Legal Digest #2

In July 2022, we witnessed a series of changes in labor legislation and currency exchange regulations, updated requirements to the insurance broker activities, ongoing recovery of regulatory authorities’ activity, etc.

Below you may find a brief summary of changes and comments of Deloitte professionals.

Currency restrictions weakening

As we have already reported, the Cabinet of Ministers of Ukraine (the “CMU”) lifted the restrictions on the purchase and transfer of foreign currency for the purpose of payment for the imported goods from July 09. At the same time, restrictions still apply to the payment for imported work and services.

The up-to-date list of work and services permitted for importation is available at the link.

Furthermore, in July, the National Bank of Ukraine made a number of changes to its Decree No.18 “On operation of banking system under martial law”:

• Payment deadlines for export and import transactions have been extended for up to 180 days.
• The period of use for the currency purchased for making payments has been reduced to 2 business days.
• Official US Dollar to Ukrainian Hryvnia exchange rate has been set at UAH 36.5686 for 1 US Dollar.
• The banks have been allowed to sell non-cash currency to individuals within a monthly limit of UAH 50,000 (in foreign currency equivalent) with subsequent placement on deposit for the term of three months and more, without the right of early termination.
• Monthly limit of UAH 100,000 (in foreign currency equivalent) previously applied to P2P cross-border transfers from UAH cards issued by Ukrainian banks has been reduced to UAH 30,000 (in foreign currency equivalent).
  

We expect that the lift of restrictions on the import of goods, the extension of payment deadlines, and the updated list of services will have a positive impact on the market.

Optimization of labor relations

Law of Ukraine No. 2352-IX, “On Amendments to Certain Legislative Acts of Ukraine on Optimization of Labor Relations” came into effect on 19 July.
Key changes:

• An employer is no longer required to preserve average wage of an employee called up for military service (including if enlisted under a contract). The only requirement is to preserve the employee’s employment and position.
• New grounds for termination of employment on the employer’s initiative.
• The State Labor Service of Ukraine is enabled to perform scheduled and unscheduled inspections regarding some matters of organization of labor relations under martial law.
• The employees may now be familiarized with certain documents using electronic communication means.

Find more details about changes in labor legislation in our Tax and Legal Alert.

We believe that, for the most part, these changes are driven by the challenges of wartime and the necessity to help businesses survive and remain activity. Further explanations are expected from the state authorities regarding the application of certain regulations, in particular, the termination of employment on the employer’s initiative.

Law “On freelance”

On 18 July 2022, the Verkhovna Rada of Ukraine adopted Law of Ukraine “On Amending Certain Legislative Acts of Ukraine Regarding the Regulation of Labor Relations with no Fixed Working Hours”, No. 5161. The Law is currently pending the President’s signature, and will come into force on the date following the date of its official publication.

The Law defines a specific type of employment agreement: an employment agreement with flexible working hours. The performance of work under such an agreement has no specific time frames. The employee’s obligation to perform a work task arises when and if the employer provides such work, however, without guaranteeing that the work will be provided on a permanent basis.

Specific aspects:

• The employer may use this type of agreement if the total number of such agreements does not exceed 10% of the overall number of employment agreements. If there are less than 10 employees, only one agreement with flexible working hours may be concluded.
• The agreement should specify a weekly number of working hours and working days; their number should not exceed that provided for ordinary employment agreements.
• Compensation will be paid for hours actually worked.
• Minimum working time is 32 hours per month. Should an employee work less than 32 hours during a month, such employee might not be paid less than for 32 working hours.
• It is possible to provide for additional grounds for termination of the agreement.
• The employee who has worked under an agreement with flexible working hours for more than 12 months has the right to request the employer to conclude a fixed-term or an indefinite term employment agreement.

Hence, the adopted Law allows more flexible regulation of labor relations. In particular, the employers will be able to engage workforce only when there is a task to be performed, and the employees will be able to work for several employers concurrently and schedule their work at their own discretion.

In our opinion, such legislative changes will have a favorable effect on the domestic labor market.

New requirements to the insurance broker activities

As of 05 July, the NBU’s Decree No.135 came into force regarding updates of the requirements to the activities of insurance brokers and insurance intermediaries. Among other things, the Decree specifies:

• Determination of a list of insurance intermediation services; standardizes the types of services of insurance brokers.
• Set of the requirements for the professional suitability for managers of insurance brokers.
• Set of the procedure for registration of brokers and entering in the register.
• Set of the procedure for performing intermediation activities with non-resident insurers.

The lack of legal regulations in insurance intermediation often raised concerns of the business about whether the regulatory authority might apply sanctions for some or other actions. In our opinion, new regulations will facilitate the activities of insurance brokers.

Recognition of European electronic signatures in banking sector

On July 12, the NBU’s Decree No. 140 aimed at revitalizing the cross-border electronic document flow in the banking sector came into effect. According to it, Ukrainian banks, subsidiaries of foreign banks, and participants of payment systems must recognize qualified electronic signatures and seals created/generated in accordance with EU laws. It means that if a bank or a payment system receives a document bearing a qualified electronic signature compliant with EU standards, it must accept and process a respective document. Rejection or non-acceptance of a such electronic document on the sole ground that it is signed with a European qualified electronic signature constitutes a violation of the Decree.

This new regulation will apply until Ukraine and the EU enter into an agreement on mutual recognition of qualified electronic trust services.

In our opinion, this is a forward-looking initiative of the NBU that might facilitate the use of electronic documents for making settlements in foreign economic activities.

Updated list of activities that require licenses /permits

Kindly reminding that by its Resolution No.314 dated March 18 , the CMU allowed carrying out licensing/permitting activities on the grounds of filed declarations (except for certain activities), for the period of martial law.
By its Resolution No.778 dated July 07, the CMU extended the list of activities that cannot be performed on the grounds of filed declarations, in particular:

• Medical practice activities.
• Activities in power industry, natural gas market, centralized water supply and centralized wastewater disposal, heat production, heat transportation by main and local (distribution) heat networks, heat supply, and other activities that are subject to licensing by the National Energy and Utilities Regulatory Commission.
• Professional activities in capital markets and regulated commodity markets.
• Importation and exportation of fauna resources into/from Ukraine.
• Importation and exportation of flora resources into/from Ukraine.
• Importation and exportation of wild flora and fauna species, travelling exhibitions, re-exportation and introduction from the sea of the specified species that are covered by the Convention on International Trade in Endangered Species of Wild Fauna and Flora, specifically pertaining to sturgeon and sturgeon products.

Declarations on the updated activities filed before the effective date of the Resolution, i.e. July 13, will be valid during six months. To further continue their activities, business entities will have to obtain relevant permitting documents.

We believe that the main purpose of the list of activities that require licensing/permitting update is resumption of operation of regulatory authorities. In our opinion, the CMU should review their approaches to business activities licensing and reduce the state’s presence in this area. Our team has a considerable experience in obtaining licenses/permits/approvals and is ready to assist you at your request.

The Antimonopoly Committee of Ukraine continues to resume its operation

Since the beginning of a large-scale war of russia against Ukraine, the Antimonopoly Committee of Ukraine (the “AMCU”) has stopped the exercise of some functions. However, the AMCU is in the process of resuming its normal operation. In particular, on July 19, 2022, the AMCU resumed the proceedings in the:

• Claims on violation of the legislation on the protection of economic competition.
• Claims for protection of rights/claims of unfair competition.
• Requests for explanation of application of legislation regarding government social assistance.

Moreover, on June 20 2022, the AMCU resumed the consideration of applications for concentration, concerted actions, and preliminary findings.

Resumption of the AMCU’s operation is important in terms of support of economic activities. In our opinion, a reform of the antimonopoly legislation, for example, the increase of concentration threshold, could be an additional support for business and foreign investors.

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