THE AUTHORS:
Timur Bondaryev, Managing & Founding Partner, Arzinger Law Firm
Volodymyr Nakonechnyi, Managing Associate, Arzinger Law Firm
Anastasiia Kotliarchuk, Associate, Arzinger Law Firm
The war in Ukraine, which has been ongoing with different intensity since 2014, left domestic and international businesses, investors and individuals facing significant damage.
While the overall legal landscape for seeking compensation is quite complex and politically driven, there are three primary legal pathways at the moment when it comes to the Russia–Ukraine war:
- Investment arbitration;
- Litigation in Ukrainian courts; and
- The developing international compensation mechanism.
Understanding when and how to use each of these options is crucial for those looking to recover their losses efficiently. Of course, enforcement against Russia remains the most crucial and fundamental issue, which often directly influences the overall decision-making process; thus, we share our thoughts as to the enforcement prospects specifically for each mechanism.
Investment Arbitration: The Best Option for Large-Scale Business Losses
Investment arbitration is the most powerful tool for investors whose assets have been damaged, expropriated, or otherwise lost due to Russia’s aggression against Ukraine. This avenue is, however, only suitable for cases where the losses stem from violations of the Bilateral Investment Treaty (“BIT”) between Ukraine (or another state) and Russia.
As to the jurisdiction, given the precedent set by successful arbitration claims against Russia in Crimean cases, there is a sufficient legal grounding for the new claims stemming from the ongoing war. An investor who intends to file a claim under the BIT has to be sure that the assets in question were located on the territory, effectively controlled by Russia at the time of the violation. This includes the temporarily occupied or “officially” annexed territories of Ukraine, while the assets damaged during the active hostilities or in the territories effectively controlled by Ukraine are unlikely to pass the control test.
Key advantages of investment arbitration include “global” enforceability under the New York Convention (1958), the ability to claim not only direct damages but also lost profits, and, as a general rule, no statute of limitations.
Additionally, investment arbitration offers flexibility in procedural rules and direct participation in the appointment of the arbitral tribunal. The arbitrators have to be chosen carefully, taking into account not only their experience and qualifications, but also possible grounds for challenges such as previous “unfriendly” statements towards Russia.
Given that Ukraine has set aside the Ukraine–Russia Bilateral Investment Treaty (“BIT”) (1998) following the outbreak of the conflict, respective BIT–qualified claims should be brought until the expiration of the Ukraine-Russia BIT’s “sunset” clause in 2035.
As arbitration proceedings can be lengthy, typically spanning several years, it is advisable to consider filing the claims as soon as possible – the preparatory work alone will probably take at least a year, while access to documents and factual witnesses will only become more complicated over time.
Investors with substantial claims – such as those involving the destruction of infrastructure, expropriation of enterprises, or long-term business disruptions – should strongly consider this option, which has the highest chances of success.
We are now witnessing the first post-Crimea generation investment claims being initiated against Russia (for BIT breaches in Donbas starting from 2014) – these include Rinat Akhmetov, once known as the richest man in Ukraine, and other investors, who remain confidential as of today.
Some Ukrainian state-owned companies (Ukrhydroenergo and recently Oshchadbank) have filed Notices of Investment Dispute and triggered the cooling-off periods for the damages suffered after 24 February 2022. However, their final strategy remains unclear – it seems to us that the state prefers consolidating all its claims (including claims of state-owned companies) for compensation through the International Compensation Mechanism being created,
Bearing in mind the relatively high costs associated with BIT claims, this avenue is, however, well-suited only for significant claims for the investment to pay off.
Enforcement prospects. Execution immunity commonly hinders efforts to seize state assets, and many jurisdictions are reluctant to allow enforcement against Russian assets, being afraid of political exposure. There is also a popular opinion that Yukos’s lawyers left no stone unturned in their search for the Russian assets around Europe.
Nevertheless, creative enforcement strategies (e.g. choosing jurisdictions which has not been considered by creditors for enforcement against Russia yet) lead to some recent breakthroughs in asset seizures.
For example, in 2024, Naftogaz managed to freeze all Russian assets available in Finland, amounting to tens of millions of USD, including, to the best of our knowledge, valuable immovable property used by Russian diplomats for recreation purposes. Recently, in 2025, Naftogaz also attached USD 120 million of Russian assets in Austria. Although not yet frequent, success stories like this one provide a more optimistic outlook for creditors seeking to enforce against Russia.
Litigation in Ukraine: A Tactical Move for Immediate Action
Following the full-fledged invasion, the Ukrainian Supreme Court has waived the traditional sovereign immunity concept in the war-related damages claims, allowing the claimants to bring their claims against Russia before the Ukrainian courts.
Even though this position of the Supreme Court has been considered as a very populist & political one, which might lead to subsequent, apparently even critical, enforcement difficulties, dozens of significant damage claims against Russia have been flooding Ukrainian courts.
For investors seeking a streamlined course of action, litigation in Ukrainian courts provides a direct route to obtaining legal recognition of their claims. This mechanism is particularly useful for investors with claims related to business losses on Ukrainian-controlled territory or in the area of active hostilities. Investors, whose losses are not substantial enough to invest in expensive investment arbitration, are also keen to consider the domestic litigation option.
Litigation in Ukraine, in the first place, offers claimants the advantage of speed. While investment arbitration proceedings take years, a domestic court ruling can often be delivered within 3-6 months following proper service to Russia. Ukrainian court judgment can further be considered as a very useful evidential tool in the upcoming International Compensation Mechanism.
Today’s evolving legal landscape means that litigation in Ukraine should not be overlooked as a viable means of recovery.
Enforcement prospects. International recognition and enforceability of Ukrainian domestic court judgements add to the overall uncertainty in this area. Many states still respect state immunity; therefore, investors should carefully consider at the very outset of the proceedings which jurisdictions may be willing to execute Ukrainian judgments against Russia. However, even such careful considerations cannot guarantee a successful outcome.
Let’s take, for example, developments coming from the Netherlands. In at least two cases, the Commercial Court of Zaporizhzhia Oblast found that Gazprom and its affiliated companies were alter egos of Russia, jointly and severally liable together with the state for the damage caused to the claimant (Farm Syu Zhnyva v. Gazprom and Gazprom v. Asset Management Company). The claimants further obtained asset-freeze orders from a Dutch court and levied a precautionary attachment on Gazprom’s shares in Wintershall.
However, in recent weeks, the Dutch first instance court denied recognition of a Ukrainian judgment, confirming concerns of the legal community as to the legal strategy chosen in these cases.
The International Compensation Mechanism: A Long-Term Solution Under Development
The international compensation mechanism, currently under development, aims to create a structured process for handling war-related claims. Potential claimants should view the mechanism as a future opportunity for limited compensation rather than a comprehensive and immediate remedy. The recently established Register of Damages in The Hague serves as an important first step, documenting claims that may eventually be compensated through an internationally agreed framework. The Commission and the Compensation Fund are currently being negotiated between the member states of the Register, and it is highly unlikely these negotiations will be swift.
This mechanism is expected to be particularly relevant and useful for individuals, state and communal enterprises without sufficient resources to pursue claims before other forums or investors, whose claims do not fit neatly into the investment arbitration framework or who are unwilling to employ domestic litigation mechanisms.
It’s important to remember, however, that the international compensation mechanism doesn’t cover claims, relating to the events, which have taken place before 24 February 2022. Which means, that the damages occurred due to the illegal annexation of Crimea and Eastern Ukraine back in 2014, have no other option but domestic litigation or international investment arbitration.
Enforcement prospects. The primary challenge for the compensation mechanism is securing financial resources for payouts. Discussions have been ongoing regarding the potential use of the frozen Russian state assets to fund compensation. While some governments support this approach, others remain cautious due to concerns over state immunity and diplomatic consequences. Even if the frozen assets are transferred directly to the Fund, they will not be sufficient to cover the losses in full. This uncertainty underscores the importance of using other legal avenues in parallel rather than relying solely on the compensation mechanism.
Choosing the Right Path: A Tailored Approach for Investors
Each of these mechanisms serves a distinct purpose, and investors should carefully assess their individual circumstances to determine the best course of action.
Large-scale claims involving BIT violations and significant financial losses are best suited for investment arbitration. There is a strong opinion that sooner or later, Russia will have to respect these awards.
Litigation in Ukraine is like a venture investment, offering a quick way to obtain a judgment and seek immediate enforcement abroad, but with very high risks of failing on procedural grounds.
Meanwhile, the international compensation mechanism presents a long-term option that could provide systemic relief once fully operational.
A strategic approach may involve pursuing multiple avenues in parallel. For example, an investor could initiate arbitration while simultaneously registering claims in Ukraine and documenting damages in the Register. By leveraging these mechanisms effectively, investors can maximize their chances of securing appropriate compensation for their losses.
Conclusion: Taking Action Now
The global order has been shifting rapidly, and delays in seeking compensation may lead to lost opportunities. While Ukraine and its allies are committed to holding Russia accountable, changing geopolitical and economic realities may influence how, when and even whether compensation mechanisms actually function.
The use of frozen Russian assets for compensation remains a subject of international debate, and future enforcement of claims may depend on shifting political alliances. Needless to say, we may soon see large creditors stepping in the line of claimants as a result of Russia forcing western businesses, leaving the market, to sell their assets far beyond the fair price.
This means those who move quickly may have an advantage over those who wait. Understanding the nuances of investment arbitration, domestic litigation, and the evolving international compensation framework is key to making informed decisions in this unprecedented legal landscape.
Ultimately, investors should view this not as a single-choice decision but as a multi-faceted strategy, taking advantage of different mechanisms where possible. The earlier the strategy is developed, the better positioned investors will be to secure compensation when financial and legal pathways become available.
ABOUT THE AUTHORS
Timur Bondaryev is a Founding & Managing Partner at Arzinger Law Firm, Attorney-at-Law, Head of Cross-Border Litigation & Arbitration Practice, Co-Head of Antitrust and Competition Practice. Timur is a respected lawyer with an exceptional reputation and more than 20 years of professional experience in the Ukrainian and international markets. He has extensive experience in commercial and investment arbitration under the rules of various major arbitral institutions worldwide, as well as UNCITRAL Arbitration Rules. Timur also specializes in supporting complex transactions and antitrust investigations in Ukraine and abroad with the participation of international and national investors. Timur’s expertise has been recognized for many years by leading international ratings, including Chambers, Legal 500, etc.
Volodymyr Nakonechnyi is a Managing Associate of Cross-Border Litigation & Arbitration Practice at Arzinger Law Firm, Attorney-at-Law. Volodymyr has more than 9 years of professional experience. He particularly focuses on the investment arbitration sphere and negotiations with the state on the settlement of investment disputes. He represented foreign investors in investment disputes in cases Gilead Sciences Inc. v. Ukraine, Philip Morris v. Ukraine, and Morgan Furniture v. Ukraine, settled peacefully during the cooling-off period. Volodymyr also represented clients in commercial arbitration and advised clients on disputes under the rules of key arbitral institutions (LCIA, SCC, SAC, VIAC, ICAC, GAFTA, FOSFA). He advised clients on complex cross-border dispute strategies, the enforcement of arbitration awards, and foreign court decisions in different jurisdictions.
Anastasiia Kotliarchuk is an Associate of Cross-Border Litigation & Arbitration Practice at Arzinger Law Firm, Attorney-at-Law. Anastasiia has over 5 years of professional experience in investment and commercial arbitration, as well as litigation. She represented foreign investors in investment disputes in Philip Morris v. Ukraine, Morgan Furniture v. Ukraine, and related national court proceedings. Anastasiia has also represented clients in commercial arbitration and advised on disputes under the rules of key arbitral institutions (LCIA, SCC, SAC, VIAC, ICAC, GAFTA, FOSFA).
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
