Ex Privatbank owners gain interim success in questioning its nationalization

Kyiv Administrative Court ruled on March 2 to
recognize as unlawful an order of Ukraine’s central bank (NBU) of October 2016
to initiate an inspection in Privatbank (PRBANK), finclub.net news site
reported on April 10 citing its sources in the central bank. The NBU has
already filed an appeal against the ruling which is not publicly available. A
Cyprian company Triantal Investments, which is a former shareholder of
Privatbank, was an initiator of the court hearing.

According to finclub.net, the NBU’s decision to
declare Privatbank insolvent in December 2016 was based on the results of the
October 2016 inspection. Therefore, by questioning the validity of the
inspection, the former shareholders of Privatbank are trying to undermine the
legal ground behind the validity of the bank’s insolvency recognition.

Recall, Privatbank was declared insolvent and
nationalized in December 2016. Since then, the government contributed UAH 155.3
mln (USD 5.9 bln) into the bank’s equity, and bailed-in creditors of the bank
contributed USD 1.1 bln into its bailout. The government and Privatbank are
suing former shareholders (Igor Kolomoysky and Gennadiy Bogoliubov) in London,
demanding compensation of over USD 2 bln.

Alexander Paraschiy: Aiming at avoiding responsibility for the insolvency of Privatbank and
related claims for compensation from the state, Kolomoysky and Bogoliubov will
use any procedural breaches in the complicated process of Privatbank’s
nationalization to question the validity of the entire process. So far, it is
hard to predict who will win the legal battle around Privatbank, but it is
clear that the battle will take many years. For the bailed-in holders of
Privatbank Eurobonds, the latest news looks encouraging, but one should take
into account that this was a ruling of the court of first instance.