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Ban of Chinese Investors’ Access to Motor Sich May Cost Ukraine $3.5 Billion

Today, Chinese investors from Skyrizon sent a note to the Ukrainian government about their intention to start international arbitration against Ukraine. At the moment, the corresponding claim has already been submitted to the Ministry of Justice, stated a representative of Skyrizon.

In the document, which is called Notice of Investment Dispute in legal practice, the Chinese investors of Motor Sich claim that Ukraine violated its international obligations stated in the Agreement between the Government of Ukraine and the Government of the PRC on the encouragement and mutual protection of investments.
 
As it is known, the Chinese investors from Skyrizon acquired 56% of the shares of the Ukrainian Aircraft Engine-Building Enterprise PJSC Motor Sich (Zaporizhzhia) in 2016. However, they have not been able to manage their assets since the court seized the shares on the initiative of the SSU. And the AMCU is delaying the issuance of a concentration permit under formal pretexts. Moreover, the rights of all shareholders of the enterprise have been systematically violated for three years as general meetings are not convened, dividends are not paid, shareholders are deprived of the opportunity to influence the actions of management. Proceedings in the courts of various instances are currently underway on claims of Motor Sich’s shareholders with a demand to lift the arrest. Still, the judges consistently refuse to summon the representatives of the Ukrainian authorities (the SSU, the AMCU, the PO, the CMU, etc.). Meanwhile, the financial and economic performance of Motor Sich enterprise is deteriorating. The company is losing markets, and its products become uncompetitive in comparison with foreign-made engines, which calls into question the very existence of the enterprise in the future.
 
The Agreement on the promotion and mutual protection of investments was concluded between Ukraine and the PRC in 1992. Under the said agreement, the parties agreed not to allow the expropriation of investments and treat foreign investors on an equal basis. In this context, the Chinese investors of PJSC Motor Sich believe that the state of Ukraine expropriated their assets by not allowing them to enter the enterprise.
he damage from the current situation negatively affects the relationship between Skyrizon and its affiliated structures with banks and exchange quotes. Chinese investors estimate it at more than $3.5 billion.
 
According to the available information about the content of the Notice of Investment Dispute, Skyrizon’s representatives urge the state of Ukraine to immediately begin negotiations and stop the illegal activities of the Ukrainian authorities concerning PJSC Motor Sich and its shareholders. If Ukraine is unable to react promptly and begin negotiations or otherwise fulfil its international obligations, Chinese investors will use their right to start arbitration proceedings.
 
The Chinese investors of Motor Sich also declare their readiness to come to the negotiating table with the Ukrainian authorities to resolve the situation and conflict. In this case, a working group will be created. The group may include representatives of the Chinese side, the Ministry of Justice, the Security Service of Ukraine, the Prosecutor General's Office, the AMCU and other authorities.