A World Bank arbitration tribunal ordered Ukraine to pay $9.5 million in damages to an American businessman, marking a rare victory for foreign investors who have long received shabby treatment.
The International Center for Settlement of Investment Disputes on March 28 gave the award to Joseph Lemire’s Gala Radio, ruling that Ukraine should pay “for denying fair and equitable treatment as required under the U.S.-Ukraine bilateral investment treaty in relation to tender applications,” the radio station said in a statement.
Prevented from expanding his radio station’s frequencies since 1996, Lemire finally filed a claim against Ukraine in 2006.
“This proves what’s been said in the press time and time again – that Ukraine isn’t open for business to foreign investors,” Lemire said. “It took an independent, unbiased institution, the most respected in the world in the World Bank to say what’s been known all along.”
It’s in Ukraine’s best interests to pay this and move on instead of dragging it out. Otherwise it’ll be a sign that Ukraine doesn’t want investors.
– Joseph Lemire
In its final award, the tribunal found that Gala Radio had been hindered by Ukraine from developing into a full national FM network and a second AM network.
“These violations pertain to arbitrary practices, influence peddling and political interventions in the awarding of radio licenses in Ukraine by the National Council since 1999 until very recently, including by way of direct intervention of the president of Ukraine in favor of certain candidates during tenders,” the Gala Radio press release said.
Ukraine has 60 days to pay the fine, or 120 days to challenge the case on procedural grounds.
In a statement, Ukraine’s Justice Ministry said the country may attempt to have the ruling annulled on procedural grounds.
Lemire lamented the non-transparent way Ukraine does business with investors, including the way it allocates radio frequencies.
Lemire’s lawyer said Ukraine spent $4.5 million in legal fees and could pay at least $1 million in additional fees to arbitrators and for legal counsel if it pursues an annulment. “It’s in Ukraine’s best interests to pay this and move on instead of dragging it out. Otherwise it’ll be a sign that Ukraine doesn’t want investors,” Lemire said.
I want the European Union, the World Bank, the International Monetary Fund and everyone who lends or gives money to Ukraine to know what happened.
– Joseph Lemire
The international tribunal’s award is enforceable in more than 140 countries. Ukraine could have assets frozen if it refuses to pay.
Lemire said the tribunal’s decision will benefit all Ukrainians by encouraging “reform and facilitating the country’s drive to democracy and liberty.”
Although Gala Radio’s Lemire has been quiet on his matter for 10 years, he wants the world to know about it now. “I want the European Union, the World Bank, the International Monetary Fund and everyone who lends or gives money to Ukraine to know what happened,” he said.
Problems with Ukraine’s investment climate are not limited to radio and television broadcasting.
The track record for holding fair and open public procurement tenders and selling state assets is dismal. Recently, the government doled out the lion’s share of grain export quotas to a handful of companies, including a little-known company partially owned by the state.
The measures ignited the ire of foreign investors and business associations in Ukraine who pointed to corruption and insider deals.
But not many investors have as much persistence as Lemire. He said that, as an individual investor, he filed the claim against Ukraine “out of principle.”
Kyiv Post staff writer Mark Rachkevych can be reached at [email protected]
