The Cyprus offshore company Tolexis Trading Limited, part of Group DF owned by exiled Ukrainian billionaire Dmytro Firtash, is set to keep one of its most valuable assets, the Zaporizhzhya Titanium and Magnesium Combine.
The revelation comes despite a legal challenge arguing that Firtash and his company had not lived up to the terms of its privatization in 2013.
The only producer of titanium sponge in Ukraine and Europe is located in Zaporizhzhya, the provincial capital of 750,000 people located some 550 kilometers southeast from Kyiv.
The Supreme Court of Ukraine overturned the decision of two previous courts, the Central Economic Court of Appeal and the Commercial Court of Zaporizhzhya Oblast, which ruled to return the titanium combine to state ownership.
DF Group announced in a statement on March 22: “The college of judges of the Supreme Court decided to cancel the decisions of the first and appellate instances as not complying with the norms of Ukrainian legislation.”
Now, the case will go back to the Zaporizhzhya court for reconsideration.
The interest in the city’s titanium combine is obvious. As strong as steel but two times lighter, titanium is often called the metal of the future and in especially high demanded throughout the aerospace industry. Ukraine has an estimated 20 percent of the world’s reserves and largest reserves in Europe, according to experts who presented at the recent Mining World Ukraine exhibition.
Required capital missing, allegations of embezzlement
In 2013, under the era of corrupt President Viktor Yanukovych, a Firtash ally, the state-owned Zaporizhzhya combine became a limited liability company after Ukraine’s Cabinet of Ministers made a decision on its privatization. Firtash is in exile in Vienna, Austria, fighting U.S. bribery charges that he denies, but his business empire — enlarged during the reign of Yanukovych — remains largely intact.
While a 51 percent stake was still owned by the state, the remaining 49 percent was transferred to Firtash’s Tolexis Trading Limited, which won at that time the competition organized by the State Property Fund of Ukraine.
Under the terms of the signed contract, Firtash’s company had to contribute $110 million to the authorized capital of the plant solely for its modernization.
But as it turned out, that did not happen, according to critics. On Sept. 23, 2016, detectives from the National Anti-Corruption Bureau of Ukraine, or NABU, in cooperation with the State Security Service of Ukraine, or SBU, detained Volodymyr Sivak, CEO of Zaporizhzhya Combine, on suspicion of embezzling Hr 492 million, or $19 million.
The investigation found that despite the fact that during 2014-2015 Tolexis Trading Limited allocated $110 million to the combine, only Hr 20 million, or $1.2 million, went for modernization. The rest was allegedly withdrawn through offshore accounts, as the Ukrainska Pravda newspaper previously reported. Group DF denies these accusations.
As a result, on July 9, 2018, the Commercial Court of Zaporizhzhya Oblast made a ruling, initiated by the Specialized Anti-Corruption Prosecutor’s Office, to terminate the agreement on the creation of this limited liability company. Firtash’s lawyers tried to change the decision, but the appellate court left it in force on Dec. 12, 2018.
On March 12, the Supreme Court of Ukraine was about to make a final decision. However, the judge took a break until March 15, and then took a sick leave before ultimately making the decision in favor of the oligarch.
