Court rules to charge USD 350 mln from Privatbank in favor of Surkis companies

Pechersk District Court in Kyiv ruled on Sept. 2 to
force Privatbank (PRBANK) to service deposits of British companies controlled by
Surkis brothers, Ukraine’s Finance Ministry reported the same day. The deposits
for a total amount of about USD 250 mln were bailed in after the bank was
declared insolvent and before it was nationalized in December 2016. The ruling
is aimed at the recovery of about USD 350 mln from Privatbank (including
principal and accumulated interest), MinFin reported while highlighting that it
disagrees with the ruling and alleging that it was adopted in violation of
procedural law.

The ruling was condemned by the National Bank of
Ukraine, PM Denys Smyhal and Justice Minister Denys Malyuska, with the last
calling it as one of the biggest scandals in the history of Ukraine’s judiciary
system. In particular, Malyuska highlighted that the ruling to return money to the
Surkis companies was made without consideration of the bail-in case on its
merits. All the affected parties promised to appeal against this ruling as soon
as they receive its text.

Alexander Paraschiy: From the
comments of Ukrainian officials, we can conclude that Pechersk court only
clarified the way to charge money from Privatbank in favour of the Surkis
brothers. The ruling that declared the bank obliged to service the deposits was
adopted by a first-tier court in February 2017 and confirmed by a second-tier
court last time in June 2020. Indeed, these courts did not rule on the
procedure of bail-in, but instead declared that Privatbank should service the
deposits until the bail-in case is considered on the merits.

The government has a chance to appeal against Pechersk
court’s ruling before it becomes enforceable. In any case, it looks possible
that Surkis-related companies will be able to withdraw their deposits from the
bank, as well as some accumulated interest (recall, members of the Surkis family
reportedly were able to withdraw their bailed-in individual
deposits in 2018).

This case is unlikely to have a direct effect on the future
of Eurobonds of Privatbank (PRBANK) which were also bailed-in as part of the
bank’s nationalization in 2016.