A leading Ukraine law firm found itself caught up in a criminal investigation into
one of its long-standing clients in February, when 30 heavily armed police from
the Ministry of Interior’s special forces
stormed its offices. Dressed in blue
combat fatigues, the agents detained the
50 lawyers and staff based in Magisters’s
Kiev headquarters while prosecutors conducted a 14-hour
search for documents relating to
state-owned oil and gas monopoly Naftogaz of Ukraine NJSC,
which the firm has advised for a
decade.
More than 1,000 documents
were seized in the raid, part of
a criminal investigation into the
alleged abuse of power by Naftogaz officials. One pregnant
employee was rushed to the
hospital by ambulance during
the ordeal, which continued into
the early hours of the following
morning. Witnesses told Focus
Europe that an American journalist from the Kyiv Post, who
had seen the raid and attempted
to interview staff, was forcibly
removed from the building.
“It was a very stressful and
unnerving experience,” says
Olga Khoroshylova, Magisters’s
capital markets, banking and
finance head. “These things
don’t happen everyday, even in
Ukraine. In fact, the firm has been in
the market for a very long time, and this
is the first time anything like this has
ever happened.”
Magisters had been representing
Naftogaz in an ongoing SCC arbitra-
tion filed by RosUkrEnergo AG (RUE),
a joint venture between Russian energy
giant Gazprom and Ukrainian billionaire
Dmytro Firtash that acted as a middle-
man in gas transactions between Russia
and Ukraine. After retaining DLA Piper
and Swedish firm Setterwalls, RUE and
Firtash started the proceedings to chal-
lenge a controversial gas deal that was
carried out under the tenure of former
Ukrainian president Yulia Tymoshenko
in 2009. The arbitral tribunal ruled that
Naftogaz must return 11 billion cubic
meters of “expropriated” gas, claimed
by Naftogaz from RUE’s reserves in re-
turn for assuming an alleged $1.7 billion
debt, plus an additional 1.1 billion cubic
meters of gas in compensation. Ukraine’s
Supreme Court upheld the decision last
August, but other consolidated claims
are still being heard.
Magisters appears to have been
caught in a political crossfire as power
Supreme Court head Vasyl Onopenko,
held a meeting with Yanukovych—but
criminal proceedings against him are
still pending. He contests the charges.
Tymoshenko herself has been per-
sonally charged in Ukraine with alleged
abuse of power under a separate crimi-
nal investigation relating to the Naftogaz
deal. (Oleh Dubyna, Naftogaz’s chair-
man under Tymoshenko, faces
similar charges.) She responded
in April by filing a class action
against RUE and Firtash in U.S.
district court in Manhattan un-
der the Alien Tort Statute, the
Torture Victims Protection Act,
and the Racketeering Influenced
and Corrupt Organizations Act.
The filing says that RUE and
Firtash manipulated the arbi-
tration ruling by entering into
a “corrupt agreement” with the
Yanukovych administration to
effectively make Naftogaz with-
draw its opposition to the claim.
Tymoshenko counsel Kenneth
McCallion of New York’s Mc-
Callion & Associates said at press
time that he had not yet heard
from any defense firm on behalf
of RUE and Firtash.
Magisters would not com-
ment on whether it plans to take
further action over the raid on
its premises—Ukraine’s nar-
row attorney-client privilege
doesn’t apply—but the dramatic
event has drawn condemnation from
the Ukrainian legal community. The
International Bar Association wrote to
the country’s prosecutor general Viktor
Pshonka that it was “deeply concerned
that this unauthorized search breached
fundamental, international legal stan-
dards respecting the independence of
the legal profession and its ability to
function fully and freely without state
interference.” The Ukrainian Bar Asso-
ciation released a statement labeling the
move an “unacceptable” use of power,
while Magisters managing partner An-
drew Mac says it is “astonishing that the
government is putting such pressure on
lawyers.”
The Ukrainian General Prosecutor’s
office did not respond to requests for
comment. —Chris Johnson
UKRAINE
Law Firm Caught in the Crossfire
Police stormed the Kiev offices of
Magisters as part of a criminal
investigation of client Naftogaz.
changed hands following Tymoshenko’s
electoral defeat by new president Viktor Yanukovych in February 2010. Even
before the raid, the firm’s former senior
partner, Yevhen Korniychuk, had been
imprisoned for the role he played while
serving as Ukraine’s first deputy justice
minister in retaining Magisters to represent Naftogaz. Korniychuk, who left
the firm in 2007, had allegedly recommended the firm’s appointment without
considering any competing bids.
Shortly after Yanukovych came to
power, state-owned Naftogaz fired
Magisters from the RUE arbitration
proceedings. The firm says that no official reason was given for its removal.
(White & Case continues to advise the
client.) Korniychuk was released in February—one day after his father-in-law,
