On Monday, the Tashkent City Court in Uzbekistan handed down a decision ordering the forfeiture of assets held by a local mobile service operator in a controversial ruling that may cause the operator’s owner, Russia’s MTS, to charge off a loss of up to $1 billion, the Russian news agency RIA Novosti reported.
The Court’s decision enables the state of Uzbekistan to go ahead with the seizure of OOO Uzdunrobita now that the operator has been convicted of financial scheming and the breach of this Central Asian country’s anti-monopoly, consumer rights protection and advertisement laws. Four company managers have been each sentenced to a three-year probation period.
Uzdunrobita, which is fully owned by MTS, a leading Russian mobile operator, has claimed the ruling is illegitimate and is threatening to haul Uzbek government officials before international courts. The Russian company says it was deprived of any opportunity to properly defend its interests during the uncommonly hasty court hearings, and feels the “numerous” procedural infringements it has noted are an indicator of Uzbekistan’s premeditated move to illegally take hold of MTS’s regional business under the guise of reparation for damages.
On a list of suppressive acts that MTS construes as brazenly abusive is the July 2012 decision by the chief Uzbek national telecommunications regulator to revoke Uzdunrobita’s license for telecom services. The regulator blamed the operator’s branch offices across Uzbekistan for working without their own licenses; MTS futilely countered the allegation by referring to the 2004 licensing agreement with Uzdunrobita that covered all the branches as well
Overseas stockholders with vested interests in the MTS business also plan to file lawsuits with international courts to contend Uzbekistan’s decision, a spokesman for AFK Sistema, a large Russian financial corporation and the parent company of MTS, told RIA Novosti.
International politicians have also made repeated efforts to help untie the legal knot as the hearings continued. The Russian Ministry of Foreign Affairs intervened several times, eventually persuading Uzbekistan to release a Russian citizen who had been jailed for running Uzdunrobita as acting chief after its delinquent CEO fled the country. The US Congress also weighed in with repeated appeals to Uzbekistan President Islam Karimov asking him to ensure justice and protect the interest of MTS, whose shares trade on the NYSE.
With all the fines and indemnifications the Tashkent court has ordered, MTS may lose as much as $1 billion, which amounts to its entire investment in the Uzbek asset since its purchase in 2004.
