Appellate court refuses to cancel Ukrtelecom privatization

A Kyiv appellate court upheld a ruling that rejected the
claim of Ukraine’s State Property Fund demanding the cancellation of a 2011
sales-purchase agreement (SPA) of a 92.79% stake in Ukrtelecom (UTLM UK), the
finbalance.com.ua news site reported on March 25.

In its Feb. 26 ruling, which was made public on March
22, the appellate court fully agreed with conclusions of the first-tier court
that rejected two arguments of the State Property Fund.

The first argument was that the acquirer failed to
invest at least USD 450 mln in the company’s development in the five years
after the purchase (the court agreed that investments were made, referring to
conclusions of auditors). The second claim was that the acquirer failed to spin
off and pass to the government a subsidiary that provides special communication
services for the state in two years after the deal (the court found that
Ukrtelecom created the subsidiary and did everything possible to pass it to the
state).

Recall, Ukraine’s State Property Fund sold the state’s
92.79% stake in Ukrtelecom to an unknown company, ESU, in March 2011 for UAH
10.6 bln (USD 1.3 bln). In 2013, the SCM holding company – controlled by
Ukraine’s richest businessman, Rinat Akhmetov – officially purchased ESU. In
May 2017, the State Property Fund initiated the cancellation of the privatization
deal. The Kyiv Economic Court in October 2017
and an appellate court in December 2017
ruled to cancel the SPA. However, Ukraine’s Supreme Court overturned the rulings in July 2018
and re-directed the case back to the Kyiv Economic Court for a new hearing.
That hearing resulted in the court rejecting the SPA cancellation in
November 2018.

Alexander Paraschiy: It looks like the case will be heard soon by the Supreme Court again
and – provided the court’s position won’t change from August – that hearing
will result in the full retention of Akhmetov’s rights over Ukrtelecom.
However, to secure his rights, Akhmetov will also have to protect the
controlling stake from the claims of Oschadbank and Ukreximbank, which are
eager to foreclose on the stake after it had been placed as collateral under
the banks’ loans. Further on, Akhmetov will have to win a hearing involving
Raga Establishment Ltd., which has demanded over USD 800 mln by claiming that
SCM had underpaid for Ukrtelecom’s stake when buying it from Raga in 2013.