14:36 17.09.2021

Violation of rights instead of rule of law: VR Capital will appeal to Supreme Court against decision of Court of Appeal on invalidity of the right of claim against Ukrzaliznytsia

5 min read

NEW YORK, September 17, 2021:On September 16, 2021, the Northern Commercial Court of Appeal upheld Ukrzaliznytsia's appeal, declaring invalid the contract for the assignment of Ukrzaliznytsia debt between Prominvestbank and the New York-based investment fund, VR Global Partners, L.P. ("VRGP"). VRGP strongly disagrees with the decision of the court, which is clouded by alarming evidence of political interference and manifest violations of due process and will appeal it in cassation to the Supreme Court.

"Yesterday’s ruling was a travesty of justice which laid bare the key problem of all foreign investors in Ukraine - non-compliance with the rule of law and the inability of investors to protect their legitimate rights in Ukrainian courts. Plain and simple, this was a kangaroo court. Its actions were riddled with due process violations, its deliberation lasted mere minutes and its decision to overturn the lower court verdict was pre-baked," commented Richard Deitz, President of VR Capital Group Ltd.

"Sadly, we are not surprised by this decision," Deitz continued. "In July, I was invited to a meeting in Kyiv at the President’s Office to discuss our dispute with Ukrzaliznytsia. At that meeting, I was explicitly warned by the Deputy Head of the Presidential Office, Andriy Smyrnov, that, while our case was legally sound, I should understand that ‘judges in Ukraine can be fired’. Since that meeting, we have seen enormous administrative pressure on the judicial system that culminated in yesterday’s decision. Multiple judges have been replaced or have recused themselves in our cases, and, in a particularly egregious example, a new appellate panel of three justices was formed in a "lottery" where 51 of the 54 eligible justices to hear the case were said to be unavailable for selection due to holidays. This is not the way a judicial system is supposed to operate, and it will not help Ukraine attract the investment it seeks to develop its economy and create jobs."

"It is particularly ironic that this decision follows so closely on the heels of President Zelensky’s White House visit, where he sought foreign investment in Ukraine and pledged to uphold the rule of law. Yesterday, President Zelensky called a meeting with the participation of the G7 ambassadors and judges chaired by Mr. Smyrnov to discuss the stalled reform of the judicial sector and unblock the High Council of Justice, pledging again to clean up the judicial system. The contrast between the President’s admirable words and the reality of his administration nakedly interfering in the judicial system could scarcely be more stark," Deitz continued.

In yesterday’s appellate decision, both the law and the established precedent of the Grand Chamber of the Supreme Court were ignored. Procedurally, the court did not even properly notify the parties of the date of the hearing, citing the absence of stamps in the court. VRGP’s application to have the legally mandated two-week notice period observed was denied, and the court provided VRGP less than a day to prepare and submit its position on this high-profile case. Despite such a short timeframe, VRGP submitted overnight its position on 68 pages. The court, however, did not even adjourn to study the materials. Instead, following brief oral arguments, a verdict was issued after two minutes of discussions in the chambers. 

A VRGP spokesman commented, "The ‘express justice’ we faced yesterday is all the more shocking when considered against the fact that the appeals by VRGP over the court rulings which block the execution of the Supreme Court decisions on debt recovery from Ukrzaliznytsia have not been even considered by the Court of Appeal for over 5 months. Yet in the current case, one court session without any time to study the materials was sufficient for the court."

VRGP has received six Supreme Court decisions in its favor in debt recovery cases against Ukrzaliznytsia. In an attempt to avoid honoring these decisions, Ukrzalyznitsia initiated a claim to invalidate VRGP’s acquisition of the loans. The Commercial Court of Kyiv rejected Ukraliznytsia’s claim on July 27, 2021. Yesterday’s decision overturning the commercial court decision will be subject to appeal.

VR Global Partners, L.P. ("VRGP"), is an investment fund managed by VR Advisory Services Ltd ("VRASL"). VRASL is registered as an investment adviser with the U.S. Securities and Exchange Commission and VR Advisory Services (UK) LLP, a sub-investment adviser for VRGP and certain other funds, is authorized by the UK Financial Conduct Authority.VRGP launched in May 1999 and has been the recipient of over 15 industry awards in New York and London for its performance over the years, including, most recently, EuroHedge’s 2020 award for Long Term Performance (20 Years) among global macro, fixed income and relative value funds. 

VR Capital is an international asset management firm serving an institutional investor client base with approximately $5 billion in investor assets under management. VR Capital is one of the largest and most experienced western investors in Ukraine with a track record of investing in the country dating back to 1999. The firm operates via its principal offices in New York and London and serves a client base of leading western institutional investors.

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