Respect for the investor: by word or by deed?

Recently, the processes of reprivatization have been raising more and more questions from both investors and the professional community. The impact of reprivatization processes on Ukraine’s investment climate is discussed by Anna Vynnychenko, managing partner of WinnerLex Law Firm, in her blog on Liga.net.

During the Ukrainian-Lithuanian Economic Forum, Ukrainian President Volodymyr Zelensky delivered a speech yesterday that contained strong messages for foreign investors.

“We respect every investor working in our country. This applies to everyone, regardless of the sector or area of business—from the restaurant industry to the energy sector. I want to reiterate that neither I nor my team will take any ill-considered or unbalanced steps related to retrospective changes in our legislation that could worsen the conditions for doing business in the country. We anticipate significant activation of investment activity and invite you to Ukraine to become part of our success.”

The President’s active stance on promoting Ukraine’s investment climate on various international platforms aligns organically with recent government announcements about plans to launch privatization processes for several hundred state-owned enterprises.

Undoubtedly, the President’s declared support for future foreign investors will spark interest. However, what follows is analysis—not of words, but of the real investment climate, real cases of those investors who have already taken the risk of working in Ukraine. The analysis will examine the actual state of protection of their rights, including by the courts, and take into account the frequent changes in political teams governing the country.

Of course, who, if not lawyers, knows about the negative experiences of foreign investors. Our law firm team can also cite examples of situations where local authorities, instead of supporting enterprises with foreign investments, actively obstruct their operations. Instead of focusing on business development, investors are forced to think about how to protect themselves. However, local authorities in each region may act differently.

The most significant markers for a potential investor are not local cases but those of national importance, which truly reflect state policy.

One notable example is the situation with Ukrtelecom, which has been at the center of legal battles for three years.

The State Property Fund’s claims aim to return the company’s shares to state ownership, allegedly due to the non-fulfillment of two (!) out of fifty (!) conditions of the privatization purchase agreement. In investors’ terminology, this process is known as “reprivatization” and sends a negative signal about the real investment climate.

Any investor seeks legal certainty regarding the object of their ownership and procedures for its effective protection by the state, including the judiciary. The three-year legal marathon surrounding Ukrtelecom demonstrates the lack of such certainty and the insufficient willingness of even the highest judicial authority to resolve the case definitively.

The grounds for the State Property Fund’s lawsuit also raise many questions. One of the two alleged violations of the agreement by the investor, as claimed by the Fund, was the failure to fulfill an obligation to create a special-purpose telecommunications network. This sounds serious. However, case materials and Supreme Court conclusions reveal that the investor fully fulfilled the obligation, and the state, represented by authorized bodies, has even been using this telecommunications network but refuses to formalize its acceptance without any grounds.

As for the alleged failure to meet investment obligations, during the case’s consideration, the investor provided substantial evidence, including audit reports, showing investments of over $800 million in the company’s development over five years, resulting in profitability. Meanwhile, the global telecommunications sector is advancing at a rapid pace. For Ukrtelecom to adopt new innovative technologies, further significant investments are required.

Do endless legal proceedings promote further investment in Ukrtelecom? This is a rhetorical question, and the answer is evident to all.

Thus, a swift and final resolution of the Ukrtelecom case is necessary for the state to turn it into a positive signal for potential investors and provide new impetus for development and investment in the telecommunications sector.