News (#7-8 July-August 2021)

Cases

Court declared confectioner AVK bankrupt

On 8 July the Economic Court of Donetsk Region declared the confectionery company AVK PJSC bankrupt and opened a liquidation procedure due to the debts of the company, which is part of the AVK holding.

The AVK Press Service explained that AVK is a holding company that includes a number of companies with relatable names, including AVK PJSC.

AVK PJSC was declared bankrupt not because of inefficient economic activity, but primarily due to Russias aggression against Ukraine, as the main assets of AVK PJSC are located in the territory not controlled by Ukraine, the Press Service added.

The beneficiaries of the holding are currently negotiating with banks to settle the debt and introduce a procedure for rehabilitation of the company. The remaining companies of the AVK Holding continue to operate as usual in Ukraine.

The court stated that there is fact of excess of the debtors liabilities over its assets, insufficiency of the debtors property to satisfy the claims of creditors.

The court concluded that it is necessary to introduce the liquidation procedure and declare the debtor bankrupt, the ruling of the Economic Court states.

The AVK PJSC has several debts. Last year, the Supreme Court amended the company creditors claims register. Thus, AVK owes UAH 291.3 million to the All-Ukrainian Development Bank, UAH 356.7 million to Raiffeisen Bank, UAH 1.34 billion to Prominvestbank, and UAH 1.2 billion to Sberbank.

Moreover, AVK PJSC has several security loans: UAH 199.5 million at the All-Ukrainian Development Bank, UAH 42.5 million at Raiffeisen Bank, UAH 489.3 million at Prominvestbank, UAH 442.3 million at Sberbank.

Bankruptcy proceedings of AVK PJSC (Mariupol) were opened in 2016. Earlier, Sberbank seized confectioneries from the AVK group in Zakarpattia Region and occupied Donetsk via court actions.

European Court of Justice issued judgment restricting pumping of gas bypassing Ukraine

On 15 July the European Court of Justice ruled in the case of the OPAL gas pipeline, upholding its previous decision, which was beneficial for Poland.

The ruling of the European Court of Justice terminates the dispute, which has lasted since 2016. The European Commissions decision of 28 October 2016, allowed Russias Gazprom to supply more gas through the OPAL gas pipeline, which connects its Nord Stream gas pipeline with Germany. It allowed Gazprom to fully utilize Nord Stream tosupply gas to Germany and the Czech Republic. Prior to that, Russia used half of the gas pipelines capacities.

A number of countries in the region have protested against the ECs decision, including Poland, which has appealed to the European Court of Justice.

Poland believes that the decision of the European Commission leads to the concentration of sources and means of gas supply in a single pair of hands, which contradicts the principle of diversification of sources, supply routes and risk management regarding obstacles or interruption of gas supplies.

OPAL is 80% owned by WIGA, a joint venture between Gazprom and Wintershall, and the rest is owned by a subsidiary of the German concern Uniper.

On 10 September 2019, the European Court of Justice annulled the decision of the European Commission of 28 October 2016, that allowed Russias Gazprom to supply more gas through the OPAL gas pipeline, which connects its Nord Stream gas pipeline with Germany.

The long-term consequence of the ruling of the European Court of Justice is that the pipeline operator must provide access to its infrastructure to third parties, and the use of a particular pipeline cannot be guaranteed by more than 50% exclusively for Gazprom in this particular case. The Court clearly pointed out that such pipelines cannot be excluded from EU rules.

After the September 2019 judgement, Russia had to reduce gas transportation by Nord Stream by 12.8 billion cubic meters per annum, while Gazprom began to increase gas transit to Europe via Ukraine.

However, in December 2019, Germany appealed against the judgement of the General Court (first instance).

On 18 March 2021, the Advocate General of the Court of Justice issued an opinion confirming the arguments of Poland, emphasizing that the decision in the OPAL case may be important for the Nord Stream-2 gas pipeline.

Supreme Court failed to allow state to return gas distribution networks assigned to RGC group for operation

The state has failed in attempts to return the gas networks of Volyngaz assigned for operation by the RGC group which are connected to Dmytro Firtash.

The Supreme Court refused to satisfy the cassation appeal of the Deputy Prosecutor-General and upheld the decisions of courts of previous instances, which also rejected the claim filed in the interests of the State Property Fund against Volyngaz and the Ministry of Energy to invalidate the agreement of 29 November 2012, according to which the gas distribution system was assigned for operation, and to collect UAH 117.8 million as a fine.

The prosecutors position was that the disputed transaction was concluded in violation of the law on the transfer of state property, the exclusive authority to dispose of which belongs to the State Property Fund, while neither the Cabinet of Ministers nor the Ministry of Energy had the right to dispose of state property and transfer it free of charge for use to a business entity in private ownership.

The courts of first and appellate instances disagreed with the prosecutors arguments, noting that the disputed agreement was concluded between the defendants according to the resolution of the Cabinet of Ministers determining the procedure for using gas distribution systems used to distribute natural gas, and is not subject to privatization and also appointing the Ministry of Energy as the governing body of this property.

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