Ukraine's Defence Ministry sues Lviv Arsenal for US$40 million for failed mine supply contract

The Northern Commercial Court of Appeal has upheld the decision of the first instance court to recover 1.5 billion hryvnias (about US$40.7 million) in favour of the Ministry of Defence from Yurii Zbitniev's Lviv Arsenal company, which failed to fulfil the contract to supply mines to the Armed Forces.

Source: press service of the Ministry of Defence

Quote: "The decision has entered into force and is subject to execution."

Details: In addition, the Kyiv Commercial Court is considering a court case on the additional recovery of 163.5 million hryvnias (about US$4.4 million) in penalties in favour of the Ministry of Defence.

As part of this case, bank accounts and other movable and immovable property belonging to Lviv Arsenal were seized.

"Said decision has been submitted to the State Executive Service of Ukraine for execution," the ministry added.

Background:

Earlier, Ukrainska Pravda reported that Lviv Arsenal received 1.4 billion hryvnias (about US$38 million) from the Ministry of Defence for the supply of a large batch of 120-mm and 82-mm mortar rounds, but the company is long overdue on the contract and had not handed over a single mine to the Armed Forces.

Ukrainska Pravda said that Lviv Arsenal is registered at 1 Pratsi Street in Kyiv. Until the autumn of 2022, it was not listed among major arms suppliers.

The only time the company had appeared in the public space before this situation was when it broke a contract with the main manufacturer of small arms for the Ministry of Internal Affairs, the Fort company, and spent several years suing for 5 million hryvnias. 

The founder of Lviv Arsenal is Yurii Zbitniev, who became one of the youngest members of the Verkhovna Rada of the Ukrainian SSR in 1990. He also took part in the creation of the Social-Democratic Party of Ukraine, but later left it.

It was reported that the Ministry of Defence signed a contract with a little-known company called Lviv Arsenal on 11 November 2022. A few days later, the then Defence Minister Oleksii Reznikov authorised an advance payment under the contract – almost 100% of the contract amount.

Deliveries were supposed to begin in December 2022 and be fully completed by the end of February 2023, but, as Ukrainska Pravda reported, as of the end of July, the Ministry of Defence had not received a single mine under the prepaid contract.

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