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6 July 2021

Tips for investors to build litigation strategy in Ukraine

Source: CEE Legal Matters

For the purposes of this review below we assume a hypothetical scenario whereas a company is illegally deprived of assets or investments in Ukraine.

Litigation would be the most common way to protect the company’s interests and seek a compensation. However, success much depends on the litigation strategy chosen right at the beginning.

While it is not complicated to commence court proceedings, a number of issues should be considered beforehand. A wrong litigation strategy may reduce other ways to protect themselves for investors.

Tip 1: Litigation and the anti-raiding commissions

For those cases when deprivation of assets occurred due to illegal changes in the state registers (for example, registers of immovable property ownership or a company share register), an application to the Anti-Raiding Commissions at the Ministry of Justice of Ukraine (the ‘Anti-Raiding Commissions’) might be the first choice.

The Ministry of Justice of Ukraine and its particular departments are empowered to withdraw respective amendments from the state registers should the Anti-Raiding Commissions find such registration actions unlawful.

Usually, this remedy can be achieved quicker than obtaining a final and binding court decision.

However, should you already refer the dispute to court, the Anti-Raiding Commissions are no longer empowered to hear the case. This is definitely worth considering while developing a litigation strategy.

Tip 2: Litigation and the ECHR

While planning litigation, further reference to the European Court of Human Rights (the ‘ECHR’) might not be apparent. Nevertheless, keep such option in mind while implementing the litigation strategy to ensure your or your company’s application to the ECHR would be admissible, if needed.

The ECHR deals with the matter after all domestic remedies have been exhausted. That means that by applying to the ECHR, you may not rely on, for example, the lack of an effective criminal investigation if you never raised that issue at the domestic level.

While you are not obligated to name a particular Convention right[1] being violated during the litigation, your arguments at the court shall at least implicitly refer to such violation so the national courts could have an opportunity to redress the alleged breach.

Ignoring a possible Convention argument during litigation may lead to the fact that the ECHR finds the application inadmissible.

Tip 3: Litigation and international arbitration

In the event of direct or indirect expropriation of investments, a foreign investor may also consider a possibility to refer a dispute against a state to international arbitration.

Until the claim is brought before the local court, check clauses of the bilateral investment treaty and other relevant treaties Ukraine is a party to. It may help you to define all possible options (fork-in-the-road clauses) to protect your rights and develop the most convenient dispute resolution strategy.

[1] Rights protected under the European Convention of Human Rights (for example, right to a fair trial, and protection of property)


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