Can foreign investors protect their rights in Ukrainian courts?
British investor Tamaz Somkhishvili calls for fair consideration of the case on compensation of losses by the Supreme Court of Ukraine
Kyiv, September 21, 2021: Tomorrow, September 22, 2021, the Commercial Court of Cassation within the Supreme Court will begin consideration of the case № 910/17647/18 on appeal against the decision of the Northern Commercial Court of Appeal on non-compensation of losses of “Kyiv-Terminal” LLC for terminating the investment agreement for the reconstruction of the Kharkiv Square.
Tamaz Somkhishvili, the beneficial owner of “Kyiv-Terminal” and a long-term British investor in Ukraine, calls on the Supreme Court of Ukraine to fairly and impartially consider the case on the legal right of a foreign investor and his Ukrainian company to fair compensation for losses incurred as a result of the termination of the investment agreement by the Kyiv City Council.
“In 2007, a Ukrainian enterprise “Kyiv-Terminal” won the competition of the Kyiv City State Administration (KCSA) for the reconstruction of the Kharkiv Square, as a result of which an investment agreement was signed, within the framework of which the investor fully fulfilled its obligations and transferred the equivalent of 13.5 million dollars to the KCSA’s account. Over the next six years, “Kyiv-Terminal” had to invest additional funds and resources in the fight against the failure of the KCSA to fulfil its obligations. For example, the land lease agreement which was necessary for the project implementation was concluded only in 2010 as a result of lawsuits initiated by the investor.
In 2013, the Kyiv City Council decided to terminate the investment agreement and undertook to compensate for our losses. However, then the Kyiv City State Administration, as the executive body of the Kyiv City Council, evaded its obligations and refused to compensate for losses.
Over the past few years, “Kyiv-Terminal” and I personally, as an investor, have tried to compensate for the losses incurred by all possible means, in particular, through negotiations with the city authorities, as well as with the Government of Ukraine. However, despite the fact that these state bodies agreed that the damages should be compensated, they insisted that their amount should be determined by the court”, — Tamaz Somkhishvili commented on the history of the case.
In 2018, "Kyiv-Terminal" applied to the Commercial Court of Kyiv city, which in 2019, awarded the investor approximately 25 percent of the claimed amount. However, on May 27, 2021, the Northern Commercial Court of Appeal completely rejected the claim of “Kyiv-Terminal” and ruled that the investor not only has no right to compensate for his losses, but also to return the amount of his direct costs for the project. This decision once again grossly violated the legal right of a foreign investor to fair compensation for losses and protection of his investments.
"Now my last chance to protect my rights under Ukrainian law is the hope for a fair and objective examination of the case by the Supreme Court of Ukraine, to which I urged the President of Ukraine in my open letter of September 16, 2021. I am convinced that if the President of the country, as the guarantor of the Constitution and the rule of law, cannot guarantee foreign investors the opportunity to defend their rights in fair courts, Ukraine will never realize its investment potential," — stressed the British investor.
Commenting on the case, Taras Dumych, a partner at Wolf Theiss law firm, a legal adviser to Tamaz Somkhishvili, said: “Unfortunately, the situation faced by Mr Somkhishvili is not new and is an example of how the state treats the fulfillment of its obligations. After all, if investors cannot count on the state to fulfill its obligations, then what else can they count on? We are confident in the legal position of the investor and hope that the decision of the Supreme Court will be based on the norms of Ukrainian legislation and international treaties of Ukraine on the rights of foreign investors. If, despite all efforts, the investor fails to defend his rights in the Ukrainian court, then the investor will file a lawsuit against the state of Ukraine on the basis of the Agreement on the mutual protection of investments between Ukraine and the UK”.
For more information, please contact Maria Bukhtoiarova, a representative of CFC Big Ideas, which is a communications advisor to Tamaz Somkhishvili, by email at: email@example.com or by phone: +380 99 317 93 46.