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British oil and gas company JKX Oil & Gas is currently progressing arbitration proceedings against the government of Ukraine, claiming it has overpaid in production taxes, according to an international stock market and financial news website at www.4-traders.com.
JKX is attempting to recover $180.0 million in rental fees, plus damages, and said a hearing is scheduled for July this year, according to the report.
The conflict concerning taxes in Ukraine was caused by the government's decision to increase production taxes to 55% in 2015, but an emergency arbitrator ruled that the government could not charge JKX taxes in excess of 28%. Although an international arbitration tribunal has ruled in JKX's favor, a final judgment is still required.
In tandem with its own claim against the Ukrainian government, JKX has been submerged in other legal battles in the Ukraine which also need to be settled, according to the report.
"The group has several potential near-term contingent liabilities arising from three separate court proceedings over the amount of rental fees paid in Ukraine for certain periods since 2007, which in total amount to a potential liability of approximately $41.0 million, including interest and penalties," said JKX.
"We believe that these claims are without merit under Ukrainian law and we will continue to contest them vigorously. There are several hearings scheduled in the coming months on these proceedings and we will update shareholders in due course," it added.
The relationship with Ukrainian authorities is really being tested, and the new management at JKX Oil will be keen to settle the ongoing problems as around three-quarters of its current revenue comes from the country, as reported.
Due to the ongoing litigation issues, Ukrainian officials suspended numerous permits covering JKX Oil's assets in the country, stating action needed to be taken within one month to avoid the permits being suspended.
"The authority gave a list of actions that were required in order to avoid suspension (including a change to the minimum production requirements under the licenses) and would normally have given the operator sufficient time to remedy the failings. Instead [our subsidiary] were given only one month to do so. Through further discussion with the relevant authority, [our subsidiary] has been given more time to comply and hearings regarding the status of the licenses are planned for March 2016, at which the board and [our subsidiary] is confident of a positive outcome," said JKX.
Tom Reed, the new head of JKX, the London-listed oil and gas company whose directors were ousted last month, said his company wants to resolve its legal case against the Ukrainian government.
"We would like to end the conflict with the Ukrainian government as soon as possible," he told The Financial Times.
UNIAN's memo. JKX Oil&Gas plc is an upstream oil and gas exploration and production company. The Company is engaged in the exploration for, evaluation, development and production of oil and gas reserves in Ukraine (core business), Georgia, Hungary, Bulgaria, Slovakia, the U.S. and Russia.
JKX Oil&Gas through the intermediary of its subsidiary company by Poltava Oil and Gas Company, as established in 1994, is developing the Novomykolayivske field, a site in the Poltava region of Ukraine with a total area of 271 square kilometers, and also has permits to explore the Zaplavska, Yelyzavetivska areas and Chervonoyarske-Skhidne field (Kharkiv region) with a total area of 171.2 square kilometers.