The banking system of Ukraine is under threat due to a legal conflict surrounding property that was mortgaged to a Ukrainian bank and sold in accordance with current legislation. Decisions by officials and lawsuits from a foreign investor could create a dangerous precedent that undermines the stability of the country’s financial system, reports UNIAN.
This is reported by Finway
The case in question involves GNT Group, which in 2019 secured credit financing from the foreign fund Argentem Creek Partners (ACP). This money was directed towards repaying a loan from the European Bank for Reconstruction and Development (EBRD).
In 2020, GNT Group approached Ukrainian banks and received a loan, including from the Southern Bank, secured by part of its assets. This allowed the company to ensure its operational activities. The transfer of property into mortgage was agreed upon by all parties and documented, including by the credit agent ACP — Madison Pacific Trust Limited.
In February 2022, due to GNT Group’s failure to meet obligations, Southern Bank sold the mortgaged property — part of a grain terminal — through a non-judicial process, selling it to the investor LLC “Sanolta Korm.” However, later ACP, changing its position, claimed that it had not consented to the transfer of assets to the bank and began contesting the agreements in court and through the Ministry of Justice.
Despite the Economic Court of Lviv Region’s ruling on September 19, 2024 (case No. 914/466/23(914/2942/23), which confirmed the legality of the bank’s actions, the Ministry of Justice annulled the state registration of the new investor’s ownership rights, arguing that there was an alleged seizure of property, even though there were no such encumbrances in the registry at the time of registration. The banking community deems this decision unfounded and contrary to the law.
The situation could lead to the establishment of a dangerous precedent. If the Western Appeal Economic Court grants ACP’s complaint, it will pave the way for mass challenges to mortgage agreements by debtors. This, in turn, would undermine trust in Ukrainian banks from international partners and investors.