LONDON – The European Union was expected this month to sign a landmark deal with the Ukrainian government.
The agreement was to be the high point in the EU’s strategy to strengthen relations with the East and spread Western-style democracy and rule of law.
Now it lies in tatters, but the news is far less important for Ukraine than you might first expect, thanks in great part to British justice.
At its heart, the association agreement between the EU and Ukraine is a free trade deal which would open up a vast new market for Ukrainian goods and expand the reach of the European market at the expense of Russia’s own customs union.
Much ink will be spilt on the geopolitical wrangling at the heart of the economic conflict between the EU and Russia, but counter-intuitively the agreement’s conditions are far more important than its economic consequences.
If no one expected to see a flood of Ukrainian tractors under European Christmas trees this December, the agreement would have granted the EU a major economic and political ally at the heart of the Commonwealth of Independent States.
Importantly, the agreement was a carrot to encourage meaningful progress for the rule of law and human rights in Ukraine.
Whilst the EU expected the Ukrainian parliament to pave the way for an independent judiciary and the release of former Prime Minister Yulia Tymoshenko in anticipation of the agreement, this week has seen these hopes dashed. Deadlock at the Ukrainian parliament leaves the prospect of legal reforms hanging by a thread and the former prime minister faces an anxious wait whilst her lawyer has been charged with domestic assault in 2008 involving his ex-wife.
EU diplomats this week held out little hope for the agreement.
Yet I am far from despondent about my country’s future. Yes, for years the country’s legal system has remained inconsistent and unreliable, but a legal transformation is already well under way.
The Ukrainian people owe this not to Brussels but to London.
Increasingly, when you look under the hood of Ukraine’s top businesses you find telltale traces of the British justice system.
Ukrainian firms seeking fair protection have started to rely on sophisticated financial structures to gain protection by the British courts. Under these arrangements, the business’s shares are kept by a British holding company, which is in turn controlled by Ukrainian owners.
The resulting multinational corporation has the protection of the British courts but remains for all intents and purposes Ukrainian. This state of affairs brings a healthy flow of business to London, which is respected internationally as a fair arbiter of disputes. In Ukraine, London’s word is final.
Ukraine isn’t alone in this respect; indeed the entire region from Russia to Kazakhstan has started to benefit from the protection of London’s courts and now over 60 percent of the cases in London’s Commercial Court originate from outside the United Kingdom.
Whilst Zaiwalla & Co. stands out for having native Ukrainian speakers, Russian is increasingly a staple in the city’s legal district.
The situation is so serious that in May last year, Anton Ivanov, the chairman of Russia’s Supreme Commercial Court. called for new powers to annul the decisions of foreign legal centers.
With Russian legal reform as sluggish as Ukraine’s, however, the connection between London and former Soviet republics is as strong as ever.
Next year, for example, Ukrainian billionaire Victor Pinchuk will take to London’s High Court in a $143 million dispute with Gennady Bogolyubov and Igor Kolomoisky, two of the richest men in Ukraine.
It will be the second time Bogolyubov appears in London’s courts in as many years after Ukrainian-focused JKX Oil & Gas supposedly attempted to confiscate his voting rights. On this occasion the court vindicated him.
If some of these cases appear distant from the experience of average Ukrainians, London may also have a pivotal role in deciding the fate of Ukraine’s only independent news channel, TVi.
The use of a series of British vehicles in a wrestle for control of the company between Alexander Altman and Konstantin Kagalovsky has put the company under British jurisdiction, at arm’s length from any political interference in Ukraine.
TVi is only one of a wave of such cases passing through our firm, Zaiwalla & Co, however, and growth looks set to continue. At this very moment for instance, we are helping Kazakhstan Kagazy, the CIS’s largest paper recycler, in a case of alleged fraud worth as much as $150 million. Once again, the decision to list the company on the London stock exchange has given it both the legal protections and regulatory controls that British businesses take for granted.
If the association agreement eventually gets the rubber stamp or not, therefore, is in some ways irrelevant. For Ukraine to grow into a stable place to live and do business, it must learn from Western legal systems. Whether this is implemented by Ukraine itself, or just borrowed from London, the process has already begun.
Zoya Burbeza is the head of the Commonwealth of Independent States law practice for Zaiwalla & Company in London. Burbeza represents businesses and high net-worth individuals from across the Commonwealth of Independent States, from Russia to Kazakhstan, who come to the United Kingdom to seek the reliability and transparency of the British justice system. Burbeza has most recently made a name for herself in the European courts, challenging and overturning EU sanctions on businesses and individuals.
