In recent years there has been a worldwide trend against arbitration conducted under the auspices of the International Centre for Settlement of Investment Disputes (ICSID). A number of Latin American countries have been critical of the ICSID Convention following a sequence of negative decisions. However, Ukraine has confirmed its commitment to the convention, which it ratified on March 16 2000.

On April 16 2012 President Viktor Yanukovych signed state budget legislation which, among other things, provides for the payment of compensation to foreign investors totalling nearly UAH100 million (approximately $12.46 million).(1) The payments relate to awards recently rendered by ICSID arbitral tribunals in Lemire v Ukraine(2) and Inmaris v Ukraine.(3)

Joseph Charles Lemire filed two ICSID claims against Ukraine. In his first claim Lemire, who had invested in the Ukrainian broadcaster Gala Radio, claimed that Ukraine had failed to meet its obligations of fair and equitable treatment in allocating radio frequencies. Based on the results of the arbitration, the parties reached a settlement agreement that was embodied in an award on September 18 2000.(4)

Lemire's second claim was that Ukraine had failed to perform its obligations under the settlement agreement that the parties had reached when considering his first claim. Ukraine was ordered to pay $8.7 million, plus post-award interest, as compensation for violating the United States-Ukraine Bilateral Investment Treaty, as well as $750,000 in arbitration costs. In July 2011 Ukraine initiated an annulment proceeding against the award, which is still pending.

In Inmaris v Ukraine a group of companies (including Inmaris Perestroika Sailing Maritime Services GmbH) sought arbitration under the Germany-Ukraine Bilateral Investment Treaty 1993. The claimants asserted that between 1991 and 1999 Kerch Maritime Technological Institute of Ukraine (KMTI), a Ukrainian state-owned educational institution, entered into a series of contracts with the Inmaris companies with respect to the Khersones, a training ship owned by KMTI. The Inmaris companies were to rebuild the Khersones and to meet the costs of training for sea cadets in exchange for the exclusive right to operate the Khersones and to market sailing tours and other onboard events.

On April 5 2006 the Ministry of Agricultural Policy, which controls KMTI, prohibited the Khersones from leaving Ukraine's territorial waters. This prohibited the Khersones from making its scheduled departures. As a result of the ministry's actions, the Inmaris companies lost control of the Khersones, which has been never restored. On March 1 2012 an ICSID tribunal found that Ukraine had violated the treaty and ordered the state to pay over €3 million, plus post-award interest. Ukraine has not filed for annulment, but the 120-day deadline for doing so has not yet expired.

The allocation of state budget expenditure for these two awards proves that Ukraine respects the authority of ICSID and confirms its willingness to honour its commitments under the convention.

Ukraine's history of ICSID arbitration has been relatively successful. Since joining the convention, Ukraine has had 10 claims lodged against it - the most of any former Soviet state:

  • Four disputes have had unfavourable outcomes for the claimants;(5)
  • Two cases - the first Lemire case and Western NIS Enterprise Fund v Ukraine(6) - were settled amicably;
  • Two awards have been rendered against Ukraine - Alpha Projektholding GmbH v Ukraine(7) and Inmaris v Ukraine; and
  • Two cases are still pending - Bosh International, Inc v Ukraine(8) and the second Lemire case.

For further information on this topic please contact Andrey Astapov or Alexander Frolov at Astapov Lawyers International Law Group by (+38 044 490 7001), fax (+38 044 490 7002) or email ([email protected] or [email protected]).


(1) Law on the Amendment to the Law on the State Budget 2012 (4647-VI), April 12 2012.

(2) ICSID Case ARB/06/18, award of March 28 2011.

(3) ICSID Case ARB/08/8, award of March 1 2012.

(4) ARB(AF)/98/1, September 18 2000.

(5) Global Trading Resource Corp v Ukraine (ARB/09/11, award of December 1 2010), in which the tribunal held that it had no jurisdiction to hear the case; and GEA Group Aktiengesellschaft v Ukraine (ARB/08/16, award of March 31 2011), Tokios Tokeles v Ukraine, (ARB/02/18, award of July 26 2007) and Generation Ukraine Inc v Ukraine (ARB/00/9, award of September 16 2003), in which Ukraine's jurisdictional objections were rejected, but the tribunal found no substantive violations of the respective treaties.

(6) ARB/04/2, award of June 1 2006, unpublished.

(7) ARB/07/16, award of November 8 2010.

(8) ARB/08/11.