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Investment disputes in Ukraine increasingly arise because of wartime measures and regulatory interference – including cases where losses occurred through Russia’s military aggression, occupation of territories, destruction of infrastructure, seizure of assets, and extensive sanctions regimes. These circumstances have fundamentally reshaped how foreign investors seek protection and when they require legal representation.
When Do Foreign Investors Need Lawyers in Ukraine?
Russia’s full-scale invasion has not only redrawn geopolitical realities but has stress-tested the entire framework of international investment protection. The armed aggression of the Russian Federation has severely affected the rights and legitimate interests of foreign investors in Ukraine, resulting in the destruction of industrial and commercial assets, the occupation of Ukrainian territories, the nationalization or forced seizure of facilities, the introduction of market restrictions and price-regulation measures, as well as the imposition of sanctions on investors or affiliated entities.
As a result, foreign companies face disputes that emerge through a combination of host-state measures and a third-state aggression, which result in a uniquely complex environment for investment protection.
Against this backdrop, the interaction between Bilateral Investment Treaties (BITs), ICSID arbitration, and domestic Ukrainian remedies has evolved rapidly. Investors today have to navigate overlapping legal regimes to preserve their rights, assess state responsibility, and secure compensation for wartime damages.
This article provides an overview of how these mechanisms function under wartime conditions, explains the shifting standards of state liability, and outlines the emerging legal avenues for recovering losses suffered by foreign investors in Ukraine.
Bilateral Investment Treaties and Legal Protections for Investors in Ukraine
Ukraine’s network of more than seventy Bilateral Investment Treaties (BITs) offers foreign investors a robust system of substantive protections, including fair and equitable treatment (FET), full protection and security (FPS), and safeguards against unlawful expropriation. Even in wartime, BITs remain the primary legal framework through which investors seek protection and legal remedies in Ukraine.
Before Russia’s full-scale invasion, arbitral tribunals had already considered Ukraine’s BIT obligations in cases such as Krederi Ltd. v. Ukraine (ICSID Case No. ARB/14/17), where the tribunal examined the limits of FET and FPS in administrative and regulatory settings. Today, however, the wartime destruction of assets, disruption of business operations, and military occupation have created unprecedented legal challenges, particularly where investor losses arise because of wartime events, including third-state aggression.
BITs traditionally hold host states accountable for their own conduct rather than for the actions of foreign aggressor states. The distinction between a state’s failure to protect and harm inflicted by a third state has become central to investment protection in Ukraine. As a result, investors must navigate a complex landscape where Ukraine’s responsibilities are shaped by doctrines such as force majeure and necessity, while Russia’s liability stems from violations of peremptory norms of international law.
In this environment, foreign investors increasingly rely on a legal counsel to assess available investment protections, determine the scope of state responsibility, and develop strategies for recovering losses sustained through wartime conditions. BITs continue to serve as a foundational mechanism, but their application is now intertwined with the realities of armed conflict and cross-border wrongdoing.
ICSID Arbitration and the Jurisdictional Challenge in Wartime
ICSID arbitration remains the principal forum for investor-State dispute settlement involving Ukraine. However, Russia’s full-scale military aggression has introduced complex jurisdictional challenges, particularly where investor losses arise because of hostilities, including the actions of Russian armed forces. Under the Articles on Responsibility of States for Internationally Wrongful Acts (ARSIWA), such damage is not attributable to Ukraine, as it results from the conduct of a foreign state.
Some investors may attempt to pursue claims against Ukraine by alleging a breach of the Full Protection and Security (FPS) standard, arguing that the State failed to take sufficient preventive measures. Yet arbitral tribunals consistently interpret FPS as an obligation of due diligence rather than strict liability. Given the scale and intensity of Russia’s invasion, proving that Ukraine did not act with due diligence is exceptionally difficult. As a result, the more viable legal option for many investors lies in directing claims against the Russian Federation itself.
ICSID or UNCITRAL-based investment arbitration against Russia may be an appropriate mechanism for investors whose assets were damaged, destroyed, or expropriated in temporarily occupied territories. In such cases, BITs between Ukraine and Russia, or between Russia and the investor’s home state, may serve as the jurisdictional basis, particularly where the claim is advanced not by a Ukrainian subsidiary but by a foreign shareholder or parent company.
Arbitral tribunals have already affirmed Russia’s international responsibility for expropriation and unlawful interference in Crimea. Decisions in Everest Estate LLC and Others v. The Russian Federation (PCA Case No. 2015-36) and Naftogaz v. The Russian Federation (PCA Case No. 2017-16) found that Russia’s actions in the occupied peninsula constituted expropriation under the Ukraine-Russia BIT. These precedents offer persuasive legal authority for extending similar reasoning to widespread destruction and interference across other parts of Ukraine affected by the war.
In this context, foreign investors increasingly require legal counsel to assess jurisdictional pathways, evaluate treaty protections, and develop strategies for initiating claims, whether against Ukraine or directly against the Russian Federation. Wartime circumstances make the jurisdictional analysis more complex, but also open additional avenues for redress through international arbitration.
Recent Trends in Investment Disputes Against Ukraine
Since 2022, Ukraine’s legislative and administrative response to Russian aggression has triggered a clear shift in the landscape of investor-State disputes. National measures adopted under sanctions frameworks, asset-confiscation programmes, criminal-forfeiture mechanisms, administrative forced recovery, and ad hoc nationalization schemes have increasingly generated international claims. These measures, aimed at depriving sanctioned individuals and entities of assets used to support aggression, have predictably prompted litigation from affected owners and affiliated companies.
Two principal dispute vectors are now emerging.
The first concerns the claims brought by sanctioned persons or their affiliated investors who challenge domestic confiscations and nationalizations as unlawful takings or violations of BIT protections. Several investors have already initiated proceedings contesting the seizure of industrial facilities and other assets nationalized under Ukraine’s sanctions legislation, with some cases progressing to ICSID or other ISDS mechanisms.
The second vector is defensive in nature: Ukrainian courts and public-policy authorities are increasingly treating sanctions and confiscation as matters of national public policy. This approach affects the recognition and enforcement of foreign arbitral awards, particularly those that would benefit sanctioned parties. Recent Supreme Court commentary and judicial practice suggest that enforcement of awards in favour of sanctioned recipients will face significant obstacles at the domestic level.
At the interstate and multilateral level, the legal environment has been further complicated by discussions regarding the use of frozen Russian state and private assets for reparations or reconstruction funding. Initiatives such as the International Register of Damage Caused by the Aggression of the Russian Federation Against Ukraine, and international debates on reallocating frozen central-bank reserves, have generated both momentum for a future reparations architecture and additional uncertainty for tribunals evaluating claims against Ukraine or Russia. As a result, the current dispute-resolution landscape is highly fragmented: outcomes increasingly depend on the forum of enforcement (whether domestic courts, ICSID, or a prospective international compensation commission) and on the intersection between sanctions, public policy, and property-rights protections.
For legal practitioners advising investors, the implications are evident. Claim-preparation and portfolio strategies must be recalibrated to reflect complex jurisdictional questions and evolving enforcement risks. Counsel must carefully document ownership structures, timing, and compliance with sanctions regimes, and should anticipate that even a favourable award may encounter obstacles at the enforcement stage if it conflicts with national sanction policy. Conversely, states undertaking confiscation measures must ensure strong procedural safeguards, a clear statutory basis, and comprehensive evidentiary records to defend against potential expropriation and due-process challenges before international tribunals.
In the evolving environment where investment protection, sanctions enforcement, and emerging reparations mechanisms converge, outcomes are increasingly shaped not only by legal argumentation but also by political context and enforcement feasibility. Ilyashev & Partners has substantial experience advising on Ukraine’s sanctions regime, representing clients before governmental authorities, and challenging personal and economic sanctions in Ukrainian courts. Numerous dispute notifications and claims were submitted during 2023-2024 following the application of sanctions and the nationalization of assets.
Recovery of Wartime Damages: From Principle to Practice
The question of compensating wartime damages suffered by investors has become one of the central issues in contemporary international law. With Ukraine’s reconstruction needs now estimated at more than USD 400 billion, the scale of economic loss sustained by both foreign and domestic investors is unprecedented. Many of these losses arose because of wartime events, including large-scale destruction, occupation, business interruption, and the unlawful appropriation of assets.
In response, Ukraine and its international partners have launched the International Register of Damage Caused by the Aggression of the Russian Federation Against Ukraine, established under the auspices of the Council of Europe and headquartered in The Hague. The Register’s purpose is to collect, verify, and preserve evidence of damage suffered by individuals, businesses, and the state itself. It represents the first institutional step toward a comprehensive international compensation mechanism that could, in the future, distribute funds derived from frozen Russian sovereign and private assets held abroad.
Historical precedent exists for such a mechanism. The United Nations Compensation Commission (UNCC), created after Iraq’s invasion of Kuwait, processed hundreds of thousands of claims and awarded more than USD 52 billion in compensation financed through Iraqi oil revenues. While the circumstances of Ukraine differ, the UNCC’s approach to claim categorization, evidentiary standards, and phased compensation provides a valuable model for designing a future reparations framework for losses inflicted as a result of Russia’s aggression.
Legal Basis for Russia’s Liability
Russia’s international responsibility for the full spectrum of wartime damages is grounded in its violation of the prohibition of aggression set out in Article 2(4) of the UN Charter and in customary international law. According to the principle of full reparation articulated in the Chorzów Factory judgment (1928), a state responsible for an internationally wrongful act must “wipe out all the consequences of the illegal act.” This standard applies with particular force to violations of peremptory norms.
Foreign investors whose assets have been destroyed, expropriated, or rendered unusable because of wartime hostilities, including indiscriminate bombardment, occupation, or the systematic targeting of infrastructure, may therefore seek reparations under the doctrine of erga omnes obligations. Russia’s acts of aggression constitute breaches of jus cogens norms, triggering an unequivocal duty of restitution and compensation.
Although the Russian Federation has withdrawn from the European Court of Human Rights (ECHR), the Court continues to examine inter-state and individual applications concerning Russia’s conduct, as demonstrated in Ukraine and the Netherlands v. Russia (Applications Nos. 8019/16, 43800/14, 28525/20, 11055/22). These proceedings are significant not only for establishing Russia’s liability but also for reinforcing the evidentiary and legal foundation upon which foreign investors may later rely in investment arbitration or before a dedicated reparations mechanism.
Domestic Remedies and Ukraine’s Legal Response
Despite the ongoing war, Ukraine has demonstrated notable institutional resilience, maintaining the functioning of its courts, legislative processes, and administrative bodies. The Law of Ukraine “On Compensation for Damage Caused by the Armed Aggression of the Russian Federation” establishes a domestic legal basis for documenting and assessing wartime losses suffered by individuals and companies. Ukrainian courts have already begun issuing judgments against the Russian Federation for damages inflicted on property and businesses because of military actions, including large-scale destruction, occupation, and targeted attacks on civilian infrastructure.
Although enforcing such judgments remains difficult due to the doctrine of sovereign immunity and the need for coordinated international action, these decisions serve an important function: they contribute to a consolidated evidentiary foundation that can be relied upon in future reparations processes and international proceedings.
Ukraine’s domestic mechanisms operate in parallel with international initiatives, most notably the International Register of Damage Caused by the Aggression of the Russian Federation Against Ukraine. The Register is designed to catalogue and authenticate claims for losses, injuries, and destruction resulting from Russia’s aggression, and is expected to form part of a broader reparations architecture alongside a future international compensation commission.
By ensuring procedural fairness, maintaining reliable documentation, and issuing judicial findings on Russia’s liability, Ukraine strengthens investors’ ability to substantiate claims before international tribunals once the enforcement of Russian assets becomes politically and legally achievable. In this way, domestic remedies play a critical complementary role in preparing the groundwork for future compensation and reinforcing investor protection during wartime.
Strategic Consideration for International Counsel
The protection of foreign investors’ rights in Ukraine is an inherently complex process that requires extensive preliminary assessment, particularly in a wartime environment where disputes often arise because of governmental measures, third-state aggression, or regulatory actions, including sanctions, occupation, and forced nationalization. Effective legal strategy therefore begins well before any formal dispute is initiated.
First, at Ilyashev & Partners we recommend conducting a comprehensive pre-arbitration assessment. This includes an asset audit, verification of ownership and corporate structure, and an analysis of all available investment-protection instruments: applicable BITs, multilateral treaties, domestic legal guarantees, and any sector-specific frameworks that might expand or limit investor rights.
Second, counsel should determine the most appropriate dispute-resolution pathway in light of the investor’s primary objectives. Depending on the factual matrix, this may involve pursuing remedies before Ukrainian courts, initiating investment arbitration, or combining domestic proceedings with international claims to reinforce the evidentiary record.
Third, it is essential to evaluate procedural and geopolitical constraints, including issues of state immunity, currency-control restrictions, the impact of sanctions regimes, and broader public-interest considerations. These factors increasingly shape both jurisdictional outcomes and enforcement prospects.
Finally, investors should consider initiating structured negotiations prior to commencing arbitration. Ukraine continues to demonstrate openness to constructive dialogue with foreign investors, and in certain cases early engagement may lead to more efficient and commercially viable solutions.
Conclusion: Toward a New Paradigm of Investment Protection
The Russian military aggression against Ukraine has fundamentally reshaped the landscape of international investment protection, exposing both the resilience and the limitations of existing treaty mechanisms. While BITs and ICSID arbitration continue to operate as core instruments safeguarding investor rights, they now function within a broader framework shaped by wartime realities, accountability for aggression, and the unprecedented scale of economic loss.
The emerging reparations architecture, which includes the International Register of Damage, Ukraine’s domestic compensation frameworks, and prospective international claims against the Russian Federation, marks a profound shift in how investor-State disputes are conceptualized and resolved. Investment protection is no longer limited to the bilateral legal relationship between the host State and the investor. It is increasingly interconnected with global enforcement of jus cogens norms, the doctrine of State responsibility for aggression, and new multilateral mechanisms designed to address losses arising because of wartime conduct, including large-scale destruction and occupation.
As these legal pathways continue to evolve, foreign investors navigating disputes in Ukraine require sophisticated, forward-looking strategies that combine treaty protection, domestic remedies, and international claims. The emerging paradigm underscores a central reality: even under conditions of armed conflict, adherence to the rule of law strengthens investor confidence and lays the foundation for future recovery, accountability, and just compensation.
Ilyashev & Partners is a leading Ukrainian law firm with a strong track record in representing foreign investors in complex investment disputes, including ICSID arbitration, BIT-based claims, sanctions-related litigation, and cases arising from wartime destruction and unlawful expropriation. Our team provides comprehensive legal support across all stages of investor-State disputes: from pre-arbitration strategy, asset and treaty analysis, and preparation of claims, to full representation before international tribunals and Ukrainian courts.
We advise clients affected by sanctions, nationalization measures, occupation, regulatory interference, and wartime losses – helping investors protect their assets, document damages, and pursue compensation through mechanisms such as BITs, ICSID, the International Register of Damage, and domestic remedies. Our experience spans investment protection, public international law, sanctions compliance, enforcement strategy, and cross-border dispute resolution.
With decades of experience in high-stakes litigation and arbitration, Ilyashev & Partners is a trusted advisor to global investors seeking clarity, legal certainty, and effective protection of their rights in Ukraine.
To learn more, please visit the Ilyashev & Partners Law Firm website or contact Marina Riashchenko directly.
Author: Marina Riashchenko, Counsel at Ilyashev & Partners Law Firm