Ukraine Capacity for growth


Oleksander Plotnikov of Arzinger in Ukraine explores the country’s exciting economic environment and analyses the risks for foreign investors


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kraine has great investment capacity. Rich and fertile soils and the comparatively afford- able cost of labour have long made it one of the favourite investment destinations in the agriculture sector. The real estate sector also makes an attractive investment opportuni-


ty: the demand in the market still fails to meet the supply. Wealthy foreign individuals also choose to deposit their money in Ukrainian banks, which offer on average 10% a year on foreign curren- cy deposits, outperforming by far most of US and European banks. Over the last year, the main driver for both foreign and domestic investors was the Euro 2012


football finals. This encompassed not only the construction of stadium arenas, but also the repair or building of infrastructure assets, such as airports, hotels and roads. Alternative sources of energy (including solar, wind and biomass) have attracted investors and caused this sector of the economy to grow. Despite the unfavourable weather conditions – there was a long, cold winter – the agricul- tural business also provided a market opportunity over the last year. There are no restrictions on the involvement of international counsel in investment transactions,


apart from the necessity for a resident to provide the servicing bank with copies of the relevant agreements with foreign companies if payments are to be made abroad. Also, according to curren- cy control rules, if the aggregate amount of payments to be made by a resident of Ukraine in dis- charge of contractual obligations in foreign currency towards a non-resident of Ukraine exceeds €100,000 ($128,000) or its equivalent in one year, the resident is required to obtain a price evalu- ation act from the State Information and Analytical Centre for Monitoring of the External Goods Markets, confirming that such payment does not exceed the fair market price for such work or serv- ices.


Regulating inbound investment The main legislation regulating foreign investment in Ukraine is the Law of Ukraine on the Regime of Foreign Investment, adopted on 19 March 1996 and amended many times since. Under this Law, the term “foreign investment” refers to assets invested by foreign investors in investment prop- erties pursuant to effective legislation of Ukraine for the purpose of gaining profit or achieving social effect. Capital contributions can be in cash or in kind (either tangible or intangible assets). Virtually no restrictions are set for the form of the contemplated investment in Ukraine. Other notable regulations in this sphere include the Civil Code of Ukraine (2003), Commercial


Code of Ukraine (2003), Law of Ukraine on Investment Activity (1991), Law of Ukraine on Protection of Foreign Investments in Ukraine (1991), Cabinet of Ministers’ Resolution on the Procedure for State Registration of Foreign Investments (1996), and National Bank of Ukraine Resolution on Regulation of Procedure of Foreign Investing in Ukraine (2005). The Law of Ukraine on the Regime of Foreign Investment contains a number of guarantees


which are granted to a foreign investor upon registration of investments in the country. The first is protection against changes in legislation (a 10-year grandfathering clause permitting


the investor to enjoy favourable treatment and guarantees contained in the Law in the event of a subsequent change in legislation). A second is protection against nationalisation excluding emergency measures, such as national


disasters, accidents or epidemics, and only on the basis of decisions authorised by the Cabinet of Ministers of Ukraine. There is also a guarantee for the compensation and reimbursement of losses whereby foreign


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The law contains a


number of guarantees for foreign investors


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