Kiev: Mittal Steel sued the Ukrainian government on Monday, alleging a $4.8 billion steel mill recently acquired by the international metals giant had been overvalued.
Mittal Steel Krivy Rih, the Ukrainian company operated by Netherlands-headquartered Mittal, filed the suit against the former Soviet republic's State Property Fund (SPF), the government agency responsible for privatising state-owned businesses.
On October 24, 2005 Mittal purchased Ukraine's largest steel mill in an open bidding.
It was the largest privatisation in Ukraine's history and, owing to its size doubled the total value of foreign direct investment in the country.
However, the SPF concealed about $6.6 million of debt owed by the Krivoi Rih- headquartered steel works at the time of the Mittal purchase, and so acted in bad faith, the suit charged.
The legal framework of the record turnover of the factory "also suffers from numerous procedural shortcomings", it alleged.
The SPF issued a statement saying the transfer had been proper in all its details, and that the Ukrainian government expected Mittal to live up to its obligations.
Mittal has failed to give SPF lawyers access to date proving Krivorizhstal was overvalued, the SPF statement charged.
Mittal's operation in the Krivorizhstal mill since October 2005 has been less than smooth, with workers threatening strikes because of Mittal's purported failure to raise salaries, and plant management alleging Mittal has not invested in the plant as much as it promised to when buying it.
Mittal officials have denied the allegations, saying the steel company is committed to the Ukrainian market and has met all commitments to shareholders and plant personnel.
Ukraine has one of the poorest records in attracting foreign investment of any East European country. The main barriers are a Ukrainian government bureaucracy unfriendly to business, and widespread corruption.
Breach of faith suits is a common legal tool in Ukrainian business disputes concerning privatisations. Typically, the company sues in order the change the terms of a turnover of state property to private industry.
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