Kyiv court rejects claim to cancel privatization of Ukrtelecom

The Kyiv Economic Court rejected the claim of the
State Property Fund that demanded the cancellation of the sales-purchase
agreement of 92.79% in Ukrtelecom (UTLM UK) in 2011, Interfax-Ukraine reported
on Nov. 21. In its Nov. 7 ruling, the court rejected two funds’ arguments of an
alleged breach of an SPA agreement by Ukrtelecom’s acquirer.

The first claim was that the acquirer failed to invest
at least USD 450 mln in the company’s development in five years after the
purchase (the court agreed with the defendant’s position that USD 802 mln in
“investments” were made). The second claim was that the acquirer failed to spin
off and pass to the government a subsidiary that provides special communication
services for the state for two years after the deal (the court found that this
subsidiary was created on time and was ready to be passed to a state body,
though it was passed later due to bureaucratic reasons).

Recall, the State Property Fund initiated in 2017 the
cancellation of the 2011 agreement to privatize Ukrtelecom. In October 2017,
the Kyiv Economic Court ruled in favor of the fund, and so did the Kyiv Appellate Economic
Court in March 2018. However, Ukraine’s Supreme Court cancelled in July 2018  rulings of the lower courts
and ruled to send the case for revision to the Kyiv Economic Court.

Ukrtelecom was privatized in March 2011, when an
unknown company called ESU paid for its 92.79% stake UAH 10.6 bln (USD 1.3
bln). In 2013, the SCM business group of Ukraine’s richest tycoon Rinat
Akhmetov purchased ESU and became the owner of the privatized Ukrtelecom stake.

Alexander Paraschiy: Akhmetov’s interim victory in his battle with the privatization agency
is no more surprising after the Supreme Court ruling in his favor. This is not
the tycoon’s final victory, as all his shares in Uktelecom are being pledged
under loans in Ukraine’s state banks, to whom it owes over UAH 4 bln. On top of
that, Akhmetov is under risk to have to pay over USD 800 mln to Raga, who claims in international courts that Akhmetov failed to pay for a purchase of ESU
(Ukrtelecom) in 2013.