Ukraine appeals USD 12 mln JKX arbitration ruling

Ukraine’s Justice Ministry has filed an appeal to overturn an international arbitration ruling to pay about USD 12.1 mln in damages to JKX Oil & Gas (JKX LN), the company reported on March 21. JKX believes the appeal is “without merit and frivolous, and a troubling attempt to set aside the legally binding and legitimate award.” The company also said it is continuing to “seek an amicable resolution of all previous legal claims” with the Ukrainian government.

Recall, JKX owes the Ukrainian government USD 10.6 mln of taxes it underpaid in 2010 and potentially will have to pay USD 23.3 mln in taxes it underpaid in 2015. At the same time, international arbitration ruled in early 2017 that the Ukrainian government should pay USD 12.1 mln in some compensation to JKX.

Alexander Paraschiy: The ruling of international arbitration – where JKX demanded compensation of about USD 200 mln from Ukraine – was not in favor of the company, which is why the government was encouraged to appeal against any compensation for JKX. In the best case for the company, the appeal will significantly postpone the government’s payment to JKX. That means there is a risk that JKX’s payables to the government, in a total amount of USD 33.9 mln, will become due sooner. JKX’s cash balance (USD 14.1 mln as of end-2016) does not allow it to pay that amount.

The Ukrainian government isn’t cooperating with JKX, as the recent police inspections suggest. The hostile treatment may be explained by the fact that Igor Kolomoisky – the Ukrainian tycoon in constant battles with the government – is the biggest shareholder of JKX. The overall situation is very risky for the company.