The Sixth Appellate Administrative Court of Kyiv has rejected the National Bank of Ukraine’s appeal of a lower court decision concluding that the 2016 nationalization of PrivatBank was illegal.
The May 13 appeals court decision brings the bank’s previous owners, oligarchs Ihor Kolomoisky and Hennadiy Boholyubov, one step closer to reclaiming control over Ukraine’s largest financial institution.
The National Bank of Ukraine, or NBU, “does not agree with the court’s ruling and intends to file an appeal in cassation,” Viktor Hryhorchuk, the NBU’s chief lawyer, said in a statement.
Less than a month ago, on April 18, the Kyiv District Administrative Court ruled in favor of Kolomoisky and Boholyubov, canceling PrivatBank’s nationalization.
The court decided that the NBU and Ministry of Finance had insufficient legal grounds to declare the bank insolvent in 2016. It annulled the NBU’s October 2016 order to audit the bank, the results of which formed the basis for nationalization.
However, according to the NBU and PrivatBank’s current management, there were solid grounds to inspect the bank, as it had failed to implement a financial rehabilitation program.
“We strongly believe that the NBU acted legally and on reasonable grounds when issuing the order for the unscheduled audit which is the merits of this case,” said Oleksiy Didkovskiy, co-managing partner of the Asters law firm, which represents PrivatBank’s current management.
Before nationalization, Kroll, a corporate investigations and risk consulting firm based in New York City, did independent research and uncovered “large scale and coordinated fraud over at least a ten-year period ending December 2016.” That resulted in PrivatBank suffering a loss of at least $5.5 billion, Kroll concluded.
Kroll also revealed that more than 95 percent of PrivatBank’s corporate lending went to parties related to its former shareholders and their affiliates.
Additionally, Kolomoisky and Boholyubov even confirmed the bank’s poor condition in a written statement addressed to Prime Minister Volodymyr Groysman on Dec. 12, 2016. In that document, they asked the Cabinet of Ministers to adopt a decision making the state purchase PrivatBank’s shares and recapitalize the bank.
They received Hr 1, or 4 cents, for all their shares and PrivatBank was nationalized and saved from the liquidation.
More recently, on May 2, Kolomoisky said in an interview with journalists from the Nashi Groshi investigative project that this letter to Groysman has no legal power since it is not an agreement.
However, according to NBU lawyer Hryhorchuk, the National Security and Defense Council of Ukraine, the Government of Ukraine, and the country’s international partners all supported the decision to nationalize PrivatBank in order to ensure financial stability and to safeguard the public’s savings.
“The legitimacy of these decisions is obvious, and they cannot be reversed, as there are no legal or economic grounds for such a reversal,” Hryhorchuk said.
“The NBU will continue to prove the legitimacy of its actions,” the central bank said in a statement. “Such court rulings pose a threat to Ukraine’s financial stability, the NBU believes.”
PrivatBank echoed these sentiments.
“We strongly believe that this decision of the Court of Appeal as well as of the court of first instance should be…appealed to the Supreme Court of Ukraine,” lawyer Didkovskiy said.
