This Final Award addresses the merits, quantum, and costs in an arbitration administered by the Permanent Court of Arbitration (PCA) under the 1976 UNCITRAL Rules. The dispute, brought by eleven Ukrainian companies against the Russian Federation, arose under the 1998 Agreement between Ukraine and the Russian Federation on the Encouragement and Mutual Protection of Investments (BIT). The Claimants alleged that their investments in a network of petrol stations and related assets in Crimea were unlawfully expropriated following the Russian Federation's incorporation of the peninsula in March 2014. The Respondent, the Russian Federation, did not participate in the merits phase of the proceedings.

Tribunal's Analysis on Liability

The Tribunal first addressed the attribution of the alleged wrongful acts to the Russian Federation. It held that the conduct of the Crimean State Council and the Sevastopol Government was attributable to Russia under Article 4 of the ILC Articles on State Responsibility, as these entities became organs of the Russian state following the incorporation. The Tribunal further found that the actions of the so-called "Paramilitary Forces" that physically seized the Claimants' assets were attributable to Russia under both ILC Article 5, as they were empowered by Russian-installed authorities to exercise elements of governmental authority, and ILC Article 11, as Russia subsequently acknowledged and adopted their conduct through legislative and executive acts.

On the merits, the Tribunal concluded that the Russian Federation had unlawfully expropriated the Claimants' investments in breach of Article 5 of the BIT. The Tribunal found that the expropriation failed to meet any of the cumulative conditions for lawfulness under the treaty. Specifically, the measures lacked a public purpose, were discriminatory in nature (being motivated by political animus and specifically targeting assets perceived to be associated with Ukrainian businessman Mr. Igor Kolomoisky), were not carried out in accordance with due process of law, and were not accompanied by any compensation. Having found a breach of the expropriation standard, the Tribunal determined it was unnecessary to rule on the Claimants' other alleged treaty breaches.

Determination of Quantum and Reparation

For an unlawful expropriation, the Tribunal applied the customary international law standard of full reparation, as articulated in the Chorzów Factory case, requiring the re-establishment of the situation that would have existed absent the wrongful act. This was quantified as the fair market value (FMV) of the investments immediately prior to the expropriation. The Tribunal established the valuation date as 22 April 2014, the date of the physical seizure of the Claimants' headquarters, which resulted in the loss of control over their Crimean operations.

The Tribunal based its quantum determination on a blended valuation methodology, weighting the Discounted Cash Flow (DCF) approach at 85% and the Comparable Publicly Traded Company (CPTC) approach at 15%. While largely accepting the framework proposed by the Claimants' expert, the Tribunal made several key adjustments, informed by the analysis of its own appointed expert. It adopted a more conservative growth rate for the impact of planned renovations, relying on historical empirical data rather than the Claimants' higher forecasts. It also adjusted the terminal growth rate used in the DCF model to better reflect the macroeconomic uncertainties of the period. The Tribunal awarded a total of approximately US$34.6 million for the petrol stations and storage facilities, and a separate amount for a residential apartment, plus compound interest from the date of expropriation.

Decision on Costs

Reflecting the Claimants' success on jurisdiction and liability and their partial success on quantum, the Tribunal ordered the Russian Federation to bear 75% of the costs of the arbitration and 75% of the Claimants' legal fees and expenses.