The district administrative court of Kyiv has granted the lawsuit filed by tycoon Ihor Kolomoyskyy against the National Bank of Ukraine (NBU) and the Cabinet of Ministers, challenging the nationalisation of Privatbank.
"The court recognised the decisions of the defendants as unlawful, as a result of which the Privatbank commercial bank was nationalised, and declared invalid the contract for the sale and purchase of the bank's shares by the state from the moment of its conclusion," the ruling posted on the court's website said.
It is noted that the case has been heard since June 2017. "Such a long period of consideration has to do with, in particular, the overall busy schedule of judges considering administrative cases and the need to study a significant amount of evidence in the case consisting of more than 50 volumes," the court explained.
"The decision was taken on the grounds that, among other things, the respondents failed to prove the existence of legal grounds for declaring Privatbank insolvent, as a result of which the procedure for its nationalization was subsequently initiated and the procedure for nationalising the bank itself was violated, the procedure for which is regulated legislatively," the court said.
A commentary on the NBU website states that the National Bank is preparing an appeal.
"The court decision has not entered into force and will be appealed by the National Bank. We will continue to prove the legality of the actions and decisions taken by the regulator in a court of appeal. Once again, we would like to draw attention to the fact that the legal uncertainty generated by the court decisions undermines financial stability," the head of the lawsuit section at the NBU's legal department, Viktor Hryhorchuk, said.
In addition, the National Bank will suggest that the Financial Stability Board raise the issue with the National Security and Defence Council (NSDC) and the Cabinet of Ministers regarding the judicial practices that are harmful to Ukraine’s international image.
"Ukraine’s international partners have repeatedly stressed that the nationalization of Privatbank was an important step to ensure financial stability. The decision to withdraw an insolvent bank with state participation was made in accordance with current legislation, and was supported by the NSDC and the Government of Ukraine in order to ensure financial stability and save citizens' funds. The legality of the decision is obvious and the reverse procedure in this matter is impossible because for this there are neither legal nor economic grounds. After the insolvent bank was withdrawn from the market, Privatbank completely switched to a market-based business model and today is the most profitable Ukrainian bank and part of a stable and transparent banking system," the first deputy head of the NBU, Kateryna Rozhkova, said.
On 21 December 2016, the state took ownership of Privatbank. The state boosted its capital by 116.8bn hryvnyas. At the end of June 2017, the Cabinet of Ministers decided to further capitalize the bank by 38.5bn hryvnyas as suggested by the NBU and the independent auditor, EY.
The former owner of Privatbank, Ihor Kolomoyskyy, wants compensation from the state for the nationalization of the institution and seeks to reclaim shares through the legal action.
Kolomoyskyy supports presidential candidate Volodymyr Zelenskyy, who is the frontrunner ahead of the 21 April presidential election runoff. In February, Zelenskyy promised that he would not return Privatbank to Kolomoyskyy if he won the election.