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REFORM “INEVITABLE” IN UKRAINE

10.10.06

Ukraine is neither an easy nor a difficult country to work in, says Arthur Nitsevych, managing partner of the locally-based International Law offices, a firm which is a member of international network World Link for Law. Nor are its working practices especially unique either.

“Once you get past any initial barriers, you can conduct business here as you would in any other country in the world,” he says.

Nevertheless, following 70 years of effective rule from Moscow, an ineffaceable mark still remains on the decision making process of the country. However, since 1991, Ukraine has managed its own affairs, avoiding the chaos and instability that have affected other nations faced with a similar predicament.

“Corruption exists, as it does everywhere, although that to be found in Ukraine is a reflection of the former status the country had within the Soviet Union,” suggests Nitsevych.

With reference to concession agreements governing port and terminal operation, he explains that existing legislation does not make this an especially attractive option. To date, the only real example of a Western Europe-style leasing agreement is to be found at Odessa, where Hamburg Port Services manages the container terminal, although ownership remains with the port.

“I should point out, though, that International Law offices has recently been contacted by consultants and the EBRD on the issue of private port development in Ukraine,” reveals Nitsevych.

He explains that the investment ability of Ukrainian companies and also of foreign investors so far working in the country are wholly inadequate for the task of making the necessary major investment required in port construction and operation. As a result, the ports remain almost wholly within state ownership.

“Ukraine needs many berths to be rebuilt, alongside draught deepened and loading capacity enhanced. It also requires new terminals to be established,” says Nitsevych. As a result, the ports of Odessa, Ilyichevsk and Nikolaev have looked at bringing in large stevedoring companies to manage cargo handling in joint venture partnerships with the ports themselves.

Interestingly, there is no legal difference between a public and a private terminal; both forms of property are equal. As a result, any legal problems arising between shipping lines and terminals do not depend on the status of the property at which cargo is handled.

There has been significant progress in respect of establishing a modern legislative base and reform in taxation. In the legislative field, in particular, the commercial, civil, customs and land codes were approved. Nevertheless, the level of availability of information must be improved if investment is to be made in port infrastructure. “In spite of this, Ukraine has impressive economic growth, its national currency is stable and there is both industrial and agrarian growth.”

With former Eastern European free-trade partners now part of the EU, Ukraine has lost significant trade outlets. However, it has a well-developed network of treaties including free-trade agreements with CIS countries. In addition, highly qualified labour is inexpensively available, which makes the country potentially very attractive to investors.

“Reform in Ukraine is now inevitable, so don’t be too put off by who may or may not be leading the country,” advises Nitsevych. “Nevertheless, when doing business here, it makes sense to spend money on consulting lawyers and industry experts, asking clear questions. In the long run this will save you money. The bureaucratic process can be complicated, so make sure your contracts are simple, straightforward and comply with Ukrainian standards. The more complex you make them the easier it will be for someone to find a way to break them.”

Автор: Артур Ницевич