It was a sunny but chilly January day in Nikopol in 2018, a typical industrial city on the Dnepr River in the southwestern center of Ukraine. After two years of hard work, research and construction, the Calgary-based TIU Canada opened its first solar station and became the first major investor under the Ukraine Ukraine (Canada Ukraine Free Trade Agreement). CUFTA) new.
Ukraine has finally turned green and developed domestic power sources to end Russia’s energy dependence. Canadians once again view Ukraine as an investment option. Three years later, the optimism is gone and the culprit, in this case, is not Russia, but Ukrainian oligarchs.
The current legal battle between TIU Canada, a mid-cap company focused on Ukraine’s renewable energy sector and the notorious and recently punished US tycoon, Igor Kolomoisky, is a worthy story. sad and wary for foreign investors wishing to do business in Ukraine.
In the dispute, was the illegal disconnection of the 10.5 MW solar station from the grid. This is an illegal act under Ukraine’s energy law that prevents power producers from being disconnected from the power grid without their permission.
However, despite many calls and discussions, including face-to-face talks with Kolomoisky, the NFZ management proceeded to disconnect TIU Canada from the substation on the morning of March 2, 2020, to repair is believed to be for an indefinite period of time. So far, this illegal disconnection has caused more than $ 2.2 million (CDN) monetary damage to TIU Canada.
So how is this a cautionary tale? Because in this story, there are practices in the oligarchy that still dominate Ukraine despite the reforms promised over the years.
The oligarchs’ intention is to maintain and expand monopolistic business practices in order to maintain operations and invest in their essential infrastructure. Their constant strategic goal is to prevent and firmly discourage foreign investors from entering Ukraine’s potential growth opportunities in the renewable energy sector and preventing market competition. .
Second, the tycoons want to continue to benefit from government-guaranteed revenue streams. Ukrainian oligarchs are not wealth creators, but sticklers who rely on the control of monopolies, constantly resisting the establishment of competitive free market conditions.
Third, they are comfortable in manipulating the country’s court system at all levels. The oligarchs’ practice assumes that if it is not possible to convince foreign investors to give up their investments, through acts of intimidating or ‘raiding’ their direct business, they will eventually flee from jurisdiction because foreign investors feel they won’t. fair recourse in the province of Ukraine’s judicial system.
These activities continue, especially for small and medium investors, because in Ukraine this is still an expected, assumed and accepted form of business.
It continued because individuals in the government were too apprehensive about the consequences of these forms of threats and did not feel that they could rely on the integrity of the judicial system to prevent actions. micro like that.
But the real question is why after the Euromaidan bloodshed in 2014, such behaviors continue and are tolerated?
Unfortunately, in Ukraine, after years of judicial reform efforts, most judges succumb to the temptation of literally selling their decisions for money.
Consequently, despite many public promises and declarations, successive governments continue to fail to transform the country’s business culture, especially in terms of ethical and legal foundations based on cultural backgrounds healthy business.
That is, to establish the free market based on the rule of law.
That is, running and conducting business based on ‘belief’ and ‘fair play’.
That is, to establish an effective legal and regulatory regime that applies to everyone and applies with fairness and honesty.
That is, respecting foreign investors and recognizing the important role foreign investors play in Ukraine’s economic growth, while at the same time providing some protection against manipulators. internal need.
That is, demonstrating a commitment to punish or limit unfair business practices.
That is, pursuing antitrust efforts will free up a corrupt economy that will then attract foreign investment in a more free and competitive marketplace.
Attention to potential economic outcomes for consumers who will benefit through competitive pricing and / or the availability of products or services by providing market-based alternatives and alternatives free.
Finally, clean up the courts and give petitioners a chance to get formal decisions.
Since the 2013-14 EuroMaidan Revolution, successive governments have failed to prove that they have learned and incorporate the most important lessons about attracting sustainable foreign investment. The lesson is to establish a link between providing a consistent, equitable, and legal-based investment climate that leads to consistent economic growth, an investment space that promotes economic growth. and is willing to combine Western investment dollars to develop Ukraine’s economy and encourage creative jobs.
When Ukrainian politicians call for increased FDI from Western partners, it makes no sense for foreign investors to assume that business will be conducted in a ‘good faith’ manner. Such negotiated agreements will be honored and contractual obligations performed.
And second, assuming that any dispute will be resolved fairly, if not through direct negotiation between the parties, then through a legal request based on the principle of ‘fair relief’. without corrupt intentions.
As Roman Washchuk, who served as Canada’s Ambassador to Ukraine from 2014-2019, said: “It is clear that Ukraine cannot be successful without the rule of law ensuring a level playing field for foreign investors. including protection against the abuse of oligarchs. ” Investment companies like TIU have found fairness and justification in their fight against Ukraine’s most notorious tycoon, whose conduct has resulted in recent US government sanctions on crimes. to add corruption to his existing investigation of fraud and money laundering? In the courts of Ukraine? In foreign court? Through the application of diplomatic pressure?
Discussions with both active and retired Western diplomats suggest acknowledgment has failed to articulate a broader link between Western economic interests and business practices of Ukraine. They admit that the lack of sustained diplomatic pressure on Ukraine’s successors did not illustrate to Ukraine’s leaders the relationship between Western business-oriented modes of business and growth. Future economic growth and overall security, in addition to the mission of changing your own civic culture.
Ukraine, along with its Western counterparts and investors from the West, will show wisdom in remembering lessons of the cautionary tale embodied in TIU’s fight against tycoon Kolomoisky and his partners.
How long will such stories be the norm and not the exception?