Swedish court fines company for Ukrainian timber purchases that flouted EUTR

Primpanel fined SEK 360,000 ($43,000) last month for buying Ukrainian timber in violation of the European Union Timber Regulation in 2019 and 2020. The company had continued to import the timber in direct violation of an official order, and sought to hoodwink Swedish authorities by routing the fresh shipments via subsidiaries and intermediaries.

This blog can be read in Ukrainian here.

In 2019, an Earthsight investigation revealed that Swedish and Italian firms had been importing timber from a Ukrainian company connected to Viktor Sivets, who was known to be the primary architect of the present-day system of corruption in Ukraine’s forestry agency. Sivets, who led that agency from 2011 to 2014 and his wife, Marina Zhuravleva, are at the centre of an ongoing £30 million criminal case for allegedly accepting bribes from foreign companies in exchange for access to timber.

Sivets was reportedly hand-picked for the top job at the SAFR by the kleptocratic Ukrainian President Yanukovych – who was deposed in 2014 - and the two were known to be close associates and tennis and hunting buddies. He is alleged by prosecutors to have orchestrated a system of kickbacks, where foreign companies were asked to pay a ‘’marketing fee’’ to companies controlled by him and his wife in return for preferential access to timber. A subsidiary of one of the largest timber companies in the world, Austrian firm Holzindustrie Schweighofer is also caught up in the scandal and is named by prosecutors as one of the companies that allegedly bribed Sivets.

Earthsight’s 2019 investigation detailed how for at least three years since the criminal case against the couple was opened - the largest corruption case involving Ukrainian forestry officials to date - four Italian companies, Co Mo Las, Sangiorgi Legnami, Basso Legnami and LP Wood SRL, and one Swedish firm, Primpanel AB, had received shipments of wood panels from firms controlled by the couple, with a total value of $500,000. 

Following the publication of Earthsight’s story in June 2019, the Swedish Forestry Agency (which functions as the Competent Authority for the EUTR in Sweden) imposed a ban in September 2019 which forbade Primpanel from placing any timber covered by the EUTR on the EU market (whether from Ukraine or elsewhere) until such a time as it had an appropriate due diligence system in place.

The company was informed of the ban on 1 October 2019. But instead of complying, it chose to try to hoodwink the Swedish authorities.

Between October 2019 and June 2020, the company received nine shipments from Ukraine in contravention of the ban. The company attempted to disguise its involvement by changing the recipient name for some of the shipments from itself to a subsidiary.  

Primpanel questioned the Swedish Forestry Agency’s handling of the case and stated that it should have been approached to "find a solution" first. It also claimed that it had not imported anything from outside the EU since the ban in 2019 and that customs records that indicated the contrary were incorrect.

In May 2021, however, an administrative court in Jonkoping ruled in favour of the Swedish Government in the case and fined Primpanel a total of SEK 360,000 ($43,000).

An official of the Swedish competent authority which brought the case told Earthsight: “The operator continued to import during 2020, despite [the] prohibition. They also shifted imports first to a daughter company, that lacked a due diligence system as well, then tried to use a transport company as consignee. The ban had said breaches would be punished with fines of 40,000 SEK per case, thus a total fine of 360 000 SEK has now been decided by the administrative court who sided in our favour.”

The fines only relate to the period up to June 2020, but Earthsight has obtained Ukrainian export records indicating that Primpanel was continuing to flout the ban at least as recently as January this year, when the records indicate it received a shipment of 135kg of wooden boards from a Ukrainian company. Later records are not yet available. It seems the court’s decision may not be the end of this saga. Earthsight has shared its findings with the Swedish authorities. 

The reaction of the competent authority authorities stands in apparently stark contrast to their counterparts in Italy. Though four of the five firms named by Earthsight in our report are Italian, we are not aware of any action having been taken there. Despite repeated attempts we have been unable to reach the Italian authorities for comment.