Kolomoisky loses first court battle over Odesa Portside

The Kyiv Administrative Court refused on July 18 to satisfy a claim by Nortima asking to declare illegal the Ukrainian government’s cancellation of privatization tender results for the Odesa Portside Plant (OPP). The news was reported by Ihor Bilous, the head of Ukraine’s State Property Fund (SPF), via social networks on July 29. “We tried to explain to investors that Nortima had no chance,” he commented, adding that the very court claim was one of the reasons for the failed OPP privatization tender on July 26. At the same time, Bilous recognized that this was just the first court battle.

Recall, Nortima, a firm controlled by tycoon Igor Kolomoisky, offered the highest price for a 99.6% stake in OPP (UAH 5.0 bln) at an open privatization tender held in September 2009. However, the tender commission decided shortly afterwards to refuse to recognize Nortima as the winner. The company has appealed that decision.

In its July 18 ruling, the Kyiv court recognized that the commission indeed had no valid grounds to refuse recognizing Nortima as the winner in 2009. However, the court refused to satisfy Nortima’s claim, cushioning its reasoning with vague text that concluded that “the recognition of the actions as illegal, even amid established conditions of their illegality, won’t lead to recovery of the violated rights of the plaintiff.”

Alexander Paraschiy: What’s most important is that a Ukrainian court found no legal basis to justify the ruling of the SPF (the tender commission) to cancel the tender results of 2009. With such a ruling, we believe Kolomoisky’s position should be strong in the international courts, where he will will turn to if the Ukrainian courts don’t satisfy all his appeals.

In other words, the legal risk remains high for any potential investor participating in a new OPP privatization tender this year or next year. Ironically, this case illustrates how poorly protected are potential winners of privatization tenders from illegal or ill-motivated moves of the state as the seller.