Date of publication: 24 December 2025
Marina Riashchenko, Attorney at Law, Counsel
Source: Yurydychna Praktyka
The full-scale aggression of the russian federation has become a test for the entire system of legal protection of foreign investments in Ukraine. In such circumstances, it is reasonable to ask to what extent the existing legal guarantees retain their protective function and what mechanisms are capable of actually compensating investors for their losses.
Despite the extreme context, the legislative and international treaty infrastructure of guarantees remains in force and provides a legal foundation for the protection of investors’ rights. Formally, Ukraine’s investment field continues to function based on national laws and numerous bilateral investment treaties, but how effective are these guarantees in wartime?
In practice, investors and state authorities have found themselves in a constant dialogue about the limits of public interest, the need for extraordinary measures, and the principles of compensation. This dialogue is increasingly moving into the realm of international arbitration, where courts and tribunals determine the acceptable limits of state intervention in investment rights during martial law. Recent arbitration activity by foreign investors in claims against Ukraine indicates the emergence of a new wave of disputes assessing the compliance of state measures with international investment law standards.
There has been an increase in the number of enquiries from foreign companies regarding the risks associated with sanctions, expropriation and regulatory restrictions during martial law.
Ukraine’s National Guarantees for International Investors
Ukraine maintains a favourable and equal regime for foreign investors, as enshrined in the Law of Ukraine “On the Foreign Investment Regime”, the Law of Ukraine “On Investment Activity” and other basic acts. The principle of non-discrimination, the guarantee of protection against illegal compulsory seizure of property, expropriation and compensation in the event of compulsory seizure remain key.
Even under martial law, these guarantees continue to apply, and any restriction of rights is permitted only within the framework of special procedures and taking into account the requirements of proportionality.
Sanctions as the Main Risk for Foreign Investors in Ukraine
The russian federation’s act of armed aggression against Ukraine has led to a special regime of sanctions against the aggressor country and a number of its citizens and companies.
The application of special economic and restrictive measures to sanctioned individuals and companies often involves the freezing of assets, the introduction of temporary property management, the seizure of property, the confiscation of assets belonging to individuals or legal entities for the benefit of the state, the prevention of capital outflows from Ukraine, etc. Such sanctions applied to foreign investors may and, most likely, will be interpreted as a violation of the fundamental principles of national guarantees for investment activity in Ukraine. Although the sanctions imposed are aimed at ensuring national security, they must be carefully documented and justified so as not to become grounds for claims by foreign investors.
In practice, this means that the procedure for deciding on sanctions, individual risk assessment for each case, and the possibility of appealing them are key to protecting investors’ rights.
At the national level, sanctions imposed can be appealed by filing an administrative claim with the Supreme Court, but such proceedings are quite lengthy and not always effective.
Standards and Approaches of Investment Arbitration in War-Related Cases
Ukraine is a party to over 70 bilateral investment treaties (BITs) and a number of international agreements and conventions, which are the main instruments for protecting the rights of foreign investors in Ukraine.
International investment instruments contain almost identical classic investment protection guarantees:
- fair and equitable treatment;
- full protection and security;
- non-discrimination;
- compensation in the event of expropriation of property.
It is these provisions that form the basis for a number of lawsuits filed by foreign investors with international investment arbitration tribunals, where investors challenge the consequences of decisions made by Ukrainian state authorities related to regulatory restrictions or compulsory seizure of property.
When considering claims by foreign investors, arbitration tribunals analyse not only the fact of state interference in the activities of companies, but also its context: whether the interference was proportionate, whether procedural guarantees were observed, and whether compensation was provided to the investor in the event of expropriation of their property.
War does not give the state automatic ‘immunity’ from liability for failure to comply with its guarantees for foreign investment. On the contrary, investment arbitrations require detailed arguments that each measure to restrict the investor’s rights was justified and consistent with international obligations. This position makes arbitration a key indicator of how a state balances security interests and the protection of investor rights.
Ilyashev & Partners Law Firm notes that increased requirements for documentation and transparency of state decisions have already become a key argument in new investment disputes.
Trends in Investment Disputes Against Ukraine
In recent years, a number of international investment disputes have been initiated against Ukraine, arising specifically from new risks associated with the war in Ukraine. The emergence of new investment disputes demonstrates that investors are actively using international mechanisms to obtain compensation in the face of the complex realities of sanctions and compulsory expropriation of property.
A notable example is the proceedings in ABH Holdings S.A. v. Ukraine (ICSID Case No. ARB/24/1), which concerns compensation for losses incurred due to the nationalisation of Sense Bank. This dispute demonstrates that even in crisis conditions, investors expect the state to maintain procedural stability and predictability.
An important category of disputes is formed by proceedings related to sanctions and temporary management of assets of persons suspected of having ties to an aggressor state. In many cases, investors claim that they have been subject to sanctions due to:
- complex corporate structures;
- cross-ownership of assets;
- incorrect assessments of their impact on national security.
Such situations in international arbitration are analysed in terms of the availability of individual assessment, the availability of mechanisms for reviewing decisions, and the proportionality of restrictions. The state must prove that the intervention is consistent with a legitimate objective and that the procedures ensure an appropriate balance between public interests and the rights of private individuals.
There is also a growing number of disputes concerning regulatory changes that investors consider to be an indirect deprivation of property. In such disputes, tribunals weigh the degree of interference, its justification, and its compliance with the investor’s expectations at the time of the investment. This creates increased requirements for the state to carefully document the reasons for its decisions and ensure maximum transparency of regulatory processes.
What Will Determine Ukraine’s Investment Climate after the War
The decisions that arbitration tribunals will make in disputes related to the war period will have a long-term impact on the formation of the state’s investment policy and law enforcement. If the tribunals confirm that certain measures taken by the state were disproportionate or implemented without adequate safeguards, this will force the state to systematise its practice of applying sanctions and temporary management. If international investment arbitration recognises such measures as justified in the presence of sufficient documentary evidence and procedures, this will set a precedent for the wider use of defensive instruments in the future. Future arbitration decisions will not only determine the fate of specific claims, but will also influence the institutional framework for investment protection in the post-war period.
The legal system of guarantees for foreign investors in Ukraine formally remains in force, but its practical effectiveness in wartime depends on the synthesis of national procedures and international arbitration mechanisms. Recent arbitration proceedings against Ukraine show that the state must combine national security with high procedural standards: documented decisions, individual risk assessment, and appeal mechanisms. It is this balance, rather than a formal declaration of guarantees, that will determine whether Ukraine can maintain its investment attractiveness and restore its economic power after the war ends. Ilyashev & Partners Law Firm expects that transparency of processes, individual risk assessment, and strict compliance with international obligations will become key elements in shaping post-war investment policy.
