UNCITRAL tribunal finds Russia liable to pay USD 207.8 million for the unlawful expropriation of the assets of a Ukrainian electricity company

JSC DTEK Krymenergo v Russia, PCA Case No. 2018-41, Award, November 1, 2023


The joint stock company JSC DTEK Krymenergo submitted a claim to an UNCITRAL ad hoc tribunal against the Russian Federation, alleging breaches of the latter’s obligations under the Agreement Between the Government of the Russian Federation and the Cabinet of Ministers of Ukraine on the Encouragement and Mutual Protection of Investments (the 1998 Russia–Ukraine BIT).

The tribunal, having dismissed all the respondent’s jurisdictional and admissibility objections, found that Russia had committed an unlawful expropriation by confiscating all the claimant’s assets without any compensation and awarded the claimant USD 207.8 million in damages, as well as interest and arbitration costs.

The dispute

This case centred on the treatment of a Ukrainian company involved in electricity distribution on the Crimean Peninsula by Russian authorities following Crimea’s annexation into the Russian Federation. JSC DTEK Krymenergo, a joint stock company registered in Ukraine and a member of the DTEK Energy Group, claimed that Russia had unlawfully nationalized its assets without providing any compensation. The claimant submitted that the implemented measures violated the Article 2 (Promotion and Protection of Investments), Article 3 (National Treatment and MFN Treatment), and Article 5 (expropriation) of the 1998 Russia–Ukraine BIT. The tribunal determined that Russia had engaged in direct expropriation by enacting legislation that deprived the claimant of its assets, transferring them to a Russian state-owned enterprise, and restricting access to the claimant’s premises. The tribunal deemed this expropriation unlawful due to the absence of compensation, its discriminatory nature, lack of justification in the public interest, and violation of the principle of due process.


This case stems from the Russian military forces entering the Crimean Peninsula in 2014 and the subsequent incorporation of the region into the Russian Federation in March of the same year. Before the annexation, the claimant managed the power distribution grid system and supplied electricity across the Crimean Peninsula. These operations were supported by various assets in Crimea, including real estate, equipment, and movable property, intangible assets, such as licences and contracts, as well as cash and securities. After the accession, the claimant reorganized its corporate presence in Crimea by relocating its corporate seat to Kyiv, Ukraine, and establishing a branch office in Crimea. JSC DTEK Krymenergo received a certificate of accreditation from the Russian authorities and continued operations until the end of 2014 (paras 191–206).

In January 2015, the State Council of the Republic of Crimea passed an amendment to a resolution nationalizing certain categories of property by virtue of which the claimant was dispossessed of all its tangible and intangible assets. Subsequently, the assets were transferred to a Russian state-owned enterprise whose employees, accompanied by uniformed security personnel, entered the claimant’s office, demanded original financial documents, keys, and seals, and ordered Krymenergo employees to leave the premises. In the subsequent month, the authorities in Crimea escalated their expropriation actions, transferring all of the claimant’s bank accounts and receivables to the Russian enterprise and confiscating the claimant’s shareholding in another energy sector company. Despite these actions, neither the Crimean nor Russian authorities have provided any compensation for the claimant’s seized assets (paras 674-9).

The tribunal’s analysis

The investment was made in the territory of Russia

The tribunal recognized its jurisdiction to hear the dispute after discussing four jurisdictional objections raised by Russia. Firstly, the tribunal dismissed (by majority) the respondent’s statement that the claimant’s investment was not located in the “territory” of Russia, defined in Article 1(4) of the BIT as “the territory of […] the Russian Federation, as well as their respective exclusive economic zone and continental shelf, as determined in conformity with international law.” The tribunal found that the BIT did not connect the notion of “territory” with the issue of sovereignty (as argued by Russia) but rather with effective jurisdictional control exercised by a state over a certain area (para 253). Given that there was no dispute that since 2014, the Crimean Peninsula remained under Russian effective control, the tribunal found that the claimant’s investment was located in the Russian territory.

To come to this conclusion, the tribunal relied on the Article 31(1) of the VCLT, under which Article 1(4) of the BIT should be interpreted “in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.” The tribunal found that the ordinary meaning of the term “territory” was “the entire area within a State’s possession or control, over which a government exercises de facto jurisdictional powers—irrespective of the question of sovereignty” (para 256). The tribunal drew the same conclusion from the context of the BIT. As the notion of “territory” included the respective exclusive economic zones and continental shelf, over which no state exercises full sovereign rights, the parties to the BIT did not intend to link the term “territory” with sovereignty. The tribunal also noted that the Russian Federation has actively affirmed since 2014 that Crimea constitutes a part of its territory. Raising a contrary statement for the purposes of the proceedings was therefore found contrary to the principle of good faith.

The claimant made the investment in accordance with the BIT

Secondly, the tribunal found that the claimant’s investment met the temporal requirements. Under its Article 12, the BIT covered all the investments made after 1992.  The tribunal found that a proper date of determining when the investment was made was the date of the claimant’s acquisition of the discussed assets in 1995 (paras 353–358). Importantly, the tribunal emphasized that the location of the investment in the territory of Ukraine at that time did not affect its protection under the BIT in the present case. This was because the treaty did not require that the investment be cross-border from the outset to qualify for treaty protection (paras 360–362).

The tribunal noted that the determination of the host state’s territory is separate from assessing the date of the investment. While the proper date for determining the territory of the host state is the date of implementing the challenged measures, this issue is considered independently of evaluating the investment’s date. Thus, by gaining effective control over the Crimean Peninsula, Russia assumed responsibilities under the BIT with respect to the Ukrainian investors that had previously made their investments in that region.

By dismissing the third and fourth jurisdictional objections, the tribunal recognized that the claimant had made an investment under Article 1(1) of the BIT and that it had standing in the proceedings as a qualified investor. It found that DTEK Krymenergo was competent under both Ukrainian and Russian law to make an investment in Crimea, and no issue of illegality of investment was proven.


Russia submitted that the DTEK Krymenergo’s claim was inadmissible because the 2012 acquisition by DTEK Holdings of a 45% shareholding in the claimant, which gave the buyer control over the company, allegedly involved large-scale corruption. The tribunal dismissed this objection. It observed that Russia’s allegations did not relate to any of the claimant’s actions but rather an alleged corruption scheme between the Ukrainian state and the claimant’s buyer. Further, it found that although it has been proven that Rinat Akhmetov, owner of DTEK Energy Group, had had close political ties with the Ukrainian state, the respondent did not prove his criminal past. Finally, the tribunal noticed that Russia’s allegations related only to the person of Akhmetov in general; however, they did not provide any particular proof of fraudulent actions with respect to the acquisition of Krymenergo (para 609). Thus, the tribunal found the claim admissible.

Russia committed an unlawful expropriation

The tribunal found that the challenged measures could be attributed to the respondent. By virtue of the annexation treaty, Russia assumed responsibility for the actions of Crimean authorities. For this reason, the amendment of the expropriation resolution issued by the State Council of the Republic of Crimea, based on which the claimant’s assets were confiscated, was attributable to the Russian Federation under Article 4 of the ILC Articles on State Responsibility (689–94).

The tribunal stated that implemented measures constituted a direct expropriation. The respondent’s defences concerning the legality of the expropriation were not accepted. The tribunal found that the lack of any compensation provided to the investor, failure to identify clearly and explain the reasons for expropriating the claimant’s assets, lack of any public purpose in the expropriation, as well as the discriminatory character of the implemented measures, rendered them unlawful. In addition, the tribunal stated that the Russian actions amounted to a violation of not only Article 5 of the BIT (expropriation), but also Article 2 (full and unconditional protection) and Article 3 (National Treatment and MFN Treatment).


In calculating the damages, the tribunal discussed the advantages and disadvantages of different methodologies for determining the fair market value of the expropriated assets. It took into regard (i) the depreciated replacement cost (DRC) method, proposed by the claimant’s expert, Carlos Lapuerta; (ii) the auction price method, favoured by the respondent’s experts, Boaz Moselle and Julian Delamer; (iii) the book value approach, referred to by the experts of both parties; (iv) the price of the listed shares; and (v) the discounted cash flow (DCF) method, as calculated by the claimant’s expert.

The tribunal decided that “each of the valuation methods should be taken into consideration and that each alternative should be attributed a reasonable weighting, established by the Tribunal taking into consideration the specific strengths and weaknesses of each methodology” (para 951). The tribunal awarded, with regards to all the above valuation approaches, the respective weighting of 10%, 30%, 30%, 10%, and 20%. The weighted average of these alternatives was USD 207.8 million, which was found by the majority to adequately represent the fair market value of expropriated assets. Arbitrator J. W. Rowley issued a separate opinion on quantum in which he argued that a different weighting would be more justified.

Russia was ordered to pay the above amount together with the compound interest on an annual basis from the valuation date until the date of payment at the 3-month LIBOR rate for USD plus 1%, as indicated in Article 5(2) of the BIT. The tribunal also stated that the respondent should reimburse the claimant the amounts of USD 1,362,422.88 paid as administrative costs and USD 9,401,644.76 incurred as legal costs.


This award discusses an important issue of territory in international investment law. Although Article 1(4) of the 1998 Ukraine–Russia BIT defined the territory of each contracting party “as determined in conformity with international law,” the tribunal, having applied the rules of interpretation of treaties contained in the VCLT, found that this definition did not refer to the issue of sovereignty of a particular state over a given geographical area. Thus, the tribunal avoided discussing the controversial topic of sovereignty over the Crimean Peninsula and emphasized the importance of Russia’s de facto control over this territory. The award raises questions as to the applicability of the basic principles of public international law, such as the sovereignty of a state over its territory, in the realm of the investor–state dispute settlement system.

Notes: The tribunal was initially composed of Stanimir Alexandrov (presiding arbitrator, appointed by the wing arbitrators), J. William Rowley (claimant’s appointee), and Vladimir Pavić (appointed by the appointing authority, who was designated by the Secretary-General of the PCA due to Russia’s nonparticipation in arbitrator appointment). In the course of the proceedings Stanimir Alexandrov resigned due to his relationship with the claimant’s appointed expert and was replaced by Juan Fernández-Armesto as a presiding arbitrator.

Author: Jan Bałdyga is an LL.M. candidate at the Geneva LL.M. in international dispute settlement (MIDS) and a PhD candidate in private law at the University of Warsaw.