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City-State N.V., Praktyka Asset Management Company LLC, Crystal-Invest LLC and Prodiz LLC v. Ukraine (ICSID)

Why it matters

This case is significant for its application of the fair and equitable treatment standard and expropriation provisions in the context of banking regulation. The tribunal's detailed analysis of the investor's legitimate expectations and the proportionality of state measures provides guidance for future investment treaty disputes involving financial institutions.

Summary

The case concerns four Dutch and Ukrainian investors who held shares in a Ukrainian bank, JSC 'Delta Bank'. Following the 2014 Ukrainian revolution and subsequent economic crisis, the National Bank of Ukraine (NBU) imposed stricter capital requirements and eventually declared Delta Bank insolvent, leading to its liquidation. The claimants alleged that Ukraine's actions, including the NBU's decisions and the bank's forced liquidation, violated the Netherlands-Ukraine BIT. The tribunal, by majority, found that Ukraine breached the fair and equitable treatment standard by failing to provide a stable and predictable regulatory framework and by treating the claimants in a discriminatory manner. It also found that the liquidation of the bank amounted to an indirect expropriation without adequate compensation. The tribunal awarded USD 8,910,490 in damages, plus interest. One arbitrator dissented on certain aspects of the liability findings.

The detail

Parties: City-State N.V., Praktyka Asset Management Company LLC, Crystal-Invest LLC and Prodiz LLC v. Ukraine

Case number: ICSID Case No. ARB/14/9

Outcome: The Tribunal found Ukraine violated fair and equitable treatment and expropriation provisions of the BIT, and ordered Ukraine to pay USD 8,910,490 plus interest and costs.

Quantum: USD 8,910,490

Applicable law: Netherlands-Ukraine BIT (1994), ICSID Convention, Arbitration Rules

Issues in play: The dispute involved the fair and equitable treatment standard (Article 3(2)) and expropriation (Article 6) under the Netherlands-Ukraine BIT, with the tribunal assessing whether Ukraine's actions in relation to the claimants' investments in a Ukrainian bank constituted a breach.

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