Verkhovna Rada has launched the reform of subsoil use in Ukraine

13/ 12/ 2022

On December 1, in the second reading, the Verkhovna Rada adopted draft law No. 4187 On Amendments to Certain Legislative Acts of Ukraine on Improving the Legislation in the Field of Subsoil Use, which launches the subsoil use reform in Ukraine. According to the EBA member companies, the adopted law will have a positive effect on the industry, as it will promote the development of subsoil use in Ukraine and the European integration of the industry. Namely: Introducing maximum digitalization, providing the opportunity to make changes to the special permit in terms of the growth of mineral reserves, which will increase revenues to the state budget; Providing for the deadlines for decisions on holding an auction, which will help subsoil use entities to form and plan their own economic activities more efficiently, based on certain time frames; Abolishing the need to obtain a mining allotment; Possibility to alienate a special permit to another subsoil user; Regulating the issue of providing access to land plots through land easements, etc. The European Business Association has been cooperating with the Verkhovna Rada Committee on Environmental Policy and Nature Management on this draft law for more than two years. Its adoption in the current version is the result of a constructive dialogue between the authorities and industry representatives, which is crucial, particularly in wartime, when the subsoil user has made significant investments in the study of the site, the protection of reserves, but temporarily does not have the financial capacity to obtain a special permit for the extraction of minerals. The economic factor in the conditions of war plays a significant role because the supply chains are lost, and the balance of supply and demand in the country at war is actually violated, which is also due to the inability to invest in the extraction of minerals, the demand for which is absent as a result of russias armed aggression against Ukraine. Thus, particularly, in this context, the change is important regarding the right to switch from a pass-through special permit to extraction without an auction within 2 years from the date of expiration of the special permit as opposed to 12 months as proposed in the version of the draft law discussed at the Verkhovna Rada Committee. We hope that this first major deregulatory step will lay the groundwork for further reform of the extractive industry, increasing its competitiveness and attractiveness for current and potential investors.

On December 1, in the second reading, the Verkhovna Rada adopted draft law No. 4187 “On Amendments to Certain Legislative Acts of Ukraine on Improving the Legislation in the Field of Subsoil Use”, which launches the subsoil use reform in Ukraine.

According to the EBA member companies, the adopted law will have a positive effect on the industry, as it will promote the development of subsoil use in Ukraine and the European integration of the industry. Namely:

Introducing maximum digitalization, providing the opportunity to make changes to the special permit in terms of the growth of mineral reserves, which will increase revenues to the state budget;
Providing for the deadlines for decisions on holding an auction, which will help subsoil use entities to form and plan their own economic activities more efficiently, based on certain time frames;
Abolishing the need to obtain a mining allotment;
Possibility to alienate a special permit to another subsoil user;
Regulating the issue of providing access to land plots through land easements, etc.

The European Business Association has been cooperating with the Verkhovna Rada Committee on Environmental Policy and Nature Management on this draft law for more than two years. Its adoption in the current version is the result of a constructive dialogue between the authorities and industry representatives, which is crucial, particularly in wartime, when the subsoil user has made significant investments in the study of the site, the protection of reserves, but temporarily does not have the financial capacity to obtain a special permit for the extraction of minerals.

The economic factor in the conditions of war plays a significant role because the supply chains are lost, and the balance of supply and demand in the country at war is actually violated, which is also due to the inability to invest in the extraction of minerals, the demand for which is absent as a result of russia’s armed aggression against Ukraine. Thus, particularly, in this context, the change is important regarding the right to switch from a “pass-through” special permit to extraction without an auction within 2 years from the date of expiration of the special permit as opposed to 12 months as proposed in the version of the draft law discussed at the Verkhovna Rada Committee.

We hope that this first major deregulatory step will lay the groundwork for further reform of the extractive industry, increasing its competitiveness and attractiveness for current and potential investors.