Several notable decisions of Ukraine's Anti-Monopoly Committee, a bottleneck caused by a spike in the number of public procurement appeals, and the country's tax amnesty program are at the top of lawyers' agendas, according to Redcliffe Partners Partner Yuriy Terentyev.
“We are seeing big inflows of money into the Ukrainian economy,” Terentyev begins. “They are affecting investment activity, public procurement, and, of course, competition. The available liquidity means a bigger interest for investments, and we anticipate an increase in M&A work and the associated antitrust activity.”
Several cases on abuse of dominance that started in 2020 or prior were completed this year, Terentyev says, highlighting one where an electricity producer was found to abuse its market position. “They of course did not agree. In Ukraine we have two energy zones: the unified energy system, including most of Ukraine, and the Burshtyn Energy Island, synced with the EU but not the rest of the country,” he explains. “Only thermal plants operate there, but energy can be imported from neighboring countries. And the electricity producer could control the availability of imported electricity and thus influence the pricing in this trading zone. We’ll have to see how it goes in the courts.”
Because of peculiarities in Ukraine’s antitrust laws, Terentyev says financial institutions acquiring control of company shares or assets through foreclosures need to file concentration notifications with the competition authority or run the risk of hefty fines. “In September the authority issued a decision against the State Savings Bank of Ukraine – for its ownership of a pledged refrigeration facility without notification – and imposed a fine of around EUR 500,000. Similarly, in the summer, the authority issued a decision concerning a sugar factory that went bankrupt several years ago, with different parts of it having been acquired by a bank and other entities and then gradually reconsolidated by the new business owner. Technically they did not acquire a working business from the bank through the first transaction – but the penalty imposed by the authority was more than EUR 2 million, setting a new standard,” he reports.
“The Anti-Monopoly Committee was sticking to a conservative interpretation of the law. Both these cases are questionable examples of 'classic concentrations.' Still, financial institutions should take this into account, from a compliance and risk management perspective, and just file the concentration notice.” He hopes this particular issue will be addressed by Parliament in the next six months. “Meanwhile, the authority has at least clarified its stance on the issue – it’s an uncomfortable clarity, but clarity nonetheless.”
The biggest issue currently affecting the Anti-Monopoly Committee, according to Terentyev, is the fact that instead of the roughly 900 appeals on public procurement procedures a year back in 2014 the authority has now received about 17,000. “So, all commissioners are now reviewing up to 100 public procurement cases every day. It’s a big bottleneck for public procurement and a strain on the authority’s other functions,” he explains. He says this will be addressed soon, with changes to the Law on Public Procurement and on the Anti-Monopoly Committee implementation, which would “divert complaints from the antimonopoly commissioners to new public procurement commissioners, to be hired within the same institution.”
Finally, Terentyev mentions that Ukraine has started a tax amnesty program, available for one year starting September 2021. “Individuals may disclose their assets – those for which taxes have not been paid – without liability.” He says competition law will again come into play. “If the ultimate beneficial owner declares an asset now, without having filed the proper concentration notification before, under the ‘amnesty’ the penalty will be limited to an amount of about EUR 700. But as of mid-September, only two tax amnesty notifications have been filed.” He anticipates that most of the filings will happen towards the end of the designated period. “With the tax authority, you just send in a letter. But things might be more complicated on competition, negatively impacting the productivity of the competition authority, which will have to deal with an unpredictable number of notifications in a limited period of time, closer to the end of the ‘amnesty.' Nobody wants to go first and risk becoming a case study,” Terentyev concludes.