Ukraine wants to reach an agreement with Mittal Steel Company

The State Property Fund of Ukraine (FDMU) and the purchaser of Kryvorizhstal are preparing an additional agreement to remove all inconsistencies. The FDMU commission set up to examine the results verifying the conditions of the agreement to purchase or sell Kryvorizhstal shares has considered the objections of the Mittal Steel Germany GmbX Company against the negative conclusions of the inspectors and ruled that the FDMU and Mittal Steel should conclude an agreement by the end of November, aimed at clarifying those clauses in the contract that are being interpreted differently by the two sides.

The commission’s decision refers to the six clauses whose non-implementation has been acknowledged by the FDMU. At the same time, the State Property Fund of Ukraine points out that its verification revealed a total of eight clauses that are not being implemented.

The commission questioning the Oct. 24 verification results came to a final conclusion about the non-implementation of two clauses: bonus payments based on work results, equal to an average month’s salary (only 75 percent of the average wage level or average month’s salary has been issued), and the order of allocating profits according to the results of financial-economical activity in 2005. If the investor does not implement these two clauses, the FDMU will resolve this question in the courts.

These are the six controversial points. The purchase-sale contract was supposed to maintain the number of employees, current as of July 1, 2005, for five years from the date of the purchase-sale agreement (57,159 employees as of July 1, 2005. In fact, 55,531 people were working in the company on Aug. 1, 2006).

The volumes of financing the company’s social sphere, according to the contract, should not have been lower than the level reached by the contract’s signing date. The results of the verification have revealed that the targeted sums have not been spent on major repairs of the sanatorium-dispensary and the medical unit during the first seven months of 2006.

The company’s expenditures on improving the employees’ living conditions should not have been less than 0.5 percent of the sum of completed production, as the contract stated. The verification indicates that these expenses were 0.43 percent during the first seven months of 2006.

Labor protection expenditures also did not meet the conditions of the contract. They should have been not less than 0.6 percent of the sum of completed production. In fact, they were 0.3 percent for the first seven months of 2006, according to the FDMU’s information.

The contract also states that the construction of housing units would be continued and that the company employees who are on the housing register would be housed free of charge. This demand was totally ignored at the time of the verification.

The same can be said about the contract’s clauses obliging the company to implement the full collective agreement and conclude collective contracts for the next periods, taking into account the norms and principles of the Branch Agreement of the Mining- Metallurgy Complexes of Ukraine and the norms and social guaranties of the previous collective agreement.

As the FDMU reported, it sent letters to the economy, finance, and labor and social policy ministries as well as the State Statistics Committee with a request to provide an explanation and proof of the terms and definitions spelled out in the agreement by Nov. 10.

The State Property Fund of Ukraine is now drafting an agreement with the Mittal Steel Company. If a coordinated decision concerning the interpretation of the agreement’s clauses is not reached within the given time- frame, the FDMU will appeal to the courts to settle all the contradictory questions.

To this one can add a single question concerning the responsibility of FDMU officials, who at one time inserted formulations into the agreement, especially those concerning the profit allocation for 2005, which also need to be redefined by the courts. Has corruption become part of this case?