Fri, Feb
57 New Articles

Crimea Creditors Jostle over Russian Assets

Crimea Creditors Jostle over Russian Assets

  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

An entity linked to Ukrainian oligarch Igor Kolomoisky has failed in an unusual attempt to halt the enforcement of a US$1.1 billion award against Russia – as it races to collect on its own treaty award compensating it for expropriated assets in Crimea.

On 10 November, the Supreme Court of Ukraine dismissed an appeal by IKB-Invest – an affiliate of Kolomoisky’s Privat Group – against the enforcement of an award in favour of Ukrainian state-owned bank Oschadbank.

IKB was part of a group of Ukrainian investors (led by Everest Estate) that won a US$159 million award against Russia in 2018 over the expropriation of real estate assets in Crimea following the annexation of the territory. Oschadbank won US$1.1 billion in a similar claim against Russia later that year over the loss of its banking operations on the peninsula.

Both awards have been enforced in Ukraine, with the Supreme Court upholding enforcement of IKB and its fellow investors’ award in February 2019 and the Kiev Court of Appeal enforcing Oschadbank’s award four months later. The Ukrainian assets of three Russian state-owned banks were attached at the request of the IKB claimants in 2018.

IKB applied in September to overturn the enforcement decision favouring Oschadbank, arguing that the Kiev Court of Appeal had erred in Ukrainian law. Fortuna, another of the investors in the Everest case, also applied to join the appeal.

However, the Supreme Court declined to rule on their merits of their claims, holding in its latest ruling that only parties to the arbitration can participate in set-aside or enforcement proceedings concerning an award.

It also refused to allow Fortuna to join the proceedings.

Counsel to IKB and Fortuna in the court action has not been disclosed. Oschadbank used Asters, which also advised the bank in the arbitration alongside Quinn Emanuel Urquhart & Sullivan. Russia was not represented.

Olena Perepelynska, head of international arbitration at Integrites in Ukraine, says IKB’s application was a “very unusual development” for an enforcement proceeding. She suggests IKB was seeking to eliminate Oschadbank from the joint enforcement proceedings to increase its share of any Russian assets attached in Ukraine.

Perepelynska says Oschadbank will be “entitled to collect the major portion of anything found by the bailiff,” as any assets attached will be distributed in proportion to the amount of the creditors’ respective awards.

While the Supreme Court took a “careful approach”, she says it departed from a general rule of civil procedure granting a right of appeal to any third party whose rights are somehow infringed by a judgment in a case in which it was not involved.

Perepelynska says the court “chose to apply a special rule for cases in arbitration-related court proceedings” by holding that only parties to an arbitration could participate.

Russia has faced various treaty claims from Ukrainian investors who lost assets in Crimea following the 2014 annexation. Russia chose not to participate in the initial wave of cases. Following a series of adverse awards, the state changed its strategy last year and is now using a co-counsel team that includes Russia’s Ivanyan & Partners, Swiss firm Schellenberg Wittmer and Dutch firm Houthoff.

The attachments issued by the Ukrainian courts at the request of the Crimea creditors led one of the targeted Russian banks, Vnesheconombank, to launch an investment treaty claim against Ukraine before the Stockholm Chamber of Commerce. In September, the Kiev Court of Appeal refused to enforce an SCC emergency award that restrained Ukraine from forcibly selling the bank’s assets.

Ukrainian media reports that an auction on 99% of the shares had already been carried out in March, with the buyers coming from Kolomoisky’s Privat Group.

By Olena Perepelynska, Partner, Integrites

Integrites at a Glance

INTEGRITES is a full-service law firm with the head office in Ukraine, offices in Kazakhstan and Russia, and representative offices in Germany, the Netherlands, and the UK.

We provide legal services to companies seeking comprehensive advice on large deals and major disputes, as well as day-to-day operation. INTEGRITES is highly recommended for its cross-border work (whether sophisticated transactions or complex dispute resolution) and for the projects in energy, in particular, renewable.

Our mission is to help companies concentrate on development of their business while we take care of the legal issues. With profound industry-focused expertise, we deliver legal solutions that add value to the business of our clients and help them successfully handle legal challenges.

In 14 years INTEGRITES has served more than 850 clients from around the globe, including Fortune 500 companies and international financial institutions. Clients in our portfolio are recognized leaders in various industries: from manufacturing, pharmaceuticals, and retail to agriculture, logistics, and renewables. Currently 80% of the companies we serve are international.

INTEGRITES has been consistently recognized by the leading international legal directories and rankings: Chambers Global/Europe, The Legal 500 EMEA, Who’s Who Legal, IFLR 1000, Best Lawyers, FT Innovative Lawyers.

All News about, and Legal Analysis by, Integrites can be found here.

Firm's website: www.integrites.com