Bankruptcy proceedings filed against offices of MTS subsidiary in Uzbekistan
TASHKENT. May 6 (Interfax) - Uzbekistan's regional economic courts have filed bankruptcy proceedings against the branches of LLZ Uzdunrobita, the Uzbek subsidiary of Russian operator OJSC MTS , according to announcements published in local media.
These proceedings are based on rulings passed by the Karakalpakstan Republic's economic court and 12 regional economic courts.
As per the court decisions, monitoring procedures have been opened at Uzdunrobita's branches, and temporary managers have been appointed. The creditors of all of the branches will hold simultaneous meetings on June 3. The bankruptcy proceedings against Uzdunrobita's branches will simultaneously be heard at all of the courts on June 10.
Uzdunrobita's offices officially bore legal entity status, but they were also part of the head company's structure.
It was the operations of these branches that prompted the Uzbek Agency for Communications and Informatization to revoke Uzdunrobita's licenses. The regulator accused the MTS subsidiary of allowing its branches to operate without individual licenses.
Prior to 2002, the Uzbek Agency for Communications and Informatization was a shareholder in Uzdunrobita. It established and implemented the company's branch structure and even confirmed the possibility of using this structure when the license was issued to the operator.
Uzdunrobita filed for bankruptcy with the court on January 18. At a meeting on March 5, the MTS subsidiary's creditors decided to open liquidation proceedings against it and asked the court to declare the company bankrupt.
However, on March 11 the court rejected the creditors' request to open liquidation proceedings, instead prolonging the monitoring procedure at Uzdunrobita.
Uzbek regulatory bodies initiated inspections against Uzdunrobita last June. That same month, the Prosecutor General's Office sanctioned searches in the company's offices, the seizure of documents and the arrest and mass interrogation of employees.
On July 17, MTS was forced to freeze its operations in Uzbekistan in line with demands by the state communications inspectorate, shutting off communications services to more than 9.5 million cell phone users across the country.
On September 17, the Tashkent city court rendered its verdict against four of Uzdunrobita's top managers and passed non-custodial sentences, in addition to transferring the company's property to the state.
The Prosecutor's Office has accused Uzdunrobita's top managers of taking money from the company by procuring equipment at inflated prices, as well as by "organizing a criminal group for the purpose of extracting unsupervised profit."
On November 8, the appeals board upheld Uzdunrobita's appeal and overturned the earlier ruling transferring the company's property to the state. It set financial claims against the company at $600 million with an option for paying that off over eight months' time.
The board also ruled that Uzdunrobita was a civilian defendant in the case against the four managers and lifted the earlier imposed freeze on company property. The verdict on the managers was left in force.
Overall, the claims made against the company by the General Prosecutor's Office, anti-monopoly entities, the Uzbek Agency for Communications and Informatization and tax bodies surpass $1 billion, which is equal to the amount of investments that MTS made in the development of its Uzbek business.
MTS considers the accusations against Uzdunrobita to be unjustified. "MTS is also standing firm on its right to make use of all possible legal instruments at the international level for the recovery of losses incurred as a result of unlawful actions against the MTS subsidiary company in Uzbekistan," the Russian company said, referring to the bankruptcy procedures against Uzdunrobita.
MTS said that it has filed a lawsuit against Uzbekistan at the International Center for the Settlement of Investment Disputes at the World Bank. The lawsuit was registered on November 15, 2012 and has been adopted.