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Ukraine State Aid Law Comes into Effect

On 2 August 2017, the Law of Ukraine on State Aid to Undertakings No. 1555-VII of 1 July 2014 becomes fully effective. In line with the EU-Ukraine Association Agreement, the new law brings to Ukraine a comprehensive and transparent legal framework for state aid regulation that is convergent with the EU acquis.

Today's enactment follows a three-year transitional period across which the Antimonopoly Committee of Ukraine (AMC) and the Cabinet of Ministers of Ukraine were developing secondary legislation (taking effect simultaneously with the law) and raising state aid awareness among stakeholders.

The main provisions of the State Aid Law may be summarized as follows:

the AMC is a key enforcer of the Ukrainian state aid legislation with strong investigative and decision-making powers;

all new state aid measures (except de minimis ones not exceeding €200,000 per undertaking over a period of 3 fiscal years) are generally prohibited and can only be implemented after approval of the AMC;

state aid providers bear primary responsibility for ensuring that their policy measures and projects comply with the state aid rules, but beneficiaries of aid, as well as their competitors, will also be considerably involved in the notification and investigation process;

if the AMC finds certain state aid measures to be unlawful and incompatible with competition, it will issue a negative decision, which means that a beneficiary of this aid will be obliged to pay it back (unless the 10-years' limitation period has passed);

state aid measures in existence as of 2 August 2017 will have to be (i) registered in the Ukrainian state aid register by August 2018, so that the AMC could examine their impact on competition and compliance with the new rules; and (ii) aligned with state aid rules by 2 August 2022.

Importantly, the EU-Ukraine Association Agreement includes the obligation of Ukraine to interpret its state aid legislation using as sources of interpretation the criteria stemming from the EU law and practice.

For further information please contact Igor Svechkar, Alexey Pustovit, or Sergiy Glushchenko.