The company in the orbit of “KSM-Group” lost the first round of court against Kyiv City State Administration for 954 million hryvnias

The company in the orbit of “KSM-Group” lost the first round of court against Kyiv City State Administration for 954 million hryvnias

LLC “Hydroinzh-Bud,” which is part of the orbit of the scandal-ridden developer “KSM-Group,” lost the first round of a legal dispute over recovering 954,3 million hryvnias from Kyiv’s budget. This concerns funds that the company paid about six years ago as a contribution for the construction of part of the Crystal Springs residential complex and spent on infrastructure construction near it, which is currently used by the “energy” companies (plus interest, inflation losses, etc.). The LLC failed to convince the court that, at that time, the law no longer required concluding participation contribution agreements and that it was effectively “forced” to do so. In addition, the company could not document the amount spent on building the utility networks or prove that it transferred or intends to transfer them to municipal ownership. Still, it’s too early to close this chapter — “Hydroinzh-Bud” has already filed an appeal against the unfavorable court decision.

As KV has learned, the Northern Commercial Court of Appeal is scheduled to consider LLC “Hydroinzh-Bud”’s appeal in case 910/7132/25 in the near future.

The company is challenging the Commercial Court of Kyiv’s decision of 15 July 2026, which denied its claims to invalidate two participation contribution agreements for the creation and development of the city’s social and engineering-transport infrastructure, concluded with the Department of Economics and Investments of the Kyiv City State Administration (KSCA) in 2020, and to recover 954,3 million hryvnias from the aforementioned department.

What the dispute is about

On 27 February and 21 September 2020, LLC “Hydroinzh-Bud” and the Department of Economics and Investments of the KSCA concluded two participation contribution agreements for the creation and development of Kyiv’s social and engineering-transport infrastructure. Under these agreements, the company undertook to pay to the city budget funds for “the construction of residential buildings with integrated public premises on Metrologichna Street” — referring to the Crystal Springs residential complex (developer – “KSM-Group”), for which LLC “Hydroinzh-Bud” acted as the customer and which was built on four plots totaling 31,77 hectares, located in the use of the National Academy of Sciences of Ukraine (which construction phases of the complex these plots relate to is not currently available in open sources — KV). Under the first agreement, the company was to pay 14 million hryvnias to the city treasury, and under the second — 17,5 million. The city authorities were theoretically supposed to allocate these funds to bring utilities to the complex, repair and maintain roads, etc.

Subsequently, it appears that LLC “Hydroinzh-Bud” paid these funds to the city treasury, but the company has now decided to recover them and other expenses it incurred. In connection with this, the above-mentioned suit was filed with the city commercial court in the first half of 2025.

The company stated that neither it nor the respondents “acted freely, and concluding such participation contribution agreements did not reflect their will” — claiming that the then-current legislation only required it. The issue is that in September 2019 amendments to the investment activity law adopted by the Verkhovna Rada stipulated that developers would no longer have to conclude participation contribution agreements with local authorities, and only agreements concluded before 1 January 2020 would remain valid. In other words, after that date, it was not necessary to enter into or perform new agreements. At the same time, LLC “Hydroinzh-Bud” emphasized that it had to sign such an agreement with the Department of Economics and Investments of the KSCA because, at that time, the aforementioned changes had not been fully reconciled with other legislative acts — allegedly, without participation contribution agreements it would have been impossible to commission construction objects.

“Hydroinzh-Bud” also stressed that during its residential development on the territory in question, heat, water, gas and electricity networks, as well as heating and sewer engineering networks, were constructed on the company’s order, even beyond the developer’s land plot. Currently, PJSC Kyivgaz, PJSC AK “Kyivvodokanal,” the municipal enterprise “Kyivteploenergo” and PJSC “DTEK Kyiv Electric Networks” are using facilities built with the customer’s funds for the Crystal Springs residential complex. Thus, according to LLC “Hydroinzh-Bud”’s management, the company should be released from paying the participation contribution and, moreover, reimbursed for expenses on networks built outside the development area.

Initially the company demanded recovery from the city budget of 622,3 million hryvnias. That amount included funds to be recovered as a result of invalidating the participation contribution agreements, as well as funds spent on building networks (162,6 million — principal debt, 131,9 million — inflation losses, 27,9 million — 3% per annum, and 268,1 million hryvnias in penalties). Later, LLC “Hydroinzh-Bud” filed a motion to increase its claims to about 954,3 million hryvnias — after the company recalculated how much it had spent on infrastructure construction and how much it may have lost in recent years due to the hryvnia’s “depreciation” and because these funds were held in the city council’s accounts (212,8 million — principal debt, 225,4 million — inflation losses, 44,5 million — 3% per annum, 436,7 million — penalties, and moreover for 31,7 million the court rulings in this case do not provide a “decryption”).

However, the city commercial court did not accept the plaintiff company’s arguments. Judge Oleksii Spychak noted that the mentioned legislative amendments in 2020 were not yet in force de jure. Therefore, in his view, LLC “Hydroinzh-Bud” in any case had to pay the participation contribution for the construction of the objects covered by the disputed agreements — whether those agreements had been concluded or not. For this reason, the judge concluded that the existence of the above-mentioned agreements in no way violated the plaintiff’s rights.

Regarding compensation for infrastructure objects built outside the plot, the court’s decision states that construction of engineering networks outside one’s own plot does indeed allow the developer to reduce the amount of the participation contribution by the estimated cost of those networks. However, such offsetting of costs or reimbursement for “other” objects does not occur automatically at the city’s discretion. For this, LLC “Hydroinzh-Bud” should have followed the required legal procedure and transferred the built objects to municipal ownership. In particular, it was necessary to sign an acceptance-transfer act for these infrastructure objects and undergo an audit of the volumes and cost of the performed works. And the auditor-confirmed amount excluding VAT could have served as the basis for reducing the participation contribution. Thus, the court emphasized that the right to compensation directly depends on the developer’s exact compliance with all legally prescribed steps, which in this specific case were not taken.

Kyiv lawyer and human rights defender Oleksandr Diadyuk, who is following the case, told KV that he considers the court’s verdict to be fair. Moreover — according to the expert, LLC “Hydroinzh-Bud” has no chance of winning this legal dispute precisely because of the statutory provisions, other court precedents and the lack of documentarily confirmed calculations.

“In my opinion, the court’s decision is lawful; moreover, there are corresponding conclusions of the Supreme Court, which [in the framework of another similar case] found that developers had an obligation to pay participation contributions for agreements concluded in 2020. [And regarding compensation for built networks] the court pointed out that the law clearly defines that a developer can receive funds only for those objects that are located outside their plot and if they are transferred to municipal ownership. ‘Hydroinzh-Bud’ did not provide any evidence that they transfer or intend to transfer those networks to municipal ownership. They also did not provide the relevant calculation of what was built, roughly speaking, for example, 500 meters of pipe: 200 meters on the plot and 300 — beyond it. And there were no calculations that the estimated cost of these networks amounts to a certain sum of hryvnias. In other words, they simply stated that their networks cost a certain amount,” emphasized Oleksandr Diadyuk.

Context

The Crystal Springs residential complex is one of the largest residential complexes in the capital, if not the largest — both in number of buildings and in area. Construction began one and a half decades ago, the first buildings were commissioned in 2013, the most recent buildings were commissioned in 2022, and several buildings are at various stages of completion (from design to finishing works). The entire complex will consist of over forty buildings (according to different sources — 43 or 45).

The complex occupies an area of more than 38,7 hectares. The users of the respective land plots are the National Academy of Sciences of Ukraine and the Shmalhausen Institute of Zoology subordinated to it (one plot of 1,1 hectares). The customers of the construction are three companies at once — the aforementioned LLC “Hydroinzh-Bud,” LLC “Interbud-TM” and LLC “Yug-proekt” (these companies are customers for construction on different plots, but in fact so far buildings have been erected only on orders from the first two LLCs). They were engaged for the works on various bases — including under agreements with the NAS of Ukraine, under which developers were to transfer certain percentages of residential areas to the academy.

Various scandals have repeatedly arisen around this development. For example, several years ago the KSCA tried in court to cancel the right to use one of the plots under this complex (cadastral number — 8000000000:79:122:0005, area 14,17 hectares) by the same LLCs “Hydroinzh-Bud” and “Interbud-TM.” The city administration argued to the court that only the KSCA has the right to dispose of state-owned plots in Kyiv, and not the NAS. However, the officials were unsuccessful, and in 2021 the court denied their claim.

What is known about the developer

According to the analytical system YouControl, the Kyiv LLC “Hydroinzh-Bud” was registered in June 2007. Its director is Svitlana Burkovska, and the founder and ultimate beneficiary is Kostiantyn Stadnichenko, who is registered in the city of Vasylkiv, Kyiv region.

YouControl attributes this company to the corporate group “KSM-Group” (developer of the Crystal Springs complex), which unites around sixty companies engaged in designing and building residential neighborhoods, infrastructure facilities, bridges, roads, etc. Key persons in this group are Arsenii and Serhii Kopystyry, Nataliia Vozna, and the aforementioned Olha and Tetiana Chernenko.

Open sources indicate that Arsenii Kopystyra is the son-in-law of Mykhailo Verbenksyi — colonel-general of militia, the current head of the State Scientific Research Institute of the Ministry of Internal Affairs (MIA) of Ukraine, former head of the Main Staff of the MIA (in 2005-2007 and 2014-2015 years) and former member of the Central Election Commission (2018). It is also known that Arsenii Kopystyra lectured at the Kyiv National Institute named after T. H. Shevchenko at least until 2020.

The figure of his brother Serhii is no less interesting. As KV reported, the latter is one of the accused in a case concerning an offer of an improper advantage to the now-former Minister of Infrastructure, Oleksandr Kubrakov (who was also Deputy Prime Minister for Ukraine’s Restoration), in exchange for “help” with developing land on Tyraspilska Street, 43 in Kyiv.

The National Anti-Corruption Bureau (NABU) has already established that Serhii Kopystyra, who called himself the actual owner of LLC “Citygazservice” (the potential developer of that land), asked the said official in exchange for apartments not only to keep the contract for construction of the residential complex at that address from being terminated, but also to provide some other “services.” In particular, Kopystyra allegedly hoped that the minister would help him transfer neighboring land plots for development, allocate state budget funds for modernizing electrical networks on them, obtain MUOs for project design that the KSCA’s relevant department refused to grant, etc. At the same time, Kubrakov was allegedly promised an increase in the size of the bribe — in addition to 15 apartments that had already been “re-registered” to his “trusted person.”

As KV has repeatedly reported, developers in the “KSM-Group” orbit are actively developing land in Kyiv that is in the use of the NAS of Ukraine and structures subordinate to the academy. In particular, this concerns the territory in the Feofaniya area (Holosiivskyi district of the capital) — where 4 of 5 residential complexes whose declared developer is “KSM-Group” are currently under construction.

The implementation of these developers’ projects is accompanied by scandals, court cases and public protests. Among the most high-profile incidents — in January 2022 companies close to “KSM-Group” demolished a dormitory of the NAS of Ukraine on Metrologichna Street (Holosiivskyi district) to build multi-storey buildings, while people still lived there. During one of the protests against this development there was a violent clash between local residents and some people public activists called “titushky”.

But the biggest recent scandals surround the planned development of a plot of 5,68 hectares on Akademika Glushkov Avenue, 65 in the Holosiivskyi district of the capital. The user of this land is the Shmalhausen Institute of Zoology of the NAS of Ukraine, which in 2018 transferred this territory to LLC “Yug-Project” (a company in the orbit of “KSM-Group”) under an agreement. The city public opposes construction of a BFC here (in fact, these will likely be ordinary multi-storey residential buildings) — local residents and activists demand protective status for this land because it is effectively the forest massif of the “Teremky” tract. Law enforcement is also involved and has initiated several court suits aimed at preserving this territory.

In addition, law enforcement continues to investigate possible violations in attempts to build housing on a plot of 4,94 hectares on Vasylia Stepanchenka Street, 5 (Akademmistechko), which is used by one of the NAS structures and intended for development by a company in the “KSM-Group” orbit. Recently the State Bureau of Economic Security (SBES) reported suspicions of abuse of office against two academy officials (at least one of them a former official), as well as the former director of LLC “Navium-2008,” which obtained the right to “develop” this territory and an adjacent plot of 1,97 hectares. According to the investigation, these figures caused damages to the state in the amount of 2,3 million hryvnias. Detectives believe this happened through misuse of the land not according to its intended purpose — this territory is, in fact, an industrial zone. Earlier, the developer in question obtained a court decision allowing buildings up to 100 meters high on this land, although the KSCA initially “allowed” no more than 45 meters.

It also appears that “KSM-Group” has interests in a potential residential development of six plots totaling more than 6 hectares on Antonovycha Street, around which court disputes are currently ongoing. LLC “Invest-Project Budivnytstvo” is seeking to cancel a number of provisions of the urban planning conditions and restrictions (MUO) for designing this construction — that company insists it does not need to coordinate anything with heritage protection authorities (even though a historic house where the prominent scientist Yevhen Paton once lived is located there) and that buildings up to 100 meters can be erected there.

In turn, the General Prosecutor’s Office, through the courts, demands annulment of the “urban planning” documents, the return of this land to the state and termination of the contract for its development concluded between “Invest-Project Budivnytstvo” and the Electric Welding Institute of the NAS of Ukraine (apparently, the agreement was supposed to be approved by the Cabinet of Ministers). Recently law enforcement achieved an interim success — during this court dispute, the court prohibited construction works on the specified plots. As for “KSM-Group,” a company in that developer’s orbit is listed as the general contractor for works on that territory.

Meanwhile, Kyiv has previously seen multi-million lawsuits over dubious claims by various companies against the city authorities. For example, in May 2025 a nearly seven-year litigation over recovery from Kyiv’s budget of 24,46 million US dollars (671,5 million hryvnias) in favor of LLC “Kyiv Terminal” was concluded; that company in 2007 had received the opportunity to reconstruct Kharkivska Square under an investment agreement with the KSCA. The company demanded compensation for losses it allegedly incurred due to the contract’s termination in 2013. The ex-investor explained such sums, among other things, by saying he had to take a loan to perform the works and spent money on land management works that became “useless.”

However, although the KSCA initially assisted the ex-investor, the courts sided with the community. This was primarily because the owner of “Kyiv Terminal” — businessman Tamaz Somkhishvili — holds Russian citizenship, and given potential Ukrainian claims to recover funds from the aggressor country, it was decided that this company could be “let go.” It is also notable that Somkhishvili was previously accused of working for Russia’s defense complex.

The Department of Economics and Investments of the KSCA has been headed by Nataliia Melnyk since 16 February 2018. The activities of this department are currently personally overseen by Vitalii Klitschko.

The National Academy of Sciences of Ukraine has been headed by Anatolii Zahorodnii since October 2020. Previously, from 1962 the academy’s president was Yevhen Paton, who died in August 2020.

Author: Oleksandr Glazunov