12:55 24.01.2018

High Court of Justice to hear SCM's counterclaim against LCIA decision in Ukrtelecom purchase-concerning $820 mln litigation with Raga

3 min read
High Court of Justice to hear SCM's counterclaim against LCIA decision in Ukrtelecom purchase-concerning $820 mln litigation with Raga

A hearing of a counterclaim of SCM against the decision of the London Court of International Arbitration (LCIA) by the High Court of Justice in the $820 million litigation with Raga Establishment regarding the purchase of Ukrtelecom is to take place on April 23, 2018.

"We believe that now the only right decision for us is to go aside, return advance payment and restore the initial agreement between the state and Raga, so that they could settle claims between each other," Director of International and Investor Relations at SCM Jock Mendoza-Wilson said in an interview with Interfax-Ukraine.

He said that the outcome of the litigation mainly depends on the decision of the High Court of Justice.

"We know the date of the hearing – April 23 in London. In principle, nothing should move forward in Ukraine until the decision of the High Court of Justice is made. I hope that the decision would be in our favor," he said.

As reported, Cyprus-based Raga Establishment (earlier it was Epic Telecom Invest Ltd. and acted on behalf of Austria's EPIC the owner of ESU LLC, the buyer of Ukrtelecom when the state sold the company in 2011) in 2016 filed a lawsuit to the LCIA, accusing SCM Financial Overseas Limited (SCM FO) of paying only $100 million out of $860 million in the Ukrtelecom re-purchase deal signed in 2013. In turn, SCM FO said that Raga failed to implement investment obligations undertaken during privatization. In particular, the issue concerns the creation of a telecommunications network for Ukrainian government agencies.

In autumn 2017, Raga received the decision of the LCIO ordering SCM FO to pay $760 million of the principal of the debt and $60.4 million of interest and court fees. Raga explained the requirement to freeze assets of Rinat Akhmetov by some transactions carried out by SCM FO in 2014-2016 which were loss-making. SCM said that these deals were usual commercial practice, and the losses are linked to the crisis situation in Ukraine in this period.

The Financial Times, referring to the owner of Raga Dmytro Horbunenko, reported that another Ukrainian businessman, Dmytro Firtash, whose company, Group DF, partially financed the purchase of Ukrtelecom in the course of its privatization, could also be involved in this case. The company is owed $300 million by Raga. According to the report, Horbunenko purchased Raga, which owned the rights to Ukrtelecom, from Epic in 2013. But the London arbitration ruling from June 2017 stated it was SCM's case that discussions about Akhmetov's purchase of an Ukrtelecom stake began in August 2012 at "the request" of former Ukrainian President Viktor Yanukovych. According to the Interfax-Ukraine news agency, Horbunenko has recently been close to Firtash. In particular, he attended an Austrian court session on Firtash's extradition to the United States in 2017.

Ukraine's State Property Fund (SPF) in 2011 sold 92.79% of Ukrtelecom's shares to ESU LLC, the Ukrainian subsidiary of EPIC, for UAH 10.575 billion. In 2017, SPF accused ESU of non-implementing investment commitments, and by the middle of December 2017 achieved two court rulings ordering to return 92.79% of shares in Ukrtelecom to state ownership. The owner of Ukrtelecom said that he will file a counterclaim.

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