Freeze of Ukrainian oligarchs' assets abroad - its practical side

Author : Eugene Blinov

Source : 112 Ukraine

Over the past month, foreign courts have frozen assets of several Ukrainian oligarchs - Rinat Akhmetov, Ihor Kolomoisky, and Kostiantyn Hryhoryshyn
20:00, 19 January 2018

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Security measures are an effective way to increase a chance of the debtor to pay his debt, the fees of lawyers or other costs in the litigation process. They are very popular abroad, both in judicial and arbitration processes (arbitration is an alternative way to resolve disputes, which is characterized by confidentiality and informality). Restrictions on disposal of property may be imposed both before the commencement of the substantive dispute and during the trial or even after its termination. The effectiveness of interim measures such as the freezing of assets is confirmed by the fact that this instrument was called a legal "nuclear weapon" in the legal community.

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In all cases, applications for interim measures should be submitted in support of an existing or future disputes, as well as in cases of enforcement of a judgment on the merits of the dispute. If the application for interim measures is requested at the stage of dispute resolution, usually, this issue is decided by the court or arbitration court that is considering the dispute or extending its jurisdiction over the location of the defendant's assets. The effect of interim measures usually extends only within the domestic jurisdiction of the court. But there are exceptions to this rule. For example, English jurisdiction has gained its popularity because of the ban on alienation that could be extended on assets located in any country of the world. The mechanism of action of such freezes is quite simple. The ban is not an encumbrance on the disposal of property, that is, formally the arrest of assets and funds is not imposed. The debtor may try to sell a certain property or perform a banking transaction, but these actions will entail criminal liability, and the transactions will be declared invalid. In addition, in pursuance of judicial orders, the debtor is always obliged to notify the banks, the management of companies and all other persons actually controlling the property about "freezing" the assets.

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There are few reasons, why disputes involving Ukrainian large companies are often conducted abroad. First, it is the choice of a neutral and unbiased court to resolve the dispute. In many Western countries, the pressure on the judge is either almost impossible (as in England), or threatened with a real and inevitable criminal prosecution. Secondly, the reputation of developed jurisdictions that actually offer judges, arbitrators, and lawyers with high professionalism (for example, England, France, Switzerland, Sweden) is a significant factor. Thirdly, it is legislative regulation and judicial practice on procedural and other issues. The popularity of London city among the Ukrainian oligarchs is known to everyone, and English court accepts the claim if the debtor's residence or the location of his assets is on the territory of the country. The jurisdiction of the courts of Cyprus or the British Virgin Islands is often based on the location of the assets and/or the place of registration of legal entities that are part of the corporate structures of holding companies.

Many foreign courts have created a carefully developed practice of assets freeze. If you refer to England, the creditor must prove that imposing a ban will bring more benefits to the creditor than harm to the debtor. He should be taking into account the degree of risk of alienation of assets by the debtor. Since such requests for a freezing of assets are usually considered without notification of the respondent and are immediately enforced, the applicant must disclose all the circumstances of the case known to him, even if they are interpreted in favor of the debtor. The orders of the courts to freeze assets are not subject to appeal but can be canceled for a number of reasons. There are no significant differences between the freezing of assets of individuals and legal entities.

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Applications for asset freezing imply a large amount of work and should be prepared in a short time, so these services are quite expensive, although the specific price always depends on the circumstances and complexity of the case. In addition to the direct work of the lawyers, the cost will also significantly depend on the scope of work of the involved audit companies, forensic experts, private detectives and other professionals who are involved in the analysis of financial reporting and asset search.

Ukraine has already witnessed successful cases of recognition of English courts orders on freezing bank accounts, but such applications are not always successful. Ukrainian court can only execute those judgments of the foreign courts that have entered into the force. In some cases, decisions on freezing will not be final due to their interim nature, pending consideration of the merits of the dispute.

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