Crux (#10 October 2018)

Legal Digest

The start of the new business season launched a number of important initiatives throughout different sectors, including renewable energy, customs and trade facilitation, public funding, information security and data protection. The long-expected Draft Law On Advocacy and Legal Practices provoked discussion in the professional community. We have prepared a new selection of novelties and comment about them.

On 4 September 2018 Parliament adopted Draft Law No.8015 On Amendments to Certain Legislative Acts of Ukraine (on Investment Attractiveness of Construction of Renewable Energy Facilities). How can this affect development of wind power in Ukraine?

Iryna Shalinska, Associate, PhD, GOLAW

The main reason the corresponding Law was adopted was to observe the recommendations of the International Renewable Energy Agency (IRENA) regarding simplification of permitting procedures for RES producers as an additional incentive for alternative energy market development.

The amendments prescribe reduction of consequence class of construction of wind power plants from CC2 class (objects with medium consequences) to CC1 (objects with minor consequences).

This, in turn, will make it possible to:

simplify the procedure for obtaining a permit for construction of wind energy objects;

speed up commissioning of wind power plants.

Before the mentioned amendments wind power plants were classified as objects with medium consequences (CC2) which, according to the Law On Regulation of Urban Development require obligatory expertise of object of construction. At the same time, the Law On Environmental Impact Assessment also provides an obligation to conduct an expertise of objects which are subject to EIA. Among other things, wind parks and wind power plants with two or more turbines or a height of 50 meters or more, are subjects to obligatory EIA. According to the proposed changes such duplication of state approval procedures will be finally eliminated.

Nevertheless, excluding wind power plants from the list of objects with medium consequences (CC2) enables the beginning of construction works on such objects without obtaining any permits provided by the Law On Regulation of Urban Development. In practice this can lead to situations when contractors can start construction of a wind
power plant before obtaining the EIA report and, consequently, decision on implementation of planned activity. This contradiction can be resolved by making amendments to the Law On EIA regarding the necessity of obtaining an EIA report and decision on implementation of planned activity prior to the beginning of construction works.

The Law On Amendments to the Customs Code of Ukraine and Some other Laws of Ukraine on Introduction of the Single Window Mechanism and Optimization of the Implementation of Control Procedures for the Movement of Goods Across the Customs Border of Ukraine (Draft Law No. 7010) was adopted taking into account the amendments introduced by President Poroshenko. Is it possible to expect improvement in the conditions for conducting foreign trade activities?

Borys Soloviov, Associate, Gramatskiy & Partners

In September Parliament passed Draft Law No.7010 aimed at simplifying the procedures for conducting foreign economic activities. In the law special attention is paid to the Single Window mechanism and the process of its implementation, which should decrease the number of bureaucratic procedures related to exporting goods. Moreover, Im truly committed to the idea that introduction of the State Information Web-portal Single Window for International Trade for interaction between declarants and customs authorities is a huge advantage for all subjects of international trade and business activity. The idea of reducing the number of oversight agencies will have a positive impact on declarants in terms of submission of documents and paying fees, establishing more operative and transparent way of interaction between private subjects and the authorities. All the innovations mentioned above will lead to the removal of unreasonable steps and measures obstructing the export of Ukrainian goods. At the same time, some issues related to the question of transfer of authority from one body to another arise. For example, imposing additional duties on the officials of the State Border Service (such as checking the level of radioactive contamination of vehicles and goods imported into the customs territory of Ukraine, verification of permits, which are now held by officials of the State Environmental Inspection) can affect the effectiveness of these measures.

Would investors be interested in the municipal development bonds, a new instrument proposed by Draft Law of Ukraine No. 9023 On Bonds to Fund Municipal Development, submitted by a group of MPs to the Ukrainian Parliament on 27 August 2018?

Ihor Olekhov, Partner, Baker McKenzie

The investment community welcomes any initiatives to reinvigorate the debt securities market in Ukraine.
The municipal development bonds as proposed by Draft Law of Ukraine No. 9023 On Bonds to Fund Municipal Development may become an attractive instrument for investors chasing higher yields. However, the key word is may.

Given the recent history of the debt securities market in Ukraine and the municipal bonds in particular, it would take heroic efforts to create the market for municipal development bonds from scratch.
The memories of municipal bond restructuring in Kiev are quite recent, as are those of the municipal bonds issued in Crimea, while some of us still remember the default on municipal bonds of Odessa in 1998 and the lengthy litigation proceedings that followed.

The proposed Draft Law seeks to give a new purpose and meaning to municipal bonds. The municipal development bonds would essentially become a tool for financing local infrastructure projects. Local councils would need to have viable infrastructure development projects for the municipal development bonds to be issued.
The Draft Law also outlines the structure for the administration and management of the proceeds of the municipal development bonds and establishes the roles of the key participants: local development fund, the bank or other financial institution managing the issue and administering of funds, escrow account bank and municipal development bonds depositary.

Having said that municipal development bonds could be attractive to investors once credibility and predictability of redemptions becomes possible. From the project finance point of view, such credibility and predictability would only be possible if investors are able to directly resort to the infrastructure project that was funded with the proceeds of the issue of the bonds. The Draft Law, unfortunately, does not provide for clear rules for direct enforcement of the investors rights against the infrastructure project. In essence, in case of default of the bonds, would the bondholders be able to take over the new bridge over the Pivdenyy Bug river in Mykolaiv, which was constructed with the proceeds of the bonds? Would such bondholders be able to impose a toll for crossing the bridge to collect the funds for redemption of the bonds? These issues are not yet addressed in this Draft.

On 6 September President Petro Poroshenko submitted Draft Law No.9055 On Advocacy and Legal Practices to Parliament. How would you assess the provisions of this document? How is the issue of non-admission and of liability for infringement of the rights of lawyers regulated?

Ivan Oskolkov, Lawyer, AVER LEX Attorneys at law

The drafting and adoption of a new law, defining the legal framework for the organization of advocacy and advocacy activity in Ukraine is a logical step after the adoption of the Law of Ukraine On Amendments to the Constitution of Ukraine (on Justice) of 3 October 2017, No. 2147-VIII.

This Draft received a positive report from experts of the Council of Europe on 21 December 2017, which states that the Draft conforms to the standards of the Council of Europe.

The Draft Law is a synthesis of established clauses and new progressive provisions. It provides for the process of implementing the establishment of a monopoly of advocacy, clear and transparent access to the profession of lawyer, extended rights and guarantees of advocacy, reorganized organizational forms of lawyer self-governance (reducing the number of legal entities lawyers self-governance bodies) and consolidating the decentralization of the powers of lawyers self-government. In addition, the whole section is devoted to the financial security of the lawyers self-government, which determines the sources of financing, distribution of funds, the procedure and form of the financial report of the bodies of advocate self-government.

However, there are certain contradictory positions. The task of the advocacy is to promote the practical implementation of the rule of law and ensure the right of everyone to receive professional legal assistance. At the same time, the Draft proposes to indicate in oath that the lawyer swears to maintain respect for the court, although this position does not apply to the tasks of the advocate or the duties of a lawyer.

Besides, the Draft envisages making certain changes to the Criminal Procedure Code of Ukraine. For example, addition of Article 22-1, which provides for the right of the investigating judge, the court, depending on the circumstances of the case, to recognize the abuse of procedural rights, to declare such abuse the filing of a complaint to a court decision that is not subject to appeal, and so on. It can be envisaged that this clause can be used to restrict access to justice, as well as to pressure on lawyers participating, particularly, in resonant public affairs, where pressure may be applied, including to a court.

Among the positive changes, we can mention the expansion of the guarantees of advocacy. It is noted that any criminal measures, operative-search and investigation (search) actions, including secret, as well as any restrictions on the freedom of movement of a lawyer are carried out only on the basis of a decision of the investigating judge of the appellate court at the request of the Prosecutor-General, his deputy, prosecutor of the ARC, region, city of Kiev and Sevastopol and solely in connection with criminal offences in which a lawyer is suspected. Entering a home or other possession of a lawyer, a room in which his workplace is located, to conduct an inspection, a search, or other investigative (search) activities until criminal charges are actually submitted to a lawyer, is prohibited.

In addition, the Draft Law proposes to supplement Clause 3 of Article 45 of Criminal Procedure Code, which provides for prosecution for any form of interference with the lawful activity of a lawyer or violation of the guarantees provided by law for his/her activities, including professional secrecy. It is also proposed to clearly identify the cases and the number of individuals who may apply to the Disciplinary Commission with a disciplinary complaint, which in turn eliminates the additional possibility of pressure on the lawyer.

It should be noted that despite the fact that the current Law of Ukraine On Advocacy and Advocacy Activity regulates the guarantees of advocacy, and the Criminal Code of Ukraine provides for criminal liability for interfering in the activities of a lawyer or a representative of a person (Article 397)
and threats or violence against a lawyer or a representative of a person (Article 398), in practice these guarantees are leveled off, and the personal and professional rights of a lawyer are grossly violated.

Thus, this situation can be repeated after the adoption and coming into force of the mentioned Draft. Therefore, in order to ensure the professional rights of lawyers, it is necessary to develop an effective mechanism of measures to prevent the violation of the rights of a lawyer, including in the form of an inevitable offence of liability for any violation of the rights of a lawyer, to allow lawyers to use traumatic weapons.

Draft Law No. 6688, which provides the authorities with almost unlimited right to block any sites, was submitted to the Committee for Informatization and Communications of Parliament. Do you see any threats in this document? Are there likely to be proposals in it that are noteworthy?

Mariia Bokach, Associate, Asters

Draft No.6688, now the subject of hot discussions, has already gained scandalous status and many opponents. It introduces many innovations and makes a number of changes to regulatory acts. Therefore, following the practice of the European Court of Human Rights (ECHR), it requires a detailed study and in-depth analysis. For example, in Urper and others v. Turkey, the Court stated that the danger inherent in prior restraints is such that it calls for the most careful scrutiny by the ECHR; careful control is mandatory when prior restrictions limit freedom of the press.

The first thing that is worth mentioning are measures that are used to block information resources.
In particular, the grounds upon which such measures can be applied are formulated quite broadly. Therefore, there is potential abuse of such measures by law-enforcement agencies. Recent decisions of the ECHR regarding blocking of information highlights and strongly recommends establishing a legal framework that will provide tight control over the scope of restrictions and effective judicial supervision in order to prevent any abuse of them by government bodies.

The Draft also proposes to introduce obligations for network operators and providers of telecom services to block access to the information resources pursuant to decisions of court, investigation judge, investigator, prosecutor and the National Security and Defense Council of Ukraine.
The big question is whether such proposals conform with the Constitution.

The administrative and economic sanctions imposed on network operators and providers of telecom services for non-compliance with the above-mentioned requirements are becoming tighter, leading to a positive and negative effect. On one hand, stricter liability helps to discipline. But on the other hand it must be commensurate and justified, otherwise such changes will not yield the expected results. In addition to the described changes the drafters propose to place on network operators and providers of telecom services a serious financial burden to buy and install using their own funds a certain type of technical equipment for monitoring.

Yet, we should first remember that before making any changes of that kind it is worth taking into account the experience of other countries with the established judicial practice on such matters, so as not to repeat the mistakes of those countries.

The Ombudsman proposes not to support Draft Law No.4571 On Combating Piracy and Improving the Investment Climate, as it provides for the publication of a registration number of an individual taxpayers personal identification card (identification code) of citizens on the official website. Are statutory provisions of legislation on personal data protection violated? How would you describe the consequences if the draft were to be adopted?

Alexander Molotai, Partner, Head of IP Practice, Evris

The Law On Amendment of Certain Provisions of Article 5 of the Law On Distribution of Copies of Audiovisual Works, Phonograms, Video-grams, Computer Programs and Data Bases has been passed. Thus, the online publication of information on the entity to which particular control marks were issued fully corresponds to provisions of Articles 6, 8, 10 of the Law of Ukraine On Protection of Personal Data, whereas it is provided for by the valid Law.

The importance and positive impact of the amendment is hard to underestimate. The Law On Distribution of Copies was vital to combat piracy at times, when data carriers like magnetic cassettes and discs and optical disks (CDs and DVDs) for which they were meant, were widely used for disseminating movies, music, computer programs. Nowadays, with the distribution of the said content having almost fully shifted online, there is no longer any (or nearly any) practical need for obtaining control marks. Respectively, published information regarding the entities to which the control marks have been granted is of no (or nearly no) use to rights holders.

On 6 September 2018, Draft Law No. 9063 STOP Raiding (on amendments to certain legislative acts of Ukraine on protection of the rights of property owners through audio and video recording of the process of notarial acts conduct) was registered with Parliament. How would you comment on this initiative?

Maksym Saliy, Lawyer, Equity

The Draft Law STOP Raiding is a legislative initiative with a flamboyant name without the content match it.

The existent mechanism for fighting raiding is quite efficient subject to it being used properly.

The present situation is likely explained by an appropriate fulfillment of their duties by law-enforcement bodies and by state registration bodies rather than by the existence of obvious legislative gaps.

The proposed legislative initiative has a positive character in general though it requires serious follow-up revisions.

The idea of video recording of notarial acts is not new, there were attempts to implement this in the past as well. However, the most important problem, both in the past and now, is the observation of notarial secrecy during creation and use of a particular video.

This Draft provides an obligation to insert the video record in the State Register of Rights during the implementation of the relevant registration act. However, one should consider that the State registrar is not always a notary and it would be more reasonable to guarantee additional warrants on keeping a notarial secrecy by other subjects of registration.

Besides, this Draft Law provides for carrying out modifications to the Criminal Code on criminalization acts on the counterfeiting of a relevant video record.

In the meantime, the video record counterfeit sanction is the same as for the substantive article on counterfeiting documents. As in the majority of cases these articles are supposed to be qualified on a global basis, the volume of reasonability will not change and consequently, the availability of additional responsibility wont be an obstacle for a criminal. Another disputable moment is inserting a video and audio record in the State Register of Rights, as such information is large and it would be problematic to store it and could create problems in the proper working of the register. Given the above, it would be more logical for such information to be stored by the subject who records it.

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