Russian-Ukrainian Legal Group, P.A.
Kiev, Ukraine; Washington, D.C., USA
Chronicle
of Recent Developments in Ukrainian Legislation
JULY 2004
Banking
Codes of Ukraine
Corporate
Registration
Currency Control
International Treaties
Land
Money
Laundering
Non-Banking Financial Services
Real Estate
Secured Transactions
Taxes
Use of Subsoil, Oil and Gas
Specific Sectors of the Economy/Miscellaneous
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The “Chronicle of Recent Developments in Ukrainian
Legislation” is a monthly summary of the most important legislative
developments in Ukraine in the area of business and corporate law, and is prepared, published
and distributed by the Russian-Ukrainian Legal Group as a free service to our
clients. The
Chronicle will be distributed only via e-mail, in English and Russian, by the
middle of each month, and will summarize the legislative developments of the
previous month. The Chronicle is
prepared in an effort to capture news of greatest interest to the widest
cross-section of our firm’s clientele, without restating all legislation
published and drowning our readers in too much information. Due to the
winnowing process necessary when preparing the Chronicle, we cannot and do not
guarantee that it contains a comprehensive list of all Ukrainian legislation
relevant to your business. Finally, please bear in mind that this summary does
not constitute legal advice; it is an informational service only. Should you wish to receive further
information or actual legal advice, please do not hesitate email us at chronicle@rulg.com
Banking
1) National Bank of Ukraine ("National
Bank") Resolution No. 268
"On Incorporating Amendments into Certain Regulations of the National Bank of Ukraine Concerning the Use of Charge Cards" dated 17 June 2004. The amendments prohibit investments in
and from Ukraine with the use of charge cards, and the latter can no
longer be used in currency exchange offices as a means for receiving cash. An
employee on a business trip can obtain a cash advance on the employee's
personal charge card, however, if the employee's employer has not provided the
employee with a corporate charge card. The Resolution
took effect on 17 July 2004.
2) National Bank Resolution No. 270 "On Approving the
Regulations on the Procedure for Receiving Foreign Currency Credits and Loans
by Residents from Non-Residents, and on Granting Foreign Currency Loans by
Residents to Non-Residents" dated 17 June 2004. The new procedure for
residents receiving foreign currency credits and loans from non-residents has
been approved. The Resolution also establishes the procedure for residents
granting foreign currency loans to non-residents and the procedure for issuing
to said residents individual licenses authorizing the
remittance of foreign currency from Ukraine. The Resolution took effect on 15 August 2004.
Codes of Ukraine
3) Law of Ukraine No. 1892-IV "On Incorporating Amendments into the Commercial Procedural Code of Ukraine and the Law of Ukraine 'On Securing Creditors' Claims and Registering
Encumbrances'" dated 24 June 2004. The Law
cancelled the rule whereby disputes, in which the defendant is not a resident
of Ukraine and has no representative office in Ukraine, must be considered at the place of location of the
claimant's seat. Said rule was prescribed by the Law of Ukraine "On
Securing Creditors' Claims and Registering Encumbrances", which took
effect on 1 January 2004 (please see the December 2003 issue of this
Chronicle). The rule now is that these kinds of disputes must be considered at
the place of location of the defendant. The Law took effect on 17 July 2004.
Corporate
Registration
4) State Committee of
Ukraine for Regulatory Policy and Entrepreneurship Order No. 73 "On
Approving the Regulations on the Procedure for Presenting Data from the Uniform
State Register of Legal Entities and Individual Entrepreneurs" dated 22
June 2004. Data from the Uniform State Register of Legal Entities and
Individual Entrepreneurs can be released on the basis of a written inquiry from
an applicant. A Register excerpt (containing information about the applicant
legal entity or individual entrepreneur) must be issued within two working days
after an application is filed. A Register reference or a Register abstract
(indicating whether the Register contains information about registrations or
consisting of a list of legal entities or individual entrepreneurs, based on
the search criteria specified in the inquiry) must be issued within five
working days after an application is filed. The Order took effect on 18 July 2004.
Currency Control
5) Cabinet of Ministers
of Ukraine ("Cabinet of Ministers") and National
Bank Resolution No. 984 "On Addenda to
Appendix 2 to the Resolution of the Cabinet of
Ministers of Ukraine and the National Bank of Ukraine No. 444 dated 21 June
1995" dated 28 July 2004. Addenda have been incorporated into the
Standard Forms of Protection Clauses of Foreign-Economic Agreements stipulating
payments with the use of foreign currency. It is recommended that, when
entering into foreign-economic agreements, Ukrainian businesses use a liability
clause stating that the parties agree to bear joint and several liability for
the performance of a contract, and that any complaint, claim or other legal
request cannot be lodged against the State of Ukraine, the state(s) of the
foreign party(ies), or against their governmental
agencies, for a default on or improper performance of the contract. The Resolution took effect on 28 July 2004.
International
Treaties
6) Law of Ukraine No. 1965-IV "On Incorporating Amendments into
Article 5 of the Law of Ukraine 'On Value-Added Tax'" dated 1 July 2004. The
following cooperative actions under the Agreement between Ukraine and the
European Community ("EC") for Scientific and
Technological Cooperation are now VAT exempt: (1) gratuitous transfer in the
customs territory of Ukraine by organizations, set up with the participation of
the EC, to Ukrainian participants, of goods, works and services acquired with
funds from the EC or from organizations set up with the participation of the
EC; (2) importation (sending) of goods to the customs territory of Ukraine, as
well as performance of works and rendering of services (with the use of funds
granted by the EC) to be used or consumed in the customs territory of Ukraine
by organizations set up with the participation of the EC or by parties to
scientific and technological cooperation. The Law will take effect on 1 January 2005.
Land
7) Law of Ukraine No. 1808-IV "On the State Expert Evaluation of Land Management Documentation" dated 17 June 2004. The
state expert
evaluation of land management
documentation ("state expert evaluation") is defined as the activity aimed at researching,
verifying, analyzing and evaluating whether examined documents meet legislative
requirements, as well as drafting substantiated conclusions for making
decisions concerning the examined documents. State expert evaluation is carried out with respect to land management
documentation and documents concerning land stipulated by the Law, as well as
materials and documentation of the State Land Cadastre. The Law took effect on 15 July 2004.
Money Laundering
8) State Department of
Financial Monitoring ("Financial Monitoring Department") and
Ministry of Internal Affairs of Ukraine ("Ministry of Internal
Affairs") Order No. 79/816 "On Incorporating Amendments
and Addenda into State Department of Financial Monitoring and Ministry of
Internal Affairs of Ukraine Order No. 83/787 dated 30 July 2003" dated 23
July 2004. The provisions of the Order regulate in detail the organization
of the granting by the Financial Monitoring Department to the Ministry of
Internal Affairs of summarized materials concerning financial transactions that
may be associated with money laundering or terrorism financing. The Order stipulates that data contained in the
above materials, as well as inquiries and messages from the Ministry of
Internal Affairs concerning the progress and results of their processing, are
confidential information which is the property of the State. The Ministry of
Internal Affairs and the Financial Monitoring Department must ensure proper
conditions for the preservation and use of received information in order to
prevent unauthorized access thereto. The Order will take effect on 17 August 2004.
Non-Banking Financial Services
9) State Commission for Regulation of the Financial Services
Markets of Ukraine ("Financial Services Commission")
Letter No. 703/11-3/1
"Concerning the Rendering of Financial and Operative Leasing
Services" dated 9 July 2004.
According to the Financial Services Commission's
clarifications: (1) an entity (lessor) does not have to be a financial
institution in order to be able to transfer property to another entity for
financial leasing; and (2) financial institutions cannot carry activities which
are not classified as financial services.
Real Estate
10) Law of Ukraine No. 1952-IV "On the State Registration of Real
Rights to Real Estate and Restrictions Thereof" dated 1 July 2004.
According to the new Law, real rights to real estate and restrictions thereof,
as well as real estate transactions, are subject to mandatory State
registration. A Uniform State Register of Rights to Real Estate and
Restrictions Thereof is being formed and will be effective in Ukraine. The State registration of such rights is open to
public review. The State recognizes the right of ownership and other real
rights to real estate accrued in compliance with the legislation that was
effective before said Law took effect. The registration of such rights will be
necessary during real estate transactions or upon the application of the owner
(proprietor) of real estate. The Law stipulates that registered real rights and
restrictions thereof will prevail over unregistered rights should a real estate
dispute arise. The Law took effect on 3 August 2004.
Secured Transactions
11) Cabinet of
Ministers Resolution No. 830 "On Approving the Procedure for Maintaining
the State Register of Encumbrances on Movable Property "
dated 5 July 2004. The
Procedure for Maintaining the State Register of Encumbrances on Movable
Property ("Register"), which Register is
stipulated by the Law of Ukraine "On Securing Creditors' Claims and
Registering Encumbrances", has been approved. Information about
encumbrances and attachments of encumbered items must be registered by the
respective departments of the Ministry of Justice of Ukraine ("Ministry
of Justice"), public notary offices, banks and other
state-owned financial and credit institutions. A fee of 34 UAH (VAT-inclusive)
will be charged for entering data into and issuing excerpts from the Register.
The Register can be accessed via a unified computer database, connection to
which will be provided by the Register Administrator on the basis of a contract
with the Register Administrator. The Resolution took effect on 23 July 2004.
12) Ministry of Justice
Order No. 73/5 "On Approving the Instructions on the Procedure for
Maintaining the State Register of Encumbrances on Movable Property and Filling
Out Applications" dated 29 July 2004. The Instructions of the Ministry
of Justice stipulate the detailed Procedure for Maintaining the Register. The
database of the State Register of Pledges on Movable Property shall be
eliminated following the introduction of the Register. The Order took effect on
9
August 2004.
Taxes
13) Law of Ukraine No. 1958-IV "On Incorporating Amendments into
the Law of Ukraine 'On the Tax Levied on Individuals' Incomes'"
dated 1 July 2004. The
rule, according to which an individual who is registered as an individual
entrepreneur and who renders services to another person under a civil-law
contract must be treated as a hired person and the respective taxes must be
levied on the income received by this person as a salary, has been deleted from
the Law of Ukraine "On the Tax Levied on Individuals' Incomes". Taxes
on the incomes of individual entrepreneurs must be levied in accordance with
the rules prescribed by special legislation, not the aforementioned Law. The
Law will take effect on 1 January 2005.
14) State Tax
Administration of Ukraine Order No. 415 "On Approving the Procedure for
Carrying Out a One-Time Inventory of the Payers of Value-Added Tax" dated
23 July 2004. All VAT payers who have received VAT Payer Registration
Certificates must (one time only) fill out (as of 1 July 2004) a VAT payer
inventory card approved pursuant to the Order, and file it with the respective
tax authority at their place of registration before 15 September 2004.
Taxpayers must report their activities, joint activity agreements they entered
into, associated persons, premises, assets, personnel, permanent staff, etc.
The Order took effect on 8 August 2004.
Use of Subsoil, Oil and Gas
15) Presidential Decree
No. 741/2004 "On Measures Securing the Observance of the Subsoil Use
Legislation" dated 5 July 2004. The
appropriate central government bodies have been instructed to ensure the
collection (with the participation the General Public Prosecutor's Office) from
users of oil- and gas-bearing subsoil, of outstanding taxes and other mandatory
fees. It has been recommended that the General Public Prosecutor's Office carry
out, within two months, a verification of the lawfulness of all resolutions
whereby the initiation of criminal proceedings based on the facts of oil- and
gas-plundering was denied. The Decree took effect on 20 July 2004.
16) Cabinet of
Ministers Resolution No. 993 "On Incorporating Amendments into Cabinet of
Ministers Resolution No. 1996 dated 24 December 2003 and Nullifying Cabinet of Ministers Resolution No.
713 dated 28 May 2004" dated 31 July 2004. The
Resolution has cancelled the need to obtain export licenses in 2004 for certain
types of oil and oil products, introduced by Cabinet of Ministers Resolution
No. 713 (please see the May 2004 issue of this Chronicle). The Resolution took
effect on 3 August 2004.
17) Cabinet of
Ministers Resolution No. 994 "On Incorporating Amendments into the
Appendix to Cabinet of Ministers Resolution No. 1548 dated 25 December 1996 and
Nullifying Cabinet of Ministers Resolutions No. 711 and No. 712 dated 28 May
2004" dated 31 July 2004. Cabinet of Ministers Resolutions No. 711 and
No. 712 (please see the May 2004 issue of this Chronicle) which stipulated: (1)
the suspension, until 1 September 2004, of auction sales of oil and gas
condensate; and (2) the power of the respective central government agencies to
adjust the range of retail and wholesale selling prices of diesel fuel and
motor gasoline, have lost force. The Resolution took effect on 1 August 2004.
Specific Sectors of the
Economy/Miscellaneous
18) Law of Ukraine No. 1905-IV "On Incorporating Amendments into
the Law of Ukraine "On the Lease of State-Owned and Municipal
Property"" dated 29 June 2004. The
amendments stipulate, inter alia, that an essential change of the
condition of a leased object due to circumstances beyond the parties' control
can serve as grounds for revising the rent. The Law also stipulates addenda to
the essential terms and conditions of lease agreements, which now include
provisions securing the performance by a lessee of his obligations with a
forfeiture (fine, penalty), surety, deposit, guarantee, etc., as well as
provisions concerning the procedure for a lessor exercising control over the
condition of a leased object. The Law will take effect on 27 July 2004.
19) Law of Ukraine No. 1955-IV "On Transport and Forwarding
Activity" dated 1 July 2004. In the
new Law, transport and forwarding activity is defined as a business activity of
rendering the services of organizing and supporting the carriage of exported,
imported, transit or other cargoes. The Law contains a list of rights and
responsibilities of a forwarding agent and a client that receives forwarding
services under a transport and forwarding contract. The Law defines which funds
must be considered payment for the services of a forwarding agent and which
costs of a forwarding agent cannot be included in said payment. The Law has not
been published in any official publication and will only take effect from the
moment of such publication.
20) Cabinet of
Ministers Resolution No. 962 "On Incorporating Amendments into Certain
Resolutions of the Cabinet of Ministers of Ukraine to Ensure Control Over the
Availability of 'Green Card' Insurance Certificates" dated 28 July 2004.
The owners (users) of transport vehicles registered in Ukraine, who travel to a
country that is a member of the "Green Card" system (an international
insurance system providing insurance against civil liability for owners of
transport vehicles in international motor transport traffic, currently having
43 member states), can cross the Ukrainian border through check points if they
possess a "Green Card" Insurance Certificate. Accordingly, said rule
also applies to foreigners and stateless persons who own or use transport
vehicles registered in Ukraine, who cross the Ukrainian
border. The Resolution took effect on 5 August 2004.
21) Ministry of Ukraine
for Extraordinary Situations and Protection of the Population From the
Consequences of the Chernobyl Disaster Order No. 297 "On Approving the
Regulations on the Procedure for Effecting State Fire Supervision of
Construction of Facilities by Foreign Firms" dated 5 July 2004. The
Order prescribes the procedure for effecting State fire supervision during the
designing, construction, technical re-equipment and reconstruction of
facilities by foreign firms and joint ventures, irrespective of their sources
of financing and forms of ownership. The Regulations regulate the operations of
officers of the State fire supervision bodies during the drafting of contracts
and agreements, expert
evaluation of construction projects and
participation in acceptance committees. The Regulations also stipulate the
responsibilities of the State fire supervision bodies as they control the
implementation of design solutions and ensure fire safety at construction
sites. The Order took effect on 1 August 2004.