Merger clearance jeopardized for sanctioned undertakings

The Law of Ukraine “On Amending Certain Laws on Protection of Economic Competition Concerning the Increase of Efficiency of Control over Economic Concentrations” (the “Amendment”) entered into force on 19 December 2017. This Amendment introduces a legal instrument aimed at limiting some undertakings from the sanctioned list to obtain the approval of the Antimonopoly Committee of Ukraine (the “AMC”) for a concentration.

The Amendment may create the impression that the prohibition to obtain the approval is intended to apply to all undertakings from the sanctioned list.

In particular, the following changes were made to:

  • the Law of Ukraine "On sanctions", stating in particular that "… In case the actions, the implementation of which requires the obtainment of the AMC's approval for the concentration, are subject to special restrictive measures (sanctions), provided by part 1 [of Article 4 of this Law], such concentration is prohibited, and the AMC's approval shall not be granted";
  • the Law of Ukraine "On Protection of Economic Competition" pursuant to which (i) the approval for the concentration shall not be granted if such a concentration is prohibited in accordance with the Law of Ukraine "On Sanctions" (the “prohibited concentration”), (ii) the application for the prohibited concentration shall not be accepted for consideration by the AMC, and if already accepted shall not be considered; (iii) consideration of the case on the prohibited concentration shall be terminated without any decision; (iv) the prohibited concentration is grounds to change, terminate or recognize invalid the AMC's decision.

Obviously the text of the Amendment is very vague and may be interpreted in various ways.

Literally, the reading of the law may lead to the following conclusion: the restriction only concerns sanctioned activity, but not persons included on the sanctioned list. In another words, if under the Law “On Sanctions” certain sanctions are applied to an undertaking, and such undertaking is planning to implement actions that under the Law of Ukraine “On Protection of Economic Competition” fall under the notion of a concentration, and implementation of such actions is impossible without violating the imposed sanctions, such concentration is prohibited under the Law “On Sanctions” and the AMC may not grant its approval.

On the contrary, if a person is subject to special economic and other restrictive measures (sanctions), but the implementation of the concentration may be carried out without violation of such sanctions, such concentration is not prohibited under the Law of Ukraine “On Sanctions” and the AMC's approval may be granted subject to compliance with the requirements of the Law of Ukraine "On Protection of Economic Competition". However, the analysis of sanctions introduced by (i) Decree of the President of Ukraine No. 133/2017 "On the Decisions of the National Security and Defense Council of Ukraine" dated 28 April 2017 "On the Introduction of Personal Special Economic and Other Restrictive Measures (Sanctions)" and (ii) Decree of the President of Ukraine No. 63/2017 "On the Decisions of the National Security and Defense Council of Ukraine" dated 15 March 2017 "On the Introduction of Personal Special Economic and Other Restrictive Measures (Sanctions)", demonstrates that only some undertakings are subject to sanctions that may cover actions defined as concentration under competition law.

At this point it is difficult to predict how the AMC will consider the concentration if one of the parties to the concentration appears to be a sanctioned person under the Law of Ukraine "On Sanctions". It is possible that the AMC will try to extend sanctions (restrictions) not only to concentrations that cannot be carried out without violating the sanctions, but also to concentrations, the implementation of which can hypothetically violate the sanctions imposed or facilitate such violation. Moreover, it is not clear how the AMC will define sanctioned undertakings. For example, the AMC may extend restrictions not only to direct parties to the concentration but to all persons connected by control relations to them. In this case, the ultimate judgement shall be taken by the court.

Taking into account the uncertainty in interpretation of the described changes to the laws, the safest way to minimize risk is to obtain preliminary conclusions or clarifications from the AMC with respect to the possibility of obtaining approval for a notified concentration. The AMC's clarifications and the first precedents are expected in the nearest future.

For any questions regarding these changes, please contact Vladimir SayenkoOleksandr NagornyMaksym Nazarenko or Valentyna Hvozd.