SECOND ROUND: VERITY GROUP TEAM TOGETHER WITH ARIO DEFENDED FORMER TOP MANAGERS OF BANKRUPT BANK IN A 77 MILLION UAH DISPUTE WITH THE DEPOSIT GUARANTEE FUND

Verity Group, together with Ario Law Firm, are defending the interests of former executives of the bankrupt PJSC "AB "Ukoopspilka" in a dispute worth approximately USD 2 million with the Deposit Guarantee Fund of Ukraine in the Commercial Court of Kyiv.

The case concerns a claim by the Deposit Guarantee Fund for nearly UAH 77 million, where the Fund seeks to hold former top managers liable for the bank’s losses. The courts of first and second instance ruled in favor of the defense, while the Supreme Court initially sided with the Fund. Subsequently, the Grand Chamber of the Supreme Court overturned that ruling and remanded the case for a new hearing.

Ario Law Firm is represented in court by Andriy Fylyk, partner at Ario Law Firm.

Case Overview

This is one of Ukraine’s landmark cases concerning the liability of executives of bankrupt financial institutions during the so-called “banking collapse” period of 2014–2018. The litigation has been ongoing since 2018. The Ario Law Firm and Verity Group teams successfully defended the interests of individual executives of PJSC  "Ukoopspilka" at the first and appellate levels in the dispute against the Deposit Guarantee Fund, which acts as the institution’s liquidator.

Although the Supreme Court sided with the Fund, the Grand Chamber of the Supreme Court later overturned this decision and sent the case back for reconsideration, marking the start of the “second round” in the litigation.

Positions of the Parties

According to the plaintiff, the actions of the former management of the financial institution in concluding certain transactions led to the bank’s insolvency. The Deposit Guarantee Fund assessed damages amounting to nearly UAH 77 million and intends to hold the former executives jointly and severally liable to recover this amount.

The defense, however, argues that the actions of the top management could not have caused harm to the institution. The disputed transactions were not declared invalid by the court, and the authorized representative of the Fund did not recognize them as void; therefore, the Fund has no grounds to assert that the bank executives acted unlawfully when concluding these transactions. Moreover, during the conclusion of these transactions, the bank was overseen by a curator from the National Bank of Ukraine, who found no risks associated with them.

The defense also points out that the register of accepted creditor claims is effectively outdated at the time of the case review, as many creditors have lost contact with the bank over the seven years, in part due to the ongoing military conflict.

Additionally, the defense stresses that the Fund’s attempt to hold the bank’s executives jointly liable cannot be enforced because the relevant legal provision was introduced significantly later than the transactions were concluded, and according to the principle of non-retroactivity of the law, it does not apply to actions performed before its enactment.

Furthermore, the individuals the Fund seeks to hold accountable worked at the bank at different times and held various positions. All management decisions were made separately, in different time periods, and concerned distinct business operations.

Therefore, the defense in courts of all instances insisted that the Deposit Guarantee Fund failed to substantiate any of the four essential elements of a civil offense: the extent of damages, the fault of specific persons, the existence of unlawful conduct, and the causal link between the defendants’ actions and the claimed losses.