KYIV - On October 21, 2010 Kyiv hosted an international conference entitled “International agency, distribution and franchising agreements: issues of major concern, European practice, latest trends” organized by the Ukrainian Bar Association and the International Distribution Institute (IDI). The law firms Vasil Kisil & Partners” and DLA Piper acted as general sponsors and co-organizers of the event. 
 
According to experts, the franchising type of business is not sufficiently developed in Ukraine, considering the national market potential. Based on the data compiled by the Association of Franchising in Ukraine by the end of 2009 there were 1533 brands, 22 chains out of Ukraine also working abroad as well as 657 franchisees (out of which only 247 operational in comparison with 383 in 2008, which was an all record high in all of franchising history in Ukraine).

Never the less, experts are optimistic in noting that year after year the general tendency of growth and development in the services and public catering sector clearly demonstrates itself and every franchisor who left the market is replaced by new ones, perhaps even more interesting chains and sometimes numerous to substitute a single player that existed on the market.   

Another group that deserves attention is global brands’ and service distributors. In particular, automotive distributors are strengthening their presence in Ukraine by ways of growing the number of their brand-specific showrooms. A lot of foreign partners are interested in doing business in Ukraine and in working closely with local professionals.

However, entrepreneurs active in this area are united in their opinion that over regulating this business hinders the pace of its development and often scares off foreign partners due to complicated and unclear legal schemes and procedures.  
 
Conference organizers expressed their hope that this event might serve as a step ahead in their advancing such partnership to the accepted in many European countries standards, which would allow foreign manufacturers to make a choice in favor of Ukraine more often than not. 
 
AGREEMENTS CANNOT BE USED FULLY IN UKRAINE
Margarita Karpenko, Managing Partner of DLA Piper Ukraine commented: "Distribution and franchising agreements have a direct impact on the development of retail and franchising sector in Ukraine. Since the Ukrainian legal framework still has some legal and regulatory barriers to them, such agreements practically cannot be used fully in our country.

"I am glad that during this conference the best Ukrainian lawyers, representatives of Ukrainian state bodies and international distribution and franchising experts had a chance to discuss modern approaches to using these agreements all over the world and ways of perfecting the appropriate part of the Ukrainian legislature. I hope that in the nearest future the practice of applying such agreements in Ukraine shall be in line with the European practice".
 
Leading European practice of using agency, distribution and franchising agreements was presented by representatives of the International Distribution Institute (IDI) Fabio Bortolotti (President) and Silvia Bortolotti (Secretary General).

Mr. Bortolotti noted the following: “The application of agency and distribution agreements is one of the most current trends in the development of global trade. With the help of these instruments many leading world manufacturers develop various markets headlong, and those countries that have prepared the legal foundation for it and were the first to attract them to their territory, are already feeling the benefits from this collaboration reflected in the turnover growth, increased employment rate, increase in tax-related budget contribution, etc.

"We are here to share with Ukrainian entrepreneurs the opportunities this type of business has to offer. In return, we urge the Ukrainian business to actively work with professional advisors who can help you speak common language with foreign partners”.

This appeal was supported by other national IDI experts, such as Gustav Breiter (Austria) and Olga Sztejnert-Roszak (Poland). Conference participants found the practical application of these kinds of agreements in their respective countries to be of great use and interest, which reflected in numerous questions from the audience.
 
Leading Ukrainian experts in the area of applying such agreements joined efforts to give a detail overview of all the particularities related to preparing aforementioned agreements, regulatory, antimonopoly and tax aspects, problems and challenges of their termination and dispute resolution.

In her presentation Vasil Kisil & Partners’ lawyer Anzhela Makhinova made an emphasis on applicable law, the transfer of intellectual property rights, consumer rights protection (which correlates with special provisions regarding franchiser’s and franchisee’s responsibility), as well as accounting in foreign currency (complying with the rules of documentation and so forth).    
 
Vasil Kisil & Partners’ partner Tatyana Slipachuk being a certified arbitrator in many countries around the globe and one of the leading dispute resolution through arbitration experts in Ukraine outlines the numerous nuances to be taken into consideration in such proceedings. As a general rule when entering into the commercial brokerage agreements parties chose arbitration as an option for dispute resolution trying to avoid problems related to hearing such cases in state courts (how to notify the client, what law to apply, how to enforce the decision).

The UN convention from 1958 on the Recognition and Enforcement of Foreign Arbitral Awards supports this choice. Judging from the lively reaction of the audience it became obvious that arbitration issues are of great relevance and importance for participant. 
 
ENHANCING BUSINESS' AWARENESS OF LEGAL ASPECTS
“I believe that our joint efforts in the area of enhancing business’ awareness regarding the  legal aspects related to the issues of commercial brokerage discussed today would allow entrepreneurs to find new ways for developing their businesses. I think that there is a demand to hold these kind of events on a regular basis coming first of all from corporate counsel of large manufacturers and retail chains/ we have the know-how and are ready to share and help realize the boldest ambitions”, - concluded Tatyana Slipachuk. 
 
The dialogue between the experts and business representatives concluded with the realization of the fact that a more active and a more successful application of agency, distribution and franchising agreements would make it possible to significantly help small and medium business. It would also allow large chains to develop and strengthen their positions on the market.

Yet the application of best European practices and the full use of all the opportunities built into the standard European agreements of this kind will become possible only after a significant adaptation of certain legal instruments and the simplification of a number of procedures related to registration, agreement enforcement, intellectual property rights and tax issues.
 
Legal professionals are ready to play an active role in perfecting the legislature in this area and with all sincerity hope that public agents would take in consideration the opinion of recognized European experts and make allowances in order to help businesses operate.   
 
DLA Piper Ukraine LLC is a law firm and part of DLA Piper, an international legal practice.  The Kyiv team comprises more than 30 lawyers and is headed by Managing Partner Margarita Karpenko. DLA Piper is an international legal practice with over 3,500 lawyers across 69 offices and 30 countries.  From its offices across Asia, Europe, the Middle East and the United States, legal and business advisers provide a comprehensive range of services to local, regional and international businesses. For further information about our organisation and services, please visit our website: www.dlapiper.com
 
Established in 1992, Vasil Kisil & Partners is one of the oldest leading Ukrainian law firms. We provide professional service of the highest quality combining technical expertise with commercial awareness and a business savvy practical approach to legal issues. We specialize in matters that require diligently tailored solutions, extensive experience, and direct personal attention of partners working with a team of recognized professionals recognized by leading international directories such as Chambers Global, Legal 500, IFLR 1000, PLC WhichLawyer?, Who’s Who International. For additional information, please, go to www.kisilandpartners.com
 
The Ukrainian Bar Association (UBA) is an all-Ukrainian public organization founded in 2002 in order to unite lawyers in creating a strong and influential professional community which would become a potent voice of all legal professionals in the country.

The main purpose of the Association is to unite lawyers to promote the Rule of Law in all spheres of state, public and social life, contribute to the development of the national legislation and promote law awareness in the society, develop legal profession in Ukraine, protect lawful rights and interests of its members and facilitate non-formal communication between them. Website: www.uba.ua
 
International Distribution Institute (IDI) is an organization that was founded in 2004 by attorneys and in-house lawyers of Italy, France, Germany and the Netherlands to develop and keep a network of professionals engaged in establishing distribution networks and in drafting, negotiating, and managing distribution, agency and franchising contracts with consideration to regional specifics of various countries. As of today, IDI unites about 400 attorneys, in-house lawyers, as well as scholars from more than 50 countries of the world.

National IDI experts from various countries provide analytics on legislative particularities and recommendations on application of respective agreements, allowing business representatives from different countries to overcome informational and legal barriers, to find qualified answers and practical advice that are gathered in one informational portal with proven accuracy and authority, as well as assurance of the currency and continuous updating of the information published on this resource. www.idiproject.com.

NOTE:  Vasil Kisil & Partners and DLA Piper are members of the U.S.-Ukraine Business Council (USUBC), Washington. D.C., www.usubc.org.