The Law of Ukraine

 On Concessions

 Date of Entry into Force: September 3, 1999

The Law defines the concept and legal principles of regulation of concession relations of state and communal property, as well as conditions of and procedure for their conducting in order to increase the efficiency of use of state and communal property and provision of needs of the Ukrainian citizens in goods (works, services).

The Law defines such terms as: concession, concession agreement, concessionaire, concession issuer, claimant, concession payments and concession competition.

The Law determines the objects which may be granted to concession. The objects of state or communal property which are used for carrying out activity in the following spheres of economic activity may be granted to concession:

·         water supply, sewage overflow and clarification;

·         rendering of city public transport services;

·         gathering and utilization of garbage;

·         rendering of services related to heating supply to the consumers;

·         building and operation of motor roads, objects of road economy, other road constructions;

·         building and operation of communication roads;

·         building and operation of cargo and passenger ports;

·         building and operation of airports;

·         rendering of communication services;

·         rendering of postal services;

·         other.

The objects of state or communal property that may be granted to concession are:

- property of the enterprises which are entire property complexes or systems of entire property complexes;

- unfinished building objects and temporarily closed down objects;

- objects specially built according to the conditions of concession agreement for satisfaction of public needs.

If land plots are required for conducting concession activity, they shall be provided to the concessionaire on the conditions of lease for the term of validity of the concession agreement according to the provisions of the Land Code of Ukraine.

The objects of state or communal property which are granted to concession shall not be privatized during validity of the concession agreement.

Special laws may inscribe the peculiarities of conducting concession activity in some spheres of economic activity.

The Law sets the procedure for holding concession tender, in particular, adoption decision about granting concession, basic principles of holding concession tender and announcement of concession tender.

Decision about granting concession to the object of state property according to the results of concession tender shall be adopted by the Cabinet of Ministers of Ukraine or body of executive power authorized by it. Decision about granting concession to the object of communal property according to the results of concession tender shall be adopted by the authorized body of local self-government.

The Law sets requirements to the concession agreement, including significant conditions of such agreement. The concession agreement shall be concluded for the term defined in it, which shall be not less than 10 years, but not more than 50 years.

Pursuant to the Law, the concessionaire shall pay concession payments for use of the object of concession. The concession payment shall be made by the concessionaire according to the conditions of concession agreement regardless of the results of economic activity. The process of settlement and limit amounts of concession payments shall be determined by the Cabinet of Ministers of Ukraine.

The Law sets basic rights and liabilities of the parties to the concession agreement. Transfer of objects to concession does not cause transfer of the ownership right to them to the concessionaire and does not cease state or communal ownership right to these objects. The property created for implementation of conditions of the concession agreement shall be the object of state or communal ownership right.

The concessionaire shall have the ownership right to the profit obtained from management (operation) of the object of concession, as well as to the products obtained as a result of implementation of conditions of the concession agreement.

Amortization deductions calculated to the capital assets obtained in concession or created due to implementation of conditions of the concession agreement shall remain at disposal of the concessionaire.

The property obtained in concession shall be included into the balance of the concessionaire - legal entity, with indication that this property was obtained in concession.

The object shall be transferred in concession in terms and under conditions defined in the concession agreement.

Customs duty, value added tax and excise duty, while importing tangible assets due to implementation of conditions of the concession agreement, shall be levied in compliance with the legislation of Ukraine.

Summary version from 11.03.2004