Tomas Fiala: Nobody deals with foreign investors advocacy in Ukraine

Founder of Dragon Capital Investment Company Tomas Fiala, told in an interview to “Economicheskaja Pravda” portal about why foreign investors can’t get justice in the courts in Ukraine.

He spoke also about the investment plans of Dragon Capital New Ukraine Fund and Fund Investment in Ukrainian real estate of Dragon-Ukrainian Properties&Development PLC. RAU quotes excerpts from his interview.

—You and the founder of the Arricano company Estonian businessman Hillar Teder has accused of your partner Andrey Adamovsky on the project Sky Mall three years ago at illegal pressure methods and blackmail. How are there situation about Sky Mall now?

— British DUPD Fund, a shareholder of the Dragon Capital, is invested to the Arricano Holding Company. This was the owner of a legal entity, which owned a pack of 50% -1 by Sky Mall share. Package 50%+1 share was owned by Andrey Adamovsky through Stockman Company, where Director was Alexander Granovsky.

DUPD joined to Arricano Company with investment in the amount of $30 million. Arricano Company had an option to buy out the Stockman Company share with a yield of 40% per annum. This option the company used. Stockman Company refused this option to perform. Litigations began between these parties.

Arricano Company lost the first trial in 2011, but then the appeal won in August 2014. The court recognized the validity and indicated force of this option.

London Arbitration Court has taken a decision in the spring of 2016, by which it was found that the damage exceeded the option price from the management of this object by Stockman Company, so Stockman Company will need to give these action in a month without any payment by Arricano Company. They didn’t do it.

They brought a Sky Mall for the Bank “Pivdenny” after losing in 2014. The scheme is simple: they took a loan and did not pay it. Thus, the object is legally transferred to the Bank “Pivdenny”.

—Do is the problem at it that the decision of the foreign court must confirm our courts?

— Yes, it is. A foreign investor hasn’t progress in the Ukrainian courts or law enforcement to return the control over the investment and the decision of the London arbitration courts is not done still.

On the contrary: Arricano Company and its shareholders have to defend themselves now in the Ukrainian court from Adamovsky claim about protection of his honor and dignity.

I think that the chances to defend own interests in Ukrainian courts for foreign investors in the present circumstances is minimal. In the same way, as in the Ukrainian law enforcement agencies, by which opponents use.

— How? Tomas Fiala

— They open a criminal cases, for example: for employees of the Arricano Company Group, on other persons, defending openly the interests of Arricano Company and Hillar Teder Company. I am as a witness through some of its. It’s a such way of pressure to forgave and gave them Sky Mall.

This is standard practice. Criminal cases is opening for you, the troubles are creating for you to hit the interest to defend own rights. And when you speak to the President he is removed from this problem decision, because the interests there are for his party allies.

The Sky Mall was built by Estonian investor for $200 million and it generates even today $15 million per year net income. But as the second party are supporting by the ruling authority, nobody deals with foreign investors advocacy. The situation is such.

—Dragon-Ukrainian Properties&Development Fund PLC (DUPD) announced in 2014 about a change in its strategy and that they will not buy now new projects. What has focused the Fund’s work now? Tomas Fiala

— It is being in orderly realization stage, it means that it isn’t making new investments, and it brings to the end all its projects, it sells its and the money returns to investors via dividend payments.

The Fund continues to build and sell retail all projects in his portfolio (Obolon Residences, Riviera Villas and Green Hills). It will be still probably 3-4 years. DUPD was created as a cross between the Fund and the Company. It is a public company listed on the London Stock Exchange.

—You have created Dragon Capital New Ukraine Fund in November 2015. What are its investment plans?

— Yes, this is our second private Investment’s Fund after Europe Virgin Fund (EVF), which was established in 2010, the main investors of which are Dragon Capital and the EBRD. It was fully invested in 2011-2015. Tomas Fiala

Dragon Capital New Ukraine Fund established for 10 years. It had to invest, manage and sell investments during this time. Its term may be extended three times for 1 year.

We have already made three investments. The Fund has bought two logistics facility: East Gate Logistic in Borispol, West Gate Logistic at Zhitomir highway and SEC Pyramida on at the Bazhana avn.

—You got burned badly with Sky Mall, but you continue still to invest. Did your approach’s has not changed to investment in Ukraine?

— Dragon Capital New Ukraine Fund buys only controlling stakes. Because there are of the law rule lack in Ukraine. We try to minimize the risks of corrupt courts and law enforcement agencies, and prevent of manual control by politicians. Tomas Fiala

We don’t want to risk when someone will be by your partner who will come to power and begin to control by the courts. Tomas Fiala

We prefer or to own by share 100% or have a controlling stake, the property to restructure at European jurisdiction Holding Company in order potential disputes by joint agreement to be able to solve and in the international courts, preferably in London.

— Who are the investors of this Fund?

—Dragon and Ukrainian Redevelopment Fund LP (a private Investment Fund managed by Soros Fund Management) there are still investors. We don’t call the size of the Fund publicly. The American State Organization OPIC has approved an investment of up to $25 million to this Fund in June last year. We are conducting a negotiations with some other investors.

— What is looking at a Fund? Tomas Fiala

— We are looking to the exporters and the players that benefit from import substitution. We are looking projects in IT, FMCG, commercial real estate and other sectors. As the transaction not yet closed, so I do not want to disclose the details.

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