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What Are Chances of Gennadiy Korban to “Muscle” in on Ocean Plaza?


Dmytro Shemelin, Lawyer at Ilyashev & Partners Law Firm
Source: The Forbes

Despite the rich experience of the former deputy head of the Dnipropetrovsk Regional State Administration, international experience proves: it will not be easy to gain control over the shopping center. The assets on the mainland instead of those withdrawn in the Crimea – such form of set-off is offered by Gennadiy Korban, former deputy head of the Dnipropetrovsk Regional State Administration. The businessman-official was forced to think of recovery of damage taking into account his own bitter experience – his hotels in Yalta were “nationalized” the very next day after the resignation, the property was distrained. Korban described this dramatic story expressively in his Facebook. The way out of unfortunate situation was proposed two paragraphs below: to take away the property of the Russian businessmen on the mainland instead of lost assets. He considers the Crimean losses equivalent to the cost of the Kyiv Ocean Plaza Mall, the owners of which are, in the opinion of the Dnipropetrovsk businessman, Vladimir Putin’s closest friends – brothers Rotenberg. “I must say that I will be forced to use the whole arsenal of effective methods of change of ownership, which I obtained, so to say, in the past life”, Gennadiy Korban hinted clearly to anyone who even slightly knows the history of the Ukrainian business. Forbes, refraining from the wishes of good luck to the businessman, decided to analyze Mr. Korban’s chances to succeed.

In connection with the last post by Gennadiy Korban it can be said definitely: the society is clearly disappointed by the prospects of obtaining compensation from Russia for the property “nationalized” in the Crimea.

Indeed, for a victim of the Crimean “nationalization” it is possible to win a case against Russia in the international investment arbitration or the European Court, and even to obtain a judgment on recovery of compensation at market value.

However, to obtain a judgment is only half the battle, you have to enforce it. So far, everything suggests that Russia will not execute the “Crimean” judgments voluntarily. Accordingly, the problem of the Crimean “nationalizations” bumps into the problem of enforced collection of the awarded compensation from Russia.

Unfortunately, to date the prospects are not too bright. As you know, judgments of the European Court are not enforced in practice. The sanction for failure envisaged in the Convention – exclusion of the wrongdoing state from the Council of Europe – has so far not once been applied. It is also unlikely to be efficient with regard to Russia, which is already deprived of voting rights in the PACE and declares further course of self-isolation.

In theory, according to decision of investment arbitration, the debtor’s property can be prosecuted in all member states of the New York Convention 1958, i.e. all over the world. However, successful recoveries against the sovereign states are rare.

Firstly, according to judgment against Russia as a state, the property can only be recovered from Russia as a state, not from the state-owned enterprises, and even more so – not from “the friends of Vladimir”. However, there is not so many state property abroad, the main business is conducted usually through formally private companies, such as Gazprom or Rosneft.

Secondly, execution of award requires recognition of such judgment by the court at the place of collection. However, Russia and its property in foreign courts enjoy a number of immunities, and it is not easy to file a claim against it.

Indeed, the present case with Russia is unique. Unlike the states, such as Iran or Libya, that previously were under long-term Western sanctions, the Russian Federation is still a major player, and continues to have its own way. Russian media like to make a comparison with China – the largest economy that also was affected by sanctions after the Tiananmen Square massacre in 1989, but recovered quickly. However, unlike Russia, at that time China did not strengthen confrontation and introduce counter-sanctions. Den Syaopin confirmed all obligations in respect of the Western partners, and this strategy paid off: sanctions have been de facto lifted within a few years.

Apparently, Russia might trigger further escalation of the conflict and provoke Western countries to strengthen sanctions. For example, the Western countries may refuse to recognize the immunity of Russian assets, or arrest the assets of Russian companies abroad. The procedure for the introduction of existing sanctions shows that the USA and the EU are quite capable of “black lists” being guided by own criteria and principles of expediency. If the same principles are put into effect in the field of immunities, recovery according to judgments against the Russian Federation will be simplified fundamentally.

A good example, though unfortunately rarely remembered, is the 1979 Iranian revolution. After the seizure of the American embassy in Tehran, the President Carter arrested Iranian assets in the United States for more than USD 10 bln. Both assets of the Iranian government and assets of the “controlled persons” were arrested. This powerful factor led Iran to the negotiating table. According to the Algiers Agreement between Iran and the U.S., the full amount of damages to foreign investors resulting from the actions of the Iranian revolutionaries is considered by the special international court: Iran-US Claims Tribunal. Two-thirds of the seized assets secure execution of judgments of the court, one-third was returned to Iran.

However, until it has happened, to date there are no reliable recommendations for solving the problem of recovery. Thus, it is not surprising that victims of Russian tyranny in the Crimea look for other ways, which, in their opinion, are on the surface and can not be realized only for political reasons.

It is quite obvious that after Mr. Korban receives “compensation” on account of Ocean Plaza such a “Russian witch hunt” will break out that will bury any investment attractiveness of Ukraine (already low in view of the current war). Therefore, both the Government and the President will have to respond very strictly and quickly to any attempt to start “own war” with Russia.

Unfortunately, if we are going to build a long-term cooperation with Europe and the Western world, it is necessary to act on their principles: predictably, reliably and legally.

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