Company of Yushchenko and Yermolayevs tries to alienate special permit blocked by NSDC

Company of Yushchenko and Yermolayevs tries to alienate special permit blocked by NSDC

The Chernihiv District Administrative Court (CDAC) has ordered the State Service of Geology and Subsoil of Ukraine to amend the special permit No. 4953, which records the transfer of the rights to use the Fedorivska oil and gas field in Poltava region from Trends System LLC to STK Real Estate LLC.

Nadra.info reports, citing a recently published court decision. YouControl attributes both companies to the Alef group of Vadym Yermolayev and Stanislav Vilenskyi.

As follows from the case file, on 05.12.2023, Trends System LLC and STC Real Estate LLC entered into a contract for the sale and purchase of subsoil use rights granted by special permit No. 4953 for the purpose of geological exploration with pilot development and subsequent production of oil, gas and condensate at Fedorivska field. On 06.03.2024, STC Real Estate LLC, as the buyer, applied to the State Service of Geology and Subsoil of Ukraine with a request to amend the special permit accordingly (according to the State Service of Geology and Subsoil, the first application was received from the company in January 2024, but it was left without consideration - Ed.) The Service refused to make changes "due to the discovery of inaccurate information in the submitted documents" (order No. 169 of 10.04.2024, download). But later, STC Real Estate received a letter from the State Service of Geology and Subsoil mentioning another reason for the refusal, namely, the suspension of the alienable special permit based on the decision of the National Security and Defence Council of Ukraine of 23.12.2023 to impose sanctions on Vadym Yermolaiev. Therefore, the buyer filed a lawsuit with the court and applied for interim relief. The buyer believes that "the rights, interests and legitimate expectations of STC Real Estate LLC for the right to use subsoil will be irreparably violated, as at the time of the Agreement, on 05.12.2023, the Company did not know and could not have known about the imposition of sanctions on the ultimate beneficial owner of the counterparty, which occurred on 23.12.2023".

Before obliging the Service to amend the alienated special permit, on 02.07.2024, the Higher Administrative Court of Ukraine partially suspended the effect of the State Service of Geology and Subsoil’s order of 10.04.2024 No. 169 (the "Ruling") as a security for the claim. By the same ruling, the State Service of Geology and Subsoil of Ukraine was prohibited from performing any actions with the special permit No. 4953, except for its renewal. On 22 July 2024, the court issued the aforementioned decision on the Service’s obligation to amend the special permit under the rules of simplified action proceedings.

The decision of the CHOAC of 22.07.2024 has not yet entered into force and may be appealed to the Sixth Administrative Court of Appeal within thirty days.

It is worth noting that the court’s decision coincided with another important event for the subsoil user: according to YouControl, on 20-22.07.2024, the sanctioned Vadym Iermolaiev withdrew from the list of owners of Trends System LLC - his place in the register was taken by Hanna Yermolayeva:

The other shareholders of the company are JSC ZNVKIF Technologies, Volodymyr Belousov and Viktor Yushchenko (President of Ukraine in 2005-2010, owns 8.5% of the company’s capital). Since 2017, STC Real Estate has been solely controlled by Stanislav Vilenskyi; in June 2024, the company changed its city of registration from Dnipro to Chernihiv (YouControl).

In addition, it is worth mentioning that in June 2024, the National Security and Defence Council adopted a corrective sanctions decision, pursuant to which the State Service of Geology and Subsoil renewed nine special permits, including those for Korostyshivskyi Karier PrJSC and Potoky LLC, which are controlled by Yermolaiev. As for Trends System LLC’s special permit No. 4953 for Fedorivska Square, it is subject to cancellation, according to the Security Council’s corrective decision. Consideration of this issue in the State Service of Geology and Mineral Resources is scheduled for after 26.07.2024 (Minutes of the meeting of the Working Group on Subsoil Use dated 26.06.2024 No. 2024-28, download).

This is not the first time that Vadym Iermolaiev has been removed from the ownership of a subsoil user company after sanctions were imposed on him, and he is not the only beneficial owner of extractive businesses to be removed from the register. For example, in February 2024, Mr Yermolayev ceded control of Korostyshivskyi Karier PrJSC to Sofiya Kononenko, but in April, the sanctioned owner was returned to the list of PBOs.

In February-March of this year, the beneficial owners of UNIGRAN quarries also changed: in March, the companies even managed to renew their special permits, but in April, the registration actions were cancelled as illegal, the records of the sanctioned owners Olena Kalpa and Ihor Naumets were returned to the register, and the permits were suspended again. A second attempt to change the owners of the quarries was made in May, also for a short time.

In early 2023, it became known that businessman Vadym Novynskyi had ceased to control the activities of the Smart Holding investment and industrial group, transferring his assets to a trust. It was reported that the agreements on the transfer of businesses to the trust were concluded in November 2022, before the National Security and Defence Council imposed sanctions on Novinsky. However, the registration actions to change the company’s charter were cancelled in April 2023. In May 2024, the holding company Smart Holding (Cyprus) LTD won a first-instance court case against the Ministry of Justice demanding that the change in the beneficiaries of its Ukrainian companies be recognised.

As a reminder, in 2023-2024. The State Service of Geology and Subsoil of Ukraine suspended a number of production and exploration licences for Ukrainian companies on the grounds that the business owners had previously been sanctioned by the National Security and Defence Council. For an overview of the consequences, please follow the link.

The alienation of special permits for subsoil use by entering into a sale and purchase agreement or contributing to the charter capital (i.e. free circulation of subsoil use rights) was introduced on 28.03.2023 by amendments to the Subsoil Code of Ukraine. The first special permit to be alienated was for the Likarivske titanium ore deposit (Kirovohrad region): Andriy Brodsky’s Velta Mining and Processing Company alienated the special permit in favour of Oleksiy Tsarapkin’s Dekart Minerals LLC. Subsequently, the media reported on other cases of alienation of special permits for subsoil use (read also about structuring of Zinoviy Kozytskyi’s amber business). Recently, it became known that the user of the Koretske granite deposit had changed.