Business news from Ukraine

SUPREME COURT’S DECISIONS ON TEDIS’S CLAIM TO ENHANCE PROSPECTS OF BIGGEST CIGARETTE MANUFACTURERS TO ACHIEVE REVOKING OF AMCU’S DECISION ON FINES

The findings of the Supreme Court, which allowed Tedis Ukraine to satisfy the cassation appeal against the Antimonopoly Committee of Ukraine (AMCU) and invalidate the fine of UAH 3.4 billion, will also significantly enhance the prospects of cigarette manufacturers to revoke the decision of the committee on fines, according to lawyers interviewed by Interfax-Ukraine.
“Speaking of other tobacco trials, it should be said that the Supreme Court’s findings on the inconsistency of the Antimonopoly Committee’s decision with the rules of prejudice and evidence can significantly enhance the prospects of cigarette manufacturers to overturn the Antimonopoly Committee’s decision,” Asters law firm partner Oleksiy Pustovit said.
He recalled that the Supreme Court had put an end to the Tedis Ukraine lawsuit against the Antimonopoly Committee, invalidating the committee’s decision incriminating anti-competitive concerted actions by Tedis and cigarette manufacturers Philip Morris International (PMI), JT International (JTI), Imperial Tobacco (IT) and British American Tobacco (BAT).
“The decision is important both in terms of influencing the law enforcement practice of the Antimonopoly Committee as a whole and in terms of changing the balance of power in ongoing similar litigation between cigarette manufacturers and the committee,” he said.
The lawyer called the Supreme Court’s decision “brief and capacious at the same time.” In particular, according to the lawyer, the most remarkable position is the illegality of the committee’s use of its decisions and recommendations in other cases as adjudicated. Many of the committee’s findings were not established or examined on the basis of evidence, as required by law, but were taken from other cases in which participants, markets and circumstances differed. In addition, the committee’s decision also contained elements of letters of recommendation as evidence in the case, which was closed without establishing any facts of violation of competition law.
“The Supreme Court concluded that the Antimonopoly Committee, citing other decisions, did not in fact investigate the market itself, which is decisive for any antitrust case, while other decisions dealt with other markets. The issue of the illegality of the committee’s use of its decisions in other cases as adjudicated was raised by the manufacturers and Tedis at the stage of consideration of the case by the committee. From a legal point of view, such an approach is tantamount to charges without some hard evidence,” he said.
The lawyer said that similar arguments were used in the claims of the tobacco manufacturers.
“Following the decision of the Supreme Court, courts will most likely follow the position of the illegality of the committee’s decisions and recommendations made in other cases as adjudicated, in other cases under manufacturer’s claims, which enhances the manufacturer’s chances of winning disputes with the committee,” Pustovit said.
In turn, partner of the Legal Alliance Andriy Gorbatenko reminded that the Antimonopoly Committee imposed a fine on tobacco companies due to the fact that with the entry of Tedis Ukraine (formerly Megapolis-Ukraine) in 2010, the number of cigarette distributors began to decline sharply and by 2013 Tedis Ukraine was the only distributor to which cigarette manufacturers supplied their products. Following the investigation, the committee concluded that this circumstance was the result of anti-competitive concerted actions that concerned the elimination of other distributors from the market or restriction of market access to them. In particular, the Antimonopoly Committee found that cigarette manufacturers had identified unfeasible selection conditions for distributors, which even Tedis Ukraine did not meet.
However, the lawyer said that “the unfortunate decision of the Antimonopoly Committee does not contain exhaustive evidence that would unequivocally answer this question,” and the Antimonopoly Committee did not provide evidence of consistency between the actions of cigarette manufacturers and Tedis Ukraine.
“Could this decision of the Supreme Court be the basis for reversing the decision of the Antimonopoly Committee and some cigarette manufacturers? Definitely, yes. Given the position set out in the decision of the Supreme Court, the accusation of the Antimonopoly Committee in this case is as follows: there seemed to be some agreement to establish barriers for other distributors to enter the primary cigarettes market, but it is not clear who agreed on this and with whom and it does not mean that the conditions established as a result of such an agreement (if any) could really create a barrier,” the lawyer said.
Gorbatenko also said that “the rest of the charges are based on evidence that cannot be used because it was collected in other investigations.”
“The probability that the Antimonopoly Committee’s decision regarding the accusations against the manufacturers will be backed by courts is akin to the probability of meeting an alien mind. Of course, there is a chance, but everyone will be very surprised if it really happens,” the lawyer said.
“We just have to hope that this decision of the Supreme Court will not only bring disappointment to the Antimonopoly Committee, but will also be an incentive for more thorough investigations and preparation of decisions, possibly in relation to Tedis Ukraine,” Gorbatenko said.
In turn, the American Chamber of Commerce in Ukraine reminded that “the rule of law and fair justice is one of the strategic priorities identified by the American Chamber of Commerce in 10 steps for Ukraine’s economic recovery and growth in 2021.”
The Chamber, in particular, notes the need for transparent and fair litigation, as companies have expressed concern that they have not been given full access to the evidence on which the Antimonopoly Committee’s allegations are based, and that insufficient attention was paid the companies’ arguments during the trial.
“Such high-profile disputes usually attract a lot of attention from the international community and can have an extremely negative impact on Ukraine’s image among foreign investors. A quick, transparent and fair solution will help maintain business relations between strategic investors and the state, not damage Ukraine’s reputation and investment climate and avoid losses for the budget,” President of the American Chamber of Commerce in Ukraine Andy Hunder said.

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UKRAINE CLIMBS TO 13TH PLACE IN WORLDSTEEL RATING OF GLOBAL STEEL MANUFACTURERS

Ukraine in May 2020 reduced steel production by 10.4% compared to the same period in 2019, to 1.638 million tonnes, but climbed from the 15th to 13th place in the ranking of 64 countries, the main global manufacturers of these products, compiled by the World Steel Association (Worldsteel).
In May, a drop in steel production was recorded in most countries of the top ten, except for China and Iran. At the same time, the largest decline in steel production was recorded in India, by 39.1%.
In May, the top ten steel producing countries were as follows: China (92.267 million tonnes, an increase of 4.2%), Japan (5.916 million tonnes, a drop of 31.8%), South Korea (5.387 million tonnes, 14.1% down), the Russian Federation (6 million tonnes, 4.8% down), India (5.767 million tonnes, a decrease of 39.1%), the United States (4.790 million tonnes, a drop of 36.6%), Germany (2.850 million tonnes, 18.9% down), Iran (2.350 million tonnes, an increase of 8.9%), Turkey (2.272 million tonnes, a decrease of 25.8%) and Brazil (2.188 million tonnes, a drop by 22.6%).
They are followed by Vietnam (1.949 million tonnes, more by 11.4%), Taiwan (1.730 million tonnes, 10.6% less), Ukraine (1.638 million tonnes, 10.4% less), Mexico (1.450 million tonnes, 13.2% less) and Italy (1.250 million tonnes, less by 43.6%).
In May, 64 countries produced 148.775 million tonnes of steel, which is 8.7% less than in May 2019.

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UKRAINIAN BATTERY MANUFACTURERS ASK PRESIDENT TO HELP LEGALIZE PURCHASE OF MATERIALS

Megatex LLC (Konstantynivka, Donetsk region), the manufacturer of batteries from used batteries, has asked President of Ukraine Volodymyr Zelensky to help solve the problem of legalizing the purchase of recyclable materials.
“We produce accumulator batteries from used batteries, and now when buying recyclable materials (any), a company engaged in cashing money flows is at the end of some link, while the plants recycling this raw material take the punishment from the tax service and prosecutor’s offices. If this is brought to the legal business, the government will receive UAH 4-5 billion of additional receipts,” Head of the company Yuriy Shapran said during a meeting between the president and business representatives of Khmelnytsky region on Wednesday, June 3.
In his opinion, a solution of this problem could be a tax of 3-4%, which the processor would pay for the supplier of raw materials.
“If buyers of recyclable materials pay a tax of about 3-4% for the supplier, then this money will go to the budget. Today, I can frankly say this, this is the cost of the services of cashing companies and it will be easier for business to work, it will not spend time on all these troubles with the law,” Shapran said.
He said that in this case there will be no avoidance of identifying a supplier, which the EU is opposed to.
“We identify him (the supplier), but we pay this tax for him and then he is free, he is honest. The company paid the tax for him and it will not require any additional taxes afterwards,” Shapran said.
In addition, he considers it necessary to cancel the payment of a 5% import duty on recyclable materials for the production of batteries.
“We import raw materials from abroad, and we have a 5% duty, while there is no any duty on other raw materials. We have very low margin, so it is very difficult,” the head of the company said.
He also said that the company is ready to work, it has prospects and more and more foreign partners (it exports 75% of its products), and it is also ready to increase production volumes.
“There were problems under the previous government authority, namely Vesta plant in Dnipro, where former MP Dzenzersky [Denys Dzenzersky, MP of the seventh convocation] worked completely off the books. They were bankrupt, but they worked and the tax service did not come there, while we were unprofitable for four years,” Shapran said.
“That is, there are two problems, namely, to legalize the purchase of recyclable materials and remove the import duty on raw materials,” he said, providing Zelensky with the prepared materials.
Since 1993, Megatex LLC has been producing various lead alloys and is engaged in the production and maintenance of accumulator batteries, their purchase and recycling.

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KOVALSKA GROUP TO PURCHASE ONE OF THE LARGEST MANUFACTURERS OF AERATED CONCRETE IN UKRAINE

JSC Kovalska Reinforced Concrete Structures Plant, part of Kovalska Industrial and Construction Group, has received permission to purchase Energy Product LLC, one of the largest manufacturers of aerated concrete in Ukraine, and intends to complete the deal by late September this year, the press service of group has told Interfax-Ukraine.
“This transaction is one of the largest in Ukraine in the construction market. We, as the market leaders, are interested in diversifying our business lines, expanding our regions and developing new types of construction materials. The aerated concrete market has a high development potential. This asset will allow us to further satisfy the needs of clients in assortment. According to the group’s strategy, we plan to continue expansion in the southern and western regions,” Serhiy Pylypenko, the director general of Kovalska Group, said.
Energy Product LLC (Nova Kakhovka) was established in 2013 and is the fourth largest producer of aerated concrete in Ukraine. The plant’s capacity is 450-500 cubic meters of aerated concrete per year.
Kovalska Industrial and Construction Group has been operating in the construction market of Ukraine since 1956. The company is the leading manufacturer of construction materials, the developer and builder of Ukraine.

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UKRAINIAN MANUFACTURERS OF AGRICULTURAL MACHINERY ASK GOVERNMENT TO LOWER LOCAL CONTENT OF HARDWARE

Ukrainian manufacturers of agricultural machinery has said it is necessary to reduce the local contents of domestic complex agricultural machinery set for 2019-2021 that should be observed for receiving a partial compensation for the cost of machinery and equipment.
UkrAgroMash Association of Agricultural Machinery and Equipment Manufacturers addressed to First Deputy Premier of Ukraine Stepan Kubiv with the respective request, the text of which was made available by the National Committee on Industrial Development on Facebook.
“Under present intense competition with the companies from other countries, which can afford cheap loans and enjoy various incentives and financial support of their countries…it becomes more difficult for the Ukrainian producers to uphold their position in the market and increase the local content with having no such kind of support,” reads the report.
The association says current year business realities make it impossible for the manufacturers of the complex self-propelled machinery to gain local contents, which have been set in 2013, for 2019/2020.
Thus, it is proposed to set local contents for self-propelled combine harvesters on the level of 40% in 2019, on the level of 45% in 2020, and on the level of 50% in 2021 (now these indicators are 55% and 60% respectively in 2019 and 2020), to set 45% and 50% contents for tractors for 2019 and 2020 (previously 55% and 60%), and 55% for 2021.
Besides, the manufacturers propose to fix local contents for special-purpose agricultural machines this and next years on the level of 50% and 55% (previously 55% and 60%), and 60% for 2021, local contents for self-propelled spraying machines on the level of 40% and 45% (55% and 60%) and introduce 50% for 2021.
The farm producers also ask to introduce spraying trailer machines into the list setting 45% of local content for 2019, 50% in 2020 and 55% in 2021.
As reported, the program of financial support for agricultural producers (subsidies for the purchase of agricultural machinery, equipment, railway cars) is about UAH 881.8 million. Of these, partial compensation for the cost of agricultural machinery and equipment made in Ukraine is UAH 681.79 million, special vehicles for the transportation of grain, equipment for the production of bioethanol and electricity from biomass, which were purchased from domestic producers – UAH 200 million.

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UKRAINE’S PHARMACEUTICAL MANUFACTURERS DEMAND TO RESOLVE NUMBER OF ISSUES ON NATIONAL LIST OF MEDICINES

Ukrainian pharmaceutical manufacturers have noted the need to resolve a number of issues related to the filling and application of the national list of essential medicines. Marketing and Sales Director of PJSC Farmak Susana Khalilova noted at present market participants do not have clear understanding of whether there will be the expansion of nosologies, according to which international nonproprietary names (INN) are included in the list, as well as the expansion of the number of molecules on the nosologies already included in the list.
“Currently we have the opportunity to apply for molecules, but we do not understand how we can justify the introduction [of drugs] for new nosologies, for example such as infertility, diabetes insipidus,” she said at a press conference at Interfax-Ukraine. Khalilova also emphasized the need to return the Fast Track procedure and simplify the introduction of changes regarding INN included in the list.
Commenting on the problem of applying the updated list at the local level, in particular the norm on 100% compulsory provision with drugs from it, she noted the difficulty of “how the coverage of this 100% need can be showed.”
Head of InterChem-Pharma Trading House Oleksandr Chumak, in turn, expressed the opinion about the need to approve such an edition of the list that would allow the Ukrainian market to plan its production.

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