Newsletter, October 26, 2006 (English version)

The Pension Fund of Ukraine explained that pension contributions are not charged and disbursed on remuneration for individuals' services
Ukraine has implemented international standards in these areas of law, which shall apply to international factoring and financial leasing transactions involving the Ukrainian companies
Ukrainian Parliament adopted the Law on the Enforcement of the Judgments and Application of Precedents of the European Court of Human Rights
The National Bank of Ukraine has increased the maximum amount that can be transferred to non-resident without obtaining a price examination certificate.

According to the Resolution of the Board of the National Bank of Ukraine "On Money Transfers in National and Foreign Currency in Favor of Non-residents on Some Operations", the basis for transferring money to non-residents as payments for work, services, intellectual property rights under a contract, and for payment of promissory notes that secure obligations under such a contract, shall, among other documents, be a price examination certificate. Such certificate should be issued by the State Informative and Analytical Center of Foreign Commodity Markets Monitoring.

Before the amendments came into force, the necessity to obtain such certificate had arisen only where the total value of work, services, and intellectual property rights under the contract exceeded 50 thousand Euros or their equivalent in another currency. After September 30, 2006 the price examination certificate is needed only in case the total value of work, services, and intellectual property rights extends the amount of 100 thousand Euros (or their equivalent in another currency).

On September 1, 2006 The Pension Fund of Ukraine issued a Letter No 11127/03-02, stating that where the remuneration is paid to individuals for services under civil law contracts, the compulsory state pension insurance contributions are not charged and disbursed. We point it out that this document though expressing the view of the Pension Fund is informative by nature and does not have a mandatory legal force, its execution is not obligatory.

However from our point of view, the position, according to which the pension contributions shall not be charged and disbursed on rewards for individuals' services, has quite strong legal grounds.

By acceding to the UNIDROIT Conventions on International Financial Leasing and on International Factoring, Ukraine has implemented international standards in these areas of law, which shall apply to international factoring and financial leasing transactions involving the Ukrainian companies.

The Ukrainian officials expect that acceding of Ukraine to the Financial Leasing Convention shall contribute to the improvement of Ukrainian investment climate (mainly, they rely on the influx of foreign capital investments) and increase the high-tech products turnover with foreign countries.

Ukrainian legislation hadn't not provided for an effecting regulatory mechanism for factoring relations before accession of Ukraine to the aforesaid Convention. Therefore, the accession of Ukraine to the Factoring Convention is expected to fill the gaps in the respective Ukrainian legislation and foster the development of factoring as a type of financial services.

Ukrainian Parliament adopted the Law on the Enforcement of the Judgments and Application of Precedents of the European Court of Human Rights on 23.02.2006, which made a revolution in the Ukrainian judiciary. By virtue of this Law, the Courts of Ukraine shall apply not only the provisions of the Convention for the Protection of Human Rights and Fundamental Freedoms directly, but the precedents of the European Court of Human Rights as well.

Additionally, the Law lays down the mechanism for enforcement of the ECHR judgment, payment of the awarded amounts to the aggrieved parties, measures to be taken in order to secure restitutio in integrum. The Law imposes an obligation on the respective executive body to track the judgments of the ECHR given against Ukraine and propose amendments to the laws, expertise of bills etc in order to secure the compliance of the Ukrainian law in general with the provisions of the Convention.

In 2005 around 45 000 of applications were filed with the ECHR and Ukrainian applicants had a significant share in this striking amount of applications. It is expected that by enforcing this Law Ukraine will reduce the amount of suits brought against it to the ECHR and improve in general the protection of human rights.