Court of Appeal has set a dangerous precedent in Ukrzaliznytsia -VR Global Partners case

that would reduce the ability of Ukrainian banks to manage their bad loans exposure. In September, a Court of Appeal upheld Ukrzaliznytsia’s bid to invalidate an agreement by which the US-based fund, VR Global Partners LP, purchased a block of loans to UZ from Prominvestbank 2.5 years ago. The court ruled that the purchase of loans at a discount was a “factoring” transaction that can only be performed by a licensed factoring company in Ukraine. VR claims that the decision of the court was politically motivated, citing administrative pressure on courts in its press release and notes that the decision was made without the court reviewing its written submissions and after two minutes of deliberations. The case is now on appeal to the Supreme Court. Its outcome may have wider implications on the Ukrainian banking system especially in the NPL’s market.