UPDATE 1-Ukraine court rules in favour of government in PrivatBank case

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KYIV, June 15 (Reuters) - Ukraine’s Supreme Court on Monday ruled in favour of the government in a major case surrounding the country’s largest lender, PrivatBank, which means the government does not have to repay more than $37 million to two businessmen brothers.

The government’s handling of fallout from the 2016 nationalisation of PrivatBank is seen as a litmus test for President Volodymyr Zelenskiy’s reform agenda and willingness to tackle deep-rooted vested interests.

The victory comes days after the government secured a new $5 billion deal from the International Monetary Fund that was partly contingent on its handling of the PrivatBank issue.

The Supreme Court reversed earlier decisions by lower courts ordering the state to repay more than 1 billion hryvnias ($37 million) to businessmen brothers Hryhoriy and Ihor Surkis.

The central bank had recognised the Surkis brothers as related parties to PrivatBank’s former owner Ihor Kolomoisky and included money from their deposits in PrivatBank in a bail-in.

The Surkis brothers challenged that decision in a legal battle that ended up in the Supreme Court. They did not immediately comment on the ruling.

Ukraine’s central bank welcomed Monday’s verdict and said its decision to declare the Surkis family as related to PrivatBank remained in force.

PrivatBank was nationalised after the central bank said shady lending practices had pushed the lender towards insolvency. Kolomoisky, one of Ukraine’s wealthiest men, denies any wrongdoing and has fought ever since to reverse the move.

The central bank and PrivatBank had worried that a victory for the Surkis brothers in Monday’s case would create a precedent and trigger other claims.

Zelenskiy, who rose to fame as an actor on a TV channel owned by Kolomoisky, has denied that he would serve the businessman’s interests since coming to power last year. (Editing by Matthias Williams. Editing by Jane Merriman)