A High Court judge in London has decided that English courts do not have sufficient grounds for jurisdiction to hear attempts by Ukraine’s state-owned bank Privatbank’s owners to recover billions of dollars they claim were embezzled by the bank’s original owners, oligarchs Ihor Kolomoisky and Gennadiy Boholyubov.
The new, government-approved owners of PrivatBank brought proceedings in the London High Court in 2017, which led to a worldwide freeze of the two men’s assets to the tune of $2.5 billion.
The judge, Justice Timothy Miles Fancourt, presided over hearings in London’s High Court last July where lawyers for the two Ukrainian businessmen argued that the English court system was not the right place for legal action against their clients and demanded that the freeze orders be rescinded.
On Nov. 23 the judge announced his decision agreeing with the businessmen’s lawyers. PrivatBank executives and the bank’s London-based lawyers said they would appeal the decision and the freeze order will stay in place until that appeal process concludes. PrivatBank said the full judgment has not yet been issued as the judge was considering some additional technical issues.
The two oligarchs owned PrivatBank, Ukraine’s largest bank, and are accused of defrauding it for years before the Ukrainian government nationalized it in 2016 and was forced to inject $5.5 billion in public money to replace missing cash.
Privabank’s current owners, appointed after the nationalization, wanted any trial to be held in England because of concerns that Kolomoisky and Boholyubov, two of Ukraine’s wealthiest businessmen, would be able to influence Ukraine’s notoriously corrupt courts.
The legal proceedings concerned only whether English courts were the correct jurisdiction for any eventual trial and were not to decide on the guilt or innocence of the two Ukrainian oligarchs.
PrivatBank issued a statement in which it said despite the decision not being the one they desired, the judge “found that the evidence is strongly indicative of an elaborate fraud and money laundering on a vast scale” at the bank.
The statement went on to say: “Despite the judge finding that the bank has been the victim of a massive fraud – between $329 million and $1.2 billion – he concluded that the English court does not have jurisdiction over its claims against its former shareholders.
“This judgment is just the first stage of the process and the bank has been granted permission to appeal the decision on jurisdiction and is confident that it will ultimately succeed in bringing its claims to trial in London. The freezing order will remain in place in full until the Court of Appeal has heard the Bank’s further application for permission to appeal on other grounds.”
Privabank’s CEO, Petr Krumphanzl, said: “It is clear that the judge had little doubt that the former shareholders are responsible for a multi-billion-dollar fraud on the bank. We remain committed to recovering these funds through the London court process and retain our faith that the English court will ultimately do justice between the parties.”
Richard Lewis, a partner at Hogan Lovells, the British law firm representing PrivatBank, said they had known that the legal issues about jurisdiction were so complex that they would ultimately have to be decided by an appeal court. “We are confident that they will be resolved in the Bank’s favor,” he said.
He said that admissions by Kolomoisky and Boholyubov’s side during the summer hearings bolster the bank’s allegations that the two men used complex, sham transactions to funnel out large sums of money. That would help PrivatBank’s case, said Lewis “if, as we expect, the bank’s claims ultimately proceed to trial in England.”
