Unlocking Investment in Ukraine

This report was commissioned by the United Kingdom Ministry of Justice in relation to the international effort to support recovery in Ukraine. It is intended to identify potential justice and legal system reforms that will encourage foreign investment into Ukraine and contribute to its recovery.

Project Report

The report was launched at a Roundtable on 24th April  

• Over the past decade, Ukraine has undergone significant judicial reform aimed at enhancing the independence, transparency and efficiency of its judiciary and legal system. This has included the establishment of a new Supreme Court in 2017 and the creation of the High Anti-Corruption Court in 2019 which included judicial selection processes involving international experts.
• Legislative measures enacted in June and July 2021, such as the reintroduction of the High Qualification Commission of Judges and vetting procedures for the High Council of Justice, have further demonstrated Ukraine's commitment to judicial reform.
• However, despite these efforts, challenges persist. A shortage of judges across various court levels, inadequate workload distribution and budgetary constraints continue to hinder the effective functioning of the judicial system. Moreover, issues such as 12,241 blocked disciplinary proceedings against judges and cases of corruption within the judiciary pose significant obstacles to the enhancement of Ukraine's legal system

• The full-scale Russian aggression against Ukraine has exacerbated these challenges, and has particularly impacted the country's courts. Significant damage with estimated remedial costs totalling EUR 225.9 million has been inflicted on Ukraine's judicial infrastructure. This damage includes the loss of judicial staff, destruction of court buildings and disruption to the administration of justice.
• From a business perspective factors impeding the investment attractiveness of Ukraine include concerns about the safety of physical infrastructure, judicial capacity and capability, inefficiency of court administration (including the use of digital technology), corruption and the undue influence of law enforcement bodies. Many business stakeholders prefer foreign dispute resolution mechanisms and law over domestic courts and law (particularly favouring English law for its predictability, flexibility and perceived fairness) and turn to international arbitration rather than taking legal proceedings in Ukraine.
• While the enforcement of court judgments and arbitral awards in Ukraine is perceived to be moderately effective, there is a consensus among respondents that Ukraine should consider the establishment of a specialised court to hear commercial and investment matters, although there is a divergence of views between judicial and business respondents on the shape this court should take. Such a court, along with enhanced recognition and enforcement of arbitration awards, could bolster confidence in investing in Ukraine and contribute to the country's economic development
• During the research for this report, one issue which is not within its scope came to the forefront. This concerns the role of state bodies in commercial legal disputes, whether against such bodies themselves or with third parties, and a further detailed study of this topic could well be valuable.
• Overall, while progress has been made in Ukraine's judicial reform efforts, ongoing vigilance and continued reform measures are necessary to address internal challenges, mitigate the negative impact of aggression and ensure the effective functioning of Ukraine's judiciary in upholding the rule of law, thereby attracting foreign investment - as well as benefitting Ukrainian citizens generally.
• Accordingly, based on its findings, this report emphasises the importance of enhancing Ukraine's dispute resolution system to unlock investment opportunities. It offers solutions categorised into two main areas: improving current practices ('enhancing solutions') and introducing innovative dispute resolution models ('innovative ideas")
• In terms of actionable solutions, we recommend enhancing dispute resolution mechanisms in Ukraine through various measures. These include improving arbitration and mediation processes, addressing challenges within Ukrainian court practices and procedures, enhancing the enforcement of court decisions and arbitral awards, bolstering judicial capacity and conducting a thorough analysis of existing laws to identify areas for improvement.
• When it comes to innovative ideas, we set out a number of alternatives for potential dispute resolution models. These include establishing a Kyiv Financial Centre Court, implementing a hybrid international court model within the Ukrainian judicial system, creating a specialised commercial/investment court within the existing Ukrainian judicial system and setting up a Kyiv International Arbitration Centre. Each of these models aims to provide efficient and effective mechanisms for resolving commercial disputes and attracting investment to Ukraine.