New law on investment in Ukraine – Government, public sector

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Background

On December 17, 2020, the Ukrainian Parliament adopted Bill No. 3760 on State Support for Investment Projects with Significant Investments in Ukraine (the “Law“), entered into force on February 13, 2021.1

The law is part of a package of bills aimed at encouraging high-value foreign investment.2 This investment promotion strategy aims to secure around $ 7.7 billion in foreign investment as of this year.3

The law

Investments eligible for State support by virtue of the law may obtain advantages of up to 30% of the amount of the expected investment with regard to: (i) tax advantages and exemptions; (ii) land advantages over state / public land; and (iii) from January 2022, construction expenditure relating to the infrastructure necessary for the implementation of an investment project.4

In order to qualify for state support under the law, investments must: (i) generate at least 80 new jobs per year (with remuneration above at least 15% of the average salary in the domain concerned); (ii) result in an investment of at least 20 million euros; (iii) be implemented within 5 years; and (iv) be established through a Ukrainian special purpose body.5

Among the industrial sectors that will benefit from the law are the processing industry (except the manufacture of tobacco and alcohol products), the extraction of mineral resources for processing and refining (excluding coal and lignite, crude oil and natural gas), waste management and transport.6

Public-private partnerships, concessions, investment projects under product sharing agreements and privatizations will not be covered by the law.7

The state aid request requires potential investors to enter into special investment contracts with the Cabinet of Ministers and relevant municipal authorities through the respective Ukrainian special purpose vehicle (the “Special investment contract“).

The law determines that investors are entitled to a dedicated public authority to provide assistance throughout the project. This figure, dubbed “the investment nanny”, will help potential investors in areas such as applying for state support under the law as well as investment project approval and implementation in accordance with the law. under the agreed conditions.8

The Special Investment Contract, the duration of which may not exceed 15 years, will determine the form of State aid and the terms of implementation of the project.9 Of particular importance to investors is the inclusion in special investment contracts of dispute settlement provisions and applicable laws that will allow the contract to be governed by foreign law and subject to international arbitration. Other guarantees provided to investors include stabilization clauses, which will allow the special investment contract to be governed by Ukrainian laws in force on the date of execution (except for the application of the latter laws. which improve the investor’s position)ten, and the reimbursement of losses to investors (except for lost profits) resulting from the failure of the state to create a stable business environment.11

Footnotes

1.
See Ukraine Invest, The President of Ukraine signed the law on state support for investment projects with large investments, February 10, 2021 [Last accessed 11 March 2021], available here. See Ukraine Inform,
Zelensky signs the law on state support for Ukrainian and foreign investors, February 11, 2021 [Last accessed 11 March 2021], available here.

2.
See Invest in Ukraine, A set of bills on the promotion of investment attraction through privatization is registered in the Verkhovna Rada [Last accessed 10 March 2021], available here.

3.
See Bloomberg, Ukraine considers investments as virus shakes supply chains, February 5, 2021 [Last accessed 10 March 2021], available here.

4.
See Verkhovna Rada from Ukraine, Passage of the Law of Ukraine “On State Support for Investment Projects with Large Investments”, December 17, 2020 [Last accessed
11 March 2021], available here (Google Translate). See Lexology,
Ukraine will support major investment projects, March 1, 2021 [Last accessed 11 March 2021], available here.

5.
See Lexology, Ukraine will support major investment projects, March 1, 2021 [Last accessed 11 March
2021], available here.

6.
See Verkhovna Rada from Ukraine, Passage of the Law of Ukraine “On State Support for Investment Projects with Large Investments”, December 17, 2020 [Last accessed
11 March 2021], available here (Google Translate). SeeLexology, Ukraine will support major investment projects, March 1, 2021 [Last accessed 11 March 2021], available here.

7.
See Mondaq, The law on investment nanny passed by the Ukrainian parliament, January 5, 2021 [Last accessed 11
March 2021], available here.

8. See Forbes, Ukraine has announced that it will have “nannies” for foreign investors. How will they work, January 28, 2020 [ Last
accessed 10 March], available here. See Verkhovna Rada from Ukraine,
Passage of the Law of Ukraine “On State Support for Investment Projects with Large Investments”, December 17, 2020 [Last accessed 11 March 2021], available here.

9.
See Verkhovna Rada from Ukraine, Passage of the Law of Ukraine “On State Support for Investment Projects with Large Investments”, December 17, 2020 [Last accessed
11 March 2021], available here (Google Translate). SeeLexology, Ukraine will support major investment projects, March 1, 2021 [Last accessed 11 March 2021], available here.

ten.
See black iron, Black Iron welcomes new Ukrainian investment law, February 11, 2021 [Last accessed 10 March
2021], available here.

11.
See Mondaq, The law on investment nanny passed by the Ukrainian parliament, January 5, 2021 [Last accessed 11
March 2021], available here. See Verkhovna Rada from Ukraine,
Passage of the Law of Ukraine “On State Support for Investment Projects with Large Investments”, December 17, 2020 [Last accessed 11 March 2021], available here (Google Translate).

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.


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