The UK’s Court of Appeal, which is considering the Russian-Ukrainian dispute over $3 billion in eurobonds issued by Kyiv, has decided to study the Ukrainian side’s argument that eurobonds were issued under pressure from the creditor, in this case Russia, the Russian Finance Ministry said in a statement, indicating that Law Debentures Trust will appeal to the Supreme Court regarding this argument on behalf of the Finance Ministry.
“Today, the UK’s Court of Appeal rendered a verdict on Ukraine’s appeal of the London High Court ruling obligating Ukraine to redeem its debt and pay interest on a bond issue acquired by Russia with funds from the National Wealth Fund. The Court of Appeal confirmed the lawfulness of the refusal to grant Ukraine consideration of three of the four arguments stated in order to avoid meeting its obligations with respect to these eurobonds,” the statement said.
“Earlier, the London High Court did not grant consideration of all of the argument stated by Ukraine, determining that they did not minimal criteria for their consideration in full-fledged court proceedings envisaging the calling of witnesses, consideration and analysis of documents, as well as other evidence presented by the parties to the dispute,” the statement said.
The Court of Appeal rendered a judgment on the necessity of conducting legal proceedings in order to determine the presence or absence of evidence supporting the remaining, fourth Ukrainian argument, which alleges that the borrower issued eurobonds under pressure from the creditor, that is Russia, the statement said. At the same time, the Court of Appeal did not confirm the rightness of the defense’s fourth argument, and only declared that that argument, as opposed to the other three arguments made by Ukraine, cannot be dismissed without conducting comprehensive legal proceedings.
Ukraine’s fourth argument, much like the other three arguments, must also be dismissed without legal proceedings, the Russian Finance Ministry said. For this reason, the Ministry has requested that Law Debenture Trust Corporation plc, as the eurobond trustee, to file an appeal with the UK’s Supreme Court regarding the decision on Ukraine’s fourth argument.
The London Court of International Arbitration on April 26 annulled key provisions of PJSC Ukrnafta’s shareholders agreement of 2010, the press service of NJSC Naftogaz Ukrainy, which owns 50% plus one share in Ukrnafta, has said. “”The judges of the arbitration court have concluded that the key provisions of the shareholder agreement between Naftogaz and the companies of [Ihor] Kolomoisky on corporate governance of Ukrnafta are not subject to execution, since they contradict the binding provisions of the corporate legislation of Ukraine,” Naftogaz said.
In particular, the court cancelled Article 9 of the agreement that concerns the election of the chairman of Ukrnafta’s board from among the candidates proposed by minority shareholders (Kolomoisky’s companies). Also, the court overturned the provision according to which the minority shareholders shall nominate five of the 11 members of the supervisory board of Ukrnafta with a quorum of eight members of the board. “The Tribunal ruled that, in general, the shareholder agreement is applicable, although its key provisions on corporate governance of Ukrnafta are not enforceable,” Naftogaz concluded.
As reported, Naftogaz and Ukrnafta’s minority shareholders (the companies that are affiliated with the Privat Group, namely Littop Enterprises Limited, Bridgemont Ventures Limited, Bordo Management Limited, Balliotti Enterprises Limited, Renalda Investments Limited) in January 2010 entered into a shareholders’ agreement, which, in particular, determined the procedure for electing the chairman and members of the board, as well as the supervisory board and the required quorum for the country’s largest oil producer.
According to the document, the chairman of the board should be elected from the candidates proposed by the minority shareholders, and six of the 11 members of the supervisory board and its head should be nominated by Naftogaz. At the same time, the quorum required the presence of eight of the 11 members of the board, which at that time did not contradict the law on joint-stock companies. In March 2015, after the law was amended, the quorum for supervisory board meetings was reduced to a simple majority of votes.
In June 2015, Ukrnafta’s minority shareholders filed a lawsuit with the London arbitration court demanding that Naftogaz should adhere to the terms of the shareholder agreement, even though the rights of Naftogaz were restricted as those of a controlling shareholder, in comparison with the rights provided for by the current legislation. Naftogaz owns a 50% + 1 share in Ukrnafta, while a group of companies affiliated with the former shareholders of PrivatBank have about 42% of the shares.