Legal Alert, Baker & McKenzie, Kyiv, Ukraine, Tue July 13, 2010

KYIV - On 1 July 2010, the Ukrainian Parliament passed the Law of Ukraine On Public- Private Partnership (the "Law"). The Law will become effective upon the signing thereof by the President of Ukraine and upon the subsequent publication of the same.

The Law defines public-private partnership as cooperation between the State of Ukraine, the Autonomous Republic of Crimea, territorial communities, as represented by state and local authorities, legal entities (other than state and municipal companies) and individual entrepreneurs on the basis of an agreement and pursuant to the procedure established by the laws.

According to the Law several persons may act on the side of a private partner at the same time. The Law envisages that a private partner, which is to enter into an agreement with the state in the context of a public-private partnership, must be determined solely by tender, , the procedure for which is to be established by the Cabinet of Ministers of Ukraine.

Pursuant to the Law, public and private relations may continue for a period from 5 up to 50 years.

The Law specifically provides that a public-private partnership may be implemented within the following scope:

- exploration, prospecting of mineral deposits and production thereof;
- heat production, transportation and supply, and natural gas distribution and supply;
- construction and/or operation of highways, roads, railroads, runways at airports, bridges, overhead roads, tunnels and subways, river and sea
ports and infrastructures thereof;
- machine building;
- water collection, purification and distribution;
- health care;
- tourism, leisure, recreation, culture and sports;
- support of operation of irrigation and amelioration systems;
- waste management;
- electric power production, distribution and supply;
- property management.

The Law establishes the following guarantees of private partners' rights:

- prohibition for the state and local authorities to interfere with the activities of private partners;
- application to the rights and obligations of the parties to the agreement, entered into within the framework of a public-private partnership for the entire term thereof, of the rules of the laws in effect as of the date of such agreement, except, however, for the requirements of the laws related to defense, national security, public order, environmental protection, quality and licensing standards, tax, currency, customs law and other laws regulating the relations to which the principle of equality is not applied;
- the private partner's right to be compensated for the losses incurred by it as a result of the fixation of prices (tariffs) for the services rendered by the private partner in amounts lower than the amounts of economically feasible costs for the provision of the respective services;
- the private partner's right to be compensated for the damage caused to it as a result of the adoption of unlawful decisions by the state and local authorities.

It is expected that the Law should create favourable conditions for attracting investments into the economy of Ukraine.

For More Information: Serhiy Piontkovsky, Partner, +380 44 590 0101, Baker & McKenzie - CIS, Limited
Renaissance Business Center, 24 Vorovskoho St., Kyiv 01054, Ukraine, www.bakermckenzie.

NOTE: Baker & McKenzie is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C.,