U.K. court rejects Ukraine appeal against USD 12 mln penalty in JKX favor
31 October 2017
The U.K. Hight Court rejected on Oct. 27 the Ukrainian government’s appeal against a penalty imposed in favor of JKX OIl & Gas (JKX LN), affirming the previous ruling that the company should be paid USD 12.1 mln in compensation. “We hope that we can now reach an amicable resolution of the other outstanding legal claims between JKX and Ukraine,” Acting JKX CEO Victor Gladun said about the ruling.
Recall, the ruling to penalize the Ukrainian government was made in early 2017 by an international tribunal. As part of that case, which JKX initiated in 2015, the company did not pay subsoil taxes in 2H15 and had accumulated USD 25.9 mln in tax payables.
Alexander Paraschiy: On the one hand, JKX’s victory is a positive development, despite receiving less that 10% of amount it claimed in international litigation. However, in its pursuit of bigger compensation in the international courts, JKX has accumulated much more in tax payables to the government, USD 25.9 mln, which should be due after the U.K. court’s decision (the litigation was the only reason for JKX to avoid the tax payment in 2015).
By our estimates, JKX now owes about USD 14 mln net to Ukraine and it has no money for such a payment. So the completion of international litigation only brings closer the tax due date for JKX, intensifying its solvency risk. We remain skeptical about JKX’s future and we are bearish on its stock, despite yesterday’s surge.
