14:26 19.07.2019

Ukraine's deputy foreign minister warns about risks if $112 mln not paid to Tatneft on intl arbitration ruling

3 min read
Ukraine's deputy foreign minister warns about risks if $112 mln not paid to Tatneft on intl arbitration ruling

A further delay in implementing a ruling of international arbitration under which Ukraine should pay $112 million in a dispute with Russia's Tatneft could lead to the seizure of Ukrainian assets abroad, in particular, those due to pay coupons on sovereigns.

This was announced by Deputy Minister of Foreign Affairs of Ukraine for European Integration Olena Zerkal, who heads the Ukrainian delegation in international courts.

"If we consider that it (the arbitration decision) was made in 2014, and now it is already the 2019, then it is clear that it should be implemented sometime. It may be unpleasant for us to do it, but if we avoid it, this could be used by the Russians as a bargaining chip for non-compliance with court rulings on investment disputes initiated by Ukrainian companies," she told ZN.ua.

Answering a question whether the accounts of the Ukrainian embassies can be frozen, Zerkal noted that embassies have diplomatic immunity, and everything related to it cannot be subject to any kind of penalty. "At the same time, it should be understood that the state appeals any attempt to seize its property, claiming immunity. This always happens," she added.

Zerkal also confirmed that Ukrainian state-owned companies' significant obligations to Boeing are now on the agenda after the bankruptcy of the Sea Launch consortium. "I know that the issue is on the agenda and the problem is being discussed. But I don't know who is looking for its settlement," Zerkal said.

Tatneft started arbitration proceedings against Ukraine in 2008 in accordance with the Russian-Ukrainian agreement on the promotion and mutual protection of investments.

Ukrtatnafta was established in accordance with the decrees of the presidents of Ukraine and Tatarstan in 1994 on the basis of Kremenchuk oil refinery. Earlier, 18.296% of Ukrtatnafta shares belonged to structures close to Tatneft, Tatarstan's Land and Property Ministry owned 28.7788% of shares, and another 8.6% of shares belonged directly to Tatneft. However, as a result of court proceedings in Ukraine, the share of Tatarstan shareholders in the refinery was practically zeroed out, and the company had new shareholders close to the Privat Group of Ihor Kolomoisky and Hennadiy Boholiubov.

In 2014, an international arbitration court ruled in favor of Tatneft and ordered Ukraine to pay the Russian company compensation in the amount of $112 million, as well as interest. Since then, Ukraine has tried to challenge this decision in international courts. In 2017, Tatneft lodged a claim with to the High Court in London for the enforcement of the court ruling. The claim was satisfied. In 2018, the Royal Courts of Justice rejected the appeal of Ukraine and awarded Tatneft reimbursement of legal costs, as a result the total amount of compensation in favor of the Russian company rose to $146 million.

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