UK's JKX says it will pursue Ukraine through courts

British oil explorer JKX Oil and Gas Plc said yesterday it would chase Ukraine's State Property Fund through as many courts as necessary to reverse what it saw as the appropriation of its subsidiary.

JKX is due to go to the Supreme Court of Arbitration, the ex-Soviet state's highest commercial court, on Thursday as part of a wrangle in which JKX's 49 percent stake in oil and gas producer Poltava Petroleum Co (PPC) has come under threat.

Although JKX's market capitalisation is just £21 million, it is the biggest UK investor in Ukraine. British Prime Minister Tony Blair has written to Ukraine's President Leonid Kuchma expressing concern over the case.

"We very much hope that at long last we will see justice done," JKX Chairman Lord Fraser of Carmyllie told a news conference held in the British embassy. "But let me make it clear that this is not the only legal remedy available to us." The State Property Fund, a 25 per cent shareholder in PPC, tried in March to give a company called Naftogaztekhnologia JKX's stake in PPC, until the Supreme Court of Arbitration temporarily suspended the move.

Lord Fraser said his company was prepared to go to international courts and also to sue Naftogaztekhnologia for illegally taking its stake in PPC if JKX lost at today's hearing. "I hope nobody in Kiev or Ukraine doubts both my patience, legal knowledge and determination," said Lord Fraser, noting his role as Scotland's former Lord Advocate (chief prosecutor) in pursuing the men who were this year found guilty of the 1988 Lockerbie bombing.

The Fund, which oversees privatisations and manages state stakes in companies, says it made the move against JKX because the British company declined to give it access to financial records and failed to appear at several shareholders meetings. JKX has dubbed the move "piracy".

State Property Fund spokeswoman Nina Buzlyuk told Reuters yesterday the decision to give away JKX's shares was made at a shareholder's meeting which JKX did not participate in.
"Our position remains unchanged, no matter what anyone says in press conferences held in foreign embassies. We are waiting for the decision of the court... let the court decide who is right," Buzlyuk said.

She declined to comment on allegations made by Fraser and JKX chief executive Paul Davies that Naftogaztekhnologia was owned by a series of companies based in Cyprus, Vienna, Luxembourg and the Channel Islands. Naftogaztekhnologia was not available for comment.

JKX, which has 58 per cent of its assets in Ukraine, accuses the State Property Fund of pouncing on PPC after it spent six years and $100 million modernising the company and making it profitable.

"I was a minister of the Crown for 15 years and in all that time I was never aware of Prime Minister (Margaret) Thatcher or Prime Minister (John) Major writing to a president of a friendly country in the terms that Tony Blair wrote to President Kuchma last week," Lord Fraser said. "Once the company (PPC) became profitable, suddenly the State Property Fund became very active," said Davies. "It suggests to me, if you can't control it, why not just steal it?"