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JSC CB “PrivatBank” (the “Bank”) is pleased to report that, on 13 September 2022, the arbitration proceedings were finally resolved in favour of the Bank, all claims against it having been dismissed in their entirety. The scope of this press statement is limited in view of the confidentiality restrictions that apply under the Rules of The London Court of International Arbitration (LCIA).
As has been reported previously, since November 2017 the Bank has been involved in LCIA arbitration proceedings brought against it concerning Eurobonds issued in 2010 (the “2010 Notes”) and 2013 (the “2013 Notes” and, together the “Notes”). The funds raised upon the issuance of the Notes were advanced by UK SPV Credit Finance Plc (the “Issuer”), an orphan special purpose vehicle, to the Bank pursuant to loan agreements dated 17 September 2010 (in the amount of US$ 200 million and relating to the 2010 Notes) and 25 February 2013 (in the amount of US$ 175 million and relating to the 2013 Notes) (the “Loan Agreements”).
In December 2016, as part of the resolution actions taken by the Ukrainian authorities on the nationalisation of the Bank, four loans totalling US$ 595 million which had been made by the Issuer to the Bank were bailed-in. These included the loans made under the Loan Agreements. As a matter of Ukrainian law, that bail-in discharged all of the Bank’s obligations to the Issuer under all four loans.
In the arbitration proceedings initiated in 2017, the claimants (being the Issuer together with Madison Pacific Trust, the Trustee in respect of the Notes) alleged that the bail-in was ineffective as a matter of English law, being the law governing the Loan Agreements and the Notes, and that the Bank therefore remained liable for the full amounts of principal together with accrued interest under the Loan Agreements.
The Bank advanced two defences, namely (i) that as a result of the bail-in, as and when that came to be recognised in due course by the Bank of England pursuant to the UK Banking Act 2009, the obligations of the Bank under the Loan Agreements would be deemed to have been discharged in full, and (ii) that the Loan Agreements were unenforceable under English law as they were affected by illegality in various respects connected with the Bank’s former owners and their related companies (the latter defence being upheld by the Tribunal in June 2019, excusing the Bank from any payment obligations in respect of any interests in Notes connected to its former owners). Subsequently, on 4 May 2021, the Bank of England announced its decision recognising that the bail-in undertaken in Ukraine was broadly comparable in its objectives and anticipated results to those of the UK resolution regime, and gave effect to the bail-in of the four loans in question, thus discharging as a matter of English law all of the Bank’s obligations under those loans as of the date of the bail-in in December 2016.
Thereafter, on 3 September 2021, the Tribunal issued Final Awards in the arbitration proceedings (i) dismissing the claims against the Bank in their entirety; and (ii) declaring that the Bank has no liability to the claimants under the Loan Agreements as to either principal or interest.
Through its success in defeating the claims in their entirety, the Bank has been relieved of any obligation to repay the principal or make any additional payments of interest under any of the four loans which were the subject of the bail-in. Altogether, this amounts to a saving for the Bank in excess of US$ 1 billion, which saving is for the ultimate benefit of Ukraine and its people.
PrivatBank recognises the essential contribution of its barristers and external legal team at Quinn Emanuel and Asters in enabling it to achieve this significant success.