After a number of important improvements to Ukrainian corporate legislation in 2017, such as the introduction of squeeze-out and sell-out procedures for joint stock companies and the concept of shareholder agreements, reform of the country’s corporate legislation is continuing, with even more significant transformations in 2018.
International arbitration is often perceived as a preferred method for international dispute resolution, due to its time/cost efficiency as well as enforceability of awards. On the other hand, enforcement of an arbitration award can be rather challenging for the parties – especially if recognition and enforcement is sought in countries like Ukraine, because for a long time, the Ukrainian judiciary has been criticized for its inefficiency and overly bureaucratic approach. However, Ukraine is on its way to changing that.
2018 has been an enjoyable year for those wanting the Ukrainian legislator to improve the country’s corporate legal framework. Since limited liability companies (LLCs) and joint stock companies (JSCs) are the most frequent forms of business in Ukraine, improvement in this direction appears to be especially important. On June 17, 2018, the Law on Limited and Additional Liability Companies (the “LLC Law”) came into force, completely replacing the outdated regulation of LLCs. Moving to JSCs, the legislator adopted a law that amended several legal acts regulating these companies and the stock market in general (the “JSC Law”). Below we will outline these major changes in the Corporate Governance in Ukraine.
If one is an example, two is a coincidence, and three is a trend, the three major law firm mergers in Ukraine this past summer demand closer scrutiny.
On July 9, 2018, the CEE Legal Matters website reported the merger of the Avellum and A.G.A. Partners law firms in Ukraine. A month later, the website reported on a second merger, this time between Asters and EPAP, the Ukrainian office of Russia’s Egorov Puginsky Afanasiev & Partners. And in September the website reported on yet another merger, between Integrites and Pravochyn. To explore these significant changes in the market, on October 26, 2018, CEE Legal Matters sat down with a collection of prominent Ukrainian lawyers — including several from firms directly involved in the summer’s mergers — at the Kyiv office of DLA Piper.
While happiness is increasingly considered the proper measure of social progress, Ukraine occupies only 138th position among 156 nations included in the multi-index World Happiness Report 2018. The country has fought for its happiness since becoming independent in 1991 following the collapse of the Soviet Union. As part of this patient and hopeful nation, I continue to believe that happiness is coming soon, exactly as I did in that already-distant 1991, when there was almost no private business and almost no legal market in Ukraine.
Currency regulations in Ukraine have always been among the most significant impediments to foreign investments and access of Ukrainian businesses to foreign markets. In 2014, substantial external imbalances, capital flight risks, and panic in the foreign exchange market prompted the National Bank of Ukraine (NBU) to adopt tight capital controls, a number of which remain in effect. Notwithstanding the alleged soundness of such temporary measures, both foreign investors and Ukrainian businesses have long called for clearer and more predictable currency regulations, as well as safeguards to protect their interests. In July 2018, Ukraine finally adopted the long-awaited “On Currency and Currency Transactions” law (the “Currency Law”) which is intended to replace the archaic currency control legislation. The effectiveness of the new legal framework, however, can only be assessed once the NBU lays out detailed rules in its regulations.
Many real estate experts and market players are upbeat about the positive trends on the Ukrainian real estate market, which is recovering after a significant downturn in 2013–2015. As the political and economic situation improves and the conflict in the south-west of the country stabilizes, foreign investors, attracted by market opportunities, are showing increasing interest in Ukraine.
According to experts, Ukraine ranks fourth in the world in export of IT-products; i.e., software. It is not a rare phenomenon for Western counter-parties buying software to encounter a low level of pre-sale clearance. In other words, the Ukrainian sellers are not always able to confirm their title rights to the software they dispose of, potentially exposing foreign buyers to the risk of IP-related claims of third parties.
The winners of the 2017 CEE Deal of the Year Awards were announced at the first ever CEE Legal Matters Deal of the Year Awards Banquet last night in Prague. The biggest smiles in the joyous and music-filled celebration of CEE lawyering, perhaps, were on the faces of Partners from Avellum and Sayenko Kharenko, which, along with White & Case and Latham & Watkins, won the award both for Ukrainian Deal of the Year and CEE Deal of the Year for their work on the 2017 Ukraine Eurobond Issue (a story initially reported by CEE Legal Matters on October 2, 2017).
The Ukrainian government has declared its intention to implement the success story of European countries in the sphere of public-private partnerships. In order to implement those ambitious plans the government has established a Project Office for PPP to work closely with international investors and lobby for relevant legislative improvements.
For various reasons, 2017 was a remarkable year for the electricity sector in Ukraine. Chief among them, no doubt, was the long-awaited adoption of the new law on the electricity market. Ukraine’s electricity market has been liberalized not only because of the country’s commitments under the EU Third Energy Package, but also as the benefits of competition became evident in the wholesale gas market. This liberalization started almost three years ago and is still on-going, though admittedly not without challenges.