Law on transparency in extractive industries

Dentons, Kyiv, Ukraine,
Wed, August 5, 2015

On 16 June2015, the Parliament of Ukraine adopted the Law of Ukraine On Amendments toSome Legislation of Ukraine on Securing Transparency in Extractive IndustriesNo. 521-VIII (hereinafter – the “Law”).The Law was signed by the President of Ukraine and officially published on July11, 2015 and came into force on July 12, 2015.

The Law wasadopted in order to increase transparency in the extractive industries,implement international reporting standards, improve natural resourcemanagement systems, improve the investment climate in Ukraine, and to implementthe standards of the Extractive Industries Transparency Initiative and theGovernment’s Coalition Agreement as well as the Initiative “Partnership OpenGovernment.”

According tothe website of the Extractive Industries Transparency Initiative (EITI) inUkraine, “EITI is an independent standard of transparency, supported at theinternational level and implemented in 48 countries (2014). Governmentsdisclose how much they receive from extractive companies operating in theircountry, and these companies disclose how much they pay. In September 2009,Ukraine committed to implement EITI, having approved the Decree of the Cabinetof Ministers No. 1098 “On Ukraine’s Accession to the Extractive IndustriesTransparency Initiative.” Later, these intentions were approved in agreementswith the IMF and the EU.

On 10 October2010, the Ministry of Energy and Coal Industry by its Order No. 785 created theEITI Multi-Stakeholder Group in Ukraine, which included representatives ofgovernment, companies and civil society. Ukraine was accepted as an EITICandidate country on 17 October 2013. The application was considered by theEITI Board during the 25th EITI Board Meeting in Abidjan.”

Key provisionsand changes provided by this Law are as follows:

· The Cabinet of Ministers of Ukraine is authorized to publish and shareinformation about national and local taxes and duties and other payments,including context information (general review) on extractive industries, toincrease the transparency of extractive industries under a procedure to beapproved by the Cabinet of Ministers of Ukraine (hereinafter – the “Procedure”). The Draft Procedure at themoment is being prepared by government officials and members of the EITIMulti-Stakeholder Group in Ukraine, and its final version has not beenpublished yet. The official publishing of the draft is planned for thebeginning of August 2015. It is expected that the Procedure will establishdetailed requirements regarding filing of the mentioned information and willcover not just information about taxes and duties but also information aboutother investment payments (fees for bidding, total amount of investments,etc.). The Procedure will establish terms of filing this information and itspublication.

· At the same time, in order to secure transparency in extractive industrieswithin the scope to be established by the Procedure: •Authorities that performState management of geological study, exploitation and protection of thesubsoil, in particular State Geological and Mineral Resources Survey ofUkraine, will be obligated to provide and publish information about thecondition of geological research, mineral resources exploitation and protectionof the subsoil.

· Users of the subsoil will be obligated to provide and publish informationabout national and local taxes and duties, other payments and also aboutproduction (business) activities.

· According to the concluding provisions of the Law, the Procedure should beapproved by September 12, 2015. The current mandatorylocal content requirement will be cancelled.