Summary

Source: icsid.worldbank.org

AWARD

Members of the Tribunal
Professor Zachary Douglas KC, President
Mr. John Beechey CBE, Arbitrator
Sir Michael Wood KCMG KC, Arbitrator

TABLE OF CONTENTS

A INTRODUCTION AND PARTIES
B THE TRIBUNAL'S DECISION ON JURISDICTION, ADMISSIBILITY AND LIABILITY
C DAMAGES AND INTEREST
C.1 THE PARTIES' POSITIONS ON DAMAGES BEFORE THE DECISION
C.2 THE TRIBUNAL'S DECISION ON DAMAGES
C.3 THE TRIBUNAL'S DECISION ON INTEREST
D COSTS
D.1 THE PARTIES' POSITIONS
D.2 THE TRIBUNAL'S DECISION ON COSTS
E FINAL AWARD
ANNEX A
ANNEX B
ANNEX C

1. This case concerns a dispute submitted to the International Centre for Settlement of Investment Disputes ("ICSID" or the "Centre") pursuant to the Agreement on Promotion and Reciprocal Protection of Investments between the Kingdom of the Netherlands and Ukraine signed on 14 July 1994 (the "BIT"), and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the "ICSID Convention").

2. The Claimants are Emergofin B.V. ("Emergofin"), a corporation incorporated under the laws of the Kingdom of the Netherlands, and Velbay Holdings Ltd. ("Velbay"), a corporation incorporated under the laws of Cyprus (collectively, the "Claimants"). The Respondent is Ukraine (the "Respondent").

3. The Claimants and the Respondent are collectively referred to as the "Parties." The Parties' representatives in the second phase of the arbitration and their addresses are listed above on page i.

4. On 1 July 2021, the Tribunal issued its Decision on Jurisdiction, Admissibility and Liability (the "Decision"),1 reserving quantum and costs for the final phase of the proceedings. The Decision, attached to the present Award, is incorporated herein and forms an integral part of the Award. These proceedings were then suspended by mutual consent of the Parties between March 2022 and January 2026. The procedural history of the proceedings leading up to the issuance of the Decision is summarized in Annex A to the Decision while the procedural history of the second phase of the arbitration, concerning quantum and costs, is set out in Annex A to the present Award. The Parties' Requests for relief in the second phase of the arbitration are set out in Annex B to the present Award. A list of abbreviations is provided in Annex C.

B THE TRIBUNAL'S DECISION ON JURISDICTION, ADMISSIBILITY AND LIABILITY

5. In its Decision, the Tribunal defined the Claimants' various claims as follows:2

6. The Claimants submitted that "Ukraine's failure to reform the single-buyer model in the Ukrainian wholesale electricity market, coupled with its failure to reinstate differential electricity pricing and followed by the discriminatory implementation of CMU Instruction No. 1855-p in favour of ZTMK (the implementation of which was denied to ZAlK)"3 constituted a violation of Article 3 of the BIT.

More specifically, the three elements set out in that summary were said to constitute a breach of Article 3(2) (the obligation to accord FET and refrain from impairing the management of the Claimants' investments in an unreasonable and discriminatory manner), whereas "[t]aken on its own" the "partial implementation of CMU Instruction No. 1855-p in favour of ZTMK"4 was said to breach Article 3(1) (the obligation to accord the Claimants' investments treatment no less favourable than the treatment accorded to Ukrainian investments) and the "failure to implement CMU Instruction No. 1855-p in favour of ZAlK"5 is said to breach Article 3(4) (the obligation to observe any obligation entered into with regard to Claimants' investments). Finally, the Claimants said that "Ukraine's failure to implement its own laws taken in conjunction with its failure to reinstate differential electricity tariffs despite the numerous concessions extorted from Claimants between 2010 and 2011 ultimately caused the annihilation of the economic value (and therefore, the indirect expropriation) of Claimants' investment in ZAlK in late 2011/early 2012", 6 and thus constitutes a breach of Article 6 (on expropriation). The Tribunal referred to the various aspects of this claim under the designation "Electricity Pricing Claim".

7. Next, the Claimants maintained that the judgments of the Ukrainian courts leading to the judicial rescission of the 2006 ZAlK SPA and the renationalisation of Velbay's 68.01% stake under that agreement constituted a denial of justice and thus a breach of Article 3(2) of the BIT and customary international law. 7 Furthermore, the "outcome" of the renationalisation was also said to constitute an illegal expropriation of the same investment and thus a breach of Article 6.8 The Tribunal referred to the elements of this claim under the designation "Renationalisation Claim".

8. The Claimants asserted that Velbay was deprived of its rights as a shareholder in ZAlK as a result of its representatives being blocked from participation at the extraordinary general shareholder meeting on 23 September 2016 and the annual general shareholder meeting on 18 April 2017 by the SPFU acting in collusion with ZAlK's management and the Khortitskiy Regiment in circumstances where the local police did not intervene. 9 According to the Claimants, this conduct violated two elements of Article 3(2): the obligation to accord FET as well as the obligation to accord full protection and security.

The Claimants also maintain that this conduct amounted to an expropriation of their shareholding in ZAlK. The Tribunal referred to the various aspects of this claim under the designation "Shareholder Interference Claim".

9. Finally, the Claimants maintained that on 16 September 2016, "Ukraine placed one of Claimants' fact witnesses as well as other related legal entities on an economic sanctions list, without any notice or explanation",10 and then, on April 2018, adopted a presidential decree to place both Velbay and Emergofin on the same list again without notice or explanation. 11 The Claimants say that this conduct violated Article 3(2) of the BIT (obligation to accord FET).12 The Tribunal referred to the various aspects of this claim under the designation "Sanctions Claim".

10. The dispositive part of the Tribunal's Decision was as follows:13

621. The Tribunal hereby adjudges and declares that:

621.1. It has jurisdiction over the dispute and the claims submitted to it to the extent that the constituent elements of such claims arose after 22 September 2005 save that the Claimants' claim for moral damages is outwith its jurisdiction and/or is inadmissible;

621.2. All the Claimants' other claims are admissible;

621.3. In relation to the Electricity Pricing Claim, the Claimants' claims based upon Articles 3(1), 3(2), 3(4) and 6 of the BIT or otherwise are dismissed;

621.4. In relation to the Renationalisation Claim, the Claimants' claims based upon Article 3(2) and 6 of the BIT are upheld;

621.5. In relation to the Shareholder Interference Claim, the Claimants' claim based upon Article 3(2) (fair and equitable treatment) is upheld whereas their claims based upon Articles 3(2) (full protection and security) and 6 (expropriation) are dismissed;

621.6. In relation to the Sanctions Claim, the Claimants' claim based upon Article 3(2) is upheld whereas their claim based upon Article 6 is dismissed;

621.7. In relation to the Miscellaneous Claims, to the extent that such claims have not been withdrawn by the Claimants, they are dismissed.

621.8. All other claims are dismissed.

621.9. The issues of damages (if any) and costs are reserved for a Final Award.

11. In more expanded terms, the Tribunal found that the Claimants had suffered a denial of justice in defending the Ukrainian Prosecutor's claim for recission of the 2006 ZAlK SPA in the Ukrainian courts, which was consummated on 11 March 2015 when Velbay exhausted the remedies available in the Ukrainian system of the administration of justice.

This was the violation of Article 3(2) of the Treaty in respect of the Renationalisation Claim. Next, the transfer of Velbay's stake of 68.01% of the shares in ZAlK to the SPFU on 9 June 2015 further to the Kyiv Commercial Court's judgment of 22 March 2012, which was tainted by a denial of justice, constituted an expropriation for the purposes of Article 6 of the Treaty.14

12. In respect of Velbay's remaining stake of 29.54% of the shares in ZAlK, the Tribunal also found that the Respondent had violated the fair and equitable standard of treatment in Article 3(2) of the Treaty in respect of the SPFU's collusion with the Khortitskiy Regiment in preventing Velbay's representatives from participating in the 2016 EGM and the 2017 AGM in violation of Velbay's rights as a shareholder in ZAlK (the Shareholder Interference Claim). 15 Finally, the Tribunal found that the Respondent had further breached the fair and equitable standard of treatment when it issued the 2018 Sanctions Decision, because there was no stated or objectively ascertainable link between the purpose and scope of the 2018 Sanctions Decision and the Claimants (the Sanctions Claim).16 All other claims were dismissed.

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E FINAL AWARD

66. The Tribunal makes the following orders:

66.1 The Respondent shall pay to the Claimants USD 71,000,000 as restitutionary damages in respect of the Renationalisation Claim based upon Articles 3(2) and 6 of the BIT;

66.2 The Respondent shall pay to the Claimants interest on the above amount at the 5-year US Treasury Rate, compounded annually from 9 June 2015 until 24 February 2022 and then from the date of this Award until payment by the Respondent;

66.3 The Respondent shall pay to the Claimants [...] [...] and [...] as a contribution towards the legal costs and the arbitration costs in these proceedings;

66.4 The Respondent shall pay to the Claimants interest on the above amount at the 5-year US Treasury Rate, compounded annually from the date of this Award until payment by the Respondent.

66.5 All other claims and relief are rejected.

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Footnotes omitted