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Andriy SELYUTIN | Arzinger
Since 2013, when the current law on sea ports came into force, the Government has been repeating the mantra that concession had to be the major form of attracting investment to the port infrastructure. Not long ago the draft concession law was approved by Parliament in the first reading and hopefully will be adopted within this year. A few ports are prepared for concession, including Yuzhniy, the deepest port in Ukraine. Perhaps 2018 will become the year of the concession project. But 2017 demonstrated that other legal forms are available and actively used.
Cargill and TIS launched a grain terminal in Yuzhniy port as a greenfield private project. Hutchison applied to rent the existing container terminal in Chornomorsk port. The deal has not been closed yet but the investor’s intent to start working “here and now” is clear. These two indicative projects show the general trend that concession is definitely not the only and perhaps not the best way of investing in the port infrastructure in Ukraine at the moment.
The absence of a straightforward legal framework usually appears as an obstacle but, at the same time, it provides opportunity. Unlike concession, where detailed regulation is expected, other forms give more freedom to potential investors. The renting out of state property, normally associated with the operation of existing terminals, can be used for the reconstruction and creation of new facilities. The law allows fixtures of the rented state property which value has to be compensated by the Government or offset against rent payments. If the fixtures result in a new object the tenant will become co-owner of it pro rata its contribution unless the rent agreement provides otherwise. At the end of the day, either the investor privatizes state property or the Government reimburses the investment. So BOT scheme can be structured via long-term renting of state property.
The significance of the transaction documents and the role of the legal counsel in this type of investments project is very high. Various elements of the port infrastructure are managed by different Government agencies and state-owned companies. The berths are the competence of the Ukrainian Sea Port Authority while the warehouses and railways are operated by state stevedoring companies. The renting of state property often requires antitrust clearance from the Antimonopoly Committee of Ukraine.
The land issue has to be solved too.
CMS Cameron McKenna Nabarro Olswang handles importanttransport infrastructure projects, including ports and roads, municipal and energy infrastructure. The firm has a range of clients including government authorities, financial institutions, leading national and international private companies. Among selected highlights are advising SD Capital on the English and Ukrainian law aspects of a joint venture transaction which brings P&O Maritime (owned by DP World Group, one of the worlds’ largest port operators) to Ukraine for the first time; advising MV Cargo on the USD 100 million joint venture with Cargill for the construction of a new grain terminal in the Black Sea port of Yuzhniy. The Kyiv team showcases active involvement in municipal infrastructure. For example, advising the EBRD on a loan to Chernivtsiteplokomunergo, a municipal district heating company, secured by a guarantee issued by Chernivtsi City Council. Partner Vitaliy Radchenko, who is known for his wealth of energy expertise, leads the practice. Other team members include Kateryna Chechulina, Vyacheslav Ovechkin, Tetyana Dovgan, Khrystyna Korpan.
The scope of Sayenko Kharenko’s industry focus group includes ports and terminals, roads and rail, aviation and airports, municipal infrastructure. The team is consistently active in managing projects supported by international financial organizations, handling projects under FIDIC and other globally recognized forms of contracts. Among the latest high-profile projects is advising Bank of America Merrill Lynch and OPIC, the lead arranger, on sovereign guaranteed financing for State Enterprise Energoatom to construct a centralized spent nuclear fuel storage via the issue of securities on the U.S. stock market and insured by OPIC. The firm increased its profile in port infrastructure and, among others, acted as Ukrainian legal counsel to P&O Maritime regarding the establishment of a joint venture called LB shipping with Ukrainian investment company SD Capital, which will provide harbor towage services in the port of Yuzhniy. The industry team is led by partner and renowned banking and finance expert Nazar Chernyavsky, and supported by counsel Andrew Zablotskyi (recently involved in handling complex infrastructure projects with specific focus on real estate, land and state property leases, regulatory matters), and senior associate Volodymyr Yaremko (arbitration practitioner experienced in FIDIC).
Baker McKenzie enjoys its global expertise legacy for obtaining major mandates in the sector. The track record includes advising financing matters for infrastructure constructions, structuring corporate and M&A, infrastructure assets transactions. The firm has a strong footprint of privatization experience and is enlisted for advisory involving privatization of assets. In particular, the Kyiv office acts as a legal counsel to the EBRD in connection with the contemplated reform of privatization laws to achieve transparent rules regarding the sale of state assets to private investors. The key individuals in infrastructure, power and project finance practice are partners Serhiy Piontkovsky and Ihor Olekhov, as well as senior associate Andrii Moskalyk.
Vasil Kisil & Partners has a wide presence across ports and road infrastructure, enhanced by its reputation in construction and dispute resolution. It recently advised logistics company Seaside Terminal in Mykolayiv Sea Port on matters related to effectiveness of a railway servitude agreement with the Administration of Sea Ports of Ukraine; and advised DuPont Pioneer on new possibilities to build a road in cooperation with Poltava Regional State Administration. The firm raised its profile in tender support. For example, it handled representation of LNK Group (Latvia) on their first attempt to enter the Ukrainian market and participate in a public procurement tender for construction of a new pier at Mykolayiv Sea Port, as well as in public procurement tender for construction of a new pier in Odessa Sea Port. Under the guidance of partner Oleg Alyoshin, the firm acted as Ukrainian law counsel for Ukrainian State Road Agency (Ukravtodor) in the London High Court litigation in relation to a contractor’s claim for interim measures based on the alleged breach of FIDIC contract on road repair. Alexander Borodkin, real estate and construction partner, heads the practice.
The full-service Ukrainian law firm Arzinger has ports and road infrastructure mandates, as well as historically strong real estate and construction practice. The firm has offices in Kyiv, Lviv and Odessa, and is especially active in the south of Ukraine, delivering advice on sea ports and terminals, including structuring partnership and financing, issues of privatization and development. The firm rendered legal support to the State Enterprise Ukrainian Seaport Administration in fulfilling a dredging contract for Yuzhniy Port based on FIDIC standards. Odessa-based partner Andriy Selyutin is in charge of infrastructure practice.
Widely noted for its high-end capabilities in corporate finance, AVELLUM advises on concessions and collaborations, projects evolving real estate and lease. The firm recently acted as Ukrainian legal counsel to the EBRD and IFC on the Contribution Agreement in connection with the implementation of potential concessions projects in Olvia and Kherson Ports signed between the State Enterprise Ukrainian Sea Ports Authority and the EBRD. A benchmark project is recent advice given to state rail operator Ukrzaliznytsya on collaboration with General Electric Company to the tune of USD 1 billion, which is aimed at renovating and modernising the locomotive fleet. Maksym Maksymenko joined the firm as a counsel to strengthen the practice. Two partners, Mykola Stetsenko and Glib Bondar, supervise infrastructure projects.
Broad coverage features in DLA Piper’s projects, energy and infrastructure practice group. The track record of the Kyiv team extends to procurement, development, financing, acquisition, construction and operation of complex infrastructure and energy projects. Among notable long-lasting highlights is advising the Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety of Germany on structuring and establishing an energy efficiency fund by international donors and the State of Ukraine. In the area of port infrastructure, the firm advised Dredging International on its first port project in Ukraine. The practice group is led by two partners, Oleksandr Kurdydyk (banking and finance, energy) and Natalia Kochergina (real estate).
Eterna Law handles, in the main, corporate work with a vivid focus on port infrastructure and construction related matters. Another area of recent focus is structuring investments, financing matters and tender support. Some public highlights included advising Prime Investments on establishing a joint venture with Hutchinson Ports on potential investing in the port infrastructure of Ukraine; advising Bunge on additional investment in expanding infrastructure and development of port capacities. The practice is led by two partners, Oleh Malskyy and Andrey Astapov.
Being well-versed in real estate and construction practices, Gramatskiy & Partners is preferred for investment infrastructure projects and advice on public-private partnerships. Most recently the firm has been actively involved in the road infrastructure field, and rendered support for construction and reconstruction of automobile roads and road infrastructure objects, as well as acted on projects for the new construction and reconstruction of bridges and tunnels in Kyiv and Odessa Regions. Another multi-million project is its continued advising of Seven Hills in connection with its Airport City Project to be located next to Boryspil Airport. Roman Pozhodzhuk manages the infrastructure work. Ernest Gramatskiy is an extremely respected figure and a recognized practitioner for real estate and construction.
INTEGRITES utilizes the expertise of its real estate and construction,dispute resolution and banking and finance practices to render legal support on infrastructural issues. Over the last couple of years the team became active in the development of industrial and infrastructure projects in energy, natural resources, gas pipeline and transit facilities. In 2017 transactional work was marked by notable deals in logistics, while the dispute team received a number of wins in high-profile international arbitrations. Its recent project portfolio takes in advising a leading Turkish construction and engineering company, Su-Yapi Engineering and Consulting Inc., on the investment project related to reconstruction of the Urengoy — Pomory — Uzhgorod gas pipeline; advising AKW Ukrainian Kaolin, a member of Quarzwerke Group, on real estate matters pertaining to construction of a 17 km access road. Another notable ongoing representation is acting for Allseeds in a mediation procedure in a dispute between Allseeds Black Sea and Odessa Regional State Administration regarding allocation of land for construction of a harbor and access route to the oil seed factory. Partners Dr. Oleksiy Feliv, Olena Perepelynska and Oleh Zahnitko cover sector-related legal issues across their core practice areas.
The team of Redcliffe Partners has traditionally strong expertise inthefinancing of infrastructure and real estate, as well as property investment transactions. The firm is the preferred legal counsel for international financial institutions being especially often involved in financing to agribusiness companies with the aim of developing new production or storage facilities. The team acted for the EBRD and IFC on extending two parallel senior secured loans to M.V. Cargo to finance the construction of a new private grain terminal in the commercial port of Yuzhniy; represented the EBRD on its USD 18.7 million loan facility to a subsidiary of Cypriot NT Olimpex Holding Ltd to build a grain drying complex at Odessa port. The firm recently boosted its project portfolio of renewable projects. The practice is led by managing partner Olexiy Soshenko andsupported by counsel Svitlana Teush.
Ukrainian law firm AEQUO has a strong roster of industrial clients, engineering, transportation majors and investors. The team is enlisted for corporate and M&A, asset deals, general issues of public-private partnership, advice on public procurement and tenders. Among other significant mandates are restructuring, competition and contentious work. The main contacts are partners Denis Lysenko and Yulia Kyrpa.
Disputes and bankruptcy matters are the core mainstay of Ilyashev & Partners. Their presence in Russia enables it to act in a number of projects. For example, advising BTA Bank on realizing the program for constructing storages of the “New silk road” in various regions of the Russian Federation. The team’s recent portfolio takes in support of bankruptcy procedures in infrastructure-related matters. The firm represented Port of Vitino on the White Sea in litigations within the bankruptcy procedure involving the port. The firm is also present in the area of social infrastructure, and currently advises Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH on structuring relations with recipients of technical aid for construction and reconstruction of social infrastructure in Eastern Ukraine. The team is led by managing partner Mikhail Ilyashev, and includes Natalia Levchuk, Leonid Gilevich, Oleksandr Denisenko and Lesia Samarina.
ILF Law Firm has a niche standing in the municipal field, showcasing an extensive workload in social infrastructure projects, especially in Eastern Ukraine. The mainstay of the firm is healthcare, with experience in PPPs and broad-based advice followed by sector reforms. Tetyana Gavrysh, managing partner, handled standalone projects of PPP. Another area of focus is energy conservation, including ESCO contracts and project finance, guided by Serhiy Silchenko.
EY is often hired for comprehensive investment structuring and corporate law matters. The legal team of this member of the Big Four developed a financial and operational performance improvement program and corporate development plan for the Kyiv Metro; advised Port Olvia as to the potential options for private investment in port infrastructure (private public partnerships and other arrangements). The office is noted for its energy expertise, and advises IFC in connection with the winding-up of the management agreement between the Kyiv City State Administration and PJSC Kyivenergo. Albert Sych, partner, is also known for his corporate work and deep energy expertise.
Regional Counsels: Port Infrastructure
The Odessa-based ANK Law Office has traditionally a market-leading profile for sea port infrastructure work. The firm acts regularly on projects to construct new terminals, i.e. new vessels, tugs and barges were completed at the shipyards, new hydraulic facilities (approaching channels, operation water areas and quay walls). Among the major highlights is legal support for receiving the consent of the lessor for conducting permanent improvements under a lease agreement over port infrastructure objects between Transgrainterminal LLC (Kernel Group) and the Regional Department of the State Property Fund for Odessa Region, as well as procedure of signing the Memorandum of Cooperation with the State Enterprise Ukrainian Sea Port Authority within the investment project to construct a modern grain terminal in Chornomorsk Sea Port. The office is at the forefront of Odessa and Yuzhniy sea ports infrastructure development issues. The team rendered legal support to subsidiary company Container Terminal Odessa, a member of the HHLA Group, within the next stage of the investment project for around USD 83 million to develop the container terminal at Quarantine Mole of Odessa Sea Port, including construction of a protective breakwater, performance of dredging works. The core individuals, Alexander Kifak and Artyom Volkov, are well known in this area.
Jurline, the Odessa-based law firm provides long-term support to various enterprises operating in the ports of Ukraine (Odessa, Yuzhniy, Chornomorsk, Mykolayiv, Izmail, Reni, etc.). The firm has accumulated clientele from the marine business, rendering advice on activities at sea terminals (easements and rent of port infrastructure facilities, joint activities in seaports, construction and modernization of port infrastructure facilities, hydraulic structures, dredging). Jurline supported investment projects for the construction of port infrastructure facilities, lease agreements on integral property complexes and privatization. It recently took part in designing, constructing and launching several transshipment complexes and sea terminals. The firm’s select clients include LLC IGT (grain terminal), LLC ISRY (ship-repair yard), TIS-Grain Ltd, LLC Terminal Capital Invest, LLC TIS-Mindobryva, LLC TIS, LLC TIS-Container Terminal, Cargill, Inc. (MV Cargo — terminal in port of Yuzhniy), PJSC Severtrans, PJSC Odesavtotrans and others. Volodymyr Zubar is the lead partner.
The Odessa-based Interlegal, the market leading maritime law firm, is traditionally focused on ports and terminals, transport logistic infrastructure. Its team renders advisory on investment projects related to development of logistics, support tenders and also acts on dredging projects. Contractors and investment banks are among major clients. The key partners for project work are Arthur Nitsevych, Artem Skorobogatov and Nikolay Melnykov.