Protection of Foreign Investments in Ukraine: Legal Framework and Main Guarantees
Attracting foreign capital remains one of the key factors for the development of Ukraine’s economy. Accordingly, the protection of foreign investments has become especially important in the current economic and political environment.
Ukrainian legislation, together with international treaties ratified by Ukraine, provides a broad range of legal instruments aimed at safeguarding the rights of foreign investors in the event of investment disputes. These instruments are designed to ensure legal certainty, predictability, and fair treatment for foreign businesses operating in Ukraine.
This article outlines the main guarantees available to foreign investors under Ukrainian law, as well as the protection mechanisms established by international investment agreements.
Guarantees for Foreign Investors under Ukrainian Legislation
The main rights and guarantees for foreign investors are established in the Law of Ukraine on the Foreign Investment Regime of 19 March 1996 No. 93/96-VR and the Law of Ukraine on Protection of Foreign Investments in Ukraine of 10 September 1991 No. 1540a-XII.
These legislative acts form the core legal framework governing foreign investment activities and defining the basic principles for the protection of investments in Ukraine.
Ukrainian law provides foreign investors with the following guarantees:
- Stability of investment conditions
If future legislation changes the guarantees for the protection of foreign investments, the state is obliged, at the investor’s request, to apply the previous guarantees for ten years from the date such changes enter into force. This rule protects investors from any deterioration of investment conditions during a ten-year transition period.
- Protection against nationalisation and requisition
Foreign investments in Ukraine are not subject to nationalisation. State authorities are prohibited from compulsory seizure (requisition) of foreign investments, except in exceptional circumstances, such as natural disasters, accidents, epidemics, or military actions. Even in such cases, investors are entitled to prompt, adequate, and effective compensation for the value of the seized property.
- Return of investments and income
In the event of termination of investment activities, a foreign investor has the right to recover its investments. No later than six months from the date of termination, the investor is guaranteed the return of invested funds, either in kind or in the investment currency, in the amount of the actual contribution, without payment of customs duties. Investors are also entitled to transfer abroad the income received from investments, in monetary or in-kind form, at real market value.
- Free repatriation of profits
After payment of applicable taxes and charges, foreign investors may freely and without delay transfer abroad profits, income, and other legally obtained funds in foreign currency. This guarantee allows investors to manage their revenues efficiently and reduces currency and regulatory risks.
In addition to the guarantees listed above, Ukrainian legislation provides further protection mechanisms, including:
- compensation for losses caused by unlawful actions of state authorities; and
- application of the most-favoured-nation treatment, where provided for by international treaties.
Together, these guarantees form the foundation of Ukraine’s legal regime for the protection of foreign investments and are intended to ensure legal stability for international business operations.
Bilateral Investment Treaties and International Protection Mechanisms
The most common investment protection standards established in bilateral investment treaties include the obligation to provide fair and equitable treatment, protection against expropriation, full protection and security, as well as national treatment and most-favoured-nation treatment.
The standard of fair and equitable treatment requires the host state to ensure fair, transparent, and non-discriminatory treatment of foreign investors and their investments. It is intended to protect investors from arbitrary, inconsistent, or unjustified actions by public authorities. A notable example is Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB/06/18, where the investor alleged that Ukrainian authorities unfairly and discriminatorily denied his applications for additional radio frequency licences. The arbitral tribunal found that Ukraine had breached the BIT with the United States and awarded compensation of approximately USD 8.7 million.
Protection against expropriation is another fundamental guarantee under BITs. These treaties prohibit both direct and indirect expropriation without prompt, adequate, and effective compensation. Expropriation is permitted only when it is carried out in the public interest, on a non-discriminatory basis, and accompanied by fair compensation. In Alpha Projektholding GmbH v. Ukraine, ICSID Case No. ARB/07/16, an Austrian investor challenged Ukraine’s treatment of its investment in a hotel development project in Kyiv. The ICSID tribunal concluded that Ukraine had indirectly expropriated the investor’s rights and breached the fair and equitable treatment standard under the Austria–Ukraine BIT by depriving the claimant of the economic value of its rights under the relevant joint activity agreements. The tribunal awarded the investor approximately USD 2.9 million in compensation.
The standard of full protection and security obliges the state to take all necessary measures to safeguard investments, including ensuring their physical and legal security. This obligation requires the authorities to protect investors against unlawful actions by third parties and improper conduct by public bodies.
In addition, BITs usually contain provisions on national treatment and most-favoured-nation treatment. These standards require Ukraine to grant foreign investors treatment no less favourable than that accorded to domestic investors and investors from third countries. Although some treaties provide for exceptions, for example in relation to land ownership or participation in privatisation, the general principle of non-discrimination remains central to the investment protection regime.
The existence of bilateral investment treaties provides foreign investors with a high degree of legal certainty and confidence that their investments in Ukraine are protected by international law. Where the host state breaches treaty obligations, investors may rely on the dispute resolution mechanisms provided in the relevant agreement, including recourse to international investment arbitration.
For a comprehensive and up-to-date list of bilateral and multilateral investment treaties to which Ukraine is a party, see the UNCTAD International Investment Agreements Navigator, available at: https://investmentpolicy.unctad.org/international-investment-agreements/countries/219/ukraine.
Multilateral Investment Agreements
In addition to bilateral treaties, Ukraine is a party to several key multilateral investment agreements that strengthen the system of investment protection. These include the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) of 1965, ratified by Ukraine in 2000, the Convention Establishing the Multilateral Investment Guarantee Agency (MIGA Convention) of 1985, and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) of 1958, which has been in force for Ukraine since 1961.
Ukraine is also a party to the Energy Charter Treaty (ECT), ratified in 1998 and in force since January 1999. This treaty contains specific provisions on the protection of energy-related investments and international arbitration of disputes between investors and states.
Investment Arbitration as a Mechanism for Protecting Investors’ Rights
One of the main advantages of international investment treaties is the availability of alternative dispute resolution mechanisms that allow investors to submit disputes with the host state to independent international arbitration, bypassing national courts.
As a rule, bilateral investment treaties provide that, at the investor’s discretion, disputes may be referred to arbitration under the auspices of the ICSID Convention or to ad hoc arbitration conducted under the UNCITRAL Arbitration Rules. In some treaties, arbitration before the International Chamber of Commerce in Paris is also envisaged as an alternative option.
Ukraine has been a party to the ICSID Convention since 2000, which enables investors from contracting states to bring claims against Ukraine before this forum. At the same time, Ukrainian investors are entitled to initiate proceedings against other states that are parties to the Convention. Under Ukrainian law, disputes between foreign investors and the state concerning investment regulation or the activities of enterprises with foreign participation fall within the jurisdiction of Ukrainian courts, unless otherwise provided by an international treaty. Accordingly, where a treaty contains an arbitration clause, such disputes are removed from national jurisdiction and may be resolved through international arbitration.
Jurisdictional Requirements in Investment Arbitration
Before initiating arbitration proceedings, the issue of jurisdiction is of critical importance. The arbitral tribunal must determine whether the dispute meets the criteria established by the applicable treaty and arbitration rules.
In particular, the claimant must qualify as an “investor” under the relevant treaty, the dispute must relate to an “investment” within the meaning of the treaty, and all procedural requirements must be satisfied. These requirements often include compliance with cooling-off periods, negotiation obligations, and limitation periods. If the tribunal finds that it lacks jurisdiction, it will dismiss the claim without examining its merits.
The case of Tokios Tokelės v. Ukraine, ICSID Case No. ARB/02/18, illustrates the importance of jurisdictional issues in investment arbitration. Ukraine challenged the tribunal’s jurisdiction on the ground that the claimant company, although incorporated in Lithuania, was ultimately controlled by Ukrainian nationals. The tribunal confirmed its jurisdiction, holding that under the Lithuania–Ukraine BIT the decisive test for investor nationality was the place of incorporation, not beneficial ownership or control. This decision demonstrates that arbitral tribunals will generally interpret jurisdictional requirements in favour of investor protection where the formal conditions of the relevant treaty are satisfied.
In general, investment tribunals adopt a relatively liberal approach to jurisdiction, provided that the claimant complies with the treaty framework. This approach enhances legal certainty for investors but also increases the exposure of states to international claims.
Conduct and Outcome of Arbitration Proceedings
Investment arbitration proceedings are usually complex and time-consuming. In most cases, the examination of a dispute takes several years and culminates in the issuance of a final arbitral award.
Where a breach of treaty obligations is established, the tribunal may order the state to pay monetary compensation to the investor. This compensation may include damages for lost profits, interest, and, in some cases, reimbursement of legal costs and arbitration expenses. Awards rendered in investment disputes against Ukraine are generally public, which enables legal practitioners and investors to analyse existing precedents and assess litigation risks.
As of early 2026, Ukraine has been involved in at least 47 known investor-State arbitration cases under international investment agreements; some disputes were settled or decided in Ukraine’s favour, while others resulted in compensation awards to investors.
Recognition and Enforcement of Investment Arbitration Awards
After obtaining an arbitral award in its favour, a foreign investor faces a practical challenge: ensuring the effective enforcement of the decision, especially where the state is reluctant to comply voluntarily. The recognition and enforcement of investment arbitration awards in Ukraine follow procedures similar to those applicable to commercial arbitration, taking into account Ukraine’s obligations under international conventions.
In this context, two distinct enforcement regimes should be distinguished: the regime applicable to awards rendered under the ICSID Convention and the regime applicable under the New York Convention.
Under the ICSID Convention, arbitral awards are binding on all contracting states and must be enforced as if they were final judgments of domestic courts. A distinctive feature of the ICSID system is the absence of any possibility of review or appeal before national courts. The only available remedy is the annulment procedure within the ICSID framework itself, conducted by a special ad hoc committee.
Once an ICSID award becomes final and all internal review mechanisms are exhausted, the state is obliged to recognise and enforce it without substantive review. Ukrainian courts have no authority to reconsider the merits of such decisions or to refuse enforcement on public policy grounds.
This approach was expressly confirmed by the Supreme Court of Ukraine in its decision of 2 September 2022 in case No. 824/182/21. In this case, a Ukrainian investor attempted to avoid enforcement of an ICSID award ordering the payment of legal costs in favour of Latvia, invoking public policy arguments. The Court rejected these arguments and emphasised the direct applicability of Article 54 of the ICSID Convention, which obliges states to enforce awards as if they were domestic court judgments.
Accordingly, in the case of ICSID awards, an investor is required only to submit a certified copy of the award to the competent Ukrainian appellate court in order to obtain a writ of execution. The court has no discretion to refuse recognition or to review the award on substantive grounds.
Where an investment dispute is resolved outside the ICSID framework, for example, under the UNCITRAL Arbitration Rules or through institutional arbitration, the recognition and enforcement procedure is governed by the New York Convention and the Civil Procedure Code of Ukraine.
In such cases, the investor must file an application with the appellate court seeking recognition and permission for the enforcement of the foreign arbitral award. Ukrainian courts may refuse recognition only on the limited grounds listed in Article V of the New York Convention. These grounds include procedural irregularities, the absence of a valid arbitration agreement, excess of jurisdiction by the arbitral tribunal, or violations of public policy.
The list of refusal grounds is exhaustive and is interpreted narrowly by Ukrainian courts. In practice, refusals to enforce investment arbitration awards are rare, and most decisions receive enforcement authorisation. Ukrainian legislation does not distinguish between commercial and investment arbitration (except for the ICSID awards as mentioned above) for enforcement purposes, and the general procedural rules apply to both categories.
The limitation period for filing an application for recognition and enforcement in Ukraine is three years from the date on which the arbitral award becomes final. If enforcement is authorised, the court issues a writ of execution enabling compulsory enforcement proceedings.
After obtaining a writ of execution, the investor, where voluntary compliance is delayed, may submit it to the State Enforcement Service of Ukraine or to a private enforcement officer for enforcement.
Enforcement proceedings against the state may last from several months to several years and are often complicated by issues of sovereign immunity. Under international law and the Law of Ukraine on Enforcement Proceedings, compulsory execution against state assets is limited to assets used for commercial rather than sovereign purposes.
It should also be noted that Ukraine has established a special mechanism for financing the execution of decisions rendered by foreign jurisdictional bodies. This mechanism is regulated by Resolution of the Cabinet of Ministers No. 408 of 7 March 2007.
Under this procedure, funds for the payment of debts arising from international arbitration awards may be allocated from the State Budget of Ukraine. The existence of this mechanism demonstrates the state’s intention to comply with its international obligations. However, in practice, the implementation of this procedure may be delayed due to administrative and budgetary constraints.
Recent Developments and Trends (2024–2026)
Since 2022, Ukraine’s investment protection regime has been operating under the extraordinary conditions of martial law and ongoing armed conflict. Wartime regulatory measures, including restrictions on currency operations, temporary limitations on certain property rights, and enhanced state control in strategic sectors, have significantly affected the legal environment for foreign investors. While these measures are largely justified by national security considerations, they have increased regulatory uncertainty and heightened the risk of disputes, particularly in sectors such as energy, infrastructure, logistics, and agriculture.
In parallel, Ukraine has intensified its efforts to align its investment and regulatory framework with European Union standards in the context of its EU accession process. Reforms in corporate governance of state-owned enterprises, public procurement, competition policy, and judicial independence are aimed at improving transparency and reducing political and administrative risks for investors. These developments are expected to strengthen the institutional foundations of investment protection and enhance confidence in Ukraine’s long-term investment climate, despite short-term challenges associated with wartime conditions.
Another notable trend is the growing importance of investment disputes related to war-related damage, expropriation, and loss of control over assets in temporarily occupied territories. Foreign investors increasingly rely on bilateral investment treaties and multilateral instruments to seek compensation for destroyed, seized, or inaccessible property. At the same time, Ukraine has been developing mechanisms for post-war reconstruction and international compensation, which may influence the future landscape of investment claims and settlement practices. In this context, proactive legal risk management and careful structuring of investments remain essential for foreign businesses operating in or entering the Ukrainian market.
Conclusion
Ukraine has established a comprehensive legal framework for the protection of foreign investments through national legislation and international treaties. This system provides investors with access to substantive guarantees and international arbitration mechanisms. However, the effectiveness of these protections largely depends on consistent enforcement, procedural transparency, and the state’s ability to comply with arbitral awards.
About the Author
Vitaliy Kozachenko is the Managing Partner at Fortior Law, an international law firm with offices in Geneva, Kyiv, London, New York, Nicosia, Taipei, and Tbilisi. He specialises in commercial litigation, international arbitration and investment dispute resolution.
Vitaliy is admitted to practice in New York and in England & Wales. He is a member of the Chartered Institute of Arbitrators and a supporting member of the London Maritime Arbitrators Association. Over the course of his career, he has been involved in numerous complex cross-border disputes, including significant litigation in the High Court in London and arbitrations before the LCIA involving major international corporate and shareholder matters.
He holds an LL.M. in Banking and Finance from Boston University, studied European Law and International Arbitration through the Erasmus programme at the Catholic University of Leuven, and earned an LL.B. from Queen Mary, University of London. Vitaliy is fluent in English, Ukrainian, Russian and French.
