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Clothing manufacturer can buy out premises after 13 years of SPF runarounds

03.05.2018

Subject of Complaint: Kyiv Municipal District Department of State Property Fund (SPF) 

Complaint in brief: Nearly three years ago, on July 7, 2015, Asteys, a clothing manufacturer, approached the BOC with a complaint against the SPF. For 10 years, the SPF had not complied with the decisions of national courts of all instances, and even the European Court of Human Rights (ECHR), concerning the Complainant’s privatization of an industrial facility.

In 2002-2005, the company rented an office and manufacturing facility on the books at the SPF for its office.  At its own expense and with the permission of the lessor, the company renovated the facility, which cost almost 30% of the market value of the premises and over 70% of its book value.

According to the Law “On the State Privatization Program” that was in force at the time, Asteys had the right to buy out the property from the SPF. However, after filing its request, the company was evicted by force and no compensation was given for any of its expenses.

The Complainant appealed to the Commercial Court of Kyiv to exercise its legal right to privatization. The court ruled in favor of the applicant. This court decision went through all court instances and continued to be upheld. For several years, it was in progress of execution by the State Enforcement Service, but was not implemented.

Unhappy with the fact that the SPF was ignoring every domestic court ruling, in 2013 the company appealed to the European Court of Human Rights, which confirmed the indisputable duty of the State of Ukraine to comply with the decisions of the national courts confirming the company’s priority right to privatize the premises. Ukraine paid Asteys €3,000 in compensation, as had been ruled by the ECHR, but still did not release the premises for privatization.

At this stage, in 2015, the Complainant turned to the BOC. As it turned out, while Asteys was still challenging the SPF’s inaction in court, the premises were leased to another company, which later rebuilt and privatized the property.

After lengthy negotiations between the Complainant and the SPF, which took place with the participation of the Business Ombudsman Council and the Verkhovna Rada Special Privatization Oversight Commission, in June 2016 the parties settled. The Fund offered the company two premises of the same area that the firm could then buy out. These actions ended the dispute and led to full implementation of the ECHR judgment. However, after the settlement was approved by a court of the first instance in 2017, new SPF management decided to file an appeal. This disrupted all previous agreements and violated the implementation of the ECHR ruling.

Actions taken: The BOC recommended that the SPF unconditionally comply with the ECHR’s decision, fulfilling the terms and conditions of the settlement agreement. In January 2018, the Court of Appeal upheld the decision of the first instance and the agreement between the parties remained in force. The SPF notified the BOC of its readiness to comply with the provisions of the settlement. At this time, premises that are subject to privatization by the Complainant are already on the list of Class A objects that are subject to privatization.

Result achieved: The privatization process has begun. After this, the Complainant will be able to buy out the premises. The BOC continues monitoring the case.