Redcliffe Partners has successfully represented the Nordic Investment Bank before the Supreme Court of Ukraine in a USD 59 million suretyship claim case.
According to the firm, the case “concerned the recognition of the bank’s suretyship claim in the insolvency proceeding against PJSC Dniprovsky Iron and Steel Works (DMK), a large Ukrainian steel mill.”
According to Redcliffe Partners, in 2008, “the bank disbursed a USD 40 million term loan to a Cypriot company for the purpose of on-lending to PJSC Alchevsk Iron and Steel Works (AMK), both companies being affiliates of the Industrial Union of Donbass group, to finance the purchase and installation of a combined cycle gas turbine at the AMK’s production facilities. The loan was secured by an English law-governed suretyship issued in favor of the bank by AMK, DMK, and several other companies of the Industrial Union of Donbass group as sureties. At some point, the Cypriot borrower stopped making interest payments and failed to repay the loan. All four sureties subsequently went into administration. The demands were served by the bank on AMK and DMK to recover the principal and accrued interest but to no avail.”
Furthermore, the firm reports that “in November of 2020, the bank filed applications for recognition of its USD 59 million claim in the insolvency proceedings against AMK and DMK. While the AMK case application is still under consideration, the DMK case has quickly progressed to the Supreme Court. In the DMK case, the court of the first instance and the court of appeal refused to recognize the bank as a legitimate creditor, holding mainly that no primary evidence of the loan disbursement, in particular payment instructions, had been provided; the applicable rules of English law had not been proved so the Ukrainian rules were applicable, and the suretyship had expired as a matter of Ukrainian law. The case was ultimately heard by the Grand Chamber of the Supreme Court, which ruled in favor of the bank and ordered the insolvency administrator to include the bank in the register of creditors. This decision of the Supreme Court is a landmark precedent in Ukraine relevant to all foreign lenders relying on English law-governed loan documentation: it affirms the duty of Ukrainian courts to apply foreign law as agreed by the parties in the relevant loan documents, and establishes the balance of probabilities as the standard of proof for such cases.”
Redcliffe Partners’ team included Managing Partner Olexiy Soshenko, Partner Sergiy Gryshko, and Senior Associates Yaroslav Petrenko and Evgeniy Vazhynskiy.