On 16 February 2016, the President of Ukraine signed into law bill No. 2319a-d “On Enactment of Some Laws of Ukraine Aimed at Improvement of Privatisation Process” (the “New Law”) which adopted a number of changes to the Law of Ukraine “On Privatisation of State-owned Property” dated 4 March 1992 No. 2163-XXII (the “Law on Privatisation”). This law was introduced as part of a widely-advertised campaign to privatise state-owned property offered for sale announced by the Ukrainian Government in 2015.
Alongside other changes in the legislative landscape to attract foreign investors, the New Law introduces a dispute resolution mechanism that allows companies to bring grievances arising out of or in connection with privatisation transactions before international commercial tribunals.
The New Law provides that the State Property Fund of Ukraine, the state body responsible for the sale of state-owned assets, may enter into an agreement regarding the sale and purchase of an object of privatisation that provides for an arbitration dispute resolution mechanism. If such an agreement provides for such a mechanism, but does not indicate a particular arbitral institution or ‘ad hoc’ tribunal, the New Law provides that any dispute between these parties shall be finally resolved in accordance with the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce.
Prior to the New Law, the Law on Privatisation only regulated provided that disputes arising out of privatisation transactions in the domestic courts. This resulted in a debate as to whether disputes arising out of privatisation transactions, in particular those arising in respect of an agreement of purchase and sale, may be settled by arbitration. The New Law ends this uncertainty.
The adoption of the New Law will allow foreign investors to take advantage of resolving disputes before a neutral forum independent of any political influence in a timely and cost-efficient manner alongside other benefits associated with arbitration.