In July 2022, we filed a claim against Wowwo with the competent arbitration court (the Court of Arbitration of the Association of Latvian Commercial Banks) to recover amounts owed to investors. As the court proceedings have completed, we are now able to share an update with you.
The arbitration court’s decision
In February 2023 the arbitration court announced its decision: The court decided that the case should be reviewed in a general court, and that the arbitration court should not pass a ruling with regards to the funds Wowwo owes to investors. This means the court has neither approved nor denied the claim as such. Mintos has all rights to litigate further in a regular court. While we respect the view of the arbitration court, we’re disappointed by this outcome, as it does not match our and our lawyers’ interpretation of our legal claim.
Why we brought the case to the arbitration court
When bringing claims against a lending company to court, we do so under the cooperation contract concluded with the company. The material law applicable to Mintos’ cooperation contract with Wowwo is the law of the Republic of Latvia. According to the jurisdiction clause in the cooperation contract, when filing a claim, the claimant can choose to do so either with a regular court in Latvia, with the arbitration court mentioned in the agreement (the Court of Arbitration of the Association of Latvian Commercial Banks), or with a court of the country where the respondent is based.
We chose the arbitration court for two main reasons: First, proceedings are typically much faster compared to general courts. Second, it’s easier to recognize and enforce an arbitral award in Turkey, as both Latvia and Turkey are parties to the New York Arbitration Convention. Hence, a positive outcome in the arbitration court would have offered the fastest resolution in favor of investors.
Our view on Wowwo’s actions in court
Wowwo’s line of arguments, together with other procedural tactics used by Wowwo to protract the case over several hearings that were several weeks apart, lead us to believe that Wowwo’s strategy was to drag out the proceedings as much as possible and to push back the court’s decision.
In our view, Wowwo’s strategy to argue how to pay as little as possible to investors on the grounds of arguments that appear opportunistic is questionable. As we understood, Wowwo even tried to claim that there was no evidence that it had received any funds from investors on Mintos. In another instance, we understood that Wowwo could agree on which loans were funded, but was suggesting to pay an amount that doesn’t match the amount due to investors according to the concluded agreements. For Mintos such an approach would not be acceptable, as it would only cover about 25% of Wowwo’s debt to investors.
By refusing to settle its debt (including interest) to investors, Wowwo continues to use investors’ money without any legitimate basis. The current statutory interest that can be applied once the claim has been approved in court in Latvia is 8% per annum, which is very likely less than the interest rate at which Wowwo could attract new funding today. This leads us to believe Wowwo is abusing the situation for its own economic advantage.
Although we’re disappointed by the arbitration court’s decision, these proceedings allowed us to gather additional evidence, and we now better understand Wowwo’s strategy. This should help us with further litigation. The debt of Wowwo towards the investors remains outstanding. We’re now reviewing the details of the decision and assessing available options in state courts. We’ll update you once we have new information.