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Ukrainian grain exports: one-man show?

Vol. 26 • February 2011

Iryna Polovets, Tetiana Kheruvimova – Associates with Volkov and Partners

Before the ink could dry on Cabinet of Ministers of Ukraine’s (the CMU) Decree No. 1254, which has established compulsory registration of the  foreign economic contracts with the Agrarian exchange (see “Grain Saga”: new season, old story for details ), as the producers “got a buzz” from another great surprise.

On February 2, 2011, Draft law No.8053 “On Amendments to the Law of Ukraine “On State Support of Agriculture” (regarding specifics of exports subject to state price regulation)” was registered with the Committee on Agrarian Policy and Land Relations of the Verkhovna Rada of Ukraine. This Draft law states that export of commodities subject to state price regulation (including inter alia wheat, corn, barley, sunflower seeds, rape seeds, flour, granulated sugar, dried milk, cattle and poultry meat, butter and sunflower seeds oil) shall be effected only by the agricultural producers within in-house volumes and a state agent in charge of exports subject to state price regulation. The list of exported products subject to state price regulation will be defined by the government annually based on results of monitoring of the agricultural products market. In other words, during sowing period a producer will hardly know whether it can freely sell its products in external markets afterwards.

Pursuant to Draft Law No. 8053 “a state agent for ensuring exportation” is a state enterprise or a business entity with a state share in its statutory fund, which is determined on a competitive basis by the Cabinet of Ministers of Ukraine. However, Draft Law No. 8053 provides for neither a size of the state share nor requirements to private participants in “the state agent”...


Adopted law facilitates procedure for decision-making on conclusion of transaction with value exceeding 50% of companys assets value

Kyiv. February 4, 2011

Roman Drozhanskyi, partner with Vokov & Partners

The Law of Ukraine “On Amendments into the Law of Ukraine “On Joint Stock Companies” adopted with inclusion of the President’s propositions does not contain now the main inconsistent provision that drew a wide response after its initial enactment by the Verkhovna Rada, believes Mr. Drozhanskyi. “So, stakeholders owning 95 or more per cent of a joint stock company’s shares will have no right to force other holders to sell their stakes”.
The provision in question disappeared from the final wording of the Law possibly due to foreign investors’ criticism implying that Ukrainian companies’ shares would enjoy low attractiveness in case such provision is introduced. Moreover, it was doubtful whether this provision is consistent with the Constitution of Ukraine saying that the enforceable expropriation of private property shall be in place only as an exception and based on social necessity.
The adopted law simplified the decision-making procedure as regards the execution of a transaction the value of which exceeds 50 per cent of a company’s assets value. Now more than 50 per cent of shareholders, but not over three fourths as before, must vote for such transaction execution.
The law concerned, however, kept in force the provision on requirement for joint stock companies to be admitted for trading at one, at least, stock exchange. This requirement, in the expert’s opinion, is rather cumbersome and contradicts the announced state’s policy on business deregulation.
At the same time, holders of over 25 per cent of shares can no longer block the transaction execution the value of which exceeds 50 per cent of the  total company’s assets, or in fact any (even the most major) transaction of the company. But such shareholders will be able to block some decisions like the introduction of amendments into the charter, changes of the incorporation form, stock placement or change of the authorized capital of the company.



Proposed amendments to tariff quota distribution procedure for raw cane sugar import to Ukraine create prerequisites for restraint of competition in Ukrainian sugar market

Kyiv. February 3, 2011

Andrii Zablotskyi, associate with Volkov and Partners

The Cabinet of Ministers of Ukraine (the CMU) proposed amendments to the procedure of tariff rate quota distribution applied to raw cane sugar import to Ukraine, whereby creating prerequisites for restriction of competition in Ukrainian sugar market, which is unallowable in terms of sugar deficiency in the market.
Although introducing ‘first come, first served’ principle Ukraine fulfils its WTO commitments, the drawback of the document cannot be but mentioned, namely, creating preconditions to limit competition in the market.
In case licence issue depends on the State Reserve Agency’s consent, it may be considered as an action able to restrict competition. Besides, such condition complicates administrative course of the licence issue procedure, which conflicts with the fundamental WTO principles.
Today, we see an explicit tendency towards tighter regulation of the agricultural products market and a sugar sector, in particular. In addition to the aforementioned, changes were also offered into the Law “On State Regulation of Sugar Production and Sale” that envisages the establishment of several commissions – technical, joint commission, and approval commission. However, the aim of their establishment and division of powers are far from being clearly outlined. The only undoubtful and clear point is that they may become another administrative barrier for sugar producers.


Duties prolonged despite technical delay of official publication of government decree On Prolongation of Anti-dumping Duties

Kyiv. February 2, 2011

Tatiana Kheruvimova, associate with Volkov and Partners

The anti-dumping duties have been prolonged, notwithstanding the technical delay of the official publication of the Government’s Decree “on Prolongation of Anti-dumping Duties”.
Draft Decree of the government of the Russian Federation (RF) “On Protection of Business Interests of Domestic Producers of Certain Types of Steel Pipes" was posted on January 20 at the official web-site of the Ministry of Industry and Trade of the Russian Federation. As the draft reads, the Decree shall be valid from January 31, 2011. Therefore, the Act has come into force on the due date, in case it is signed by head of the government.
Speaking about official publication, one cannot but admit that, subject to provisions of the Order of Head of the RF “On Procedure of Publication and Enforcement of the President’s Acts, Government Act and regulatory acts of the federal executive agencies”, decrees of the Russian Government must be officially published in “Rosiyskaya Gazeta” (Russian Newspaper) within 10 days after signing thereof. Government acts can also be published in other printed editions, as well as publicly read on TV and radio, served with state agencies and authorities, …, enterprises, offices, organizations, communicated through other communication channels”.
Admittedly, the Ministry of Industry and Trade of the Russian Federation assures that the Decree has already been signed and is going to be officially published soon. Thus, the issue on non-compliance to the procedure can be raised only after 10 day term for official publication of the document from the date of signing of the Decree.


Spinning a coin: Dispute Settlement Mechanism under Free Trade Agreement or the WTO?

The Ukrainian Journal of Business Law
Vol.9 #1-2 January - February 2011

Andrii Zablotskyi, associate with Volkov and Partners
Iryna Polovets, associate with Volkov and Partners
Tetiana Kheruvimova, associate with Volkov and Partners

This article addresses the dispute settlement mechanism under free trade agreements which have flourished in the last few decades, and considers their potential as an effective substitution of WTO dispute settlement mechanism and a tool for reducing potential conflicts of norms and jurisdictions

Currently, the European Union has provided the boldest and perhaps most advanced example of regionalization in the world [1]. Within the framework of the WTO, the European Union has become a major proponent and user of the approach to stipulate specific dispute settlement mechanism as a solution of trade disputes. A fundamental shift occurred with the conclusion of the free trade agreements with Mexico (2000), Chile (2005) and Korea (2010), which incorporate a dispute settlement mechanism. Since 2000, the EU has sought to introduce similar procedures to all ongoing free trade negotiations. Negotiations on the free trade agreement between the European Union and Ukraine (hereinafter — the EU-Ukraine FTA), which began in 2007, are still ongoing. Although information about the course of these talks and their current state is scarce, we also made an attempt to analyze the transformative power on Ukraine in the sphere of dispute settlement taking into consideration previous EU experience...


Ukraines grain export commitments under national legislation and WTO law

Yurydychnyi zhurnal
(Law Magazine) 1 (103) 2011

Tetiana KHERUVIMOVA, Associate with Volkov and Partners Law Firm
Iryna POLOVETS, Associate with Volkov and Partners Law Firm

Definition of “Export restraints”

Specificity of the export restraint institute, hard-to-get initial information, exporting entities trying their best to keep information on conflicts arising during their activity confidential made investigation of the legal aspects of the respective Ukrainian institute unattractive. Analysis of scientific legal literature devoted to the separate aspects of foreign economic activity restraints, showed that there is lack of publications concerning legal regulation issues as for export restrictions.

Presently, national legislation lacks determination of ‘export restraint’ term. First legal definition of this term was provided in the case on subsidies and export restrictions filed against USA. The issue of United States - Measures Treating Exports Restraints concerned conformity of the US laws with the Agreement on Subsidies and Countervailing Measures [1]. Therefore, the term was defined by the Panel as “a border measure that takes the form of a government law or regulation which expressly limits the quantity of exports or places explicit conditions on the circumstances under which exports are permitted, or that takes the form of a government-imposed fee or tax on exports of the products calculated to limit the quantity of exports.” [2]...


Ukraine: the Most Recent Novelties in Export-import Regulatiom of Sugar Market

Ukraine and the World Trade Organization

Andriy Zabolotskyy, lawyer at the Volkov & Partners

The Ukrainian market of agricultural products becomes increasingly overregulated. Following the imposing the quota system on grain exports, the Cabinet of Ministers goes on by planning to make amendments to the Procedure for distributing the tariff quota on imports of raw cane sugar into Ukraine.

Talks about some possible amendments to the above Procedure and preparation of a respective Draft Regulation of the Cabinet of Ministers of Ukraine have been going on since as far back as early September 2010. As per statements by representatives of the Ministry of Economy of Ukraine, the main aim of the development of that document has been the harmonization of the procedure for distributing the quota with the commitments undertaken by Ukraine when acceding to the WTO.

Before the country’s accession to the WTO, the distribution of the quota on imports of raw cane sugar was carried out by means of auctions. As such a mechanism for distribution of quotas is in breach of the relevant WTO norms, among other, Articles II and VIII of GATT 1994, as well as Article 4 of the Agreement on Agriculture, Ukraine has committed not to use any mechanism of conducting auctions for distribution of the quota on import of sugar starting from the date of its accession to the WTO. In addition to the above, the item 136 of the Report of Working Party on the Accession of Ukraine to the WTO explicitly states that Ukraine would adopt a system of allocating raw cane sugar quotas on a first-come first-served basis within three years of the date of its accession...


Appropriateness test

Ukrainian Lawyer
9-10 (93-94) September-October 2010

Roman Drozhanskyi, Volkov and Partners Law Firm

Lately, Julian Assange, previously hardly known by anyone, has broken into the information realm acting in a way that provoked a blow up in the world of diplomacy and journalism. Particularly, the newspapers all over the world published correspondence between American embassies and the State Department on different issues: from special features of French president’s character to course of acts of war in Afghanistan.
Such vast information «leak» has been possible owing to the nature of the Internet, where the freedom can hardly be restricted even by the American government. Official and off-the-record ‘witch-hunt’ by the US triggered off sudden upswing in hacker’s, journalists and average people, whose efforts transformed the documents disseminated by Wikileaks into ever existing in the network.
In my opinion, information of this kind, disclosed through the Internet, has the adverse effect, as it can hinder rather then help American – and not only American – diplomatic officials to work efficiently. Free communication with the sources and possibility to hand down this information to the governments is all part and parcel of the diplomatic duties, and it is hardly possible to imagine international relation on the hole without it.
However, the positive result of the Wikileaks scandal is that it has made possible to watch a reaction of the western governments who used to be proud of freedom of speech as the main achievement of their legal systems. As ever, some governments failed the test for response adequacy and showed hypocrisy – awaited by some critics – where the freedom of speech was used against them...

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