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London arbitration confirms legality of PrivatBank's bail-in eurobonds during its nationalization – bank
KYIV. Sept 19 (Interfax-Ukraine) – The London Court of International Arbitration (LCIA) on September 13, 2022 finalized arbitration proceedings on the legality of including PrivatBank eurobonds in the bail-in procedure – the forced conversion of obligations on bonds into shares with a further buyback of all shares by the state for UAH 1 during nationalization – in favor of the bank, according to the financial institution.
"Thanks to success in full defense against claims, PrivatBank has been released from any obligation to pay principal or any additional payment of interest on any of the four loans under a bail-in procedure," the bank said in a press release.
The financial institution emphasizes that all claims against it were completely rejected, which in total saved more than $1 billion.
The bank recalled that since November 2017, it has been involved in LCIA arbitration proceedings initiated against it on eurobonds issued in 2010 and 2013 through a special British company (SPV) Credit Finance Plc, which, in turn, provided loans to the bank.
In December 2016, as part of the nationalization of PrivatBank on four loans from Credit Finance Plc for a total of $595 million, a bail-in procedure was carried out, as a result of which, under Ukrainian law, all the bank’s obligations to Credit Finance were fully repaid.
In the arbitration, the plaintiffs (Credit Finance together with Madison Pacific Trust, the bond trustee) argued that the bail-in procedure was not valid under English law as the law governing loan agreements and bonds, and that the bank remained liable to pay the principal amount and the amount of accrued interest in full.
The bank, in turn, presented two lines of defense. In particular, the first one dealt with the recognition of the legality of bail-in by the Bank of England. Under the second, the loan agreements could not be enforced under English law because they were affected in various contexts by issues of illegality associated with the bank’s former owners and affiliated companies. The last line of defense was taken by the arbitration court in June 2019, allowing the bank not to pay any amounts on obligations on bonds associated with its former owners. Subsequently, on May 4, 2021, the Bank of England announced its decision to recognize the bail-in procedure.
Thereafter, on September 3, 2021, the arbitral tribunal rendered final arbitration awards in arbitration proceedings, which provided for the rejection of all claims against the bank and confirmation that the bank has no obligations to pay principal and interest to the claimants under the loan agreements.
PrivatBank in the release noted the significant contribution of its lawyers and the teams of external legal advisers Quinn Emanuel and Asters to achieving this significant success.
