Competition Regulations and Practice in Ukraine during Martial Law
Activities of AMCU during martial law
Russian military aggression started on 24 February 2022. Thus, the end of February 2022 became a critical point also for the Antimonopoly Committee of Ukraine (AMCU). AMCU then was forced to take rapid actions aimed at ensuring the safety of its personnel and the legality of the competition-related processes in Ukraine.
Considering that Russia’s war against Ukraine turned out to be full-scale, also with Ukraine’s capital (Kyiv) as a target, the AMCU decided to relocate its central office and staff from Kyiv to Lviv and decided to suspend most of its functions.
The relevant procedural document was published by the AMCU on 7 March 2022. By this decision AMCU, in cases where there was no final decision on or before 25 February 2022, suspended (for the period of martial law) the review of:
- the merger control and concerted actions’ applications and cases;
- claims on violation of the competition law;
- claims on unfair competition;
- applications to receive preliminary conclusions on merger control and concerted actions;
- applications to verify/reconsider AMCU decisions;
- state aid notifications and cases, letters to clarify the application of state aid legislation;
- complaints on violation of public procurement legislation.
What is important for the businesses involved in active communication with the competition authority, AMCU also decided to suspend the deadlines for providing information in response to AMCU requests in cases where the deadline for providing such information fell on or after 25 February 2022.
Further on, AMCU slowly began to recover its activities and even relocated back to Kyiv on 6 May 2022. Moreover, AMCU had been clarifying practical aspects of some of its wartime restrictions.
Merger clearances and concerted action permits
AMCU further shed some light on the imposed limitations in terms of merger clearances and concerted actions’ permits. This was a critical and expected step as most of the relevant foreign-to-foreign M&A transactions could not have been put on hold for a long time and businesses required more predictability with Ukrainian merger clearance regulations compliance.
On 1 April 2022, the Antimonopoly Committee of Ukraine published guidelines on merger control and concerted action permits’ procedures for the period of martial law.
In particular, considering that during martial law AMCU’s capabilities to review applications for merger clearances and concerted action permits are significantly limited, AMCU decided to introduce a temporary procedure.
The relevant procedure provides that while the merger control regime generally remains in force, AMCU’s permits will not be issued before the closing of the notified deals. The authority is now merely collecting all filed applications, making initial formal review and will start detailed review after the martial law ends.
Moreover, AMCU introduced a simplified procedure for filing the relevant applications during this time. Parties will have to file a limited scope of documents either in writing or electronically. Within 3 months after the martial law ceases to apply, the relevant parties will have to complement the filings with the missing documents and AMCU will then be able to issue a clearance/permit. Until then, the standard procedure will not be available, so all wartime clearances/permits will be issued post factum.
Unfortunately, although being practically unable to receive a preliminary clearance/permit, the parties are not relieved from fines under the guidelines. This is since such relief will most likely require the relevant legislation to be amended by the parliament of Ukraine. Perhaps this may be done in the future. However, as of now, if notified transactions have no negative impact on competition in Ukraine and have been properly notified under the procedure provided in the guidelines, AMCU will impose rather symbolic fines equal to approximately EUR 1 500.
State aid regulations
In terms of state aid, the situation looks fairly straightforward. To cut a long story short, the Ukrainian parliament de-facto deactivated the Ukrainian state aid control system for the period of martial law. The relevant legislative amendments took effect on 13 April 2022, and AMCU additionally issued guidelines on the topic on 15 April 2022.
State aid granted during martial law is automatically considered compatible. Additionally, state aid grantors are not obliged to file notifications on state aid in case such aid is granted within the period of martial law and one year thereafter.
AMCU will also not perform any of its state aid control obligations during martial law. This also means suspension of any pending state aid cases.
Generally, although this is a piece of bad news for state aid enthusiasts in Ukraine, an effective state aid control system in times of war may create obstacles to immediate economic decisions which may be needed for survival and further recovery of Ukrainian economy.
Public procurement complaints: wartime changes
After the initial suspension of AMCU’s functions as authority for review of public procurement complaints, on 14 April 2022, AMCU announced that it will resume consideration of the relevant complaints in a limited mode.
First of all, AMCU will consider complaints that were received before 22 February 2022 (inclusive) and which were not considered by AMCU as of 24 February 2022 (inclusive). Further complaints will be considered in a manner that will take into account the martial law restrictions affecting AMCU’s operations as well as military threats and technical capabilities available.
Generally, AMCU is now mostly occupied with reviewing the pre-martial law cases, but recently also de facto resumed reviewing new complaints. Nevertheless, we do not expect that AMCU will review the new cases at pre-war volumes and pace.
Consequences of war for the Ukrainian economy and AMCU’s future role
Of course, the Russian war against Ukraine will not only bring thousands of human losses to Ukraine but will also significantly affect its economy. The depth of the mentioned effect will depend on the steps that will be taken both by the international community (meaning predominantly post-war economic support) and by Ukraine internally.
Effective functioning of the AMCU after the war will be crucial. AMCU should become a watchdog, guarding fair competition in the markets which hopefully will be financially sourced by international donors and businesses. We hope that AMCU will properly and professionally do its job and potential cashflows will be used to rebuild Ukraine and will not be misappropriated in a form of excessive income on wild markets with abusive pricing.
While de facto pause in proper launching and functioning of state aid in Ukraine create risks of future significant structural and behavioral problems for the various sectors of Ukrainian economy, this situation may also provide a good opportunity for AMCU to take lessons from previous periods of the authorities’ mistakes and shortcomings, to amend properly the obsolete competition legislation and to implement best practices of competition protection.
While the relevant legal framework for nationalization of Russian assets in Ukraine is still being developed, we may also expect AMCU to be actively involved into the process of the nationalization along with the sanctions policy increasingly affecting Ukrainian economy.
However, as of now, AMCU’s main goal seems to be limited to the task of survival and avoidance of unnecessary intrusion into wartime economic processes.
One may resume those current special times require special actions. Nonetheless, we will be able to evaluate the effectiveness of the present decisions and their impact on competition at various markets only with the flow of hopefully the soonest peaceful time in Ukraine.
Oleksandr Aleksyeyenko, partner, Nobles
Sviatoslav Henyk, senior associate, Nobles