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Oksana Karel
Arzinger, Kyiv
Oksana.Karel@arzinger.ua

Daryna Hrebeniuk
Arzinger, Kyiv
Daryna.Hrebeniuk@arzinger.ua

 

In recent years, Ukraine has been working persistently on attracting larger flows of foreign investment into its economy. Dispute resolution options available for investors are considered to be of utmost importance.

Arbitration is becoming more popular in relations between foreign investors an state bodies/entities. As the Ukrainian legislature becomes ever-more active in its aspirations to make Ukraine an arbitration and investor-friendly jurisdiction, it has given a strong message to investors that the arbitration clauses will be honoured in and by Ukraine.

In Ukraine, the referral of disputes to arbitration is addressed in Ukraine’s Law on International Commercial Arbitration and the Commercial Procedure Code, Article 22, whereby any commercial dispute with a ‘foreign element’ may be referred to arbitration except for an exhaustive list of exceptions.^[1]

At the same time, state bodies and state-owned entities are more comfortable with domestic litigation and are cautious when consenting to international commercial arbitration. To promote Ukraine as an arbitration-friendly jurisdiction, the Ukrainian Parliament has included direct provisions in the law recognising and welcoming arbitration as a means of dispute resolution involving state organs in particular in privatisation, renewable energy and concessions projects.

Privatisation

Privatisation of state property was the first sphere to be addressed. In February 2016, the Law on Privatisation of State Property^[2] was amended with provisions explicitly granting parties the right to incorporate an arbitration clause in an agreement for the sale of an asset subject to privatisation. If the parties cannot agree upon the arbitration institution, the Stockholm Chamber of Commerce (SCC) shall be designated by default.

This provision with minor amendments was adopted in the new Law on Privatisation of State and Municipal Property.^[3] The law allows the laws of England and Wales to be the governing law of the agreement on sale of privatisation object upon a request of a non-Ukrainian purchaser. That option is of transitional nature and will be available until 1 January 2021.

Renewable energy

The next arbitration-friendly public-private sphere is renewable energy generation.

In April 2019, the Parliament introduced changes to a number of laws of Ukraine governing renewable energy generation and model power-purchase agreements (PPA) between renewable energy sources producers (RES producer) and state enterprises purchasing the electricity (guaranteed buyer).

Under the new model PPA, the parties must attempt to settle all disputes amicably and may contact the Energy Community Secretariat's Dispute Resolution and Negotiation Centre for assistance in such amicable settlement efforts.^[4] If no settlement is reached within three months, as prescribed by the Procedural Act 2016/3/ECS,^[5] any party may initiate dispute resolution procedures – either International Chamber of Commerce arbitration or through a competent Ukrainian commercial court.

Should the parties include the arbitration option, the RES producer shall make payments to the special fund to cover potential future expenses of the guaranteed buyer in arbitration.^[6]

Concession

To facilitate the attraction of private equity in October 2019, the Ukrainian Parliament adopted the new Law on Concession with updated concession dispute resolution provisions aimed to introduce more confidence and guarantees for potential investors. Article 45 of the Law now expressly states that parties to a concession agreement are free to choose their dispute resolution mechanism, including mediation, non-binding expert opinion, domestic or international commercial or investment arbitration. By means of the concession agreement's provisions, the state may waive its immunity, which immunity shall cover rendering of judgements/ awards on the merits, interim relief and their coercive enforcement.^[7]

 

 

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