• Igor Nagai

    Partner, Lexwell & Partners

  • Olena Tregubova

    Senior Associate, Lexwell & Partners

Lexwell & Partners


Sophia Business Centre,

6 Rylsky Lane, 5th Floor,

Kyiv, 01001, Ukraine

Tel.: +380 44 330 0080

E-mail: lexwell@lexwell.com.ua

Web-site: www.lexwell.com.ua


Lexwell & Partners is a Kyiv-based Ukrainian law firm which has been offering high-end professional legal services to major international and leading Ukrainian companies since 2005. We focus on complex and high-profile national and cross-border matters and possess strong expertise in foreign investments, M&A, tax, real estate, litigation and international arbitration. We earned an excellent reputation which is highly ranked by the Legal 500, Chambers and Partners, IFLR1000, Ukrainian Law Firms, Kyiv Post, Legal Practice, Legal Newspaper. Our achievements include:

  • No. 5 by gross revenue (Legal Practice/Yuridicheskaya Practika, 2021);
  • No. 1 by revenue per lawyer (Legal Practice/Yuridicheskaya Practika, 2021);
  • No. 1 in high-value tax disputes (Legal Practice/Yuridicheskaya Practika, 2021);
  • Tier 1 for dispute resolution (The Legal500, 2021);
  • Tier 2 for tax, real estate and construction, commercial, corporate and M&A (The Legal500, 2021);
  • Recognized Practitioner in Dispute Resolution: Arbitration (Chambers & Partners, 2019).

Key clients of Lexwell & Partners are multinational and leading national companies, including ABN Amro, AET, Amstar, ArcelorMittal, Bridgestone, Bunge, Cargill, Chicago Mercantile Exchange, CRH, DuPont, East Metals, Eurobank, Evraz, Honda Trading, ING, Interpipe, Intesa Sanpaolo, Pfizer, PHV (Calvin Klein and Tommy Hilfiger), PwC, Rabobank, Red Bull, Marubeni, Millhouse, Morningstar, Naftogaz (National Oil & Gas Company), Schenker, Sojtz, Subaru, Sumitomo, Suzuki, Toyota, VS Energy.

Mechanisms for Compensation for Damage Caused to Investments as a Result of russian Aggression

At present, investors whose investments in Ukraine have been affected by the armed aggression of the russian federation may apply a number of legal mechanisms to indemnify their losses. All of them have certain peculiarities and difficulties in terms of their implementation. However, their thorough selection and application may still entail a positive outcome in the form of desired compensation, or ensure such compensation in the future when more effective mechanisms are elaborated. In this Article, we will consider some options available to investors whose property has been destroyed or damaged as a result of russian aggression in its war on Ukraine. 

International Investment Arbitration

Ukraine and the rf signed the Agreement on the Encouragement and Mutual Protection of Investments in 1998, under which the parties guarantee each other the complete and unconditional legal protection of investments made on their territories; exclude the possibility of expropriation of investments and application to the other party of discriminatory measures, which could interfere with the management and disposal of those investments. In case of violations, investors of either contracting state may seek redress with international investment arbitration. The rf has entered into similar agreements with many other states. Hence, an investor whose property has been damaged as a result of the rf’s armed aggression may apply to international investment arbitration on behalf of a Ukrainian company through which business is conducted in Ukraine based on the russian-Ukrainian Agreement on the Protection of Investments, or based on the relevant investment agreement of its jurisdiction with the russian federation if it is possible under the terms and conditions of such an agreement.

It should be noted that this instrument may not be applied to all cases, as it has a number of peculiarities that must be considered. The claimant must prove that russia has violated their rights protected under the relevant investment agreement. Therefore, to ensure the efficacy of this mechanism, the investor will need to prove that the rf has actually controlled certain territory of Ukraine, where the damaged property was located, so that it has become subject to a certain investment agreement as the territory within which russia guarantees the protection of investments. The above may be applicable to the territories of the Autonomous Republic of Crimea, Donetsk, Luhansk, Kherson, Zaporizhzhia Regions that have been directly annexed by the rf.  If property belonging to an investor and located on territory controlled by Ukraine has been damaged as a result of military actions, for instance russian shelling, but the territory is not controlled by the rf, then such a case is not covered by investment agreements. In addition, damage caused by active hostilities is not covered at all by some investment treaties.

The matter regarding the mechanism for enforcement of arbitral awards is rather complicated. On the one hand, it can be regarded as an advantage that such a mechanism still exists and is enshrined in law at international level. Thus, an arbitral award can be enforced in every country that has acceded to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards. On the other hand, the very process of such enforcement is quite complicated, since there is not much property of the russian federation on which execution can be levied, and part of such property, as the sovereign property of the state, is immune from compulsory levy of execution under court decisions or arbitral awards. Thus, determining the location of the property and support for the procedure for the recovery against property, even after a positive arbitral award in favor of the investor has been obtained, is a rather complicated process, which also needs to be taken into account when choosing this mechanism. 

The European Court of Human Rights

One of the possible mechanisms for receiving compensation for damage caused to investments located on the territory of Ukraine is filing an application with the ECHR. When applying such a mechanism, one should take into consideration its peculiar features. It is a common fact that the rf has withdrawn from the European Convention on the Protection of Human Rights, so currently it is possible to file a claim with the ECHR against the rf only in relation to events that took place before 16 September, 2022 (although the russian federation itself, in accordance with the law adopted by its State Duma, has determined that the rf is free not to comply with decisions passed by the ECHR against it after 15 March, 2022). The statute of limitations will be four months from the occurrence of events that violate the rights protected by the European Convention on Human Rights. Therefore, in order to be able to take advantage of this mechanism it is necessary to document all the necessary evidence as quickly as possible.

It is important to realize that ECHR case law regarding the very possibility of compensation for damage caused by military actions is rather ambiguous. There are cases where the ECHR has not actually determined its jurisdiction over violations that took place during active hostilities. At the same time, ECHR case law in which it satisfied applications for compensation of damage that was caused after the cessation of active hostilities during a period of occupation, is widespread. For this purpose, it is necessary to prove that damage was caused on the territory where the rf was actually exercising effective control. In any case, ECHR case law in respect of these matters tends to change.

The main disadvantage when filing an application with the ECHR is the actual lack of a viable mechanism for the enforcement of its decisions, which, along with the considerable duration of the proceedings, calls into question its effectiveness in the short-term. At the same time, taking into account the fact that the situation concerning the implementation of the ECHR’s decisions may change for the better, and the decisions of this institution are quite authoritative and may serve as additional evidence of damage, this mechanism can also be considered in combination with others. 

National Mechanisms

At present the legislation of Ukraine (Law of Ukraine No. 2709-IV On International Private Law) establishes judicial immunity for a foreign state in the absence of the consent of the competent authorities of that state from bringing it into the proceedings as a defendant before a national court of another state. At the same time, the Verkhovna Rada of Ukraine is considering several draft laws that provide for the abolition of this rule at legislative level.

In addition, since the beginning of russia’s armed aggression against Ukraine, the case law of Ukrainian courts, as initiated by the Supreme Court of Ukraine, has been established. According to this case law, russia’s consent to take part in cases seeking compensation for damage caused by russian armed aggression is not necessary. When making such a conclusion, Ukrainian courts proceed from the fact that filing a claim with a Ukrainian court is the only reasonably available remedy to protect the right, the deprivation of which would mean the deprivation of such right in general. That is, it would deny the very essence of such right. Also, national courts draw attention to the fact that according to ECHR case law, which forms part of Ukrainian law, granting immunity to a state in legal proceedings pursues the legitimate goal of observing international law to promote comity and good relations between states through respect for the sovereignty of another state. At the same time, the armed aggression against Ukraine carried out by the russian federation in violation of the fundamental principles and norms of international law, particularly the UN Charter, crimes against the international law committed by its armed forces in Ukraine exclude, at the initiative of the rf, comity and good relations between the countries. For such reasons, Ukrainian courts adjudicate cases against the rf without the consent of the latter’s authorities.

The disadvantage of applying to a national court is the difficulty of recognizing and enforcing its decision abroad. According to established case law, if the case is considered without russia’s consent, the enforcement of the decision in a foreign country seems unlikely. Despite this fact, there are grounds to hope that a number of states will amend their national legislation so that this procedure becomes much easier. In any case, it should be noted that when recognizing a decision abroad, a foreign court will consider such a decision very carefully. Therefore, high-quality support for such a case will be of great importance at the stage of its enforcement.

In addition, despite the fact that the enforcement of decisions of Ukrainian courts in other jurisdictions is complicated, national mechanisms are currently being developed. These mechanisms are aimed at providing compensation at the expense of russian property and funds that are to be seized under special procedures. Also, the establishment of a special organization for Ukraine called the International Commission for Review of Claims, which would have jurisdiction to consider the claims filed by individuals, legal entities and states seeking compensation for damage caused by russia’s invasion of Ukraine, is being actively discussed at present, including at international level. In addition to the establishment of such a commission, there are also plans to set up a compensation fund, which will finance the compensations based on the decisions adopted by the commission. It is expected that the fund will be financed from russia’s assets and persons connected to it, seized or provided for seizure in the jurisdictions of member states.

When the relevant mechanism is implemented, the effectiveness of decisions adopted by national courts obliging the rf to compensate for damage it has caused is expected to increase significantly. Therefore, when choosing the legal mechanism for obtaining compensation, the mechanism that provides for filing a claim against the rf with a Ukrainian court seeking compensation for damage caused should be taken into consideration. 


In general terms, there is no doubt that russia must pay compensation for all the damage it has caused to businesses on the territory of Ukraine. There are a few legal mechanisms for such compensation. Existing mechanisms can be quite effective if the strategy is correctly and consistently built. In addition, new mechanisms and opportunities to restore one’s rights and receive compensation can be developed and implemented. Their application, in any case, requires high-quality expert collection of evidence of violations caused, as well as the correct choice of the most viable mechanism aimed at restoring violated proprietary interests.