Court rulings on Ukrtelecom nationalization overturned by supreme court

Ukraine’s Supreme Court satisfied an appeal by
Ukrtelecom’s (UTLM UK) owner ESU and overturned an appellate court’s ruling
canceling an agreement to privatize 92.8% of the shares in Ukrtelecom,
Interfax-Ukraine reported on July 4, citing its sources. The Supreme Court
ordered the case returned to a first-tier court for review, Interfax said.

Recall, Ukraine’s State Property Fund (SPF) initiated
litigation last year aiming to cancel a 2011 agreement under which it sold a
92.8% stake in Ukrtelecom to ESU for UAH 10.6 bln. The SPF based its position
on ESU’s breach of some of its post-privatization commitments, including
failure to invest USD 450 mln into Ukrtelecom by 2016, as well as failure to
spin off to the state Uktelecom’s division that provides special communication
services for government agencies by 2013. The SPF’s claim was supported by the Kyiv Economic Court in October
and by the Kyiv Appellate Economic Court in December.

Alexander Paraschiy: This is a
really unexpected development that significantly reduces the SPF’s chances to
recover its control over Ukrtelecom. For SCM, this is just the beginning of the
battle for the contested stake in Ukrtelecom, which had been pledged under a
loan from Oschadbank (OSCHAD). Recall, just a month ago, the Kyiv Economic Appellate Court rejected
Oschadbank’s foreclosure claim on the pledged shares, referring to its October
ruling that the shares should be returned to the SPF. Now the bank has the
chance to seize the collateral. In any case, this ruling merely extends this
contest for many months, if not years.