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.