The regulatory legal act aimed at creating favorable conditions for investing in the search, exploration and extraction of minerals within the territory of Ukraine, its continental shelf and exclusive (maritime) economic zone on the basis of production sharing agreements is the Law of Ukraine «On Production Sharing Agreements» No. 1039-XIV of September 14, 1999 (hereinafter referred to as the Law of Ukraine No. 1039-XIV).
In accordance with Part 1 of Article 4 of the Law of Ukraine No. 1039-XIV on production sharing agreements, one party - Ukraine (hereinafter referred to as the state) entrusts the other party - the investor, for a specified period, with the search, exploration and extraction of minerals in a specified area (areas) of the subsoil and the conduct of work related to the agreement, and the investor undertakes to perform the assigned work at his own expense and risk, with subsequent compensation for expenses and receipt of payment (remuneration) in the form of a part of the profitable production.
At the same time, the Law of Ukraine No. 1039-XIV (paragraph 1 of Article 1) includes citizens of Ukraine, foreigners, stateless persons, legal entities of Ukraine or another state, associations of legal entities established in Ukraine or abroad, as «investors»; or persons acting individually or jointly, who have the appropriate financial, economic and technical capabilities or appropriate qualifications for the use of subsoil and are determined by the winner(s) of the competition; person(s) determined by decision of the Cabinet of Ministers of Ukraine based on the submission of the Interdepartmental Commission for the Organization of the Conclusion and Implementation of Production Sharing Agreements); person(s) who acquired the rights and obligations specified in the production sharing agreement as a result of the transfer of rights and obligations.
That is, the Law of Ukraine No. 1039-XIV defines an investor not as any person (individual or legal entity) or association of such persons, but only as those persons from among citizens, legal entities, foreign citizens, foreign legal entities, stateless persons, etc. who have financial, economic and technical capabilities or appropriate qualifications to use subsoil, and recognized as the winner of the competition or recognized as the winner in a non-competitive manner by decision of the Cabinet of Ministers of Ukraine or alternatively acquired rights and obligations as a result of the transfer of rights and obligations in accordance with the procedure specified by the Law of Ukraine No. 1039-XIV.
The investor may apply to the Cabinet of Ministers of Ukraine or the Interdepartmental Commission with a proposal to resolve the issue of holding a competition to conclude a production sharing agreement for a separate subsoil area.
The investor is notified of the results of consideration of the submitted proposal no later than within three months (paragraph 1 of part 2 of Article 6 of the Law of Ukraine No. 1039-XIV).
The product sharing agreement is concluded with the winner of the competition, considering the conditions of the competition and the winner's competition application.
The competition is considered to have taken place if at least one participant has applied for participation in it, if he fulfills all the conditions of the competition (Part 4 of Article 6 of the Law of Ukraine No. 1039-XIV).
By decisions of the Cabinet of Ministers of Ukraine and a local government body, a production sharing agreement may be concluded without a tender for subsoil areas with insignificant reserves of minerals, which is confirmed by the conclusions of the relevant state bodies.
If a subsoil user who has a special permit to use subsoil and has begun activities under the conditions provided for by it, expresses a desire to conclude a production sharing agreement, such an agreement (bilateral or multilateral) may also be concluded without a tender by decision of the Cabinet of Ministers of Ukraine.
A production sharing agreement may be concluded in this manner also based on several special permits and/or in respect of several subsoil areas simultaneously, regardless of whether such subsoil areas are adjacent or located separately from each other.
The decision of the Cabinet of Ministers of Ukraine to conclude an agreement without conducting a competition is made based on:
a written application (application) from the subsoil user to the Interdepartmental Commission with a proposal to conclude a production sharing agreement (bilateral or multilateral) with the attachment of copies of documents confirming the legal status of the applicant, his financial capabilities, a copy of the special permit (permits) for the use of subsoil and other information and materials at the request of the Interdepartmental Commission;
proposals of the Interdepartmental Commission on the possibility of concluding a production sharing agreement.
In the event of applying (statement) by a subsoil user regarding the conclusion of a multilateral production sharing agreement, such an application (statement) must be signed by all applicants and contain information about each of them (Part 5 of Article 6 of the Law of Ukraine No. 1039-XIV).
If the participants in a production sharing agreement are two or more investors, they must appoint one investor from among themselves - the operator of the agreement - to represent their interests in relations with the state.
The rights and obligations of the parties to a production sharing agreement are determined in accordance with the civil legislation of Ukraine, taking into account the features provided for by the Law of Ukraine No. 1039-XIV.
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