Cyprus-based offshore companies Littop Enterprises Limited, Dridgemont Ventures Limited, and Bordo Management Limited claim to own shares in PJSC Ukrnafta and intend to demand $5 billion from Ukraine. This is because, according to Bill No. 1310, passed by parliament on January 14, the state can take control of the management and profit distribution of mining companies in which the state owns 50% plus one share.
The remaining shares are distributed as follows: approximately 42% belong to Igor Kolomoisky's Privat Group; approximately 8%, according to these "investors"—Littop Enterprises Limited, Dridgemont Ventures Limited, and Bordo Management Limited—belong to three foreign companies registered in Cyprus.
It was these three Cypriot investors in Ukrnafta who, on December 31, 2014, sent a written notice to the Minister of Energy and Coal Industry of Ukraine, Volodymyr Demchyshyn, of their intention to resolve what they claim is a long-standing dispute between them, the “investors,” and the state of Ukraine and all its state structures.
In fact, the long-standing problem of state management of assets, operations, and profit distribution at the mining company Ukrnafta is linked to the following demands from government agencies at the public joint-stock company:
1. Supply all natural gas produced by Ukrnafta, as well as other state-owned companies, to Ukraine to meet the gas needs of the population at a tariff set by the national regulator, the National Commission for State Regulation of Energy and Public Utilities (NKREKP), which has always been set below the maximum gas price set by the NKREKP for industrial consumers.
2. Distribute and pay dividends (the 2015 budget of Ukraine already includes dividends from Ukrnafta's operations in 2011-2013 as income, amounting to approximately UAH 2 billion). 3. The State Fiscal Service requires the payment of increased royalty payments for natural gas and oil production to the budget of Ukraine for the second half of 2014, amounting to approximately UAH 3 billion.
Investors "believe that in this case Ukraine is taking deliberate action, on the one hand, by blocking Ukrnafta's (UKN) ability to manage its resources, and on the other, by applying additional sanctions to UKN with the help of the State Fiscal Service, which is controlled by the Cabinet of Ministers of Ukraine.
Thus, by its actions regarding investments, as described above, Ukraine has violated each of the aforementioned obligations under the Treaty and caused investors and the UKN significant losses exceeding $5 billion. The investors demand compensation for these losses, as well as a guarantee that Ukraine will continue to fulfill its obligations under Ukrainian law and the ECT.
Investor companies, assuring their friendly intentions and availability for discussion of the dispute, propose a “peaceful resolution of the conflict during a meeting with representatives of Ukraine.”
Otherwise, the Cypriot investors inform, “if this dispute cannot be resolved within three months from the date of this letter, the investors intend to submit this dispute to international arbitration.”
Let us recall that during the process of adopting the 2015 State Budget, the Verkhovna Rada failed to adopt a resolution providing for the denunciation of the agreement with Cyprus on the avoidance of double taxation.
Thus, companies registered in the offshore zone of Cyprus, as before, may not pay taxes in Ukraine.
Cypriot companies sent copies of this letter to Ukrainian President Petro Poroshenko, Prime Minister Arseniy Yatsenyuk, Minister of Justice Pavlo Petrenko, Ukrainian Foreign Minister Pavlo Klimkin, and Chairman of the Board of Naftogaz Ukrainy NJSC Andriy Kobolev ( read more about him in the article " Andriy Kobolev: An Inconspicuous "Veteran" of the Gas Pipeline ").
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