Improved State Guarantee Conditions for Investments in Ukraine
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Partner
Germany
As co-head of the global Finance & Financial Regulation Practice Groups and head of the German Finance & Financial Regulation Practice Group, I advise on national and international finance and capital markets law as well as on commercial and corporate law. I am also a member of the international steering group of our Financial Services Sector Group.
Associate
Germany
As an associate in our German Finance & Financial Regulation Group based in Frankfurt, I advise national and international clients on finance and regulatory matters.
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The German Government extends the instrument of investment guarantees for investments of German companies in Ukraine. In addition to property damage up to the complete loss of the investment, conversion and transfer risks for interest payments on equity-like loans can now be covered.
Investment Guarantees of the German Government
The investment guarantees are a support instrument of the German Government to protect German direct investments abroad against political risks (e.g. nationalisation, expropriation, war, civil war, transfer restrictions, breach of governmental commitments or payment moratoria and conversion or transfer restrictions). The Federal Government provides investment guarantees if the investment is eligible for support and the risk is reasonable.
Consequences of the Russian War of Aggression
After the start of the Russian war of aggression on Ukraine, the German Government discontinued investment guarantees for investments by German companies in Russia and Belarus. Regarding investments in Ukraine, the German Government most recently made it clear in April of this year that coverage by investment guarantees remains possible within reasonable risk limits. However, the risks of payment moratoria and conversion or transfer restrictions for equity-like loans were still excluded from the coverage.
Extension of the Coverage for Ukraine Investments
In order to preserve and expand the business relations of German companies with Ukraine even during the Russian war of aggression, the Interministerial Committee of the German Government for Investment Guarantees decided to expand the possible coverage for Ukraine investments.
Now conversion and transfer risks for interest payments on equity-like loans of shareholders or third parties (mostly banks) for investments in Ukraine can once again be covered by investment guarantees. Therefore, the capital invested (capital cover) as well as income due (e.g. dividends and interest) can now be guaranteed in the case of new and expanded investments in Ukraine.
