Palts defeats Russian army in Crimea

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Former Tallinn mayor, businessman Tõnis Palts is defending real estate he owns on the Black Sea shore in Crimea and recently defeated the Russian defense ministry in court. The dispute is set to move to a higher instance court next.

The Sevastopol court of arbitration ruled in favor of Palts' Kaskad Investments on March 7, with the text of the ruling published a week later. „The main argument [against the Russian defense ministry] was that the limitation period for filing a claim had expired,“ Palts told Postimees yesterday. „The motive was that actual violations were nonexistent. While it was possible to find some formal nuances, the case was closed on grounds of expiration of the deadline.“

Palts admitted that the ruling came as a surprise: „As far as we know, it is the first time anyone has achieved a victory over the Russian armed forces in Sevastopol's first instance court.“

Palts is fighting the court battle over a 20-hectare piece of real estate in Balaklava, near the Crimean military port of Sevastopol. Palts bought the former military campus of nearly 30 buildings from the Ukrainian defense ministry for ten million hryvnia (€1.65 million at the time) in 2006. The site was a Soviet underground missile complex (known as B-42) meant to protect the fleet based in Sevastopol. The complex was left idle after the collapse of the Soviet Union. Palts' company bought the land under and around the buildings from the town of Sevastopol.

Army wants the campus back

Palts first ran into problems when Russia annexed Crimea in 2014. His property came to the attention of the almighty Russian defense ministry that wants to reclaim all territories that used to belong to the Soviet ministry of defense. The Crimean media reports the ministry wants to retrieve 275 former military campuses.

The ministry sued Palts' company in January of last year, claiming that Kaskad Investments had purchased the territory from Ukraine's defense ministry illegally. „The Russian ministry of defense demanded our right of ownership be found null and void,“ Palts said. „Simply by fishing for mistakes in the privatization contract from that time.“

Palts admitted that because of past (and current – J. P.) ambiguity in Ukrainian law it is generally possible to find holes in contracts of the sort. He claimed, however, that the contract between Kaskad Investments and the Ukrainian defense ministry signed 11 years ago was drawn up impeccably.

„Our transaction of purchase and sale was near perfection for its time,“ Palts said. „Everyone knows that most transactions were carried out anyhow and had corrupt roots at the time. Ukrainian oligarchs blatantly robbed their country, and sometimes I feel Russia was right to take pieces of it away.“

The Russian ministry is almost certain to appeal the ruling, which is why it is too soon to declare Kaskad Investments the winner. „Russian law basically requires these things to be appealed to take away the possibility of pursuing the matter again for a period of eight years,“ Palts said.

Plot registered to Palts' company

Palts said that one very important aspect of the case is the fact that the land under the object in question has been registered to Kaskad Investments in Russia's land register. „The problem currently concerns ruins above ground. A pointless matter that is keeping us from moving forward,“ he said.

Palts spent $10 million on land for what will be a resort bordering a nature preserve. The detailed plan was completed in 2010, and Palts started looking for investors from Europe and Asia to contribute, along with himself, around $200 million to the project called Balaklava Blue. In his presentation, Palts promises to build the best wellness resort in the Black Sea region. The businessman said a year ago that he puts the value of his real estate and detailed plan in Crimea at $17 million.

The dispute with the ministry has made investors, who have already placed $2 million in the project, nervous. „Investors are very tired of this matter,“ Palts said. „Of course they will ask for their money back. We have extended debt instruments until now. However, everyone understands we're dealing with one of the best pieces of land on the southern coast of Crimea, and what has befallen us is historical misfortune. Even though it is already clear land prices are expected to skyrocket next year due to the completion of the bridge.“

Palts' reference concerns a bridge from mainland Russia to the Crimean peninsula over the strait of Kerch, expected to be completed by the end of next year. Right now the only land connection to Crimea leads through Ukraine but remains virtually blocked.

The B-42 complex, considered by Palts to be the best place for the resort, remains quiet. „Our guards are keeping an eye on it,“ Palts said.

A Reuters correspondent who visited Crimea last fall wrote that the coast of Balaklava already has signs designating it as a restricted area of the Russian defense ministry. The report concerned a former strategic object known as „Object 100“ or „Sotka“ tourists could visit for $50 when the area was under Ukrainian control but now allegedly hosts a modern anti-ship missile complex, „It is a twin plot of the one we have located a few kilometers away,“ Palts knew.