14:47 12.07.2018

Rada passes law releasing Ukroboronprom from MTC contracts with Russia

3 min read
Rada passes law releasing Ukroboronprom from MTC contracts with Russia

The Verkhovna Rada on Thursday passed at second reading and in full a law releasing the state-owned Ukroboronprom concern from contractual military technical cooperation (MTC) obligations with Russia.

Some 244 deputies, 18 more than the 226 minimum required, voted for law No. 6697 "On introducing changes to laws of Ukraine on resolving several questions of the debt of defense enterprises, part of Ukroboronprom, to the aggressor country and/or occupying country and providing for stable development," which includes amendments agreed upon during the first reading of the bill.

The law ends enforcement proceedings and enforcement measures for judicial decisions to recover debts from listed enterprises of strategic importance for the economy and security of the state in favor of legal entities of the aggressor state and/or occupying state, legal entities with foreign investment and foreign enterprise of the aggressor state and/or occupying state.

In addition, judicial proceedings in the case of bankruptcy of these defense enterprises are not allowed on applications of legal entities of the aggressor state and/or occupying state with foreign investments or foreign enterprises of the aggressor state and/or occupying state.

The explanatory note refers to the decision taken by state leaders in 2014 to terminate MTC with Russia and cancel MTC contracts with Russia, because until 2014 it was impossible to appeal to Russian courts to recover debts, fines and other penalties, as well as for Ukrainian enterprises invoke force majeure provisions.

"Conducting legal proceedings in the territory of the aggressor state resulted in the issuance of a number of court decisions, according to which the Ukrainian party is obliged to pay amounts exceeding the cost of the agreement itself," the law says.

Violation of the rules of jurisdiction for adjudicating decisions on the territory of the aggressor state against Ukraine's defense industry enterprises complex of Ukraine resulted in the accrual of excessive fines, authors of the bill said.

According to the estimates made during the meeting of the parliament, the amount of indebtedness for termination of MTC contracts with Russia, including fines and interest, is an estimated UAH 3.8 billion.

As earlier reported, Ukraine in 2014 stopped exports of military equipment and dual-use goods to Russia, citing the latter's illegal annexation of Crimea and invasion of eastern Ukraine.

The ban on military-technical cooperation with Russia, including the supply of dual-purpose products, is enshrined in presidential decree No. 691/2014 of August 27, 2014, which enacts the National Security and Defense Council's (NSDC) decision of August 27.

The government in May 2015 terminated the intergovernmental agreement with Russia in the field of military-technical cooperation from 1993. In August of the same year, the government denounced the intergovernmental agreement with Russia on the production and scientific and technical cooperation of defense industry enterprises signed in 1993.

In August 2017, the Cabinet terminated the intergovernmental agreement with the Russian Federation from 2003 on cooperation in the export of military products to third countries. In October 2017, it cancelled an intergovernmental agreement with the Russia signed in 2000 on retaining the specialization of enterprises and organizations involved in the production of military products, and in November 2017, it cancelled the agreement with Russia signed in 2005 regulating the procedure for the mutual supply of weapons and military equipment, military components and services.

In accordance with the law adopted by parliament in June 2011, Ukroboronprom, which now includes more than 130 Ukrainian defense enterprises, including the state company Ukrspecexport and its subsidiaries, provides management of state property in the defense industry jointly with the government.

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