INVESTING IN UKRAINE

Chinese investors in Motor Sich announce USD 3.5 billion international arbitration plans

Representatives of Chinese company Skyrizon have called on Ukraine to enter into negotiations and establish a working group

Business Ukraine magazine
Saturday, 05 September 2020 21:11

Officials representing Chinese company Skyrizon have this week informed the Ukrainian government of their intention to begin international arbitration proceedings against Ukraine over the stalled acquisition of a 56% stake in Ukrainian aviation industry engine manufacturer Motor Sich.

Official confirmation of the arbitration plans included accusations that Ukraine had violated its international obligations in line with existing bilateral agreements between Beijing and Kyiv governing the mutual protection of investments.

Skyrizon acquired a 56% stake in Motor Sich in 2016 but the Chinese company has been unable to manage these assets after the deal was blocked by the courts at the insistence of the Ukrainian security services and the country’s anti-monopoly committee. The United States has been vocal in its opposition to the deal.

Due to this deadlock, shareholders of the enterprise claim that their rights have been systematically violated for the past three years. They are currently pursuing claims in various courts in a bid to unblock the process but have been able to make progress.

Meanwhile, the inactivity at Motor Sich itself risks undermining the company’s competitiveness on international markets and poses a threat to its future operations.

According to the terms of Skyrizon’s claims against the Ukrainian government, the costs of the current situation are estimated at more than USD 3.5 billion. Representatives of the Chinese company have urged Ukrainian government officials to immediately initiate negotiations in order to revolve the issues surrounding the acquisition of a controlling stake in Motor Sich.

If talks do not begin in the near future, the Chinese side plans to use its right to initiate arbitration proceedings.

Skyrizon officials underlined their readiness to sit down at the negotiating table with the Ukrainian authorities. They envisage establishing a working group to address all outstanding issues. This would include representatives from the Chinese side together with officials from the Ukrainian Ministry of Justice, Security Service, Prosecutor General’s Office, Anti-Monopoly Committee, and other relevant authorities.

 

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