Law of Ukraine

 “On Production-Sharing Agreements”

 Date of Entry into Force:

October 12, 1999

This Law regulates relationships arising from the process of concluding, executing and terminating production-sharing agreements, defines basic legal requirements to such agreements and peculiarities of legal relationships with regard to the use of subsoil on the conditions of production sharing.

Production-sharing agreements govern relationships arising from the process of exploration and extraction of minerals, produced production sharing and transportation, processing, storage, use, sale or otherwise disposal thereof.

The law defines the parties to a production-sharing agreement, conditions of concluding such agreement and requirements thereto, requirements for organizing and holding a tender for concluding a production-sharing agreement, the procedure of registration and approval of a draft production-sharing agreement.

This Law sets forth requirements relating to works being executed under production-sharing agreements, conditions and procedure of production sharing between the parties, taxation peculiarities during execution thereof, competence of bodies exercising control over compliance with production-sharing agreements and other organizational and legal aspects with concerning conclusion and execution of such agreements.

The Law stipulates that according to a production-sharing agreement one party - Ukraine - entrusts the other party - the investor - with minerals exploration and extraction to be carried out within the determined term and on the determined subsoil area and execution of works under an agreement, and the investor shall fulfill the entrusted works for its own expense and risk with the subsequent reimbursement of expenses and shall be paid (remunerated) by the portion of profit production. The term of a production -sharing agreement shall be identified by the parties thereto, however, it cannot exceed fifty years as of the date of its signing.

The permanent Inter-Departmental Commission, which shall be established by the Cabinet of Ministers of Ukraine, shall be authorized to resolve the matters relating to the organization of conclusion and implementation of production-sharing agreements.

Summary version from 16.01.2003