Identifier
Created
Classification
Origin
07KYIV113
2007-01-18 12:55:00
UNCLASSIFIED
Embassy Kyiv
Cable title:  

UKRAINE: 2007 INVESTMENT CLIMATE STATEMENT

Tags:  EINV ETRD KTDB OPIC USTR UP 
pdf how-to read a cable
VZCZCXYZ0002
RR RUEHWEB

DE RUEHKV #0113/01 0181255
ZNR UUUUU ZZH
R 181255Z JAN 07
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC 0914
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUCPCIM/CIMS NTDB WASHDC
UNCLAS KYIV 000113 

SIPDIS

SIPDIS

STATE FOR EB/IFD/OIA (JNHATCHER) AND EUR/UMB
STATE PLEASE PASS TO USTR FOR KLEIN/MOLNAR
USDOC FOR 4201/DOC/ITA/MAC/BISNIS
USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYCK

E.O. 12958: N/A
TAGS: EINV ETRD KTDB OPIC USTR UP
SUBJECT: UKRAINE: 2007 INVESTMENT CLIMATE STATEMENT

REF: 2006 STATE 178303

UNCLAS KYIV 000113

SIPDIS

SIPDIS

STATE FOR EB/IFD/OIA (JNHATCHER) AND EUR/UMB
STATE PLEASE PASS TO USTR FOR KLEIN/MOLNAR
USDOC FOR 4201/DOC/ITA/MAC/BISNIS
USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYCK

E.O. 12958: N/A
TAGS: EINV ETRD KTDB OPIC USTR UP
SUBJECT: UKRAINE: 2007 INVESTMENT CLIMATE STATEMENT

REF: 2006 STATE 178303


1. As requested reftel, below is the 2007 Investment
Climate Statement (ICS) for Ukraine. Post is transmitting
the ICS in three separate parts due to its large size.
Post will send the ICS in Microsoft Word version to
EB/IFD/OIA by email.

Begin Text:

A.1. Openness to Foreign Investment

GOVERNMENT'S ATTITUDE TOWARDS FOREIGN INVESTMENT

When President Viktor Yushchenko took office in January
2005, he made improving the investment climate one of his
top economic policy goals. This led to a number of new
government initiatives, such as creation a State agency for
investment and innovation and a number of investor councils
chaired by the President. Additionally, there have been
several positive steps for U.S.-Ukraine trade and
investment relations over the past year. Both the United
States and the European Union granted Ukraine market
economy status, in February 2006 and December 2005,
respectively. In March 2006 the United States terminated
the application of the Jackson-Vanik amendment to the Trade
Act of 1974 to Ukraine, providing Ukraine permanent normal
trade relations status. International investment companies
rushed to take advantage of the improved mood and held
several large-scale Ukrainian investment conferences in
2005 and 2006, both in Ukraine and abroad. Political
uncertainty dampened investor enthusiasm during the run-up
to the March 2006 parliamentary elections, and in the
ensuing five months it took for Ukraine to form a
government.

After eight years of decline following independence, the
Ukrainian economy has been growing since late 1999, with
real GDP growth at about 7% in 2006. Over the past few
years, Ukraine has liberalized its markets, reduced
regulation, eliminated most licensing requirements,
eliminated most restrictions on foreign exchange and begun
the transformation of the agricultural sector from state-
run farms to private agriculture. After years of
hyperinflation and plummeting currency values, the national

currency, the hryvnia (UAH),has been stable against the
U.S. dollar for over five years. The National Bank of
Ukraine (NBU) allowed it to appreciate about 5% in early
2005, but has maintained a nearly constant exchange rate to
the dollar since then. The inflation rate fell from 2004's
12.3% to 10.3% in 2005, and was expected to be between 10%
and 11% in 2006. Ukraine remains in need of substantial
reforms in order to achieve full economic liberalization.
Ukraine's economy is still shackled by corruption, poorly
developed rule of law, over-regulation, and excessive
government interference in what should be private business
decisions.

Ukraine was not able to achieve its goal of entering the
WTO in 2006, but made significant progress during the year.
Ukraine's Verkhovna Rada (parliament) passed about 20
pieces of legislation helping to bring its trade regime
into consistency with WTO rules. Ukraine also made
progress on its bilateral market access agreements, most
notably with the signing of a bilateral agreement with the
United States on March 6, 2006. Ukraine must still
conclude its last bilateral agreement with Kyrgyzstan.

Foreign investors continued to express little confidence in
the Ukrainian court system. In a growing number of cases,
predatory minority shareholders have been able to procure
dubious court decisions in an effort to wrest control of
companies away from the majority investors. Around a dozen
such attacks, which targeted both Ukrainian companies and
major foreign investors, occurred over the past year.
Ukrainian courts have a long record of striking down or
ignoring contractual provisions that assign legal
responsibility for dispute resolution to a foreign court or
arbitrator. Many investor complaints over the years have
involved the State Tax Administration's (STA) selective
enforcement of tax policy. Businesses have claimed that
STA local and regional branches use investigative authority
to advance favored political or business interests. While
the number of such complaints dropped in 2005, exporters
have suffered from the STA's failure to refund VAT payments
on inputs in a timely fashion. Although some improvements
in payment of refund arrears occurred in late 2005 and
early 2006, in August 2006, the GOU again decreased the
pace of VAT refunds, reimbursing only 76 percent of
verified claims, down from 87 percent refunded in 2005. At
year's end, several major exporters are facing large and
continuously accumulating arrears.

MAJOR LAWS/RULES AFFECTING FOREIGN INVESTMENT

Ukraine's law "On the Foreign Investment Regime" (1996)
provides for equal treatment of foreign and Ukrainian-owned
business with some restrictions in broadcasting and weapons
manufacturing. Although Ukraine passed several laws in
the 1990s that provided tax privileges to joint ventures
with foreign participation, by 2002, these privileges had
been cancelled.

In early 2005, Ukraine lifted all tax and tariff exemptions
to investors in Special Economic Zones (SEZ) in order to
stop large-scale misuse of the zones. Some investors
criticized the abrupt cancellation of the privileges and
the absence of any compensatory provisions, and they said
these actions destabilized the investment climate. U.S.
investors with planned or existing investment in the SEZs
faced substantial losses from the elimination of these
privileges. The new government of Prime Minister Viktor
Yanukovych has announced its intention to re-establish some
tax and customs privileges for investors and export
processors located within SEZs, and stated it would develop
a compensation mechanism for investors who suffered from
the 2005 cancellation. By year's end, no action was taken
to re-establish the SEZs and the planned privileges were
not defined.

Both a new Civil Code and a competing and incompatible new
Commercial Code went into effect on January 1, 2004.
Lawyers and judges continue to grapple with how to
implement the two conflicting laws, which also contradict
some existing legislation. In 2005, the Ukrainian
government proposed to annul the Commercial Code, but as of
the year's end, no corresponding new draft legislation has
yet to be registered in the parliament.

On October 25, 2001, the Ukrainian Parliament passed a Land
Code. It provides for private ownership of land,
facilitating the privatization of land for agricultural
purposes, but also provides for a moratorium on
agricultural land sale until January 1, 2008. Individuals
will not be able to acquire or sell agricultural lots
larger than 100 hectares between 2008-2015. The Land Code
includes a 20-year moratorium on agricultural land sales to
foreigners, though foreigners may own land plots on which
industrial facilities have been built. Efforts to cancel
the moratorium in 2007 have failed. The Rada voted to
override President Yushchenko's veto of the moratorium,
citing the need to first strengthen the legal framework
covering land sale, while Yushchenko called on the Rada to
hasten passage of legislation necessary to end the
moratorium. Such restrictions may delay the development of
a functioning land market, but the overall picture is not
entirely negative, as there is an active market in
agricultural land leasing.

A new Customs Code went into effect January 1, 2004,
codifying uniform procedures for all goods, and creating a
mechanism for submitting a preliminary declaration for
customs clearance for those who declare items on a regular
basis. The Code widened the powers of the State Customs
Service (SCS),granting its staff free access to the
companies' premises where commodities subject to customs
clearing are stored. It also gave the SCS the power to
review foreign trade companies' financial and economic
performance. Both provisions are considered consistent
with WTO norms. December 2005 amendments to the Customs
Code and Single Customs Tariff brought Ukraine's customs
regime almost fully into compliance with the WTO Customs
Valuation and Rules of Origin Agreements.

Under the 2001 law, "On the Customs Tariff of Ukraine,"
only the Rada can introduce or change tariffs. The import
tariff system of Ukraine has 21 sections, encompasses 97
groups of goods, and lists over 11,000 import duty rates.
Between March and July 2005, the parliament passed three
packages of amendments to the Customs Code of Ukraine to
decrease tariff rates. These measures brought the normal
average tariff rate down to 6.5 percent, or more
specifically to 13.8 percent (down from 19.7 percent) for
agricultural goods and 4.4 percent (down from 8.3 percent)
for industrial goods.

Ukraine's anti-monopoly committee implements anti-monopoly,
competition, and consumer protection legislation under the
March 2002 law "On Protection of Economic Competition."
New companies and mergers/acquisitions face strict
controls. Most investments, joint ventures with multiple
partners, and share acquisitions require the committee's
approval. The law requires that the Committee obtain a
court order before entering private property. Those
violating fair competition rules may be fined up to 10% of
the prior year's turnover. If unfairly gained profit
exceeds 10% of income, up to three times the normal penalty
can be collected. Legal experts have expressed concern
over restrictions on who may appeal a Committee decision.

PRIVATIZATION AND FOREIGN PARTICIPATION

Ukraine's privatization law provides for the cash sale of
majority shareholdings in state enterprises, open bidding
procedures, and the use of independent financial advisers
to assist Ukraine's State Property Fund (SPF). In
practice, however, privatizations conducted between early
2000 and 2004 were non-transparent and arbitrary -- and
were marked by heavy behind-the-scenes political
interference. In 2005, the new government of President
Yushchenko undertook a review of past privatizations with
the professed intent of invalidating those found to have
been corrupt reselling thQnterprises. The government
secured a court ruling invalidating the May 2004
privatization of Ukraine's major steel plant,
Kryvorizhstal, which the son in law of then-President
Kuchma acquired for $800 million. The GOU conducted a new
transparent tender open to international participation and
sold the enterprise to Mittal Steel in October 2005 for
$4.8 billion. The government's failure to articulate a
clear policy regarding past privatizations other than
Kryvorizhstal created significant uncertainty among
business owners and prospective investors. By early 2006,
the government under Prime Minister Yuriy Yekhanurov
dropped its effort to redress improper past privatizations
and the Yanukovych government has not revisited this
policy.

There were few new privatizations of major state
enterprises in 2006. As of October 2006, only 15% ($64
million) of the year's target for privatization had been
transferred to the budget.

Ukrainian law formerly limited foreign participation in
privatization of certain "strategic" enterprises (radio,
television, energy, and insurance). Foreign shares of TV
and radio broadcasting and publishing companies generally
could not exceed 30%. On January 12, 2006, Ukraine's
Parliament adopted a new law "On Television and Radio
Broadcasting" that eliminated restrictions on the share of
foreign capital in the charter funds of television and
radio broadcasting companies. Foreigners are now
prohibited from founding TV or radio stations, however.
Ukrainian law continues to limit foreign participation in
the privatization of a few "strategic" sectors, such as
energy, although the Rada retains the authority to lift
legislative restrictions on foreign ownership in specific
instances, and has done so on occasion.

PROCUREMENT

Ukraine is not a signatory to the WTO Agreement on
Government Procurement but is negotiating WTO accession. A
March 2000 government procurement law favors Ukrainian
bidders on contracts to sell goods and services, affording
a 10% differential to domestic bidders over foreigners in
certain cases. Foreign investors also complain about a
lack of advance notice of rules and requirements for
tenders, covert preferences in tender awards, hidden
conditions on awards that are not defined in tender
announcements, partiality towards domestic investors, and
an inability to resolve grievances and disputes. The
American Chamber of Commerce in KYIV has reported that many
firms are reluctant to pursue GOU procurement opportunities
out of concern they will be unable to collect payment.
Foreign companies generally win only a tiny fraction of the
total tenders (0.01 percent during the first half of 2006).
A law "On Production Sharing Agreements" (PSA),effective
October 1999, provides a legal framework guaranteeing that
the terms of agreements between foreign investors and the
GOU for natural resources development cannot be changed
once an investment is made. However, additional enabling
legislation is needed in order to harmonize Ukrainian laws
with the PSA's joint exploration and production license.
Also needed are Cabinet of Ministers resolutions to
establish special tax benefits envisioned by the PSA law,
such as the amount of profit tax revenue the government
will receive from the PSA producer. The development of
PSA's is being tested after the GOU awarded the U.S.
company Vanco a tender for the Prikercheskiy block for
offshore oil exploration in the Black Sea. Vanco and the
GOU are, as of the year's end, negotiating the terms of the
PSA for this project.

In December 2005 Parliament adopted amendments to the law
"On Procurement of Goods, Works and Services Using State
Funds" of February 22, 2000. The amendments, which entered
into force in March 2006, transferred the authority to
coordinate government procurement from the Ministry of
Economy to the Antimonopoly Committee of Ukraine. The
authority to oversee government procurement was distributed
among a range of agencies, including the Antimonopoly
Committee, the Accounting Chamber of Ukraine, and the
quasi-governmental Tender Chamber of Ukraine. The
amendments have been criticized for creating an overlap in
authority of various regulatory agencies and decreasing the
transparency of the system. Under Ukraine's amended law,
the Tender Chamber has exclusive authority to review claims
of tender participants and issue recommendations regarding
single-supplier procurement. The measure introduces
burdensome and lengthy procurement procedures, and requires
all tender proposals to be secured by collateral, limiting
the number of tender participants and increasing the cost
of the tender participation.

Finally, the new law made it mandatory that procurement by
state enterprises follow government procurement rules and
procedures, rather than permitting the enterprises to make
contracts on a commercial basis. This feature contradicts
accepted international practice and commitments made by
Ukraine in WTO negotiations. Ukraine is not currently a
signatory to the WTO Agreement on Government Procurement
(AGP),but will become an observer to the AGP at the time
of WTO accession, and could start AGP negotiations by
requesting membership one year after accession.

A.2. Conversion and Transfer Policies

RESTRICTIONS ON CONVERTING/TRANSFERRING FUNDS

The April 1996 "Foreign Investment Law" guaranteed the
"unhindered transfer" of profits, revenues, and other
proceeds in foreign currency after taxes and other
mandatory payments. By intervening in exchange markets,
the National Bank of Ukraine (NBU) maintains a de facto peg
of Ukraine's currency, the hryvnia, to the dollar. In
2006, the hryvnia traded against the U.S. dollar at or near
UAH 5.05 to the dollar.

While foreign investors may repatriate earnings, companies
must obtain a license from the NBU for some operations.
For repatriation of hard currency, each transaction over
$50,000 must be approved by the NBU. The NBU also charges
a fee to review the transaction. In view of increased hard
currency inflows, the NBU on March 31, 2005, canceled its
1998 surrender requirement that exporters convert half of
their hard currency revenues into hryvnias. Foreign
exchange is readily available at market-determined rates,
which generally do not vary greatly from the daily official
exchange rate. In February 2005, the NBU lifted the 2%
limitation on deviation of bank exchange rates from the
official exchange rate, which had been in effect since
October 2004. A pension fund tax is levied on transactions
to purchase hard currency. A 2005 GOU decision to reduce
that tax from 1.5% to 1.2% of the amount of the transaction
as of January 1, 2006 was never implemented, but the State
Budget for 2007 includes a measure reducing the rate to
1.3%.

Foreign investors have complained of cumbersome NBU
regulations (2005 Resolutions 280 and 281) requiring them
to open local accounts in Ukrainian banks and to use the
services of Ukrainian brokers in order to make investments
in Ukraine. Past direct investors seeking to liquidate and
repatriate their investments face stringent documentary
requirements, though the NBU has stated its willingness to
waive requirements if documents from the original
transactions are no longer available.

Investors convert their earnings into foreign currency
through commercial banks, which purchase foreign currency
on the electronic inter-bank currency market. Commercial
banks may trade foreign currency in electronic form with
other banks through participation in electronic inter-bank
currency market, regulated and operated by the NBU. To
purchase hard currency, companies must provide their banks
with a copy of their foreign trade contracts. In an
attempt to expedite purchases of hard currency, in March,
2005, the National Bank of Ukraine cancelled the
requirement that companies obtain State Tax Administration
permission to purchase hard currency. Commercial banks
must announce their clients' intentions to sell on inter-
bank currency market if the transactions exceeded $500,000.
The law "On the Circulation of Promissory Notes" provides
an opportunity for payments in foreign currency and
issuance and circulation of promissory notes, in accordance
with the 1930 Geneva Convention "Providing a Uniform Law
for Bills of Exchange and Promissory Notes." Residents may
transfer up to USD 600 abroad without opening a bank
account. Illegal trade of hard currency is not a criminal
matter but brings administrative penalties.

A.3. Expropriation and Compensation

Under the 1996 law "On the Regime of Foreign Investment," a
qualified foreign investor is provided guarantees against
nationalization, except in cases of national emergencies,
accidents, or epidemics. International institutions have
recommended that definitions of expropriation and
nationalization in the foreign investment law and bilateral
treaties be expanded to include indirect and creeping
expropriation. Courts can determine whether owners of
privatized enterprises failed to pay for an enterprise or
to implement investment commitments in a privatization
sale. Failure to pay or invest allows the GOU, with court
permission, to revoke ownership and resell the property.

A.4. Dispute Settlement

EXTENT AND NATURE OF INVESTMENT DISPUTES

The Embassy continues to provide advocacy on behalf of U.S.
investors. For many years, investment disputes frequently
have involved key problems with the investment climate such
as the lack of adequate rule of law, fair and impartial
dispute resolution mechanisms, and enforcement of domestic
court and international arbitration decisions. Another
problem is poor corporate governance (inadequate protection
for shareholder rights, inadequate disclosure, asset-
stripping, and voting fraud). Dispute settlement remains
weak. Currently, there is no single point of contact in
the Ukrainian government committed to helping resolve
business and investment disputes. Most U.S. businesses
have little confidence in Ukrainian courts. Commercial
contracts may permit the parties to use international
arbitration or specified foreign courts to settle disputes.
Though Ukrainian legislation recognizes international
arbitration decisions, in practice such decisions are very
difficult to enforce in Ukraine.

Corruption continues to lie at the heart of many investor
disputes. Laws and regulations are vague, with
considerable room for interpretation, providing officials
at every bureaucratic layer ample opportunities for
corruption. Foreign investors are often seen as
competitors to domestic firms and their allies in the
government.

DESCRIPTION OF UKRAINE'S LEGAL SYSTEM

Ukraine has a civil law system relying on codes and
separate legislative acts. The court system comprises the
Constitutional Court, which interprets the Constitution and
laws of Ukraine, and a system of courts of general
jurisdiction. The courts of general jurisdiction are
further divided into general courts, which handle civil,
criminal, and administrative matters, and specialized
commercial courts, which review business disputes,
bankruptcy, and anti-monopoly cases. Both the general and
commercial court systems feature a hierarchy of local
and/or regional courts and appeals courts. The Supreme
Court of Ukraine is the highest court in the system of
courts of general jurisdiction.

The law "On the Judiciary," in force as of June 2002,
creates four levels of courts -- local courts, courts of
appeal, courts of cassation (higher specialized courts) and
the Supreme Court. This law also establishes an
independent judicial department, the State Judicial
Administration, to manage the court system, with the
exception of the Supreme Court, which is self-administered.
The law did increase the independence of the judiciary; but
it also in some cases increased the powers of the President
over the judiciary. While the law envisioned the creation
of a separate system of Administrative courts, this system
is not yet fully set up. The Supreme Administrative Court
started its work only in the fall of 2005. The
Administrative Procedural Code, which entered into force on
September 1, 2005, governs the organization and work of the
administrative courts.

The National Commission on Democracy and the Rule of Law
prepared a "Concept of Improvement of the Judicial System,"
signed by President Yushchenko on May 10, 2006. The
document outlines a program for comprehensive judicial
reforms, but has yet to be implemented.

ENFORCEMENT OF RIGHTS

Investors criticize Ukraine's legal system for its
inefficiency, burdensome procedures, unpredictability,
corruption, and susceptibility to political interference.
Even when they obtain favorable decisions, investors claim
the decisions are rarely enforced. The enforcement
responsibilities fall under the State Enforcement Service,
which reports to the Ministry of Justice, but whose head is
appointed by the Cabinet of Ministers.

The procedure for recognizing and enforcing foreign court
decisions is regulated by Section 8 of the Code of Civil
Court Procedures of Ukraine. In accordance with the Code,
a foreign court decision is recognized and enforced in
Ukraine if such recognition and enforcement is provided for
in international treaties, the mandatory nature of which
has been endorsed by the Rada, or based on a mutual ad-hoc
agreement with a foreign state whose court has rendered a
decision that is to be enforced in Ukraine.

The State Enforcement Service implements decisions rendered
by foreign courts and arbitration tribunals in accordance
with the law "On Enforcement Proceedings." The law "On
Implementing Decisions and Applying Practices of the
European Court of Human Rights" entered into force on March
30, 2006. Along with a subsequent Cabinet of Ministers
implementing Resolution, the law obligates the Ministry of
Justice to ensure implementation of the Court's decisions.

COMMERCIAL LAW

A new Civil Code and a competing and incompatible
Commercial Code both went into effect on January 1, 2004.
Lawyers and judges have since grappled with how to
implement the two conflicting laws. Despite heavy
criticism of the Commercial Code by businessmen and GOU
officials, the Rada has not yet taken action to amend or
annul it. The Civil Code ensures protection of the rights
of private property, of engaging in contracts, and of
entrepreneurial activity. It provides a unified framework
for economic regulations.

The Civil Code is generally market-oriented and modern, but
the Commercial Code is often contrary to market economy
principles and directly contradicts provisions of the Civil
Code in numerous instances. The Commercial Code aims to
preserve a privileged position for the public sector of the
economy and allows for governmental interference in private
commercial relations. Further, in both codes gaps in
regulation exist. The existence of these two codes creates
uncertainty in planning and structuring transactions, and
leaves questions surrounding transactions unanswered.
Problems arising from these two codes also surface in the
resolution of disputes, as courts are not able to resolve
the conflicting provisions of the codes, or are not able to
fill in the gaps in regulation that arise as a result of
the missing provisions in the codes. Finally, other
E
commercial laws have not been harmonized with these codes.

A 1999 bankruptcy law provides for debtor-led
reorganization, a meaningful moratorium on payment and
collection of pre-existing debt, and a tax forgiveness
provision. The 1999 law provided thousands of heavily
indebted industrial enterprises with an alternative to
liquidation that did not exist under Ukraine's original
1992 bankruptcy law. Since then, many firms have reached
amicable settlements with their creditors and established a
workable schedule of debt forgiveness and repayment.
Creditors protect their rights under the law by electing a
creditors' committee, which is actively involved in the
bankruptcy proceedings.

Most observers believe the bankruptcy laws must be amended
to provide more protection for creditors. Notice
provisions, protections for the rights of minority
shareholders, and procedures for valuation and the sale of
assets to satisfy liabilities are undeveloped.

CORPORATE GOVERNANCE

Problems with corporate governance in Ukraine involve
corporate ownership, shareholder rights, transparency, and
disclosure. The law "On Companies" offers scant protection
for minority shareholders against insider dealing, asset
stripping, profit skimming, and share dilution. Corporate
finance is restricted. Some examples of shareholder rights
abuses include limited disclosure, capital restructuring
without shareholders' consent, and shareholder voting
fraud. Nevertheless, a Company Register that was
established in 2004 improved transparency. A new Joint
Stock Company law was first drafted in 1998 to improve the
current law by introducing sound corporate practices that
meet international standards. It has failed repeatedly in
parliament, despite increasing interest in the business
community. The Rada has not yet considered the most recent
version of this law, submitted in June 2006.

BINDING INTERNATIONAL ARBITRATION

Ukraine enacted an international commercial arbitration law
in February 1994, which parallels commercial arbitration
laws set forth by the United Nations Commission on
International Trade Law. Ukraine is a member of the New
York Convention of 1958 on the Recognition and Enforcement
of Foreign Arbitration Awards. Some investors have
problems enforcing foreign arbitration awards in Ukraine.
Foreign arbitral award enforcement procedures in Ukraine
are regulated by a number of statutes and regulations,
including the Section 8 of the Civil Procedural Code and a
law "On Enforcement Proceedings." In early 2000 Ukraine
ratified the Washington Convention, providing for use of
the International Center for Settlement of Investment
Disputes (ICSID),an internationally recognized mechanism
for resolving investment disputes between investors and the
GOU. The U.S.-Ukraine Bilateral Investment Treaty (BIT),
signed in November 1996, recognizes arbitration of
investment disputes before the ICSID. One major investment
dispute involving a U.S. company was resolved in May 2006
through a combination of direct consultations with the
Ukrainian government and international arbitration by

ICSID.

TAYLOR