51 LOUISIANA AVENUE, N.W. • WASHINGTON, D.C. 20001.2113 TELEPHONE: +1.202.879.3939 • FACSIMILE: +1.202.626.1700 Direct Number: (202) 879-5409 [email protected] 29 April 2021 VIA EMAIL AND CERTIFIED MAIL President of Ukraine Volodymyr Zelenskyy Cabinet of Ministers of Ukraine 11 Bankova St., 01220 Kyiv 12/2 Grushevskogo St., 01008 Kyiv [email protected] [email protected] [email protected] [email protected] Ministry of Justice of Ukraine Ministry for Development of Economy, 13 Gorodetskogo St., 01001 Kyiv Trade and Agriculture of Ukraine [email protected] 12/2 Grushevskogo St., 01008 Kyiv [email protected] [email protected] [email protected] [email protected] Ministry of Finance of Ukraine Ministry of Foreign Affairs of Ukraine 12/2 Grushevskogo St., 01008 Kyiv 1 Mykhailivska Sqr., 01018 Kyiv [email protected] [email protected] Prosecutor General’s Office of Ukraine Security Service of Ukraine 13/15 Riznytska St., 01011 Kyiv 33 Volodymyrska St., 01601 Kyiv; [email protected] 16 Malopidvalna St., 01601 Kyiv [email protected] State Judicial Administration of Ukraine 18/5 Lypska St., 01601 Kyiv [email protected] Re: Notice of Dispute under the Agreement between the Government of the Republic of Estonia and the Government of Ukraine for the Promotion and Reciprocal Protection of Investments Dear Sir or Madam: I write on behalf of Jones Day’s clients Hillar Teder, Rauno Teder and Juri Põld (all Estonian nationals), as well as Riverside OÜ, Retail Real Estate OÜ, DeltaMax Group OÜ and OÜ Ekspert Kapital, legal persons incorporated in accordance with the laws of the Republic of ALKHOBAR AMSTERDAM ATLANTA BEIJING BOSTON BRISBANE BRUSSELS CHICAGO CLEVELAND COLUMBUS DALLAS DETROIT DUBAI DÜSSELDORF FRANKFURT HONG KONG HOUSTON IRVINE JEDDAH LONDON LOS ANGELES MADRID MEXICO CITY MIAMI MILAN MINNEAPOLIS MOSCOW MUNICH NEW YORK PARIS PERTH PITTSBURGH RIYADH SAN DIEGO SAN FRANCISCO SÃO PAULO SHANGHAI SILICON VALLEY SINGAPORE SYDNEY TAIPEI TOKYO WASHINGTON Page 2 Estonia (together, the “Investors”).1 I wish to inform you of a dispute that has arisen between our clients and the Government of Ukraine (the “Government”). The Government’s conduct toward the Investors and their investments in Ukraine has violated the Agreement between the Government of the Republic of Estonia and the Government of Ukraine for the Promotion and Reciprocal Protection of Investments (the “Treaty”) and caused the loss of their investments in excess of US$ 750 million. This letter serves as notice of the dispute, an invitation to negotiate an amicable settlement pursuant to Article 8(1) of the Treaty, and a statement of the Investors’ intention to submit the matter to arbitration pursuant to Article 8(2) of the Treaty if a suitable resolution to the dispute is not promptly achieved. Below, we describe the basic details of the Investors’ interests in Ukraine (infra § A), the Government’s illegal conduct (infra § B), and the applicable provisions of the Treaty and international law (infra § C). Upon request, we would be pleased to provide you with relevant documentation substantiating these claims. A. The Investors’ Investment in Ukraine The Sky Mall Shopping and Entertainment Center (“Sky Mall”) is one of the largest commercial shopping centers in Kyiv. It is located on the left bank of Dnipro, in the Dniprovsky Administrative District. The construction of Sky Mall began in 2006. Mr. Hillar Teder was an early investor in the project. In 2005, he purchased shares in Dniprovska Prystan PJSC (“Dniprovska Prystan”), a Ukrainian corporate entity that owned the lease rights to the land where Sky Mall would be built. In January 2006 Mr. Hillar Teder formed Pryzma Beta LLC (“Pryzma Beta”), also a Ukrainian company, which would eventually own Sky Mall. Construction of Sky Mall was done through Dniprovska Prystan and another Ukrainian company, Stilf LLC (“Stilf”) that is wholly-owned by Riverside OÜ. In 2012, Stilf acquired an unfinished parking lot attached to Sky Mall from Dniprovska Prystan. Mr. Hillar Teder played a major role in Sky Mall’s construction. He and his team introduced a number of technical and architectural innovations that helped shape Sky Mall’s design and its balance of retail galleries, restaurants, parking and entertainment. Mr. Hillar Teder also financed much of Sky Mall’s construction. Through his indirect but wholly-owned Cypriot entity, Filgate Credit Enterprises Limited (“Filgate”) 2 , he loaned substantial sums of money to Dniprovska Prystan and Pryzma Beta, sums which were used to build Sky Mall. Arricano Real Estate Plc (“Arricano”)3, a Cypriot company, was formed in 2008 to focus on Mr. Teder’s real estate interests in Ukraine. Arricano’s wholly-owned Cypriot subsidiary, 1 Duly executed and valid powers of attorney are attached hereto as Annexes A through G. 2 Mr. Hillar Teder remained the sole indirect shareholder of Filgate, until 2016, when Arricano acquired a 49% share in Filgate. 3 Until 12 September 2012, known and doing business as Arricano Trading Limited. Page 3 Assofit Holdings Ltd (“Assofit”), was formed the same year and became the sole owner of Pryzma Beta—and thus the sole, indirect owner of Sky Mall. The company is now held directly and indirectly by the Investors—Mr. Rauno Teder, Mr. Juri Põld, Retail Real Estate OÜ, DeltaMax Group OÜ and OÜ Ekspert Kapital, as well as by Dragon Capital Investments Limited (a Cypriot company). Phase 1 of Sky Mall opened in 2007. Phase 2 of Sky Mall opened on August 27, 2010. Arricano has also developed five other shopping centers in Ukraine between 2008 and 2014. Arricano has at least three other projects under construction in Ukraine, demonstrating its long- term future commitment to the Ukrainian economy. B. The Government’s Illegal Conduct against the Investors and Their Investment In 2009, just before Phase 2 of Sky Mall opened, it needed an injection of capital to finish the construction. A third party incorporated in the British Virgin Islands, Stockman Interhold S.A. (“Stockman”), invested approximately US$ 30 million in capital and loans to the Sky Mall project in exchange for 50.03% of the shares in Assofit. This money, along with approximately US$ 125 million from Mr. Hillar Teder and Arricano, was loaned to Dniprovska Prystan and Pryzma Beta through Filgate. A shareholders’ agreement and call option agreement, signed in February 2010, gave Arricano the right to repurchase the shares owned by Stockman at a predetermined price; this arrangement allowed Arricano to reacquire full ownership and control of Assofit once Sky Mall opened, with Stockman earning significant return on its investment. In November 2010, Arricano exercised its call option to repurchase the Assofit shares. Rather than transfer its share and earn its promised return, Stockman terminated the shareholders’ and call option agreements and sought to retain its majority share in Assofit—and thus Pryzma Beta and Sky Mall. The parties instituted parallel arbitrations under the UNCITRAL and LCIA rules regarding the ownership and control of Assofit. While those arbitrations were ongoing, Andrey Adamovsky (a Stockman principal and director of Assofit), his son Dmitry Adamovsky (a purported beneficial owner of Stockman) together with Alexander Granovsky (a minority stakeholder of Stockman and its de facto director in matters regarding Sky Mall, former director of Assofit and former member of the Ukrainian Parliament), Liudmyla Parkhomenko (director of Assofit), Olga Tkachenko (director of Pryzma Beta), Kostiantyn Likarchuk (lawyer of Andrey Adamovsky), PJSC Bank Pivdennyi and AS Reģionālā Investīciju Banka worked to retain control of Pryzma Beta and siphon millions of dollars in loan proceeds and other assets to themselves and their various corporate affiliates. But they did not do so alone; they worked in concert with Ukrainian courts and other Government authorities. The Government’s acts and omissions vis-a-vis the Investors’ came in three waves—the first in early-to-mid 2013 (as the LCIA arbitration was sub judice), the second in mid-2014 (after Arricano was successful in the arbitration), and finally again in 2017: Page 4 First, in February 2013, the Commercial Court of Kyiv removed Filgate as the lender and creditor on over US$ 100 million in loans it made to Pryzma Beta. In its place, the court named Assofit—which was still controlled by Stockman (and thus Mr. Adamovsky)—thereby divesting Filgate and Mr. Hillar Teder from any right or ability to direct the actions of Pryzma Beta. Within a month, Assofit (controlled by Stockman) transferred the loan again, this time to Torsem Co Limited (“Torsem”), a Cypriot corporate entity purportedly beneficially-owned by Dmitry Adamovsky. No consideration was paid for this transfer, and the Investors lost any status as a creditor to Pryzma Beta. This decision was affirmed by the Ukrainian Supreme Court, leaving Pryzma Beta fully controlled by and deeply indebted to Adamovsky-affiliated companies. This was an irregular decision with no basis in Ukrainian law; it was clearly aimed to strip the Investors of their rights and to benefit Stockman and Adamovsky. And it opened the door to a quintessential corporate raid. Pryzma Beta quickly obtained many millions in new loans from Financing and Invest Solutions BV (“FIS”) (a Dutch company which will have greater relevance a few months later); Pryzma Beta paid those borrowed funds directly to Torsem (and not to Filgate); and Torsem eventually transferred those funds to Dmitry Adamovsky. This charade— facilitated by and executed through the Ukrainian courts—was found by the sole arbitrator in the LCIA proceedings to be a “deliberate misappropriation of assets and a fraud on Arricano, Filgate and Mr. Teder.”4 In light of these developments, Arricano and the Investors moved to protect their investment in Sky Mall, and obtained a series of injunctions in the hope of doing so.