September 2018 – The Antimonopoly Committee of Ukraine published new guidelines on state aid dated 6 September 2018 that clarify the AMC's approach to financing provided by international financial institutions and to state and municipal guarantees securing the obligations in respect of such financing.
On 17 September 2018, the Antimonopoly Committee of Ukraine (the "AMC") published new guidelines on state aid dated 6 September 2018 (the "Guidelines") that clarify the AMC's approach to financing provided by international financial institutions ("IFIs") and to state and municipal guarantees securing the obligations in respect of such financing. While the Guidelines do not include a definition of an IFI, they do expressly mention the European Investment Bank, the European Investment Fund, the International Monetary Fund and the European Bank for Reconstruction and Development. Therefore, financing provided by these IFIs in connection with state aid falls under the scope of the Guidelines.
The Ukraine's legislation on state aid is built around the concept of "state resources" and "municipal resources", the granting of which may constitute "state aid". Follow this link to download a detailed overview of state aid legislation in Ukraine.
Financing by IFIs
According to the Guidelines, if a state or municipal authority provides a loan to an undertaking, e.g., Ukrainian business organisation or individual entrepreneur (the "beneficiary"), such a loan is regarded as "state resources" or "municipal resources", respectively, and its granting may be considered as state aid – even if funding is provided by an IFI – unless the following exception applies. If the IFI designates the beneficiary and determines the purpose and disbursement regime in relation to the loan, such financing provided by the IFI is not considered as state aid and does not trigger the requirement for the state or municipal authority to obtain the consent of the AMC.
On-lending by Ukrainian state-owned banks
With reference to the European Commission's Notice on the notion of State aid , the AMC has clarified that state resources include all resources of the state-owned sector of the economy, to the extent the state is able to direct the use of such resources. According to the Guidelines, state resources therefore include the resources of state bodies (in particular Ukraine’s central bank) and of state-owned companies.
With this in mind, the Guidelines allow the following interpretation in relation to, e.g., a Ukrainian state-owned bank. If an IFI provides a loan to a Ukrainian state-owned bank for the purpose of on-lending to other borrowers and the IFI does not designate the beneficiary and determine the purpose and disbursement regime of such a loan but instead provides the bank with guidelines for the selection of borrowers and sets other loan parameters, the financing by the bank may be regarded as state aid and the bank may need to obtain consent of the AMC.
Co-financing with Ukrainian state and municipal authorities
In contrast, if an investment project is financed jointly by an IFI and a Ukrainian state or municipal authority, in accordance with the Guidelines the state or municipal authority must obtain the AMC's consent only in relation to the part of the financing that is considered state or municipal resources.
State and municipal guarantees
According to the Guidelines, a state or municipal guarantee is a state aid measure and requires the consent of the AMC unless all of the following conditions are satisfied:
- the borrower of the guaranteed loan is not in financial distress as defined in Ukrainian law;
- the guarantee secures not more than 80% of the principal amount of the loan;
- the guarantee secures a specific transaction that is limited in terms of the amount and term;
- the guarantee is issued for a market-based fee.
Notification and consent of the AMC
If state aid to a beneficiary over the previous three-year period equals or exceeds EUR 200,000, the state or municipal authority (or other state aid donor as determined under Ukrainian law) must notify the AMC and obtain its consent:
- in relation to a loan – before disbursing it to the recipient; and
- in relation to a guarantee – as clarified in the Guidelines, before the respective state or municipal authority acting as guarantor resolves to issue the guarantee.
Under Ukraine's Law on State Aid, it takes up to three and a half months for the AMC to issue its state aid consent. The AMC can extend the review period for additional six months if further assessment is required.