Publications
Today, there are quite a lot of trade associations in the world, which are intended to promote the development of trade in commodities. For companies that do business in the agricultural sector, by far, the most important are the GAFTA and FOSFA, given the large amounts of grain and oilseed crops production.

But what are the main activities of these associations and how can they help agribusiness?

Ivan Kasynyuk, Partner at AGA Partners,
Iurii Gulevatyi, Associate at AGA Partners
(exclusively for Yurist&Zakon (Lawyer and Law) magazine)

The article is available in Russian only.

15.06.16
Disputes arising from correctness of the lay time calculation and parties’ responsibility for demurrage or dispatch after loading operations are quite frequent. There is well known rule to exclude certain periods from the lay time calculation, no matter whether ship began loading operations or remains off the harbor, waiting for mooring.

In this article, we provide a case study on the practice of lay time calculation when the vessel remains off the harbor.

Irina Moroz, Partner at AGA Partners law firm
(Exclusively for Yurydychna Gazeta (Legal Newspaper))

The article is available in Ukrainian only.

13.06.16
Recently, there have been several significant events in the world. At the global level - Panama's public attempt to protect its financial sector and its position on the issues of automatic exchange of tax information, followed by information leakage of the planetary scale.

In the local scale, Ukrainian president, after the publication of his secret offshores, announced the start of deoffshorization and activation of Ukraine's efforts in this regard in the international arena.

Alexander Gubin, Associate at AGA Partners
(Exclusively for Forbes Ukraine)

The article is available in Russian only.

Link to the source

01.06.16
Having annexed the Crimean Peninsula, Russia nationalized numerous facilities, recognized as the state property of Ukraine, which among others, also included seaports located on its territory.

The article reads what specific steps and actions are taken by Russian and Ukrainian authorities during the fight for the seaports of Crimea, to what extent the ongoing conflict has influenced the international trade, and what happens de facto on the territory of the peninsula ports.

Ivan Kasynyuk, Partner at AGA Partners
Dmitry Koval, Associate at AGA Partners
(exclusively for the Ukrainian Journal of Business Law)

Having annexed the Crimean Peninsula, Russia nationalized numerous facilities, recognized as the state property of Ukraine, which among others, also included seaports located on its territory - Evpatoria, Kerch, Sevastopol, Feodosia and Yalta.

However, the reaction of international community and, in particular, non-recognition of annexation of the Crimean Peninsula by the Russian Federation, clearly manifested that in the modern world it is not feasible to physically capture territory and property of other country without bearing relevant consequences for such aggressive actions.

Since Crimea had been annexed, the majority of the world's leading traders ceased to trade through Crimea, and shipowners refused to send the vessels to the ports of the peninsula. This resulted in a significant decrease in turnover of the ports located on the peninsula.

Realizing this fact, the Russian authorities, mainly through the adoption of various laws at the national level, as well as addressing the international organizations, are trying to "return" the former cargo turnover to Crimean ports.

On the other hand, the Ukrainian authorities, being in position of legitimate owners, have no intention to "give up without a fight". Using the principle of "sea blockade", Ukraine quite successfully endeavors internal and external political legal mechanisms, in order to prevent ports from their normal functioning.

What specific steps and actions are taken by Russian and Ukrainian authorities during the wartime for the seaports of Crimea? Whose policy is more effective? How and to what extent the ongoing conflict has influenced the international trade? What steps should be taken in future? How the international community responds? And what happens de facto on the territory of the peninsula ports?

In this article the authors will try to provide answers to these and many other questions.

 Russia's actions

It all started in March 2014, - the State Council of the Republic of Crimea nationalized enterprises and property of Ukrainian seaports located on the territory of Crimea and Sevastopol, and handed them over to the newly created company "Crimean ports". The same month, an already Russian (!) Federal Agency of Sea and River Transport in Crimea appointed new captains of sea ports of the peninsula.

Later, in June, sea ports Yevpatoria, Kerch, Sevastopol, Feodosia and Yalta were included and listed in the Register of the sea ports of the Russian Federation.

This was followed by a series of actions taken to affect international maritime community. The same month, the Russian Federation has sent a note to the International Maritime Organization (IMO) providing that starting from this moment, it undertakes the actual implementation of security measures in the ports of the Crimea and their water areas, referring to the fact that Ukraine has already notified all that Ukrainian authorities will no longer ensure the safety of navigation in the ports of the peninsula.

Somewhat later, in September, the Russian government has included the seaport of Sevastopol in the list of ports that are allowed to accept the foreigners and stateless persons arriving to Russia by ferry in tourism purposes.

Immediately thereafter, the Russian government opened Crimean sea ports to foreign vessels and thereby assigned them to have an international status.

As we can see, as soon as annexation had occurred, the Russian authorities have promptly carried out a series of deliberate measures at national and international level aimed at (i) nationalization of the Crimean ports and (ii) recognition by the international community that from now on, ports of Crimea are Russian, not Ukrainian.

 What have Ukraine done?

From April to May 2014, the Government of Ukraine was actively taking steps at both, national and international level. At domestic level, Ukrainian authorities, by a series of legislative acts recognized Crimea as temporarily occupied territory, closed Crimean seaports for shipping, and imposed administrative and criminal liability for violation of the rules of entry and exit from the peninsula.

According to new order, those who violate the order of entry into the territory of the peninsula and out of it, can be punished with fines and administrative arrests (15 days), the confiscation of the vehicles, and even imprisonment of such persons (from 3 to 8 years of imprisonment).

The government officially reported the inability to handle ships and passengers, to ensure a proper level of navigation safety and to comply with international agreements of Ukraine in the sea ports situated in the territory of Crimea. Any vessel sailed at the ports of the peninsula, does so at her own risk. Owners and crew of the ship that will ignore the ban can be punished by a fine or even imprisonment.

At the international level, Ukraine notified the IMO that it no longer provides proper navigation safety and compliance with international obligations arising from the need to preserve human life at sea, search, rescue, as well as the high level of property risks in the waters and nearby Crimean seaports. This information was transmitted to the IMO Secretariat and circulated among its Member States and representatives of foreign companies accredited by the organization.

Thus, in a couple of months Ukraine has officially closed the Crimean ports according to the norms of both international and national law and duly notified the international community.

How international community responded?

One of the most important decisions on the "Crimean issue" at the international level was made on 27 March 2014, when the UN General Assembly adopted a resolution on Ukraine, which called upon States, international organizations and other institutions - not to recognize the annexation of Crimea and Sevastopol, refrain from any action that may directly or indirectly be interpreted as recognition of the annexation. This resolution was supported by 100 countries - members of the UN.

It also should be recalled that both governments handled their notes to the IMO. Ukraine reported on the impossibility of ensuring navigation safety standards stipulated by international conventions and IMO codes at the peninsula ports, and Russia, in turn, guaranteed the safety of the Crimean port for shipping in their note to the IMO.

However, since the IMO is the United Nations specialized agency in the field of international commercial shipping and, accordingly, does not recognize the annexation of Crimea by the Russian Federation, it is unlikely that the organization will provide the Russian authorities with right to ensure the safety of Ukrainian ports to IMO Member States.

In other words, this means that Crimean ports are no longer in line with international safety standards, and theoretically, for every vessel, corresponding to such standards, entry into one of these ports can subsequently become the reason for inspections or even detention of the vessel.

Unfortunately, the IMO has no right to force governments and/or shipowners to comply with their decisions. This organization can only recommend to vessels of all member countries of IMO to avoid visits to Crimean seaports. And those, in turn, shall decide to adhere to the recommendations of the maritime community or not.

Another significant event - Crimean ports were not included in the list of ports authorized to issue Ship Sanitation Certificates under the International Health Regulations, published by the World Health Organization, according to which, all vessels are required to obtain such certificates in order to be able sail to further ports.

The EU has also imposed sanctions against Crimea and Sevastopol, in particular banned the import of goods originating from Crimea and the export of certain goods and technologies by Crimean companies. The EU imposed a ban on investment in Crimea. Europeans and the EU companies can no longer buy the property or establish the entities or other organizations in Crimea, nor can they finance the Crimean companies or provide similar services.

European tour operators are prohibited from offering travel services in Crimea and Sevastopol. European cruise ships can no longer enter the ports of the Crimean Peninsula, only for emergency.

Therefore, it is evident from the above facts that there is a clear position of the world's leading organizations with regard to the annexation of Crimea and the nationalization of Crimean ports by the Russian Federation. International organizations impose all sorts of bans and sanctions, excluding Crimean ports from their lists and do not recommend or even prohibit vessels of their member states to visit Crimean ports.

 Reality: What is actually happening?

In fact, the Crimean ports continue to operate, and vessels of European countries including those voted for the UN resolution, continue to enter the ports, despite the ban imposed by Ukrainian authorities and strong recommendations of the international community, and even neglecting risks of being detained by the Ukrainian authorities for breach of national legislation.

Thus, the last published list of non-governmental organizations dealing with tracking of ‘intruders’ has 216 trading vessels from 16 countries. Indeed, the overwhelming majority of intruders are the vessels of Russia, Turkey and Greece - 181 vessels. However, there are some European countries like Germany, Italy, Switzerland, Lithuania and others among the violators.

It is important to note though that among 105 foreign vessels (not including the vessels of Russia and Ukraine), about half - 51 ship - committed violations only once and do not enter the ports of annexed Crimea thereafter. This reflects a real tendency connected both with the effect of international sanctions, and dissemination of information about ‘intruding’ vessels in media - foreign shipowners are less and less wishing to enter into the Crimean contracts. Therefore, those are more actively replaced by Russian shipowners.

The Ukrainian authorities have already applied to the countries of ‘intruders’ with a request to explain the actions of its vessels. Also, General Prosecutor's Office has opened and investigated more than 69 criminal cases concerning the unauthorized entries into the Crimean ports. Some individual governments, for instance Moldova, had expressly reacted to violations of its vessels and prohibited sea vehicles under the Moldovan flag from entering the ports of Crimea.

However, only in February 2015, almost a year after the annexation, the Ukrainian authorities were able to use the long-awaited mechanisms for punishing violators. Singapore intruder repeatedly coming to the occupied Crimea was detained in the port of Ilyichevsk. The detention lasted about three days, however, this period was enough for the shipowner to suffer losses and make appropriate conclusions.

Then in March, the court arrested Turkish vessel for entering into one of the ports of the Crimea. As it turned out, the vessel has been repeatedly entering Crimean ports illegally annexed by Russia, thus violating not only a number of international rules, but also Ukrainian criminal law.

During the inspection of another ship, this time Ukrainian, the state bodies have found that the vessel had entered the port of Kerch. In this case, the Court considered it sufficient to limit the punishment by imposing a fine on the whole crew and the ship's captain. However, the main point behind is that the Ukrainian authorities have actually begun to punish offenders, and the next time the court may not limit itself to fines.

 Conclusion

Having nationalized Crimean ports, Russia has faced with condemnation and non-recognition of its actions by the international community. Moreover, Ukraine has quite effectively implemented mechanism of "sea blockade" of the peninsula ports, thus creating obstacles for Russia to benefit from owing the ports. Special attention should be paid to actions taken by Ukrainian mass media and public organizations monitoring and publishing information about the offending vessels.

However, in reality, despite implied sanctions and bans and significantly reduced level of economic activity, Crimean ports are still involved in the international trade. Obviously, in such circumstances rather than to wait for help from other countries Ukraine must be more "tough" in prohibiting of any business activity within Crimean ports and insist on compliance with its own national legislation as well as pursue for the enforcement of other international sanctions.

As we can see, Ukraine has virtually commenced to use the internal mechanisms of protection. By detaining the offending vessel, illegally entering Crimean ports, Ukraine has set a precedent in practice, thereby preventing such violations in the future, and giving effect to the principle of inevitability of punishment for violations.

Ivan Kasynyuk, Partner at AGA Partners

Dmitry Koval, Associate at AGA Partners

25.05.16
As soon as the law on the introduction of derivative actions had entered into force, the legal community began cautiously discussing what problems it will create.

We offer a look into the essence of a derivative action of "Ukrainian sample" and possible difficulties on the path of implementing the best international practices.

Olga Kuchmiienko, Junior Associate at AGA Partners Law Firm
(Exclusively for Yuridychna Praktyka)

The article is available in Russian only.

18.05.16
The global economic trend in 2016 was marked by a general euphoria about the lifting of sanctions from Iran.

To understand what opportunities are now really open for agribusiness and what exist only on paper, it is necessary to find out what sanctions imposed against Iran exist, which ones have already been lifted, and how this affects the trade in agricultural goods.

Aminat Suleymanova, Managing Partner,
Olga Kuchmiienko, Junior Associate at AGA Partners Law Firm
(Exclusively for APK-Inform)

The article is available in Russian only.

16.05.16
The trend of the provision of legal services by computer programs or online services, rather than by professional lawyers, promising to significantly reduce the cost of consultations and thus create serious competition for law firms in developed legal markets is gaining momentum.

Ivan Kasynyuk, Partner at AGA Partners
(comment for Ukrainian Lawyer magazine)

The article is available in Ukrainian only.

11.05.16
How many independent directors should be in the supervisory board and how to improve its performance, to preserve the independence and thus open up new perspectives for the company?

Olga Kuchmiienko, Junior Associate at AGA Partners Law Firm
(Exclusively for Forbes. Ukraine)

The article is available in Russian only.

25.04.16
"The wolves are full and the sheep are whole," or what should Ukrainian exporter take into account while exporting to Iran?

Olga Kuchmiienko, Junior Associate at AGA Partners Law Firm
(Exclusively for Novoye Vremya)

The article is available in Russian only. 

13.04.16
For the last few weeks the conflict between Nibulon and Rise is actively discussed on the agricultural market. Do you know what is the true cause of the war between the companies? Who really is to blame and what will happen next?

Ivan Kasynyuk, Partner at AGA Partners
(Exclusively for Forbes Ukraine)

The article is available in Russian only.

Link to the source

17.03.16
What rights has a man who left his wife, but is a loving father?

Aminat Suleymanova, Managing Partner at AGA Partners
(Exclusively for Fathers' Club online edition)

The article is available in Russian only.

Link to the source

04.01.16
Please find below chapter dedicated to the Ukrainian jurisdiction from Private Client 2016 prepared by AGA Partners team.

Tax

1 How does an individual become taxable in your jurisdiction?


According to Ukrainian law, an individual can be considered a tax resident of Ukraine if he or she meets the Ukrainian tax residency criteria, which
are as follows:

• if the individual has a domicile in Ukraine;
• if the individual also has a domicile in another country, the individual is deemed a resident of Ukraine provided he or she has a permanent place of residence in Ukraine;
• if the permanent place of residence is also available in another country, the individual is deemed resident of Ukraine provided his or her centre of vital interests is situated in Ukraine (eg, the place of the permanent residence of the members of an individual’s family or the place of an individual’s registration as a business entity);
• if it is not possible to determine the actual centre of vital interests, or if the individual does not have a permanent place of residence in any country, the individual is deemed to be tax resident of Ukraine if he or she stays in Ukraine in excess of 183 days during a tax (calendar) year;
• if it is impossible to determine tax residency on the basis of the above provisions, then the individual will be a tax resident of Ukraine if he or she is a Ukrainian citizen;
• a person who fails to qualify as a Ukrainian tax resident will be considered a ‘non-resident’ for purposes of the Tax Code;
• the Tax Code also provides for a self-recognition procedure, according to which an individual can voluntarily elect to be a Ukrainian tax resident; and
• in conflict cases, the rules of the relevant double taxation treaties may be applied.


2 What, if any, taxes apply to an individual’s income?


In Ukraine, individuals are subject to personal income tax, regardless of whether they are tax residents or not. Individuals as tax residents of Ukraine are taxed on their worldwide income, while non-residents are taxed on their Ukraine-sourced income only. Ukrainian laws determine Ukraine-sourced income as income derived by an individual as a result of any business activity performed in Ukraine, which, inter alia, includes remuneration for work performed in Ukraine, whether paid by a Ukrainian
or a foreign company.

Both resident and non-resident individuals are taxable at the same tax rates, being 15 per cent and 20 per cent applied as follows:
• the 15 per cent rate applies to monthly income up to a threshold of 10 minimum wages per month (since 17 September 2015, 13,780 hryvnas);
and
• the 20 per cent rate is applicable to monthly income in excess of a threshold of 10 minimum wages per month.
The individual’s income is taxable whether it was obtained in cash or in kind. Taxable income includes employment income (with in-kind benefits), income from trading or professional activities (including operations with intellectual property), income from the alienation of property, winnings and prizes, insurance payments, interest and dividends, investment income and contributions to unqualified pension plans made on behalf of a taxpayer by another person or employer.

3 What, if any, taxes apply to an individual’s capital gains?


The general rate applied to employment income is 15 per cent (to monthly income not exceeding 10 minimum wages) and the 20 per cent rate applies to monthly income exceeding that threshold.
All passive income (including royalties, bank deposit interest, but excluding dividends, except for those paid out by joint investment institutions), and investment income is taxed at a 20 per cent rate. Dividends, paid out by resident CPT payers are taxed at a 5 per cent rate, and those paid out by non-residents at 15 per cent. Winnings and prizes are subject to 30 per cent tax by both residents and non-residents, except winnings in the state lottery and those received from a gambling organiser. As an exception, cash winnings in sports (other than remuneration to athletes) are subject to the standard 15 per cent and 20 per cent tax rate.


Gains derived from the sale of a real estate are not subject to tax if the sale takes place once during the year, provided the owner has held legal title for at least three years before the sale (the three-year ownership period does not apply to inherited property). The rate is 5 per cent if the taxpayer makes more than one sale per year. Gains derived from the sale of moveable property by a resident are subject to a 5 per cent rate; gains derived by a non-resident are subject to a 15 per cent or 20 per cent rate. As an exception, income derived by the taxpayer from the sale (exchange) during the year of one of the objects of personal moveable property, such as a car or motorcycle, is not subject to taxation. Sale of two or more motor vehicles by the same person during the year will be taxed at rates of 5 per cent for residents, and 15 per cent and 20
per cent for non-residents.


4 What, if any, taxes apply if an individual makes lifetime gifts?


In Ukraine, funds, property or property rights, and the cost of work or services presented to the taxpayer as a gift shall be taxable in the same way as inheritance. 

Inheritance (real estate, chattels, securities, corporate rights, cash, insurance, etc) and gifts are taxable at the following rates:
• zero per cent if the recipient is a resident defined as a close relative (parent, spouse, children, etc);
• 5 per cent if the recipient is a resident not qualified as a close relative; and
• 15 per cent (or 20 per cent on income which exceeds 10 minimum wages per month) if the recipient (non-relative) is a nonresiden  but the testator was a resident (or vice versa).

Please find the full chapter by clicking on the link below.

08.12.15
International disputes in the agrarian sector have always developed as a separate legal service segment. The international rules and institutions governing this area enjoy an incredible level of credibility and enforcement. Recent political changes affect agrarians and the nature of disputes that are unusual for Ukraine. Disputants expect and demand more from their legal advisors, especially when it comes to unsuspected difficulties and consequent losses. The UJBL tackles the recent state of play with arbitration challenges with AGA Partners, a bright Ukrainian team focused on sectoral legal assistance.

International disputes in the agrarian sector have always developed as a separate legal service segment. The international rules and institutions governing this area enjoy an incredible level of credibility and enforcement. Recent political changes affect agrarians and the nature of disputes that are unusual for Ukraine. Disputants expect and demand more from their legal advisors, especially when it comes to unsuspected difficulties and consequent losses. The UJBL tackles the recent state of play with arbitration challenges with AGA Partners, a bright Ukrainian team focused on sectoral legal assistance. What does the firm face in its client workflow, and how does it respond? We asked three partners:Aminat SuleymanovaIvan Kasynyuk and Irina Moroz. This is what they told us.

UJBL:You are known for your sharp focus on international arbitration, especially soft commodities arbitration practice (agrarian sector). Can you tell us about recent developments in such arbitrations?

Aminat Suleymanova: AGA Partners has always occupied a unique niche in the legal services market. Indeed, we focus mainly in the agrarian industry, advising Ukrainian and international grain traders in the course of exporting agricultural commodities and resolving disputes that arise under sale contracts. In the last few years we have noticed a rise in the number of more complex cases in the agricultural sector, which entails a high standard of legal services and specific requirements to the role of legal adviser in resolving international disputes. The types of claims have also been in a state of flux: earlier, cases mostly concerned non-delivery or short delivery of goods, which are seen as quite common, and currently, cases have become more intricate, that is predetermined by recent legislative and geopolitical changes. Along with Ukrainian integration into the EU, agribusiness should satisfy high requirements to the quality of exported commodities, which often causes disputes. There are also a growing number of cases based on force majeure clauses, that arose after occupation of the Crimean Peninsula, introduction of restrictions on import of soft commodities to the Russian Federation, hostilities in the eastern part of our country. Moreover, the geopolitical situation in the world is unstable and a great number of sanctions introduced by the USA, the EU, Switzerland and other European countries cause complications in executing sale contracts and international money transfer. As a consequence, this gives rise to new types of disputes that arise under legislation on sanctions. Therefore, we can notice new categories of cases unusual for our jurisdiction, like peculiar force majeure, related to military conflicts and constant unpredictable political and economic changes in Europe and Asia. As a result, legal advisors should go in step and broaden their knowledge in order to comply with recent developments in the field of international trade and arbitration and be more flexible.

 

UJBL:  What are the most typical requests made by your clients in this regard?

A. S.: Cases on non-delivery, short delivery and non-payment for the delivered goods remain the most common ones. The growing number of companies working in the international field of agribusiness causes an increase in supply and demand and huge market competition. Consequently, when traders are not satisfied with the initial contract price, they have more options in reselling the goods to the other party, and this leads to disputes. We have to point out that Ukrainian agricultural market players become more familiar with the principles of English law, which is most commonly applied in international trade and, consequently, it leads to an increasing number of more complicated disputes. The wide range of inquiries relate to whether a contract was actually concluded, as it might be concluded even without the signing of a single document by the parties. Moreover, we are often approached by our clients to give our opinion on whether the complicated political situation in Ukraine and hostilities in the eastern part of the country can be considered as force majeure. Of course, each such case has its peculiarities and each contract should be analyzed separately. The reasons for relying on force majeure regarding hostilities in Ukraine are very constrained. The trend shows that clients, while submitting cases to GAFTA and FOSFA arbitration, want to have constant legal advice of the highest quality.

 

UJBL:  Does the current situation in Ukraine affect the number of applications to GAFTA and FOSFA arbitration institutions? What kind of challenges did the annexation of Crimea and occupation of the East bring to arbitration practice?

Ivan Kasynyuk: The current situation in Ukraine has no direct influence on the number of applications to the mentioned arbitration institutions, but we noticed a spike in the number of cases immediately after the annexation of Crimea in 2014. The general position under GAFTA and FOSFA contracts is that despite the difficulties in political and economic situation in Ukraine, changes in exchange rate, difficulties with the Ukrainian banking system, contracts shall be fulfilled and the parties should keep to their bargain. The parties can be discharged from their contractual obligations in very limited situations and under exceptional circumstances. Therefore, GAFTA and FOSFA arbitration institutions do not afford easy relief and/or remedy just because of the difficult current political and economic situation in Ukraine.

Irina Moroz: However, we have to point out that the annexation of Crimea imposes new challenges to resolution of investments disputes. We had a number of inquiries from clients that lost their assets in Crimea after its occupation, and we are pursuing new and efficient mechanisms of investment dispute resolution related to the compensation of financial losses sustained by legal and natural entities after expropriation of property in Crimea.

We expect the number of claims to investment arbitration institutions to rise, as it is obvious that there are a significant number of investors who suffered huge damages after the annexation of Crimea and many of them are now in the process of drafting claims to submit them to international arbitration institutions.

 

UJBL:  Which cases have been the most significant for your firm to date, and why?

A. S.: We have no particular case we consider the most significant, as all our clients and all cases we had are very important to us, but we can provide two examples to illustrate the importance of our legal role on the market. The first is the contract with an overall value of USD 26.5 billion between the State Food Grain Corporation of Ukraine (SFGCU) and China National Machinery Industry Complete Engineering Corporation (CMCEC) on cooperation in agriculture. Our company advises SFGCU, the largest state-owned company, under the contract of inter-government significance. The contract was concluded with the approval of the Chinese and Ukrainian governments to guarantee food security of the Republic of China and it is one of the most important contracts for the Ukrainian government.

The second one is the High Court of Justice case in a dispute between PC Rise and Nibulon S.A. The majority of grain industry players in Ukraine remember late 2010 well, when the Ukrainian Government introduced grain export quotas and subjected grain export to licensing. The quota allocation rules and procedures were changing on a daily basis, often at the last minute and in a very impracticable manner for business. As a result, only a few companies were able to obtain export licenses; the majority, including the largest international trading houses, were unable to do so and could not perform their contractual obligations, which led to a wave of terminations and cancellations of contracts.

A case arose at GAFTA where Nibulon S.A. claimed damages for non-delivery of corn due to prohibition of export from Ukraine. The GAFTA Award was reviewed at the High Court of Justice, where the relevant judgment was issued in 2015. The importance and the high role of this case is due to the fact that this matter has fundamentally influenced trading practice in the Black Sea region and we are proud to be involved in such a significant case.

 

UJBL:  It is known that the arbitration award not always guarantees it will be executed. What experience do you have in the recognition and execution of arbitration awards?

I. K.: From the initial stage of our engagement, we think on the process of award execution, as we clearly understand that obtaining an arbitration award does not always mean real refunding to our client’s bank account. In this regard, our legal support always consists of a detailed action plan, including seeking of preliminary measures aimed at securing a claim where it is available and handling the arbitration process in a manner that guarantees unimpeded execution of arbitration award in any jurisdiction. As our experience shows, in 80% of cases companies voluntarily execute GAFTA and FOSFA arbitration awards. Besides, we have experience of successful recognition and enforcement of arbitration awards in Switzerland, Germany, Poland, Turkey, Russia, Ukraine and other jurisdictions.

 

UJBL:  Your firm has considerable practical experience in the field of arbitration. Do you take part in the development of new legislation or new trade rules?

I. M.: Yes, we understand we should use our experience to help develop and improve the legal regulation of the agricultural sphere. Accordingly, we actively participate in enhancing trade rules and developing national legislation. For instance, our partner Ivan Kasynyuk is a member of the GAFTA Trade Committee and participates in elaboration of new legislation on cargo quality standards. Moreover, recently he became a member of the working group of the Ukrainian Ministry of Agrarian Policy and Food with the primary task to make improvements to Ukrainian legislation on transfer pricing.

I. K.: Our firm regularly participates in enhancing international trade rules and their unification at the request of international trade associations, in particular GAFTA, as well as at the request of our clients, who use these rules in their daily work.

 

UJBL:  Currently Ukraine is on its path to integration with the EU, which opens up new markets for Ukrainian business and introduces new standards for producers of agricultural commodities. What are the most typical requests made by your clients in this regard?

A. S.: Ukraine’s integration into the EU poses new challenges for both the Ukrainian authorities and the agriculture business. We are constantly improving and deepening our knowledge of legislation on European integration and establishment of free trade zone, new quality requirements to exported goods, new standards and technical regulations. Our company shares its cumulative experience with its clients in order to make Ukrainian agribusiness meet EU standards and make their daily work in entering European markets easier.

 

UJBL:  How do global arbitration developments affect Ukrainian cases? How did they shape your practice?

I. K.: It is an international trend to resolve international disputes that arise from the contracts of agricultural commodities at London-based arbitration institutions. Despite this, we can notice that resolution of disputes in other spheres tends to be replaced with arbitration institutions in Asian countries, which is explained by the growth of Asian economy and rising number of contracts for import and export of commodities concluded with Asian companies.

I. M.: While earlier London, Paris and Stockholm arbitration institutions were the most commonly pursued in the event case of international disputes, now we can see the tendency for contracting parties to refer disputes to arbitration institutions in Singapore and Hong Kong.

Our company supports the trend to meet the new needs of our clients in expanding their trade with Asian countries, and that is why we have started to step up our presence in this region.

 

UJBL:  In September 2015 AGA Partners celebrated its 10th anniversary. What are your team’s main achievements?

A. S.: AGA Partners law firm has been included in the list of the leading companies in its practice fields from the moment of its establishment. We have had many achievements over the course of 10 years. We have significantly expanded the number of our clients, increased the number of our employees, and with their help, got into gear and work with a larger number of cases. We have carried out the restructuring of our company and changed the partnership structure. Our firm has also expanded by having a presence in new jurisdictions.

We are proud of the fact that the biggest Ukrainian based agribusiness companies are among our clients, and it is great achievement for AGA Partners to be the first Ukrainian law firm to be invited as speakers to GAFTA training courses.

I. K.: Moreover, Aminat Suleymanova, ma- naging partner, is acknowledged and recommended as one of the leading Ukrainian lawyers in agriculture and land legal practices. She was also named by the annual legal rating Ukrainian Law Firms. A Handbook for Foreign Clients among notable practitioners in the field of agribusiness, international arbitration and international trade. The firm is invariably ranked among the leading Ukrainian law firms in the areas of International arbitration, International trade and agribusiness.

AGA partners has been constantly developing not only its practice in GAFTA and FOSFA arbitrations, but also in other professional arbitrations. We recently expanded our activity with a private clients’ practice advising on international business structuring and taxation.

I. M.: Besides, the recognition of our firm’s legal practice in the field of international family law can also be considered a big achievement. Aminat Suleymanova was the first member of IAML (International Academy of Matrimonial Lawyers) from Ukraine. She is currently an active member of this organization. Besides, the our firm’s lawyers are often asked to contribute to the world’s leading legal editions on private clients’ practice and international family law. Notably, AGA Partners team has contributed to the Ukrainian jurisdiction in Private Client 2015, prepared in cooperation with the acknowledged foreign publication Getting the Deal Through, published by Law Business Research, to the Ukrainian jurisdiction in Family Global Guide, to the Ukrainian and Russian jurisdiction in IBA Surrogacy Newsletter, and Jurisdictional Comparison on Children Relocation covering Ukrainian and Russian jurisdictions.

 

UJBL:  What is the strategy of AGA Partners for tomorrow?

A. S.: We now live in time described by many as a crisis, but we believe it’s a time for opportunities. The crisis is a challenge, which we are happy to accept. Perhaps those law firms that previously specialized in almost all areas of law, must now identify the main specialization in order to convince a client in their exceptional services. We think that the company’s development strategy now should be clearly defined and more than ever bold and innovative.

In our work, we abide by several of our fundamental principles, including the principle of pragmatism, — law for the sake of the client, rather than law for law’s sake. Moreover, our specialists are always concerned about the long-term consequences of the solutions that we propose, which is one of the key rules for a modern lawyer. AGA Partners has been guided by these rules without fail ever since it was established.

Talking about our self-improvement, we can mention that providing high quality services was always the core of our company’s strategy. We believe that our employees’ high level professionalism is a guarantee of the company’s successful development. For this reason, we have strict requirements of our employees’ education and are continually trying to provide them with opportunities to broaden their knowledge by participating in internship programs, attending international training courses.

We truly believe that it is this practice that underlies the high esteem and appreciation in which our company is held by our clients and all participants of the legal services market. In our view the rules underlying our operations are a direct reflection of our success and never-ending development.

18.11.15
We are pleased to announce the release of a new edition of IBA Surrogacy Newsletter that is focused on the legal aspects of surrogacy in the world's major jurisdictions.

Irina Moroz, Partner in AGA Partners Law Firm
(Exclusively for International Bar Assosiation)

We are pleased to announce the release of a new edition of IBA Surrogacy Newsletter that is focused on the legal aspects of surrogacy in the world's major jurisdictions. It’s also worth mentioning that partner of AGA Partners Law Firm Irina Moroz, who is an expert in the field of family law, has contributed to this edition by describing peculiarities of surrogacy in Ukrainian and Russian jurisdictions.

Ukraine must not be mistaken for a surrogacy haven

Ukrainian legislation regulating assisted reproductive technologies (ART) favours the individual’s reproductive rights and is considered to be one of the most tolerant in Europe. At first sight, there is nothing to be worried about. A married couple (either Ukrainian or foreign) applies for ART treatment to the clinic of their choice. Once the clinic and the method is approved they enter into a binding agreement with the surrogate mother, a woman aged 20–40, in good physical and mental health with at least one child of her own. The surrogate mother is delivered of a child and the intended parents’ names appear on the child’s birth certificate.

Thus, at first sight, Ukrainian jurisdiction might seem to be a surrogacy haven, but once you take a closer look, you will see a number of traps the intended parents should keep their eye on.

Pitfalls of surrogacy regulation in Ukraine

To be legally recognised as the parents and proceed with a child’s registration, the couple must comply with the basic requirements of Ukrainian Law. Pursuant to the Order of the Ministry of Health of Ukraine No 787 dd. 09.09.2013 (‘Order No 787’), ART is defined as a method of infertility treatment, whereas the intended parents are regarded as patients of ART treatment. In accordance with Article 123 of the Family Code of Ukraine, only married couples may be recognised as a child’s parents and shall proceed with the child’s registration. It means that cohabiting couples, single people and same-sex couples are prohibited from undertaking ART. Furthermore, to be registered as a child’s parents in Ukraine, at least one of the spouses shall contribute his/her genetic material along with the donor’s gametal cells. Donors may be known or unknown.

Before the ART treatment begins, commissioning parents and the surrogate mother enter into a surrogacy and childbearing agreement that stipulates their rights and obligations. Ukrainian legislation does not provide for a specific form of the agreement. Many issues, such as refusal to accept the child and terms of payment, fall outside the scope of the regulation; therefore, the terms of the surrogacy agreement are agreed at the parties’ discretion.

As was mentioned above, the intended parents are deemed to hold the legal status of the child’s parents from the very moment of conception and their names are listed on the birth certificate of the newborn baby. However, so as not to mislead foreign couples, their trespass towards exercising parental rights does not end up with receipt of the child’s birth certificate listing their names in Ukraine. The commissioning parents shall recognise their parental rights in the country of their residence and comply with the legislative requirements of their country in order to bring their child home.

Given what is set out above, Ukrainian legislation requires a number of improvements. In particular, there is a need to provide legal regulation of the surrogacy and childbearing agreement that will cover relations deriving from surrogacy arrangements and will comply with international surrogacy standards. There is also a need to find a solution to the problem of surrogacy treatment for foreign couples who come from countries where surrogacy is prohibited.

 

Absolute discretion of the surrogate mother to leave the child or hand him or her over to the intended parents

One of the major controversies of Russian surrogacy law is that the surrogate mother holds exclusive power whether or not to give her permission to the intended parents to register a child under their names. The commissioning parents might find themselves in a vulnerable position, being dependent on the surrogate mother’s decision.

Article 51 of the Family Code of the Russian Federation1 explicitly states that the registration of a child by the commissioning parents shall be accompanied by the written permission of the surrogate mother of a child. Furthermore, according to Article 16 of the Law on Acts of Civil Statuses, such permission shall be given only after the child’s birth and certified by the medical institution. In other words, the surrogate mother’s permission given on the child’s birth is a necessary condition for the child to be registered under the names of the commissioning parents. Any other documents, including the surrogacy contract, signed and given by the surrogate mother before the child’s birth, are not acceptable. Intended parents should not be tricked with promissory notes of any kind, even if they explicitly state the surrogate mother’s permission. However, once the permission that complies with the requirements of Article 16 of the Law on Acts of Civil Statuses has been given by the surrogate mother, the spouses’ parental rights may not be contested.

It should be noted that there are no legally binding instruments that might force the surrogate mother to give her permission. If she decides to register the child under her name, the Russian authorities will not prevent her from doing so.

The couple may seek remedy in court, but in the majority of cases, courts are reluctant to award the parental rights over the child to the commissioning parents. In this regard, we would refer to Order No 880-0 of the Constitutional Court dated 15 May 2012, where the court refused to admit the petition of the commissioning parents for recognition of their parental rights, prioritising the rights of the surrogate mother as a woman that gave birth to a child. In this course, the legislators should be guided by the principle of the best interests of the child and amend current laws by putting the rights of the commissioning parents above the rights of the surrogate mother.

Russian law, unlike legislation in the majority of European countries, allows single women and cohabiting couples to undertake a surrogacy programme on the same basis as married couples.5 Furthermore, the costs are comparably reasonable and procedures are simplified. Therefore, notwithstanding the potential risk that the surrogate mother might leave the baby, the Russian jurisdiction is known as being favourable for assisted reproductive technology (ART) treatment.

Irina Moroz, Partner in AGA Partners Law Firm

13.10.15
It is sad but inevitable that times of changes and challenges prompt people to leave Ukraine and search for a better destiny abroad. But what makes Ukrainian lawyers, who are self-sufficient pillars of the rule of law, look for other destinations?

Ivan Kasynyuk, Partner of AGA Partners law firm

Ivanna Dorichenko, Consultant with Clyde&Co
(exclusively for The Ukrainian Journal of Business Law)

Contracts and background facts

The dispute arose out of three separate contracts for the sale of 158,000 mt of Ukrainian feed corn CPT Nikolayev with delivery pe-riods from September to Decem- ber 2010 (Contracts). Each contract obliged the sellers to obtain “at his own risk and expenses any export license [sic] or any other official document” (Clause 11.3) and in-corporated the terms of GAFTA 78, where such terms were not in con-tradiction with the above. In turn, GAFTA 78 included the so-called GAFTA Prohibition Clause (Clause 17) whereby the contract could be deemed as cancelled in case of “any executive or legislative act done by or on behalf of the government […] restricting export” provided that such restriction prevented per-formance of the contract. Custom-arily for all GAFTA contracts, the contract was subject to English law and GAFTA arbitration in London.

Most grain industry players in Ukraine remember late 2010 well, when the Ukrainian Government introduced grain export quotas and subjected grain export to licencing. The quota allocation rules and pro-cedures were changing on a daily basis, often at the last minute and in a very impracticable for busi-ness manner. As a result, only a few companies were able to obtain export licences; the majority, in-cluding most international trading houses, were unable to do so and could not perform their contractual obligations, which led to a wave of terminations and cancellations of contracts. Unfortunately, sell-ers fell under the unsuccessful category and aimed to cancel the contracts pursuant to Clause 17. The buyers treated the sellers’ ac-tions as a repudiation of contract, held the sellers in default and referred the case to GAFTA arbi-tration in London claiming some  USD 26 million in damages. 

Arbitration awards and issues for the court

The first-tier GAFTA Tribunal found that the events of Ukraine did fall under Clause 17 and sell-ers could potentially be relieved from liability for non-performance; however, on the facts, the Tribunal had not seen evidence of sellers’ reasonable efforts to perform the Contracts and eventually found for the buyers.

The sellers appealed and took that opportunity to furnish the previously omitted evidence of their best efforts in performing the Contracts to the GAFTA Appeal Board. Consequently, from the Ap-peal Award issued on 23 April 2014  (Award) it followed that the Board of Appeal was obviously satis-fied with the sellers’ evidence of their efforts but made some quite surprising findings on law and construction of the respective con-tractual clauses. Consequently, the Board found for the buyers again, but reduced the sellers’ liability to about USD 17.5 million.

Firstly, in the Board’s view, the sellers’ obligation to obtain export licences under Clause 11.3 was ab-solute, and Clause 11.3 overrode Clause 17, except in the event of a total ban; on the facts, there was no such ban. In support of its conclu-sion, the Board relied on the case of Pagnan v Tradax (1987),2 where the factual matrix was substantially similar to the present case. 

Secondly, the sellers could not rely on Clause 17 since they were not “prevented” but were merely “restricted” in making the ship-ments to the buyers. 

Thirdly, having reached the above conclusions, the Board  nevertheless recognised the ex-treme difficulties, under which the sellers were operating, and stated that if the Board was to have de-cided whether the sellers had dis-charged their duties of best or rea-sonable endeavours in obtaining export licences, the Board would have unhesitatingly decided that the sellers had. 

Naturally, the sellers disagreed with the Board’s findings on law and in May 2014 sought permis-sion to appeal from the High Court in respect of the following ques-tions of law: 

(1) whether Clause 11.3 over-rode Clause 17 or was qualified by the same; 

(2) whether Clause 17 applied exclusively in circumstances of a “total ban”; and 

(3) whether the sellers could rely on Clause 17 if they were merely “restricted” rather than “prevented” from shipment.

On 25 September 2014 the per-mission to appeal was duly granted in respect of all three sellers’ ques-tions with the court agreeing that “the Award was open to serious doubt” and the main hearing of sellers’ appeal was subsequently fixed for 4 March 2015.

The judgment

The matter was heard by  Mr. Justice Hamblen, who, by coin-cidence, also appeared as a counsel for the winning party in Pagnan v Tradax, the authority at the core of the appeal from the sellers.

As to question (1), the buy-ers’ main argument was that the two clauses were inconsistent as Clause 17 contradicted the spe-cially agreed terms of Clause 11.3. Hamblen J disagreed. According to the normal principles of contractu-al construction under English law, there is no inconsistency between the contractual clauses unless they cannot be sensibly read together. Pagnan was directly relevant be-cause the Court of Appeal had to deal with the same question of con-sistency between the two clauses, and found that the GAFTA clause simply qualified the obligation to provide an export licence. Moreo-ver, in the judge’s view, the proviso “at their own risk” did not mean the clause could not be qualified by the other contractual terms. Conse-quently, the judge concluded that Clause 17 qualified Clause 11.3, but was not overridden by it.

As to question (2), the judge pointed out several references to “partial restriction” in the word-ing of Clause 17, and found that it plainly applied to a qualifying event “partially restricting” export and, as such, to a partial prohibition or other qualifying event which had a like effect. He also referred to the case of Bunge v Nidera3 where the Court of Appeal made exactly the same observation and concluded that the relieving effect of Clause 17 was not limited by circumstances of a “total ban”.  

As to question (3), and in line with previously decided authori-ties, Hamblen J emphasised that the Prohibition Clause requires both proof of a qualifying event (i.e., “an executive or legislative act done by or on behalf of the Government” which had the ef-fect of “restricting export, whether partially or otherwise”) and evi-dence of its restricting effect on the seller’s total or partial ability to perform. On the specific point of prevention versus restriction, the judge made the following observa-tion: “In so far as the Appeal Board are… saying that it is necessary to establish a qualifying event which prevents export that is not correct. What needs to be established is a qualifying event which restricts export. The word “prevent” appears as part of the deeming provision in the clause. It is not part of the definition of the relevant qualify-ing event. However, if the Appeal Board are saying that it is neces-sary to show that the qualifying event prevented performance in the sense that it caused inability to perform then that would be a cor-rect approach.”

Finally, in the view of the judge, the Board had not specifi-cally addressed the critical causa-tion question (i.e., whether the ex-port restrictions in fact prevented the sellers from performing), and, on the basis of the findings in the Award, the judge could not confi-dently conclude what the Board’s answer to that question was. Con-sequently, he remitted the matter to the Appeal Board for further consideration and the parties are currently awaiting the revised ar-bitration award from the Appeal Board.

Ukrainian side of the coin

In the meantime, the real drama was unfolding in a totally different place. On 18 September 2014, just a few days short of the sellers’ per-mission to appeal, the buyers filed an application for recognition and enforcement of the Award to the Svyatoshyn district court in Kiev. On 13 November 2014 the sellers  provided their objections empha-sizing, in particular, that the High Court in London allowed the sell-ers’ appeal and considered the Award to be open to serious doubt. However, on 30 January 2013 the Kiev district court decided to sat-isfy the buyers’ application for enforcement and issued respective order. Apparently, the Kiev district court was unimpressed by the fact that the high specialized court (Commercial Court of the HCJ) in the most impartial dispute resolu-tion jurisdiction (England), which was the only judicial body statuto-rily authorized to consider appeals from arbitration awards (akin to the Ukrainian concept of a cassa-tion instance), unequivocally rec-ognized that the Award had a flaw and required reconsideration.

Naturally, the sellers immedi-ately challenged the first instance court decision and appealed to the Kiev Court of Appeal, hoping for a more reasonable approach of the appeal judges. Yet, within just over a month, on 5 March 2015, the Kiev Court of Appeal re-confirmed the decision made by the court of first instance. The appeal court was very brief in its analysis of Mr Jus-tice Hamblen’s findings relating to the Award being open to “serious doubt” and effectively ignored the point, calling the sellers’ argu-ments to that effect “unfounded”. One can only speculate as to the reasons why this matter received such speedy consideration and why the decision coincided almost to the day with the hearing of the sellers’ appeal by the High Court, which, for technical reasons, was shifted from 4 March to 6 March 2015.  However, from the conduct of the proceedings by the judge at the hearing one could already sensibly see that the sellers’ position ap-peared to be more persuasive. At the end, judge Hamblen promised to deliver his judgment within the “next week or two”; and, at it hap-pened, the proximity of the final decision in this matter had a magi-cal effect on the speed, at which further developments unfolded.

To prevent the decision of the Kiev Court of Appeal from be-coming final and enforceable, on  10 March 2015 the sellers applied to the last resort — the High Spe-cialized Court of Ukraine (HSCU), which had statutory powers to stay enforcement proceedings com-menced pursuant to decisions of lower courts. Indeed, on 17 March the HSCU ordered such a stay. One can just imagine the surprise of the sellers when, three days lat-er and with no trace of compli-ance with the HSCU’s order, on  20 March 2015 the Kiev district  court issued a writ of execution al-lowing collection of the full amount of USD 17.5 million against the sellers’ funds and assets.

At the same time, on  24 March 2015, judge Hamblen finally announced his judgment and answered all questions of law in the sellers’ favor, as described above. From that moment the Award was formally remitted for reconsideration to the Board and could no longer be enforceable against the sellers. All would be well if not for a minor detail: on the same day, 24 March 2015, just as the judgment of Judge Ham-blen was being announced, the State Execution Service (Bailiffs) was arresting all sellers’ bank ac-counts and assets pursuant to the execution proceedings initiated on the same day, 24 March 2015.

Eventually, the execution pro-ceedings were suspended as per the HSCU’s order of 17 March 2015 until the HSCU’s final determina-tion in this matter. However the sellers’ funds remain attached to date, irrespective of the fact that (1) the actual Award is currently being reconsidered; and (b) there is a clear order within the Ukrainian judicial system to stay any and all execution proceedings that might have been commenced to date. 

Conclusion

The story is notable in three respects. First of all, it shows how (still) remarkably different are the approaches of English and Ukrainian courts when it comes to the administration of justice and dealing with specific issues in the same matter and factual sce-nario.  Secondly, it flags the problem of “selectivity” in the Ukrain-ian system of justice, which picks only favourable or suitable legal principles to justify certain deci-sions and completely ignores the obviously relevant concepts, sim-ply because they do not fit the re-quired position. Thirdly, and most importantly, it raises the question as to whether it is worth seeking justice in jurisdictions with strong rule of law, if one is bounced back to the system described by one re-nowned English commercial QC as the “Wild, Wild East”? It is, of course, our choice as both mem-bers of the legal profession and users of the system on whether to keep it as is, run from it or reshape its future. However, it is at least hoped that with the current wind of changes stories like this will slowly but inevitably sink into ob-livion. As they should.

Ivan Kasynyuk, Partner of AGA Partners law firm

Ivanna Dorichenko, Consultant with Clyde&Co

21.09.15
Cases of divorce between citizens of Ukraine and foreigners have long been part of the daily practice of Ukrainian courts. But is there an opportunity to get a divorce judgment in Ukraine, when both husband and wife are foreigners and what are the legal consequences of such divorce?

Irina Moroz, Partner at AGA Partners
(Exclusively for Yurydychna Gazeta (Legal Newspaper)

The article is available in Ukrainian only.

Link to the source

17.08.15