Russian-Ukrainian Legal Group, P.A.

Kiev, Ukraine; Washington, D.C., USA

 

 

Chronicle of Recent Developments in Ukrainian Legislation

 

 
march – APRIL  2006

 

Banking

Civil Procedure

Foreign Economic Activity

Holding Companies

International Treaties

Investment

Labor Law

Licensing

Fuel and Energy Complex

Securities

Taxes

Use of Subsoil, Oil and Gas

Specific Sectors of Economy / Miscellaneous

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 ("NBU") Resolution No. 143 “On Approving the Regulations on Establishing a Bank Subsidiary, Branch or Representative Office of a Ukrainian Bank in the Territory of Other States” dated 12 April 2006. Prior to establishing a foreign subsidiary (including by purchasing a foreign bank), branch or representation office, a Ukrainian bank must obtain a permit from the NBU. Permits are valid for six months from issuance. Permits will not be issued if (i) the subsidiary's, branch's, or representative office's host state has not acceded to international money laundering treaties, or (ii) the international organizations responsible for certifying state compliance with anti-money laundering rules have issued a negative conclusion regarding the host state's compliance. After obtaining the NBU permit, a Ukrainian bank must still obtain the usual NBU individual license to make investments abroad. The Resolution took effect on 1 May 2006.

 

Civil Procedure

 

2) Law of Ukraine No. 3541-IV "On Amending the Law of Ukraine 'On Enforcement Procedure' and Certain Other Acts Concerning the Fulfillment of Judgments" dated 15 March 2006. The Law clarifies certain provisions of the Law of Ukraine "On Execution Procedure". For example, it is clarified that attaching a debtor's property does not prevent attaching the debtor's funds. The Law also amends several codes and other laws, aiming to prevent various state agencies from freezing the accounts of subjects of economic activity. The Law took effect on 14 April 2006.

 

Foreign Economic Activity

 

3) Ministry of Economics of Ukraine ("Ministry of Economics") Order No. 95 "On Approving Amendments to the Procedure for Applying to Subjects of Foreign Economic Activity of Ukraine and Foreign Subjects of Economic Activity the Special Sanctions Stipulated by Article 37 of the Law of Ukraine 'On Foreign Economic Activity'" dated 15 March 2006. "Special sanctions" (e.g. fines, imposition of an individual licensing regime or suspension of foreign economic activity) can be imposed on subjects of foreign economic activity up to three years after the date a violation is discovered. Appeal against imposition of sanctions will not suspend their enforcement. Sanctions remain in force until the violation that caused their imposition has been cured. The Ministry of Economics will post on its official website information about the status of sanctions (e.g. their imposition, cancellation, amendment, or suspension). The Order took effect on 20 April 2006.

 

Holding Companies

 

4) Law of Ukraine No. 3528-IV "On Holding Companies in Ukraine" dated 15 March 2006. The Law defines the basic principles of how holding companies function in Ukraine, as well as the specifics of their creation, activity and liquidation. A holding company is a closed joint-stock company that possesses, uses and disposes of share packets of two or more other corporate enterprises. Holding companies must be registered in the State Register of Holding Companies. The Law took effect on 18 April 2006.

 

International Treaties

 

5) Law of Ukraine No. 3477-IV "On Executing the Decisions and Applying the Practice of the European Court of Human Rights" dated 23 February 2006. ECHR Decisions in matters brought against Ukraine are binding on Ukraine. Ukraine will bear the cost of executing such decisions. The Law describes the procedure for notifying interested parties about ECHR decisions, publishing and enforcing such decisions as well as for applying the Convention for the Protection of Human Rights and Fundamental Freedoms in Ukraine. The law took effect on 30 March 2006.

 

6) Law of Ukraine No. 3301-IV “On Accession of Ukraine to the UNIDROIT Convention on International Financial Leasing” dated 11 January 2006. Ukraine has acceded to the UNIDROIT Convention on International Financial Leasing, which was signed on 28 May 1988 in Ottawa. The Convention defines the principles of international leasing activity, the rules for concluding leasing agreements, the rights and responsibilities of parties to a lease, lease warranties, the compensation of losses, etc. Ukraine's accession to the Convention is expected to spur broader use of financial leasing in Ukraine. The Law took effect on 12 May 2006.

 

7) Law of Ukraine No. 3302-IV “On Accession of Ukraine to the UNIDROIT Convention on International Factoring” dated 11 January 2006. Ukraine has acceded to the UNIDROIT Convention on International Factoring, which was signed on 28 May 1988 in Ottawa. The Convention regulates the rules for concluding and applying factoring contracts and the assignment of rights to monetary claims and defines the rights and responsibilities of parties to factoring contracts. Ukraine's accession to the Convention is expected to spur drafting of factoring legislation in Ukraine. The Law took effect on 12 March 2006. 

 

8) Cabinet of Ministers of Ukraine ("Cabinet of Ministers") Decree No. 353 "On Approving the Procedure for Official Translation of Multilateral International Treaties of Ukraine into Ukrainian" dated 14 March 2006. The Ministry for Foreign Affairs is responsible for making official translations of multilateral international treaties to which Ukraine accedes. "Official translation" means an authentic exposition in Ukrainian of the text of an international treaty concluded in a language other than Ukrainian. The Decree took effect on 14 March 2006.

 

Investment

 

9) Presidential Decree No. 300/2006 “On the Plan for High Priority Measures in the Field of Investment Activity” dated 10 April 2006. The approved Plan lists the initiatives that the Cabinet of Ministers is supposed to focus on this year. Specific persons are named responsible for the progress of each "measure". Investment priorities include the following matters: right of ownership; protection of intellectual property rights; land-use; elimination of red tape; execution of court and other judgments; a special regime for stimulating investment; and tax policy. The Decree has not yet been published but will take effect ten days after its official publication.    

 

Labor Law

 

10) Ministry of Labor and Social Policy of Ukraine, State Employment Center and Inspection of Control over the Observance of the Employment Legislation of the Population Letter No. DTs-12-1556/0/6-06 "Concerning the Use by Employers of the Labor of Foreign Citizens and Stateless Persons" dated 24 March 2006. The Letter answers some questions regarding the employment of foreigners in Ukraine. For example: (1) foreigners who immigrated to Ukraine for employment for a certain term can be hired on the basis of a work permit; (2) employees of foreign companies' Ukrainian representative offices may work in Ukraine without obtaining work permits, provided the representative office in question is registered with the Ministry of Economics; and (3) foreign individual entrepreneurs and foreigners who have written civil-law agreements (contracts) with Ukrainian companies currently do not need to obtain work permits.

 

Licensing

 

11) State Commission for Regulation of the Financial Services Market of Ukraine (“Financial Services Commission”) Order No. 5523  On Approving the Licensing Conditions for Transferring Funds by Non-Bank Financial Institutions” dated 23 March 2006. The Licensing Conditions contain the rules for issuing a license to transfer funds and for reissuing or issuing duplicates or copies of such licenses, as well as the rules that a recipient of such a license must comply with. The Financial Services Commission issues such licenses on the basis of an application and corresponding package of documents. Licenses are valid for three years. Prior to actually transferring funds, a financial institution must still also obtain a general NBU license to conduct currency operations. The Order took effect on 23 April 2006.   

 

Fuel and Energy Complex

 

12) Law of Ukraine No. 3503-IV "On Chemical Sources of Current" dated 23 February 2006. The Law regulates the development, sale, import and operation of chemical sources of current ("CSC"), as well as the storage and utilization of CSC. CSC are sources of electrical energy that is produced by transforming chemical energy into electrical energy. The production, import, storage and utilization of CSC are all subject to licensing. The Law will take effect on 1 July 2006.

 

Securities

 

13) Law of Ukraine No. 3480-IV "On Securities and the Stock Market" dated 23 February 2006. The Law consists of six sections. The first two sections focus on defining key concepts. The third section is devoted to professional activity on the stock market and to the procedure for creating and operating stock exchanges. The fourth section describes the stages of securities issuance in both open (public) and closed (private) placements, the procedure for registering an issue and for keeping records of issued securities. The fifth and sixth sections describe the procedure and conditions for disclosing information and regulating the securities market. Once the Law takes effect, the 1991 law of the same name will lose force. The Law took effect on 12 April 2006. Certain provisions of the Law will come into force in three years after the Law took effect.

 

Taxes

 

14) Cabinet of Ministers Resolution No. 421 “On Recognizing Certain Resolutions of the Cabinet of Ministers of Ukraine as Having Lost Force” dated 5 April 2006. The Cabinet of Ministers continues the process canceling outdated regulatory acts, which began in 2005 with the Presidential Decree “On Liberalization of Entrepreneurial Activity and State Support of Entrepreneurship” in order to create more favorable conditions for business development in Ukraine. In this Resolution, a number of Cabinet of Ministers Resolutions in the field of taxation are recognized as having lost force. In particular, a Resolution permitting the tax authorities to confiscate cash from taxpayers who have tax debts and who lack bank accounts has been canceled. The Resolution took effect on 5 April 2006.

 

Use of Subsoil, Oil and Gas

 

15) Law of Ukraine No. 3396-IV "On Amending Article 9 of the Law of Ukraine 'On Licensing Certain Types of Economic Activity'" dated 7 February 2006. The excavation of minerals from deposits that have national significance and that are included in the State Fund of Mineral Deposits is now subject to licensing. Previously, only the excavation of uranium ore was subject to licensing. The Law took effect on 2 March 2006.

 

16) Cabinet of Ministers Decree No. 249 "On Amending Cabinet of Ministers of Ukraine Decree No. 1304 dated 30 December 2005" dated 7 March 2006. The export of Ukrainian-sourced gaseous natural gas is licensable in 2006. The Decree took effect on 11 March 2006.

 

17) Ministry of the Environment of Ukraine ("Ministry of the Environment") Order No. 103 "On Approving the Rules for Conducting Auctions for the Sale of Special Subsoil Use Permits in 2006" dated 6 March 2006. The Rules regulate how buyers may participate in auctions for the sale of subsoil use permits, the procedure for paying for permits and the documentary registration of auction results. The Ministry of the Environment organizes these auctions and reports on their results, indicating their starting price and the list of bidders for each object of subsoil use not later than four days before the auction is held. Bidders must register and pay a deposit to take part in an auction. The Ministry of the Environment sets the amount of the required deposit, basing it on the starting price; deposits are not to exceed 5% of the starting price. The Order took effect on 2 April 2006.

 

Specific Sectors of Economy / Miscellaneous

 

18) Law of Ukraine No. 3317-IV "On Amending the Law of Ukraine 'On Television and Broadcasting'" dated 12 January 2006. The Law lays out the basic principles of state policy in the spheres of television and broadcasting. A uniform license for broadcasting is now standard for this activity, and can be issued on either a competitive basis (by open tender) or without competition (in response to an application); the Law describes how to obtain such a license. The Law took effect on 1 March 2006.

 

19) Law of Ukraine No. 3509-IV "On Amending Certain Legal Acts of Ukraine" dated 23 February 2006. The Law amends the Air Code of Ukraine, according to which navigation in Ukrainian airspace is conducted in accordance with the rules of the International Civil Aviation Organization (ICAO) and the European Organization on Safety of Air Navigation (Eurocontrol). Payment for air navigation services, the procedures for estimating the fee, for paying the fee and for obtaining exemption from the fee, and the procedure for use of such fees are all defined in accordance with the requirements of Ukrainian law and the requirements of the ICAO and Eurocontrol. Paying this fee in foreign currency outside Ukraine does not require first obtaining an individual license from the NBU. The Law took effect on 24 March 2006.

 

20) State Committee of Ukraine on Technical Regulation and Consumer Policy Matters Order No. 375  On Approving National Classifications, Changes in State Classifications and Canceling the Operation of State Classifications” dated 26 December 2005. A new Classification (i.e. list) of Professions and a new Classification of Types of Economic Activity have entered into force. As a result, the classifications set forth in 1995 and 1996 became void effective 1 April 2006.