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PRINT THIS PAGE Advantages of investing in Ukraine SEZs abolished15/03/2006. Source: Freshfields Bruckhaus Deringer.
The Ukrainian government has abolished the advantages of investing in the country’s special economic zones and territories of priority development. This Freshfields Bruckhaus Deringer briefing examines the effects of the abolition and outlines some of options available to investors. The government has not gone so far as to offer investors compensation but it has promised to reinstate the benefits. However, a complex legislative process to do this, along with political instability, mean the outcome for investors remains uncertain for private equity firms. Earlier this year the Ukrainian government abolished fiscal advantages in all of the country's 10 special economic zones (SEZs) and in the 72 territories of priority development (TPDs).
The government has not gone so far as to promise investors actual compensation but it has said that a bill would be submitted to parliament by the end of the year to reinstate the benefits. However, given the lengthy and complex procedure of passing a bill through parliament, coupled with the unstable political climate in Ukraine, the outcome for investors remains uncertain.
In these circumstances, it is important for foreign investors to have a clear understanding of rights of recourse under international treaties, either for use in negotiations or as the basis for a possible claim for compensation. Companies should also take appropriate steps to reserve international rights of recourse to retain the option to recover losses if negotiations to obtain compensation and restoration of their legitimate expectations prove fruitless.
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© Freshfields Bruckhaus Deringer 2006. Reposted on AltAssets with permission.
Freshfields Bruckhaus Deringer is a leading law firm for European private equity and venture capital. Our international private equity group provides our clients with a combination of the local insight of lawyers in our network and money-centre know-how, delivered by fully integrated international teams. We specialise in and are well known for innovative and challenging transactions. For more information about the firm please visit http://www.freshfields.com/sector/privateequity
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