10:23 24.11.2020

Author INTS KRASTINS

What shall Scania do – satisfy illegal claims or further invest in Ukraine?

5 min read
What shall Scania do – satisfy illegal claims or further invest in Ukraine?

Ints Krastins, financial director, Scania Ukraine

 

Upon reading the news in Ukrainian media the conclusion is the following: seven years after the Revolution of Dignity and two Presidents later – the judicial system remains the same. Unreformed, sluggish and confident of its impunity. Moreover, the decisions of these courts affect the country’s vital spheres: economy, foreign investments, which strongly affects the credibility of the Ukrainian state.

The theses above are not an extract from a lecture for sophomore economists, but an element of reality. As a Swedish multinational company, part of a consortium that includes such global automakers as Volkswagen, Porsche and MAN, we operate in all countries in strict accordance with international and national laws. Violating them is senseless and irresponsible. Now you can understand our outrage with the September decision of the Economic Court of the Kiev region, which supported a groundless claim to recover more than UAH 123 million from Scania.

Wave of a magic wand

Scania CV AB has been operating in Ukraine since the 1990s through an official distributor (an affiliated Ukrainian company) and an extensive network of dealers. In the period 2016-2017, at the initiative of Scania, cooperation with one of the dealers – «Zhuravlyna» Firm, LLC – was terminated because the dealer did not meet the Scania CV AB standards of doing business since 2012. We do not continue such risky partnerships which tend to use counterfeit and used spare parts for the truck repair.

In response, the ex-dealer in 2019 filed an unreasonable claim to recover two types of compensation from Scania:

  • compensation for lost profits, which it allegedly did not receive, as other Scania dealers sold trucks, spare parts and provided services in areas that «Zhuravlyna» Firm, LLC considered “its own”.  This is a common practice in Ukrainian “doing business” style – the whole concept of dividing the country into certain zones of influence. However, the agreements between Scania and «Zhuravlyna» Firm, LLC did not contain any conditions of exclusivity, and therefore the stated requirements are far-fetched and groundless.
  • fictitious debt for payment of services for the provision of dealer services in 2012-2017. Thus, Zhuravlyna sought to collect from Scania a service fee in an amount that is several times higher than the one specified not only in their contract, but also in contracts to which the plaintiff has no relation.

And it’s not funny at all, that claims for recovery of over UAH123 million from a foreign investor were based only on self-compiled tables of plaintiff, without any documentary evidence. Any documentary evidence was absent. Ignoring all Scania's arguments about the groundlessness of the claims and the factual lack of evidence, Svitlana Chongova, the judge of the Commercial Court of Kyiv region, satisfied the claim in full –  collected from the distributor Scania in favor of «Zhuravlyna» Firm, LLC funds in the amount of over UAH 123 million. That’s exactly the sum of yearly investment od Scania in Ukraine.

To give or fight?

European business standards and company values make it impossible for us to ignore the blatantly illegal court ruling, the ultimate goal of which is to misappropriate Scania's assets. The plaintiff's appetite is enormous: the fine exceeds the total investment in the construction and equipment of a full-fledged European-style truck service center.

The situation is absurd, since the further strategy of Scania's work in Ukraine may depend on a single case, the participants of which are the characters of a Bollywood film: an offended ex-partner, an unscrupulous judge and a diligent foreign company that once decided to enter the market of a high-risk country. It's about Ukraine, yes. Although we used to think that those days are long gone, the reality is different

I will say this: I personally do not like it when we are faced with a choice - to satisfy illegal claims approved by a corrupt court or to continue investing in the Ukrainian economy, providing jobs and paying considerable taxes in full (a little less than 100 million euros during 1998-2020).

Toxic

The decision to collect a huge amount from a large international investor Scania is an indicator of the toxicity of the investment climate in Ukraine. The situation may have long-term negative consequences for the national economy and investment initiatives of the country's leadership, as large investors may reconsider their intentions to invest in Ukraine.

The decision to collect a huge amount from a large international investor Scania is an indicator of the toxicity of the investment climate in Ukraine. The situation may have long-term negative consequences for the national economy and investment initiatives of the country's leadership, as large investors may reconsider their intentions to invest in Ukraine.

What is important for the investors and Scania as well? Protection from wayward courts and support from the authorities. We are glad that the Temporary Special Commission for the Protection of Investors' Rights of the Verkhovna Rada has undertaken to analyze our situation, and we are sure that the Court of Appeal will take it into account, to which we have already applied. Moreover, we are ready to fight right up to the Supreme Court and filing a claim against Ukraine as a state whose management allowed such a situation.

We do not need ‘invest nanny’ – which is already an internet mem. We need a fair and impartial consideration of our case.

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