Foreign Investments Legislative Support: one rotten apple spoils the whole barrel (the article by V.Zagariya for The Business Herald)

VALENTYN ZAGARIYA, Attorney, Managing Partner at Spenser & Kauffmann, special for “The Business Herald

Today, supporting investment projects in Ukraine is primarily described by collapse in M&A and corporate law. We are sorry to tell you that. Investment funds perceive our state as distressed assets in the context of investments.

However, for this very reason one should invest in Ukraine whose economy ‘is at the death’s door’ and business, being deprived of working capital, lending, and state aid, is undervalued.

After all, Ukraine is unique due to its black soils covering near 44% of its territory. The current troubled political situation is causing a significant decrease in land assets value: figuratively speaking, the lands can be leased for peanuts. Therefore, investments in the agricultural sector are expected to increase.

Those willing to assume risks from direct investment and other foreign funds will definitely gain their dividends in 3-4 years with the economy recovery. Especially since the last year has seen permanent attempts to make favourable changes to the Ukrainian legislation fostering foreign investments.

Thus, last year a number of positive changes occurred in the area of land relations and real estate, registration of legal entities and private individuals engaged in entrepreneurial activities, corporate affairs, antimonopoly and tax regulation.

However, a rotten apple spoils the whole barrel. Thus, the National Bank of Ukraine imposed restrictions on the repatriation of dividends and incomes from the sale of shares. Another grave problem pertains to the protection of investors rights within the provisionally occupied territories since neither the Russian Federation nor occupation authorities recognize international arbitration awards. Therefore, unfortunately, effective mechanisms for protecting investors’ rights can be hardly expected in Crimea or in the East of Ukraine for so far. This issue seeks rather a political decision. This stalemate will persist until the problem is resolved.