PrivatBank appeals in London court case against former owners

Ukraine’s state-owned PrivatBank on Dec. 21 filed an appeal against a London High Court decision which had set back its attempts to regain billions of dollars that Ukraine’s largest bank claims its former owners, oligarchs Ihor Kolomoisky and Gennadiy Bogolyubov siphoned off before the bank was nationalized in December 2016 – an accusation they deny.

PrivatBank’s new management had hoped to sue the former owners in London because they thought the case had a better chance of being heard fairly in England than in Ukraine where the judicial system is riddled with corruption.

As a first step in December 2017, PrivatBank secured an order freezing $1.9 billion of Kolomoisky and Bogolyubov’s assets worldwide – currently $2.6 billion including interest. The case was brought in London as Bogolyubov was resident there during much of the time the alleged fraud is said to have happened. Three companies allegedly involved in the fraud are registered in England. 

But later the two businessmen’s lawyers argued that, among other things, as both men had become residents of Switzerland, and the three companies were a fraction of some 130 non-British companies accused by PrivatBank, the connections with England were too tenuous to justify legal proceedings being held there.

When the judge presiding over those hearings, Justice Timothy Fancourt, finally delivered his decision on Dec. 4, he said England was not the correct jurisdiction for the proceedings.

Now PrivatBank is appealing the ruling in the Court of Appeal of England and Wales.

“PrivatBank looks forward to the Court of Appeal considering this matter in due course, and remains confident in its position,” said Yuriy Sak of CFC Consulting Company, PrivatBank’s public relations representatives in Kyiv.

Kolomoisky and Bogolyubov founded PrivatBank in 1992 and owned it until December 2016, when the Ukrainian government nationalized it due to the bank’s financial problems. By the time of the nationalization, PrivatBank, the largest bank in Ukraine in terms of depositors, had a hole in its ledger worth of $5.5 billion, mostly left by insider loans, according to the government. 

The Ukrainian government, effectively the country’s taxpayers, had to raise money $5.5 billion through bond issues to replace the missing cash. The new, government-approved owners started proceedings in the London High Court to recover some of those funds. 

In later interviews, Kolomoisky denied any wrongdoing, criticized the government, and called the nationalization a hostile takeover of his bank.

The legal proceedings in the judge’s ruling concerned only whether English courts were the correct jurisdiction for any eventual trial and were not a decision about the guilt or innocence of the two Ukrainian oligarchs. In his judgement, Fancourt said that “whether or not a fraud was involved will be a matter for trial somewhere, someday.”

If PrivatBank loses its appeal, it will have to pay Kolomoisky and Bogolyubov’s legal fees of at least £7.5 million (around $10 million) plus additional fees for their own British lawyers.