06 July 2018

King & Wood Mallesons scores a major victory for Ukraine in another high stakes investor-state arbitration

KWM arbitration team has secured a second major victory for Ukraine in as many years as an ICSID tribunal unanimously rejected all claims made by a British investor, Krederi Ltd. The value of the claims was in excess of USD 137 million. 

The investor brought the claims in 2014 under the bilateral investment protection treaty between Ukraine and the UK (“BIT”), alleging expropriation of a land plot in the historic center of Ukraine’s capital city Kyiv (ICSID case No. ARB/14/17). 

The Ukrainian press connected the investor and other companies involved in the acquisition of land with Viacheslav Suprunenko, the son in law of the former mayor of Kiev, Leonid Chernovetski. The sale of the previously public land to the companies linked to the investor was authorised by Kyiv City Council in 2007 when Mr Chernovetski served as Kyiv’s mayor and Mr Suprunenko as a member of city Council.  Although the land was originally granted for the construction of a museum, the museum was never built. After Mr Chernovetski left his post, the authorities challenged the grant of the land plot in the Ukrainian courts and returned it to public ownership.

The investor then alleged expropriation of the land plot by means of a series of court judgments annulling contracts for the acquisition of the land and filed the ICSID claim. The investor complained that it was deprived of rights allowing it to develop a hotel, shopping centre and apartment complex. The investor also claimed that the court judgments violated the Ukraine-UK BIT obligations to provide fair and equitable treatment and full protection and security to foreign investors. 

The ICSID tribunal, constituted of President August Reinisch (replacing Albert Jan van den Berg, following his resignation in April 2017), Markus Wirth and Gavan Griffith roundly rejected all claims and found for Ukraine. 

The tribunal declared the proceeding closed on 26 June 2018.

The KWM team was led by partners Andrei Yakovlev (Dubai) and Dorothy Murray with associates Alexis Namdar and Edmund Northcott (London).

KWM’s arbitration team recently scored a series other major victories in other high stakes investor-state arbitrations. These include: 

  • the dismissal of over 95% of a US $270 million claim against Ukraine by the UK petroleum company JKX Oil & Gas Plc in connection with an increase by Ukraine of oil and gas production taxes from 5% to up to 65%; 
  • annulling an arbitral award ordering Kyrgyz Republic to pay US $16 million in compensation for alleged expropriation of the bank, on the grounds that the bank was involved in money laundering;
  • achieving the withdrawal by the investor of a US $450 million claim against the Kyrgyz Republic in connection with an alleged expropriation of another bank; 
  • winning a multilateral investment treaty interpretation case before the CIS Economic Court ranked by Global Arbitration Review among the 10 ‘most important decisions of the year’ globally.

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