Another venture of Yulia Tymoshenko has failed. Recently, The London Court of International Arbitration made its final decision regarding the dispute between Ukrnafta minority shareholders and Naftogaz. In other words, oligarch Ihor Kolomoyskyi sued Naftogaz, the state energy company, and lost spectacularly.
What has Tymoshenko to do with all this?
It seems that Tymoshenko is involved in every shady business in the energy market. In this case, she also partnered with Kolomoyskyi to create intricate scheme that was difficult to disentangle. But in the end it was disentangled.
Ihor Kolomoyskyi could consider himself a Londoner although he lives in Geneva. London is the place where several court cases regarding his disputes in Ukraine is taking place. For instance, Privatbank, after it has been nationalized, sued its former owner for allegedly managing illicit financial outflows. On December 17, 2017, the London Court rendered a verdict on worldwide arrest of the assets of Ihor Kolomoyskyi and his partner Hennadiy Boholiubov, as well of six companies that are most likely owned or controlled by them.
‘Decision to cease the assets was made on the basis of detailed evidence presented to the court showing that Messrs. Kolomoyskyi and Boholiubov, through several illicit operations, withdrew almost USD 2 billion from the bank and transferred these funds to the companies they secretly owned or controlled,’ Privatbank said in a press statement.
It also stressed that, with the help of this court proceeding, Privatbank expects to reclaim more than USD 2.5 billion, which also includes interest.
The court will make its decision in May. However, Kolomoyskyi’s claim to Naftogaz has already been resolved not in his favor. Hold your breath and read through several more paragraphs.
‘The Tribunal concluded,’ Naftogaz site says, ‘that the key clauses of the shareholder agreement between Naftogaz and the companies owned by Ihor Kolomoyskyi on corporate governance at Ukrnafta are unenforceable, being incoherent with the mandatory provisions of Ukrainian corporate law.
The relevant section of Article 9 of the shareholder agreement — stipulating that six members of the Ukrnafta Supervisory Board are elected from among candidates suggested by Naftogaz while the other five members and CEO from among those suggested by Ukrnafta minority shareholders, i.e. the companies owned by Ihor Kolomoyskyi — cannot thus be enforced. Article 9 also provides that members of the Ukrnafta Executive Board are approved by the Ukrnafta Supervisory Board upon submission by the CEO.
The Tribunal, however, declared that the shareholder agreement was valid in general, though its key clauses on corporate governance at Ukrnafta were unenforceable.’
In other words, the Court declared invalid those provisions of the Agreement that allowed Kolomoyskyi to execute total control over Ukrnafta through domination of his proxies representing companies controlled by Kolomoyskyi. You may wonder how such agreement, beneficial to the oligarch, came into being.
As it turned out, it was signed with assistance from then Prime Minister Yulia Tymoshenko. This is what journalist Serhiy Leshchenko wrote about this.
‘On January 25, 2010, between the first and the second rounds of the presidential elections, a contract was signed that legalized Ihor Kolomoyskyi’s interest in management of Ukrnafta company. Nominally, the state was the major stakeholder of Ukrnafta. Rumors about this contract have circulated for long period and today we publish its full text for the first time.
The contract was executed by three parties. First, it was signed by Naftogaz Ukrayiny that owns majority of Ukrnafta shares. The second party was represented by four offshore companies, of which three were registered on Cyprus on a single day and the fourth had registration in the Caribbean island nation of Saint Kitts and Nevis city of Charlestown. Ukrnafta was the third party.
The contract signatories reached an agreement to divide their shares in the Supervisory Board which, according to this document, appoints members of the Ukrnafta Executive Board.
According to the agreement, six members of the Supervisory Board were to be nominated by Naftogaz, while five members of the Supervisory Board and the Head of the Ukrnafta Executive Board by minority shareholders (Kolomoyskyi’s companies). Importantly, to make any decisions, the Supervisory Board should have a quorum of eight (!) members.’
In this way, Kolomoyskyi established control over one of Ukraine’s most profitable companies.
Why did Yulia Tymoshenko agree to this? The answer is simple. In the first round of 2010 presidential elections, she trailed Viktor Yanukovych by a large margin and was actively seeking help to remedy the situation. Since Ihor Kolomoyskyi controlled (and still controls) large media resources, she decided to secure his support by granting him control over Ukrnafta. But it didn’t help her and she lost the elections.
And now she lost in the London Court, as the Court annulled the very provisions that were added to the contract for Kolomoyskyi’s benefit.
Recently, Yulia Tymoshenko met Ihor Kolomoyskyi in Israel. Fortunately, she cannot give him anything for free now, as she is no longer Prime Minister. But we could guess that she was seeking his assistance again. One could only imagine what she promised him in case of her victory in the next presidential elections.