News (#05 May 2019)

Biznews

Trade Policy

Ukraine lost to Russia in WTO dispute over transit

Ukraine has lost a dispute to Russia at the level of panel of arbitrators in the World Trade Organization (WTO) regarding restrictions on the transit of Ukrainian goods through the territory of the Russian Federation.

The arbitrators found no violation of Russias commitments under the 1994 General Agreement on Tariffs and Trade (GATT) and the WTO accession agreement. Due to this, the panel of arbitrators decided not to make any recommendations to the WTO Dispute Settlement Body.

According to the report, the panel of arbitrators expressed the view that Russia may impose restrictions on the transit of Ukrainian goods during an emergency in international relations.

Ukraine sent a request for consultation with Russia to the WTO regarding restrictions on Ukrainian goods through the territory of the Russian Federation in mid-September 2016. But these consultations did not lead to a common solution. The panel of arbitrators in this case was established in June 2017.

The reason for the dispute was the decree of Russian President Vladimir Putin of 1 January 2016, which introduced significant restrictions on the transportation of goods from Ukraine to Kazakhstan through Russian territory. In early July these rules were extended for transit traffic from Ukraine to Kyrgyzstan.

In its complaint to the WTO, Ukraine estimated a fall in the export of Ukrainian goods in the first half of 2016 due to such actions of the Russian Federation by 35.1%, and to Kazakhstan by 45.5%.

European Union won dispute with US in the WTO on benefits for Boeing

On 28 March 2019, the World Trade Organization decided that the United States, despite the rules and decisions of the organization, provided certain subsidies to aircraft manufacturer Boeing, which allows the European Union to claim compensation from the United States.

The European Commission explained that subsidies allowed the American aircraft manufacturer to sell their aircraft cheaper, which caused damage to the European concern Airbus.

A reminder that in September 2017, the WTO canceled the earlier decision on the illegal payment of subsidies by the US authorities to the Boeing Company for the production of the new 777H airliner.

At the same time, in 2011 the WTO decided that the American aircraft concern used illegal subsidies from the authorities of the United States.

M&A



Ukrainian company Ajax Systems attracted USD 10 million worth of investment

A Ukrainian developer of security systems called Ajax Systems has attracted USD 10 million from the investment company Horizon Capital.

The investor was the new Horizon Capital fund Emerging Europe Growth Fund III, LP (EEGF III), with the sum of USD 200 million, acquiring a minority stake in the company.

Ajax Systems was founded in 2011. The company is growing rapidly with more than 70% of revenue coming from export sales to more than 75 countries, mainly in the EU.

The entire production and research team is located in Ukraine. Now the company employs more than 500 people, almost 20% of whom are focused on R&D.

Wireless security system Ajax Systems is one of the most high-tech in the world. The products are designed and manufactured in Ukraine. The company has 5 patents.

Chevron to acquire competitor for USD 33 billion

Chevron Corp., the American oil and gas company, has reached an agreement to acquire Anadarko Petroleum, with which it is in competition, for USD 33 billion. Chevron claimed that the agreement would significantly expand the assets portfolio in the field of exploration and production and would strengthen the companys position in the shale, deep water and gas deposits sector. The deal will likely be completed in the second half of 2019. Under its capitalization rate, Chevron is the largest oil and gas company in the USA, second only to ExxonMobil.

Banking & Finance

Banks received multimillion loan from NBU

The National Bank of Ukraine has granted UAH 83.8 million of refinancing to three banks. The loan was granted at an interest rate of 18% per annum.

According to the NBU, on 1 February this year the largest debtors on refinancing loans were three banks PrivatBank, Ukrgasbank (both state banks) and a private one called Bank of Investments and Savings.

Credit Rankings

S&P confirmed credit ratings of Ukraine

S&P Global Ratings, the international rating agency, has confirmed the long-term and short-term sovereign credit ratings of Ukraine under its liabilities in foreign and national currency at the level of B-/B and the rating under the national scale at uaBBB with a forecast of stable.

Despite the rise in economic growth and reduction in inflation, we note the uncertainty of the forecast for financing the governments foreign currency liabilities, whose maturity period is after 2019 when Ukraine has to reach a new agreement with the International Monetary Fund (IMF), S&P noted. The agency also reminded that in 2019 Ukraine will have to repay significant amounts under its external debt and hold presidential and parliamentary elections.

S&P points out that the forecast of stable reflects its expectation that Ukraine will, in general, comply with the terms of the agreement of the standby program signed with the IMF worth USD 3.9 billion, although there may be some delays in its fulfillment.

Automobile Industry

Fiat to create association with Tesla due to fear of multi-billion dollar fines

Fiat Chrysler Automobiles, the Italian and American automotive company, has announced the creation of an association with Tesla, the electric vehicles manufacturer, to reduce CO2 emission.

The company will pay Tesla hundreds of millions of euro for this agreement. At the same time, it will be able to avoid fines totaling EUR 2 billion under new EU legislation on the reduction of carbon dioxide emissions. It will come into force in 2020.

Pursuant to the law adopted by the European Parliament in February, the CO2 emission limit by 2030 is set at 37.5% and 31% for cars and minibuses, respectively. By 2021, emissions should not exceed 95 grams per kilometer (current rate is 130 g/km).

Violators may face multi-billion dollar fines EUR 95 per each gram of CO2 exceeding the limit. This amount will be multiplied by the total number of this manufacturers vehicles sold in the EU.

To avoid fines and comply with the standards, it is recommended that companies start making vehicles with a low emission rate. Another option is so-called greenhouse pools. These are associations with brands whose vehicles do not produce excess emission. In this case, the regulator will calculate the average CO2 rate not for an individual brand, but for the pool.

Competition

UIA to undergo inspection over new rules for carriage of luggage

The Antimonopoly Committee initiated a case proceeding on possible signs of violation of competition law in the actions of the airline Ukraine International Airlines and other air carriers.

New rules of carriage of luggage and hand luggage came into force on 15 January 2019.

Passengers who have purchased tickets, the cost of which does not include the carriage of checked luggage, can take on board only 1 piece of hand luggage weighing up to 7 kg and no more than 55 x 40 x 20 cm in size, as well as outerwear and an umbrella.

In addition, each UIA passenger, regardless of the class of service and fare at which he purchased his ticket, will be able to take another additional piece of hand luggage weighing up to 5 kg with a size of no more than 40 x 30 x 10 cm, pre-paying its transportation fee of EUR 15.

Any additional personal items, such as Duty Free bags, laptop, reading press, camera, binoculars, suit bag must be packed in hand luggage.

In support of such changes, companies refer to the need to ensure the cheap price of tickets.

According to the Committee, the introduction of new conditions by UIA for the carriage of hand luggage did not affect the price of tickets and the quality of services.

It is noted that the inspection relates not only to signs of violation of competition law by the Ukrainian company UIA, but also by other air carriers, including Ryanair and Wizz Air.

E-auctions

KPMG launched online auction platform in Ukraine

KPMG Ukraine has joined the network of auction operators for the state-owned Deposit Guarantee Fund (DGF) intended for the sale of assets of insolvent banks held via ProZorro.Sales, the electronic auction system. The new KPMG Ukraine Auction Platform allows the enlisting of not only Ukrainian but also international investors to participate in DGF tenders, which should significantly revive the Ukrainian distressed assets market. KPMG will act as the lead consultant for foreign investors in Ukraine and provide services during the process of asset acquisition, including the initial verification of documentation.

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