08:58 23.12.2021

VRGP Disappointed by Supreme Court ruling in Ukrzaliznytsia Case; Question of Restitution Must Now be Resolved

3 min read

NEW YORK, December 23, 2021: In an oral hearing on December 21, the Supreme Court of Ukraine denied the appeal of New York-based VR Global Partners, L.P. ("VRGP") and let stand a ruling of the Northern Commercial Court of Appeal declaring invalid the contract of assignment by which VRGP acquired debts of state-owned Ukrzaliznytsa from Prominvestbank in February 2019.

The Supreme Court announced its decision in an oral hearing. In the hearing itself, the Supreme Court panel did not ask any questions on the merits of the appellant's counsel. In issuing the ruling, the court did not indicate the rationale for its decision. As a result, VRGP as yet has no understanding of the legal reasoning behind the adverse decision.

VRGP has earlier pointed out significant irregularities in court processes at the appellate stage as well as direct warnings made to VRGP's management by a senior official in the Ukrainian government that actions of the judiciary were subject to administrative influence.

VRGP will review the Supreme Court's ruling when the full text is issued and carefully consider its next steps.

The Supreme Court's decision implies that the original agreement on the sale of claims to Ukrzaliznytsia should be terminated, with VRGP receiving restitution of the funds paid under the agreement. Implementation of such an order will require additional negotiation amongst all parties to the conflict. VRGP will act vigorously to protect all of its rights, both in terms of avenues for reconsideration of the Supreme Court ruling and ensuring appropriate compensation.

Richard Deitz, President of VR Capital Group Ltd., commented as follows: "The decision of the Supreme Court was disappointing. We witnessed strong political interference in this case, but had hoped that Ukraine's Supreme Court would be immune to administrative pressure. This has been a bitter case in which the Ukrainian government has actively opposed one of Ukraine's leading western investors and supporters for reasons that remain incomprehensible to us. Regardless of the outcome, this ongoing conflict has not been good for any of the parties. Nor has the conflict been fully resolved. We have at all stages promoted a negotiated outcome. In the interests of containing the damage to Ukraine's investment environment, it is time for that to happen."

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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