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No Irish Need Apply

Controversy around Ufa Hypermarket Is Close to Resolution

Roman Rechkin, INTELLECT-S: "Judgments on shares in fact prejudice property adjudications"

07.02.2014 | Kommersant | By Bulat Bashirov

The Bashkortostan Commercial Court resumed the hearing of the high-profile case involving the title to the building of Ufa's hypermarket Castorama, which the Swedish company Bashkort AB has been contesting since last year against its former subsidiary and two Russian individuals.
Bashkort lost the first round of litigation as it failed to challenge a chain of transactions resulting in the change of control over the group owning the building. Legal experts believe the former owners and their creditors stand virtually no chance of recovering the property.

The protracted litigation is around the ownership of the hypermarket conveniently sitting on a busy thoroughfare between Bashkortostan's capital Ufa and its airport. Its former owner Bashkort AB, claiming the 12,600 sq. m property, rented by the Castorama retail chain since 2010, is a member of the bankrupt Irish Quinn Group; the other plaintiff is the group's creditor Irish Bank Resolution Corporation (IBRC) which financed the construction of the hypermarket.

The Bashkortostan Commercial Court resumed the hearing of Bashkort AB's action against the Ufa-based company Business Park and the hypermarket's two subsequent owners after an eight-month stay. Bashkort owned the market from 2006 through April 2012. The next two owners were Evgeny Makarenko and Yuri Smirnov, two consecutive individual owners, each owning the property for months only in 2012.

Bashkort and IBRC sued for the hypermarket after Quinn Group's bankruptcy at the end 2012. The bank had obtained a 25% stake in the group and was trying to recover the loans out of proceeds from selling Quinn's Russian assets it had financed the construction of. According to open sources, however, by the time IBRC filed its claim, Quinn Group's assets had had new formal owners, legally unrelated to the group. The hypermarket in Ufa made no exception: before Quinn's bankruptcy, the hypermarket's owner Business Park was acquired first by Ufa-based OOO Saturn, then by a string of others. The property itself also changed hands in the process: Business Park's new owners sold it to Makarenko who then passed it on to Smirnov. Messrs. Makarenko's and Smirnov's occupation is unknown.

The Irish bank contested both the change of control over Business Park and the sale of the company's property. IBRC's counsel sought to demonstrate in court that the new owners were "nominal" and transactions had been made in the interest of Quinn Group's founder Sean Quinn. IBRC's lawyers alleged in court that the nearly RUB400m property had been sold far below the market price, and so had been the shares in Business Park: 99% of the company was sold to Saturn at par value (Business Park's authorized capital is only RUB10,000). That all lead the plaintiff to allege that the transactions had been made to siphon off the bankrupt company's assets.

The Swedish company and IBRC lost the first stage of litigation in which they contested the acquisition of Business Park by OOO Saturn, on January 17, 2014 when the courts found the transactions of Quinn Group's prior management validly made under Russian laws. In particular, they had been approved by Sean Quinn's and Bashkort AB's attorney Stephen Joseph Kelly. Bashkort's counsel Vladimir Pestrikov told Kommersant the court's decision was appealed in cassation the day before.

In the meantime, the hypermarket building is attached pending the final outcome of the litigation.

Our comment:

Roman Rechkin, INTELLECT-S, special for Kommersant:

Independent legal experts believe that there is a chance of avoiding the transactions, albeit small. According to INTELLECT-S's senior partner Roman Rechkin, "judgments on shares in fact prejudice property adjudications. You can only demonstrate collusion and conspiracy to take over an asset with detective work, in a criminal investigation," the expert says.

Real Estate, Real Estate Disputes

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