British company JKX Oil & Gas, which owns Ukraine’s Poltava Petroleum Company, has won a legal case against Ukraine, with a Swedish court ordering that the state pay the company $12 million as compensation for inflated rent payments.
Ukrainian oligarch Ihor Kolomoisky and his business partner Gennadiy Bogolyubov own a 27.47 percent share in JKX through a company called Eclairs Group Ltd.
However, the compensation payout is far lower than the company had been hoping for. JKX Oil & Gas claimed that its subsidiary, Poltava Petroleum, paid inflated rent for domestic gas extraction in 2011-2015, and demanded $180 million in compensation. It later increased its demand to $270 million.
The International Arbitration Court in Stockholm, Sweden ruled in favor of JKX Oil & Gas on Feb. 3, but awarded only $12 million in damages, a fraction of the original demand.
A statement issued on Feb. 6 by JKX Oil & Gas read that the court “found that the government of Ukraine was in breach of elements of the bilateral investment treaty between the government of the United Kingdom and the government of Ukraine, and has awarded JKX damages of approximately $12 million.”
JKX is a British-registered hydrocarbon exploration and production company that operates mainly in Russia and Ukraine.
In February 2015 it started legal action against Ukraine in Stockholm, claiming that Ukrainian government’s regulations had imposed unjustified costs on its business.
The government regulations that JKX challenged in court included an increase in subsoil taxes for oil and gas production, an obligation for large companies to purchase gas only from Ukraine’s state-owned gas monopolist Naftogaz, and National Bank of Ukraine administrative measures on the foreign exchange market, such as regulations on sales revenues in foreign currency on the interbank currency market of Ukraine, and limits on the timing of payments made for goods import and export transactions.
Ukrainian Cabinet of Ministers spokesman Dmytro Stolyarchuk couldn’t comment on the court decision or say if Ukraine would pay the $12 million to JKX.
The JKX subsidiary, Poltava Petroleum Company, extracts gas in six sites in Poltava Oblast. Besides Ukraine, JKX has licenses for oil and gas production in Georgia, Bulgaria, Turkey, Italy, the United States and Russia.
Kolomoisky and Bogolyubov were revealed to be investors in JKX during a 2013-2015 legal process in which JKX’s board accused its two minority shareholders, Eclairs Group Ltd. and Glendary Overseas Ltd., of a corporate raid, and restricted the exercising of their rights.
The case made it to the Supreme Court, which ruled in 2015 that JKX’s board had acted improperly against Eclairs Group Ltd. and Glendary Overseas Ltd., which own 27.27 percent and 11.42 percent of JKX respectively.
The Supreme Court ruling revealed that Eclairs Group is owned by trusts associated with Kolomoisky and Bogolyubov, while Glendary Overseas is owned by Russian-British businessmen Aleksander Zhukov and Aleksander Ratskevyich.
Other major investors in JKX are Russia’s Proxima Capital Group Inc. (a 19.92 percent stake), and Turkey’s Neptune Invest & Finance Corp. (12.51 percent).
