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The Cabinet of Ministers has approved the Procedure and Rules for mandatory insurance of civil liability of investors including the damage to environment and human health, according to Production Sharing Agreement, unless otherwise specified therein, the Information-Analytical Bulletin of the Cabinet of Ministers of Ukraine informs.
Experts from Ministry of Economic Development and Trade note that Law of Ukraine "On insurance" envisions insurance of investor liability for damage to environment during activities performed on the basis of Production Sharing Agreement (PSA). The approval of Procedure and Rules of mandatory insurance of civil liability of investors enforces provisions specified by this Law.
According to experts, the resolution of the government will ensure definition of legal and organizational basis for insurance and state guarantees aimed to ensure compensation of damage that may be caused by investor to property, environment, and human health.
Practical application of such insurance will also reduce the burden on the state budget due to the need for reimbursement of the harm and damage that may be caused to property, environment, and human health as a result of accidents or technical problems during implementation of investor’s activities under PSA, due to the fact that payments will be made by insurers.
Experts say the resolution will make it more attractive for investors to implement PSAs, which have been signed with major international oil and gas companies Shell and Chevron.
On the one hand, investor liability insurance is supposed to enhance the investors' liability for harm to environment and human health. On the other hand, it must ensure the public confidence that any damage potentially caused by investor under PSA will be reimbursed in cash.