Russian-Ukrainian Legal Group, P.A.

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

Chronicle of Recent Developments in Ukrainian Legislation

maY 2006

Banking

Intellectual Property

Labor Law

Permit System

Financial Services

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) Bill No. 1040 “On Amending Certain Legal Acts of Ukraine on the Forms for Creating Banks and the Amounts of Authorized Capital” dated 5 June 2006. The Bill would require that all new banks be set up as open joint-stock companies or corporate banks. Those banks, which have already been created in the form of closed joint-stock companies or limited liability companies, would have three years to amend their charters to comply with the new requirements. The President of Ukraine submitted the Bill to Ukraine's Parliament on 2 June 2006.

2) Cabinet of Ministers of Ukraine (“Cabinet of Ministers”) and National Bank of Ukraine (“National Bank”) Resolution No. 753 “On Approving the Concept of Extending Non-Cash Payments With Use of Special Means of Payment” dated 26 May 2006. The Concept is aimed at creating conditions to improve the money turnover structure and to reduce the use of cash payments, namely: by increasing investment opportunities for banks by attracting citizens’ funds to bank accounts; by reducing corruption in the economy; by reducing cash payments outside banks; by increasing citizens’ interest in using payment cards, including by having banks offer more possibilities for buying on credit; by reducing expenses connected with cash turnover by implementing non-cash payments with use of payment cards in the spheres of trade and services; and by expanding electronic commerce. The Resolution has not yet been published but will take effect once officially published.

Intellectual Property

3) Cabinet of Ministers Resolution No. 711 “On Amending the Regulations on the Government Intellectual Property Controller” dated 24 May 2006. Among other things, the amendments permit intellectual property controllers to attach objects of intellectual property for the required term provided that there are grounds for suspecting a violation of the law. Attachment cannot last longer than 30 days. This deadline was not strictly regulated before. Controllers have also been granted the right to present conclusions concerning the legitimacy of using objects of intellectual property. The Resolution took effect on 24 May 2006.

Labor Law

4) Cabinet of Ministers Resolution No. 269-r “On Approving the Concept of a National Program for Improving Safety, Labor Hygiene and the Production Environment in 2006-2011” dated 11 May 2006. The Concept analyzes the causes of problems in labor protection and suggests possible ways to resolve these problems. On the basis of the Concept, the authorized state agencies must draft a National Program for Improving Safety, Labor Hygiene and the Production Environment and submit it to the Cabinet of Ministers for consideration. The aim of the Program is to develop and ensure the implementation of the latest safe technologies and advances in science and technology in the sphere of labor protection and hygiene, to harmonize Ukraine's labor protection and production safety legislation with that of the EU and to strengthen the legal basis for Ukraine’s entry into the EU. The Resolution took effect on 31 May 2006.

Permit System

5) Cabinet of Ministers Resolution No. 685 “On Approving the Procedure for Notifying an Administrator or Permit Authority on the Conformity of the Material and Technical Base of a Subject of Economic Activity with Legislative Requirements” dated 17 May 2006. The Law “On the Permits System in the Sphere of Economic Activity” (“Law No. 2806”), of the adoption of which we informed in the September 2005 edition of this Chronicle, introduces the notion of a "declarative principle", according to which a subject of economic activity (i.e. a business) acquires the right to carry out certain economic actions without obtaining a permit document, by way of notifying an administrator or a correspondent permit agency about the conformity of its material and technical base with legislative requirements. The procedure for making such notification is defined by the approved Procedure. The Resolution took effect on 17 May 2006.

6) State Committee of Ukraine for Regulatory Policy and Entrepreneurship (“Entrepreneurship Committee”) Order No. 39 “On the Temporary Procedure for Developing, Running and Using the Register of Permit Documents” dated 18 April 2006. The Temporary Procedure aims to implement the requirements of Law No. 2806. Pursuant to the Procedure, the register of permit documents is a uniform automated national system of collection, storage, protection, record-keeping and provision of information on such documents and on refusals to issue such documents. Information on a business, to which a document has been issued, and information on the document itself (its name, the business to which it was issued, the issuing agency, the term of validity, etc.), will be entered in the register. The Order took effect on 27 May 2006.

7) Entrepreneurship Committee Order No. 45 “On Approving the Procedure for Controlling the Observance of Legislative Requirements for the Issuance of Permit Documents” dated 15 May 2006. Law No. 2806 authorizes the Entrepreneurship Committee to control the activity of permit agencies. Pursuant to the approved Procedure, this control will be carried out through scheduled and unscheduled inspections, which will last up to five working days. Unscheduled inspections, in particular, may be carried out on the basis of a written application describing a violation of the legislative requirements for issuing permit documents to businesses and citizens. The Order took effect on 12 June 2006.

Financial Services

8) State Committee of Ukraine for Regulation of the Financial Services Markets Instruction No. 5720 “On Approving Amendments to the Provisions on Financial Monitoring Carried Out by Financial Institutions” dated 28 April 2006. Pursuant to the amendments, a financial institution must suspend a financial operation if its participant or beneficiary is a person/entity included on the list of persons/entities connected with terrorist activity. The institution must notify the State Committee of Financial Monitoring of Ukraine (the “Committee”) about the suspension of the operation on the very same day it is suspended. If the institution does not subsequently receive, within two working days, the Committee’s decision on termination of the operation, the institution may proceed to carry out this operation. The Instruction took effect on 27 May 2006.

Use of Subsoil, Oil and Gas

9) Cabinet of Ministers Resolution No. 619 “On Amending Cabinet of Ministers Resolution No. 599 dated 4 April 2000” dated 11 May 2006. Auctions for selling oil, gas condensate, liquid gas and coal shall be handled by not one but several exchanges. As was the case previously, the Ministry of Economy is charged with organizing specialized tenders for defining which exchanges may conduct these auctions, and for concluding contracts with these exchanges. The Resolution took effect on 11 May 2006.

10) Cabinet of Ministers Resolution No. 686 “On Recognizing the Cabinet of Ministers of Ukraine Resolutions on Defining Mineral Deposits with Hard-To-Access and Exhausted Reserves as Having Lost Force” dated 17 May 2006. In accordance with the Resolution, nine Cabinet of Ministers Resolutions defining oil, gas and gas condensate mineral deposits with hard-to-access and exhausted reserves have lost force. The indicated amendments were adopted because the laws granting concessions to companies working such deposits has also lost force. The Resolution took effect on 17 May 2006.

11) Cabinet of Ministers Resolution No. 746 “On Amending the Procedure for Granting Special Permits for the Use of Subsoil in 2006” dated 25 May 2006. The Procedure for granting special permits for subsoil use in 2006, of the adoption of which we informed in the February 2006 edition of this Chronicle, has been amended. The list of materials required to obtain a permit without an auction is now defined not by the Ministry of the Environment but directly by the Cabinet of Ministers. In connection with this, a new Procedure is annexed as "Annex 2 – The list of documents attached to an application to obtain a permit without an auction in 2006”. The Resolution took effect on 25 May 2006.

Specific Sectors of Economy/Miscellaneous

12) Cabinet of Ministers Resolution No. 662 “On Amending Cabinet of Ministers of Ukraine Resolution No. 1544 dated 15 October 2002 and Resolution No. 1351 dated 27 August 2003” dated 11 May 2006. The List of works and services in the sphere of ensuring the sanitary and epidemiological well-being of citizens, which are carried out and sold by institutions of the State sanitary-and-epidemiological service, has been amended. The new List also contains tariffs for said works and services. In particular, the List no longer contains: "consulting services" or "services on executing sanitary certificates for objects". The Resolution took effect on 31 May 2006.

13) Cabinet of Ministers Resolution No. 740 “On Approving the Procedure for Running the Uniform State Register of Judicial Decisions” dated 25 May 2006. In connection with the entry into force of the Law “On Access to Judicial Decisions” (of the adoption of which we informed in the December 2005 edition of this Chronicle), effective 1 June 2006, the web-site for Ukraine's judicial branch will grant round-the-clock access to the data-retrieval system of the Uniform State Register of Judicial Decisions. The Resolution approves the Procedure for maintaining the Register. Users of the Register can search, review, print and receive electronic copies of judicial decisions by copying texts in whole or in part in accordance with Ukraine's new regime for access to judicial decisions. The Resolution took effect on 7 June 2006.

14) Cabinet of Ministers Resolution No. 774 “On Approving Tariffs for the State Fire Supervision Agency Conducting Appraisals (Expert Examinations) of the Fire-Protection Status of an Enterprise, Object, Premise or Design Estimate Documentation, which Approval Does Not Require the Existence of a Conclusion of a Complex State Expert Examination” dated 31 May 2006. As suggested by the title, this Resolution sets the prices for conducting fire safety inspections. Please note that the inspections in question are those that are voluntarily requested by a legal entity or individual. The Resolution took effect on 31 May 2006.

15) Ministry of Agricultural Policy of Ukraine Order No. 154 “On Approving Amendments to Phytosanitary Rules for Importing from Abroad, Transporting Within the Country, Transit, Export, and the Procedure for Processing and Sale of Quarantineable Materials” dated 28 March 2006. The Order amends the procedure for importing into Ukraine goods subject to quarantine, reducing the time needed to execute a quarantine permit from 14 to just five working days. It also confirms that a decision to refuse to issue a quarantine permit may be appealed, including in court. The Order will take effect on 16 July 2006.