By Damon Vis-Dunbar
13 October 2008
Details of an arbitration involving a Latvian investor and the government of the Ukraine have emerged following the public release of the tribunal’s final award, some seven months after the decision was rendered. The Ukraine has been absolved of charges that it had breached the Energy Charter Treaty (ECT), a multilateral agreement that governs investment in the energy sector.
The suit was launched in 2005 by Amto, an investment company based in Riga, owned by a holding company in Liechtenstein, and controlled by a Russian. In 1999, Amto purchased a majority stake in a Ukraine company called EYUM-10, which serviced the Ukraine’s state-owned nuclear power company, Energoatom. Outstanding debt owed to EYUM-10 by the ailing nuclear power company formed the foundation of Amto’s case against the Ukraine.
According to Amto, its efforts to invest in the Ukraine’s nuclear power sector via EYUM-10 were met with resistance, and once the investment was made, the state-owned power company deliberately refused payment of debts owed to EYUM-10.
In particular, Amto drew attention to the Ukraine’s judiciary and bankruptcy law, holding that they failed to live up to the standard required by international law. These alleged deficiencies had frustrated efforts to retrieve the debt owed to EYUM-10 through a series of bankruptcy proceedings, argued Amto.
However, while the Ukraine’s bankruptcy law is not flawless, the tribunal found no reason to believe that it did not give effective means for creditors to exert their rights. Nor did the tribunal find evidence that the government had interfered in the bankruptcy proceedings.
Indeed, the tribunal would go on to dismiss all of Amto’s claims, including allegations related to denial of justice and the treaty’s umbrella clause.
The Ukraine also submitted a counterclaim for arbitration costs and non-material injury; the latter stemming from alleged injury to the Ukraine’s reputation. But the counter-claim was dismissed for lack of applicable law.
The arbitration costs are to be split between the parties, and each was ordered to bear its own legal costs.
The final award in Limited Liability Company AMTO (Claimant) and Ukraine, Arbitration Institute of the Stockholm Chamber of Commerce, Arbitration no. 080/2005 is available for download by clicking here.