31 March 2014

Legal Issues Pertaining to Conducting Business in the Crimea (update)

This newsletter contains an update on the recent developments affecting the legal regime of business operations in the Crimea and the city of Sevastopol (collectively, the Crimea), which have taken place since our previous newsletter as circulated on 25 March 2014.

Prohibition of business operations

The overall prohibition of business operations in the Crimea initially contemplated by Draft Law of Ukraine No. 4473-1 "On Securing Rights and Freedoms of Citizens on the Temporarily Occupied Territories of Ukraine" (the Draft Law) has been limited to prohibiting business operations:

  1. which are subject to obtainment of licenses, permits, patenting, assignment of quotas, certification, standardization, investment and tax exemptions, subsidies, compensations and similar;
  2. import and/or export of military and double-purpose goods;
  3. organization of railway, automotive, sea, river, ferry and air traffic;
  4. utilization of state resources; and
  5. financing of, or otherwise facilitating, the operations mentioned in paragraphs (i) to (iv) above.

The aforementioned business operations in the Crimea can be performed in cases and in accordance with the rules, which are yet to be established by the Cabinet of Ministers of Ukraine. The money transfer rules governing such business operations, as well as banks' own operations, should be established by a separate regulation of the National Bank of Ukraine.

The reference to related parties has been removed from the Draft Law. Initially, the prohibition applied to the related parties, which notion covered any foreign company having its presence in the Crimea.

Parliament's decisive voting for adopting the Draft Law is expected to occur on 1 April 2014.

Suspension of land plot allocation

The Crimean government has suspended allocation of land plots and privatization of republican assets. The relevant resolution shall be in effect until the general plan of development of the territory of the Crimean Republic is approved upon its elaboration by Russian competent ministries in co-operation with the Crimean authorities. It is anticipated that the concept of development of the territory of the Crimean Republic will be set up by 25 April 2014. 

Mobilization and labor regulation

On 27 March 2014 Verkhovna Rada of Ukraine adopted Law "On alteration of certain laws of Ukraine on supporting of mobilization" (Law). Law is pending presidential approval, it will be effective as of the date following the date of its official publication. Law, inter alia, provides that:

  • During mobilization, however for no longer than 1 year, called up Ukrainians shall preserve their work places (positions) and average remuneration.
  • During mobilization called up Ukrainians shall preserve their status of entrepreneurs (if any).

Alcohol market

Federal Service for Alcohol Market Regulation of Russia starts reissuing alcohol licenses for market players operating in the Crimea and Sevastopol. Licenses are reissued for the same period as indicated in previous licenses (issued by Ukrainian authorities). Also applications for getting special federal marks can be filed with the Federal Service for Alcohol Market Regulation. Such marks are mandatory for alcohol products distribution on Russian Federation territory.

Use of medicines and medical devices

By its Resolution dated 26 March 2014 the State Council of the Republic of Crimea determined that during the transitional period it is permitted to use and sell medicines and medical devices, provided that they have been duly registered and are accompanied with quality certificates issued by authorities of Ukraine, the Autonomous Republic of Crimea or the Russian Federation.

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We continue monitoring the legislative and regulatory developments and will follow-up upon occurrence of any significant changes.

© Asters 2014
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