You're reading: Embattled Swissport cargo handler gains court victory (UPDATED)

The Highest Commercial Court of Ukraine on Oct. 2 dealt a blow to Ukraine International Airline’s attempt to take over the nation’s largest air cargo handler that it once owned with Swissport International. 

Specifically, the court nullified a lower court’s
ruling that awarded Swissport’s 70 percent stake in the local company formerly
known as Swissport Ukraine  – valued at $25
million – to its former partner Ukraine International Airlines, which dominates
the domestic market. 

The panel of three judges also ordered a new trial to
take place in a lower court to hear the ongoing corporate dispute between the
two companies. 

The trial is expected to start in November, said
Artur Kiyan, senior associate of Lavrynovych & Partners, who represented
Swissport. 

A Ukraine
International Airlines news release accused Swissport of politicizing what it calls  a simple “commercial dispute” by appealing to European Union and Ukrainian government officials. 

Swissport International, in turn said that the case was political from the outset since UIA never treated the matter as a commercial dispute. 

Swissport senior Vice President Mark Skinner added that now that “there’s a level playing field,” he hopes to settle the issue out of court at a roundtable with UIA to “find an amicable business solution” that will satisfy both parties.  

The decision marks a breakthrough for the Swiss-based
company which on March 27 lost its majority stake in Swissport Ukraine to UIA
for $400,000, or less than one percent of its value, according to the ground
handler’s estimates. 

Swissport had also
accused UIA and its main shareholder and chairman, Aron Mayberg, of
orchestrating a “hostile raider attack.” 

Illegal company
takeovers, often through the use of Ukraine’s notoriously corrupt courts, are
seen as a huge detriment to bringing foreign investment into the country. 

UIA has categorically rejected
the allegations. Earlier statements to the media by UIA said that Swissport had set the low share price in the
first place. The nation’s largest air carrier has maintained that initially it
started litigation to protect its minority rights in the joint venture, which
it claimed were in breach. Particularly, UIA stated that Swissport had
threatened to dilute its 30 percent stake in their joint venture. 

Swissport countered
that it had merely proposed that UIA get a reduction in shares in place of the
money the Geneva-based company would invest on its behalf in order to sustain
double-digit growth in Ukraine. Swissport added that UIA refused to cover its
share of the proposed investment. 

After taking full
control, UIA re-branded the local company as Interavia and pumped nearly $1
million into its share capital to meet growing demand for services at Ukrainian
airports, it explained in a news release, adding that Swissport had neglected
to do so. 

Skinner of Swissport called UIA’s explanations “inconsistent.” 

“First they say they are protecting their minority rights, later they say we didn’t want to invest to expand the company,” said Skinner. 

As a result, Swissport
believes that now its stake in the company has been diluted to less than 1
percent should it regain ownership rights again. Kiyan told the Kyiv Post that
his law firm will argue in court to restore all of Swissport’s rights that
existed prior to the March 27 ruling. 

“We believe all of
UIA’s actions after the March 27 ruling were illegal and that any further moves
it makes (at Interavia) must be done in consultation with Swissport,” said
Kiyan. 

Meanwhile, Swissport
went on the offensive to involve the Swiss and French embassies – it is owned
by a French private equity firm – and has written letters to European Union
officials and agencies, including European Commission President Jose Manuel
Barroso. 

UIA denounced Swissport’s out-of-courtroom actions calling it “inadmissible” that it involved the “political resources of the European Union to resolve a commercial dispute and to levelling the bias of the court of cassation…”

The case has even
caught the attention of the nation’s inter-agency commission on illegal company
takeovers chaired by First Deputy Prime Minister Serhiy Arbuzov. During a
public meeting the commission held on Sept. 16, Arbuzov first mentioned
Swissport’s case among a list of disputes that it was examining. The commission
added that it has received nearly 70 cases of raider attacks worth up to $125
million in losses to victims.

(Editor’s note: This article was updated twice to include commentary from Ukraine International Airlines and then Swissport International, which was received after the Kyiv Post published the article.) 

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