Government of Ukraine: Statement on Vanco Investigation and Negotiations

    KYIV, Ukraine, Aug. 1 /CNW/ -- The Government of Ukraine (GoU) continues
to pursue an investigation into the circumstances surrounding Vanco
International and its affiliates (the "Vanco Companies"), including Vanco
Prykerchenska Ltd.  The Vanco Companies present a complex network of offshore
entities, the owners of which have yet to be fully disclosed.  Through this
investigation and possible related legal steps in Ukraine and abroad, the GoU
is determined to ensure transparency and the observance of Ukrainian law, and
to encourage and protect legitimate foreign and domestic investment.  The
following points should be clarified in relation to the current dispute with
the Vanco Companies:
    -- The GoU welcomes foreign and domestic investment, and is committed to
creating a stable environment for that investment.  This requires transparency
and respect for the rule of law.  The GoU has been encouraged by all of its
international partners to continue to press for reform in its commercial
dealings.  This applies equally to foreign and Ukrainian companies, and it
applies when foreign and Ukrainian companies act in concert.
    -- Given that Vanco Energy Company, one of the original participants in
the license tender for the exploration of the Prykerchenska block of the Black
Sea continental shelf, is a U.S. corporation and subject to U.S. jurisdiction,
the GoU has kept the U.S. government apprised of the situation as it has
developed.  The U.S. authorities are at the vanguard of the global fight
against corruption, and the GoU will continue to work with all of its
international partners to advance this investigation and pursue necessary
legal steps as appropriate.
    -- Vanco Prykerchenska Ltd. is not a subsidiary of the U.S. company Vanco
Energy.  Vanco Energy is simply a minority shareholder in Vanco Prykerchenska
Ltd., an offshore company dominated by Ukrainian interests and other offshore
entities whose ultimate owners remain undisclosed.  It is Vanco Prykerchenska,
and not Vanco Energy or its subsidiary Vanco International, which recently
initiated arbitration against the GoU in Stockholm pursuant to the
Hydrocarbons Sharing Agreement for the Prykerchenska subsoil block of the
Black Sea continental shelf (the HSA).
    -- The GoU has consistently pursued good-faith negotiations with the
Vanco companies to achieve an amicable solution to the dispute, so long as
they are mutually beneficial and carried on in a cooperative atmosphere.  On
several occasions, the GoU has proposed to the Vanco Companies an agenda for
negotiations, covering all of the circumstances leading to the present
dispute, including the circumstances surrounding the initial tender process,
the negotiation and execution of the HSA with Vanco International Ltd., and
the purported assignment of rights from Vanco International Ltd. to Vanco
Prykerchenska Ltd.  The Vanco Companies have not responded to this proposed
    -- The decision of Vanco Prykerchenska Ltd. to initiate arbitration at
the Stockholm Chamber of Commerce was inconsistent both with its earlier
representations and with the conduct of productive, good-faith negotiations.
For this reason, the GoU has informed the Vanco Companies that negotiations
will not take place unless Vanco Prykerchenska Ltd. agrees to suspend the
Stockholm arbitration.  Should the Stockholm arbitration not be suspended, or
if negotiations prove unsuccessful, the GoU is fully prepared to defend the
interests of Ukraine by all legal and contractual means available.
    -- The Ministry of Justice, duly authorized by the Government of Ukraine,
has retained Freshfields Bruckhaus Deringer as legal counsel to defend
Ukraine's interests in all negotiations related to the Vanco dispute.  No
other legal counsel has authority to make statements on Ukraine's behalf in
this regard.  All inquiries in relation to this matter should be directed to
Mr. Peter Turner of Freshfields Bruckhaus Deringer, Paris.
    This press release was authorized by Mr. Yevgen V. Korniychuk, First
Deputy Minister of Justice of Ukraine.

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