Among the world companies to be supposedly attracted
by fresh Ukrainian developments, only Uber appeared to be brave enough to enter
the Ukrainian market.
By far, it is only abroad that Ukrainians can officially
try some of global brands’ products, such as IKEA (active in 50 countries),
Starbucks (active in 24 countries), H&M (active in 61 countries), Subway
(active in more than 100 countries), etc.
The Ukrainian government’s fight against international business is
aggressive as
demonstrated not only by restricting
access to the Ukrainian market, but also by complicating cooperation between Ukrainian and foreign businesses.
According to the Law of Ukraine “On Foreign Economic Activity”
adopted back in 1991, the Ukrainian authorities may impose special sanctions
against foreign enterprises violating this or associated laws. The sanctions
available for the government are as follows: fines, individual regime of
licensing of foreign economic activity, and temporary suspension of foreign
economic activity.
In most cases, sanctions against foreign companies are applied for an alleged
violation of the ‘rule of 90 days’ (the ‘Rule’), set out in the Law of Ukraine “On
the Order of Settlements in Foreign Currency” adopted in 1994, and the
by-laws of the National Bank of Ukraine. Roughly, the Rule implies that
settlements for imported/exported goods must be effected within 90 days.
Such type of individual sanctions practically means that any Ukrainian
entity intending to engage in cross-border business with a sanctioned foreign company
has to obtain a special license from the Ministry of Economic Development and
Trade of Ukraine and pay a special fee for it. A separate license is required
for each export/import operation, which practically bans the sanctioned company
from doing business with Ukrainian entities.
This rule is broadly used by the State Fiscal Service of Ukraine as a
formal ground to initiate the inclusion of international enterprises having
import/export operations with Ukrainian counterparties, to the list of
sanctioned companies.
Such blacklisting is not always based on an actual breach
made by a respective foreign company – it may often happen vice versa when a breach
by a Ukrainian partner leads to imposing sanctions against a foreign entity. Hence,
even if the foreign economic contract implies that the foreign
importer is to supply goods to its Ukrainian counterparty only
after the second installment is made by the latter, and the Ukrainian company failed
to pay, the foreign importer will most likely face sanctions.
Similarly, if the
State Fiscal Service, in the course of a tax audit of a Ukrainian exporter,
fails to find any proof of the fact that the foreign purchaser paid for goods
exported from Ukraine, then such foreign company will most likely be sanctioned
as well.
So far, approximately 95 percent of the sanctions imposed by Ukrainian
authorities have been initiated by the State Fiscal Service of Ukraine, while those
remaining have been applied by the Ukrainian Security Service against companies
involved in crime financing and money laundering.
The full list of sanctioned companies is available at the website of the
Ministry of Economic Development and Trade of Ukraine (http://www.me.gov.ua/SpecialSanctions/List?lang=uk-UA&showFrgn=True).
Of interest here is that sanctions are officially imposed by the Ministry of Economic
Development and Trade (the ‘ministry’) by its Decrees, which just rubberstamp
the submissions from the State Fiscal Service of Ukraine (the ‘SFS’), initiating
such sanctions.
If the administrative court holds to lift the sanction based on
a lawsuit filed by the foreign company, then the ministry will challenge such a
court decision at the Administrative Court of Appeal, and if the latter
upholds, then the ministry will most likely apply to the High Administrative
Court of Ukraine, seeking enforcement of sanctions.
At the same time, in the
course of court proceedings, the ministry has the following position: the ministry is not authorized to reject the SFS’s submissions on imposing
sanctions and, therefore, has no alternative but to grant such a submission
irrespective of its accuracy or appropriateness.
Hence, though the ministry’s role in imposing sanctions seems to be minimal
(the SFS initiates the entire procedure), its resulting support of the SFS’s
initiatives shows up rather forcefully. Thus, the majority of sanctions are initiated by the
SFS, while the Ministry uses all the available possibilities for ultimate judicial
defense.
If we look closer at the formal grounds on which the sanctions are
applied for violations of the Law of Ukraine “On the Order of Settlements
in Foreign Currency” (the rule of 90 days as mentioned above), it becomes
clear from the provisions’ wording that foreign companies simply have no
possibility to violate this Law.
These relevant provisions of the Law of Ukraine “On the Order of
Settlements in Foreign Currency” state as follows:
Article 1. The revenue
of residents in foreign currency shall be transferred to their foreign currency
accounts in the authorized banks within the period of settlement specified in respective
contracts, but no later than within 180 days from the date of customs clearance
(extract from export customs declaration)
of goods exported, and in case of export of works (services), intellectual
property rights – from the date of signing the acceptance certificate or other
document confirming the execution of works, provision of services,
export of intellectual property rights. Exceeding of this period requires a [positive]
conclusion of the central executive authority that
implements the state policy in the field of
economic development.
When
the goods are placed under the customs regime of processing, beyond the customs territory, the period for returning such goods or their processed products to the customs
territory of Ukraine under the
import customs regime shall be determined in accordance
with the Customs Code of Ukraine.
The National Bank of Ukraine
shall have the right to introduce other terms of settlements than those indicated by paragraph
1 of this article, for a period of up to 6 months.
Article 2. Import operations of
residents performed on the deferred delivery terms, in case such deferral exceeds
180 calendar days after effecting the advance payment or drawing the bill to the supplier of the imported goods (works,
services), require a [positive] conclusion of the central executive authority
that implements the state policy in the field of economic development.
In case the documentary credit
settlements are applied to import operations of residents, the period stipulated
by paragraph 1 of this article, shall commence
from the moment of payment made by the authorized bank to the non-resident.
The period and the conditions for
finalizing the import operation without the goods delivery to the territory of
Ukraine shall be determined under the procedure
established by the Cabinet of Ministers of Ukraine, as agreed with the National
Bank of Ukraine.
The National Bank of Ukraine
shall have the right to introduce other terms of settlements than those
indicated by paragraph 1 of this article, for a period of up to 6 months.
From either of the above articles it remains unclear which condition exactly
may be violated by a foreign legal entity, given that Art. 1 provides for the
special rules in crediting residents’ revenues to their accounts, whereas Art.
2 provides for the obligation of importing residents to obtain a conclusion of
the central executive authority. Paragraph 3 of Art. 2 refers to the Order of
the Cabinet of Ministers of Ukraine as of December 05, 2007 No. 1392 “On
Adoption of the Procedure of Determining of the Period and Conditions for Finalizing
of Import Operation without Delivery of Products to the Territory of Ukraine”.
Article 1 of the Order states as follows: “the
effect of this Order extends to all resident
business companies irrespective of their ownership type”.
Hence, Order No. 1392 referred to by paragraph 3 of Art. 2 of the Law of
Ukraine “On the Order of Settlements in Foreign Currency” does not
contain any instructions or requirements to non-residents, which they can
violate, and extends its effect to residents only, whereas sanctions are
imposed against foreign entities as well.
The situation with Ukrainian economic sanctions sometimes tends to turn really
awkward, and everything goes terribly wrong: by its Decree No. 733 as of July 09, 2015 No. 733, the Ministry of
Economic Development and Trade imposed a special sanction – the individual
regime of foreign economic activity – against the Union of Economic Football Associations for the alleged debt before
Schenker, a subsidiary of Deutsche Bahn, in the amount of EUR 1.3 million.
The said Decree states, inter alia, that
UEFA has its official seat at ‘Route de Geneve 46, CH-1260 Nyon 2, Sweden, whereas the official seat of
UEFA is ‘Route de Genève 46, CH-1260 Nyon 2, Switzerland, as anyone can
see from its official website.
However, this particular sanction was temporarily suspended upon the
UEFA’s Motion.
By imposing the economic sanctions against international business entities operating with
their Ukrainian counterparties, the government clearly shows that
it is not willing to integrate Ukraine into the Western world and would rather
prefer to control the Ukrainian international trade manually.
