Graham Stack in Kyiv -

Three dodgy takeovers of European investors' assets in Ukraine were spectacularly reversed in October, as pressure mounts on Kyiv in the run-up to signing a trade and association agreement with the EU in November. Is Ukraine's investment climate improving or is it just window dressing before the EU summit in Lithuania?

While Kyiv's central square Maidan symbolises the spirit of mass pro-democracy protests in 2004, directly below the square the gleaming boutiques of the Globus shopping mall have come to epitomise Ukrainians' thirst for western living standards. Not only are the brand names western, the mall's investors hail from the UK: it was acquired in 2007 by London & Regional Properties, a worldwide investor, at the peak of the credit bubble for a whopping $200m - a sum that even the Ukrainian state has trouble raising nowadays.

Having sunk so much money into the mall only a few years back, London & Regional were hopping mad when on September 16 a Kyiv court ordered the mall to reinstate a former manager of doubtful loyalty, Olena Morris, as CEO of the mall.

Then things took a nasty turn. According to London & Regional's top legal officer Leonard Sebastian: "On the night of September 22, a group of 50 people in track suits and with shaven heads, under the leadership of Olena Morris, our former employee, seized the guards' rooms, the central control point and other strategically critical nodes of the mall. They expelled people from their workplaces, and placed groups of bandits to guard the entrances to Globus."

Sebastian told a press conference in Kyiv on September 26 that police apparently stood by idly and watched, saying this was a corporate conflict and not their remit. "We're only here to see you don't beat each other up," they said, according to Sebastian.

The court decision that triggered the takeover was curiously a labour dispute. Morris demanded she be reinstated as CEO of the mall's management company, a position she had never formally held, according to the state register, being a mere manager for logistics at a subsidiary. But witnesses claimed Morris had held the CEO post informally for a number of years, until a still-unexplained acid attack in 2010 had necessitated extensive plastic surgery. The judge ruled that Morris was thus entitled to reinstatement and legalisation of the position she claimed to have held as CEO - thus bestowing her full legal rights to run the mall, whatever the opinion of the shareholders.

But luck could be on the side of London & Regional. Ukraine, facing growing funding problems that only the International Monetary Fund can solve, is desperate to get back on board with the West and to sign an Association Agreement with the EU, a first step in the long march to joining the bloc, at the November 28-29 summit in Vilnius. To this end, the administration of President Viktor Yanukovych have rammed through parliament a raft of reform legislation demanded by the EU in lightening quick time, and are even contemplating releasing from prison the ailing opposition leader and former prime minister Yulia Tymoshenko, as demanded by Europe.

This all makes Ukraine unusually pliable at the moment, and the British embassy in Kyiv acted fast to take up London & Regional's cause. According to bne sources, it was made clear to the Ukrainian government that the seizure of the Globus mall had to be reversed quickly for progress with the EU to continue. On October 3, London & Regional announced that Yanukovych's chief aide for the court system, Andriy Portnov, had initiated the dismissal of the judge who had "reinstated" Morris as CEO and enabled her "coup" to take place. The High Council of Justice, on which Portnov sits and which oversees the court system, confirmed this days later. Then on October 15, an appeal court overturned the initial decision, and on October 17 London & Regional got their management back in, with Morris ushered out the door.

Raids repulsed

On the same day that the UK company got its Kyiv mall back from the corporate raiders, courts restored to Ireland another landmark Kyiv shopping mall, Ukraina, after it had been seized by raiders in 2011-2012. The mall had been acquired by Ireland's now-disgraced property investor Sean Quinn during the credit bubble for around $150m. After Quinn's crisis-induced bankruptcy in 2011, ownership of the mall should have shifted to the Irish state itself, in the form of the Irish Bank Resolution Corporation (IBRC).

But a hostile takeover of the Ukraina mall unfolded in late 2011. Unseen forces not only secured a court-imposed change in management of the mall, but also the recognition by courts of a $45m debt claim against the mall, which by bankrupting the mall could induce a final change in ownership. But in 2013 Ireland got tough on Ukraine, with Irish Deputy PM Eamon Gilmore telling Ukraine's prime minister, Mykola Azarov, the mall "belonged to the Irish people". In July, a Kyiv court ruled against ordering the collection of the $45m debt. The decision on October 17 by a court of appeal finalised this decision, and thus the repulsion of the raid - with the exception of $15m allegedly stolen from the mall by the raiders' interim CEO, according to the Irish side.

And in another surprise October victory for European investors, a Kyiv court ruled in favour of global airport services giant Swissport, a Swiss company with a French investor. Swissport had established a joint venture with Ukraine International Airlines that had become market leader in baggage handling in Ukraine - until in 2012 Ukraine courts found in favour of Ukraine International Airlines' sudden claim to sole ownership of the company. Intensive lobbying of Ukraine's government by Swiss, French and EU officials prompted courts to reverse the decision, according to Swissport.

Window dressing?

The question is: do the reversals of these high-profile raids point to an improvement in the investment climate accompanying Ukraine's turn to European values and the signing of the free trade and association deal with the EU? Or are they - literally - mere shop-window dressing?

Pointing to the latter, is that the raid reversals have been masterminded by the powerful but inexperienced first deputy prime minister, Serhiy Arbuzov, in his capacity as chairman of the hastily convened "Government Commission on Illegal Company Takeovers". The 37-year old Arbuzov, a close friend and business associate of President Viktor Yanukovych and sons, largely single-handedly runs the economy. Arbuzov is pulling out all the stops to avoid a politically disastrous devaluation of the hryvnia before presidential elections in early 2015 - which analysts view as mission impossible without financial support from the West.

Other October events point to the rule-of-law malaise continuing. In early October, a newly appointed justice minister replaced the heads of state bodies that run all crucial state registries of property rights, including the company register, registers of permits and licences, real estate, inheritance and citzens' personal data. Some registers were down for a number of days, as a behind-the-scenes conflict raged. Civil servants alleged in an open letter that one of the new appointees had allowed unauthorised individuals illegal access to the registers to make copies of the data. The justice minister hit back, saying that the fired heads had outsourced IT administration of the registers to private companies, which had abused their privileged access to the data. The episode raises questions over the integrity of crucial property rights data in Ukraine. Manipulation of such data is often a starting point for raider attacks.

Ironically, given that the raider attacks reversed in October were all the result of dodgy court decisions, well-meaning EU-compliant reform legislation, enacted at lightening speed by Ukraine's parliament in October, aims to strengthen the independence of the notoriously corrupt court and prosecution system - by abolishing terms of office for judges and the prosecutor general, allowing them to serve indefinitely instead of the current five-year terms. The reforms, which will require changes to the constitution, have raised fears that no leverage will remain to rein in judicial corruption.

The high-profile return of assets is a welcome sign, but the jury is still out on whether anything fundamental has changed in Ukraine's appalling record on respecting property rights.