On September 8, the Northern Appellate court, just outside of Kyiv’s city center, will announce its ruling in the case of TIU Canada against the oligarch Igor Kolomoisky.
Many observers believe that this decision, especially if it rules in TIU’s favor, just may be the first domino to drop in the post-Maidan Ukrainian judicial decision-making process in regards to upholding the integrity of legal contracts between foreign investors and Ukrainian business entities.
A favorable decision on behalf of TIU, will illustrate that the tradition of Ukrainian courts to sublimate their decisions to powerful and corrupt domestic interests may be coming to an end.
The publicity of this case has reached the Presidential Administration. According to high-level sources, President Volodymyr Zelensky has expressed his wish that the rights of the Canadian company be respected and that a “solution” be found.
It is clear to Zelensky’s administration that an unfavorable decision against TIU will damage relations with Ukraine’s western partners. Western embassies are diligently following this case, monitoring its events and scrutinizing if there is any practical truth at efforts of legal reform.
Both the effect and the publicity surrounding this case, especially if the court hands down an unjust verdict, will further cripple foreign direct investment, which presently hovers around 0%. In addition, it will negatively affect the already shattered image of judicial reform in Ukraine and that of the Zelensky administration.
But perhaps most importantly, numerous legal observers strongly believe that a decision against a Koloimosky controlled business enterprise will show, that in fact, a foreign business entity can receive a just and fair decision in Ukraine. A decision in favor of TIU, will erode the cynical belief that a notoriously powerful and proven corrupt oligarch can no longer get anything he wants in a legal dispute with a foreign investor.
Nonetheless, all would agree that a decision for Kolomoisky would be a major legal setback for the cause of legal reform and foreign direct economic investment. After many years, there is finally some evidence of a growing understanding in the government that there are direct ramifications between having a sound judicial process and foreign investment. At present, there is no doubt that the government will confront major negative effects if a just decision is not handed down. Quite clearly, there will be virtual halt of foreign investor activity especially amongst mid-cap investors who are the best median for swift wealth and job creation.
Simply put, TIU Canada was the target of a typical oligarchic raid by Kolomoisky. Seeing an entity that created and operated an efficient business and that generated consistent revenue that was guaranteed by the Ukrainian government, Kolomoisky simply implemented a plan to take it over, using the heretofore proven means that he could scare off the investor and, if not, manipulate the legal system through their inaction, fear, or direct financial benefit, affirm his actions through a prolonged war of attrition.
However, in this case, he underestimated the resolve of the Canadian investor, Michael Yurkovich, to fight back and challenge archaic legal practices. If anything, this case revealed that if changes are to occur in Ukraine, then oligarchs and the business practices and values they represent must be directly confronted. A fair and just economic and judicial system will never exist if Ukrainian authorities and institutions seek to co-exist with oligarchs.
This said, a decision affirming the claims of TIU by the court will be a signal that such predatory behavior will no longer be legally tolerated and that the rule of law will now be the sole determinant governing economic behavior.
Such a decision, which would then be broadcast to foreign investors, will announce to foreign companies that they will be protected from corrupt and seemingly powerful internal corporate predators by Ukraine’s courts.
Put another way, the importance of the upcoming decision will be a clear signal to the foreign investment community that Ukraine’s judicial system has the courage to transcend its xenophobic behavior and provide a just decision, that not, in a small way, illustrates that it can put aside the constraints of an arcane system of law and establish modern legal precedents within a system that is still inadequate for a struggling economy trying to transform itself to a rule-abiding economic system.
All said, what this case has revealed is that Ukraine still has not established a judicial system that can provide a legal framework for a modern free market economy.
If Ukraine is to transform its economy and fundamental business practices, it must create a judicial system whereby it can provide fundamental and timely legal relief for those exposed to predatory practices.
Why does an investor have to suffer and go through a painstakingly legal process and huge financial outlay through the still byzantine and unreliable courts, when a timely injunction could, and should have been issued that would have allowed TIU to produce electricity, generate revenue and freely fulfill the requirements of its lawfully obtained license?
Almost a year and a half after having been illegally cut off from the electricity grid, and with losses nearing €3 million, Ukrainian courts have yet to determine whether there was an actual breaking of the law, let alone determine the financial remedies owed to the claimant. One major problem in Ukrainian law is that before financial damages can be considered in a commercial court, it must first be proved that a criminal act has in fact been committed.
Where have the legal authorities been all this time and what have they done in the pursuit of criminal charges against Kolomoisky? Another question, why have not the appropriate regulatory authorities been more diligent and effective in pursuing blatant malfeasance in this case that has national security implications?
This case has always been a cautionary tale. The questions that remain are: what has been learned and what is going to be done? Ukraine’s partners and foreign investors are watching.