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The Ukraine is one of the many Eastern European countries which introduced franchise specific legislation in 2004 following the example of Russia. However, the registration laws caused numerous practical problems for franchisors due to the absence of a registration procedure.
It is a requirement of Ukrainian Law that franchise agreements are registered with the state authority which registered the franchisor. For foreign franchisors, the franchise agreement has to be registered by the authority which registered the franchisee.
As such the provision seems reasonably straight forward, but so far proved to be impossible to comply with. In practice, the state authorities currently simply refuse to register franchise agreements. This puts franchisors in a difficult situation as:
- the agreement does not come into force until registration has taken place; and
- the parties are prevented from relying on the franchise agreement vis-à-vis third parties unless the franchise agreement is registered
Until now franchisors had to rely on case law which suggested that for franchisors who tried to register, but were turned away by the registration authorities, could not be held liable. The new law envisages that in future the Ukrainian Intellectual Property Office will register franchise agreements creating one central body for all registrations. As the Ukrainian IPO is already accustomed to the registration of trade mark licenses (which generally goes smoothly) it is thought that franchise registration will soon be a straight forward procedure.
In the meantime franchisors that have not been able to achieve registration need to ensure that they keep on file the official refusal letter to avoid challenges.
For more information on franchising in the Ukraine or on the new draft law, please contact Mark Abell, Babette Märzheuser Wood or Chris Wormald.