OREANDA-NEWS. January 15, 2008. Iskander Makhmudov, a Russian oligarch, co-owner of Transmachineholding, will have to return Luganskteplovoz OJSC to the state. The Supreme Court of Ukraine refused to the State Property Fund of Ukraine, Briansk Machine Engineering Management Company CJSC, and Luganskteplovoz Holding Company, to commence proceedings on review of the ruling made by Superior economic court dated November 8, 2007, related to sale of a 76% stake in Luganskteplovoz, motivating it by lack of grounds. “The Supreme Court by refusing to review the Superior economic court decision, de-facto recognized all previous rulings on illegality of Luganskteplovoz stake privatization to be legal and well-grounded,” states the press-release made public by the Supreme Court on Thursday. The Supreme Court stresses that the court ruling binds Briansk Machine Engineering MC CJSC to return the aforesaid stake in Luganskteplovoz to the State Property Fund of Ukraine.

The first auction on sale of a 76% stake in Luganskteplovoz was held back in 2001. At that time the winner became AutoKrAZ Holding, controlled by brothers Oleg and Konstantin Zhevago. However, later the SPFU challenged the auction results. The next auction was scheduled for early December 2006. However, the SPFU set the auction terms and conditions that were frankly discriminative for all its potential participants, except for the Russian Transmashholding. As a result of the lawsuit filed by Ukrzaliznytsia, Kiev economic court did not permit to sell this company for peanuts to the Russian-based company. The climax in the Luganskteplovoz privatization epic occurred in 2007. In fact, lobbyism and conspiracy in the SPFU activities reached their peak when Valentina Semenuk headed this agency. So, on March 22, the journalist asked Mr Rudkovskiy, minister for transport and communications (and the fellow-party member of Mrs Semenuk), when will be sold Luganskteplovoz?  The answer was as follows: “this year”. And he was absolutely right: the auction on sale of a 76% stake in this company was held the next day on March 23. As it turned out, on May 22, 2007, Kiev economic court abolished its previous ban. On the same day, the SPFU approves the protocol of tender committee dated October 2006, according to which out, of 4 auction participants (2 Ukrainian – Marganets Mining OJSC and Dneprovagonmash OJSC, and 2 Russian – Demokhovskiy Machine Engineering OJSC and Briansk Machine Engineering Management Company CJSC) there remain only two Russian-based companies. The Ukrainian companies were not admitted due to some mysterious “non-compliance with qualification requirements". The winner became Briansk Machine Engineering by purchasing the stake for UAH 292.505 mn with the starting price of UAH 292 mn.

Late March 2007, Dneprovagonmash OJSC files a claim to Kiev economic court referring to breaches committed during the auction. On June 26, this claim was partially satisfied and the decisions of the SPFU on the auction renewal, non-admission of Dneprovagonmash OJSC to the auction, and recognition of Briansk Machine Engineering Management Company CJSC as the auction winner, were ruled as illegal. The signed purchase-sales agreement was declared void as well. Now, the new owner is obliged to return to the SPFU a 76% stake in Luganskteplovoz.

However, Briansk Machine Engineering, Kuganskteplovoz and … the State Property Fund file their appeals. On September 25, Kiev economic court of appeal remains unchanged the decision of Kiev economic court. Now, all these three entities file cassations. On November 8, 2007, this time – Superior economic court of Ukraine waives them, leaving unchanged all previous court rulings on this issue. A full stop (or not?) in this history was put by the Supreme Court of Ukraine that waived their cassation. As you see, Luganskteplovoz obtained a chance to become the best selling company in the history of the Ukrainian privatization.