Recent developments

On 6 April 2016, the Cabinet of Ministers of Ukraine by Resolution No. 277 changed the Rules for sale of exploration licenses or mining licenses¹ and Rules for grant of mineral rights² (the "Changes"). These recent Changes provide, inter alia, for more transparent rules for mineral blocks auctioning and sale. As a result of these Changes, the list of license suspension or reinstatement events is clarified, list of regulatory authorities in the mineral industry becomes more limited, and requirement to have the exploration report confirmed by eligible professionals is abolished.

Rules for sale of exploration licenses or mining licenses

As a result of Changes, transparent rules for initiating mineral block auctions by interested investors, and subsequent sale of such mineral blocks, are established. The Changes simplify the auction procedure, introduce the auction procedure video recording requirement, and clarify grounds for refusal of exploration application or mining application.

From now onwards, all outstanding exploration licenses and mining licenses, and respective agreements in respect of mineral blocks, must be published on the web-site of the State Geology and Mineral Resources Service of Ukraine.

Further, the Changes provide for substantially extended scope of information regarding the auction lot to be provided to potential bidders, and extend the period of time for review of such information from 30 to 90 days.

In our opinion, such Changes will promote transparent competition for mineral blocks.

Changes to mineral rights

Changes provide for limited events when the exploration license or mining license may be granted outside the auction procedure. For instance, such option will cease to be available to any company where the state owns 25% or less, and will only be available to companies wholly-owned by the state. 

Also, from now onwards, no mining license may be granted outside the auction procedure in the event if the exploration of respective block was carried out and financed jointly by the state and private investor. 

Now, such option is available to a private company only in the event if exploration was financed wholly with private money, and to a state-owned company, if wholly with public money.

Changes provide for more limited list, and detailed description, of events when no extension of mining license is allowed, including the very general and ambiguous "violation of the laws" event.

As a result of Changes, list of suspension events in respect of exploration license or mining license becomes more limited, and reinstatement or extension of any such license requires no confirmation of exploration report by eligible professionals. 
 

[1] Resolution of Cabinet of Ministers of Ukraine No. 594 On approval of Rules for auction sale of exploration licenses or mining licenses dated 30 May 2011
[1] Resolution of Cabinet of Ministers of Ukraine No.615 On approval of Rules for grant of mineral rights dated 30 May 2011
 

Additional notes

This LEGAL ALERT is issued to inform Baker & McKenzie clients and other interested parties of legal developments that may affect or otherwise be of interest to them. The comments above do not constitute legal or other advice and should not be regarded as a substitute for specific advice in individual cases.