Crux (#11 November 2013)

Sensible Implementation

Ukraine, being an independent state as well as a former part of the Soviet Union, signed and ratified many international treaties. Areas like commercial and trade matters, human rights, IP and many other areas are under international regulation. Quite often the problem of thoughtless implementation of international legislation in national legislation arises, as is seen by the example of maritime law. These and many other issues are examined by the monthly discussion panel.

Which international treaties signed or ratified by Ukraine have influenced the legal practice in this country most?

Taras Utiralov,
lawyer, Ilyashev & Partners

Almost any treaty a state enters into gives it some benefit as a result of a compromise aimed at resolving problems which impede cooperation or getting additional advantages in relations. Therefore, almost all treaties concluded by Ukraine are important at least for that field which they are intended to regulate. There are, of course, treaties which have an impact on nearly all spheres of legal practice. The Convention Abolishing the Requirement of Legalisation for Foreign Public Documents (1961) is surely one of them. Other Hague conventions, such as the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (1965) or the Convention on the Taking of Evidence Abroad in Civil or Commercial Matters (1970) obviously facilitate international civil and commercial procedure on a global scale while the Agreement on the Order of Settlement of Disputes Related to Commercial Activity (Kiev, 1992) and the Convention on Legal Assistance and Legal Relations in Civil, Family and Criminal Matters (Minsk, 1993) do the same (and even more) within the CIS. There are numerous treaties which are important for a specific area. For instance, in IP matters such agreements include Berne Convention for the Protection of Literary and Artistic Works (revised in Paris in 1971), Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (Madrid, 1989) and others. Numerous bilateral double taxation avoidance agreements and mutual legal assistance treaties provide significant advantages in respective fields.

And there are treaties which became true milestones for the development of the legal system (such as the Convention for the Protection of Human Rights and Fundamental Freedoms (1950) and for trade relations (Agreement Establishing the World Trade Organization, 1994).

How are international agreements on economic crimes applied in Ukraine?

Bogdan Bilenko,
senior associate, Antika Law Firm

Ukrainian law-enforcement authorities often resort to assistance from their foreign colleagues both in the investigation of criminal offences and in cases related to economic crimes. More often, they address the law-enforcement authorities of CIS countries in order to receive legal assistance. The main disadvantage related to the application of international agreements on rendering legal assistance in criminal cases is lack of operational and effective coordination between the law enforcement authorities of the requesting country and the law-enforcement authorities of the executive country.

The current procedure involves passing of law enforcement authority request through a number of authorities, before it will be sent to the executive party. First of all the request on rendering legal assistance is sent to the district (city) prosecutor office for agreeing, then to the regional prosecutor office, and then to the Prosecutor-General’s Office of Ukraine. After final agreeing, the Prosecutor— General’s Office of Ukraine sends a request on rendering legal assistance to the law-enforcement authority of the requesting country. Further, in the same order the request “comes down” to the executive party.  It takes a lot of time for the request to pass through all authorities but in some criminal investigations one simply does not have time for passing such procedure. Therefore, in order to reach the desired result, law-enforcement officials often have to resort to direct contact establishment with law-enforcement officials of the requesting country asking for assistance on criminal case. In such case their legal assistance is provided faster and more effectively, and the request that they sent in parallel, is the way to make the result of their cooperation legal.

What are features of the practical application of the international agreements on preventing double taxation?

Irina Pavliuk,
associate, Konnov & Sozanovsky

Double Taxation Treaties (DAT) concluded by Ukraine will be applied if such treaties provide for other taxation rules than those provided in the domestic legislation. But there are some restrictive preconditions for such application, which may be specified as follows:

— Substantive: limitation on benefits provisions (LOB); concept of beneficial owner.

— Procedural: presentation of Tax Residence Certificate.

LOB clauses are intended to avoid treaty shopping, whereby a third party national or corporation sets up a shell company in a contracting state through which income will be passed by the owners in an attempt to achieve tax rate reduction, or to eliminate tax on the income without real investment. For example, the company from one contracting state may not be entitled to a reduced rate of withholding unless this company owns a certain amount of shares in the company from other contracting state. The beneficial owner of income is a person that has the full privilege to directly benefit from the income. As it follows from the Tax Code of Ukraine persons who should not be considered the beneficial owners of income are: agents; nominees; an intermediary in respect of such income. In order to benefit from DAT protection, the non-resident should receive a Tax Residence Certificate from the tax authorities of the country of its residence and provide it to the Ukrainian taxpayer in order to confirm that the respective non-resident is the resident of a country with which Ukraine has an effective DAT.

To what extent have provisions of international agreements of Ukraine in the area of maritime law been integrated into national legislation? What are features of the practical application of international agreements in this area?

Andriy Selyutin,
counsel, head of South Ukrainian Branch of Arzinger

According to the Constitution of Ukraine, an international treaty duly ratified by the Parliament of Ukraine is deemed to be an integral part of Ukrainian domestic legislation. One could treat it as though there is no need to double appropriate provisions of the international treaty by adopting a law, while the ratification of the treaty might be enough.

The issue of real implementation may be easily described in terms of International Convention Relating to the Arrest of Sea-Going Ships (1952). Ukraine joined the Convention in 2011 with only reservation as to naval and non-commercial vessels. It must be noted that before Ukraine joined the Convention many of its provisions had already been implemented into the Marine Merchant Code of Ukraine (aka KTM in Ukrainian). Specifically, both the Convention and the Code specify that the vessel may be arrested in respect to maritime claim in order to get a security of that maritime claim. The treatment of a maritime claim is also rather similar in the Convention and in the Code. The only material difference is that the Code, being a local Ukrainian legal act, is only applicable to the vessel flying the Ukrainian flag, while the Convention regulates the arrest of vessels flying the flag of any contracting state. For the purpose of court procedure Ukraine has also adopted the law on jurisdiction of maritime arrest cases (No.4190-VI of 2012 December) providing that appropriate cases are subject to the jurisdiction of the commercial and the common courts where the port of vessel call is located. In practice, however, it appeared that this was not enough. Both the Civil Procedural Code of Ukraine and the Commercial Procedural Code of Ukraine provide for the only legal form to bring an action, which is a lawsuit. As an exception, before submission of a lawsuit a claimant may submit an application on security (restrictive) measures such as arrest of the property belonging to a defendant.

The question arises: which legal form is suitable for the application on arrest of the vessel? One could suggest that arrest is a kind of restrictive measure, and so the application of security measures is necessary. But unlike the Convention, which provides that the arrest of the ship means detention of a ship, but does not include the seizure of a ship in execution or satisfaction of a judgment, the Commercial Procedural Code treats the arrest (as one of restrictive measures) as the security of the claim enabling further fulfillment of the court decision and requires the value of the arrested property to be matched with the amount of the claim. Ukrainian courts usually reject the application on arrest of the vessel presented in the form restrictive measures with reference to this provision of the Code. On the other hand, bringing an action by means of the lawsuit in order to get an arrest as the security of the maritime claim is absurd.  As a result, the absence of a separate legal form for the maritime arrest cases disables application of the international treaty, which is duly ratified and even partly implemented to national law. Therefore, in order to make the international treaty work not only is ratification or implementation (which sometimes is treated as simple translation and installation to the text of the law) necessary but also a deep understanding of how the treaty fits with the national legal system and legal practice.

What are the most recent changes in Ukrainian legislation due to the implementation of international agreements in the area of protection of intellectual property rights?

Natalia Mescheriakova,
partner, AstapovLawyers

With inuring the Proposal for a Council Decision on the conclusion of the Association Agreement between the European Union and its Member States, of the one part, and Ukraine, of the other part the geographical indications of the products that are under the EU protection (Chapter 9, Sub-section 3) shall be kept in Ukraine as well. Consequently, Ukrainian producers would have to abandon the use of these names familiar to Ukrainian customers. The producers of some alcohol drinks and food products will face the need to rename their goods; this procedure will require some efforts: like time, investments and promotional support. The names that have been in use for ages will be banned because, as stated in the Agreement : “any misuse, imitation or evocation, even if the true origin of the product is indicated or if the protected name is translated, transcripted, transliterated or accompanied by an expression such as style, type, method, as produced in, imitation, flavor, like, or similar; and any other false or misleading indication as to the provenance, origin, nature or essential qualities of the product, on the inner or outer packaging, in advertising material or documents relating to the product concerned, and on the packaging of the product in a container liable to convey a false impression as to its origin”.  However, taking into consideration the more than modest amount of Ukrainian-registered geographical indications the protection of the latter will be hardly of equal rate. It gives a jab to our producers, who have not managed to develop the popularity of Ukrainian geographical indications but simply use outlandish names. It seems that only in the last few years has interest in national goods risen.

As for the provision of clauses of the Agreement on industrial designs, I put my trust in amendments to current legislation that will prevent numerous registrations of identical industrial designs; designs that constitute only functional immaterial details and those that do not take into consideration the degree of freedom of the designer in developing the design. It also triggers limiting the registration of the designs that do not remain visible during normal use of the complex product. These measures are intended to trouble the trolling in patent registration that is currently in the pink.

What international agreements of the Customs Union can Ukraine join?

Khrystyna Kostiushko,
associate, ENGARDE

From the legal standpoint, Ukraine can accede to the international treaties of the Customs Union which do not conflict with the provisions of the Association Agreement between the European Union and Ukraine (Agreement).  In this regard, Article 39 of the Agreement provides as follows: “This Agreement shall not preclude the maintenance or establishment of customs unions, free trade areas or arrangements for frontier traffic except insofar as they conflict with trade arrangements provided for in this Agreement.”

Membership of the Customs Union is open to all states that undertook the commitments arising under the Treaty on the establishment of the Eurasian Economic Community of 2000 (Treaty) and under other agreements, in accordance with the schedule established by resolution of the Interstate Council. As Ukraine did not accede to the Treaty, it can accede only to the treaties not requiring the membership of the Customs Union. For instance, Ukraine may accede to the Agreement of the Customs Union on the elimination of technical barriers in trade with the CIS member states which are not members of the Customs Union.

As regards the other international treaties of the Customs Union, Ukraine may accede to some of them only subject to the permission of the Customs Union’s member states to sign a certain treaty with a non-member state.

How was Ukraine affected by Russia and Tajikistan joining the WTO? Did it result in more projects for lawyers?

Nataliya Mykolska,
counsel, head of International Trade, Sayenko Kharenko

It is well-known that Russia is a major trading partner for Ukraine, amounting to almost 30% of Ukraine’s foreign trade turnover. Thus, both the Ukrainian Go-

vernment and industries welcomed Russia joining the WTO expecting more predictable and transparent rule sand practices for international trade. Unfortunately, notwithstanding obligations undertaken by it, Russia continues to create trade barriers for Ukrainian imports prohibited in the WTO. For example, ecological tax for automotive, unexpectedly strengthened control under customs clearance of Ukrainian imports, ban on Ukrainian dairy and confectionary imports, etc. The Russian authorities’ actions raise serious concerns also under the recently ratified CIS FTA. It shall be noted that Russia also expressed its concerns as to bilateral trade. That is the Ukrainian safeguard measures on autos and launched informal bilateral consultations followed by initiation of the pre-dispute settlement consultations under the CIS FTA.

Unfortunately, at this stage the Ukrainian Government is trying to resolve all the issue through the bilateral consultations

without resorting to the dispute settlement mechanisms within the WTO or provided by the CIS FTA.

It works on a case-by-case basis, but it only does things halfway and leaves open systematic problems in bilateral trade relations.

The Ukrainian Journal of Business Law

Subscribe to The Ukrainian Journal of Business Law right now and enjoy the most relevant issues on doing business in Ukraine on your device or in print.

All this for just USD 9.99 a month.


Subscribe now