Ukraine Business Ombudsman Algirdas Semeta Supports the SkyMall Case and Recommends an Increased Level of Protection for the State Register of Rights to Real Estate

The Business Ombudsman for the Ukrainian Anti-Corruption Initiative, Algirdas Semeta, has investigated the complaint from Arricano Real Estate Plc regarding gross violations of law by Ukrainian State Register officials during reregistration of SkyMall shopping mall. After acknowledging the validity of the complaint, he addressed the Ministry of Justice with a recommendation for an increased level of protection for the State Register of Rights to Real Estate, in particular referring to cases of unauthorized tampering in registration activities above a certain threshold value.

Vyacheslav Peskov, the Procurator representing Arricano, noted, “Ukraine is in need of a reliable system of property rights protection to be created. Today, in fact, any citizen of Ukraine can one day discover that his or her property, apartment, commercial property or land, no longer belongs to him or her. With the right network of contacts and exploiting faults of data protection system of Ukrainian State Register, you can change the property rights to any item of property, which is what happened to SkyMall shopping mall. Any person having the correct electronic key could do it; there is no reliable personality verification system. Moreover, in our case, the electronic system allowed those responsible to remove the attachments from SkyMall shopping mall in the night, when, according to the law, the registration activities are impossible.”

Mr. Semeta thinks that even after having confirmed the violations from the part of registrars, the Ministry of Justice put Arricano in a difficult situation as the agencies which are under its jurisdiction offer the company to restore its property rights for SkyMall shopping mall through judicial authorities. With that, Arricano could only litigate the “violation of judicial decisions and injunctions for performance of registration activities and alienation of disputed property adopted earlier by the officials of the Ministry of Justice,” and the violators themselves had only formal or insignificant punishment.

He made a point to the Minister of Justice, Pavel Petrenko, and Acting City Procurator of Kyiv, Oleg Valenduk, of the inefficiency in the investigation of criminal cases concerning the law violation of public registrars and illegal reregistration of property rights to SkyMall shopping mall.

Violations at transfer of 100% equity rights were confirmed by the investigation of Ukrainian State Register, the government establishment; following its results, the agency filed a request with the public prosecution office. Notwithstanding the numerous requests of Arricano and Ukrainian State Register, the fraudulent reregistration of Sky Mall shopping mall has not been investigated for over a year by Dneprovskiy District Procurator Office.

Vyacheslav Peskov mentioned, “For 1.5 years, the law enforcement authorities have been artificially delaying the investigation of criminal cases relating to the SkyMall shopping mall reregistration. Just recently, on January 6, we received a letter from the Main Directorate of National Police confirming the validity of our complaints concerning the delay in the investigation. We are hopeful that the police valuation and the recommendation of the business ombudsman will be taken into consideration by the Ministry of Justice, as well as the public prosecution office. A positive experience of a western investor in Ukraine will become an indicator of improvement in the investment climate and the guaranty of investment safety in Ukraine.”

Background on the SkyMall Dispute

On 19 August 2014, the International Commercial Arbitration LCIA (London) delivered a judgment in favor of Arricano restoring the right of the company for reacquisition of majority stake for Sky Mall shopping mall. Following this, in Ukraine, in September 2014, 100% of equity rights to the property was transferred to third party, a Dutch company Financing and Invest Solutions B. V., and the property rights for the shopping mall was registered by Pivdennyi Bank because of the outstanding purposefully created debt amounting to 32 mln US dollars. Both of these actions were performed by Ukrainian State Register illegally inasmuch as at that time several valid attachments were imposed on the shopping mall. According to Arricano, these actions were performed by Ukrainian partners of the company, businessmen A. Adamovsky and A. Granovsky who currently is a people’s Deputy of Verkhovna Rada (Supreme Council of Ukraine) from Petro Poroshenko Block in order to wash out the property rights for the project and prevent the implementation of decision of English court regarding the return of this asset.