Experts point out how PrivatBank cases show gaps in Ukrainian judicial system

21 October 2022, 07:34 PM
Courts surrounding PrivatBank have shown that there is no justice in Ukraine (Photo:Free photo / Max Pixel)

Courts surrounding PrivatBank have shown that there is no justice in Ukraine (Photo:Free photo / Max Pixel)

Ukraine’s judicial system remains one of the most unreformed state institutions. Courts continue to work wonders even during wartime. The court proceedings against PrivatBank are one of the most high-profile stories.

Ihor Kolomoisky and Gennadiy Bogolyubov continue to attack PrivatBank, which was nationalized by the state almost six years ago. After the beginning of the Russian aggression, these attacks slowed down a bit, but over the past two months, the oligarchs have renewed their efforts.

It should be mentioned that a record UAH 150 billion ($4.1 billion) had to be poured into the country’s largest financial institution in order to eliminate the threat of bankruptcy. An independent audit by the Kroll international agency revealed in 2018 that the bank, under its former owners, had become the object of large-scale fraudulent activities, which led to losses of at least $5.5 billion.

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Years of lawsuits initiated by the former owners have created a whole case study about the gaps in the country’s judicial system. Former NBU Governor Valeria Hontareva has even gone as far as to say the court proceedings against PrivatBank have shown that there is no justice in Ukraine.

But what does this case reveal in detail? NV collected the opinions of legal experts and analysts regarding the biggest flaws of the judicial system that have been laid bare during the court proceedings against PrivatBank.

Olena Shcherban, head of the legal department of the Anti-Corruption Action Center

From the very beginning, the lawyers of the Anti-Corruption Action Center (AntAC) analyzed the abuse of Ukrainian judges in the cases of PrivatBank. We conducted our own monitoring and analysis, based on publicly available information and by analyzing the Unified Register of Court Decisions. Everything related to similar violations in PrivatBank cases was collected by our lawyers in a separate publication.

It turned out that, in addition to the odious Kyiv’s Pechersk District Court, there are others similar to it in the regions, which make contradictory decisions in favor of Kolomoisky. In cases where such decisions reached the Supreme Court, they were usually overturned there.

Judges systematically allowed gross procedural violations in PrivatBank cases.

For example, on Jan. 22, 2021, the judge of Kyiv’s Commercial Court, Dmytro Baranov, examined the evidence in the case of the claim of JSC Nikopol Ferroalloy Plant against PrivatBank in 37 minutes. It was about 4,000 pages of case files. The owners of the enterprise, Kolomoisky and Bogolyubov, urgently needed the full text of the decision for Jan. 22, because it was the last working day before the meeting in Delaware in the case of PrivatBank against them, as well as their companies.

There are a lot of similar abuses behind the cases we observed.

And the problem leads to the fact that our country has had a corrupt High Council of Justice (HCJ) for a long time, which did not punish judges for such violations. There are many facts that such judges could close disciplinary cases brought against them in the HCJ thanks to bribes of $50,000. Such information was published in the National Anti-Corruption Bureau of Ukraine (NABU). It turns out that the judges took bribes for illegal decisions, violating the legal course of the case, and later bought off the HCJ for some part of this bribe.

That is why, when the question arose of competitive selection during the judicial reform, former HCJ members refused to participate as they understood that they would not be able to explain the origin of the owners’ fortune. I hope with the continuation of the judicial reform, this key judicial body should be reloaded on the basis of integrity and the judges will lose the corrupt loophole.

Mykhailo Zhernakov, co-founder and chairman of the board of the DEJURE Foundation, former judge

As for the last two most high-profile cases involving PrivatBank, the Cypriot company Triantal Investments Ltd, the Supreme Court ruled in favor of the state-owned PrivatBank. This is one of the key cases that Kolomoisky lost. And at the same time, the Supreme Court canceled the decisions of two previous instances. So, this decision in favor of the state was held by a thread. I think it was largely due to publicity.

In another case regarding the ownership of the Myr Hotel in Kyiv, the Supreme Court made a wrong a right. In my opinion, it was an illegal decision, and gave a huge property to the oligarchs. This shows the double standards of justice and the fact that the integrity of many judges of the HCJ is in great question.

The judicial reform, which is currently underway, is No. 1 among the means of de-oligarchization and the establishment of Ukraine as an independent and capable state. Because no matter how much we pass laws on de-oligarchization, on entering such people into a separate list, they will not cease to be oligarchs. The main thing is to take away from them the tools to be oligarchs. And this can be done only by establishing an independent judiciary on legal grounds, as well as a powerful Antimonopoly Committee.

There are two categories of typical litigation influence schemes used by unscrupulous litigants – bypassing the automated case distribution system to get them to the “right” judges. Interested persons even resort to such services, when using the parallel servers of such an automated case distribution system they test which of the judges will receive their case.

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In addition, another obvious scheme is used: 20 lawsuits are submitted to the court at once and the court fee is not paid for any of them. As a result, the case is returned without consideration on all submissions. After that, such a person pays the court fee only for the lawsuit where the “right” judge is selected.

There are several other ways to intervene in the automated system. A court clerk may, for example, manually remove some judges from the case allocation system by order of the court head. This is open data. However, it is difficult to detect since hundreds of such distributions occur every day.

There is another large category of manipulation, e.g. delaying the trial.

Oleg Lazovsky, head of the legal department of PrivatBank, lawyer

The first basic violation in the cases of the former owners against the bank is the bypassing of the automated case distribution system and the massive use of “carousels.” This is realized through the plaintiffs’ abuse of their rights when they file similar five-10 lawsuits without paying a court fee to the same court.

The system automatically distributes them to different judges, after which the plaintiff chooses a so-called “right” judge, who is given proof of payment of the court fee. As a result, such a judge continues the case, and all other judges close the proceedings. Similar things are happening in many high-profile cases, of which there are more than 500 in total, based on lawsuits by former owners and top management of the bank, as well as companies related to them. Of course, this is not news, and procedural codes ban such abuses – if the court finds that “carousels” took place, it is obliged to leave without consideration or return such a lawsuit.

The second significant procedural abuse is the groundless application of enforcement measures. This is a procedural measure where, upon the plaintiff’s application, the court can, for example, seize property to ensure the execution of a future decision. And this is one of the main tools of abuse, when courts groundlessly and arbitrarily impose seizures on property or prohibit the bank from taking any actions even before the court case is considered on its merits.

Serhii Fursa, Dragon Capital analyst

When the state had political will, no oligarch could overcome it, since the topic of PrivatBank is critically important in communication with Western partners. This issue is prioritized, so the state has the will to prevent Kolomoisky from winning. Especially since the “Anti-Kolomoisky” law was passed under the pressure of our partners. And this law made it difficult for the oligarch to defend his position in the courts. As for the two most recent judgments of the Supreme Court regarding the property of the Cypriot company Triantal Investments Ltd and regarding the Myr Hotel, we can say that we definitely do not know everything, how these issues are resolved.

Globally, the state probably monitors those processes that pose a threat but does not really help to fight corruption at a level lower than the threat of returning the bank to the previous owners, allowing the oligarch to make money there.

From the point of view of our international partners, any decision in favor of Kolomoisky affects the image of Ukraine: the more significant the case, the more it affects it.

Using the pretext of war, Kolomoisky was able to delay the process in London. He postponed the consideration of the case on the merits for one year. For 2023. The whole case is very unambiguous, and Kolomoisky will definitely lose it. The consequences for him will be such that all his assets outside the country will be seized and transferred to the state of Ukraine. As for Ukrainian assets, this is a matter for judges in Ukraine. Because the decision of the London court will have to be implemented in Ukraine. So, we need the political will to implement these judgments after the London court hearing, or to have a reformed judiciary by that time that will do it on its own.

Mykhailo Demkiv, financial analyst of the ICU company Do the PrivatBank cases demonstrate that the state has learned to resist the oligarchs’ arbitrariness?

Protecting the state’s interests is a thankless pursuit. It is difficult, and it is necessary to face not only good lawyers, but also media pressure. In the case of PrivatBank lawsuits, the interests of the state bank and the state as a shareholder are sufficiently protected both in Ukrainian and international courts, which is definitely a positive. For more than 30 years, Ukraine has had many cases that affected its investment image. Therefore, in this context, PrivatBank has a leading individual place due to its significant size. However, even such important issues in 2022 gave way to another – the issue of security.

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