Courts of Appeal Affirm Legality of Freezing of Ukrzaliznytsia's Funds in VR Capital Case
NEW YORK, December 13, 2021: Ukrzaliznytsia ("UZ") has recently suffered two setbacks in its ongoing efforts to evade payment of its adjudicated debts held by VR Global Partners ("VRGP"). On December 7, 2021, the Northern Commercial Court of Appeal ordered the State Executive Service to freeze $36.9 million and UAH 268 million of Ukrzaliznytsia's funds. These amounts correspond to amounts confirmed by the Supreme Court as due to VRGP in respect of three enforcement proceedings that were the subject matter of this case. VRGP holds claims against UZ in respect of nine loan agreements, seven of which have already been confirmed by the Supreme Court.
In ruling in favor of VRGP, the appellate court affirmed decisions of the Commercial Court of Kyiv of September 7, 2021. The affirmed decisions rejected UZ's efforts to challenge actions by the State Enforcement Service to arrest UZ's accounts in conformance with the Supreme Court rulings against it. The appellate court confirmed that the actions by the State Enforcement Service to freeze UZ's funds were legitimate and, further, that it was unlawful to discharge a freezing order over UZ's bank account in Oshchadbank.
In addition, on December 9, 2021, the Sixth Administrative Court of Appeal partially upheld VRGP's appeal and overturned the decision of the Kyiv District Administrative Court of October 28, 2021 undoing the freezing order on UZ's funds.
As a result of these decisions confirming the legality of the prior freezing orders of UZ's funds as a result of the company's non-compliance with Supreme Court judgments, the State Enforcement Service has been ordered to freeze UZ's funds in the amount of VRGP's aggregate claim in the instant enforcement proceedings, totaling USD 36,850,000 and UAH 268,332,684.59.
VRGP welcomes the recent decisions and again calls on UZ to respect the rulings of Ukraine's Supreme Court.
Richard Deitz, President of VR Capital Group Ltd., commented, "UZ has spent years telling its auditors and international bond investors that it intends to settle these debts, yet in reality it has done nothing but try to evade payment. The spectacle of Ukraine's largest state-owned enterprise defying judgments of its own Supreme Court inevitably calls into question the basic commitment to rule of law in Ukraine. The damage from such actions extends beyond VRGP to the broader investment environment in Ukraine."
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.