Legal aspects of developing and selling aircrafts, two types of corporate lawyers, and why...

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Interview with Dmytro Shymkiv:

“Legal aspects of developing and selling aircrafts, two types of corporate lawyers, and why student organizations are a playground”

Dmytro Shymkiv, a Ukrainian businessman, who during the war invested and became a partner in a company “Aerodrone” which developed drones for civil and military use. Primarily focusing on high endurance, long range and high payload for different UABs. He is also a member of the board of one of the biggest Ukrainian telecom companies such as “Kyivstar”, “Ukrtelecom”, “Helsi” and “Hellstack”. He is also known as a member of the “Ukrainian startup fund board” which is a seed fund for Ukrainian startups. In the past, Dmytro was the deputy head of the presidential administration of ex-Ukrainian president Petro Poroshenko.

The company “Aerodrone” had developed innovative, affordable drones that can be used both for civil and military purposes. In this interview, Dmytro agreed to share what the legal processes on the road to mass distribution of such drones look like. He also shares a set of valuable observations about corporate lawyers in general and advice for the members of student organizations.

The following questions were asked by the author to Mr. Shymkiv, and all answers to them are directly transcribed.

Tell us about your product a little bit. What is special about your drones?

We are focusing on high payloads. One type of drone, the “D-80” can carry eighty kilos and the “E-300” can carry three hundred kilos. They can also fly on very long ranges from eight hundred to almost three thousand kilometers for “E-300”, the flight time can be up to 23 hours. It creates a particular niche in the drone market, which enables us to use beyond visual line-of-sight flights and service customers with logistic needs, agricultural needs, for inspection of pipelines, etc. It is for civil use. For the military, it is logistical drones, and other military needs drones. So, the market is very actively developed, we have been the company primarily focusing on civil drones, but now working also with the military.

Are there any specific regulations connected to your product?

True. Well, actually yes and no. Aviation and propulsion systems are a part of the dual-use regulations so that puts on a lot of requirements on both supplies and the spare parts for the planes but also puts on a lot of regulations on the export, use, control, etc.

Are there any specifics of international markets in terms of legal permissions?

Currently, we are working on both the Ukrainian and international markets. For international markets, if we are talking about civil use, it is either the “European Certification Agency” equaling to “ECAU” rules or the Federal Aviation Agency in the United States. We are currently looking into this opportunity and having several dialogues about this.

Can you tell me a little bit more about how the license to produce such planes was got by your company? Because as far as I understand, the production of dual use products requires certain specific permissions.

You can produce anything you want. You need permission to fly. If we are talking about importing parts, you will have to make sure that the country which is exporting them gives the right permit. Then there are regulations that the state would require that people who use them in the manufacturing processes have transparency on the product. On the next step when you export the finished plane there is a procedure for the control of the export. There regulations on dual-use products come in place. So that’s the process of how it works when we are talking about regulations in terms of building and selling.

Now talking about flying. Flying requires another set of regulations that enable you to use it if we are talking about considering our weight, which significantly exceeds 20 kilos, which puts us in the range of the special permits, and special regulations. The objective of our business is in the end to get the certification of the type, which will enable planes to be used by our customers. Moreover, on top of it, customers may need to certify each sample because those are the planes.

Therefore, the customers also need to go through certain legal processes.

Not the customers, us. When we sell this to them there are two types of customers. Those who want to own it need this product to be certified for use. In addition, if they want to fly, they need to get a permit for flying it like any other aircraft and on top of it they need also to have an agreement. If they want to lease them there could be a wet-lease or dry lease depending on the approach you would use.

How about the certification of military aircrafts? Can you describe how it is done?

When we talk about the certification of military aircrafts, it is a slightly different story. Normally you go through the certification of the particular country where you work. Therefore, the export regulations are the same. You need to certify parts and disclose that your product will be used on certain military roads and what it is going to be. Then we need to disclose who will be the end customer of the product, there is a whole procedure behind that. That is a requirement of international regulations then depending on what is the range, conditions, and speed of the aircraft need to be checked again by the set of regulations for rocket distribution control. We do not qualify for that but there are planes that qualify for that.

Then there is a certification process with the Ukrainian military or any other military, there is a procedure for that, legal procedure. Then you need to agree on your tactical characteristics, you need to certify to confirm them. Then you go through the certification process by the military. At the end of it, you get a certification number, which is a NATO standard number, which is visible in the NATO systems.

After that you must have two elements, your plane needs to be approved for use, meaning that you have NATO code or local code, they can be approved but not used, and then the ministry of defence needs to approve them for the use or experimental use. While your plane is on experimental use, it can be used but not mass-produced. Only after the experimental use, it can be officially used. That is the moment when your plane is used by the military regularly. Nevertheless, it is a long and complicated process in terms of commits, agreements, etc.

Thanks for bringing the light on those processes. Maybe changing the direction of the conversation, a little bit, during your career you were part of many director boards. Many law students in our university will specialize in corporate law. Can you maybe give some personal observations and rules to those young people?

The first rule that anybody has in the legal field or business field is compliance. Compliance is very critical. It is compliance with legislation, compliance with anticorruption practices, compliance with anti-trust laws, and many other things. Lawyers are the first people who can flag misconduct or misbehavior or activities that can jeopardize people and companies. Therefore, compliance is number one. Because compliance is also about integrity, and legal teams need to make sure that the ethical standards of compliance and values are implied. They will very often be tempted to advise or act on shady grounds,[O(31] and they should completely follow the rule of law and the principle of not endangering the business by indecent behavior of some of the business people.

Priority number two is to build a personal relationship, and the ability to understand a counterpart to be in a very good dialogue with the different stakeholders when you are discussing the legal conditionalities of all sorts of things.

Third, is of course knowledge. Have deep knowledge in broad fields. To look not only at the legal background but also at the business structure and how the business operates, what works and what does not work, and how every business has its particular areas.

Finally, my oldest preference was with the lawyers who have creativity around the business. What do I mean by that? They understand the business so they can advise businesses to make money, not to lose it. And it comes with a very simple thing, very often corporate lawyers can be approached by the company owners or management team to design, approve, or review some of the models. Some of the commercial models might be heading into the grey zone or complex zone or some issues.

There are two types of lawyers in this situation. Lawyer one will say “No, no go.” and that’s not my preferred type of lawyer. But there is another type of lawyer who says “It is no go. But, if we tune it here, there and we correct that and make it compliant, that’s a go.”. There are two types of lawyers, those who follow the principles of law and that’s it. They are primarily acting as a knowledge bank assessing the opportunities around the criteria. Nevertheless, there is another type of lawyer who looks at the situation and looks at the needs of the business. Says, “We are ready to look into issues and see what can be done in a compliant and transparent way so that the project or the model becomes viable and become reasonably workable.” Those who are both very attentive to what the business needs and are looking for solutions. Those will always be very valuable to the business environment.

Due to modern tendencies, young lawyers will find themselves not once and not twice in situations where they fit the solution to multi-factor and multi-stakeholder problems into a five-minute speech. Can you, as a person with significant experience in this matter, give advice on how to act in such a situation?

My advice in this one is to focus on what matters. There will always be topics of significant importance. You always do a certain project or business or activity with something in mind. Meaning that you need to pick that from everything else. During the conversations with different stakeholders, you gradually will be polishing your priorities and focus. Over time that will become the essence of your speech and you can make a pitch of your story, your vision, of your strategy within a few seconds and people will understand it. It requires a lot of work to pick the right words to identify what matters, and what is the priority. Peel everything unnecessary off and focus. Trying to do everything at once is usually the road to failure; strategy needs to have a needle.

The final question may be a little more personal. It is known you were part of various student organizations, and you still support many of them. What particular value do you see in them for the youth?

They allow to “Play” let’s put the word “play” into brackets the adult life. And make mistakes while the consequences of those mistakes are not so high at the same time gaining a unique experience. Learning, acting in the practices, motivating people without money that you carry through the rest of your life. Then you understand how things are done. People who are not part of student organizations often graduate the universities with a very theoretical understanding of what the real work environment looks like. People who have been to the student organizations have a fuller understanding of how things are working, how you work with your peers, how you work with the international community etc. Therefore, the student experience and especially exchange programs are something that differentiates later. Therefore, my advice, join student organizations, seek exchanges, and internships, and act now not when you will be after graduation.