Property of Kremlin’s Accomplices under HACC’s Scrutinizing Eye

Over the past six months, the HACC has adopted few decisions on the confiscation of assets of Russians and Russian companies. But this is not due to the delays of the court or the Ministry of Justice filing fewer lawsuits. The main reason is the complexity of the cases opened during this time. 

Since the sanction mechanism for the recovery of pro-Russian assets was launched in the summer of 2022, the HACC has considered an average of 2–3 such cases per month. Sometimes the hearing lasted more than 2 months, since it concerned the assets of such well-known Russian oligarchs as Shelkov or Deripaska. 

However, now the HACC is hearing not one or two really “big” sanctions cases, but four. These are cases of significant business assets in Ukraine with a complex ownership structure or class action lawsuits. In such proceedings, there are many enterprises and people who may not be defendants but want to protect their rights through participation in the case as third parties. 

In the text, we will consider the cases in question, and which assets can be recovered into the national income.

1. VS Energy 

The case of VS Energy is currently the largest of all that has been in the practice of the HACC. The Ministry of Justice filed a lawsuit against the European owners of this company in Ukraine because of their potential connection with the Russians close to Putin: Yevgeny Giner, Mikhail Voevodin, and Alexander Babakov. 

Thus, officially, the owners of the Ukrainian branch of VS Energy are citizens of Germany and Latvia, who are actively defending their independence from Putin’s henchmen in court. However, law enforcement agencies have evidence to the contrary, which was the basis for seizing the assets of this company. After the full-scale invasion, they had grounds to file a claim for confiscation by the Ministry of Justice. 

VS Energy International Ukraine owns 8 regional electricity distribution companies (3 of them partially), 2 hotel chains under the Premier and Accord Hotels brands, First Investment Bank, Metropolis and Metrograd shopping centers in Kyiv, and 2 factories. In addition, VS Energy has corporate rights in another 31 companies that can also be confiscated. 

The case has been heard by the HACC since June 2023, and more than 100 people are involved in it, so the decision should not be expected soon. We wrote more about this case and its complexity here.

2. HMS Group (Hydromashservice) 

The Ministry of Justice filed a lawsuit against the HMS Group Company, as well as its owners — Russian businessmen father and son Lukyanenkos and Herman Tsoi — in November 2023. The reason is that this company is one of the largest machine-building holdings in Russia, which produces pumping equipment for the oil and gas complex, energy, housing, and municipal services and water management of the Russian Federation. The HMS Group has its assets in Belarus, Germany, and Ukraine. 

In particular, in Ukraine, this company owns shares in the Sumy Pumping and Power Engineering Plant Nasosenergomash, Sumy Machine-Building Scientific and Production Association (former Frunze plant), Heavy Drill and Lead Pipe Plant, SMNVO-Engineering, Atommashproekt Consortium, and Yubileinyi Hotel Complex. 

In addition to these enterprises, the Ministry of Justice also asks to recover the corporate rights of the HMS Group in 13 more companies, as well as to confiscate 21 land plots, 2 apartments, 1 house, 6 vehicles, funds on an account, and 8 guns.

3. ROYAL PAY EUROPE

Royal Pay Europe is registered in Latvia and provides services for electronic payments and other financial solutions for businesses. 

In 2023, the State Bureau of Investigation (SBI) opened criminal proceedings against this company on the fact of embezzlement of funds allocated by foreign banks to one of the Ukrainian commercial banking institutions for a total amount of more than EUR 30 million.  

According to the materials of this investigation, the company, during the hostilities in Kharkiv Oblast, tried to re-register the property rights to the real estate of one of the Ukrainian banks, which is in the process of dissolution. In addition, the SBI established in the course of this investigation that the beneficiary of Royal Pay Europe is Sergey Kondratenko, a Russian citizen associated with the Russian bookmaker 1xBet. 

As part of the open criminal proceedings, the assets of Royal Pay Europe were seized and transferred to the management of the ARMA. However, it is much easier to confiscate assets through a sanction case than to wait for a decision in criminal proceedings. The Ministry of Justice mainly bases its lawsuits on the materials of criminal proceedings. 

Because of this, the ARMA acts as a third party in the sanction case against Royal Pay Europe. In the event of granting the lawsuit, the funds and securities under its management will be transferred to the SPFU. The assets that might be confiscated amount to about UAH 2 billion.

4. The case of Bohuslayev and Kononenko 

The last high-profile case that was opened following a lawsuit of the Ministry of Justice was the case against Vyacheslav Bohuslayev, the former president of Motor Sich JSC, and Petro Kononenko, the senior manager of the enterprise. 

Since October 2022, Bohuslayev has been suspected of collaboration and has remained in custody. 

The Ministry of Justice motivates the lawsuit by the fact that Bohuslayev, together with Kononenko, supplied the aggressor country with products manufactured by Motor Sich JSC and its separate subdivisions since 2014. It was done despite the legislative restrictions on the prohibition of the export of military goods to the Russian Federation through a number of enterprises owned by them. Even after the full-scale invasion on February 24, 2022, they ensured the supply of engines for the Russian army so that it could continue to produce and repair combat helicopters (Mi-8, Mi-24, Mi-28, and Ka-52). All these helicopters were actively used by the Russian Federation in attacks on Ukraine, especially at the beginning of the full-scale war. 

The Ministry of Justice asks the court to confiscate 10 apartments, 3 houses, 8 land plots, 12 non-residential real estate objects, corporate rights in 11 enterprises, property rights, money on accounts, and more than 600 guns in favor of Ukraine. The parties to the case, together with the defendants, are their relatives as co-owners of certain property and the mentioned 11 enterprises.

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Thus, we see that during the second year of the full-scale invasion, the Ministry of Justice began to increase the scale of its lawsuits to confiscate Russian assets in Ukraine. This is undoubtedly a positive pattern that needs to persist and improve because the work done must not only end in success in the High Anti-Corruption Court but also withstand potential international appeals. To this end, first of all, it is important to ensure proper procedural rights for all participants in the trial.

This publication was prepared by Transparency International Ukraine with the financial support of Sweden.