Swissport appeals to the Highest Economic Court of Ukraine following the ruling of the Court of Appeal against Swissport
Swissport International (Swissport), the world’s leading provider of ground and cargo handling services to the aviation industry, continues seeking justice in the Ukraine. Last year on 27th March 2013 Swissport lost its majority share of 70.6% and the control over its joint venture Swissport Ukraine LLC (now renamed to Interavia LLC). Swissport Ukraine LLC was victim of a raider attack followed by a flawed legal process led by Ukraine International Airlines (UIA), rumoured to be ultimately owned by oligarch Igor Kolomoisky, governor of the Dnepropetrovsk district. In October 2013, the Highest Economic Court in the Ukraine ruled in favour of Swissport, cancelled all prior decisions and referred the case back to the first instance court.
In May this year, Swissport achieved another significant success in front of the Economic Court of Kyiv, the first instance court, which ruled in favour of Swissport. However, following UIA’s appeal the Court of Appeal last week surprisingly ruled against Swissport, despite the fact that Swissport meanwhile has obtained in an ancillary proceeding a final and binding court ruling in its favour, pursuant to which Swissport would need to be re-entered as shareholder into the Ukrainian state register and the company would have to be renamed to Swissport Ukraine again.
The fact that the Court of Appeal now ruled against Swissport in the main case is a surprise, since the verdict is not in line with Ukrainian law and contradicting Ukraine´s attempt to get closer to European legal standards and to improve its legal and political environment to protect foreign investments efficiently. The recent ruling in this context seems to be rather contradictory. However, Swissport is still confident that the current political developments are going in the right direction and will help to establish due process and primacy of the law. The Swiss and French embassies continue to support Swissport´s efforts to regain its business in the Ukraine, and the EU Commission is aware of the proceedings as well.
Below please find a complete summary of the proceedings in the main court case and some background information.
Overview on the proceedings in the main court case in the Ukraine:
In 2006 Swissport entered the Ukrainian market by acquiring shares in a joint venture named Interavia LLC. In the following years, Swissport increased its share in the joint venture from previously 51% to finally 70.6% with the remaining 29.4% held by UIA. Until 2011, when UIA´s ownership was sold to private investors with Ihor Kolomoyski and Aron Mayberg at the forefront, Swissport had a very good partnership with UIA.
As Swissport Ukraine was successfully growing double-digit every year, investments into the company became necessary to support further growth. UIA struggles from the beginning with the ability to meet their pro rata share obligations. Swissport was ready to finance the growth and was expressing its will to further invest in the company’s future and to ensure continuous growth by financing the company even beyond obligations. Based on mere discussion during a Participants´ Meeting about a potential future capital increase, UIA alleged that Swissport had resolved on a capital increase against the votes of UIA and therefore violated UIA´s minority shareholder´s rights and went to court.
The capital increase has never been resolved by Swissport and UIA to date was never able to give evidence to their allegation. Nevertheless, the Economic Court of Kyiv, the first instance, ruled against Swissport. The second instance court, the Court of Appeal ruled against Swissport as well, the consequence of which was the immediate loss of Swissport’s 70.6% shares in Swissport Ukraine and the control over the company. UIA became the sole owner of the company, which, at that time, had an estimated value of 25 Mio USD. Moreover, the airline owners of UIA managed to convince the court that the 70.6% share in Swissport Ukraine would only be worth 400k USD. This was one of the reasons why Swissport decided to keep on fighting for its business and went to the highest court in the Ukraine, the Highest Economic Court of Ukraine.
The court appeal hearings at the Highest Economic Court were postponed several times based on dubious reasons. In the meantime, UIA had unilaterally taken the decision to increase the share capital in Interavia with the obvious goal to dilute Swissport. By doing so UIA did the very thing, for which it sued Swissport when the company falsely alleged Swissport of a dilution attempt. The Ukrainian Government and Anti-Raider-Commission were long in coming with their promised support for foreign investors and companies that lost their business through hostile takeovers. This all happened before the political situation in the Ukraine started to change.
In the third instance, the Highest Economic Court of Ukraine on 2nd October 2013 cancelled the decisions of the first and second instance court and referred the case back to the first instance court. Shortly after, on 6th November 2013, court proceedings in the first instance court, the Economic Court of Kyiv, started again. On 29th May 2014 the first instance court decided in favour of Swissport and dismissed UIA’s claim against SPI. UIA appealed against this court decision. Finally, on 25 September 2014, the second instance (Court of Appeal) ruled against SPI.
Swissport will appeal against this latest court ruling, which means that the case will again be dealt with by the third instance, the Highest Economic Court of Ukraine.
Swissport International Ltd. is the world´s largest provider of ground and cargo handling services in the aviation industry. The company provides ground services on behalf of some 700 client-companies and handles around 224 million passengers and 3.9 million flights per year. The company operates 120 warehouses and moves approx. 4.0 million tonnes of cargo. With a workforce of around 55,000 personnel, Swissport is active at more than 260 stations in 45 countries across five continents, and generates annual consolidated operating revenue of CHF 3 billion. www.swissport.com
For more information please contact:
Swissport International Ltd.
+41 43 815 00 15
Farner Consulting AG
+41 44 266 67 22