Two years after Ukraine’s antitrust agency slapped giant tobacco players with a record $256 million in fines, the state budget will not be adding anything to its coffers.
On June 1, the Supreme Court of Ukraine, the country’s highest judicial body, ruled that allegations Imperial Tobacco Ukraine had acted in violation of anti-monopoly legislation were groundless, overturning the $17 million fine imposed by the Anti-Monopoly Committee of Ukraine (AMCU).
According to the court’s ruling, Imperial Tobacco had nothing to do with the fact that there was only one distributor on the tobacco market.
Prior to the June 1 ruling, Imperial Tobacco failed to nullify its $17 million fine during a hearing at the Northern Appellate Commercial Court in February.
Rastislav Chernak, director general of Imperial Tobacco, says the company’s activities were “completely transparent and complied with all Ukrainian antitrust laws.”
“We consider this decision as a triumph of law and justice,” Chernak said in a statement published on June 2.
Andriy Gorbatenko, partner at Legal Alliance law firm, says the “unfortunate decision” of the antitrust agency did not contain enough evidence to sway the Supreme Court’s judges.
Imperial Tobacco Ukraine — better known under cigarette brands like Davidoff, West, Style, Parker & Simpson, and Prima — is the latest of tobacco giants to score a win in a drawn out legal battle.
In October 2019, the AMCU imposed fines on four multinational tobacco producers — Philip Morris, JT International, British American Tobacco, and Imperial Tobacco Ukraine, as well as the distributor Tedis Ukraine— who controls about 80% of the market and is often associated with Russian oligarch Igor Kesayev.
According to the AMCU they were fined for engaging in “concerted practices” that enabled Tedis Ukraine to maintain a dominant foothold in the tobacco distribution market and which led to the “creation and support of artificial barriers that prevented market entry for other companies.”
After suffering losses in lower courts, the tobacco giants vowed to appeal the cases in both Ukraine’s courts and through international arbitration and have been scoring wins since then.
To the accused, this scenario was another “alarming signal to the community of foreign investors about the real state of justice in Ukraine,” Chernak said in February.
In April, the North Appellate Commercial Court cancelled another two considerable fines: a $35 million fine imposed on JT International, known among smokers under brands like Winston, Camel, and Sobranie, and $46 million on Philip Morris Ukraine.
The largest fine of $138 million that the AMCU imposed on Tedis Ukraine was also overturned in February by the Supreme Court.
Gorbatenko says the AMCU never stood a chance. “The odds the antitrust agency’s accusations against tobacco producers would withstand the courts were about as likely as meeting an alien,” he said.
“It could have happened, but everyone would be very surprised if it actually had,” he added.
