Ukrainian lender PrivatBank has won an appeal in a London court against one of the nation's most powerful tycoons as the Kyiv government seeks to break free from decades of oligarchic influence.
The Court of Appeal in the British capital on October 15 said PrivatBank "has a good arguable case to recover the full $1.9 billion -- $3 billion including interest -- given in the particulars of claim," the bank said in a statement on its website.
PrivatBank CEO Petr Krumphanzl said that "we are very pleased with the Court of Appeal's judgment, and are ready to move forward with the bank's claims in England. This is an important step toward achieving justice for the bank and the people of Ukraine."
The bank, which was nationalized by Ukraine three years ago, has alleged that former owners Ihor Kolomoyskiy and Hennadiy Boholyubov committed fraud that it says cost the financial institution billions of dollars.
In a statement released after the court judgment, Kolomoyskiy denied there was any fraud or loss caused to the bank.
The statement said Kolomoyskiy was "seeking permission from the U.K. Supreme Court to appeal these decisions. And if permission is granted, the question of whether the English court has jurisdiction together with the question as to whether the English proceeding should have been stayed in favor of proceedings in Ukraine will remain to be determined."
The case is part of a protracted legal battle between the Ukrainian government and the two former owners after PrivatBank was shuttered as part of the central bank’s drive in 2014 to clean up a banking system that many said was riddled with illegal practices.
The bank, which has filed a similar case in the United States, has pursued the matter in foreign courts because many of the disputed transactions occurred with offshore entities.
The impact of the bank’s legal fate on Ukraine goes far beyond the $3 billion the state is seeking.
The government of President Volodymyr Zelenskiy has been negotiating a new loan with the International Monetary Fund (IMF) to replace a $3.9 billion standby agreement that expires at the start of January.
However, the talks stalled amid concerns that a Ukrainian court could overturn the nationalization and hand the bank back to Kolomoyskiy and Boholyubov. Ukraine's deputy central bank governor told Reuters last week that such an outcome would be a "huge danger" for the country.
In a statement in September, the IMF did not mention PrivatBank or Kolomoyskiy but said Ukraine needed to tackle corruption, reduce the influence of oligarchs over the economy, and minimize "the cost to taxpayers from bank resolutions."
The international focus on PrivatBank has put pressure on the 41-year-old president, whose surprising rise to power was backed by Kolomoyskiy. Zelenskiy has repeatedly batted away suggestions he would help Kolomoyskiy regain control of the bank or win compensation.
PrivatBank was among some 80 Ukrainian banks that lost their licenses over a two-year period during the presidency of Zelenskiy’s predecessor, Petro Poroshenko, with some going into receivership while others were liquidated.
PrivatBank, once the largest private lender, was the most notorious of them. International auditors found a $5.5 billion hole on its balance sheet. It was forcibly nationalized in 2016 and is being run by personnel appointed by the central bank.
Billionaire former owner Kolomoyskiy doesn't face criminal charges related to his former bank and is currently engaged in litigation in Ukraine and foreign jurisdictions to reclaim ownership rights to the financial institution.
Kolomoyskiy had been at odds with Poroshenko for years, leading to his two-year self-exile from the country until Zelenskiy’s victory in an April 21 presidential runoff election.
PrivatBank also filed a lawsuit in the U.S. state of Delaware against Kolomoyskiy and Boholyubov in May, alleging that the two former co-owners used the bank to engage in rampant third-party lending practices, even money laundering, and fraud.
The former owners deny any wrongdoing and say Ukrainian authorities deliberately misrepresented the state of PrivatBank's finances when it was nationalized in December 2016.
The London court refused to give the defendants permission to appeal, and required them to file their defense by the end of November, it said.
PrivatBank said a worldwide asset freeze on the former owners' assets will remain in place while the case is heard.
