A stevedoring company majority-owned by U.S. and German companies lost a case on Aug. 5 at the Kyiv Commercial Court, and with it, further hope of resuming the use of a Black Sea port terminal where it has invested $51 million.
The ruling in the case upheld a lower court’s decision on Jan. 27 that terminated in March a joint activity agreement between private company Container Terminal Ilyichevsk (CTI) and state-owned Sea Commercial Port of Illichivsk. The agreement allowed the foreign-owned company to use four berths at the port under concession.
Andriy Pavlyutin, a 25-percent shareholder and chief executive officer of CTI, has accused billionaire Igor Kolomoisky of being behind his company’s expulsion from the port, where it has conducted business since 2005 and has invested millions of dollars in facility upgrades.
The Kyiv Post was unable to reach Kolomoisky for comment through two spokespersons who worked with him when he was governor of Dnipropetrovsk Oblast. He doesn’t have a publicly listed phone number or press service.
“Looking at this from a standpoint of attracting foreign direct investment for Ukraine at this particular moment, this is a very unfortunate case… we really have an investor who came in here (Ukraine) to develop the port infrastructure,” Vasyl Myroshnychenko, a CFC Consulting communications advisor to CTI, said.
The lawsuit was initiated after the Administration of Sea Ports of Ukraine was established in 2013 to oversee reforms in the industry. CTI’s counterparty in the joint activity agreement, Illichivsk, initially argued in a legal claim obtained by the Kyiv Post that since it no longer managed the berths leased to the company after the newly formed administration appeared, it wanted to annul the deal.
Obtained by the Kyiv Post, the agreement text says CTI gets to use the berths for free and the deal would expire in 2035. In a 2007 revision, it was to split profits with Illichivsk receiving 24 percent of proceeds and at least pay a minimum yearly fee equivalent to 196,000 cargo units at the terminal if profits were below that. To do this, it invested more than $50 million to purchase new equipment and overhaul the facilities.
CTI has been asking the Infrastructure Ministry and the state-owned port to pay more than $500 million to repay the investments that were made and compensate it for the profits that it expected to make for the duration of their deal.
So far the infrastructure ministry has supported the courts’ decisions relating to the case.
State interests in the joint agreement were neglected, Illichivsk’s deputy director of legal affairs Dmitrii Ochkolias told the Kyiv Post. In a phone interview with the Kyiv Post, he said the port received less money than it was supposed to receive, although he didn’t specify the amount.
“The relationship that was created in 2005 … was formed absolutely not in the interests of the government enterprise and the government as a whole,” Ochkolias said. “This mutual cooperation was absolutely ineffective.”
He also said that CTI had to aim for an annual freight turnover of 500,000 cargo units, although the Kyiv Post couldn’t find this requirement in the text of the agreement.
Pavlyutin of CTI defended the terms of the joint activity agreement, saying that it is in the state’s interests to draw in investments in infrastructure.
“It’s against common sense and the interests of the state to do something against us, and we have said many times that we are willing to find a compromise,” Pavlyutin said. “If you’re saying that we need to change something then tell us – but there were no negotiations whatsoever.”
The state enterprise rejected that assertion, saying that it insisted in written form that the profits should be split half-and-half.
Instead, according to Pavlyutin, the state enterprise started the lawsuit “without preliminary discussions” in November 2014.
U.S.-based Siguler Guff and Company owns a 50 percent stake in CTI, with Germany’s SRR Deutschland owning 25 percent and the rest belonging to Pavlyutin. Before 2012, the enterprise belonged to Russia’s National Container Company.
The sea ports administration declined to comment to the Kyiv Post on any matter regarding the dispute between the two enterprises. However, it did say that it should not have any effect on previous corporate agreements.
The timing of the lawsuit coincides with when Ilyichevsk Sea Fishing Port started processing container shipments at the port in December, a month after litigation started, according to Pavlyutin. He accused the state-run port of serving the interests of the company, in which he believes Kolomoisky has an interest.
“That was the only way his (Kolomoisky’s) terminal would be able to work,” Pavlyutin says.
Illyichevsk Fishing Port did not comment on the issue to the Kyiv Post. It used to be owned by Ukraine-registered Antarktika. Neither the fishing port nor Antarktika would confirm whether the two are still related. The latter in turn is majority-owned by two offshore companies, Expert Holding Limited in Cyprus and Madecom Limited in the British Virgin Islands — where the ownership trail ends.
Antarktika uses the services of Privat Bank, co-owned by Kolomoisky, and an auditing firm based in Dnipropetrovsk.
Maersk, a leading container shipping company, says that since February it moved its business from CTI to Ilyichevsk Sea Fishing Port.
CTI also claims that UNIAN and 1+1 Channel, both media companies belonging to Kolomoisky, have falsely accused it of acting as a pro-Russian agent to destabilize the situation in the region.
“We have been accused of supplying 2,000 containers of weapons,” Myroshnychenko said. “His (Kolomoisky’s) media was used to smear the company.”
According to CTI, it employed 608 people and accounted for a third, or Hr 98 million, of Illyichevsk city’s tax revenues last year in Odesa Oblast, according to the company. In 2014 alone, the company paid Hr 74 million to the state enterprise as a minimum fee.
Kyiv Post staff writer Ilya Timtchenko can be reached at [email protected].
