An additional condition for electricity production incentives is the use of solar modules at electricity production facilities. The share of raw materials of Ukrainian origin in the production cost of such solar modules shall make at least 30% starting from 1 January 2013 and 50 % starting from 1 January 2014, respectively.
The Resolution of NERC # 32 as of 22 January 2009 “On approval of Procedure for the establishment, revision and termination of “green” tariffs for business entities” states that a business entity seeking “green” tariff must submit, among other documents, a document proving its “local content”.
  
2) Conflict with international agreements
 
Ukraine ratified a number of international agreements in the energy sector. It is worth paying attention to their regulation relating to support of local producers.
 
European Energy Charter 1991
 
Ukraine ratified the Agreement and the Protocol on 06.02.98, these documents entered into force for Ukraine on 27.01.99. According to Article 5 of the Charter, “A Contracting Party shall not apply any trade-related investment measure that is inconsistent with the provisions of Article III or XI of the GATT,” which stipulates the principle of national treatment[1].
 
WTO
 
On 5 February 2008 Ukraine joined the WTO, which is the successor to the General Agreement on Tariffs and Trade (GATT). The WTO Agreement on Subsidies and Countervailing Measures prohibits subsidies contingent upon the use of domestic over imported goods (Article 3.1).
 
 
EnergyCommunity
 
On 15 December Ukraine ratified the Protocol on Ukraine’s accession to the Treaty on European Energy Community. Pursuant to Article 18 of the Treaty, prohibited is “any public aid that distorts or threatens to distort competition by favouring certain undertakings or certain energy resources.” According to Article 41 of the Treaty, “Customs duties and quantitative restrictions on the import and export of Network Energy and all measures having equivalent effect, shall be prohibited between the Parties”.
 
Thus, the requirements established by Ukraine for the use of domestic share stipulate less favorable treatment for foreign producers of renewable energy, as manufacturers are forced to buy locally produced equipment. Accordingly, the “local production” requirement violates the provisions of the three agreements mentioned above.
 
3) Tips on how to proceed in case of refusal
 
What can be done, if NERC did refuse to approve a “green” tariff based on the lack of an appropriate share of raw materials / supplies / services of Ukrainian origin? PursuanttoArticle 9 oftheConstitutionofUkraine, “Current international treaties that are binding under the approval given by the Verkhovna Rada (the Parliament) of Ukraine are part of the national legislation of Ukraine.” Article 29 of the Law on Electricity, which establishes the local content requirement, sets forth the following: “If an international treaty to which Ukraine is a party, sets rules other than those provided by the Ukrainian legislation on electricity, the rules of the international treaty shall apply.”
 
In other words, the provisions of international treaties (Article 5 of the European Energy Charter, Article 3.1 of the WTO Agreement on Subsidies, Article 18 and Article 41 of the Treaty on European Energy Community), which prohibit to establish requirements for the use of the share of Ukrainian origin, prevail over the provisions of the Law on Electricity establishing such a rule, so the plaintiff may directly invoke the norms of international treaties in court.
 
Therefore, in this situation a person that was refused the approval of a “green” tariff on the basis of its non-compliance with the local content rules has the right to resort to court, in order to challenge the legal act of individual action.
 
According to Para 2 Part 1 Article 17 of the Code of Administrative Procedure of Ukraine (hereinafter the CAPU), “the jurisdiction of administrative courts applies to public-law disputes, particularly to disputes of individuals or entities with an authority in terms of appealing against its decisions (normative legal acts or legal acts of individual action).”
 
If the court allows an administrative action it may pass a decision as follows: 
    
1) on recognizing the authority’s decision or its single provisions as unlawful and on repealing or invalidating the decision or its single provisions;
 
2) on obliging the respondent to perform certain actions.
 
Accordingly, the plaintiff may file a suit seeking the court to recognize NERC’s refusal to approve the “green” tariff as unlawful and to oblige NERC to approve the “green” tariff for the plaintiff.


[1] In accordance with this principle, member countries are obliged to provide the treatment of sales of imported goods on national markets no worse than the treatment of similar domestic products.