Ukraine’s Supreme Court has reversed a lower-court decision in favor of the government in a landmark case related to state-owned PrivatBank.
The top court’s ruling on June 15 means the government does not have to pay back more than a billion hryvnyas ($37 million) to two brothers who lost their savings in the 2016 nationalization of Ukraine’s largest lender, writes RadioLiberty.
The victory comes days after Ukraine struck a $5 billion agreement with the International Monetary Fund (IMF) that was partly contingent on its handling of the PrivatBank issue.
Resolving lingering issues over PrivatBank and securing the IMF deal are viewed as key tests for President Volodymyr Zelenskiy to deliver on promised reforms and tackling deep-rooted vested interests.
Ukraine’s central bank had recognized the tycoon brothers, Ihor and Hryhoriy Surkis, as related parties and included money from their deposits at PrivatBank in a bail-in.
The Surkis brothers, known as associates of the former owner of PrivatBank, Ihor Kolomoyskiy, challenged that decision in court, forcing the central bank to defend its actions.
Kolomoyskiy lost control over PrivatBank in 2016, when the central bank took it over after it failed stress tests and was deemed to be undercapitalized.
An independent audit later concluded that PrivatBank had conducted “large-scale and coordinated fraud” for at least 10 years before its takeover by the state.
U.S.-based corporate investigative firm Kroll and attorneys at AlixPartners also found a hole of at least $5.5 billion in the bank’s balance sheet.
Kolomoyskiy has denied wrongdoing and maintains that he is the rightful owner of the bank, which he has vowed to regain control over.
The central bank and PrivatBank had worried that a victory for the Surkis brothers would have opened up other claims, particularly from Kolomoyskiy.
Kolomoyskiy lived in self-imposed exile for nearly two years and returned after Zelenskiy’s election in April 2019.
His ties to Zelenskiy, who rose to fame as an actor on a TV channel owned by Kolomoyskiy, had raised concerns over the president’s independence from the oligarch.
In May, Ukraine’s parliament, the Verkhovna Rada, approved a banking bill that prevents the former owners of banks that were nationalized from regaining ownership rights or receiving monetary compensation.
Although the legislation was implemented to improve the financial sector, its main purpose is to prevent Kolomoyskiy from regaining ownership rights to the bank.