You're reading: Arbuzov, diplomats, oligarch, enter Swissport’s quagmire

As Swissport’s legal battle against Ukraine International Airlines draws to a close, stakes are rising with the first deputy prime minister, diplomats and one of Ukraine’s ten richest oligarchs getting involved.

UIA won a court case on March 27 giving it full control over the nation’s largest airport cargo handler at the expense of its former joint-venture partner Zurich-based Swissport International.

On the same day it won the rights to and immediately purchased 70 percent of Swissport’s share in the joint-venture for just $400,000, at less than 1 percent of its true value, according to Swissport’s estimates, thus inheriting a company worth $25 million.

UIA argued it was Swissport that assessed the share price value in the first place and that its 30 percent minority rights were breached. Swissport refuted the allegations and said it had treated UIA amicably, noting the airline constantly struggled to meet its share obligations to invest in the company.

Then UIA quickly rebranded Swissport Ukraine into Interavia, and Aron Mayberg, the airline’s chairman, announced on April 18 that management had set the task of submitting a business plan and a long-term development strategy.

And when Swissport’s senior vice president Mark Skinner called the ruling an “unfortunate consequence of a successful hostile raider attack (by) Ukraine International Airlines and its main shareholder (and Chairman Aron Mayberg),” the airline rejected the accusations and backed its claims with legal arguments by international law firm Cameron McKenna.

All this came on the heels of UIA reporting a net profit of $3.25 million for 2012, the first time it has been in the black since 2009, when its profits were a third of last year’s.

Meanwhile, Swissport fought tooth and nail to regain its Ukrainian business, which had 800 employees, some 20 customers, and was experiencing double-digit growth. On April 16 it appealed the unfavorable ruling with the Economic Court, the nation’s highest court for commercial cases, with the trial scheduled for June 11.

On the sidelines, Swissport has applied diplomatic and political pressure. The Swiss and French embassies – Swissport is owned by PAI partners, a French private equity firm – have discussed the case with First Deputy Prime Minister Serhiy Arbuzov and Swissport’s local lawyers from DLA Piper, Skinner told the Kyiv Post.

In late May Arbuzov became the chairman for a re-tooled inter-government commission to protect investors’ rights and combat illegal mergers and company takeovers.

Ukraine’s Cabinet recently raised the agency’s status by filling it with ministry and department heads, instead of their deputies, as it was before. It also boosted its powers and spread the scope of its functions, notably to protecting investors’ rights.

“We’ve been told our case is at the top of the list to be handled,” Skinner told the Kyiv Post on June 4.

Arbuzov’s spokesperson Oleksandr Kutereshchyn said the commission will hold its first meeting shortly but did not specify a date and said the first deputy prime minister will start a round of meetings with European Union ambassadors next week to discuss their concerns, “including the Swissport case.”

Meanwhile, Skinner said “one of Ukraine’s 10 richest oligarchs” has offered to mediate the corporate dispute. He would not name the individual, however, and believes the oligarch’s approach “was a tactical move to see what we know” because no progress has been made.

Despite these new developments, Swissport has little hope of winning the appeal.

“We’ve lost all trust in the legal system of Ukraine… the damage has already been done in a very non-transparent way,” Skinner told the Kyiv Post during an April interview.

Indeed, the case appeared to be rigged from the outset. It had six scheduled hearings, three of which were postponed and two of which saw the judge changed at the last minute.

“Regarding the court decisions there are several odd indications that due process principles were not respected, the decisions are in our opinion not in line with local law and we have lost, based on our bad experience, the faith in the proper functioning of the legal system,” Skinner said, adding he learned of the court’s March 27 decision a day in advance.

At the appeals trial Swissport’s legal team plans to argue the previous courts and judges had “decided wrongly based on wrong facts that were not in-line with Ukrainian legislation,” Skinner explained.

“We will seek vindication,” he concluded.

Should Swissport lose the case, Skinner promised to re-enter the Ukrainian market.

“Ukraine has shown fantastic growth rates – it’s always double digit. But the joint-venture partner wasn’t the right one, so we need to be careful with whom we team up, or go in without a partner. We would compete with UIA, but I don’t think there will be competition for long – Ukraine’s ground handlers cannot keep up with our safety levels and we should be able to outperform,” Skinner said confidently.

Kyiv Post editor Mark Rachkevych can be reached at [email protected]