Global law firm White & Case LLP has achieved another victory for Ukraine, as a tribunal rejected all claims in the arbitration filed by Bosh International Inc. and B&P Ltd Foreign Investments Enterprise (B&P) against Ukraine under the Ukraine-United States Bilateral Investment Treaty (BIT) before the World Bank's International Centre for Settlement of Investment Disputes (ICSID).
This award issued on October 25, 2012 is a new authority on recurring issues in ICSID jurisprudence, in particular concerning the scope of review by a BIT tribunal of domestic courts proceedings, compliance with contractual prerequisites when asserting umbrella clause claims, and attribution and State responsibility.
B&P—a locally-incorporated subsidiary of US-company Bosh—had entered into an agreement with the Taras Shevchenko National University of Kyiv for the development and operation of a hotel and science complex on State-owned property. The University later terminated the agreement and the legality of that termination was confirmed through litigation before the Ukrainian courts. B&P was eventually evicted from the complex. In their arbitration before ICSID, Bosh and B&P claimed that Ukraine had, through the conduct of various State entities including the University, breached its obligations under the BIT.
The tribunal found that the pertinent conduct of the University is not attributable to Ukraine. The tribunal determined that the University is not a "State organ" within the meaning of Article 4 of the International Law Commission Articles on State Responsibility (ILC Articles). Although finding that the University is an entity that is empowered by Ukrainian law to exercise elements of governmental authority within the meaning of ILC Article 5, the tribunal held that University's decision to enter into and terminate the agreement with B&P did not relate to the exercise of any governmental authority.
As for Claimant's umbrella clause claim, the tribunal observed that "where a contractual claim is asserted under an umbrella clause, the claimant in question must comply with any dispute settlement provision included in that contract." The tribunal noted that the termination of the contract had been confirmed by three levels of Ukrainian courts. Accordingly, the tribunal ruled that that B&P no longer had any contractual rights that it could properly assert under the BIT.
In reviewing the conduct of the Ukrainian courts, the tribunal noted that it is only in a situation where national court proceedings would "offend a sense of judicial propriety" that "it would be open to the Tribunal to find that those proceedings did not meet international standards." The tribunal found that the Claimants were not in any way denied due process rights before the Ukrainian courts. The tribunal observed in this regard that "to apply a provision of Ukrainian law in a non-discriminatory fashion will rarely give rise to a breach of an international standard, such as the fair and equitable treatment obligation."
The White & Case team was comprised of John Willems, Marily Paralika, Noor Davies and Angélica André, all based in Paris.
Egorov Puginsky Afanasiev & Partners—including lawyers Serhii Sviriba, Markiyan Kliuchkovskyi, Krystyna Khripkova and Kseniia Koriukalova—acted as co-counsel.
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