The Grand Chamber of the Supreme Court has partially approved the cassation appeal of the National Bank of Ukraine (NBU) canceling the decision of courts of previous instances in the Surkises case, and has decided to close the proceeding. Please be reminded that courts of previous instances have:
- cancelled NBU decision on recognizing the members of the Surkis family as related parties to PrivatBank
- found void the sale agreement of the secondary offering shares of PrivatBank on the account of deposits of the Surkis family (bail-in)
- have charged from PrivatBank over UAH 1 billion.
Thus, these court decisions have been repealed
Also, the Supreme Court noted that claims of the Surkis family were subject to the civil court of justice, and not the administrative court. “We welcome the decision of the Supreme Court on cancelling decisions of courts of previous instances. NBU decision that the Surkis family are related parties to PrivatBank remains effective. So, the government had all rights to exchange their deposits for PrivatBank shares of the secondary offering in order to ease the burden for tax payers, when resolving PrivatBank with the state involvement,” noted Viktor Hryhorchuk, the Head of Litigation of the Legal Department of the National Bank of Ukraine. At the case hearings, the NBU provided strong evidence connecting the Surkis family with the former shareholder of PrivatBank, Ihor Kolomoiskyi.
The main arguments of the NBU in the case:
On the Relatedness of Ihor Surkis to the former owners of PrivatBank
Ihor Surkis through Bolvik Ventures LTD and a number of similar companies holds jointly with Ihor Kolomoiskyi TV Company TET PJSC, Gravis-Kino LLC, and Broadcasting Company Studio 1+1 LLC. The ownership structure is released on websites of thise TV channels. The NBU presented to the court evidence of such information. The NBU has received similar evidence form the National Council of Television and Radio Broadcasting of Ukraine that were entered into the record of the case. Also the NBU presented facts in court that Ihor Surkis, as the beneficial owner of Zhaporizhzhia Ferroalloy Plant PJSC, conducted transactions through the entity in the interests of nonresidents that PrivatBank itself classified as related.
Recognizing Parties as Related with the Bank Falls within the Remit of the NBU
The NBU reserves the sole right to recognize parties as related with a bank (Article 52 of the Law of Ukraine On Banks and Banking). No other state authority is authorized to do so.
Within 15 days PrivatBank failed to contest the relatedness of the Surkis family.
An entity shall be deemed as the bank’s related party, unless the bank proves otherwise within 15 business days after being notified by the NBU about the person/entity having been identified as a related party. The decision on recognizing the Surkis family as related parties was made on 13 December 2016. Thus, since 13 December 2016, they are deemed related parties to PrivatBank. PrivatBank failed to refute this fact.
1. A related party shall mean an individual that according to his/her position, family connections or financial standing is related with operations and management of a bank and may gain certain material benefits from bank’s performance of its functions.
Related parties can be the following: 1) bank’s top managers; 2) qualifying holders of a bank; 3) immediate family, spouse, children, parents of a top manager or a qualifying holder of a bank; 4) affiliated entities of a bank, top managers and qualifying holders of affiliated entities, as well as immediate family.
2. Bail-in is a generally accepted European practice for regulating insolvent banks by writing down own funds of shareholders and related parties.