Representation of resident interests in ICAC

When companies provide foreign economic activities, they sometimes face with foreign counteragents, who refuse to execute their contractual obligations properly.

The consequence of obligation`s breach by a foreign counteragent is not only the loss of profit that Ukrainian company expected to receive, but, also, imposition of sanctions by the supervisory body for breaching  the terms of payment for export / import transactions.

We are talking about the recently enacted Ukrainian Law “On Currency and Currency Transactions” (hereinafter referred to as the Currency Law) and Resolutions of the Board of the National Bank of Ukraine (hereinafter referred to as the NBU), which were adopted on its basis.

One of the basic requirements of the currency legislation is compliance with the terms of payments. The new Currency Law does not set a specific time limit for settlements, but allows to set such a deadline by the NBU. However, now such a measure is not just a clause of the Act, but a special measure of protection that should be applied exclusively with existence of negative economic and financial trends and deteriorating macroeconomic indicators.

The Part 2 of Art. 13 of the Currency Law stipulates that in case the National Bank of Ukraine establishes a deadline for settlements on transactions for residents for export of goods, the funds shall be credited to the accounts of residents in banks of Ukraine within the terms specified in the agreements, but not later than the period and in the amount established by the National Bank of Ukraine. The term of payment of the debt is calculated from the date of customs clearance of the exported products, and, in the case of export of work, services, intellectual property rights and (or) other non-property rights – from the date of signing (in paper or electronic) form of the act, invoice or other document certifying it’s submission.

At the same time, the Deed about Measures to Protect and Determine the Procedure of Performing Individual Transactions in Foreign Currency, which was approved by the Resolution of the Board of the NBU dated 02.01.2019 № 5, indicated the deadline of 365 calendar days.

Thus, according to the Part 5 of Art. 13 of the Currency Law, a resident’s breach of the settlement deadline entails the 0.3 percent of penalty for each day of delay in the amount of unpaid contract money (the value of the undelivered item) in national currency (in the case if foreign contract payments are set in the national currency) or in a foreign currency, transferred into national currency at the rate of the National Bank of Ukraine, which was set at the date of arrears. The total amount of assessed penalties cannot exceed the amount of unpaid contractual value (the value of the undelivered item).

Thus, in case of improper execution by a foreign contractor its obligation to pay the value of goods (work, services) for a term longer than 365 days, there shall be assessed a penalty to the company in accordance with the Part 5 of Art. 13 of the Currency Law.

The reason for determination of assessed penalties is the application to the ICAC for the purpose of enforcement of debt (if there is appropriate arbitration clause in the contract or there was a signed arbitration agreement) or the occurrence of force majors.

The Part 7 of Art. 13 of the Currency Law indicates that in case of consideration by court, international commercial arbitration of a resident’s claim concerned with  recovering of non-resident’s debt arising from the non-resident’s failure to comply with the deadline provided by a foreign economic agreement (contract), or acceptance for carrying out by appropriate country authorized body of the document to recover such debt from foreign debtor in favor of a resident in a non-judicial (pre-trial) compulsory order in accordance with the conditions established by this article, the term (period) shall be  settled down since the date of acceptance of such claim (acceptance of the relevant document) and there will be no penalty assessed for violation of the terms within this period.

In case, if a court or international commercial arbitration court takes a decision to satisfy the claim, the penalty is assessed only for the period before the day when a claim was received for consideration by the court or international commercial arbitration court.

The experienced lawyers of our company will help you to protect your interests in a court, and the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry. They as well will assist to collect the debt from the foreign counteragent, who broke payment obligations and, also, will help you to avoid imposition of sanctions by the state bodies of authority.