IDBank is adamant to defend its interests in all judicial instances: bank is not threatened by bankruptcy

18.11.2019 18:43
IDBank is adamant to defend its interests in all judicial instances: bank is not threatened by bankruptcy

YEREVAN, November 18. /ARKA/. The IDBank is adamant to defend its interests in all judicial instances, the chairman of the bank’s Board Mher Abrahamyan told reporters on Monday in comments on a trial that involves businessman Gevorg Afandyan and the alienation of property of B.M.L Arzni LLC that has been considered by Armenian courts for several years already.

Essence of the case

A well-known businessman Gevorg Afandyan, the real beneficiary of the former Star supermarket chain, the Arzni mineral water factory, the Byurakn LLC and other companies, was awarded a loan of $7 million by the IDBank (at that time it was called Anelik Bank). As a security Afandyan offered the BML Arzni LLC, including its premises. However, after the borrower failed to fulfill his obligations stemming from the loan agreement, the question of confiscation of the security arose. In such cases, the bank, as a financial institution, is not interested in operating the enterprise, trying to reach an agreement with the owner on the redemption of the enterprise in favor of a person or a company associated with it.

In 2015, the Bank agreed to provide Afandyan or the person indicated by him the two-year long exclusive (preferential) right to buy back the property, undertaking to pay a fine of five times the value of the property if it were alienated to a third party.

A year later, in 2016, the Bank fulfilled its obligations by selling the plant to a third party indicated by Gevorg Afandyan, the Tarmak company, which was created for that purpose and in which Afandyan’s son was awarded a 33% share without making any investment.

In 2017, the B.M.L Arzni LLC's bankruptcy manager filed a lawsuit, accusing the Bank of violating the above-mentioned agreement, demanding a fine to the tune of $22 million. Moreover, bypassing the law (the Bank was registered in Yerevan and therefore the case was to be considered by a capital-based court - ed.), the case was sent to the Kotayk first instance regional court , which had already examined a number of bankruptcy cases involving Afandyan's companies.

Having considered the case, the court ruled in favor of Afandyan - that is to recover $22 million from the Bank, without even going into the details of this unprecedented for the banking system of Armenia case. The Bank listed 25 gross procedural violations committed by the court when making the decision, as well as violations of material rights , and took the case to the Court of Appeal.

The latter, having revoked the first instance court's verdict, sent the case for a new consideration, saying that the ruling of the first instance court failed not reveal the real will of the parties to the dispute, since it was unclear what the preferential right meant, and what kind of a procedure was to be used to implement it.

On September 20, 2019, a new ruling was issued by the first instance court that not only ignored the instructions of the Court of Appeal, but, according to the Bank, contained new violations of the procedural nature and substantive law, including through a rule not applicable to the case in question. The Bank again took the case to the Court of Appeal.

Resonant and unprecedented case

As Mher Abrahamyan says, this is an unprecedented litigation in terms of scale and essence in Armenia's banking history, which has an important systemic significance. The second important circumstance, according to him, is that Gevorg Afandyan and the companies affiliated or associated with him are involved in a string of lawsuits not only with Anelik, but other banks as well.

"Today, Afandyan and affiliated parties are involved in litigations with eight Armenian commercial banks (there are 17 banks in Armenia - ed.). In fact, the activities of such unscrupulous entrepreneurs threaten the stability of the financial and banking system of Armenia," Abrahamyan said.

He said that all eight banks have signed an appeal to the Prime Minister and the head of the Central Bank, indicating the presence of a certain intentionality in the actions of the entrepreneur to destabilize the banking system of Armenia.

"We had to turn to the prime minister and the head of the Central Bank, given the importance of this case, its systemic significance and the threat, which we consider in the context of the impact on the entire banking system and the investment environment of the country. We want to draw attention to the problem, but we do not expect intervention in the lawsuit; we’re just asking to speed up the reform of the judicial system to rule out the possibility of biased court rulings regarding the banking system and create the opportunity for an impartial and fair judicial decisions,' Abrahamyan said..

He recalled that IDBank is a bank with 100% participation of foreign capital, emphasizing that in the context of foreign investors this is a serious issue not only for the bank, but for the entire economy of the country.

"The ruling in question may become a precedent, and it will turn out that unscrupulous entrepreneurs may escape fulfilling their obligations to the bank, and go to court instead and receive compensation worth tens of millions of USD through financial fraud,' Abrahamyan warned.

Next steps

The chairman of IDBank’s Board also refuted Afandyan’s statement that the decision to create a new company was allegedly not discussed with him and, accordingly, the transaction is invalid.

"Since there had been correspondence between the Bank and Afandyan after the property was transferred to the bank and before its alienation, we declare that he participated in the negotiations - this is documented, and at the final stage he (Afandyan) agreed to alienate this company. If necessary, we are ready to publish this correspondence, "Abrahamyan said.

At the same time, the banker expressed surprise that the court had failed to take into account this and many other important facts, indicating that Afandyan personally negotiated and agreed to conclude the deal.

“The latest ruling is unacceptable to us, and we will defend our interests, good image and the interests of our customers in every possible legal way. We understand the importance of the issue in the context of the rating and the business environment of the country and would not like to contact international authorities because of this. However, if we exhaust all internal resources and do not reach a fair solution, we do not exclude the possibility of taking the case to an international court, "Abrahamyan said.

He also said that there are numerous stories in the local media about Afandyan’s connections with former officials, expressing confidence that in the new Armenia, even with the assistance of senior officials, it is impossible to resolve issues in this way.

"We hope that justice has no alternative in this process, and we will be able to protect our rights," Abrahamyan said.

Bank is not threatened by bankruptcy

The trial has caused a wide public outcry, which is why some IDBank customers began to worry about its financial viability. "I want to dispel all doubts - the bank is in a stable condition, it has no problems with liquidity, and is actively and dynamically developing. We have approved long-term development programs and we have serious plans in Armenia," Abrahamyan said.

He said that the bank aims to become international so that not only Armenian citizens use its services, but also customers outside the country.

"I want to assure that not one of our clients will suffer, because the bank has more than enough capital, liquidity and in terms of these indicators it is one of the leading banks in Armenia," Abrahamyan said.

IDBank was established on July 9, 1990, and was registered on October 1, 1991 as Anelik Bank cjsc. In May 2017, Anelik Bank made a rebranding and was renamed as IDBank. Today, the bank has two shareholders - FISTOCO LTD - 59.7% and CreditBank S.A.L. - 40.3%. --0--

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