Crimean Kaleidoscope (Recent business & legal developments)

• Ports and Terminals
• International Trade
• Corporate & Taxes

Among news on Crimea, that appear recently like mushrooms after the rain, some in our opinion deserve special attention. 

 

1. The new company “Crimean Sea Ports” will be managing ports in Crimea. Pilot service will be arranged also by the new company - “Pilot-Crimea”. On the 28th of March Federal Marine and River Transport Agency of Russia (Rosmorrechflot) appointed harbour masters in Crimean ports.

2. Hard to believe, but after occupation of Crimea, there is some growth of cargo handling volume in sea ports of Ukraine. The Administration of Sea Ports of Ukraine informs   that from the 1st of January till the 20th of March 2014 total cargo handling volume increased by 1.6% and made up 31,173.7 thousand tons. Even for the first twenty days of March it increased by 6.5%. Last time similar dynamics appeared before the crisis in 2009. In March the worst situation occurred in Crimean ports. In Yevpatoriya port volumes decreased by 31.4%, in Sevastopol – by 35.2%, in Yalta – by 81.9%, in Feodosiya – by 25.6%, in Kerch – by 72.5%.

3. The harvest of grains in 2014 is expected to make up 57.3 million tons, against 63 million tons in 2013. First of all, it is related to the fact that balance sheets do not include grain cultivated at the territory of Crimea. Meantime experts forecast increase of oil crops for the present year: 9.7 million tons of sunflowers, nearly 3.1 million tons of soybean, 2 million tons of rape. At the present moment Ukraine has exported 27 million tons out of planned 33 million. Last year about 5% from total grain export volume were shipped through ports in the Sea of Azov, but in case of any problems of vessel pass through the Strait of Kerch cargo may be handled through the Danube ports or ports of Nikolaev region. Furthermore it may give an impulse to port infrastructure development in these regions.

 

Surely, now Crimea has started to face extralegal situation when both Russia and Ukraine are trying to implement their laws. We face a very high level of unpredictable risks related to activities in Crimea. The situation is unlikely to be legally solved soon..

 

1. Therefore, it is too risky to plan any projects in Crimea for the near future. Moreover, it became risky to perform any commercial operations in Crimea now, as in the territory with uncertain legal status, including that of banking and finance. It is still unclear, at which court and under which law the disputes will be settled, both now and in future.

2. Now nobody can guarantee the protection of private property. The transition period creates grounds for various speculations and fraud. The recommendation now is to save, at least, all the documents which may be used as evidence in future.

3. In order to determine the legal status of property or activity in Crimea and to provide for the certain legal succession, negotiations could have been the best way for contending parties, which now seems unrealistic. So, problematic issues may be lasting for months if not for years.

 

There is a risk that laws adopted by the Ukrainian Parliament will remain declarative as at present no real opportunity to secure their performance is available. Thus, under the principle might makes right it is more likely that Russian laws will be implemented. 

How to secure rights? Where to claim? Under what basis? These are the questions that will require answers in the nearest future.