System Capital Management’s Cypriot assets unfrozen following court ruling
The District Court of Nicosia today (6 June 2018) ruled in favour of System Capital Management (SCM), Ukraine’s leading financial and industrial group, in its dispute with Raga Establishment over the status of Ukrtelecom, the country’s largest fixed-line, mobile and internet communications service provider. As a result of the win, SCM’s assets have been unfrozen, reversing a December 2017 Cypriot court ruling.
Earlier this year, the District Court of Nicosia issued a temporary order to freeze SCM’s Cyprus-based assets up to the amount of US$820 million, following a dispute with Raga Establishment over the privatisation of the former state-owned telecoms company, Ukretelecom.
The dispute arose following the failure of Raga Establishment to honour the strict legal terms of its sale of Ukrtelecom to SCM in 2013. In the agreement, Raga claimed to have adhered to a 2011 privatisation agreement with Ukraine’s privatisation authorities, which bound it to heavily invest in Ukrtelecom’s infrastructure in the country. This was not fulfilled.
Upon discovering Raga’s failure to adhere to its legal agreement with the Ukrainian state regarding Ukrtelecom, SCM sought to reverse the agreed purchase and demanded the return of its $100 million prepayment. This sparked a lawsuit on the part of Raga Establishment, demanding that SCM pay them the full US$760 for an asset that will likely be taken back into state ownership shortly.
In September 2016, SCM filed a counterclaim with the LCIA to rescind the sale of Ukrtelecom, which would have rightfully returned shares in Ukrtelecom to Raga and the prepayment sum to SCM. While the arbitration was still pending, in April 2017, the State Privatisation Fund of Ukraine initiated proceedings to renationalise Ukrtelecom – as a result of Raga Establishment’s failure to honour the terms of its privatisation agreement.
Commenting on the successful outcome, SCM’s Director of International & Investor Relations Jock Mendoza-Wilson said: “We are delighted by today’s judgement. The District Court of Nicosia has ruled that the freezing order obtained by Raga Establishment Limited on 27 December 2017 against, among others, several SCM Group companies and Mr Rinat Akhmetov has now been discharged. All restrictions imposed by that freezing order in dealing with their respective assets have been removed. The Court also issued an order awarding the legal costs in favour of the SCM Group and against Raga.
“The court stated in its judgement that the December 2017 Cypriot freezing order was obtained by Raga inappropriately and unjustifiably. This is illustrative of Raga’s behaviour in this dispute and a reflection of the true nature of its claim filed against SCM Group and Mr Akhmetov in Cyprus. We maintain that such claim is baseless, just as the now discharged freezing order had been baseless.
“We will continue to defend vigorously against Raga Establishment claims in Cyprus and other jurisdictions.”