Legal regime of privatization of state-owned banks in Ukraine: main problems, solutions and international legal aspects

The article analyses the legal regime of privatization of state-owned banks in Ukraine. The author examines international arrangements between Ukraine and foreign partners to reduce the share of the state in the banking sector of Ukraine, in particular those set out in the memorandum between Ukraine and the International Monetary Fund. Although these agreements do not establish legally binding obligations for Ukraine under international law, they can be seen as ‘soft law’, the implementation of which is important for Ukraine’s international reputation and for obtaining funding from international donors. The article provides a comparative analysis of the current Law of Ukraine ‘On Peculiarities of Sale of Stakes Owned by the State in the Authorised Capital of Banks in Which the State Participated’ and the new draft law amending the said Law. The article highlights the main differences between the current regulation and the regulation proposed in the draft law and assesses the impact of the proposed legislative changes on the regulation of privatization of state-owned banks in Ukraine. The author examines the key changes proposed by the new draft law, including the extension of the scope of the law to all state-owned banks, the expansion of the range of potential investors, the improvements in the flexibility of the privatisation process, the introduction of restrictions for persons associated with the russian federation and the republic of belarus, the heightened requirements for financial advisors and the expansion of their powers, and the involvement of representatives of international organisations in the privatisation process. Special attention is paid to the analysis of international legal aspects of privatisation of state- owned banks. In particular, the author examines the choice of applicable law to a bank share purchase agreement, as well as the use of contractual mechanisms typical for international M&A market, such as representations, warranties, and indemnities. The author explains the meaning of these concepts and their potential impact on the privatisation process. The article also discusses mechanisms to protect the privatisation process from possible abuse by minority shareholders and former owners of nationalised banks. The article analyses the proposed amendments to the procedural legislation aimed at preventing disruption of the ongoing privatisation process.