Over seventy years of subordination in a command economy led to irrational resource usage and sustained energy-intensive technological processes in Ukraine. By the way Ukraine generated practically one-fourth of the Soviet Union's GDP. It is widely known now that Ukraine's environmental problems include the nuclear contamination resulted from the 1986 Chernobyl accident. One-tenth of Ukraine's land area was affected by the radiation.

Pollution from other sources also poses a threat to the environment. Ukraine releases polluted water, heavy metals, organic compounds, and oil-related pollutants. The water supply in some areas of the country contains toxic industrial chemicals up to 10 times the concentration considered to be within safety limits. Air pollution is also a significant environmental problem in the Ukraine.

Legislative framework

Environmental policy in Ukraine springs from several provisions of the Constitution of Ukraine. They are:

right to ensure ecological safety in Ukraine,

right of citizens to healthy and safe environment, and

right to free access to information regarding the environment .

Ukraine is also a signatory to a number of international conventions and legal successor to certain conventions signed by the former USSR. All of them make an integral part of the legislation.

The basic principles of the national environmental policy are similar to those of EU countries, and of Central and Eastern European countries integrating into Europe. But at this stage likeness comes to the end.

The framework Law On Environmental Protection was adopted in 1991 before the collapse of the Soviet Union. As a follow-up, the Law On Air Protection (1992, new version dated of 2001), the Water Code (1995), and Law On Waste (1998) were subsequently enacted to create regulatory frameworks for each of those institutions. Other laws address air protection, mineral resources, ecological expertise, etc.

The main governmental body of Ukraine in the sphere of environment is Ministry of Environmental Protection responsible for protection and administration of environment. Authorities within the Ministry are divided among various agencies and committees. A number of other Ministries and Committees, including health protection, industrial safety and industrial policy, also have authority for certain aspects of environmental laws. Local authorities may also have some responsibility for administration of environmental laws, depending upon the nature of the project under consideration. Law enforcement bodies, such as the Ministry of Internal Affairs and the General Prosecutor’s Office, which includes a specialised environmental prosecutor’s department, have significant authority to enforce actions against violations of environmental laws.

Companies as legal entities are subjects of regulation in Ukraine. It makes almost impossible to either obtain reliable information on main production processes or to use effective regulatory mechanisms. The focus is on "end-of-pipe" emission/effluent treatment measures rather than on the analysis of the production process as it is and pollution prevention through improvements of production techniques. The law provides for issuance of permits for emission of pollutants into air, wastewater discharge into water bodies, and placement of waste. Such standards identify permissible levels of discharges by companies of particular pollutants and establish a schedule of payments for discharges of pollutants within these established limits. Factors such as soil contamination, noise, odour, vibration, electromagnetic radiation and other important environmental aspects are not widely considered.

Obviously, Ukraine's regulatory framework requires considerable reform to introduce integrated pollution prevention and control and integrated permitting. The reform should include both adjustment of the current environmental legislation and adoption of a new law which would cover key elements of integrated permitting.

Although prevention is a more rational method than attempting to solve problems after they have occurred, presently environmental policy in Ukraine does not incorporate these procedures in full.

Liability for the Violation of Ukrainian Environmental Laws

The issue of liability for violations of Ukrainian environmental law and injury caused to the third parties as a result of violation of environmental legislation must be understood apart from regulatory requirements relating to payments for discharges of pollutants into the environment.

1. a party causing injury to the third party as a result of a violation of applicable environmental legislation must fully compensate the injured party for actual damages,
2. a director or other official acting within the bounds of official duties does not share civil liability,
3. as a rule, damage resulting from violation of environmental legislation shall be compensated in full.

The scope of Ukrainian environmental legislation is broad, covering most areas of environmental protection and natural resource management. However, Ukrainian environmental legislation is largely declaratory in nature, and it lacks adequate subordinate legislation (regulations, guidelines, bylaws, etc.). The current environmental permitting system in Ukraine is based on a medium-specific approach, with separate regulations related to air and water protection and waste management. All sources of air and water pollution are required to have valid permits which stipulate maximum allowable values of specific parameters of emissions to air and discharges to water, as well as monitoring requirements. There are also separate permits specifying limits for waste storage and disposal.

The permitting system is institutionally complex: operators need a minimum of seven environmental or health-related permits or approvals from different authorities. So, the system is weak from the regulatory point of view.

Requirements for installations are laid down in various parts of primary and secondary legislation, which are rarely interlinked. In extreme cases, compliance with one requirement can be incompatible with other requirements, as it is technically impossible to fulfill both at the same time. Sometimes the same requirements are interpreted differently by different authorities.

There are many authorities issuing permits such as:

Ministry of Environmental Protection

Ministry of Emergency Situations

State Inspection of the Black Sea and the Sea of Azov

Sanitary Inspection

Municipality, etc.

Besides, there is also a strong inspection function carried out by Government authorities monitoring the correct application of the Laws. Please, mind that there is virtually no public involvement in the permitting process.

Taking into consideration all above, business transactions in Ukraine for a foreign investor today must include consideration of environmental issues. Complex laws can impose significant environmental liabilities on purchasers, sellers, and lenders involved in a deal, whether or not they caused the problem, and whether or not they still own the property.

Since this may not be an easy task in Ukraine sometimes all above may need to be the subject of a separate Due Diligence project for Environment (EDD). EDD is an important part of most mergers and acquisitions. The purpose is to evaluate the potential liability costs associated with environmental issues.