Bondar Kateryna. Consideration of сases involving Ukraine by arbitration tribunals of the International Centre for Settlement of Investment Disputes
International Centre for Settlement of Investment Disputes (hereinafter – ICSID) was established by the Washington Convention on the Settlement of Investment Disputes between States and the Nationals of Other States (hereinafter – the ICSID Convention). 159 states signed and 150 states including Ukraine ratified the ICSID Convention. Today ICSID mechanism is often used for resolution of disputes between foreign investors and host states. The vast majority of approx. 500 ICSID cases were considered in the last 15–20 years. 24 % of all reported cases concern Eastern Europe and Central Asia.
Statistics and practice of consideration of cases involving Ukraine are analyzed in the article. Ukraine was respondent in ten ICSID cases. Five of these cases were resolved in favor of Ukraine (Generation Ukraine, Tokios Tokeles, Bosh International and GEA Group), three – in favor of the applicant, two – settled otherwise. In particular, the first case Lemire was settled without compensation, and in 2006 the proceedings in Western NIS Enterprise Fund were terminated by the parties’ agreement. Two cases against Ukraine (Krederi Ltd; City-State NV, Praktyka Asset Management Company LLC, Crystal-Invest LLC and Prodiz LLC) are pending.
Particular attention is drawn to ICSID cases against Ukraine that had influenced the development of international investment law and arbitration. Several decisions formulated important provisions and were mentioned in later decisions of ICSID tribunals, scientific literature and teaching courses. The article examines the awards rendered by the ICSID tribunals in cases where Ukraine was the respondent, main conclusions and importance of these decisions.
Joseph Charles II Lemir against Ukraine was the first case where Ukraine’s responsibility for violation of foreign investor’s rights in accordance with the international agreement on the promotion and protection of investments was established. In this case especially interesting was the existence of jurisdiction of the arbitral tribunal, namely ratione voluntatis – parties’agreement to submit the dispute to ICSID. Tribunal rejected both respondent’s objections to jurisdiction.
In Generation Ukraine the Tribunal dismissed all investor’s claims and found no violation of Ukraine-US BIT. Although the Tribunal found that investor’s stake in the company Generation was an investment within the meaning of Article I of the BIT, the tribunal concluded that the ownership of the company was not affected by Ukraine’s behavior. It found that the refusal of local authorities to provide revised land leases had no intent to deprive investor of his right to start construction, therefore no indirect expropriation took place. The award is also interesting in terms of the distribution of arbitration costs.
In Tokios Tokeles the question of the jurisdiction of the tribunal was the most interesting.
Decision has demonstrated that the arbitral tribunals strictly apply the nationality criteria set out in international investment agreements. The tribunal held that the plaintiff was an investor within the meaning of Lithuania-Ukraine BIT as BIT uses the criterion of incorporation. It held that the control test was not applicable because there was no corresponding provision in BIT and provision on foreign control in art. 25 ICSID may be applied only to expand the possible scope and application of the Convention and not to restrict it.
In Global Trading Resource and Globex International v. Ukraine the tribunal followed an objective approach to the definition of investment (the ICSID Convention contains specific investment concept that is comprised of certain characteristics) and dismissed the case under Rule 41(5) based on the preliminary objection of lack of jurisdiction by indicating that salepurchase contracts were purely commercial transactions and the right to request the money is not an investment. This case was the first in the history of the ICSID that was dismissed under Rule 41(5).
Review of cases shows that Ukraine’s experience in investment arbitration is significant and the use of investment arbitration provides not only protection of investors’ rights but also the protection of host states from unfounded and exaggerated investors’ claims.
Key words: investment arbitration, investment dispute, arbitral award, jurisdiction, investment.