing measures aimed to prevent occurrence and spread, localization and liquidation of epidemics, pandemics of COVID-19. The list of such a goods, services and works to be developed by the government.
• The time of unpaid vacation during quarantine is unlimited. Thus, the unpaid vacation may last form more than 15 days.
• During the quarantine an employer may arrange distance work or grant vacation to employees.
• From the first day of quarantine time limits for appliance for administrative services or other services shall be suspended;
• During the quarantine all the scheduled inspections of business is restricted.

Directive of the Cabinet of Ministers of Ukraine as of March 16, 2020 No. 290-р “On amending Directive of the Cabinet of Ministers of Ukraine as of March 16 2020 No. 287”

• From March 17 2020 to April 3 2020 border points for international passenger railway, air and automobile (for buses) transportation are temporarily closed.

Decree of Cabinet of Ministers of Ukraine as of March 14, 2020 No. 291-р

• Temporary from March 16th, 2020 till April 03rd , 2020 close of border with occupied territory of Crimea for citizens of Ukraine.

Decree of Cabinet of Ministers of Ukraine as of March 14, 2020 No. 287-р (AMENDED)

To close temporary from March 16th, 2020 till April 03rd, 2020 border checkpoints for passengers transportation.

To close temporary from March 16th, 2020 till April 03rd, 2020 border for foreigners. The restriction does not refer to:

• ­           foreigners who have permanent or temporary residence permit, spouses or children of Ukrainian citizens.
• ­           spouses or children of Ukrainian citizens, employees (and their families) of diplomatic (consular) missions, international missions and organizations;
• ­           drivers and service personnel of freight vehicles, crew members.

Еntry into Ukraine of other categories of foreigners upon agreement with the Ministry of Foreign Affairs.

Decree of Cabinet of Ministers of Ukraine as of March 13, 2020 No. 288-р

• Temporarily closed checkpoints and checkpoints across the state border according to the list.
• Suspended pedestrian traffic at border crossings at the state border according to the list.

By Max Lebedev, Partner, Oleksandr Melnyk, Associate, and Andrii Oliinyk, Junior Associate, GOLAW

On March 31, 2020 Verkhovna Rada of Ukraine enacted the Law of Ukraine “On amendments to certain legislative acts of Ukraine concerning turnover of the agricultural land” (Bill No. 2178-10) (hereinafter referred to as the “Law“). The Law is set for signature of the President of Ukraine and will take effect on July 1, 2021.

Effective date of Law applies for all major provisions except for obligations of the Cabinet of Ministers of Ukraine to approve a procedure for financial assistance to citizens and legal entities purchasing land plots, to introduce outgoings to the state budget for state policies of development of small and medium agricultural producers, and adjust laws and regulations ensuring compliance and enforceability of the Law, which shall be done within 6-month term as of promulgation of the Law. Therefore, secondary legislation and regulations ensuring enforcement of the Law are expected to be enacted soon.

GOLAW have prepared the review of major novelties of the Law.

What happened?

The Law introduces the market for agricultural land. It repeals paragraphs 14-15 section X “Transitional provisions” of the Land Code of Ukraine that have provided for moratorium on sale of agricultural land. According to the new Law, individuals and legal entities can acquire ownership and alienate agricultural land plots subject to restrictions and limitations set forth by the Law.

Who is ALLOWED to acquire ownership of land?

The Law has established an exhaustive list of persons who can be owners of the agricultural land. The Law explicitly allows acquiring ownership rights to agricultural land plots by:

• citizens of Ukraine;
• Ukrainian legal entities, whose shareholders are only citizens of Ukraine and/or state, and/or local community;
• local communities;
• state.

The Law envisages banks as a distinctive category. Banks cannot purchase land but can acquire the ownership thereto only by procedure of enforcing foreclosure on such a land being subject of lien and under the undertaking to further alienate a plot via land auctions during two years as of ownership acquisition.

Who is PROHIBITED to acquire ownership of land?

The Law prescribes classes of entities which are prohibited to acquire ownership of an agricultural land until the referendum takes place and those which are subject to unconditional prohibition.

Until the referendum is held it will be prohibited to acquire ownership of agricultural land plots for Ukrainian legal entities whose shareholders or ultimate beneficial owners are not citizens of Ukraine. It seems though that such a ban concerns legal entities regardless of the amount of interest of the foreign national therein.

In addition, until the referendum is held, foreigners, stateless persons and legal entities are prohibited to acquire ownership of the interest (shares, membership, participation) in the equity capital of legal entities (except for the ownership in the share capital of the banks), which are the owners of agricultural land.

Therefore, the Law limits opportunities for agribusiness to structure the ownership of agricultural land by the means of holding structures on the territory of Ukraine as well as by using foreign companies. However, it is important to note that such restrictions may be lifted in the result of referendum on the foregoing matters.

Along with this, the Law prescribes that in any case, even if the mentioned referendum is held, the acquisition of ownership to agricultural land plots shall be prohibited for:

• legal entities, whose shareholders or ultimate beneficiaries are foreigners – in respect of land plots located within less than 50 km from state border of Ukraine (except for the state maritime boundaries);
• legal entities, whose shareholders or ultimate beneficiaries are citizens of Russian Federation;
• persons who are aligned or were aligned with terrorist organizations;
• legal entities, whose shareholders or ultimate beneficiaries are foreign states;
• legal entities, whose ultimate beneficiary cannot be identified;
• legal entities, whose ultimate beneficiaries are registered in the offshore zones (according to the list of offshores adopted by Ukrainian Government);
• individuals and legal entities, as well as for their affiliates, who have been subjected to sanctions pursuant to the Law of Ukraine “On Sanctions” by prohibition for acquiring ownership of land plots;
• Ukrainian legal entities whose controllers are registered in states from FATF’s list.

Considering abovementioned restrictions, agribusiness planning to acquire ownership to agricultural land plots has to disclose the information on beneficiaries and should revise its corporate structures eliminating offshore companies along the process.

Limitations

Until January 1, 2024 total area of agricultural land plots in ownership of one citizen cannot exceed 100 ha. Area of land plots acquired by citizens before the Law takes effect shall not be included. From 2024 total limitation for citizens will be increased up to 10 thousand hectare per capita.

Legal entities can acquire ownership of agricultural land only after January 1, 2024 and within the 10 thousand hectares limit while not exceeding total area of agricultural land plots that can be in ownership of all shareholders of such a legal entity. The mentioned restrictions do not apply to banks acquiring land by the enforcement of foreclosure on the land being subject of lien.

It should be taken into account that area of the land plot in ownership through owning interest in equity capital of a legal entities combines with an area of land plot in direct ownership of the citizen. Area of land plot that is owned by a citizen through owning interest in the equity capital of company shall be calculated on a pro rata basis – total area of land plots in ownership of legal entities multiplied by percentage of member’s interest in equity capital.

Therefore, provided a citizen is the direct owner of 10 thousands hectares of agricultural land, legal entity, where such a citizen is the sole member, cannot acquire ownership of agricultural land.

Failure to observe abovementioned limitations and restrictions entails voidance of deeds for alienation of land plots and is deemed a legal ground for forfeiture (seizure) of the land plot.

Peculiarities of sale and purchase

The following specifics of sale and purchase of agricultural land shall be taken into consideration:

• sale and purchase is carried out adhering preemptive right (right of first offer) with possibility to transfer such right to a third party subject to prior written notice to the owner;
• settlementofpayments forlandplots purchase shall becarriedoutvia bank transfer;
• buyers shall have documented proof of source of funds or other assets used to acquire ownership. At this stage the Law does not stipulate the procedure and authorised persons for verifying the sources of funds.
• Until January, 2030 sale price shall not be less than normative monetary evaluation of the land plot.

Sale of the agricultural land plots in state and public ownership is prohibited.

Liability

The Law prescribed that failure to comply with Law’s requirements as to acquisition of ownership of agricultural land is the legal grounds for declaration of deed for acquisition of ownership of land plots null and void. In addition, the Law provides for forfeiture (seizure) of the land plot.

On a separate note the liability of the persons who will take ownership over the land, which by operation of Law such persons cannot acquire. Such persons are obliged to alienate land plots within one year term as of the transfer of ownership title. In case of delay, upon the petition of Stategeocadastre the land plot can be seized following court’s decision.

Moreover, forfeiture (seizure) upon the decision of the court can be enforced on the land plots, area of which exceeds limitations for agricultural land that can be in ownership of individual.

Seized land plot shall be sold on land auctions subject to decision of the court. Consideration for land plot sold on land auction with deducted expenses for sale process shall be disbursed to the former owner.

At this stage, it is clear that Law will significantly affect agricultural business in Ukraine. Owners of agricultural companies planning to form their privately owned land stock have to take care of reviewing of corporate structures in advance in order to comply with new requirements.

By Max Lebedev, Partner, Oleksandr Melnyk, Associate, and Andrii Oliinyk, Junior Associate, GOLAW

Everlegal has advised UDP Renewables on the development and construction of the 20 MW Terslav solar power plant in the Dnipropetrovsk region of Ukraine.

According to Everlegal, the Terslav project “covers an area of ​​28 hectares and is equipped with more than 91,000 solar panels, which will produce 23,275 MWh of electricity per year. The power plant will be able to supply energy to almost 9,000 households and will reduce CO2 emissions by up to 30,000 tons per year.”

Everlegal’s team was led by Partner Andriy Olenyuk and included Managing Partner Yevheniy Deyneko, Senior Associate Yuliia Kylchynska, Associate Alina Zhuk, and Junior Associates Olha Horodniuk and Lidiia Vatutina.

On March 17, 2020 a law (bill No. 3219) came into force that included quarantine established by the Cabinet of Ministers of Ukraine in the list of force majeure events. Will this be a tool that allows Ukrainian businesses to drop their obligations without any consequences? In most cases – no, because force majeure is not as easy as it might seem at first glance.

Is quarantine always a force majeure event?

The Law on Chambers of Commerce in Ukraine provides the following definition:

“Force majeure events (circumstances of insuperable force) are extraordinary and inevitable circumstances that objectively make it impossible to fulfill the obligations stipulated in the agreement (contract, transaction, etc.) and obligations under legislative and other normative acts.” After this definition the law provides the list of circumstances that may be considered as force majeure. This list has recently been supplemented by quarantine.

It should be noted that this list is not exhaustive – It ends with the word “etc.”. That is, the absence of a direct reference to “quarantine” does not mean that any event which is not explicitly stated in the law cannot be declared as force majeure. In addition, circumstances such as the “epidemic” and “long-term interruptions in transport, governed by the relevant decisions and acts of state authorities”, were previously included in this list. However, a clear statement in the law that quarantine can be recognized as a force majeure is likely to make it easier for businesses to confirm this fact.

We knowingly write that quarantine “may be recognized” instead of “is recognized” as force majeure. The mere rule that quarantine is in the list of force majeure events is not enough to apply it to your business and your contracts.

How to confirm force majeure?

The only admissible evidence to confirm the existence of force majeure is a certificate issued by the Ukrainian Chamber of Commerce and Industry and regional chambers of commerce and industry. Such a certificate must be obtained separately for every contract regarding which force majeure event has arisen.

A certificate of force majeure is not automatically issued. As can be seen from the definition of force majeure, these circumstances must objectively prevent the fulfillment of contractual or any other obligation. This means that in order to obtain a certificate of force majeure, an entity must prove that it cannot fulfill its particular obligation(s) because of the quarantine. In other words, if there were no quarantine, there would be no obstacle to fulfill this obligation. The burden of proving such causation rests with the applicant.

What does the case law say?

A certificate of force majeure, although mandatory, is not sufficient. There are court rulings where the Supreme Court did not declare the occurrence of force majeure event despite having a certificate issued by Chamber of Commerce (Case No. 926/2343/16, Case No. 902/368/16, Case No. 904/1224/18). In addition, the Supreme Court concluded last year that there is no provision about force majeure in tax legislation, therefore even a certificate of force majeure will not help in disputes with tax authorities (case no. 804/15246/15).

What is in practice?

Imagine that someone’s business was badly affected by the quarantine and that person was able to obtain certificates of force majeure regarding its contracts. However, this is not a permit for non-performance of the contractual obligations. The most interesting thing about force majeure is that it releases from liability for non-performance, but does not absolves from the performance of the obligation itself. In other words, force majeure is an exemption from fines and penalties, but not from the payments stipulated in the contract. Moreover, provided for in Art. 625 of the Civil Code of Ukraine “compensatory” 3% per annum and inflationary losses are maintained regardless of the presence of force majeure – in this regard the Supreme Court of Ukraine spoke in 2017 (Case No. 913/869/14).

On the other hand, we recommend reviewing your contracts where the force majeure clause may absolve not only from liability but also from the obligation itself. 

Also, in some cases the law may also exempt from the obligation. An example is the obligation to pay rent. At present, all shopping and entertainment centers in Kyiv are closed which makes it impossible for tenants to conduct business activities, that is, to use the leased premises for the intended purpose.

In this case, tenants can take advantage of the provisions of Part 6 of Art. 762 of the Civil Code of Ukraine, under which the tenant is exempted from the obligation to pay the rent for the whole period during which the tenant was deprived of the opportunity to use the premises due to circumstances beyond its control. Thus, the tenant does not even need to obtain a certificate of force majeure – it is sufficient to record the fact that it is impossible to use the leased premises. 

Conclusions

Undoubtedly, a certificate of force majeure is a very useful business tool. It allows to get rid of fines and penalties, as well as to delay the fulfillment of the obligation until the force majeure expires. But obtaining it is not an easy procedure. It is important to think carefully about whether this is applicable to your business. Consideration should also be given to modifying existing contractual agreements with counterparties. And, of course, there is no need to fear that all agreements suddenly became unenforceable due to the inclusion of quarantine into the list of force majeure events.

Take care and stay safe!

By Iryna Kalnytska, Partner, GOLAW

The LCF Law Group has helped Scatec Solar and Partners launch a 54 MW Boguslav-2 PV-power-plant in Ukraine, less than ten months after the closing of the project financing.

The power plant is located in Boguslav, in the Kyiv region of Ukraine, and will provide clean energy to about 27,000 households. According to LCF, the firm “provided full legal support in the regulatory procedures required for the commercial operation of the project.”

LCF’s team consisted of Counsel Ivan Bondarchuk and Associate Kateryna Andarak.