Legality of the joint venture confirmed

Published: 6/5/2000

The Novosibirsk Regional Arbitration Court has ruled that joint stock company Airport - Service, a joint venture of the oil company Sibneft and Tolmachevo Airport, was legal. The impact of the decision is to reduce the attractiveness of the state's 51% stake in the airport, as Airport-Service owns the only fueling facility at the airport, which generates more than 50% of the airport's profits in 1999 of $2.6m. The airport's board of directors challenged the legality of the joint venture prior to privatisation after their efforts to end the joint venture and return the fueling facility to the airport's control failed. The basis of the challenge to the joint venture is that the joint venture had been established without the consultation and consents of the majority shareholder the Ministry of State Property. Sibneft however, convinced the court that the company should not be subject to retrospective action and was formed legally at the time and in good faith. If the shareholders had not been consulted or notified, then the problem lay with the management of the airport, responsible for setting up the joint venture in the form of former Vice-Governors Yury Alaferovsky and Leonid Nikonov representing the airport's board and Sibneft should not suffer as a result. It would appear that the major beneficiary of the problem could be the regional government, who was of the view that an open auction would price them out of contention of buying the 51% holding, although these developments may have opened a glimmer of hope given the reduced attractiveness of the airport to a buyer of the 51% given the sharing of the profits. The investment tender requirement of $30m however, still remains to be met under the current structure, so avoiding the high purchase price may only be the removal of one of many hurdles. Sources within Sibir suggest that the company will not bid for the government's stake in the airport. The reason being given is that they may not have the funds to meet the investment requirement of the tender and are eager to achieve their primary goal of getting the airport to provide a higher level of service, a task which will involve the commitment of significant capital.

Article ID: 1841