LONDON – The Court of Appeal of England and Wales started a week-long set of hearings on July 22 to deliberate on whether a lower court, the High Court, was right in its decision to dismiss PrivatBank’s fraud case, citing a lack of jurisdiction back in December 2018.
Despite finding that the bank had been the victim of “money laundering on a vast scale” the High Court ruled that English courts do not have sufficient grounds for jurisdiction to hear the complaint from Ukraine’s state-owned Privatbank, citing a lack of connections to the UK.
Ukraine’s largest bank is trying to retrieve billions of dollars allegedly embezzled by the oligarchs Ihor Kolomoisky and Gennadiy Boholyubov, the bank’s former owners prior to its nationalization in December 2016. Both businessmen and their lawyers have strongly denied any wrongdoing.
PrivatBank is seeking to retrieve $1.9 billion, allegedly laundered through six British limited companies, with added interest also accruing at around $500,000 a day.
According to the High Court judgment dated December 4, the case has no strong connection to the UK and should be tried in Ukraine “or if necessary Switzerland”, where Kolomoisky and Boholyubov lived at the time of the court ruling.
The judge pointed out that of the 192 companies connected to the alleged PrivatBank fraud, only three are English, and three are incorporated in the British Virgin Islands. Hence the court suggested that Ukraine was forum shopping, looking for a “significant advantage” from the British legal system in bringing its claim to London.
Trying the case under so-called English law, widely seen as a strong standard for effective justice, could bring notable advantages to PrivatBank.
For example, it can pursue another Worldwide Freezing Order enabling a freeze on assets held by Kolomoisky, Boholyubov and six of the companies associated with them. Some $2.6 billion-plus interest can be frozen.
A previous freeze order was lifted by the High Court ruling, however, the court then stayed its dismissal, keeping it in place pending the outcome of this week’s appeal hearings.
The Court of Appeal has engaged three judges to review the case. PrivatBank’s case is heard by Lords Justices Flaux, David Richards, and Newey. In the High Court, the case was heard by one judge, Justice Fancourt.
The July 22 hearing in the Court of Appeal started with PrivatBank lawyers defending its claim. Major points of the bank’s position were addressed by Lord David Pannic QC, a leading barrister in the United Kingdom and also a member of the British parliament.
He challenged the decision of the High Court, where the judge had said that the only purpose of PrivatBank bringing a claim against Kolomoisky and Boholyubov to London was to remove them from the jurisdiction of Switzerland. The High Court’s judge, Justice Fancourt, referred to the Lugano Convention of 2007, a European treaty regulating jurisdictions, saying that Ukraine “crafted its claim” to make British companies “central”.
Lord Pannic QC, representing PrivatBank, said that the person living in one country can be sued in another one if “he is one of a number of defendants,” among which there are locally-based defendants. The claims against all of them need to be closely-connected, Pannic added.
He said that the link between the six companies in question, Kolomoisky and Boholyubov is indisputable: “The connection test is passed,” he said.
Judges asked the lawyer whether there was a “real purpose” to suing the British companies.
“When we start the proceedings we do not know the extent to which they are involved in a fraudulent scheme. The absence of assets, the absence of documents in these companies only proves they are shady,” Pannic said.
Regarding the intention behind PrivatBank bringing its case in London, he stressed: “We want to sue in this jurisdiction. There is nothing to apologize for. Why here? Because of the skills and efficiency of our courts. It is an important purpose to bring alleged frauds to justice here.”
Since the High Court’s decision was issued, one defendant, the London-registered company “TRADE POINT AGRO LIMITED” was dissolved. However, that should not affect the proceeding in this jurisdiction, said Pannic.
He also challenged the High Court’s approach to connecting this proceeding against Kolomoisky and his allies, with ones pending in Ukrainian courts, they should be separate, he argued.
In December, the High Court judge in his decision also highlighted a defamation claim that Kolomoisky had filed against a journalist in Ukraine who had reported on the alleged PrivatBank fraud.
Kolomoisky applied to the Pechersk District Court in Kyiv on November 2017 to sue the journalist in question, who wrote a critical article about PrivatBank’s alleged money laundering scheme.
In October 2018 the case was dismissed by the Perchesky District Court, which labeled it “frivolous and fabricated”.
However, Kolomoisky appealed this, and the next hearing on the defamation suit will be heard before the Ukrainian Supreme Court on Aug. 7.
In London, appeals judges said they want to hear the ruling of the Supreme Court in Kyiv to see if it is relevant to their case.
“The correct decision is to allow these proceedings to continue there,” PrivatBank’s lawyer said.
Lawyers for Kolomoisky and Boholyubov were present at the Court of Appeal hearing on its first day but did not speak. It is understood that the judges will listen to the position of the defendants in due course this week.
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