Appellate court confirms Privatbank obligation to service Surkis deposits for USD 257 mln

The Kyiv Appellate Court ruled on June 10 to reject an
appeal by Ukraine’s cabinet against a February 2017 ruling by a first-tier court
that obliged Privatbank (PRBANK) to service the deposits of Cypriot companies
related to the Surkis family, Interfax-Ukraine reported the same day, citing a
lawyer for the bank. The lawyer also promised to challenge the ruling in the
Supreme Court. The deposits of the Surkis-related companies for about USD 257
mln (UAH 6.8 bln) were bailed-in before the bank’s nationalization in December
2016. Besides these deposits, the government bailed-in all Privatbank Eurobonds
(USD 550 mln, or UAH 14.5 bln), the individual deposits of members of the
Surkis family for UAH 1.1 bln, and the bank’s other obligations to allegedly
related parties, all for a total amount of UAH 29.4 bln.

So far, the Surkis family has won all the court
battles for its deposits in Privatbank in the Ukrainian courts. Next week,
Ukraine’s Supreme Court is scheduled to hear a case on the bail-in of Surkis
family deposits for UAH 1.1 bln.

Alexander Paraschiy: Privatbank
is obligated to implement the appellate court’s ruling, but the legal mechanism
of its implementation is unclear, taking into account that the deposits were
converted into the bank’s equity. Therefore, another series of court hearings
might be needed to cancel the bank’s capital increase, or to force the bank
paying the Cypriot companies compensation in the amount of the bailed-in money.
Meanwhile, there is a small chance that the government will manage to
successfully appeal this ruling in the Supreme Court.

Ultimately, this ruling is unlikely to affect the
attempts of Privatbank bondholders to reinstate in the U.K. courts their rights
over the bailed-in Eurobonds.