Our editorial staff talked to Elvira Gavrilova, a producer, owner of the international advertising company Amillidius, a person who owns more than ten business projects about investments in Ukraine, and how a foreign investor can protect investments in the concessions of Ukraine.
Elvira not only successfully manages her companies and actively participates in the creation of new projects but is also engaged in attracting investments from abroad to Ukraine. Therefore, we decided to ask Elvira several questions about how to attract a foreign investor to our country and how to protect his investments.
Practice shows that many investors investing in state facilities in our country do not receive the desired profit due to violations in the state system. In this case, investment arbitration comes to the investor’s rescue – the right tool that will help the investor to protect the funds invested in concessions.
A concession refers to a long-term commitment between the state and a private investor. How does it work? The state hands over an object (plant, port, road, enterprise) to the investor for management for a period of 5 to 50 years. The investor, during the period of the object’s usage, carries out its reconstruction, reconstruction and pays deductions to the treasury. At the end of the concession period, both the investor and the state remain in profit. The investor receives dividends from the operation of the enterprise, the passage of vehicles on the highway, etc., and the state receives a rebuilt or renovated facility and regular deductions.
Concessions in Ukraine
For many years, the infrastructure in Ukraine suffered from underfunding due to the lack of foreign capital inflow. It is because in Ukraine there was no legislation on concessions that would meet the requirements of the time. In October 2019, the Verkhovna Rada of Ukraine adopted the Law of Ukraine “On Concession”.
Both the government and Ukrainian businessmen admit that last year’s New Concession Law was a major step towards attracting foreign investment to Ukraine on a much larger scale.
At the beginning of this year, the media reported that the seaport of Olvia and the Kherson seaport were transferred to a concession to foreign investors. As part of the concession contract, the QTerminals Qatari company plans to invest USD 140 million in Olvia until 2024. The consortium of the Georgian company Georgian Industrial Group and the Swiss Risoil plans to invest about UAH 300 million in the Kherson seaport.
The 2019 Concession Law was supposed to become an important trigger for foreign investors and facilitate a significant influx of foreign investment in Ukrainian concessions due to the effective protection of rights and Ukraine’s readiness to settle disputes arising in independent international institutions – arbitration.
Why Investment Arbitration?
Investment arbitration is based on international investment protection standards and provides investors with maximum protection compared to commercial arbitration.
Now Ukraine has signed and ratified treaties on mutual protection of investments with more than 70 countries, specifying investment arbitration as a single body for resolving investment disputes.
Pros of Investment and Cons of Commercial Arbitration
We should start with the fact that only the parties to the contract entering into a concession agreement are subject to commercial arbitration, while a foreign investor’s rights may be violated by a body that is not a party to the concession agreement.
Secondly, investment arbitration is an effective way to protect the rights of shareholders of the concessionaire company, who are often not a party to the concession contract.
Thirdly, if an investment dispute is referred to the ICSID in Washington, then its decision will not require additional court approval on the territory of Ukraine and is indisputable.
On the other hand, a commercial arbitration decision against a Ukrainian government body or enterprise will need confirmation in Ukrainian courts. This factor is a significant disadvantage of the procedure for a foreign investor in a concession. It is known that due to the shortcomings of the court system in our country, not all decisions are made taking into account the rights and obligations of both parties to the process.
I hope that in the next few years, concessions will become an effective tool for attracting investment to Ukraine. And, thanks to investment arbitration, foreign investors will no longer be afraid to invest in the economy of our country, knowing about the high level of protection of their own funds.