On 22 October 2015, the National Bankof Ukraine (the “NBU”) issued Regulation No. 718 (“Regulation 718”) whichintroduces amendments to its earlier Regulation No. 581 “On Regulating theSituation in the Monetary and Foreign Currency Markets of Ukraine” (“Regulation581”). You may find our analysis of Regulation 581 in our recent law-nowarticle. Regulation 718 slightly liberalises some of the foreign currencyrestrictions the NBU had previously imposed.

75% Mandatory Sale Rule

The mandatory sale rule will no longerapply to foreign currency proceeds received by Ukrainian residents from abroad:

·      undertransactions carried out pursuant to the agreements between Ukraine and theEuropean Union regarding Ukraine’s participation in European Unioninternational programmes;

·      as grantsfrom international financial institutions (IFIs) of which Ukraine is a memberreceived by Ukrainian legal entities which are financed under such grantsprovided that the Ukrainian government is involved in the management of suchlegal entities;

·      as a cashsecurity (guarantee payment) for non-resident’s participation in an auction(tender) in relation to the privatisation of state property credited to theaccounts of an organiser of such an auction (tender).

Currency Control by Ukrainian Banks (Set-off)

Set-off of the obligations ofUkrainian telecommunication operators to pay for internationaltelecommunication services (international roaming and traffic transmission)against similar counterclaims in foreign currencies will now be permitted.

Prohibition of Pre-Payment under Cross-Border Loans

Ukrainian residents will now beallowed to make early repayments under cross-border loan agreements in favourof (i) IFIs of which Ukraine is a member and (ii) IFIs for which Ukraine hasagreed to ensure a legal regime similar to the one granted to the other IFIs.

Prohibition of Assignment of Foreign Currency Loans

The existing prohibition on assignment(replacement of a lender and/ or a borrower) under the cross-border loanagreements no longer applies if: (i) the original lender is replaced as aresult of reorganisation (accession of the original lender to its legalsuccessor (new lender)) or liquidation (previously, this exception applied onlyto the borrowers) and (ii) the assignment (replacement of a lender and/ or aborrower) is in relation to loans which were granted to Ukrainian residentswith participation of a foreign export-credit agency.

Legislation:

1. Regulation of the National Bank of Ukraine “On Introducing Amendments toRegulation of National Bank of Ukraine dated 3 September 2015 No. 581” No. 718dated 22 October 2015; and

2. Regulation of the National Bank of Ukraine “On Regulating the Situationin the Monetary and Foreign Currency Markets of Ukraine” No. 581 dated 3September 2015 (as amended).

Authors:

Vitaliy Radchenko, Partner, Vitaliy.Radchenko@cms-cmck.com;