Chinese investors in Motor Sich have initiated international arbitration against the State of Ukraine for 3,5 billion dollars

Chinese investors in Motor Sich have initiated international arbitration against the State of Ukraine for 3,5 billion dollars

On 5 December, Chinese investors of PJSC Motor Sich initiated international arbitration seeking to recover 3,5 billion dollars from the State of Ukraine, as they characterize the actions of the Ukrainian authorities as an expropriation of their investments in the company.

The corresponding notice was posted on the official website of the DCH group, a partner of Skyrizon — one of Motor Sich’s Chinese shareholders.

“On 5 December 2020, Chinese investors of PJSC Motor Sich sent a notice to the Ukrainian government initiating international arbitration against the State of Ukraine under the Agreement between the Government of Ukraine and the Government of the People’s Republic of China on the Promotion and Reciprocal Protection of Investments,” the DCH website states. As is known, the Chinese investors acquired shares in the private company Motor Sich back in 2016, and also invested over 100 million dollars in production development.

However, effective control of the enterprise is still exercised by Motor Sich’s former owner, the company’s “honorary president” Vyacheslav Bohuslayev, and the management he controls.

The Chinese investors still do not have the ability to exercise their rights because the company’s shares are subject to a number of similar arrests at the initiative of the SBU and the GPU, and the Antimonopoly Committee systematically refuses to consider concentration applications. The investigation initiated by the SBU has not been conducted over all these years; there are neither suspects nor explanations in that case.

Attempts by various Motor Sich shareholders to challenge the arrest of shares in Ukrainian courts also yielded no result; shareholder meetings of the company have not been held for 3 years, dividends are not paid, and shareholders are unable to participate in management. According to a number of experts, there are grounds to suspect corrupt motives for blocking Chinese shareholders’ access to the company. As a result, on 4 September 2020, the Chinese investors of PJSC Motor Sich sent the Ministry of Justice of Ukraine a Notice of Investment Dispute demanding compensation of 3,5 billion dollars, thereby recording their intention to refer the matter to international arbitration. Since then, one meeting of the Interagency Working Group under the auspices of the Ministry of Justice of Ukraine has taken place, the results of which were not communicated to the Chinese shareholders.

Accordingly, no pre-arbitration settlement of the investment dispute occurred. Oleksandr Yaroslavsky, owner and president of DCH, on 26 November addressed an open letter to the President of Ukraine, the prime minister, and the leadership of the Verkhovna Rada, in which he writes that the Chinese investors of PJSC Motor Sich are unequivocally determined to seek justice in international arbitration: “For the past four years they have had no opportunity to exercise their rights as shareholders due to the actions of the Ukrainian authorities… And they do not see prospects for a fair resolution of the matter within the Ukrainian legal framework.”

Experts from the world’s most respected law firms are convinced that the Ukrainian authorities have no grounds to prevent the Chinese investors of PJSC Motor Sich from contributing to the development of the Ukrainian economy and the revival of industry. With a high degree of probability, the international arbitration tribunal will share that view. As a citizen of Ukraine sincerely devoted to his country, and a businessman interested in its economic growth, I consider it my duty to try to prevent further adverse developments that could inflict serious damage on our state’s financial condition and its international reputation.”

According to media reports, the Chinese investors in the international arbitration will be represented by globally known law firms: WilmerHale, DLA Piper, and Bird & Bird, where the founders of the modern foundational principles of investor protection work — principles that underpin many related intergovernmental agreements. In addition, one of DLA Piper’s partners is currently Doug Emhoff, the husband of Kamala Harris, who is to be sworn in as Vice President of the United States on 20 January 2021.

Recall that on 4 September the Chinese company Skyrizon sent a notice to the Ministry of Justice of Ukraine of its intention to initiate international arbitration against the State of Ukraine. The investors assessed their damages at $3,5 billion.