 Ukrainians, especially the men, will probably have no difficulty defining the word "raid." As children, almost all of us loved movies with daring sea raids by pirates who boarded gold-laden vessels and assaulted coastal towns.
Later, Sydir Kovpak's* real life guerilla raids mesmerized us. His insurgents fought the World War II Nazi invaders from Putvyl in the east all the way to the Carpathians.
Today, six decades later, front pages of Ukraine's newspapers and television screens in our homes are full of news about raids. However, these are not as enthralling and inspiring as they were in our childhood, and do not make us believe our victory over the German enemy is inevitable.
Today's raids have no relationship to nobility, courage and a desire to take risks, and only slightly correspond to the original definition of the word, mainly because of a few merely lexicological similarities.
I am not going to intrigue our readers any longer. The article I am writing is obviously not about pirates roaming the Black Sea or the Sea of Azov, for there are and could be no pirates on Ukraine's absolutely civilized shores. Moreover, our seas are geologically locked and have no direct water link to the global ocean but the world's narrowest strait, the Bosporus.
I am speaking about attempts to seize control of a company by self-proclaimed owners. It is
a Ukrainian version of property redistribution, which is said to have been borrowed from our northern neighbor, Russia, which in turn is believed to have adopted all these dubious methods from Europe.
Property redistribution is a never-ending market duel between those who are strong and those who are weak, and involves mergers and takeovers, both friendly and hostile. Property redistribution is a common form of competitive rivalry and contributes to economic development.
In our country, however, this process is perverted and often looks like a hostile takeover, and features court rulings presented by those with powerful connections in government. These decisions often have little or nothing to do with law. Judges, who are elected for life in Ukraine, are simply bribed and blatantly ignore their professional commitments. This type of property redistribution is not civilized at all and contradicts the rules of economic competition. Here is how it happens in Ukraine.
A company having connections in government or representing an economic clan decides to seize control of another company. It hires a firm specializing in providing raider services and formulates a takeover agenda. To create the slightest illusion of lawfulness, it purchases some shares belonging to the minority shareholders of the company it seeks to control. Then the raider firm, which usually employs an experienced lawyer, brings suit in a friendly court. Of course, this is only after the necessary steps have been taken to assure that the judge will make the ruling that the raider wants.
Confronted with an illegal and often absurd court decision, the attacked company appeals against it, and a court of appeal often restores its rights. However, the raider produces another court ruling, sometimes several such rulings, until both sides have several decisions in their favor. If the rightful owners do not want to leave the corporate premises or headquarters, bailiffs accompanied by bodyguards have been known to break in and force the owners out and install new management. The scenarios vary, but the goal is always to replace existing ownership with new ownership.
Reality is often far more complicated and raids much bolder. We often see these confrontations on television. They involve lawmakers of all levels, security guards, often from Russia, and police officers trying to prevent injuries and even murders. Those clashes are very noisy and result in heart failures, bruises, cuts and grazes.
It is usually impossible to return a raided company to its owners, even though they appeal to the country's senior officials for help. Government officials also protect its new owners.
Raiders are now attacking an estimated 3,000 companies, a number so large that it is very difficult to restore justice.
Why is this unpleasant practice so widespread in Ukraine and raids so numerous?
The recent spate of business raids is caused by murky post-Soviet privatizations of state property by clans. These disputes, however, are often resolved quite peacefully. Those who privatized companies for nothing compromise with new owners who threaten to reveal the illegal schemes and details of how the companies had been purchased. They usually reach an understanding, but sometimes there are real threats, pressure and violence. We often hear on television or read in newspapers about business people, as well as raiders, being murdered. This means the work of raider firms entails great risks. But they charge 10 percent of the actual value of the attacked company for their dangerous work. Millions of dollars are a good remuneration for taking a few risks.
However, it is important to note that legal property rights reduce the risk of being attacked by raiders, which is why foreigners are rarely raided.
People's attitudes to such attacks have evolved from indifference to condemnation and fierce resistance, particularly by those working for a raided company. They often do not wish to hear that their owners, who illegally privatized their companies, have done little or nothing for their development because of the lack of funds or managerial skills. At some companies, employees seem not to care who pays salaries to them and even hope their new owner will make their future more stable and secure. But those new owners often prove even bigger predators and frauds. They immediately sell their company or its valuable equipment. Such was the fate of thousands of sugar factories, machine building plants, sanatoriums and other once profitable companies.
There have also been a few cases of employees and workers resolutely supporting their caring and fair owners.
Let us try to predict when there will be no raids or, at least, such raids as described above.
Given Ukraine's history and post-communist capitalist experience, one can quite confidently say that soon such raids will pass from the scene. On the one hand, the government will try to enforce and ensure the observance of property laws. The Verkhovna Rada has recently passed a bill under which a court in eastern Ukraine has no right to consider a property dispute in western Ukraine. In other words, this court has to be located where a raided company is located. This will help avoid contradictory rulings, which still provide a virtually legal basis for business raids.
The parliament has also established a special commission to monitor the situation. It will propose amendments to property legislation to prevent dishonest businessmen and unscrupulous judges from violating laws. These changes are urged by increasingly powerful democratic institutions and will, no doubt, be introduced. It will take time but it is now absolutely obvious that there is no other way to eradicate corruption among judges serving for life.
We had this kind of situation after the downfall of the Soviet Union, when racketeers ruled the country. They exterminated themselves in constant fights and clashes. Those who survived that period are said to have become exemplary fathers, businessmen or officials.
Thus, most experts claim Ukraine will have fewer and fewer raids. Its participants will either work in government or business, or will enjoy an ordinary but wealthy life as law-abiding citizens. However, if new clans come to power in Ukraine, there may be new property scenarios. Whatever happens, today's raids will soon be seen only in action movies.
*For more on Sydir Kovpak, see an earlier Senchenko column at: http://www.ukraine-observer.com/articles/201/523
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