Scandals surround construction of Ukraine’s most expensive bridge

The following is an abridged translation of a story originally published by a Dnipropetrovsk-based website Buro UA and supported by Objective Investigative Reporting Project.

By Olga Yudina, Buro UA

The Darnytskiy Bridge in Kyiv is one of the most notorious infrastructure projects in independent Ukraine. The bridge opened in 2011, though one of its entrances is still under construction.

The bridge’s construction, that has been going on since 2004, drained almost 1 billion euro from the state budget.

But that is not the end of the spendings: The pricy bridge can soon suck even more funds out of Ukraine’s budget.

A Turkish contractor sues Ukraine’s state company that ordered the construction for nearly $30 million dollars as compensation for loss profits. The contractor says that it was first signed up to build the bridge, but later dodged for a local company.

The story told by the sides has inconsistencies. A lawyer that worked for the Ukrzaliznytsya says that his employers deliberately sabotaged the defense to allow the contractor win the case.

The affair even features an alleged forgery of legal documents.

The bridge

The Darnytskiy Bridge is one of the seven bridges that connect the left and right banks of Kyiv across the Dnipro River. The construction of the bridge started in 2004.

The problem was, Ukrzaliznytsya signed similar contracts with two construction companies almost simultaneously. One of the companies claims it lost millions in profits because of it.

After it lost in all the courts possible, Ukrzaliznytsya lawyer tried to prove that a Swiss arbitrage ruling is not obligatory for execution in Ukraine, but was immediately removed from the case by the state company’s management.

The cost of it – almost 1 billion euros – amounts to some of the most expensive bridges in the world, even though the construction doesn’t boast extreme measurements: it is 1,066 meters long and 20 meters high.

For comparison, the world’s highest automobile bridge, Millau Viaduct in France, is 2.5 kilometer long and 342 meters high. And yet, its construction cost only 394 million euros – twice less than the Kyiv bridge. Moreover, it was built in just three years.

The delays weren’t the only problem in the Ukrainian bridge construction. There are serious concerns about its quality.

In May 2007, deep cracks showed on seven pillars of the bridge. Saint-Petersburg-based architectural company Transmost claimed responsibility for it, saying it made a mistake in the project of the bridge. The pillars were since reinforced.

A year later, a pillar No. 14 shifted. Ukrzaliznytsya blamed the constructing company, PlanetaMost, which in its turn blamed the local architects who worked on the project, and they blamed the Russian bureau.

Infrastructure Ministry’s Ukrinvestexpertise said that the bridge should be rebuilt because the pillars were built weak. The original project recommended using 120 kilograms of metal armature fittings per one cubic meter of concrete, but the constructors ended up reducing the reinforcements to only 25 kilograms.

Despite the warnings, the construction continued.

The Cabinet of Ministers disagreed that the bridge was overpriced. It said in 2011 that the price was justified because it included the construction of 47 kilometers of automobile and railway roads leading to the bridge.

Several contractors worked on the construction of the bridge over the years.

The very first company to get signed was Dogus Insaat Ve Ticaret AS, a Ukrainian branch of Turkish construction company. At the same time, Ukrainian companies Planeta-Most and Mostobud were signed.

Ukrainian media reported that the Turkish company received a $60 million advance payment. In 2005, Infrastructure Ministry said it will cancel the contract with it, but didn’t. The company went back to work.

In 2006, the ministry said it was going to make Planeta-Most the only direct contractor, and let it sign and control the other contractors – for the sake of stronger control of quality.

Trials

In May 2008, Planeta-Most, the new main contractor went to a Kyiv court to demand Hr 42 million from the South-Western Railroad, a part of Ukrzaliznytsya. The contractor claimed that it wasn’t paid for the two months of works – November and December 2007.

They cited a direct general contract signed щn Nov. 16, 2004, two days after Ukrzaliznytsya signed Turkish company Dogus. The whole amount on the contract was more than Hr 2 billion. Dogus was a third party on the suit, but had no claims for Ukrzaliznytsya.

But Ukrzaliznytsya claimed it worked with Planeta-Most not by the 2004 general contract, but by a 2007 subcontract, with Dogus being a general contractor that signed the subcontract with Planeta-Most.

Dogus was saying that the contract between Planeta-Most and Ukrzaliznytsya is invalid because Planeta-Most was Dogus’ subcontractor since Nov. 19, 2004.

The chain of claims looks absurd.

The court proved that Planeta-Most was paid by Ukrzaliznytsya, not Dogus, and supported the Hr 42 million demand. A Kyiv Appeal Court and Supreme Economic Court both supported the ruling.

But it wasn’t the end of it.

In April 2012, Supreme Economic Court ruled invalid a 2007 appendix to a contract between Ukrzaliznytsya and Dogus which confirmed that Dogus completed construction works worth of $60 million (the sum that matches the advance payment?). The court ruled that (on the Ukrzaliznytsya side) the document was signed by an unauthorized representative.

Dogus appealed to international arbitrage in Switzerland, which ruled that Ukrzalyznytsia must pay Dogus $20 million debt and some $3 million in court fees. But only $4.2 million of the $20 million debt was a payment for the completed works. The rest was a compensation for the lost profit.

The Ukraine’s Supreme Economic Court complied with the arbitrage.

But Ukrzaliznytsya was reluctant to pay, so in September 2015 a yet another court, a Shevchenkivsky District Court, obliged Ukrzaliznytsya to execute the decision forcibly.

Before it, Ukrzaliznytsya filed two surprising motions to the Shevhchenkivsky court. Signed by Deputy CEO Artem Mironovych and representative Kostyantyn Astriukhin, the motions advocated the cause of the state company’s opponent, Dogus: they asked the court to support the demands of Dogus.

Meaning that the state company was seeking to pay the demanded $23 millions to the Turkish companies.

After the ruling, Ukrzaliznytsya claimed that the motions were forged and called them a provocation. Myronovich said he never signed a paper like that.

“The official position remains unchanged: We consider unreasonable the debt claimed by Dogus Insaat ve Ticaret A.S., which failed to perform the contract,” read a press release by Ukrzaliznytsya.

Lawyer for Ukrzaliznytsya

However, a former lawyer of Ukrzaliznytsya doubts that the company sincerely wants to challenge Dogus.

Dnipropetrovsk lawyer Ilya Bondar worked pro bono for Ukrzaliznytsya during three months in 2015.

He says that it was enough to understand that the state company doesn’t really want to fight for the money. He is afraid that the company is about to lose Hr 612 million to the Turkish contractor without a fight.

Once Bondar started working at Ukrzaliznytsya in 2015 he made it his main job to fight for the money in question. He appealed the Shevchenkivskiy court decision that obliged Ukrzaliznytsya to comply with the Swiss arbitrage ruling.

He’s built his argument saying that the arbitration clause in the initial contract between Dogus and Ukrzaliznytsya named a different arbitrage for solving the possible conflicts.

The contract named the International Court of Zurich, while Dogus went to International Arbitration Court of Zurich Chamber of Commerce.

Bondar says that a wrong choice of the arbitration body is enough for Ukrzaliznytsya to refuse pay the debt.

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