This is the third ICSID case against Ukraine that has resulted in monetary compensation to foreign investors.
In the first case – Alpha Projektholding GmbH v Ukraine (ARB/07/16) – Ukraine was ordered to pay USD 2,979,232 with additional interest accruing from 1 July 2004 at a rate of 9.11% compounded annually. This award was successfully enforced in June 2011.
In the second – Joseph C. Lemire v Ukraine (ARB/06/18) – Ukraine was ordered to pay USD 8,717,850 in compensation for violation of the fair and equitable treatment standard defined in the USA-Ukraine BIT, USD 750,000 in compensation for the costs and expenses incurred in that arbitration and post-award interest of LIBOR + 2%. However, in July 2011 Ukraine filed a request for the institution of annulment proceedings. And on 14 February 2012 upon the respondent’s request the ad hoc Committee issued a decision to stay the enforcement of the award.
Apart from these cases, so far Ukraine has won four and settled two ICSID arbitrations, while one more case (ARB/08/11) is still pending. Having been a party to a total of 10 ICSID cases Ukraine remains the most popular ICSID respondent in the post-Soviet world. This said, Ukraine signed the ICSID Convention much later than other CIS countries: on 3 April 1998. The Convention entered into force for Ukraine on 7 July 2000, 30 days after the deposit of its ratification instrument.
Inmaris Perestroika Sailing Maritime Services GmbH and others v Ukraine
The claims against Ukraine in this arbitration (ICSID Case No. ARB/08/8) were brought on behalf of multiple companies in June 2008 (together, the “Inmaris Companies”): Inmaris Perestroika Sailing Maritime Services GmbH; Windjammer Beteiligungsgesellschaft mbH & Co. KG; Dr Sven-Holger Undritz as the insolvency administrator of Inmaris Windjammer Sailing GmbH i.L.; and Dr Sven-Holger Undritz as the insolvency administrator of Inmaris Windjammer Chartering GmbH i.L.
The dispute concerned the maritime operations of The Khersones, a windjammer sail training ship, owned by the Kerch Maritime Technological Institute (the “KMTI”), a Ukrainian state-owned education institution (now the Kerch State Maritime Technological University), which was controlled by the State Committee for Fishery of Ukraine, which in turn was controlled by the Ministry of Agricultural Policy of Ukraine.
Between 1991 and 2006 the KMTI entered into multiple contracts with various members of the Inmaris Companies in connection with the operation of The Khersones and financing of her renovation.
In particular, these contracts allowed the Inmaris Companies to operate The Khersones and to market sailing tours and other onboard events, while at the same time the KMTI could continue to provide training to cadets for Ukraine’s national fishery fleet.
The dispute arose in 2006 when the Minister of Agricultural Policy of Ukraine Oleksander Baranivskyy sent a government telegram prohibiting The Khersones “from leaving the borders of the territorial waters of Ukraine until clarification of the matters, as related to its joint operation”. This prevented The Khersones from making a scheduled departure from Kerch on 7 April 2006 for the 2006 summer sailing season. The Inmaris Companies never regained control of The Khersones after that date, and ultimately proceeded to file their claims in ICSID arbitration pursuant to the Germany-Ukraine BIT.
According to the information reported by the Ministry of Justice of Ukraine the Inmaris Companies claimed “over EUR 13 million, as well as compensation of the claimants’ moral damages and legal costs”.
On 30 April 2010 the tribunal rendered the decision on jurisdiction. The final award dated 1 March 2012 has not been published yet. According to information communicated by the Ministry of Justice of Ukraine the claimants were awarded EUR 3,034,388.34 in damages plus interest. The Ministry of Justice of Ukraine is currently considering the question of whether the award should be annulled under Article 52 of the ICSID Convention.
Olena Perepelynska, MCIArb
Counsel at Sayenko Kharenko in Kyiv, Ukraine