THINK BEFORE YOU INVEST IN UKRAINE
Statement by Dr. Mohammad Zahoor
(Founder, ISTIL Group, previous owner of the Kyiv Post)
Kyiv, Ukraine, Wednesday, October 3, 2018
My name is Dr. Mohammad Zahoor and I am a British citizen, ex-owner of the only independent English language newspaper in Ukraine “KyivPost.” I made my first Ukrainian investment in 1993 in Odessa Sea Port and since then, as of today, my Group has invested over $400 million in to the various fields of Ukrainian economy.
Ukraine is striving to attract foreign direct investments, which are currently at their lowest ebb. Numerous roadshows showcasing the attractiveness of investments in Ukraine are being organized in different countries. On 8th October there will be a full UKRAINE WEEK in London, where the Ukrainian leadership will attempt to create the impression that Ukraine is an increasingly attractive and safe country for foreign investors.
I owned KyivPost for nine years and, without fear and favour. I strove to bring to public knowledge both the positive and negative aspects of doing business in Ukraine. I frequently highlighted all the pros and cons and then left it to the readers and investors to make their own minds up with regard to investment.
I sold the newspaper in April 2018 but have not changed my attitude towards championing the truth. For some years we made it a priority to report investment issues that foreign companies and individuals were experiencing in Ukraine, such as corruption, raiders, unfair judges, the prosecutor’s office, police, tax authorities, city authorities, criminals etc.
In 2000 I had personal experience of the perils of doing business in Ukraine, when after having invested over $150 million in Donetsk Steel Works I was told to leave. With the help of KyivPost and the diplomatic community I was able to withstand that attack. After that I had no problems until I took over the KyivPost. While there were requests through my Ukrainian employees to stop the publication of certain articles in the KyivPost, but we never acceded to them. In response there was an effort to exert administrative pressure on my other business entities through both the tax and prosecutor offices. Yet through all this we stood tall.
Since I sold KyivPost the vengeance has begun again. This stems in part from the fact that, although the KyivPost did support Poroshenko in the beginning of his term in office, we noticed that corrupt practices are not being tackled properly. On the contrary, these issues are mushrooming. Therefore we started criticizing him and his team. In response, just recently the SBU, who are responsible for state security in economic sphere forced police to initiate criminal case against us based on allegation that we have illegally altered the historic façade of the former hotel Leipzig we own (where we have invested upwards of $90 million and counting). For some reason they seem to see this as the biggest threat to the state security. However, when we provided all the documents and permissions confirming that façade works were done in full compliance with laws, the case was closed.
Yet right now we are under another raider attack by clerks from the Ministry of Defence (MoD) and no name “construction company” Prombud-M, under the sacred slogan of “Housing for Soldiers” are trying to snatch a piece of land legally belonging to us. Here is the chronology of the events which evident how much rotten is the system and how meticulously organized the raiders are:
- July 2009 - we purchased a property complex consisting of several buildings in dire condition located on the land plot of 0.6 hectares on 24-A, Artema street (currently Sechevykh Streltsov street) in Kyiv. The Property was privately owned and was purchased from a company that had all necessary title documents and who had paid about one million US dollars to MoD for this property. However, immediately after the purchase, our ownership over the property was challenged in court by the MoD.
- September 2009 - Economic Court of Kyiv acknowledged us as bona fide purchaser and confirmed our property ownership right. This decision was upheld and confirmed by all subsequent court instances, including the Supreme Court of Ukraine (in December 2009).
- December 2010 - Kyiv City Council passed resolution to sell the land adjacent and under the buildings to us;
- February 2011 - contract of sale and purchase of this Land plot was signed with Kyiv City Council on installments basis with in 5 years;
- May 2017 – All payments were made by us on timely basis and we registered the ownership right for the Land plot;
- December 2017 we came to know that the Ministry of Defence signed a contract in March, 2017 for construction of a residential complex on the Land plot owned by us with some bogus company Prombud-M registered in some remote area of Ukraine, having no construction licence and experience and less than Euro 300 charter capital;
- In April 2018 - I sold KyivPost;
- We challenged the fictitious agreement between the MoD and Prombud-M and received a decision in our favour. They appealed.
- 22nd May 2018 – As we expected Judge Vladyslav Demydov of Economic Court of Kyiv decided in favour of raiders and Ministry of Defence annulling Kyiv City resolution about the sale of land to us. We appealed, though anticipate the outcome. The judgement that we won was stayed pending the result of our appeal. The next hearing is on 22nd October.
- 23rd May 2018 – Just one day after passing the judgment in MoD’s favour, ironically, Judge Vladyslav Demydov’s mandate as a judge expired;
- June 2018 – we filed a criminal case with Kyiv city police department against Mr. Soban of the MoD, who initiated the tender for the construction of residential complex on our land.
- September 2018 – the criminal case file was taken out from police by the General Prosecutor’s Office “for supervision”.
I am sure that the corrupt judges and judicial system of Ukraine will never let me win. However I am not giving in and even if I lose all the cases here, then I will continue to fight in the European Court for Human Rights where I am already fighting a case with Ukraine, which I filed in 2008 and now near culmination.
In the meantime, in order to avoid these expensive court battles, and so as not to litigate against another raider case, in March 2018 I have approached Daniel Bilak, Director of UkraineInvest and Chief Investment Adviser to the Prime Minister of Ukraine to ask whether his office can help to resolve this matter. Bilak found the case to be very disturbing and this is not the first instance they’ve come across. He arranged for me to meet with Oksana Markarova, the Government Investment Commissioner (at that time also First Deputy Minister of Finance) and a head of the inter-agency Working Group established by Mr. Groysman to deal with cases involving existing investor’s issues.
I had a very positive and encouraging meeting with Oksana Markarova and the Working Group’s counsel Iryna Krasko in March 2018. They were informed about the facts of the raid towards Istil’s land plot that are being carried out with the direct involvement and support of the state authority of the Ministry of Defence of Ukraine, and negative influence such facts may cause to the Ukrainian investment climate. Oksana assured us that the Ukrainian Government is making considerable efforts to create an attractive investment climate in Ukraine. She promised to inform the Prime Minister of Ukraine about these facts and approach Ministry of Defence as well. She also asked whether we were willing to go to anti-corruption court, if the outcome is negative. I told that we most certainly would. However, after this meeting, for reasons unknown to us, Oksana discontinued any further communication on this matter and all our emails went unanswered. Later she became the acting Minister of Finance.
We tried to resolve this matter without hurting Ukraine's dire need for foreign investments but it seems that nobody cares about it in the higher echelons of Ukrainian Government. These include officials from UkraineInvest – the agency that is supposed to be the investors’ voice, assisting investors to solve their issues in this country.
I hope the diplomatic community, business associations, ombudsman, financial institutions, Ukraine friendly countries abroad, and other agencies working on the positive image of Ukraine will read this article and use their influence to make the Ukrainian leadership understand that if the present investors in the country are not happy, especially the one who have invested in excess of over $400 million in this country, then all their efforts to portray a rosy picture of Ukrainian investment climate will never prevail.
USUBC NOTE: ISTIL Group is a member of U.S.-Ukraine Business Council (USUBC), Wash, D.C. www.USUBC.org