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Emergofin B.V. and Velbay Holdings Ltd. v. Ukraine, ICSID Case No. ARB/16/35

New
Short Name:

Emergofin v. Ukraine

Case Type:
International Investment Agreement (Investor–State)
Applicable Procedural Rules:
ICSID Convention Arbitration Rules (2006)
Seat of Arbitration:
Washington D.C. (United States)
Applicable Treaty:
Netherlands-Ukraine BIT (1994)
Applicable Legal Instruments:
Netherlands-Ukraine BIT (1994)
Economic Sector:
Mining and Quarrying, Including Hydrocarbons (oil and Gas)
Outcome:
In Favour of Claimant(s)
Amount of Damages:
US $71,000,000
Other Remedy:
The Tribunal ordered Respondent to pay Claimant USD 71M in damages, plus interest and a contribution towards legal and arbitration costs. All other claims and relief were rejected.
See case mapped on Investor-State LawGuide

Available documents

26 Oct 2016
Claimants' Press Release on the Commencement of Arbitration
Document Details:
PARTICIPANTS
Claimants' Press Release on the Commencement of Arbitration
Participants listed are for this document only and may not include all participants involved in the entire case. Always consult the original documents.
Claimant appointee
Respondent appointee
Tribunal/Panel chair
Arbitrator(s)
Sole Arbitrator
ICSID Annulment Committee president
ICSID Annulment Committee members
WTO Appellate Body members
WTO Appellate Body chair
Judges
Claimant's counsel
Respondent's counsel
Other counsel
Claimant's expert
Respondent's expert
Claimant's witness
Respondent's witness
Other witnesses
Tribunal secretary
Tribunal assistant
Country
Print reporter
Entities
Document Summary
Claimants' Press Release on the Commencement of Arbitration
This summary note is machine-generated. Always consult the original materials.


5 Dec 2017
Decision on Provisional Measures
Document Details:
PARTICIPANTS
Participants listed are for this document only and may not include all participants involved in the entire case. Always consult the original documents.
Claimant appointee
Respondent appointee
Tribunal/Panel chair
Arbitrator(s)
Sole Arbitrator
ICSID Annulment Committee president
ICSID Annulment Committee members
WTO Appellate Body members
WTO Appellate Body chair
Judges
Claimant's counsel
Respondent's counsel
Other counsel
Claimant's expert
Respondent's expert
Claimant's witness
Respondent's witness
Other witnesses
Tribunal secretary
Tribunal assistant
Country
Print reporter
Entities
Document Summary
This summary note is machine-generated. Always consult the original materials.

Produce a well-written, professionally drafted, highly sophisticated summary of the document such that all the key issues are covered. Maximum words: 300 words. Use legal writing tone and format. DO NOT use bullet points.
22 Oct 2020
Decision on the Admissibility of New Evidence
Document Details:
PARTICIPANTS
Participants listed are for this document only and may not include all participants involved in the entire case. Always consult the original documents.
Claimant appointee
Respondent appointee
Tribunal/Panel chair
Arbitrator(s)
Sole Arbitrator
ICSID Annulment Committee president
ICSID Annulment Committee members
WTO Appellate Body members
WTO Appellate Body chair
Judges
Claimant's counsel
Respondent's counsel
Other counsel
Claimant's expert
Respondent's expert
Claimant's witness
Respondent's witness
Other witnesses
Tribunal secretary
Tribunal assistant
Country
Print reporter
Entities
Document Summary
This summary note is machine-generated. Always consult the original materials.

Produce a well-written, professionally drafted, highly sophisticated summary of the document such that all the key issues are covered. Maximum words: 300 words. Use legal writing tone and format. DO NOT use bullet points.
1 Jul 2021
Decision on Jurisdiction, Admissibility and Liability
Document Details:
PARTICIPANTS
Participants listed are for this document only and may not include all participants involved in the entire case. Always consult the original documents.
Claimant appointee
Respondent appointee
Tribunal/Panel chair
Arbitrator(s)
Sole Arbitrator
ICSID Annulment Committee president
ICSID Annulment Committee members
WTO Appellate Body members
WTO Appellate Body chair
Judges
Claimant's counsel
Respondent's counsel
Other counsel
Claimant's expert
Respondent's expert
Claimant's witness
Respondent's witness
Other witnesses
Tribunal secretary
Tribunal assistant
Country
Print reporter
Entities
Document Summary
This summary note is machine-generated. Always consult the original materials.

Produce a well-written, professionally drafted, highly sophisticated summary of the document such that all the key issues are covered. Maximum words: 300 words. Use legal writing tone and format. DO NOT use bullet points.
1 Jul 2021
Decision on Jurisdiction, Admissibility and Liability
Document Details:
PARTICIPANTS
Decision on Jurisdiction, Admissibility and Liability
Participants listed are for this document only and may not include all participants involved in the entire case. Always consult the original documents.
Claimant appointee
Claimant appointee:
John Beechey
Respondent appointee
Respondent appointee:
Michael Wood
Tribunal/Panel chair
Chair/President:
Zachary Douglas
Arbitrator(s)
Sole Arbitrator
ICSID Annulment Committee president
ICSID Annulment Committee members
WTO Appellate Body members
WTO Appellate Body chair
Judges
Claimant's counsel
Raëd M. Fathallah, Tim Portwood, Marina Weiss, Shane Daly, Laura Fadlallah
Respondent's counsel
Jennifer Younan, Elise Edson, Sandrina Antohi, Anna Guillard Sazhko, Emmanuel Gaillard, Yas Banifatemi, Rudolf Simone-Pont, Mariia Tsarova, Marija Sobat, Irina Nazarova, Dmytro Donenko, Anna Tyshchenko, Yuliia Dikhtiievska
Other counsel
Claimant's expert
William E. Butler
Respondent's expert
Claimant's witness
Respondent's witness
Other witnesses
Tribunal secretary
Laura Bergamini, Aurelia Antonietti
Tribunal assistant
Country
Print reporter
Entities
Bredin Prat, Shearman & Sterling, Engarde Attorneys at Law, State Property Fund of Ukraine, Zaporozhye Aluminum Combine, Zaporozhye Titanium-Magnesium Plant, Emergofin B.V., Velbay Holdings, Ukraine
Document Summary
Decision on Jurisdiction, Admissibility and Liability
This summary note is machine-generated. Always consult the original materials.

Procedural Posture

This document is a Decision on Jurisdiction, Admissibility, and Liability issued by an ICSID Tribunal in an arbitration between Emergofin B.V. and Velbay Holdings Ltd. (Claimants) and Ukraine (Respondent). The dispute arose from Ukraine's treatment of the Claimants' investments in the Zaporozhye Aluminum Combine (ZAlK), specifically concerning electricity pricing, the judicial renationalization of Velbay's shareholding, physical interference at shareholder meetings, and the imposition of state sanctions. Having bifurcated quantum, the Tribunal herein addresses the Respondent's jurisdictional objections and the merits of the Claimants' liability claims under the Netherlands-Ukraine Bilateral Investment Treaty (BIT).

Jurisdiction and Admissibility

The Respondent raised several jurisdictional objections, primarily targeting the timing and control of the Claimants' investments. The Tribunal upheld jurisdiction ratione temporis over claims arising after 22 September 2005, the date Emergofin acquired control over Velbay and thus established a protected investment under the BIT. The Tribunal dismissed the Claimants' request for moral damages, ruling that the BIT's substantive protections and the Tribunal's jurisdictional mandate are strictly limited to the protection of the "investment" as an asset, precluding claims for reputational or psychological harm suffered by the investors or their representatives.

Tribunal's Analysis on Liability

The Tribunal dismissed the Electricity Pricing Claim, finding no actionable breach of the Fair and Equitable Treatment (FET) or national treatment standards. The Tribunal held that Ukraine's policy to eliminate cross-subsidies in the wholesale electricity market was a legitimate exercise of regulatory power and did not constitute arbitrary or discriminatory conduct against ZAlK.

Conversely, the Tribunal upheld the Renationalisation Claim, concluding that the Ukrainian courts committed a denial of justice in breach of the FET standard. The domestic courts rescinded the 2006 Share Purchase Agreement (SPA) based on an unpleaded ground of material breach, rather than the pleaded ground of a material change of circumstances. This deprived Velbay of its fundamental due process right to confront the legal propositions underpinning the rescission. The Tribunal further held that the subsequent transfer of Velbay's shares to the State Property Fund of Ukraine constituted an unlawful expropriation under Article 6 of the BIT.

Regarding the Shareholder Interference Claim, the Tribunal found that the State Property Fund of Ukraine colluded with an armed group and ZAlK's management to physically blockade Velbay's representatives from attending the 2016 and 2017 general meetings. This orchestrated exclusion violated the FET standard. Finally, the Tribunal upheld the Sanctions Claim, ruling that the 2018 Presidential Decree imposing sanctions on the Claimants lacked any stated or objectively ascertainable link to the sanctioned entities, rendering the measure arbitrary and in breach of Article 3(2) of the BIT.

Decision

The Tribunal declared that it possessed jurisdiction over the dispute for claims arising after 22 September 2005 and found the claims admissible. On the merits, the Tribunal held Ukraine liable for breaches of the FET standard and unlawful expropriation concerning the Renationalisation Claim, the Shareholder Interference Claim, and the Sanctions Claim. All other claims were dismissed. The Tribunal reserved the issues of quantum and costs for a subsequent final phase of the arbitration.
1 May 2026
Final Award
Document Details:
PARTICIPANTS
Final Award
Participants listed are for this document only and may not include all participants involved in the entire case. Always consult the original documents.
Claimant appointee
Claimant appointee:
John Beechey
Respondent appointee
Respondent appointee:
Michael Wood
Tribunal/Panel chair
Chair/President:
Zachary Douglas
Arbitrator(s)
Sole Arbitrator
ICSID Annulment Committee president
ICSID Annulment Committee members
WTO Appellate Body members
WTO Appellate Body chair
Judges
Claimant's counsel
Raëd M. Fathallah, Tim Portwood, Marina Weiss, Shane Daly, Maria Kiskachi
Respondent's counsel
Jennifer Younan, Elise Edson, Sandrina Antohi
Other counsel
Claimant's expert
Respondent's expert
Claimant's witness
Respondent's witness
Other witnesses
Tribunal secretary
Laura Bergamini
Tribunal assistant
Country
Print reporter
Entities
Emergofin B.V., Velbay Holdings, Bredin Prat, A. & O. Shearman, Shearman & Sterling, Ukraine
Document Summary
Final Award
This summary note is machine-generated. Always consult the original materials.

Procedural Background and Disposition of Liability

This document is the Final Award rendered by an ICSID tribunal in the dispute between Emergofin B.V. and Velbay Holdings Ltd. against Ukraine. The Award resolves the final phase of the arbitration concerning quantum and costs, following the tribunal's Decision on Jurisdiction, Admissibility and Liability of 1 July 2021, which is incorporated by reference.

In its prior Decision, the tribunal had largely upheld its jurisdiction and found Ukraine liable for breaches of the Netherlands-Ukraine BIT. Specifically, it upheld the Claimants' "Renationalisation Claim," finding that the judicial rescission of a 2006 Share Purchase Agreement (SPA) and subsequent transfer of a 68.01% stake in Zaporozhye Aluminium Combine (ZAlK) constituted a denial of justice under Article 3(2) of the BIT and an unlawful expropriation under Article 6. The tribunal also upheld claims for breaches of the fair and equitable treatment (FET) standard in relation to the "Shareholder Interference Claim" and the "Sanctions Claim," which concerned Velbay's remaining 29.54% stake. Crucially, the tribunal dismissed the Claimants' high-value "Electricity Pricing Claim," which had formed the basis of their primary market-based valuation for damages.

Tribunal's Analysis on Damages

The tribunal's damages analysis was bifurcated based on the distinct assets and treaty breaches. For the expropriated 68.01% stake, the tribunal adopted a restitutionary approach, reasoning that this reflected the remedy Velbay was deprived of in the tainted domestic proceedings. It rejected the Respondent's argument that the asset had no economic value, distinguishing between the existence of loss and its quantification. The tribunal awarded the Claimants the purchase price of the stake, USD 71,000,000, viewing this as restitution for the unjust enrichment of Ukraine, which had assigned value to regaining control of the asset. However, the tribunal declined to award approximately USD 148 million in subsequent capital investments. It reasoned that since the "Electricity Pricing Claim" had been dismissed, the deterioration of ZAlK's value was not legally attributable to Ukraine, and awarding these sunk costs would improperly shift the consequences of the Claimants' own investment decisions to the Respondent.

For the breaches related to the remaining 29.54% stake (Shareholder Interference and Sanctions Claims), which involved temporary interference with shareholder rights rather than a permanent deprivation, the tribunal rejected the Claimants' claim for restitution of the purchase price. It found no unjust enrichment and noted that the Claimants had failed to articulate a viable methodology for assessing compensation for such temporary interference. Consequently, no damages were awarded for these established breaches.

Decision on Interest and Costs

The tribunal awarded interest on the principal sum of USD 71,000,000, compounded annually at the 5-year US Treasury Rate. Interest was to accrue from the date of expropriation (9 June 2015) until 24 February 2022. The tribunal suspended the accrual of interest from the commencement of the armed conflict in Ukraine until the date of the Final Award, after which it would resume until payment. In its decision on costs, the tribunal considered the mixed success of the parties. While the Claimants prevailed on several claims, their primary and most resource-intensive claim on electricity pricing, which underpinned a quantum claim exceeding USD 1 billion, was dismissed. The tribunal therefore ordered each party to bear its own legal costs but awarded the Claimants a portion of their costs and reimbursement for the half of the arbitration costs they had advanced on behalf of the Respondent.

Final Award

The tribunal ordered Ukraine to pay the Claimants: (i) USD 71,000,000 as restitutionary damages; (ii) interest on that amount as calculated by the tribunal; and (iii) a contribution towards legal and arbitration costs, with interest. All other claims for relief were rejected.
Case Summary
This summary note is machine-generated. Always consult the original materials.

Case Overview

In Emergofin v. Ukraine, Dutch and Cypriot investors Emergofin B.V. and Velbay Holdings Ltd. brought a claim against Ukraine under the 1994 Netherlands-Ukraine Bilateral Investment Treaty (BIT). The dispute, administered by the International Centre for Settlement of Investment Disputes (ICSID), concerned the claimants' investment in the Zaporozhye Aluminium Combine (ZAlK), Ukraine's only producer of primary aluminium. The claimants alleged that a series of state actions destroyed their investment, including the renationalisation of their majority stake, interference with their remaining shareholder rights, and the imposition of arbitrary sanctions. In a final Award dated May 1, 2026, the Tribunal upheld several of the claimants' claims, finding that Ukraine had breached the fair and equitable treatment (FET) standard and unlawfully expropriated part of the investment. The Tribunal awarded the claimants USD 71 million in damages plus interest and costs.

Procedural History

The claimants filed a Request for Arbitration on October 25, 2016, and the case was registered by ICSID on November 9, 2016. The Tribunal, composed of Zachary Douglas (President), John Beechey (claimants' appointee), and Michael Wood (respondent's appointee), was constituted on March 15, 2017. On July 1, 2021, the Tribunal issued a Decision on Jurisdiction, Admissibility and Liability, which bifurcated the proceedings and reserved quantum and costs for a later phase. In this decision, the Tribunal upheld its jurisdiction over claims arising after September 22, 2005, and found Ukraine liable for several treaty breaches while dismissing others. Following the escalation of the armed conflict in Ukraine, the proceedings were suspended by mutual consent of the parties from March 2022 until January 2026. After the proceedings resumed, the Tribunal considered submissions on quantum and costs, culminating in the Final Award of May 1, 2026.

Key Issues and Positions

The claimants advanced four main claims against Ukraine. The "Electricity Pricing Claim" alleged that Ukraine's failure to maintain a preferential electricity pricing regime for ZAlK breached the BIT. The "Renationalisation Claim" asserted that the judicial rescission of the claimants' 2006 share purchase agreement and the subsequent transfer of their 68.01% stake in ZAlK to the state constituted a denial of justice and an unlawful expropriation. The "Shareholder Interference Claim" alleged that Ukraine, through the state-owned State Property Fund (SPFU), colluded to physically prevent the claimants' representatives from attending shareholder meetings for their remaining 29.54% stake. Finally, the "Sanctions Claim" argued that Ukraine's imposition of sanctions on the claimants in 2018 was arbitrary and breached the FET standard. Ukraine defended its actions, arguing, inter alia, that its measures were legitimate exercises of sovereign authority and that the claimants' investment had no economic value due to their own business decisions, independent of state actions.

Tribunal/Court Reasoning and Holdings

Jurisdiction

The Tribunal affirmed its jurisdiction over the dispute to the extent the claims arose after September 22, 2005. It found, however, that the claimants' claim for moral damages was outside its jurisdiction, reasoning that the BIT protects the "investment" itself, not the personal rights or well-being of the investor's representatives.

Merits

The Tribunal dismissed the Electricity Pricing Claim in its entirety. It found no basis in the BIT for a legitimate expectation of a stable legal framework or the continuation of a specific pricing policy. The Tribunal held that Ukraine's policy decisions regarding the elimination of cross-subsidies in the energy market were a rational exercise of sovereign power and not arbitrary or discriminatory. Conversely, the Tribunal upheld the Renationalisation Claim. It found that the Ukrainian court proceedings leading to the seizure of the claimants' 68.01% stake were tainted by a denial of justice, constituting a breach of the FET standard. The Tribunal concluded that the courts had decided the case on a legal basis never pleaded by the prosecutor, depriving the claimants of the ability to present a defense. The subsequent transfer of the shares to the state was consequently deemed an unlawful expropriation under Article 6 of the BIT. The Tribunal also upheld the FET portion of the Shareholder Interference Claim, finding sufficient evidence of collusion between the SPFU and other actors to physically block the claimants' access to shareholder meetings. Finally, the Tribunal found a breach of the FET standard in relation to the Sanctions Claim, holding that the 2018 sanctions were arbitrary because Ukraine failed to provide any stated or objectively ascertainable link between the purpose of the sanctions and the claimants.

Quantum/Damages

For the successful Renationalisation Claim, the Tribunal adopted a "sunk costs" approach to damages. It rejected the claimants' primary valuation of over USD 1 billion, which was premised on the failed Electricity Pricing Claim. Instead, it awarded restitutionary damages equal to the original purchase price of the expropriated 68.01% stake, amounting to USD 71 million. The Tribunal declined to award compensation for subsequent capital investments, viewing them as business risks assumed by the claimants. For the successful Shareholder Interference and Sanctions claims, the Tribunal awarded no damages, finding that the claimants had failed to articulate a viable methodology for quantifying the loss from the temporary interference with their shareholder rights.

Costs

The Tribunal adopted a mixed approach to costs. It acknowledged the claimants' success on several key claims but weighed this against the failure of their primary, and most resource-intensive, Electricity Pricing Claim, which had sought over USD 1 billion. Taking these factors into account, the Tribunal ordered Ukraine to pay a portion of the claimants' legal costs and to reimburse them for half of the arbitration costs they had advanced on Ukraine's behalf during the proceedings.

Disposition / Relief

The Tribunal ordered Ukraine to pay the claimants USD 71,000,000 as restitutionary damages for the unlawful expropriation of their investment. The Tribunal also awarded pre-award interest from June 9, 2015, to February 24, 2022 (the date the armed conflict commenced and proceedings were suspended), and post-award interest from the date of the Award until payment. Additionally, Ukraine was ordered to pay a contribution towards the claimants' legal and arbitration costs. All other claims for relief were rejected.