Protection of foreign investments in Ukraine

From one hand rights and interests of the foreign investors are protected in Ukraine by affords of various state authorities in the same way as rights and interests of Ukrainian corporate entities and Ukrainian natural persons. Therewith the Law of Ukraine "On the Regime of Foreign Investments" contains a list of clauses devoted to protection of rights and interests of foreign investors in Ukraine, namely clauses 7 to 11 of the above Law of Ukraine. However most of such provisions are just of declarative nature without special procedures, so investing into Ukraine one should not relay too much on this provisions and have to be ready to protect their rights and interests in Ukraine using the ordinal procedures, which are provided for all Ukrainian corporate entities and Ukrainian natural persons.

Clause 7 of the Law of Ukraine "On the Regime of Foreign Investments" provides that the foreign investors on the territory of Ukraine are treated in the same way as the Ukrainian national entities and persons as concerning their investment affairs and other business affairs in Ukraine as well. And this is quite understood as far as if the foreign investors would have better rights in Ukraine then the Ukrainian nationals it would be discrimination of Ukrainian nationals.

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

Clause 8 of the Law of Ukraine "On the Regime of Foreign Investments" provides that in the event if subsequent special legislation of Ukraine concerning foreign investment shall change the terms and conditions of guarantees for protection of foreign investments in Ukraine specified by this Law, Ukrainian government guarantees that the protection of the foreign investments stipulated by this Law shall apply for a period of ten years from the date when such legislation became valid, however on the grounds of a separate request from such foreign investor.

Clause 9 of the Law of Ukraine "On the Regime of Foreign Investments" provides state guaranties against seizure and unlawful acts of Ukrainian state bodies and state officials. Thus the foreign investments in Ukraine cannot be nationalized. State bodies cannot seize foreign investments, with the exception of emergency measures in the event of natural disaster, accidents, epidemics, or epizootics.

Decisions in respect of the seizure of foreign investments and terms and conditions of compensations for the same can be appealed to the court.

Clause 10 of the Law of Ukraine "On the Regime of Foreign Investments" establishes compensations and reimbursements of losses incurred to the foreign investors. Thus, the foreign investors have the right to receive compensation of their losses, including lost profit and moral damage incurred as the result of actions, inactions or improper fulfillment of their responsibilities by the state bodies of Ukraine and/or their officials as concerning the foreign investors or corporate entities with foreign investments.

All expenses and losses incurred by the foreign investors in the result of activity (non-activity and/or poor activity) described above are to be compensated on basis of the current market prices and/or substantiated evaluation, 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 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.

This clause also provides that from the moment of issuing the decision to pay the compensation and up to the moment of its actual payment the interest for the amount of unpaid in time compensation in amount of the London Inter-Bank Offered Rate is to be paid as well. 

Clause 11 of the Law of Ukraine "On the Regime of Foreign Investments" provides guarantees for the event of termination of the investment activities in Ukraine. This clause provides that in the event of termination of investment activity the foreign investor has the right within 6 months from the day of termination of such activity to recoup his investment in-kind or in the currency of investment in amount of the actual contribution (taking into account the possible reduction of the authorized capital) 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 otherwise is not provided by Ukrainian legislation in force.

And clause 12 of the Law of Ukraine "On the Regime of Foreign Investments" provides guarantees for remittance of profits and other amounts resulted from the foreign investments. Upon payment of taxes, duties and other required payments, foreign investors are guaranteed unimpeded and prompt remittance abroad of their profits and other amounts in the foreign currency obtained legally in the result of investment activity.

The above information is provided herein in educational and informative purposes only. It is provided that you have to get appropriate legal advice as regarding the legal and other issues of your interest in Ukraine in order to have the exact, extensive and up-to-date legal and other related information.

Do not hesitate to contact us if you have any questions or issues of legal nature, our Law Firm is working for you and our experienced legal specialists are always ready to help providing the client with appropriate legal consultations, legal reports and summaries, reasonable legal advices and all the other required legal support, assistance, coverage and protection.

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