Protection of foreign investments in Ukraine

Protection of foreign investments in Ukraine

The state guaranties of protection of foreign investments are stipulated by the Law of Ukraine on the Regime of Foreign Investments adopted by Verkhovna Rada (Parliament) and signed by President Kuchma on March 19, 1996.

Legal Regime for Investment Activity

Foreign investors on the territory of Ukraine receive national treatment as to investment and other economic activity with the exceptions provided for by Ukrainian legislation and international agreements of Ukraine.

Investment incentives and other economic incentives may be granted to business entities which carry out projects with the attraction of foreign investment that are implemented according to governmental programs for the development of priority sectors of the economy, the development of social services or the development of territories.

The laws of Ukraine may, for the purposes of national security, designate territories where foreign investors' activity and activity of entities with foreign investments are restricted or prohibited.

Guarantees against Changes in Legislation

In the event that subsequent special legislation of Ukraine concerning foreign investment shall change the terms and conditions of guarantees for the protection of foreign investments specified by the Law on foreign investment regime, upon request of the foreign investor, government guarantees for the protection of foreign investment stipulated by this Law shall apply for a period of ten years from the date when such legislation came into force.

Guarantees against Seizure and Unlawful Acts of State Bodies and State Officials

Foreign investments in Ukraine are not nationalized. State bodies may not seize foreign investments, with the exception of emergency measures in the event of natural disaster, accidents, epidemics, or epizootic. The above-mentioned seizures may be carried out on the basis of decisions of bodies authorized to do so by the Cabinet of Ministers of Ukraine.

Decisions in respect of the seizure of foreign investments and the terms and conditions of compensation may be appealed in court in.

Compensation and Reimbursement of Losses Incurred by Foreign Investors

Foreign investors have the right to receive compensation of their losses, including lost profit and moral damage incurred as a result of actions, inaction or improper fulfillment by the state bodies of Ukraine or their officials of the responsibilities in relation to foreign investors or entities with foreign investment stipulated by the legislation, according to the legislation of Ukraine.

All expenses and losses incurred by foreign investors as a result of activity described above are to be compensated on the basis of current market prices and/or substantiated valuation, certified by an auditor or auditing company. Compensation paid to the foreign investor is to be prompt, adequate and efficient. Compensation to be paid to the foreign investor as is calculated as of the moment of the cessation of the property rights.

Compensation to be paid to the foreign investor is determined as of the moment of making the decision regarding reimbursement of losses. The sum of compensation is to be paid in the currency in which the investment has been made, or in any other currency acceptable to the foreign investor, according to the legislation of Ukraine. From the moment of receiving entitlement for compensation and up to the moment of its payment, interest for the amount of compensation is accrued at the average interest rate, at which London banks provide credits to first-class banks on the European foreign exchange market (London Inter-Bank Offered Rate - LIBOR).

Guarantees in the Event of Termination of Investment Activity

In the event of termination of investment activity, a foreign investor has the right within 6 months from the day of cessation of that activity to recoup his investment in-kind or in the currency of investment in the amount of the actual contribution (taking into account the possible reduction of the Statutory fund) without payment of duty, along with profits from those investments in monetary form or in goods at actual market value at the moment of termination of investment activity, if not otherwise provided for by the legislation of Ukraine or international agreements to which Ukraine is a party.

Guarantees for the Remittance of Profits, and Other Sums Resulted from Foreign Investments

Upon payment of taxes, duties, and other mandatory payments, foreign investors are guaranteed unimpeded and prompt remittance abroad of their profits and other sums in foreign currency obtained legally as a result of foreign investments.

Procedures for the remittance of profits and other sums received as a result of foreign investments is determined by the National Bank of Ukraine.

The above is intended to provide a brief guide only. It is essential that appropriate professional advice is obtained. Our company will be glad to assist you in this respect. Please do not hesitate to contact us.