Swissport Loses Out In Ukraine … For Now

Court rules in favor of Ukraine International Airlines over a $30 million joint venture gone very wrong.


Either Swissport International Ltd. was the victim of a corrupt legal process in Ukraine where judges still act like Soviet-era puppets who hold hearings that aren’t scheduled on any court docket, refuse to deliver legal briefs and mysteriously recuse themselves at the last minute, all to enable a hometown hostile corporate raider to pay $400,000 for a thriving $30 million business, including $8 million worth of GSE …

… or Ukraine International Airlines was the victim of an underhanded business deal, taken advantage of by a much larger, more famous company that turned the screws on its minority business partner right from the start and, finally, fed up with this hostility, but only after failing to get both sides to agree to “civilized principles,” decided to stand up and fight for its rights in a court of law.

Take your side, but both companies can agree that Swissport lost out in Ukraine, at least for now.

After almost a year of legal wrangling, a Ukrainian appellate court ruled on March 27 that Swissport had violated UIA’s minority shareholder rights, immediately stripped Swissport of its 70 percent outstanding stake in joint venture ground handler Swissport Ukraine and essentially handed it over to UIA for just 1 percent of the JV’s value.

“This hostile raider attack was based on alleged violations of formalities without legal grounds and now resulted, after an unfair judicial process, in this surprising loss of ownership,” Swissport stated in a press release.

After the verdict, UIA renamed the company Interavia (the original name of the ground service provider), and announced new management was deliberating on a business plan to run the company independent of the airline. Swissport cut off the Interavia from its corporate passenger servicing system and IT systems. The international ground handling company also stated it would fight the verdict and return to Ukraine.

 

LEGAL BASIS

UIA’s basis for legal action against its former partner was a claim that Swissport was violating its minority shareholder rights. Namely, Swissport wanted to further invest in the ground service provider to keep up with its double-digit growth.

That action, if unmet by any further capital from UIA, would naturally dilute the value of the airline’s stake in Swiss-port Ukraine.

According to UIA, Swissport unilaterally voted in favor of increasing its investment in the JV at a shareholder’s meeting on March 6, 2012.

However, in a Swissport press conference held April 17 to discuss the case, the company said any talk of further investment was just that – talk – and a final vote on the matter would take place at a future shareholder’s meeting.

Based on a “mere discussion” of a future capital increase, UIA went to court, according to Swissport.

“It was not a discussion,” Evgeniya Satskaya, UIA’s corporate press secretary, told us by email after the airline held its own press conference on April 18. “On March 6, Swissport voted in favor of dilution of UIA’s shareholding in Swissport Ukraine.”

Satskaya also said that decision was against the rules of the participant’s agreement. UIA subsequently sent a default notice to Swissport. But given the absence of any response UIA brought the action to court.

The airline’s spokesperson added UIA wanted to invest in the ground service provider.

“Investment has always been each party’s sole right,” Satskaya said. “UIA was willing to invest based on a long-term development strategy. But the parties were not able to agree due to different visions of future development for Swissport Ukraine.”

Swissport ended up losing its case in the first round before the Kiev City Economic Court and appealed the decision.

 

HIGH NOTE

No matter how the JV ended up, it certainly started out on a high note.

“Kiev becomes Swissport station number 175,” reads the headline of the press release Swissport posted after UIA sold a 51 percent share of ground handler Interavia to the company seven years ago.

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