The Sixth Administrative Court of Appeal has closed proceedings in a lawsuit that sought to strike down the authorities’ decisions to resolve PrivatBank with state participation. This court has confirmed the impossibility of returning the bank to its former owners.
Specifically, on 15 November 2023, the Court of Appeal overruled the decision of the District Administrative Court of Kyiv, dated 18 April 2019, that satisfied the lawsuit filed by PrivatBank’s former co-owner Ihor Kolomoiskyi against the National Bank of Ukraine, the Cabinet of Ministers, the Deposit Guarantee Fund, and the National Securities and Stock Market Commission. The 18 April 2019 ruling declared unlawful and overturned the decision to resolve insolvent PrivatBank with state involvement.
“The NBU welcomes the appellate court’s decision. The decision to resolve insolvent PrivatBank with state participation was made in accordance with current legislation and endorsed by the National Security and Defense Council of Ukraine and the government to ensure financial stability and preserve people’s funds. Today, six years after the nationalization, the court has confirmed that it is impossible to return PrivatBank to its former owners. The state has spent more than UAH 155 billion to recapitalize the bank. It should also be noted that all of the decisions made by the authorities regarding PrivatBank’s nationalization are valid,” said Viktor Hryhorchuk, Head of the Litigation Office at the NBU’s Legal Department.
The court invoked the Law of Ukraine No. 590–IX On Amendments to Certain Laws and Regulations of Ukraine Concerning the Improvement of Banking Regulation Framework, as the claims made in Kolomoiskyi’s lawsuit fell afoul of this law’s provisions, Victor Hryhorchuk said.
On 18 December 2016, the NBU came to a determination to recognize PrivatBank as insolvent and resolve it with state involvement. The NBU suggested that the government come into ownership of the bank’s shares.
This decision was substantiated by the fact that the bank’s regulatory capital had moved into negative territory. The shortfall in PrivatBank’s capital had been confirmed by an independent, internationally recognized audit firm, among other things. PrivatBank’s shareholders had failed to meet their commitments to ensure its financial recovery.
The same day, the Cabinet of Ministers of Ukraine passed a decision allowing the state to participate in PrivatBank’s capital. The state took over PrivatBank in accordance with Article 411 of the Law of Ukraine On Households Deposit Guarantee System. This decision helped avoid systemic risks to the banking sector and secure Ukraine’s financial stability.
On 18 April 2019, in the lawsuit by Kolomoiskyi, the District Administrative Court of Kyiv declared illegal and annulled the government’s decision to resolve insolvent PrivatBank with state participation. In making that ruling, the court ignored PrivatBank’s recapitalization needs that had been established by the NBU. The court also neglected to take into account the failure by PrivatBank and its shareholders to implement the financial recovery program.
The NBU filed an appeal on 24 May 2019.
On 2 March 2021, the Sixth Administrative Court of Appeal suspended the lawsuit until the Constitutional Court of Ukraine heard a different lawsuit, filed by 64 lawmakers, that questioned the constitutionality of certain provisions of the Law of Ukraine No. 590–IX On Amendments to Certain Laws and Regulations of Ukraine Concerning the Improvement of Banking Regulation Framework.
On 1 June 2022, the Supreme Court ended the suspension, making it possible for the court of appeal to continue hearings in the case.