NBU Introduces Prohibition of Prepayment of Loans Provided by Foreign Lenders

Under Resolution No. 172 of the National Bank of Ukraine (the "NBU"), which came into effect on 28 March 2014, the Ukrainian borrower can repay a loan under an agreement with a foreign lender, including in case of introduction of an amendment to the loan agreement, not earlier than on the date established by such loan agreement (the "Prepayment Prohibition"). The Prepayment Prohibition applies both to prepayment of the loan principal and early payment of other charges contemplated by the respective loan agreement. Resolution No. 172 shall be in effect until 1 May 2014.

Resolution No. 172 terminated Resolution No. 49 of the NBU, dated 6 February 2014. By adopting Resolution No. 172 the NBU eventually substituted the prohibition to purchase foreign currency for early repayment of loans with a general early repayment prohibition applicable also to the prepayment of loans with borrowers' own funds in foreign currency.

Historically early repayment of loans was prohibited by the Law of Ukraine on Amendment of Certain Laws of Ukraine with the Purpose of Overcoming Adverse Consequences of the Financial Crisis, dated 23 June 2009. However, later it was amended to cancel the early repayment prohibition in full.

The introduction of the Prepayment Prohibition by an NBU resolution may be interpreted as an unlawful (not envisaged by a law) interference by the NBU with business operations, on which basis the Prepayment Prohibition can be challenged in court by the affected party. Furthermore, it can be argued that the Prepayment Prohibition applies solely to the borrower and should not prevent the lender from declaring the loan principal and all charges thereunder immediately due and payable upon occurrence of certain events contemplated by the loan agreement (e.g., change of control provisions, event of default provisions and similar). However, one may not exclude that a local bank servicing payments under a loan agreement can interpret the Prepayment Prohibition restrictively by treating it as a ground to refuse to purchase and transfer of foreing currency for the purposes of the loan prepayment made both voluntarily and upon acceleration by the lender.

For further information please contact Asters'
partner Iryna Pokanay and counsel Gabriel Aslanian.

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