Ukraine introduced martial law ending on 26 December 2018 in 10 regions of Ukraine bordering the Russian Federation, Belarus and Moldova’s Trans-Dniester area (Vinnytsia, Luhansk, Mykolaiv, Odesa, Sumy, Kharkiv, Chernihiv, Donetsk, Zaporizhia and Kherson regions), and in the internal waters of Ukraine in the Azov-Kerch water area.
What Does Martial Law Mean?
During the period of the martial law, the military command authorities either independently or with involvement of local administrations or military administrations (if established) are authorized to introduce measures restricting certain rights and freedoms of individuals and companies, including, inter alia:
- use of companies’ productive facilities for defense purposes;
- forced disposal of companies’ assets in the interests of the state;
- special regime of manufacturing and supply of medicines containing narcotic, psychotropic substances and precursors;
- replacement of management of particular companies that fail to comply with the martial law;
- ban on sale of chemical and poisonous substances, alcohol and weapons;
- labor duty for individuals for defense/social work purposes;
- partial mobilization;
- regulation of operation of companies engaged in telecommunication, printing industry and radiobroadcasting;
- seizure of radioactive substances and materials, highly potent chemical and poisonous substances from the companies;
- inspections of vehicles, cargos, offices as well as personal belongings and private residences;
- restriction of free movement for individuals and vehicles; and
- prohibition on public meetings and demonstrations.
As of 30 November 2018 none of the above listed restrictive measures (except for limited restrictions on the movement of individuals) have been introduced.
Immediate Steps for Business
The martial law does not have an immediate effect on the ordinary course of business of most of the companies operating in Ukraine or foreign companies doing business in Ukraine or with Ukrainian counterparties. However, such companies should:
1. Review agreements, contracts and other transactional documentation to understand the immediate and potential impact of the martial law on their respective transactions (M&A, financing, capital markets, investment or trade), in particular whether the introduction of martial law or further imposition of the above specified restrictive measures may:
- trigger event of default, force-majeure, suspension or termination provisions
- require special notification or disclosure; and/or
- hinder timely performance and require changes to the relevant transactional documentation;
2. Consider potential effect on and changes required to trade logistics in case the restrictions on free movement of vehicles, individuals, goods or cargo and/or special entry/exit regime are introduced in the relevant regions;
3. Develop internal policies and provide clear guidance to the local management and employees on the actions to be taken and the rights and duties of the company and its management and employees upon the introduction of restrictive measures affecting the company’s business and operations (in particular, concerning the issues of compulsory use of production facilities for defense purposes, replacement of management, sale of assets or mobilization);
4. Monitor decisions/orders of the local military command authorities; and
5. Monitor developments with respect to sanctions and trade restrictions, which may be introduced by the National Security and Defense Council of Ukraine and the Ministry of Economic Development and Trade of Ukraine in connection or in parallel with the martial law regime.
Baker McKenzie’s Kyiv Office has established a working group ready to advise clients on various aspects of the martial law. Please contact the group’s coordinator, Hanna Shtepa, or other experts Serhiy Chorny, Olha Demaniuk, or Ganna Smyrnova, whenever a need arises.