In the ongoing legal battle between TIU Canada and Ukraine’s notorious and heavily sanctioned oligarch, Igor Kolomoisky, over what seems a pretty straight-forward dispute where a company and facility controlled by the oligarch illegally, prevented TIU the use of its land be as a conduit for the transit of its solar production, a new chapter can now be added.

The most recent development was a decision of the appellate court as to who would hear the case. TIU lawyers presented a motion to the court using information that it had garnered in the public domain, arguing that the members hearing the present case, had a record of ruling in favor of Kolomoisky on a number of previous occasions. Their argument was simple: the Court, they felt, had exhibited a predisposition to rule in Kolomoisky’s favor.

Having presented their motion before the court on a Friday calling for the judge of the Court to be dismissed, and then arguing their motion on the following Monday in a short appearance before the Court, they saw their motion dismissed after 20 minutes. Intriguingly, the appellate court, in dismissing TIU’s motion to dismiss them, then recused themselves from the case.

What is intriguing is that the decision only raises further questions that invite further speculation as to the motives of the Court, and the judges, Popikovoy O.B., Korsaka B.A. and Yevsikova O.O.

Why did they first rule to deny the motion asking them to dismiss themselves, to only then recuse themselves from the case after they made the decision? Furthermore, in relation to proper and accepted Western practice: if they already knew of their decision to recuse, why did they not do so before making a decision? This action does not pass the smell test or logic.

For what it suggests is that there may have been other reasons for their recusal. Reasons that do not seem readily evident. This is not to say, nor imply “corruption” on the part of the Court, but if the Court decided to recuse itself on a Monday, only days after being presented with the motion, what new “facts”, if any, could have possibly come into play during the weekend? Did the court suddenly become aware of its need to have an established reputation for fairness and to act without prejudice?

These are important questions to ask in Ukraine as it continues to harbor a reputation for being tolerant of corrupt courts. It is not a secret, either in the country, nor outside of it, that the legal system, whether, the police, prosecutors, or judges, more often than not, fall under the influence of economic criminal interests or covert political manipulations. This is a major reason that this case is a cautionary tale for foreign investors and the future of Ukraine as a fair and rule of law jurisdiction. Again, that being said, no one is casting aspersions or accusing any participants of malfeasance in this case.

TIU’s challenge of the status quo and its unwillingness to submit to numerous legal maneuvers in a country that oftentimes exhibits xenophobic tendencies as to accepted western practices, shows the company’s resolve to find justice. Not only for its own legal claims as a foreign investor, but to ask publically, for all to see and hear, whether it is possible to get a fair legal hearing within the country.

In-country legal observers and practitioners say that the legal “experience” of TIU is not out of the ordinary. They have no problem comparing the experience of TIU, a Canadian company, with the experience of other corporate entities seeking legal remedies in the highest courts of the land. They suggest that the Court acted in this way so as to avoid further public attention and scrutiny. That it was a deliberate move to avoid unwanted and negative media public relations and that they wanted to avoid potential public complaints and potential investigations.

Trials such as this one are a test as to how Ukraine’s western partners choose to hold Ukraine to account in the development of a fair justice system, a major issue in post-Maidan Ukraine.

Western countries, if they are to aid Ukraine in its transition towards a fair and law based judicial system, cannot remain silent and neglect the tools of rhetorical persuasion. This practice, however, should by no means seek to influence the decisions of what should be the decisions of independent judges.

So how should foreign governments act upon the scenarios that emanate from such legal disputes?

Foreign governments must make public and visible their efforts to monitor the legal cases of their nationals.

They must publically state their expectations for legal fairness to government and legal institutions in addition to public media.

They must comment and provide daily scrutiny on the expectation of fairness in the process, using their pronouncements as a “teaching moment”.

They, meaning Ambassadors and ministers, must directly warn, through diplomatic mechanisms, of the potential negative effects on their relationships with Ukraine especially as to how judicial misbehavior, would impact the direct foreign investments of their nationals, as well as their governments.

In a general sense, they must apply more pressure towards the government of Ukraine in its pursuit of a fair and just legal system that would eat away at Ukraine’s reputation as a corrupt legal jurisdiction.

Increased and more sustained efforts should have the general aim of working with Ukraine to establish a more fair and just legal system, especially as it relates to the need to constantly and consistently deliver judicial legal decisions based on the highest standards of moral integrity. In time, this will become the backbone for a just society that contains a framework for a rules-based legal system and a greater rule of law society.

In a number of ways, TIU’s lawsuit against Kolomoisky is a direct challenge to the economic and legal status quo in Ukraine. The oligarch’s and Ukraine’s economic criminals know this. It is a challenge inspired by an assumption in the fundamentals of the free market, a competitive marketplace, fair competition, an expectation of a fair and unbiased judicial process, and equitable judgements. A system of law without prejudice.

The original article can be found here – https://www.neweurope.eu/article/recusal-in-the-case-of-tiu-canada-and-the-ukrainian-oligarch-kolomoisky/

Ukraine’s government was euphoric over the visit of US Secretary of State Tony Blinkin to Kyiv last week. Grip and grin photos aside, behind closed doors Secretary Blinkin delivered a tough message to Ukraine about corruption. Discussion about corruption in the energy sector was a key component of that delivery, especially as it relates to the renewables energy sector.

After the Euromaidan, the new government of Ukraine made a decision to establish a large-scale renewables sector with its prime motivation being to attract foreign investment. To this end, it offered attractive tariffs and made the renewables sector the greatest generator of FDI in Ukraine.

From 2017-2019, more than $8 billion poured into green energy. In 2020, approximately 7.3% of Ukraine’s electricity was being generated from renewable sources (12.4% including large hydro), with the goal of 25% by 2030. The move away from hydrocarbons was deliberate; Ukraine wanted to align itself with its European Union partners in both participating and contributing to lessening their overall dependence on hydrocarbons. In addition, Ukraine wanted to pursue a strategy towards energy independence.    

Though Ukraine’s strategic objectives are to be lauded, glaring missteps have become evident as they relate to the participation of foreign investors. Relationships with foreign investors is a key ongoing concern because without direct foreign investment, Ukraine cannot, and will not, fulfill its strategic objectives regarding the use of renewables.

The major issue that has cast doubt on this effort is that the government of Ukraine has not abided by its renewable energy contractual obligations, more specifically, paying electricity producers for their production.

After a promising and hopeful start, foreign investors are now owed close to $700 million in unpaid fees. These still unpaid bills, after numerous negotiations and compromises made by investors over the last 18 months are forcing investors to renegotiate bank loans, consider bankruptcy, and pursue international litigation against Ukraine. 

Most troubling is that the confidence of international institutions such as the U.S. DFC, EBRD, the IMF and others who have provided long-term financing for renewable projects in Ukraine, is being undermined and confidence shaken. 

This unresolved situation has the potential to cause financial and macro-economic instability within the country as Ukrainian lenders must prepare for an impending crisis of investors’ inability to service their debts. 

It has now become obvious to Western governments and investors that such behavior is the cause of increased consternation amongst Ukraine’s Western bilateral partners and that it is affecting Ukraine’s international standing.

Ukraine’s inconsistent, undependable, and even erratic behavior towards foreign investors has been exposed. And however hard its leadership may wish to deny that this is not the case, the unpredictable nature of Ukraine’s investment climate, its haphazard attempts to establish the rule of law, its lack of fealty to meet its contractual obligations and its ineffective anti-corruption efforts are privately scoffed at. The promises made by Ukraine’s political leaders are met with incredulity.

Ukraine still has not learned the fundamentals of managing foreign investment.  Attracting, and more importantly, keeping a constant flow of foreign investment into one’s country requires that the government keeps its promises, engender trust, and show a commitment to establishing and managing, a fair and competitive market.

Whether at the highest levels of the federal government to local municipalities, Ukraine’s political leadership still lacks fundamental knowledge of how a free market system actually works. The tradition of economically ambitious individuals entering government for the purpose of making money remains strong.

Stability and confidence are essential to attract long-term investment. With three regions of Ukraine under Russian occupation, attracting investment to Ukraine is no longer an easy proposition.

In general, Ukraine does not have the experience nor the realization that stable foreign investment takes place within a relationship that is based on established trust, good faith, and the expectation of fairness and a fair return on investment. 

What Ukraine still must learn on its road to becoming a major investment space with a western orientation is that if it continues to violate its contractual obligations and not act in good faith in fulfilling its agreements regarding state guarantees, it will continue to forfeit investment confidence within its greater economy. This will have definite long-term implications, greatly impeding its economic growth and the quest to job creation. 

In the renewables sector, Ukraine’s investment narrative and reputation has become such that it is becoming a country within which it is not only too risky to invest but may not even be worth the effort.

Years after the political upheaval of the Maidan, successive governments have not been able to ward off the political manipulations of high-level decision-makers and parliamentary committees by corrupt practitioners. Ukraine’s government cannot guarantee judicial fairness and protection for foreign investors by corrupt interests. One such example is the ongoing legal fight of TIU Canada and Igor Kolomoisky over the illegal disconnection from the power grid as an attempt to raid the company.

But most importantly, Ukraine’s government lacks the political will to pay its debts to foreign investors. This is cause for alarm for all. Ukraine must show that it is willing to learn the importance of committing to the principle of honoring its agreements with its foreign investors. 

What solutions exist to fix this crisis of confidence in the promises of the Ukrainian government to honor its commitments to investors?

First, the issuance of green bonds is viewed as a way to finance the so-called “Guaranteed Buyer”.  These bonds, with maturities of 5-10 years, can provide the Guaranteed Buyer the cash flow to make the monthly payments to green energy producers. State banks have already moved in this direction.  However, the problem is that money designated for green energy payments is diverted to Energoatom and other state agencies.

Second, a carbon tax is inevitable for Ukraine. The only questions that remain is when such a tax will be imposed and the rate of taxation. The country’s largest industries including coal, steel and metallurgy must reinvest in the future lest Ukraine become a countrywide exclusion zone due to pollution. Experts are pushing for the introduction of a carbon tax to cover debts to green energy producers, however, major industry participants (i.e. oligarchs) are already lining up against it. At the same time, government bureaucrats are growing expectant at the thought of new revenues to embezzle and squander.

In reality, the answer is that Ukraine needs both green bonds in the short term and a carbon tax for the longer term. The question that must be answered: does Ukraine’s government have the political will to make the tough choices to get both done?

The original article is available here – https://www.neweurope.eu/article/the-unfortunate-state-of-the-renewables-industry-in-ukraine/