The President of Ukraine gave a command to the parliament to make foreign exchange regulation system transparent for foreign exchange transactions entities.

“Foreign exchange regulation system is non-transparent for foreign exchange transactions entities and creates additional difficulties when entering into foreign exchange legal relations,” the President of Ukraine says and submits a draft law on currency (No. 8152) aimed at setting a foreign exchange regulation regime providing for free conduct of foreign exchange transactions by such entities. The President defined the document as urgent.

“Foreign exchange regulation effective model in Ukraine on foreign economic transactions and settlements in foreign currency (introduced as far back as the 1990s) is now extremely outdated and is regarded as one of the most stringent in the world,” MPs repeat to the head of state and submit an alternative draft law on currency (No. 8152-1), aimed at setting a modern liberal regime of foreign exchange control in Ukraine providing for free implementation of foreign exchange transactions by such entities.

A question of compromise

Sergii Papernyk, Head of Banking & Financial Practice, Head of FinTech

Legislation of Ukraine on foreign exchange regulation was de facto based on a single document – Decree of the Cabinet of Ministers of Ukraine No. 15-93 “On Foreign Exchange Regulation and Control System” of February 19, 1993. Sure, all this time amendments were introduced to the Decree, but regulation itself, adopted more than 25 years ago, cannot adequately regulate current legal relations.

Furthermore, according to Chapter 7 of the European Union Association Agreement, Ukraine has undertaken to take measures to ensure free capital flow between the countries which are parties to the Agreement. Since Ukraine today has one of the most stringent foreign exchange regulation regimes, our country obviously needs new foreign exchange legislation.

Draft law No. 8152-1, being an alternative to Presidential one, looks as much more detailed and thorough regulation unlike draft law No. 8152, which is more declarative, leaving details of foreign exchange regulation to the discretion of the National Bank of Ukraine.

Moreover, the norms of draft law No. 8152-1 can be called liberal as regards business, since they solve the most sensitive issues such as deadlines for settlements on export transactions and sale of currency proceeds. It is proposed to classify all these measures as “temporary measures”, which the NBU may apply only in a certain way.

Sure, the issue of prospects of these draft laws is the subject of political dialogue and compromise. Alternative draft law No. 8152-1 is a much better basis for free capital flow, but authors’ lack of confidence to NBU as a financial regulator is obvious from the text. At the same time, presidential draft law No. 8152 is rather declarative, but it can allow the National Bank to response more rapidly and flexibly to challenges of the economic situation.

“Yurydychna praktyka” №17, 24.04.2018