The State Property Fund of Ukraine announced the upcoming privatization of a number of iconic objects, including the Ocean Plaza shopping mall, Zhytniy rynok, Hotel Ukraina, and Hotel Kozatsky. However, the privatization of the latter has a number of problems that are accompanied by lawsuits and conflicts.
The auction is scheduled for July 18, 2024.
To understand the situation around the "Kozatsky Hotel", a simple search in open sources shows that there is a long-standing dispute between private investors and the State Enterprise "Kozatsky Hotel". The dispute concerns a joint investment activity agreement, under which the State Enterprise "Kozatsky Hotel" transferred the hotel building to the joint activity, and investors, including foreign ones, invested money.
The first court decisions on this agreement date back to April 2007. Since 2011, the conflict has reached its peak: the investors appealed to the Stockholm Arbitration Court, which recognized the agreement as valid and confirmed the investors’ share in the joint property. At the same time, the state-owned enterprise recognized the agreement as invalid, thus creating mutually exclusive decisions: the investors have the decision of the Stockholm Arbitration Court, and the state-owned enterprise has the decision of the national court.
Vadym Vaispapir, the manager and co-owner of one of the investors, said that his company, Carlton Trading Ukraine LLC, together with the foreign investor Carlton Trading LTD, concluded a joint activity agreement with the State Enterprise "Kozatsky Hotel" in 2000.
At first, everything was fine: investors invested money in hotel renovations, purchasing materials and equipment, marketing, and staff training. The hotel began to generate profits, which the participants distributed and reinvested. A complete reconstruction of the hotel was planned, for which millions of dollars were allocated.
However, in 2010, with the coming to power of Viktor Yanukovych's team, the state-owned enterprise "Hotel "Kozatsky" unilaterally refused to fulfill the terms of the contract, transferred the hotel to its balance sheet and began to appropriate all the profits. Investors turned to the international auditing company BDO, which confirmed the contributions of all participants. The investors' share in the hotel is 39.28%.
After that, the investors appealed to the Stockholm Arbitration Court, which recognized the contract as valid and binding. However, despite this, the State Enterprise "Kozatsky Hotel" appealed the decision in the national court, which recognized the contract as invalid. The investors appealed to the European Court of Human Rights (ECHR), where the case has been pending for over 10 years.
Investors argue that the privatization of the state share of the hotel should take place in a civilized manner, and not in the context of legal conflicts. They are ready to buy out the state share, but the State Property Fund refused. Investors warn that the results of the auction may be declared invalid in court, which will complicate the situation for a potential buyer.
Therefore, the situation with the privatization of the "Kozatsky Hotel" is not transparent. Although the price for the hotel may seem attractive, the prospects of legal battles with investors who have gone through a long path of litigation are obvious.
