Mechanism
Recognition and enforcement of a decision
Term
Grounds
Decision, perspectives
Type of losses covered and damage assessment
Bilateral investment treaties with the Russian Federation, in particular, the Bilateral Investment Treaty between Ukraine and the Russian Federation, dated 27 November 1998, and international law.
Type of damage to be compensated and assessment of damag
Direct and indirect losses, i.e.:
- The full market value of assets affected by the actions of the Russian Federation;
- Lost profits that would have been accrued in the ordinary course of business but for the irregularity.
Furthermore, moral damage caused to the investor’s person, including compensating damage that led to mental suffering, insults to feelings, humiliation, shame, egradation, loss of social standing or damage to credit or reputation.
Damage is assessed according to international standards, which means a more comprehensive amount of compensation is awarded.
Since 2014, the practice of considering investor cases against the Russian Federation related to the occupation of the Crimean Peninsula has been formed on the basis of the international legal concept of “effective control”.
Arbitral tribunals that have heard cases involving Crimean assets have developed an approach to the application of investment treaties outside the territory over which a state exercises its legitimate sovereignty. The “Crimean cases” can be extrapolated to the East and South of Ukraine, over which Russia currently exercises de facto control, or which have recently been formally annexed by Russia.
Given this practice of investment arbitration, the development of public international law and its application, the prospect exists of positive decisions in favour of Ukrainian investors. Investment arbitral awards are recognised and enforced without hindrance in virtually any jurisdiction on the basis of the New York Convention, to which almost all the world’s nation states are a party.
It is also possible to “sell” an arbitral award at a discount to specialised funds, which means that the arbitral award can be monetised quickly. Decision perspectives Recognition and enforcement of a decision
Ukrainian legislation.
Type of damage to be compensated and assessment of damage
- Direct and indirect losses, as well as non-pecuniary damage.
- An assessment of damage is carried out according to national standards, which are based on more conservative methods of damage assessment, which means a lower amount of compensation awarded.
Since 2022, Ukraine has been developing a practice where courts satisfy claims for damages from the Russian Federation, arguing against the Russian Federation’s judicial immunity on the
grounds of its gross violation of international law.
A significant drawback of Ukrainian court decisions is the lack of a practical mechanism for their recognition and enforcement, and therefore for the recovery of compensation due to the apparent judicial immunity of the Russian Federation.
Decision perspectives Recognition and enforcement of a decision
The Register was established pursuant to Resolution CM/Res (2023)3 “On the Establishment of an Enlarged Partial Agreement on the Register of Damage Caused by the Aggression of the Russian Federation against Ukraine” at the Summit of Heads of
State and Government of the Council of Europe, held on 16-17 May 2023 in Reykjavik,
Iceland.
The Register is part of the International Compensation Mechanism, which provides for the establishment of a Claims Commission and a Compensation Fund.
The Register does not review the merits of the claims received, does not assess their value, and does not make any payments. These will be the functions of the Commission and the Compensation Fund.
The application to the Register may be submitted by legal entities (including foreign entities), individuals, and the state of Ukraine (including state authorities and state-owned
enterprises).
The initial launch of the Register is focused on only one category – damage or destruction of residential real estate of individuals, so only individuals can apply for it.
Subsequently, redress will be available in respect of:
- deprivation of health and life, torture.  economic losses, loss of property and income. the forced displacement of persons.
Legal entities may file claims for damage or destruction of property and other assets, claims for compensation for other economic losses, such as loss of control over property in the temporarily occupied territories, relocation (evacuation) of business, and humanitarian aid costs.
Damage caused after 24 February 2022 on the territory of Ukraine within its internationally recognised borders, which also extend to its territorial waters, is compensated.
Read full insight at the following link: https://kinstellar.com/upload/Legal%20Alert_Mechanisms%20of%20Damage%20Compensation_ENG.pdf
Olexander Martinenko
Partner
olexander.martinenko@kinstellar.com
Danylo Volkovetskyi
Managing Associate
danylo.volkovetskyi@kinstellar.com
Oleksandra Udovenko
Student Associate
oleksandra.udovenko@kinstellar.com
