News & Analysis

Ukraine’s PrivatBank wins London court appeal against former owner

The Court of Appeal of England and Wales has endorsed an appeal by PrivatBank, Ukraine’s largest commercial bank, allowing the company to claim three billion US dollars including interest from former owner Igor Kolomoisky, a Ukrainian oligarch with financial ties to Volodymyr Zelensky, the country’s president.

“The Court of Appeal has given judgment confirming that the English court has jurisdiction to hear PrivatBank’s fraud and conspiracy claims against its former shareholders, Igor Kolomoisky and Gennady Bogolyubov,” the London court said in a statement, adding that worldwide asset freezes on the former owners of the bank will remain in effect.

The ruling is the latest stage of a lengthy legal battle between Mr Kolomoisky and the bank he owned before it was nationalised in 2016 with support from the International Monetary Fund over solvency concerns.

The PrivatBank lawsuit claimed that Mr Kolomoisky and Mr Bogolyubov had committed fraud that cost the bank several hundreds of millions of US dollars, with Ukrainian authorities saying that a 5.6 billion US dollar-hole was left in the bank’s finances by the former owners.

Reacting to the ruling, Mr Kolomoisky denied any fraud had taken place, adding that he would seek permission from the UK Supreme Court to appeal the decision.

“It is increasingly difficult to see how the defendants will defend the bank’s claims at trial,” Richard Lewis, a partner at Hogan Lovells International told Interfax Ukraine after Mr Kolomoisky announced that he would attack the ruling.

“We are very pleased with the Court of Appeal’s judgment, and are ready to move forward with the bank’s claims in England. This is an important step towards achieving justice for the bank and the people of Ukraine,” PrivatBank CEO Petr Krumphanzl said in a statement.

“It is very positive for Ukraine that we will see the court case proceed in London, where the judiciary is of a high standard and transparent,” wrote Reuters, quoting an unnamed fund manager.

The National Bank of Ukraine welcomed the London court’s decision, arguing that the ruling was good news for the Ukrainian economy, with the country’s dollar-denominated bonds climbing slightly higher on October 15.

The Ukrainian government is yet to negotiate an agreement with the IMF to replace the current standby arrangement of 3.9 billion US dollars that expires by the end of the year. Despite not naming Mr Kolomoisky or PrivatBank, the institution has for several times said that tackling corruption and reducing the influence of oligarchs was a necessary step to improve the economy.

Mr Kolomoisky has previously filed lawsuits in Ukraine in order to claim back ownership of the bank. A number of these are ongoing.

“It is very hard to defend Ukraine – the courts haven’t been rebooted yet. But we must do everything so that not a single kopiyka is paid to the former owners,” the Ukrainian president said prior to the decision.