Russia has for years demonstrated contempt for international law, ignoring international treaties, court decisions and its own commitments. Ukraine, on the contrary, builds its foreign policy, European integration and cooperation with international partners on the principle of strict adherence to international law and European values. That is why any attempts by individual Ukrainian state bodies to independently reinterpret or substitute the content of international treaties pose not only a legal problem but also damage the state's image, writes UNN.
Adherence to international law is one of Ukraine's main advantages
After the start of the full-scale invasion, Ukraine has repeatedly emphasized that its fight against Russia is not only about preserving territories, it is also a fight for the international legal order. It is on the provisions of the UN Charter, international conventions and the principles of the rule of law that Ukraine builds its lawsuits against Russia in international courts, advocates for sanctions, confiscation of Russian assets and bringing those guilty of war crimes among Russians to justice.
Thanks to this, Kyiv enjoys unprecedented support from foreign partners who perceive Ukraine as a state that acts within the framework of international law even under conditions of full-scale war.
Therefore, it is now especially important that Ukrainian authorities adhere to the same principles within the country.
A dangerous signal for investors
However, recently, the practice of individual state bodies independently interpreting the provisions of international conventions contrary to established legal norms has been causing increasing concern.
A striking example is the position of the Bureau of Economic Security regarding the application of international conventions on the avoidance of double taxation for aircraft leasing. The BES began to qualify payments by airlines for the operating lease of aircraft and helicopters from non-residents of Ukraine as royalties, although the conventions on the avoidance of double taxation between Ukraine and a number of foreign states, the OECD Model Convention (Model Convention on Taxes on Income and Capital developed by the Organisation for Economic Co-operation and Development), long-standing international practice and Ukrainian courts have the opposite approach on this issue.
The law enforcement agency, together with the team of the State Tax Service under the leadership of Tetiana Kyriienko, since 2024 began to use their own interpretation of leasing without any changes to the legislation or the conventions themselves.
The STS proposed taxing aircraft leasing as royalties, i.e., instead of renting transport, in their opinion, a tax should be paid for the use of intellectual property. This position of the tax authorities resulted in a series of criminal cases by the BES against representatives of the aviation business. After all, law enforcement officers are convinced that Ukrainian air carriers using aircraft under lease should have paid 15% royalties to the Ukrainian budget, rather than paying a rental tax in the country of the lessor's residence, while applying international conventions to avoid double taxation. At least 5 airlines have already suffered from the pressure of the BES: MAU, "Aviation Company Constanta", "Urga", "N3OPERATION" and "Skyline".
The Ukrainian Air Transport Association emphasizes that this approach of law enforcement officers to the interpretation of leasing operations hits the competitiveness of Ukrainian air carriers on the global market and they may lose international contracts, through which they survive in the conditions of the closed sky over Ukraine.
Conventions cannot be rewritten by departmental decisions
International treaties are concluded between states and have the same understanding for all their participants. By ratifying the conventions on the avoidance of double taxation, Ukraine agreed to apply them in accordance with generally recognized international principles and approaches formed on the basis of the OECD Model Convention.
It is important to note that for decades the essence of the conventions has not changed, nor have amendments been made to the Tax Code of Ukraine regarding the taxation of aircraft leasing in the last 30 years.
"It is fundamentally important that since 1992, the OECD has deliberately excluded payments for the use of industrial, commercial or scientific equipment from the composition of royalties. Lease payments for machinery, transport, equipment are business profit under Article 7, or rental of transport within the scope of international transportation under Article 8, not royalties," explains Managing Partner of LAW GUIDE, expert in international tax planning, M&A, business structuring and asset protection, Olena Kuznechikova.
Lawyers explain that in Ukraine, international conventions have higher force than Ukrainian legislation.
"According to the Constitution of Ukraine and procedural codes, those changes that were made in 2018, if there is a relevant law regulating certain relations, and there are international acts ratified by Ukraine, they have higher force than the domestic legislation of Ukraine," explained in a comment to UNN lawyer, partner of the law firm "Kravets and Partners" Rostyslav Kravets.
If one of the parties begins to apply international documents in a way that contradicts the generally accepted interpretation, this calls into question the predictability of the legal regime in that country. For business, this means that the rules can change not through a decision of parliament or as a result of international negotiations, but through the position of an individual state body.
International investors perceive this especially sensitively. They assess not only tax rates, the judicial system or the economic situation, but also the stability of the application of international agreements. If the state begins to deviate from generally recognized international rules, investment risks automatically increase, and this scares away foreign business.
What is especially dangerous is that this problem may extend far beyond the aviation industry. If a precedent is created where any state body, especially a law enforcement body, can interpret an international treaty in its own way, similar practice could potentially spread to other areas – from investment agreements to international trade.
For Ukraine, which seeks membership in the European Union and counts on large-scale post-war investments, the predictability of law enforcement is one of the key criteria of trust.
It is important not to lose your main advantage
Today, Ukraine has a strong international reputation as a state that defends the rule of law and demands that the world adhere to international norms regarding Russian aggression.
That is why, within the country, state bodies must also act in accordance with these principles. Any attempts to independently change the content of international treaties or apply them contrary to established international practice can undermine legal certainty, worsen the investment climate and create undesirable reputational risks.
In the fight against Russia, Ukraine has repeatedly demonstrated that its strength lies not only in the army but also in respect for international law. It is this difference that is one of the key advantages of the state, which is especially important to preserve.