Biznews

Trade Policy

New Disputes with Russia at WTO

At the meeting of the Cabinet of Ministries, the Ministry of Economic Development and Trade of Ukraine was authorized to launch disputes on Russia’s import and transit restrictions within the World Trade Organization. The Cabinet of Ministries also allowed the inclusion of legal experts, including foreign ones, who will help form the legal position of Ukraine during disputes with Russia within WTO.

Maksim Nefedov, Deputy Minister of Economic Development and Trade, requested the Ministry receive authorization to carry out activities related to preparation and sending inquiries on the start of consultations as to restrictions on transit transportations via the territory of Ukraine, initiation of the consideration of a case on the import of certain types of Ukrainian food products, as well as along with the Ministry of Foreign Affairs, the Ministry of Finance and the Ministry of Justice to submit under the urgent procedure the Draft provision on the protection of economic interests using the WTO’s mechanisms. 

The government also entrusted the Ministry of Economic Development and Trade, the Ministry of Foreign Affairs, the Ministry of Finance and the Ministry of Justice to prepare the Draft provision in which the procedure on protection of Ukraine’s economic rights and interests would be stated.

M&A

Deutsche Boerse and London Stock Exchange agreed terms for merger

The boards of Deutsche Boerse and the London Stock Exchange announced they have agreed on the terms of a merger of these two exchange operators. Shareholders of Deutsche Boerse and the London Stock Exchange are recommended to support the GBP 21 billion deal to be implemented by exchanging the shares, resulting in the forming of the biggest stock exchange in Europe. The newly-merged exchange operator will become one of the biggest exchanges in the world, which will be worth around USD 30 billion. The merger will enable annual saving in costs of around USD 500 million. The Euro Stoxx 50 Index, the FTSE 100 Index and the DAX Index will all be under one roof.  This is the largest M&A deal between exchanges since the ICE acquisition of NYSE Euronext. The decision now hinges on the agreement of the shareholders of both stock exchanges as well as antitrust regulators.

Banking & Finance

Ukraine received  USD 331 million loan from Japan

Ukraine received a long-term USD 331 million loan from Japan within the World Bank Joint Second Financial Sector Development Policy Loan Project. The loan was granted through the Japan International Cooperation Agency and will be credited to the general fund of the national budget. Receipt of the loan from Japan became possible due to fulfillment of all the conditions and carrying out a number of structural reforms by Ukraine, namely implementation of an electronic system of VAT administration, gas market reforms, introducing effective control mechanisms for budget expenditure and revenue. The loan will be used to increase the efficiency and transparency of the government sector, for deregulation and improving the business and investment environment. The term of the loan is 20 years with a six-year grace period, and the interest rate is set at the level of Libor + 0.05%, which is less than 1% per annum.

Privatization

List of state-run companies not subject to privatization is shortened  

The Ministry of Economic Development and Trade of Ukraine has prepared the Draft ActOn Reduction of the List of State-run Companies not Subject to Privatization. The number of state-run companies not subject to privatization has to be halved to 850 enterprises. Privatization of defense enterprises, forestry areas as well as strategic companies is still prohibited. The State Property Fund of Ukraine plans to launch the process by privatizing the Odessa Portside Plant in the middle of the coming summer. 

Capital Markets

Apple placed USD 3.5 billion worth of Bonds

Apple Inc., an American technology company, has placed three issues of bonds for the total amount of USD 3.5 billion. This is the sixth placement of Apple bonds since 2013 for a sum of several billion dollars. On the last occasion Apple raised USD 12 billion by placing nine bond issues at once.

Bonds placed on 17 March and to be redeemed in 2021, 2026 and 2046 represent the next issue after those three sold by Apple on 17 February. These bonds were placed in February with a yield higher than the yield of similar US Treasury bonds by 2.05% points.

Apple intends to use the funds raised through bonds sale to replenish its current assets, acquire new assets and pay off company debt.

Doing Business

German-Ukrainian Chamber of Commerce and Industry

On 23 October 2015 an agreement providing for the establishment of the bilateral German-Ukrainian Chamber of Commerce and Industry, aimed at assisting development of trade and economic relations between companies and organisations of Ukraine and the Federal Republic of Germany, protection of interests of both countries’ businesses, and promotion of mutual economic exchange was signed in Berlin. On 16 March the Verkhovna Rada of Ukraine adopted the Act On Ratification of the Agreement between the Governments of the Two Countries on Establishing the German-Ukrainian Chamber of Commerce and Industry.

Comments

Dr. Tatyana Slipachuk

Partner, head of International Arbitration and International Trade Practices, Sayenko Kharenko

In trade relations with Russia, the benefits accrued by Ukraine as a WTO member were nullified and impaired by several unlawful trade restrictions introduced by Russia (e.g., transit ‘saga’, abuse of SPS measures, and arguendo embargo). Since such restrictions violate WTO agreements, Ukraine has solid legal grounds to bring Russia to book within the WTO dispute settlement forum.

Ukraine has already resorted to diplomatic means by trying to attract attention of the international trade community to Russian breaches of WTO law. Complicated bilateral trade relations were discussed during meetings of various WTO Committees and even the WTO General Council.

However, now it is high time to move from words to actions and file a complaint with the WTO against Russia. Furthermore, it is strategically important for Ukraine to pursue a case against Russia regarding railway equipment (DS499). Given that the consultations failed, it is unreasonable for a complainant party to delay establishment of the panel. Otherwise, Ukraine`s intentions would not be perceived seriously neither by Russia nor by the Ukrainian business community. 

Despite the membership of the states in the WTO, the direct and apparent beneficiaries of concessions and commitments that states undertake are private operators, whose business activities are impacted by measures that are challenged. Obviously, there is a great business interest behind every WTO case. Unfortunately, business operators cannot shield themselves from the government’s support given that ab initio a private actor and a responding state are not equal. Meanwhile, every WTO case is the ‘joint responsibility’ of the government and business, and only with the active involvement and support of business are there any chances of success.