Olympic cashes in Ukrainian chips

  • 2009-07-15
  • By Ashley Brettell

The Estonian casino operator was forced to shut down its Ukrainian branches.

TALLINN - Olympic Entertainment Group AS (OEG), one of Estonia's most successful companies, is ending its disastrous foray into the Ukrainian market.
OEG has been involved in a running dispute with political leaders in Ukraine. On the May 15 the Ukrainian authorities withdrew gaming licenses from all gaming companies whilst they investigated a fire that occurred in the premises of an OEG competitor.

An industry insider commented that "there was more to the temporary withdrawal of licenses from casino's in Ukraine than was immediately obvious." 
"It was not credible that the licenses had been withdrawn for 3 months as a result of a fire at a different company's premises," he said.
The expert said there was a wider political issue, related to who had the authority to distribute these licenses to the very profitable gaming industry. 
The original license suspension was issued by the Ukrainian Minister of Finance in May.  The ministry stated that licenses of all casino enterprises operating in Ukraine were suspended in order to carry out inspections.

The suspension by the Minister of Finance was due to a fire that resulted in casualties at a gaming facility located in Dnepropetrovsk.
OEG contended that the suspension of their casino license was illegal and disproportionate. According to OEG, their Ukrainian casinos did not violate any safety requirements.
The Ukrainian parliament then passed a law suspending the activities of all the gaming enterprises in Ukraine. This suspension was for three months and the explanation was that the Ukrainian government wanted to develop a new Gambling Act and this would take three months to complete.
OEG told the Tallinn stock exchange that the company believed the parliament's decision was directly related to the increased political struggle before recent elections.

There have recently been several cases where the orders of the government that regulate the gaming sector have been annulled by the president the next day, and they had hoped this would be repeated.
This time the suspension was upheld and as a result OEG temporarily closed its facilities and their employees were sent on holiday without pay.
OEG claimed that the suspension issued by the Ministry of Finance was illegal. They also alleged that the Ministry of Finance's decree was in direct conflict with other existing Ukraine laws.
OEG's competitors and the Association of Gambling Operators agreed with the illegality of the suspension.

The decree issued by the Ministry of Finance expired on June 7 after the President of Ukraine refused to sign the law on June 4.  He stated that the suspension approved by the parliament was done with too much haste.
On that basis OEG reopened all its Ukrainian casinos at midnight on June 8. However, the Ukraine parliament then voted against the president's veto.

The law suspended all casino operations activities and canceled all licenses issued to casino operators. Parliament left in force the order for the government to prepare the new Law on Gaming activities, which would relocate all casino operations into special zones within three months.
OEG announced to the Tallinn stock market, that due to the Ukrainian gaming suspension law that came into effect on June 25, all their casino operations in Ukraine had now ceased. 
OEG has now initiated the liquidation process of its subsidiaries, Olympic Casino Ukraine TOV, Ukraine Leisure Company and Eldorado Leisure Company.

OEG is planning to demand investment compensation from the Ukrainian state based on investments propitiation and mutual protection agreements signed between the Estonian and Ukrainian governments.
OEG also threatened to turn to the European Commission 's alongside other casino companies operating in Ukraine 's to seek compensation.

Losses from the liquidation of the units are under evaluation, the company said in a regulatory statement. Olympic formerly got about 12 percent of its revenue from Ukraine.