Tokios Tokelés v. Ukraine
ICSID · Investment (ICSID and treaty) · Ukraine · 26 Jul 2007
Why it matters
Tokios Tokelės v. Ukraine is a landmark case on the standard of proof for expropriation and fair and equitable treatment claims based on a pattern of state harassment. The majority's requirement of a 'manifest and gross failure' of justice sets a high bar for treaty breaches arising from domestic proceedings. The dissent highlights the tension between state sovereignty and investor protection, influencing subsequent investment treaty jurisprudence.
Summary
Tokios Tokelės, a Lithuanian company, owned two Ukrainian subsidiaries, Taki spravy and TSII, which operated a successful printing and publishing business. In 2002, during parliamentary elections, Taki spravy printed campaign materials for the opposition BYT bloc. The State Tax Administration (STA) issued a press statement accusing Taki spravy of illegal activities, including printing banned materials and tax evasion. This was followed by a series of raids, seizures of documents, tax investigations, and criminal proceedings against the company's director, Oleksandr Danylov. The claimant alleged that these actions were a politically motivated campaign ('nayizd') to punish the company for supporting the opposition, amounting to expropriation and a breach of fair and equitable treatment under the Lithuania-Ukraine BIT. The tribunal, by majority (Lord Mustill and Professor Bernardini), dismissed the claim, finding that the evidence did not prove a coordinated state campaign or a treaty breach. They noted that the state's actions, while sometimes flawed, were within its regulatory authority and did not meet the high threshold of a manifest and gross failure of justice. Arbitrator Price dissented, arguing that the state's unexplained and inaccurate actions, including the press statement and repeated criminal case openings, shifted the burden to the state to justify its conduct, which it failed to do, thus breaching Article 3. The award was dispatched on 26 July 2007.
The detail
Parties: Tokios Tokelés v. Ukraine
Case number: ICSID Case No. ARB/02/18
Outcome: The Tribunal dismissed the claim; the majority found no breach of the Treaty. Arbitrator Price dissented, finding a breach of Article 3 (fair and equitable treatment).
Applicable law: Agreement Between the Government of Ukraine and the Government of the Republic of Lithuania for the Promotion and Reciprocal Protection of Investments (1994); ICSID Convention; Ukrainian law.
Issues in play: The case involved the fair and equitable treatment standard under the bilateral investment treaty versus Ukraine's sovereign right to investigate tax and criminal matters. The majority required a manifest and gross failure of justice for a treaty breach, while the dissent argued that unexplained arbitrary acts sufficed.
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