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14 June 2019

Franchising in Ukraine: be careful of hidden reefs! – International Franchising Committee

Source: IBA International Franchising Committee newsletter

When choosing a governing law for franchise agreements, franchisors usually try to find an option with fewer mandatory obligations for themselves. At first sight, one may believe that Ukrainian law offers such a ‘safe harbour’ because both the Civil Code of Ukraine and the Commercial Code of Ukraine[1] do not stipulate mandatory pre-contractual disclosure or mandatory testing of franchises before granting under franchise agreements. They also do not stipulate any mandatory compensation to franchisees for the termination of franchise agreements. Nevertheless, this is not the case in practice. This article highlights the most questionable provisions of Ukrainian franchising regulations that require careful evaluation by franchisors if they choose Ukrainian law.

Pre-contractual disclosure

Ukrainian law does not stipulate any pre-contractual disclosure requirements unlike many jurisdictions (for instance, Italy and the United States) where applicable regulations set forth the scope of disclosure and relevant timeframes as well as negative consequences for violation.

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