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Agreement between the Government of the Russian Federation and Cabinet of Ministers of Ukraine on encouragement and mutual protection of investments

of November 27, 1998

The government of the Russian Federation and the Cabinet of Ministers of Ukraine which are hereinafter referred to as with Contracting Parties

developing basic provisions of the Agreement on cooperation in the field of investing activities of December 24, 1993,

having intentions to create and support favorable conditions for mutual investments,

wishing to create favorable conditions for expansion of economic cooperation between Contracting Parties,

agreed as follows:

Article 1 of Determination

For the purposes of this agreement:

1. The term "investments" means all types of property and intellectual values which invest the investor of one Contracting Party in the territory of other Contracting Party according to its legislation, and in particular:

a) personal and real estate, and also appropriate property rights;

b) money, and also securities, obligations, deposits, and other forms of participation;

c) intellectual property rights, including copyright and related rights, trademarks, the rights to inventions, industrial designs, models, and also engineering procedures and know-how;

d) the rights to implementation of economic activity, including the rights to investigation, development and operation of natural resources.

Change of type of investments in which will be made investments will not influence their nature as investments provided that such change will not contradict the legislation of the Contracting Party in the territory of which investments are performed.

2. The term "investor of the Contracting Party" means:

a) any physical person who is the citizen of the state of the Contracting Party and competent according to its legislation to perform investments in the territory of other Contracting Party;

b) any legal entity created according to the legislation existing in the territory of this Contracting Party provided that the legal entity is competent according to the legislation of the Contracting Party to perform investments in the territory of other Contracting Party.

3. The term "income" means the amounts received as a result of investments and includes, in particular: profit, dividends, percent, license and commission fees, and also other remunerations.

4. The term "territory" means the territory of the Russian Federation or the territory of Ukraine, and also the corresponding their exclusive economic zone and the continental shelf determined according to international law.

5. The term "legislation of the Contracting Party" means respectively the legislation of the Russian Federation or Ukraine.

Article 2 Encouragement and protection of investments

1. Each of Contracting Parties will encourage investors of other Contracting Party in implementation of investments in the territory and allows such investments according to the legislation.

2. Each of Contracting Parties guarantees complete and unconditional legal protection to investments of investors of other Contracting Party according to the legislation.

Article 3

National treatment and most favored nation treatment

1. Each of Contracting Parties provides in the territory to the investments performed by investors of other Contracting Party, and activities in connection with such investments the mode at least favorable, than the mode which is provided to own investors or investors of any third state, excluding application of measures of discrimination nature which could interfere with management and the order of investments.

2. Each of Contracting Parties reserves the right to determine industries and fields of activity in which activities of foreign investors are excluded or limited.

3. The most favored nation treatment provided according to Item 1 of this Article will not extend to benefits which the Contracting Party provides or will provide in the future:

a) in connection with participation in the free trade area, the custom or economic union, the monetary union or the international agreement establishing similar associations or other forms of regional cooperation which participant any Contracting Party is or can become;

b) on the basis of the agreement on avoidance of double taxation or other arrangements on the tax matters.

Article 4 Openness and availability of the legislation

Each Contracting Party for the purpose of the assistance to understanding of the legislation relating or affecting the investments performed by investors of other Contracting Party in its territory provides the greatest possible openness and availability of the legislation.

Article 5 Expropriation

1. The investments of investors of one of Contracting Parties performed in the territory of other Contracting Party will not be expropriated, nationalized or subjected to the measures equal for expropriation effects (further hereinafter are referred to as - expropriation), except as specified, when such measures are taken in public concerns in the procedure established by the legislation, are not discrimination and are followed by payment of bystry, adequate and effective compensation.

2. The amount of this compensation shall correspond to market value of the expropriated investments directly until expropriation or before officially it became known of expropriation, at the same time compensation will be paid without delay taking into account the percent charged from the date of expropriation to payment date on interest rate for three-months deposits in US dollars in the London interbank market (LIBOR) plus 1% and will be effectively implementable and freely translated.

Article 6 Compensation of Damage

The mode at least favorable will be provided to investors of one of Contracting Parties to which investments damage in the territory of other Contracting Party owing to war, civil conflicts or other similar circumstances is caused, than that which the last Contracting Party provides to investors of any third state concerning any measures which are taken by it in connection with such damage.

Article 7 Payment transfer

1. Each of Contracting Parties guarantees to investors of other Contracting Party after accomplishment of all tax liabilities by them according to the legislation of each of Contracting Parties free transfer abroad of payments in connection with investments, and in particular:

a) the amounts of initial investments and the additional amounts for maintenance and increase in investments;

b) income;

c) the amounts paid in repayment of the loans relating to investments;

d) the amounts received by the investor in connection with partial or complete liquidation or sale of investments;

e) compensation provided in Article 5 of this agreement.

2. Payment transfer will be made without delay in freely convertible currency by the currency rate applied for date of transfer according to the legislation on currency control of that Contracting Party in the territory of which investments are performed.

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