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Roman Drozhanskyi: Legal entities risk to lose title of inheritance for farmlands

Kyiv. September 18, 2012

“Legal entities, both Ukrainian and foreign, may be deprived of the right to inherit agricultural lands,” a partner of Volkov and Partners Law Firm Roman Drozhanskyi informed “Interfax-Ukraine” agency.
According to him, a draft law No. 11128 “On amendments to the Land Code of Ukraine concerning the purchase of title to agricultural lands” adopted in the first reading on Tuesday, contains a significant drawback. In particular, it suggests amending Article 82 of the Land Code with the provision depriving legal entities of the right to inherit agricultural land plots.
“This right will be abolished not only for foreign legal entities (as provided for in current wording of the Land Code), but also for agricultural enterprises, scientific and research institutes, educational establishments, which have an ownership title for farmlands under the Laws of Ukraine,” Roman Drozhanskyi emphasized.
However, he noted that the key innovation under the draft law is that the title to acquire non-agricultural lands will be gained by those Ukrainian legal entities, which shareholders (members) are foreign individuals and legal entities.
The Lawyer believes this innovation will enable to increase a number of prospective investors for agriculture in Ukraine.
Reportedly, on Tuesday 233 people’s deputies voted “for” to adopt the draft law “On amendments to the Land Code of Ukraine concerning the purchase of title to farmlands” in the first reading registered with parliament on August 31, 2012.
The draft law is purposed to provide legal entities established under the laws of Ukraine and foreign countries with the possibility to purchase land plots from the state and public ownership.


Criminal liability for violation of pre-clinical trials is unique to Ukraine, say experts

Kyiv. September 6, 2012

The introduction of criminal liability for the violation of pre-clinical trials and the state registration of drugs in Ukraine has no analogues in the European and international legislation and hinders the development of innovative pharmaceutical business in Ukraine.
Executive Director of the European Business Association (EBA) Hanna Derevianko told this to Interfax-Ukraine when commenting on bill No.11129 of MP Valeriy Kharlim (the Regions Party faction) abolishing criminal liability for the violation of pre-clinical trials and the state registration of drugs.
She noted that the EBA repeatedly stated in its appeals to the government the inadvisability of the introduction of such an excessive and disproportionate responsibility for health care workers involved in clinical trials, as well as pharmaceutical company employees involved in the registration of medicines.
"Unfortunately, the article of the Criminal Code [321-2] was adopted, and we believe that it hinders the development of medicines in Ukraine both at international pharmaceutical companies and domestic producers. It is dangerous primarily for patients, especially those with cancer and neurological diseases, for whom participation in clinical trials is the only way to get high-quality treatment at the European level and free treatment using innovative medicines," said Derevianko.
Lawyer of the Volkov and Partners law firm Oleh Shekhovtsov, in turn, said the procedural violation of the procedure of clinical trials and the state registration of medicines (with no impact on the health of citizens), in terms of its danger to society, does not meet the concept of criminal offense and certainly should not be punished by imprisonment only.


Ukraine: to respond Russia with utilization fee means to breach international obligations - Lawyer

Kyiv. September 4, 2012
“Prime-Minister of Ukraine, Mykola Azarov suggested introducing vehicle utilization fee for imports from Russia in return to the similar measure introduced by Russia, which may result in violation of international obligations and lead to complaints from Russia and other trade partners of Ukraine,” informed head of the international trade department of Volkov and Partners Law firm, Andrii Zablotskyi to the Interfax-Ukraine agency.
“Countermeasures (or “mirror measures”) are often used by the members as political pressure leverage, however being frequently contrary to the applying country’s obligations. Thus, to introduce similar measures in return for Russian restrictions may result in violation of Ukraine’s international obligations,” said he.
Mr. Zablotskyi explained: for example, if Ukraine introduced utilization fee for the specified products and the fee would be binding only for foreign companies, Ukraine might be regarded as a country in breach of non-discrimination principle. The above, in its turn, is already constituted a violation of international obligations and, all in all, may lead to Russia’s and other trade partner’s complaints.
Ukraine better not to apply “an eye for an eye” policy with regard to international relations, as there exists a number of regulatory agreements on international trade between Ukraine and Russia, including agreements establishing dispute settlement procedure,” considers Mr. Zablotskyi...


RF Vehicle Utilization Fee contravenes WTO national treatment principle

Kyiv. September 3, 2012

Amendments to the Russian Federal Law "On Consumption and Industrial Wastes’ introducing vehicle utilization fee from September 1 undermine one of the key World Trade Organization (WTO) principles, namely, national treatment, states a Senior Associate of Volkov and Partners Law Firm, Andrii Zablotskyi.
“On August 22, Russia became a full-fledged WTO member, and, consequently, undertook obligations set forth in official package of WTO Agreements. Among other obligations is a national treatment regarding internal taxes and regulations prescribed by Article 3 of the General Agreement on Tariffs and Trade (GATT 1994)”, explained the lawyer.
According to him, the national treatment obligation requires that the RF may not treat imported products less favourably than like (similar) domestic products. And despite the Law does read that it applies to both imported and domestic vehicles, section 6 of article 24.1 envisages some cases allowing to avoid payment of utilization fee.
“One of the cases is producer’s obligation to ensure further safe utilization of waste associated with the disposal of vehicles that are no longer operational, i.e. dispose of them. The foreigner (e.g. Ukrainian) can hardly undertake this obligation,” believes Mr. Zablotskyi.
Hence, he said that if the law is actually applied the foreign producers will face more competition comparing to Russian producers, and reminded that the EU has already expressed its worries concerning this discriminatory law.
The Lawyer supposes that the issue may appear to be a subject for the first hearing associated with Russia within the WTO dispute settlement procedure.
Reportedly, on September 1, 2012 the Law ‘On 30 percent utilization fee for fleet vehicles’ entered into force. Currently, it reads that utilization fee shall be paid for each vehicle, imported to the Russian Federation or produced in Russia to support ecological safety. The fee will be paid by persons importing cars to the Russian Federation, and those producing the same on its territory.


Joining WTO GPA may open market of USD100 mlrd for Ukrainian companies

Kyiv. August 31, 2012

In case Ukraine joins the World Trade Organization (the WTO) Government Procurement Agreement, the GTA opens up for Ukrainian businesses tenders for foreign public procurement, which according to the WTO data amount to USD80-100 mlrd per year, says the Associate of Volkov and Partners Law Firm, Irina Polovets.
She expressed the opinion concerning Head of the Ministry of Economic Development and Trade (the MEDT), Petro Poroshenko’s outgiving on initiative of Ukraine’s accession to the WTO GTA; additionally, Ms. Polovets also emphasized that Ukraine undertook to become an observer, as well as to commence negotiation with the aim to join Government Procurement Agreement, since accession to the WTO in 2008, thus it would be incorrect to state that accession is being initiated just now.
"Besides access to other member’s market, joining the agreement shall lead to decline in corruption, increase in competition, effective and efficient management of public resources, and transparency of government decision making process on the whole. Strengthening openness and transparency, in its turn may favour investments and know-how to the country," stressed the lawyer.
Ms. Polovets also mentioned that the parties to the agreement are mostly economically developed countries; therefore national companies will face tough competition with more technically developed foreign businesses.
"A possible solution is to exclude sensitive sectors from the GPA’s scope or to set transition periods for them to adjust to new environment," considers Iryna Polovets.
According to Markian Malskyy, partner and head of the West Ukrainian Branch in Arzinger, WTO GPA has been signed by all members of the EU, as well as USA, Canada, China and some other...


Lawyers: loan interest rate to become more predictable for borrowers

Kyiv. October 13, 2011

Following the changes recently adopted in the legislation, when signing a loan agreement a borrower will immediately get to know whether an interest rate is to be varied and what a rate movement procedure is. This will make an interest rate more foreseeable for borrowers.
This comment on Law “On changes introduced into certain laws of Ukraine as regards the protection of the rights of lenders and financial services consumers” No. 7351 adopted by the Verkhovna Rada  of Ukraine was given by Roman Drozhanskyi, Partner with Volkov&Partners.
“The Law contemplates a possible establishment of a fixed rate tied to a certain public index. As such, borrowers will chance to foresee easier an interest rate. Moreover, lawmakers determined that the index-related movement procedure of the fixed rate has to be negotiated just in the loan agreement”, the expert explained.
Furthermore, Mr. Drozhanskyi mentioned that the Law actually removed a possibility to declare a sole proprietor a bankrupt, which earlier often resulted in recognition of all its liabilities redeemed. Now a liquidation estate in a case on such sole proprietor’s bankruptcy will just include liabilities assumed by such individual as an entrepreneur.
In addition the lawyer pointed out that the Law, after all, does not stipulate a possibility to recognize an individual - non-entrepreneur a bankrupt.
“Such lacuna bears out that the Ukrainian legislation leaves much to be substantially developed and makes it impossible to apply a financial sanation procedure to individuals, which is widely envisaged by laws of many foreign states”, Mr. Drozhanskyi summed up.


The draft law on the extension of export duties on grain breaches the tax laws fundamentals

Kyiv. October 4,  2011

The deed drafted by the Ministry of Economic Development and Trade that stipulates a year-long extension of export duties for wheat, barley and corn (until January 1, 2013) breaks the fundamentals of the Tax Code of Ukraine, an opinion of the lawyers interviewed by Interfax-Ukraine.
"Subclause 4.1.9. of clause 4.1. of Article 4 of the Tax Code determines the principle of stability of the tax legislation. Changes in any components of taxes and charges may not be introduced later than six months prior to a new budget period, within which new rules and rates will run", believes Larisa Poberezhniuk, Partner of “Pavlenko&Poberezhniuk” Law Group...
Andrii Zablotskyi, Volkov&Partners lawyer, in his turn, feedbacked that the extension of the actual and newly introduced export duties may find an adverse response of WTO partners.
"The terms of Ukraine’s accession to the WTO do not contain an explicit ban of use of export duties. However, the Ukraine’s Working Party Report (IV Section) reads that export duties could create obstacles to international trade and so must be lowered,” emphasized Mr. Zablotskyi.
He assumes that export duties introduction has less distorting effect for trade than export quotation or licensing, but duties themselves do not favour an upward performance of the agricultural market.


Taras Rozputenko: Revocation of State Registration Certificate fails to better entrepreneurs lives

Kyiv. April 8, 2011

If the certificate of state registration of the legal entities and individual entrepreneurs is cancelled the life is not suddenly better for entrepreneurs, what will really make it easier is Internet access to the Unified State Register of Legal Entities and Individual Entrepreneurs, considers Taras Rozputenko, an associate with Volkov and Partners Law Firm.
"At present, an information database can be accessed via any computer connected to the Internet. In Great Britain, the Internet is the way to access the documents similar to those kept in the Unified State Register, in particular, right at the web-site of the relative state agency," commented Mr. Rozputenko to "Interfax-Ukraine" Agency concerning the law adopted by the government and canceling the certificate of state registration.
The Lawyer believes, the entrepreneurs have to prove their registration only electronically via the Internet, instead of obtaining the extract from the Unified State Register.
"It would be logical to exclude an entrepreneur from the chain of data exchange between the Unified State Register, entrepreneur and any state agency that requires a confirmation of such entrepreneur’s registration, and to entrust the said state agency to obtain the information from the Unified State Register,” Mr. Rozputenko noted.
In turn, Senior Associate with AstapovLawyers International Law Group Volodymyr Yakubovskyy emphasized that in case of cancellation of the state registration certification and simplification of licensing system to obtain corporate seals, articles of association becomes a key corporate attribute needed to be closely watched out to manage a company.
Reportedly, the Law “On Abolition of the Certification of Business Entity Registration” adopted by the Parliament on Thursday waives such certification and prescribes to use directly the data excerpted from Unified State Register of Legal Entities and Individual Entrepreneurs to confirm such registration. Such excerpt is given for free.
If a status of a person needs to be certified by some document, such person may use an excerpt of the Unified State Register of Legal Entities and Individual Entrepreneurs or its copy. Alongside, a notarization of such copy is offered to be waived as the criminal legislation imposes the responsibility for consistency of the provided data on a person that submitted such data.


Possible cancellation of decision on safeguard investigation on imports of certain oil derivatives may become a precedent

Kiev. April 7, 2011

Possible cancellation of the decision of the Interdepartmental Commission on International Trade (Commission) on initiation and conduct of safeguard investigation as regards imports to Ukraine of certain oil derivatives by the District Administrative Court of Kiev threatens to create a precedent. This is the common view of lawyers polled by Interfax-Ukraine.
"If the court overturns the decision of the Commission, it will set a precedent, which will allow foreign manufacturers, exporters and importers of products to Ukraine to take advantage of it," says Associate with Volkov & Partners Law Firm, Andrii Zablotskyi.
Head of West Ukrainian Branch of Arzinger Law Firm, attorney Markian Malskyy also admits chances a precedent to be set, however, adds that challenging of the Commission’s decision cannot in any way mean that it strips its power.
Lawyers agreed that it would be extremely difficult to challenge the decision on initiation and conduct of the investigation. They explained that it would be virtually impossible to prove that there were no formal reasons for its initiation, in particular, due to the fact that the decision contains many subjective components, as it was noted by M. Malskyy.
Reportedly, the Association of Operators on the Ukrainian Market of Petroleum Products has filed a lawsuit demanding cancellation of the safeguard investigation that was launched by the Interdepartmental Commission on International Trade concerning importation of certain types of oil products. The court hearing will take place on April 7.
The safeguard investigation concerning import of certain oil derivatives to Ukraine regardless of country of origin and export was initiated at the end of January 2011. Notably, the Ministry of Energy and Coal Industry of Ukraine called for introduction of import duties of EUR 80 per ton of diesel fuel and EUR 130 per ton of gasoline.
However, on March 14 the Minister of Energy and Coal Industry Yuriy Boyko stated that Ukraine was not going to impose any duties on imports of oil products.
Experts argue that import quotas may be introduced instead of taxes. Ukrainian oil refineries numerously claimed that they buy oil products at world prices, while the member countries of the Customs Union, in particular, Belarus, which is the major exporter of oil to Ukraine, buy crude oil which is not levied by taxes. Local plants are of the view that imposition of taxes will allow to boost the volumes of oil refinery and conduct modernization of production.
Major petrol filling stations that predominantly import oil products criticized the possibility of import taxes imposition, as it may lead to the market monopolization. In addition, the embassies of Lithuania, Romania and Poland expressed their concerns on the situation in their joint letter to the Prime-Minister of Ukraine.


Taras Rozputenko: STSUs explanation of Tax Code regulations run counter to those regulations

Kyiv. April 6, 2011

On April 1, 2011 Tax Code regulations came into force, among others, those regulating application of profit tax relief. The State Tax Service of Ukraine (STSU) explained them. But the explanations contradict to the Tax Code regulations, believes Taras Rozputenko, an attorney at law with Volkov and Partners Law Firm.
The abovementioned was his comment to the Interfax-Ukraine Agency concerning the regulations coming into force, as well as the STSU’s letter No. 6286/7/16-1517 dated March 4, 2011. Under the letter tax/duty exemption benefit should be applied not to separate taxpayers but to certain transactions, determined in Article 197 of Section V and separate clauses of subsection 2 of Section of the Tax Code.
"Further, the STSU’s letter presents interesting and illogical conclusion: the taxpayer can either wave a tax relief or stop applying it for one or several tax periods only in case if such tax relief is applied directly to the taxpayer, but it cannot if the tax relief applies to certain goods and services delivery transactions. And it cannot wave lower tax rate as well,” explained Taras Rozputenko.
At the same time, Mr. Rozputenko made an admission that Tax Code reads nothing of conditions making the wave of tax relief impossible. Moreover, a benefit is in essence an advantage, which must be granted to the subjects set out in the law.
In addition, Mr. Rozputenko considers, the ambiguous approach of the STSU’s letter can be applied to the profit taxation matters and other issues regarding tax and duties, confusing business representatives still further.
The lawyer also explained that the STSU’s letters are not binding and likely to be of recommendative or informative nature, aiming to outline the STSU agency’s legal views on a certain issue. “But that is not to say such legal views are necessarily true. One should first carefully read the provisions of laws and bylaws and, afterwards, pay regard to opinions of certain public agencies,” emphasizes Mr. Rozputenko.
The expert, thus, points out that the Tax Code stipulates a tax relief may be used, waived, or suspended.
“If the Tax Service concludes in writing to apply the Tax Code’s provisions in a different way, such conclusion may be surely claimed in the superior tax body or in the court to protect taxpayer’s interests,” summed up Mr. Rozputenko.
Pursuant to clause 30.1 of Article 30 of the Code a tax relief is taxpayer’s immunity from accrual and payment of tax and charges, which is provided by the tax and customs legislation; payment of tax and charges at lower rate provided there arise grounds set out in the Tax Code.
Simultaneously, clause 30.4 of Article 30 of the Code entitles a taxpayer to waive a tax relief or suspend it for one or several periods, unless otherwise prescribed in the Tax Code.
Reportedly, since April 1, 2011 certain provisions of the Tax Code lowering income tax from 25 percent to 23 percent, introducing tax relieves for certain industries and “tax holidays” for enterprises with annual income below UAH 3 mln have become effective. In addition, the whole part regulating taxation of corporate profit has come into force as well.

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