The distrainment of yet another Ukrainian AN-124-100 “Ruslan” airplane, property of the state enterprise Antonov Aviation Research-and-Design Complex (ARDC), was a wonderful present for Independence Day. The aircraft was attached at the Belgian Military Airport Melsbroek on Wednesday, 18 August, when it was about to fly to Kabul carrying transportation means, spare parts, containers and tents for Belgian soldiers in Afghanistan.

The reason is familiar: Belgium has recognized the decision of the Arbitration Institute of Stockholm Chamber of Commerce, dated May 30, 2002, in the case brought by TMR Energy Ltd. Company against the State Property Fund of Ukraine. Pursuant to the court decision, the Ukrainian party is to pay a debt of USD 36.7 million (plus interest at the rate LIBOR+5%). On June 25, 2003, another Ukrainian “Ruslan” airplane, also on a NATO mission, was seized in Canada for the same reason.

On August 24^{th, Ukraine’s Independence Day, the Brussels Administrative Court held its first session to consider the Ukrainian side’s complaint against the airplane attachment. The court ruled to convene again on August 31st in order for the parties to present their respective cases and produce evidence. The ARDC Antonov hired a Belgian law firm, Huyghe, Ballet, Stas & Vanderschueren, to represent them in the litigation. Nevertheless, as the Canadian experience testifies, the airplane can remain in distress for years. Concomitantly, the court suspended the execution of the NATO-Ukraine airlift contract due to the airplane distrainment, which may hinder the signing of a new 12-month contract for the NATO’s lease of Ukrainian aircraft.}

The ARDC had known about Belgium’s recognition of the Stockholm arbitration decision long before the airliner was seized. The information reached them while one of the company’s planes was in the air heading for Belgium. So to avoid attachment, the pilots had to turn the jet around and land in a neighbouring country. According to Kostiantyn Lushakov, CEO of Antonov Airlines (transport division of the ARDC Antonov), prior to the “Ruslan” flight to Brussels, NATO partners assured the company the plane would be safe at the military airfield.

Ukrainian properties abroad have been frequently attached this year based on the TMR claim. For instance, on June 6th, the Jerusalem Circuit Court stopped accounts of the Ukrainian Embassy in Israel. Three days later, our diplomats succeeded in releasing the blocked accounts, albeit temporarily. On April 7-14 , 2004, the dry-cargo ship “Fatesh” owned by the Donbass Mercantile Marine Company was not allowed to leave the French port of Gonfleur. This time the TMR attorneys failed to get it seized, even though 25% of the Donbass Mercantile Marine shares belong to the state. The company has a history of bailing out its vessels, two of which - “Makeyevka” and “Dobrush” were attached some time ago, in a different lawsuit. So it may have resorted to a similar arrangement this time, too: after all, it is cheaper than waiting for the court decision while the vessel stays idle.

Alas, the list of distrained properties is open, with another four months to go before the year ends….

Meanwhile, Ukraine’s attempts to protect and rescue its properties abroad are far from sufficient. The Ukrainian defendants - ARDC Antonov and its domestic legal adviser, the law firm “Ilyashev and Partners”; the State Property Fund with its lawyers from “Kravets and Levenets”; and Ministry of Justice - argue with each other, instead of coordinating their work towards a common goal. The aircraft builders blame the State Property Fund and its top officials for intentionally “setting up” Ukraine when it signed the contract with TMR in 1999 (the breach of the contract created the legal basis for the Stockholm Arbitration judgment), as well as for foiling the company’s efforts to recover the airplane kept in Canada. The SPF lawyers censure the ARDC for the lack of professionalism and pointless emotionality, holding them responsible for the Canadian Federal Court decision to sell the jet at auction. The Ministry of Justice agrees with them on that.

The parties’ legal tactics differ as well. The ARDC Antonov, having lost the case in Canada, followed its attorney’s recommendation to go to the Ukrainian courts. Thus, in June, Kyiv Appellate Court denied TMR the enforcement of the Stockholm Arbitration decision in the territory of Ukraine. Earlier, the Kyiv Commercial Court forbade seizure of the Ukrainian airliner. “Ilyashev and Partners” filed a petition with the Cabinet of Ministers requesting it to lift judicial immunity of Canadian property in Ukraine, since no such immunity is guaranteed to Ukrainian property in that country.

The SPF and Ministry of Justice attorneys condemn this tactic as futile and inadequate, for Ukrainian courts’ decisions are not, for the most part, recognized in other jurisdictions, so they cannot be quoted as a legal precedent. The Stockholm judgment is a decision by a court of arbitration, i.e. a non-state institution; therefore it is immediately enforceable and cannot be appealed against in state courts.

The State Property Fund favours lodging an appeal against recognizing the Stockholm decision in various jurisdictions. As of today, seven states have recognized this decision, so the SPF appeal is to be considered in each of them. The lawyers working for the ARDC Antonov believe this method is “too expensive and practically useless” because, in spite of all steps taken so far by the State Property Fund, the company’s airplanes continue to be seized in foreign airports.

As for the strategy for settling the debt to TMR, it is still non-existent. Under the circumstances, the planes will hardly be released soon. It looks like the State Property Fund and the ARDC Antonov need an arbitrator to help them harmonize their actions. Will the Ministry of Justice be able to serve as such? Will it show sufficient flexibility necessary in such matters? Will it have enough funds? Or is it better to turn to the Donetsk business group for assistance? It contrived to recover its “Fatesh” (which is also one quarter state-owned ), without making fuss over it, bringing diplomatic and administrative pressure to bear or passing the buck to the State Property Fund (through whose fault they, in fact, lost USD 40 thousand because of vessel demurrage).