Investment treaty practice
Does the state have a model BIT?
The state does not have a model BIT.
Preparatory materials
Does the state have a central repository of treaty preparatory materials? Are such materials publicly available?
The Ministry of Foreign Affairs maintains a State Departmental Archive that houses official documents, including original international treaties and related preparatory materials.
Scope and coverage
What is the typical scope of coverage of investment treaties?
Investment treaties typically define ‘investment’ and ‘investor’ broadly, covering various assets and entities, including tangible and intangible property, shares, monetary claims, and intellectual property rights. They apply to investments made by one party’s investors in the other’s territory, often including those made before and after the treaty’s enactment.
The definition of an ‘investor’ typically encompasses citizens or nationals of a contracting party, generally excluding permanent residents. This, however, is subject to a few exceptions. Four Bilateral Investment Treaties (BITs) (those with Azerbaijan, Canada, Israel, and Kazakhstan) as well as the Energy Charter Treaty, extend protection to both citizens or nationals and permanent residents of the contracting parties. Additionally, BITs with Bosnia and Herzegovina and San Marino offer protection to both citizens and permanent residents of these countries. However, Ukraine only extends protection to citizens, not permanent residents, of these nations.
Several BITs, and a Fair Trade Agreement with Canada, contain provisions that aim to prevent ‘treaty shopping’ and ensure that only genuine investors from the contracting states benefit from the treaty’s protections. Such provisions allow Ukraine to deny benefits to a company either controlled by a national of any third state or which has no substantial business activities in the territory of the other party.
Treaty protections include fair and equitable treatment, full protection and security, national treatment, and most-favoured-nation treatment. They safeguard against expropriation and provide compensation for losses due to extraordinary circumstances.
BITs also offer dispute resolution mechanisms, including investor-state and state-to-state procedures, allowing direct recourse to international arbitration. They typically have set durations with renewal provisions and ‘survival clauses’ extending protections after termination.
Modern BITs often address performance requirements, subrogation rights, and transparency in investment-related regulations. While generally consistent, specific provisions vary between Ukraine’s individual treaties.
Protections
What substantive protections are typically available?
Investment treaties typically offer the following protections to investors:
- Fair and equitable treatment.
- Most-favoured-nation treatment (investors receive treatment no less favourable than that given to investors from any third state).
- Protection against expropriation.
- Compensation for losses (covers losses due to war, armed conflict, national emergency, revolt, insurrection, or riot; specific compensation for property requisitioned or destroyed by host state forces).
- Free transfer of funds (covers profits, capital gains, dividends, royalties, interest, liquidation proceeds, loan repayments, licence and technical fees, and investor earnings).
- Subrogation rights (a contracting party’s right to assume investors’ rights if it pays under an indemnity, guarantee, or insurance contract).
- Preservation of more favourable treatment (investors can benefit from more favourable treatment provided by domestic legislation or other international obligations).
Only six of Ukraine’s BITs (Armenia, Azerbaijan, Croatia, Russia, Tajikistan and Turkey) do not contain a fair and equitable treatment standard.
By contrast, other BITs are more detailed. The France–Ukraine BIT stipulates that limits imposed on the purchase or transportation for production of raw materials or supporting materials, fuel and energy shall be considered a breach of fair and equitable treatment.
All Ukrainian BITs provide that the provision of most favoured nation or national treatment does not extend to the benefits of membership of a customs union, monetary union or free trade area.
Most carve-outs in BITs relate to taxation and the application of other international treaties.
A total of 27 investment treaties contain an ‘umbreall clause’, including treaties made with the following countries:
- Austria
- Azerbaijan
- Belgium and Luxembourg
- Denmark
- Egypt
- Finland
- Germany
- Italy
- Japan
- Korea
- The Netherlands
- Panama
- Singapore
- Spain
- Switzerland
- The United Kingdom
- The United States
Dispute resolution
What are the most commonly used dispute resolution options for investment disputes between foreign investors and your state?
The following are the most commonly used dispute resolution options:
- International Centre for Settlement of Investment Disputes (ICSID).
- ICSID Additional Facility (often mentioned as an alternative when one of the parties is not a member of the ICSID Convention).
- Ad hoc arbitration under the United Nations Commission on International Trade Law (UNCITRAL) Rules.
- The Arbitration Institute of the Chamber of Commerce in Stockholm.
- The International Court of Arbitration of the International Chamber of Commerce.
Confidentiality
Does the state have an established practice of requiring confidentiality in investment arbitration?
Arbitration awards in most investment disputes are public, save for the following cases:
- Remington v Ukraine; and
- JKX Oil & Gas and Poltava v Ukraine.
Hence, Ukraine does not have an established practice of requiring confidentiality in investment arbitration.
Insurance
Does the state have an investment insurance agency or programme?
Ukraine has established a comprehensive investment insurance programme primarily managed by the Export Credit Agency (ECA). This initiative is based on the Law of Ukraine No. 1792-VIII, ‘On financial mechanisms to stimulate export activity’, adopted on 20 December 2016.
The ECA provides insurance, reinsurance, and guarantees for contracts that promote export development, operating on a voluntary and commercial basis.
As of 1 January 2024, under Law No. 3497-IX, the ECA’s mandate has been expanded to include insurance against military and political risks for investments in Ukraine.
The war risks insurable by the ECA encompass the following:
- military conflicts, including war, armed aggression, and hostilities;
- violent changes in constitutional order or seizure of state power;
- terrorist acts and sabotage related to military conflicts; and
- occupation and annexation
The ECA has begun accepting applications for investment insurance and has already signed its first war risk insurance contract for an investment loan.
This programme represents progress in Ukraine’s efforts to mitigate risks for foreign investors.