Ukraine Improves Procedures for Granting Subsoil Use Licenses

On 25 April 2018, the Ukrainian Government ("CMU") adopted Resolution No.333 "On Amending Procedures Approved by Cabinet of Ministers of Ukraine Resolutions No.594 and No.615 dated 30 May 2011" ("Resolution") that entered into force on 08 June 2018, save for certain provisions taking effect on 01 January 2019 and 08 June 2019. The Resolution improves the subsoil use regime and is pivotal for the increase of subsoil production in Ukraine. In particular, it amends (i) the procedure for conducting auctions for sale of subsoil use permits/licenses and (ii) the regulation on the subsoil use permits as set out in CMU Resolutions No.594 and No.615 dated 30 May 2011. 

Below, we outline principal changes proposed by the Resolution. 

Auction Procedure 

The Resolution introduces, among others, a notion of a deferred permit sale and purchase agreement. Accordingly, in order to receive the subsoil use permit following the auction results, the auction winner may conclude with the auction organizer either a permit sale and purchase agreement or the deferred permit sale and purchase agreement. The latter provides that granting the subsoil use permit is conditional on obtaining of an environmental impact assessment ("EIA") report within 6 months from the time of its conclusion. 

In addition, the Resolution shortens approval deadlines for proposals to determine subsoil sites for use, except for sites on the continental shelf and in exclusive (maritime) economic zones. In particular, 45 (previously, 90) calendar days are allocated for approvals by relevant territorial councils, and 15 (previously, 30) business days – by the Ministry of Ecology and Natural Resources of Ukraine. 

Non-auction Procedure 

Obtaining of the subsoil use permit or its extension are also possible through a non-auction procedure. Notably, to get a special permit through a non-auction procedure it is required to file an application along with EIA results. According to Resolution, the EIA results include EIA report, Public Hearings report, and EIA opinion. 

However, it is also possible not to file the EIA results where the subsoil use permit is granted on non-auction basis through extension of subsoil sites by no more than 50% of the earlier designated territories, if certain statutory defined criteria are met. 

Resolution further releases applicants for subsoil use permit or its extension from an obligation to provide EIA results who have submitted supporting documents along with an application by 31 December 2018. To this end, it also requires filing a certified copy of a notice on planned activity and a confirmation of its registration with EIA Single Register, as well as obligates to conduct EIA within 6 months after the registration. 

Amending Subsoil Use Permits 

The Resolution extends grounds for amending subsoil use permits. In particular, the subsoil use permit needs to be amended where a subsoil user company holds at least 50% of interest in a company to continue operations in a designated site provided that: 

(i) subsoil user complies with subsoil use statutory restrictions;

(ii) subsoil user has no outstanding debt under rental payments for subsoil use at the time of decision to amend the subsoil use permit; and

(iii) subsoil user provides a confirmation of non-violation of subsoil use conditions as stipulated in subsoil use permit or an agreement on terms for subsoil use, upon state supervision conducted no later than 6 months before filing an application for amending the subsoil use permit. 

However, the above ground is inapplicable to state owned entities and companies with at least 50% shareholding by state owned entities. 

Overall, the Resolution evidences an attempt to address the granting of the subsoil use permits on a transparent basis. It introduces new tools for subsoil users, inter alia, the deferred subsoil use permit sale and purchase agreements. However, there is no certainty that it resolves the ultimate goal of terminating practices of non-auction granting of subsoil use permits, which is critical for the future of the subsoil industry.

For further information please contact Asters Partner Yaroslav Petrov

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