The Kyiv Court of Appeals on April 15 ruled that state-owned PrivatBank must pay $259 million to six British companies owned by the families of Ihor and Hryhoriy Surkis, the business partners of the bank’s former co-owner, oligarch Ihor Kolomoisky.
The money is compensation for the Surkises’ deposits, which were converted into PrivatBank shares when the bank was nationalized in December 2016.
The Ukrainian government recognized the Surkis brothers as a related party to the bank’s co-owners, Kolomoisky and Gennady Boholyubov, who were the brothers’ business partners. When the state took the bank from the former owners, it discovered that they had allegedly embezzled $5.5. billion from it in a fraudulent insider lending scheme.
Since then, PrivatBank’s nationalization has been the subject of hundreds of lawsuits. In a number of cases, former depositors who were recognized as the bank’s insiders are trying to get their deposits back. In total, they are suing for $1.16 billion.
The newest appeals court ruling is the first case in which PrivatBank depositors who were recognized as insiders are getting their money back. The decision is final and cannot be appealed further.
While this defeat will hurt state-owned PrivatBank, its biggest battle with former depositors still lies ahead.
The most critical litigation is currently being heard by the Supreme Court. There, the Surkis brothers, their wives and other family members are suing to get the rest of their former deposits back, which exceed $40 million.
There is a critical difference from the case they just won.
Unlike their $259-million win, where the brothers managed to persuade the Ukrainian court that PrivatBank was wrong to lay claim to the deposits because they were placed in its Cyprus branch, in this smaller case they will try to overturn the bail-in procedure, through which their deposits were converted into the bank’s shares.
If they succeed, it will create a precedent that may be used in 45 separate lawsuits by other depositors who were also counted as PrivatBank insiders and lost their deposits.
The Supreme Court will hold the next hearing on this critical case on April 27.
Meanwhile, PrivatBank needs to decide whether to comply and pay $259 million to the Surkises’ companies.
What happens next
The $259 million in question will not be taken from PrivatBank automatically. Instead, the bank will have to make a transfer, something it is not keen to do yet.
“Either the bank’s top management or the supervisory board or even the owner, the Cabinet of Ministers, will have to decide whether to comply with this decision or not,” Andriy Pozhidaev, PrivatBank’s lawyer, said during a press conference on the Zoom video conferencing platform on April 15.
This could happen during the Cabinet of Ministers’ session, he suggested. If the bank does not obey, it will first be fined and then its leadership will face criminal charges, Pozhidaev said.
The problem is not only that the bank disagrees with the court’s decision, Pozhidaev said, but also that it was not told how much exactly it has to pay the Surkises.
“There is no court ruling that would determine the exact volume of these obligations of the bank in favor of these companies,” Pozhidaev said.
Victor Borukh, a lawyer representing the six companies controlled by the Surkis brothers, was not available for comment at the time of publication. However, in an April 13 interview with the Gordon.ua news site, Borukh stated that it is obvious how much PrivatBank has to pay, the value of the deposits and interest.
The subject of the appeal was a February decision by the lower court, the Pechersk District Court. It ruled that state-owned PrivatBank must comply with the earlier court decision from 2017 and fulfill deposit obligations before the claimants, the six British companies, and pay back the deposits and interest.
PrivatBank insists it has fulfilled its obligations before the claimants during the bank’s nationalization, when the Surkises’ deposits were converted into the bank’s shares under the bail-in procedure.
The $259 million in question is the sum of deposits that six British companies owned by Ihor and Hryhoriy Surkis’ wives made in a Cyprus branch of PrivatBank in 2012-2014. Camerin Investments LLP, Sunnex Investments LLP and Tamplemon Investments LLP are owned by Olga Romanova, Ihor Surkis’ wife. Lumil Investments LLP, Berlini Commercial LLP and Sofinam Investments LLP belong to Polina Kovalyk, the wife of Hryhoriy Surkis, according to the British company registry.
These six companies are suing PrivatBank with similar complaints in Cyprus as well. They allege that PrivatBank illegally withdrew money from the companies’ accounts under the bail-in procedure and did not have the authority to do that abroad. Similar lawsuits have been filed to administrative courts in Ukraine. They mirror the suit the companies just won.
