1. Actions of the Antimonopoly Committee of Ukraine (AMCU)
The AMCU has no legitimate grounds to refuse to grant its merger clearance for acquisition of shares of "Motor Sich" JSC (Motor Sich) by DCH Group and the Chinese investors of Motor Sich.
The only legitimate grounds for such actions of the AMCU theoretically may be two the following reasons regarding acquisition of shares:
· if the contemplated transaction leads to a monopolization or substantial restriction of competition on the Ukrainian market (under Article 25 of the Law of Ukraine "On protection of the economic competition");
· if the participants of the transaction are entities included in the Ukrainian Sanctions List (under Article 24 of the Law of Ukraine "On protection of the economic competition").
Both the above-mentioned cases are not about our joint with the Chinese partners application for merger clearance for acquisition of shares of Motor Sich.
First of all, currently neither DCH Group nor our Chinese partners exercise any business activity on the relevant markets of Motor Sich in Ukraine. Consequently, as a result of the transaction the market shares of the merger participants will not change: the purchase of shares of dominant (monopolist) company in itself will not lead to changes of the market shares on the monopolized market. Motor Sich historically has held monopoly position on the Ukrainian aircraft engines market.
Secondly, DCH and the Chinese partners on Motor Sich project are not sanctioned according to the Ukrainian legislation on Sanctions as well as do not fall under the Ukrainian Sanctions List.
Given the above, the AMCU has no justified legal grounds to refuse to grant its merger clearance for the transaction under the joint application of DCH and our Chinese partners. If the AMCU in violation of the law does not clear the transaction within the stipulated time frames, or prohibits the transaction, such actions will be challenged in court.
Furthermore, due to significant delaying consideration of applications for merger clearances previously submitted to the AMCU by our Chinese partners, we find it necessary to emphasize that the legislation provides for the period of consideration of application for merger clearance ranging from 45 calendar days (under the standard procedure) to 3 months (in case of an in-depth study), and in any case cannot exceed 135 days from the date of the announcement of the opening the case on in-depth study.
2. The actions of law enforcement agencies
Motor Sich is in poor financial condition now, its economic and social development has been illegally blocked from 2017 by Ukrainian authorities' actions. As a result, the unique labor collective of the huge enterprise suffers from undeserved hardships.
Since 2017 law enforcement agencies have been carrying out the criminal proceedings, where all shares of Motor Sich were arrested. This leads to gross violations of EVERY shareholder's rights.
Consequently, there is a ban on re-registration of shares and issuance of a shareholders' register with respect to 100% of shares. This means that more than three years the shareholders of Motor Sich have been unable to enjoy their rights of owners of the company, including participation in the management of the enterprise and supervision over the compliance of the decisions made by the management in accordance to the economic interests of shareholders.
By its legal nature, an arrest is a temporary measure aimed at preventing the possibility of concealing, damaging, destroying, or alienating of the relevant property that is relevant to criminal proceedings. However, in the case of Motor Sich all court decisions on the imposition of arrests were made with violations of the criminal procedural legislation's requirements. The property of shareholders was arrested in the absence of proper verification of the circumstances stated by the prosecution and without examining the validity of such a security measure.
The economic activity of the enterprise is paralyzed as well as the possibility to attract new investments. Therefore, the arrest of shares does not in any way "ensure the safety of property". Moreover, it consistently leads to the destruction of Motor Sich.
The abovementioned gives the shareholders of Motor Sich sufficient reasons to consider the actions of Ukrainian law enforcement agencies as pressure on a business. In response to such behavior of authorities, the shareholders may apply to the international judicial institutions in order to put an end to this blatant arbitrariness and restore their violated rights.
3. Investment protection
In accordance with national legislation and international agreements, Ukraine is obliged to ensure on its territory equal treatment and protection in relation to foreign investors and their activities related to such investments.
All parties to the transaction, for the approval of which we and our Chinese partners have now applied to the AMCU, are private companies operating based on freedom of entrepreneurial activity in the legal field. Motor Sich is not included into the list of state property objects of strategic importance for the economy and security of the state in accordance with the Resolution of the Cabinet of Ministers of Ukraine No. 83 dated March 4, 2015 https://zakon.rada.gov.ua/laws/show/83-2015-%D0%BF and was not included in the state strategy for the development of the aircraft industry https://zakon.rada.gov.ua/laws/show/429-2018-%D1%80/print.
As a result of illegal actions of the AMCU and law enforcement bodies, all investors (shareholders) of Motor Sich are in a difficult situation. Despite the long-term interest in the development and well-being of the enterprise, both majority and minority shareholders are ready to defend their rights in courts of all instances. If this is followed by recourse to international arbitration, then the state of Ukraine will be forced to compensate damages and incur enormous reputational losses.
Therefore, we hope that our state will further refrain from any form of illegitimate behavior of state authorities (the AMCU, etc.), which does not meet international standards for treatment of foreign investors.
DCH considers its participation in the development of Motor Sich as one of the most important priorities of its investment strategy. We have sufficient financial capabilities to carry out the concentration of the company's shares without attracting external financing, and we will independently exercise full corporate control in the long term.
Based on this, we will make every effort and use all legal tools to protect both our investments and the investments of our Chinese partners in Motor Sich.
Legal Position of DCH regarding issues related to JSC 'Motor Sich'
