Ukraine

1. Is there construction-relevant COVID-19 regulation?

No, there is no COVID-19 regulation that exclusively applies to the construction industry. However, certain safety measures introduced by the Ukrainian authorities to prevent the spread of COVID-19 have caused serious issues for several construction companies. The most important measures for construction industry are:

  • a ban on groups of more than two people; even though this restriction does not apply to construction sites, some law enforcement agencies tend to enforce it against them anyway; and
  • restrictions on public transport.

2. Subsidies and other government support for employer, contractor and other involved parties? (generic, high level only).

No, there are no specific COVID-19-related subsidies or other government support for construction companies. However, the Ukrainian government has introduced several measures to assist the construction industry in general. These measures are:

  • from 1 March to 31 March 2020, taxpayers were released from land tax, land rent and real estate tax, as the payment deadline for land tax, land rent and real estate tax due for April 2020 was extended until 30 June 2020;
  • penalties for breaching tax legislation from 1 March 2020 until 31 May 2020 will not accrue, except for VAT tax, excise tax, and rent tax;
  • from 18 March to 30 June 2020, documentary and factual tax audits are forbidden, with minor exceptions;
  • amendments were made to the Ukrainian Labour Code to allow remote working from any location outside the employer’s premises and flexible working hours. The latter concept considers that the employee’s aggregate daily working time will now consist of a fixed number of working hours and non-fixed hours. The employee will have full discretion in the proper allocation and use of non-fixed hours. Additionally, if the company is unable to continue fully or partially operating during the quarantine period, it can announce a standby regime for all or some of its employees for this period. In this case, employees on standby are entitled to receive two-thirds of their basic salary. This is not a new condition, but an adjustment and clarification of the standby rules for the quarantine period;
  • as long as the quarantine measures remain in force, commercial banks are forbidden from increasing interest rates under loan agreements.

Yes, a pandemic or quarantine can be considered as force majeure. Moreover, the Ukrainian Parliament recently amended the definition of force majeure so that it explicitly includes the quarantine recently introduced in Ukraine. However, under Ukrainian law a force majeure event itself does not entail any legal implications. Thus, an entity can be relieved from liability if it can prove all of the following three elements: (i) an event of force majeure; (ii) its inability to perform under the contract or obligation arising from the law; and (iii) a direct causal link between (i) and (ii). The time and price impacts of the current legal measures will be reviewed on a case-by-case basis.

4. Does the Epidemic give rise to termination rights to either party?

No, unless explicitly agreed otherwise in the agreement.

5. Do the measures currently being taken in relation to the Epidemic amount to change in law? What are the price and time consequences?

Change-in-law clauses are rare in Ukraine and difficult to enforce, so other legal concepts are more typical (please see the answers to questions 4 and 6).

6. Are there any other issues relevant to COVID-19 the construction industry should be aware of?

Ukrainian law provides that a party to an agreement may bring an action to court to: (i) terminate the agreement; or (ii) change the agreement’s terms due to a substantial change in circumstances. To do so, the following must be proved: (i) when entering into the agreement, the parties assumed that such change of circumstances would not occur; (ii) the change of circumstances was caused by events which an interested party, acting with due care and prudence, could not avert after they arose; (iii) the performance of the contract would upset the balance of the parties’ interests and deprive an interested party of what it expected to obtain when it entered into the agreement; and (iv) it does not follow from the nature of the agreement or business practices that the risk of the changed circumstances should be borne by an interested party.

Picture of Nataliya Kushniruk
Natalia Kushniruk
Partner
Kyiv (CMS CMNO)
Picture of Anna Pogrebna
Anna Pogrebna
Partner
Kyiv (CMS RRH)